Chapter 4 emphasises the 4Ps of marketing that come under tactical marketing. Interwood Mobel Ltd, which boasts a state-of-the-art production facility, embarked on the voyage to meet customer needs by focusing on the product itself by investing in R&D, and using unconventional materials such as metals, PVC, HPL and veneer. It then increased customer accessibility to retail by developing its dealership network. As it felt that some dealers lacked the necessary passion, it resorted primarily to company-owned outlets. To make the payment systems easier for its customers it launched different financing options. It partnered with Meezan Bank to offer an easy finance scheme that worked along the lines of a customer loan. It encouraged women to pool money by contributing a pre-decided monthly amount. All in all, this was a major effort to revamp its tactical marketing, the 4 P’s discussed in Chapter 4 (Dr. Aamir Khan, Case Advisor).
On a cold wintery morning of 2016, Farooq Malik, Chairman of Interwood Mobel Ltd., stood by his office window overlooking the factory floor which covered 600,000 square feet in the outskirts of Lahore, Pakistan. Scores of CNC machines, beam saws and automatic spray lines dotted the factory floor that bustled with activity. Interwood Mobel Ltd. had been providing a high-quality range of readymade, customized furnishings and fit out solutions for four decades. In the years bygone, Interwood Mobel Ltd. had become a brand name synonymous with quality and exclusivity in the otherwise informal tax evading furniture industry of the country.
Even as Malik marveled at the state-of-the-art production facility that his son, successor, and current CEO Omar Farooq had helped set up, he wondered if, despite the unparalleled production capabilities, and a year-on-year growth of 30-40%, Interwood would be able sustain its business ideology of providing quality products on customer friendly price points while maintaining its ethically sound business principles. Malik knew that a rising middle class, bigger disposable incomes and emerging aesthetic sense among urban dwellers were bound to drastically change the dynamics of the industry. Contemplating the odds of appealing to the value-riven middleclass consumer, Malik decided to have a word with his director sales and marketing, Ali Farooq, to strategize Interwood’s leap into the fast-changing furniture market.
The Furniture Industry
With total sales of more than 2.5 billion dollars in 2017, Pakistan’s furniture industry had the potential to generate tremendous revenues for the country. However, lack of government’s support in terms of vocational training, resources and infrastructure facilities turned the industry into a breeding ground for unorganized small-scale players who believed in tax evasion, and the “father to son” regime of skill transfer and lacked evolution. Furniture mafias had strong footing in the sector and controlled the demand, supply, and pricing of raw materials. Small furniture manufacturers were dependent on the mafia’s support to not only acquire cheap raw materials but also stand out of the tax net.
Customers considered furniture purchase to be a highly involved decision which required serious contemplation and market research. Handcrafted furniture made primarily of wood was a must-have item to commemorate special occasions such as weddings or moving to a new house and would be held dearly for a lifetime. However, post 2015 the industry started transforming. Although it was still largely dominated by the unorganized players, small, documented players like Habitt started gaining market traction and brought the concept of furniture retail to the Pakistani market. Habitt’s small, scaled attempt at furniture retail was a test case for big manufacturers like Interwood. Learnings from the competition coupled with their own research made Interwood realize that they were dealing with a more mature and sophisticated customer base which needed to be connected to.
Interwood’s 46-year journey
Interwood had a humble start in 1974 when Malik set up a small furniture shop in Shalimar Town in Lahore. The venture focused primarily on contractual work using conventional production processes. Product assortment was limited to TV cabinets and other small furniture items. It took Malik nearly four decades to create a business empire that had a strong presence in the local market. The key reason behind Interwood’s astounding success was its commitment towards continuous innovation, delivering value to customers and ethical business practices. In the year 2002, Malik decided to step down and made his son, Omar, take the reins of the business. Within five years of this change in the upper
management, production, innovation accelerated as the company invested in machine programmed production eradicating its dependence on human skill. Production processes were integrated with an enterprise resource planning software (ERP) which ensured business efficiency and agility. However, the change in customer dynamics necessitated going beyond production innovation in order to better resonate with the customers.
The Game Plans
The duo Omar and Ali observed that despite a large orthodox consumer base which was still dependent on the unorganized furniture manufacturers, there was a growing segment of aspirational customers. This change could be owed to an expanding base of the middle class. These customers recognized the importance of quality and sturdiness of their furniture items, attributes that Interwood was historically very well positioned on. However, while quality was pivotal to the purchase decision, value for money was what these growing middle-class customers coveted. A shift in the venture’s positioning and ultimately its archetype did seem like a leap in the dark, however desperate times called for desperate measures.
Getting the Basics Right
Interwood embarked on the voyage with a three-pronged strategy that would help reshape the brand’s archetype into an everyman brand. The starting point was of course the product itself. Staggering rates of deforestation across Pakistan had resulted in wood becoming a scarce resource. This imbalance of demand and supply, exacerbated by mafia control, led to an artificial hike in the prices of wood and timber that had skyrocketed over the years. The management had foreseen this burgeoning issue and decided to address it by investing in research and development. Investments in R&D propelled production design innovation and helped Interwood craft unique pieces of furniture from unconventional materials such metals, PVC, HPL and veneer. The use of these raw materials not only offered a contemporary and sleek outlook but made the product pocket friendly, bolstering Interwood’s strategy to reposition itself.
The Tale of Retail
The next major step was to increase the customer’s accessibility to the product. This propelled the venture into furniture retail which was an unmapped territory for a furniture manufacturer. To execute this strategy, Interwood developed its dealership network across the country. The company moved from smaller retail outlets that housed limited product assortment to mega stores in malls and shopping areas that showcased the complete range, ensuring a memorable retail experience for the customer. However, the management at Interwood felt that dealers lacked the passion to connect with customers and compromised on customer service. They believed in selling the product more than creating a lasting retail experience. This made the management reevaluate its distribution strategy, making them resort primarily on company owned outlets rather dealerships.
Interwood also had to limit its presence in mall spaces as it felt that Pakistani customers did not have the inclination to buy furniture from a mall setting. Return on investment was becoming a major challenge for outlets stationed within shopping malls. This led to the closure of a few high visibility outlets which were adding marginally to the bottom-line targets. Moreover, with a surge in homeowners and influx of hyper markets and super stores, the Pakistani customer was becoming more amenable to the idea of concept stores that aimed to provide a one stop solution to all customer needs. This trend caught the management’s attention and led to development of Lifewares by Interwood, a sub brand of Interwood that provided aesthetically pleasing yet affordable home accessories and lifestyle solutions. This launch was an attempt to educate the masses about the importance of tasteful yet economical interior decoration. It was also hoped that this move would help increase customer footfall into the retail setting and help the venture upsell and cross sell its products. However, the management was not convinced about this change in the brand’s architecture which resulted in the untimely closure of this sub brand.
Easy Payments- Deepening the connection with the masses
The Pakistani consumer had been accustomed to the ubiquitous financing options offered by banks. Net consumer financing posted an increase of Rs 37.6 billion in the first half of 2017(Tribune,2017). This indicated that Pakistani consumers did not shy away from using financing options to fulfill their desires. In view of promising statistics, Interwood decided to replicate the western model of furniture financing in Pakistan, a first for the industry.
Under the Easy Payment umbrella, Interwood launched 3 different financing options, the first of these was the installment on credit cards program. This allowed customers of leading banks of the country to have an installment plan made for their transactions that they decide to process through their credit card. The installments gave the flexibility to stagger the payments over a period of 36 months and offer zero percent interest for 6-12 months depending upon the terms and conditions of the bank. This product garnered customer interest quite fast as was seen from its year-on-year average growth rate of 25%.
However, Interwood realized that although the product sold like hot cakes among users of credit cards, those who did not believe in the credit card ideology due to religious or personal issues were still not within Interwood’s reach. Global averages of credit card user data in Pakistan further affirmed this notion as only 0.97 percent of Pakistan’s population claimed to be users of credit cards as compared to a global average of 19.28%(Anon,2021). To eradicate this issue, Interwood took Meezan bank Limited on board and developed with them an easy finance scheme that worked along the lines of a consumer loan. Meezan bank had various successful stints of launching installment programs on consumer durables thus making it obvious partner in this venture. The new scheme eliminated the customer’s dependence on card backed services and allowed him to pay the loan amount based on an installment plan that worked for him.
As a last step aimed at achieving the extraordinaire, the innovative idea of the Interwood committee was introduced. This service was in line with the societal setup of the country. In its crude form committee usually entailed women from a neighborhood/ family to get together and create a pool of money by contributing a pre-decided monthly amount. At the end of the committee’s tenure, which was decided in advance, each person would get turns to collect a lump sum in return of their monthly payments. Interwood replicated this model to its service and helped the customer choose what he liked and then allowed him to deposit monthly payments to Interwood for the tenure of the committee which ranged from a minimum of 6 months going up to 18 months. At the end of the tenure the customer was given his desired item without the hassle of going through any financial institution or fretting about interest payments.
The measures taken by Interwood to connect with the aspirational customer made business sense but carried substantial risk with them.
Questions to stimulate conversation on the case
- Identify the environmental factors that had played a pivotal role in the management’s decision to reposition Interwood Mobel Pvt limited and critically evaluate whether these factors were significant enough to make this decision inevitable.
- Using the Ansoff matrix identify the growth strategies that Interwood was using to strategize its business operations. Do you think these changes in business strategy would result in value creation for Interwood Mobel Pvt limited?
- Using your knowledge of positioning and repositioning of brands, critically evaluate whether Interwood’s brand repositioning will help it connect with its customers, or will it all go in vain?
Links and media
Anon, 2021. Pakistan Percent people with credit cards - data, chart. [online] TheGlobalEconomy.com. Available at: <https://www.theglobaleconomy.com/Pakistan/people_with_credit_cards/.> [Accessed 12 Jul. 2021].
Furniture & Fixture- An overview. [online] Available at: <https://www.pacra.com/sector_research/Furniture%20Sector%20Study_1582264758.pdf> [Accessed 12 July 2021].
Haqq, R., Pakistan's Middle-Class Consumer Population Among World's Fastest Growing in Haq's musings. 2020. Available at:
http://www.riazhaq.com/2020/01/pakistans-middle-class-consumer.html [ Accessed 12th July,2021]
Qureshi, M., Kamran, A., Khan, M. and Desai, M., 2021. Factors Affecting Furniture Purchase in Pakistan. In: Fourteenth International Conference on Management Science and Engineering Management. [online] Available at: <https://www.researchgate.net/publication/342374358_Factors_Affecting_Furniture_Purchase_in_Pakistan> [Accessed 12 July 2021].
Shahid, J., 2020. Pakistan's deforestation rate second highest in Asia: WWF. [online] DAWN.COM. Available at: <https://www.dawn.com/news/1574424> [Accessed 12 Jul. 2021].
Tribune, 2017. Pakistan's middle class continues to grow at rapid pace. [online] The Express Tribune. Available at: <https://tribune.com.pk/story/1398602/pakistans-middle-class-continues-grow-rapid-pace> [Accessed 12 Jul. 2021]
Zahid, A., 2017. Selling picture-perfect homes. [online] Aurora. Available at: <https://aurora.dawn.com/news/1142053> [Accessed 12 July 2021].
Website: https://interwood.pk/
As per Kantar’s brand archetypes model, an everyman brand persona is one that is based on the ideology that good things belong to everyone. https://heybrand.de/brand-archetypes/