CASE STUDY: Matrix Footwear India Ltd.

THE DISCUSSION
VINOD SAWHNEY Vice-President, Godrej-GE Appliances Matrix Footwear's problems have their genesis in an inadequate understanding of what the brand means to the customer. This led the company to tinker with its core proposition-with disastrous consequences. But the company cannot be blamed. The lure of value over volumes, of a higher return on investment, and of the need to be all things to people is difficult to resist for any marketer. This is the trap that Matrix Footwear has fallen into. It is a tribute to the inherent strengths of the brand that Matrix bounced back in as little time as it did. Having restored its customer-base, the company should now take the following course of action:
POPULAR RANGE. This will continue to be the dominant range in the Indian context, but with moderate rates of growth; perhaps less than 5 per cent per annum. But, since volumes are likely to be high in absolute terms, Matrix will have to continue to concentrate on this market. This is the segment that will keep the cash-registers at the retail-stores ringing. Matrix should leverage its position of strength in this segment, and extend its retail network to smaller towns and semi-urban areas using a combination of owned and franchised outlets. RURAL MARKETS.

This is, evidently, an untapped market, which can ensure regular leaps in turnover. Matrix should reach deeper into the rural market. This approach will also ensure the optimisation of the company's manufacturing-capacity to produce standard products. is a growing segment of the population which Matrix can ignore only at its own peril. It may not bring in volumes, nor will offerings in this segment be consistent with the image Matrix has nurtured over the years. But each unit of footwear sold in this segment will contribute far more to the company than a corresponding unit sold in any other segment. Clearly, this is a segment that needs to be nurtured carefully.

THE YOUNG ADULTS MARKET. This

Matrix should create a new line of business, with a totally new team. And it is important to build a new brand altogether-either by association with the parent brand, like Matrix Plus or Matrix Ultra, or by launching a completely new brand without the deficiencies (or virtues) of the mother brand. These steps will have to be followed by mapping products and brands to retail chains. The young adults market for shoes-and even related fashion-accessories-will be limited to Class A cities. Thus, separate showrooms can be established to market Matrix's premium products. However, the company should ensure that the range of accessories it offers is limited to related products, which not only mesh with the company's core business of footwear, but also with the requirements of young adults. Matrix can use its manufacturing facilities to mass-produce standard offerings targeted at its core middle-class and rural target-audience. Mass-production does not fit in with the fickle demands of operating in the premium segment. Thus, it makes sense for Matrix to outsource its premium offerings. Each segment of the market requires a unique set of marketing skills, and brands that are positioned differently. After all, as a shoe-maker, Matrix should be the first to know that one size does not fit all.

RAFIQUE MALIK Managing Director, Metro Shoes Matrix has many things going for it: an emphasis on mass production, standardisation, and capacityutilisation. They have served the company well and will, probably, enable it to hold on to its leadership position in the popular segment for decades to come. However, moving into the high end, which Matrix wishes to do, requires a different orientation along several parameters. The design process will have to be linked to market realities; the manufacturing process will need to be re-engineered to accommodate small batch-sizes; and the sales function will have to emphasise specialisation. Nor can you continue with the traditional store format, where the customer, by and large, helps himself. In the premium segment, the customer must be pampered. A fashion business, whatever the category, is a personalised business. However, the Value-For-Money (V-F-M) proposition rules even at the premium end of the market. This is particularly true of products manufactured locally since the perceived value of an imported product is far higher than that of one manufactured locally. We have seen this happen in white goods. True, several companies were guilty of over-estimating demand in the premium segment, but the real reason for their failure was their inability to understand the Indian customer's definition of value. Matrix will have to continue to generate 80 per cent of its turnover from the popular segment. The company should not dilute its focus on this bread-and-butter segment. However, this does not mean that the company should ignore the young adults market. That is where the margins are. While mass production helps cover fixed costs, it does not guarantee a healthy bottomline. My conclusion: Matrix needs to acquire a younger and fresher corporate image. How should it go about creating one? There are several footwear-companies that manufacture footwear for young adults. Matrix should enter into marketing alliances with some of these companies; it could even consider buying up such brands. And the formidable distribution network it has built up over the years can be leveraged to its advantage. Matrix has done well to segment its stores. However, it might be a good idea for each store to have a separate outlet selling products targeted at young adults. A large proportion of the people in this segment must have shopped at Matrix stores when they were children. Thus, the company does not need to reinvent the wheel when appealing to young adults. All it needs to do is to spruce up its retail outlets to make them contemporary. I see no problems in the same store selling both popular as well as high end products. Matrix will have to seriously consider re-training its front-line employees. While the company has done well to revisit its incentive system, it could consider linking a significant part of the compensation of its retail staff to billings. Matrix should first establish a beachhead in the premium segment, and only then consider extending its brands. Even this should be done on a limited basis, and not across-the-board. Matrix can start with T-shirts, sports-shoes, caps, and travel-bags, and gradually move on to other products.

There can be no debate over Matrix's choice of core business. It has to be footwear-not fashionaccessories. And the company should continue to nurture the popular segment of the market without compromising on the need to keep pace with evolving customer preferences. To succeed in the long term, though, Matrix needs to view itself as a footwear-marketer, not a footwear-manufacturer. If there is one lesson to be learnt from its failure to make any headway in the premium segment, it is the fact that manufacturing and retailing are different businesses. Retailing cannot be perceived as an extension of a company's manufacturing operations. In fact, manufacturing is a liability for companies like Matrix. After all, footwear is not a hi-tech product; the business has no entry-barriers, and manufacturing can never be the source of a sustainable competitive advantage in this business. Matrix should, gradually, divest all its manufacturing facilities, and opt for outsourcing. But that is a strategic decision.

S. RAMESH KUMAR Associate Professor (Marketing) IIM-B Matrix will have to consider 4 major changes in the business environment while formulating its strategy. First, there is a huge young adults (18-30 years) segment, which is growing faster than the other segments. Second, aspirational marketing has engulfed almost all consumer product categories, especially ones which have a symbolic social appeal like cars, two-wheelers, cosmetics, watches and, of course, footwear. Third, more and more companies are realising that restricting themselves to a few segments creates marketing inertia in the long run. A company must ensure that its offerings are available across segments to sustain a competitive advantage. This does not mean that the company should offer everything to everybody. It only means that moving out of a fixed-menu mode will facilitate organisational rejuvenation. And there is a greater need to create a philosophy brand, which will help a company enter several product-categories allied to the category in which it now operates. Clearly, Matrix can't ignore the premium end of the market. There are several ways in which it can make an impact on this segment:
BRANDING.

Matrix needs to create a philosophy brand. A philosophy brand, fundamentally, stands for a specific proposition. In foods, it could be health. In soft-drinks, it could be fun. In footwear, it could be youthful rebellion in the premium segment. Owning the specific proposition-preferably, a lifestyle proposition-is important. Emotional bonding crafted onto the brand, often, transcends its functional attributes.

Matrix seems to own the v-f-m proposition in the minds of consumers. Thus, neither an extension nor a sub-brand will work for it. This can actually work to the advantage of the company, which can use this opportunity to launch a philosophy brand targeted at the premium segment. Since philosophy brands do not, normally, get into the product-association trap, Matrix can extend its new brand to, say, ready-to-wear garments, perfumes, and sunglasses.
THE TARGET SEGMENT AND THE OFFERING. Across product-categories, several brands targeting the premium segment have failed. This is because most companies forget that value is vital even in the premium segment. The value of the offering is governed by pricing. Even today, there is a large gap between the premium and the next rung of brands in the footwear market. Evidently, there is enough opportunity for Matrix to create a new value-plus-premium segment. THE INFRASTRUCTURE.

Matrix has a large retail network, and it should not be difficult for it to create an exclusive network for its premium offering. However, the company should differentiate these outlets from those selling its popular range. Segmenting its retail network into those that sell only products in the economy range or only those in the premium range may be a good idea.

Of these three, branding is likely to play a crucial part in ensuring Matrix's graduation to the premium segment. With the company certain to choose a lifestyle proposition for its premium brand, it may be a good idea to market it along with other lifestyle brands in related product-categories. Alliances with these brands, in terms of cross-promotions or joint marketing efforts, will facilitate the acceptance of Matrix's premium brand. However, the company should ensure that these alliances do not dilute the premium-ness of its brand. Since Matrix's long-term aim should be to establish a presence in categories that have some synergy with the brand proposition of its offering in the premium segment, it should try to build and sustain relationships with its customers. A database of customers compiled over a period of time will help the company reach out to its loyalists in terms of preferences, trends, and lifestyles. And serve as the ideal launch-platform for the company's future offerings. However, this is a long-term strategy, and should be woven around the core proposition of the brand. The philosophy brand, in my view, is the only thing that can provide the leverage and the flexibility that Matrix needs to break out of the strategic stupor it seems to have fallen into.

PRANAB DUTTA CEO (Healthcare), Marico Industries Matrix diversified into the premium end of the market without putting into place the business processes required to handle a different segment. Why, the company even initiated a foray into the fashion-accessories business without first establishing its equity in the premium end. These are costly mistakes. It must, however, be conceded that the company did the right thing in revisiting its basics, and has done a remarkable job of turning around quickly. Now, Matrix needs to consolidate its gains, and address the market afresh. The young adults segment is a critical part of the footwear market. It cannot be ignored by a marketleader like Matrix. But the young do not have the same attitude as their parents. Every purchasedecision they make is a reflection of their attitude. Matrix needs to address this. Given the changing demographic profile of the population, the company has to target this market with appropriate productpricing strategies. There is one reason why Matrix should make a renewed attempt at entering the premium end of the market, from where it has all but withdrawn. Despite its successful turnaround, Matrix is a highvolumes, low-margins, high-cost organisation. That makes it vulnerable at the top end, where it has to compete with nimble, fleet-footed organisations, and at the bottom end, where there is a huge unorganised sector enjoying cost-advantages. So, it is essential that Matrix grow by at least 40 per cent every year. Even that will grant it only a temporary respite. I would suggest the following course of action: It should go further down the market. There is a huge market in the rural and semi-urban areas (Tier-3 buyers). Matrix should woo this segment, whose needs are being met by the unorganised sector. With the right pricing strategies, this approach will boost Matrix's sales. A quick way for Matrix to cut costs is by outsourcing as many activities in the supply chain as possible. Such opportunities for an organisation the size of Matrix are manifold. The company can outsource activities at either end of the value chain: manufacturing, or retailing. Franchising is, for instance, a good option to grow the retail end of the business without having to make any fresh major investments. Even while exploring these alternatives, Matrix needs to look at its business processes. The v-f-m proposition, which imbues every aspect of the company's operations, needs to be replaced by the customer-focus proposition. This is particularly true in the case of softer processes, like training and development. Matrix could also commission a survey to understand where the company stands in the mind of the young adult. The survey should be so designed as to secure insights into what these customers expect from the Matrix brand. And any decision to enter the premium segment or the fashion-accessories market should be based on the findings of this study.

The steps I have suggested should precede any fresh forays into the premium end of the market. I don't think Matrix needs to establish a separate organisation to cater to the demands of the youth; a sensible approach to segmentation will suffice. The hotels industry is a case in point; there are luxury, business, and economy hotels functioning under the same umbrella brand, each catering to a specific segment. Should Matrix remain a footwear company, or move into fashion-accessories? Most of the footwear majors operating in the premium segment have a presence in fashion-accessories too. Matrix could too, but in phases. For, it is essential that the company enhance the lifestyle attributes of its brand before doing so.