Chapter 9 is about Innovation and Design as a means to create value for the customer. A good example in the Pakistani durable goods context is that of Dawlance, established in 1980 in Karachi. When it entered the market, the international brands were focusing on no-frost refrigerators. Dawlance reduced the height and increased the width of the refrigerators to meet Pakistani consumers’ needs. But its introduction of the microwave oven in Pakistan was a big innovation because the Pakistani consumer were buying voluminous gifts for the wedding of their daughters that did not include the oven. In fact, Dawlance is credited by many to have brought the microwave into the consideration set of the bulk of Pakistani consumers. It then went on to introduce a range of new SKUs, such as the 20L MWO EC 20 at a price point of Rs 5000 that became an instant hit. It then introduced the 26L and the 32L models. It also introduced the ‘Health Zone’ series and partnered with famous chefs to educate consumers about cooking a wider range of food. Innovation, as Peter Drucker said, is one of the two major roles of marketing. (Dr. Aamir Khan, Case Advisor)
Dawlance was established by Mr. Bashir Dawood in 1980 in Karachi as a private limited company. The refrigerator factory was established in Hyderabad. Prior to the company’s set up the market was dominated by international brands that were catering only within the No-Frost refrigerators. Dawlance, unlike the international refrigerator brands, started local manufacturing of refrigerators that were smaller in height and had a wider body to meet the requirements of Pakistani Consumers. As a result of its consumer-centric approach, the company witnessed an unparalleled growth, as it launched a product portfolio that met the core needs of Pakistani consumers by providing high quality products.
In 1988, Dawlance started making deep freezers and over time diversified into other home appliances. The core value at Dawlance had always been the reliability of its products and this claim was ensured across various functions, such as manufacturing, HR and customer services. By 2015, Dawlance had revenues of more than PKR 20 billion, a head count of over 1800 employees, and growth rate of more than 10% in an otherwise sluggish economy. The company’s website declared the vision of the company as “Make Dawlance a global brand by practicing Reliability: Make Pakistan proud of us.” Its mission was to “promote reliability in everything we do in the field of the household appliance.”
Dawlance in the Microwave ovens market
Dawlance ventured into the microwave ovens (MWO) segment in Pakistan in 1995 with two international brands – Sharp and National. During this period, MWO was considered as a luxury item in Pakistan. International brands such as LG, Samsung and Panasonic dominated this segment. The overall size of the MWO market was estimated to be PKR 675 million that made up only less than 1% of the white goods appliances industry.
Initially the MWO market was small but was seen as a market with great potential. In the year 2000, Dawlance decided to play a more active role within the segment by entering into the market with a “value for money” proposition under its own brand name. This was backed with the insight that consumers buy wedding gifts for their daughters and want voluminous items as fillers within the gifts that they give.
Dawlance realized that their entry into the “Value for money” segment under the Dawlance brand name could revolutionize the MWO market and help elevate the living standards of the Pakistani consumers where a woman had to manage multiple tasks during the day. This launch would not only help Dawlance tap the growth potential and develop the category but also help the company in gaining incremental sales and market share. Additionally, this initiative would help in Dawlance’s equity building efforts through the launch of innovative technological products.
As MWO was a new category that held a great potential to grow, the company decided not only to change the consumer perception about MWO but also grow the segment with its three staged approach built upon three key pillars - " Consumer centric approach ", “value for money" and “Innovation”. Dawlance continued to introduce different models in different capacities and features in the following years.
The Three Staged Approach to MWO success in Pakistan
The first stage (1995-2001): In 1995 Dawlance ventured into the MWO category and launched 2 brands – Sharp and National to gain insights of the category dynamics with key focus on attaining the category development through incremental sales and understanding the consumer needs. During this period, the size of the Microwave oven category was overall, 40,000 units that were sold across Pakistan. Key international brands dominated the category with 45% market share offering premium priced MWO at a price point of PKR 15,000 and the most popular capacity was 30L. The other capacities offered in the market were 45L and 60 L.
Category development required expanding the MWO segment through product penetration amongst the households. Consumer and trade insights indicated that consumers bought microwave ovens with the basic purpose of heating food only. It also indicated that the prevalent price point of Rs. 15,000 for 30L MWO was a high price point and made MWO accessible to only a certain set of socio-economic class within the country. In addition to this there was a big opportunity lying where the bride was given a wedding gift such as refrigerator, washing machine, TV and small appliances to act a filler within the other gifts that were given to the bride. Amongst all the gifts being given to the bride MWO was not within the consideration set of the consumers. There was an opportunity where a MWO within the price point of PKR 5,000 could be part of the appliances group that were given to the bride in form of gifts.
In addition, many times families replaced their old appliances when shifting to a newly constructed house. Dawlance did not have exact data on this; however, anecdotal accounts of their dealers suggested that durable purchases were split evenly between new and replacement purchases.
In the year 2001 Dawlance launched a 20L MWO – EC 20 at a price point of PKR 5,000 that became an instant hit amongst the consumers who were either a wedding customer or looking to buy a new set of appliances for their homes. In addition to this a MWO at such an economical price point increased the category household penetration as it became affordable for consumers from different walks of life.
This served as a first turning point towards transforming the MWO category from a luxury item to a “good to have” item. Market size grew from 40,000 units per annum to 85,000 within the first year of launch, with Dawlance growing its market share from 7% to 48%. This launch now made Dawlance an undisputed leader in the MWO category as well.
The second stage (2004-2009): This era came with multitudes of innovations within the category. Insights from other neighboring countries suggested that MWO was not only being used for heating but was also used for cooking. Based on increasing the MWO usage within the country, in 2006 Dawlance launched its very first “Cook King” model DW-392 in 26 L capacity with a distinctive feature of 24 Pakistani built in recipes as per the consumer’s taste palate. This upgraded the consumers to high end MWO models which helped Dawlance grow the category share both in terms of volume and value. Upgradation of consumers would only be possible if homemakers started using the microwave oven for cooking of food, in addition to merely heating. Until 2006, Dawlance was importing units from both Korea and china as a completely built unit (CBU).
As the market share grew it only became more viable for Dawlance to commence local assembly of MWO in Pakistan to increase the category profitability and expand the product line up. In 2006, Dawlance set up its own MWO assembling line in Landhi Industrial Area in Karachi and started assembling them in Pakistan. Local assembling of MWO paved the way for launching innovative solutions that could add convenience to the lives of the consumers.
In-depth consumer researches highlighted that consumers were more into cooking traditional cuisines such as korma and biryani along with baking pizzas or cakes. Based on this insight, Dawlance began working with its suppliers to develop a model that could cater to the traditional dishes as well as to the baking needs in MWO. They partnered with Chef Gulzar and came up with the very first 32L MWO model – DW 125 C that could not only bake but also make “Chargha” and the all-time favorite dish of our Pakistani consumers – “Biryani” at a touch of a button.
After this, Dawlance launched different versions of cooking MWOs. In this way they were able to convert the MWO market from only heating to cooking of food within it. Dawlance further strengthened its market share by taking penetration in every 6 out of 10 households of Pakistan having MWO.
Third phase (2010-2015): Keeping up with its legacy of innovation and consumer centric approach the company saw that consumer trends were changing, and the consumers were becoming more and more health conscious with the passage of time. Keeping this insight, in 2010 Dawlance launched their “health Zone” series which revolved around the induction of technologically innovative features such calorie indicator for the built-in recipes and deodorizer in MWO.
In 2012, Dawlance launched another model - DW 115 CHZ. Consumer insights indicated that they wanted MWO within the popular price point of PKR 12,000 - 13000 in a smaller capacity (23-25L) to cater to their baking needs. With the young adults becoming more impassioned with baking and experimenting with different baking recipes in MWO, the existing baking models were beyond the purchasing power of the middle-income group. This launch resulted in further growing the share within the market where other competing brands were also establishing themselves within the mass market segment (20L) leading into a fierce price war and depletion of the category profitability.
Taking cooking convenience to the next level, Dawlance partnered with Chef Mehboob and added an accessory of “Tawa” to its range of baking MWO model line-up. This stepped up the game for Dawlance where as consumers could now make different types of traditional Pakistani styled breads such as Naan, Taftan, Paratha, Qeema Naan, Garlic Naan, Sheermaal as well as Pizza within the comforts of their home.
To encourage MWO cooking and build the consumer believability the company collaborated with many celebrity chefs such as Gulzar, Mehboob and Zakir and developed a complete 360-degree campaign based on this collaboration. Cooking snippets were recorded and provided free with the Cooking models along with country wide on-ground activations engaging consumers from different walks of life.
2015 - Present: Dawlance has been able to sustain its leadership position in the MWO categories based on its ethos pertaining to innovation. The company believes that it is a key to success as technological advancements within the appliances industry keep the brand ahead of the competing brands. In 2015 Dawlance introduced “Air fryer” technology in MWO. As the consumer trends indicated that consumers were becoming more and more health conscious with the passage of time and less oil in-take were becoming more popular across all age groups. The Air fryer model – DW 540 AF gave the consumers 5 in 1 benefit i.e., heating, cooking, grilling, baking and air frying food in a single appliance that no other brand was offering in the market.
In 2016, Dawlance was acquired by a leading Turkish company – Arçelik. With Arçelik’s strong R&D capabilities, design engineering and network across the world with 11 brands and 18 manufacturing facilities in seven countries including Turkey, Russia, Romania, South Africa, Bangladesh and India opened multi-faceted opportunities for Dawlance. The Arçelik acquisition opened up the world to Dawlance as the company became popular for its phenomenal success in the MWO category with the Pakistani market. Dawlance became the first and only brand in Pakistan to export MWO to Bangladesh market where they adapted the same success story for their own country and are now also registering a growth within the category.
Innovation was at the heart of Dawlance’ s success within this category not only within the country but also across the borders as well. Dawlance also created an online presence to tap potential customers and to improve the overall customer experience. An e-commerce website, launched in April 2020, gave Dawlance the first-mover advantage in the industry. The website received organic traffic of 7,000 to 10,000 on a daily basis. Dawlance’s market share is estimated to be approximately 65% within the category. However, the challenge pertaining to the MWO category still prevails. Despite all product innovations, 360-degree advertising and communication efforts, strong customer service back up, online presence and offline availability across Pakistan, household penetration of MWO stood at 12% in 2020’ compared to washing machines or refrigerators with a household penetration of 50% + within the Pakistani market.
The question is how can the company further grow this MWO category? And what should be Dawlance’s future course of action?
Questions to stimulate conversation on the case
- What was Dawlance’s role in the electronics industry?
- What changes were made to the MWOs? Why were these changes made?
- If you were given the task to grow the category, what would be your course of action?
Links and media
Website: https://www.dawlance.com.pk/