Philips digs at bottom of the pyramid

Philips Electronics India Ltd is resorting to innovative pricing and customer engagement models in India to gain market share and acceptance by ‘bottom-of-the-pyramid’ segments and enterprise customers. Clean energy is the common pitch that Philips is making to log in higher customer numbers through such innovations.

For instance, in one such initiative, the company has collaborated with Washington-based C Quest Capital (CQC) to supply 2.6 million compact fluorescent lamps (CFLs) to official residences of employees of the Indian Railways. These CFLs have a life of 10,000 hours and will be supplied free of cost to the Railways under the scheme and available on exchange with energy-inefficient incandescent bulbs. However, the condition is all the legal and beneficial rights to any emission reduction generated by the bulbs and all corresponding benefits and all certified emission reductions (CERs) will accrue to CQC, which is funding the project.

While the project kicked off on a quite note earlier this year, Philips is now talking to several state governments for establishing similar lighting ventures, Philips Electronics India MD & CEO Murali Sivaraman told DNA Money.

The Indian subsidiary of the €26 billion Royal Philips group, which is present in India across various verticals like healthcare, consumer and professional lighting, domestic appliances and personal care, is currently talking to at least five states for similar projects.
Rajeev Chopra, head of lighting, Philips India, said, “We are open to such innovative engagements for financing options through carbon credits or otherwise including service contracts even with commercial establishments.”

According to Chopra, the Indian lighting market is estimated at around Rs5,000 crore and Philips has one-third share of this market. The company’s lighting business grew 18% in 2008 to Rs1262.60 crore, thanks to the company’s aggressive channel expansion initiative and increased acquisition in the professional segment, he added.

Philips has been concentrating on signing up installation and service contracts for large commercial and sports complexes, which added to the growth, Chopra said.

Sivaraman said apart from operating in the segments where it is already strong, Philips is also exploring adjacent spaces and businesses from solutions beyond the product. As part of this strategy, the company is also implementing pay-per-use solutions and financing options for enterprise customers.

Services constitute 30% of Philips’ global business, and the share is around 15-20% in India. “The global strategy is to invest in services to increase revenues across segments,” he added.

Lighting accounts for 50% of Philips’ revenues, while healthcare and lifestyle products contribute the rest. Emerging markets accounted for 30% of its revenues in 2008 and Philips is aiming to increase this share. In an effort to meet this goal, the company strengthened its presence in India in 2008 by acquiring two Indian companies — Alpha X-Ray Technologies, a leading manufacturer of cardiovascular X-Ray systems, and Meditronics, a leading manufacturer of general X-ray systems. Both the acquisitions were to target the economy segment of the market.

“We are targeting the bottom of the pyramid and acquired the two companies to enter the volume game in healthcare equipment,” the Philips CEO said, adding the company was open to more such acquisitions in India, including in solar-enabled lighting.