Indian households hold nearly $ 1 trillion worth of gold ~ 11% of global total deposits. This great opportunity led Titan, Tatas’ famous watch company, to foray into the jewelry segment with a new ‘Tanishq’ brand in 1996. For the Tatas, Titan was a big success story and became the number 1 player in the watch industry.
Given the enormous demand for jewelry on the Indian market, Titan decided to enter the branded jewelry segment with a new Tanishqq brand. In 1996, Tanishq opened its first store in Chennai. Instead of the more traditional and famous 22-carat jewelry, one differentiator offered by Tanishq was 18-carat jewellery.
The argument of the company is that 18-carat gold will allow them to make jewelry that is better, less costly & scratch proof. This was a mistake in failing to consider the actions of the user. In India, people have not only bought jewelry for ornamental purposes. Gold was used as a token of prosperity and a store of money. Consequently, the 18-carat variant that was less pure could not become the preferred option
Tanishq tried to pursue the 18-carat bid for nearly 5 years, but couldn’t succeed. Tanishq ‘s overall losses were close to 150 crores INR.
Titan’s stock was affected by the relentless erosion of money, bringing it to just 2 Rs in 2001. McKinsey was employed by Titan to conduct a review of the jewelry industry. McKinsey indicated that closing down the jewelry sector was safer.
The president of the Tata Group, Ratan Tata, left the decision with Xerxes Desai, who did not give up on the venture. Finally, Tanishq admitted the error and introduced the Indian customers to 22-carat jewelry. They still had to clear one big barrier. Most Indians tended to purchase gold from traditional jewelers who were known to their relatives and family.
One big breakthrough launched by Titan was about to forever alter its fortunes. In all of its shops, they introduced a system called Karatmeter. At the time, it cost about 1 million INR per piece and was imported from Germany. The precise purity of gold was given by these Karatmeters using X-Rays.
Tanishq launched a campaign where consumers were offered to carry their old jewelry and get it checked for free in their Karatmeter shops. This campaign got a big response from consumers and the shops had a lot of traffic of people coming in to test their jewelry.
There was a lot of frustration at the same time from the thousands of conventional jewelers. But Tanishq remained, laid down, This opened the doors to many new clients who had never been to Tanishq before. They got to know the service, Tanishq’s product range. As the family jewelers said, about 60 percent of the jewelry tested was less pure. This destroyed the trust that jewelers enjoyed.
Sales were also not going up at Tanishq. When Jacob Kurian, then COO, further investigated by talking to some clients, he realized that Tanishq just made clients feel bad. They made consumers aware of the problem but did not solve it for them.
Tanishq also added a solution to the issue after a lot of deliberation by implementing the ‘Impure to Pure Scheme’ If a customer brought jewelry lower than 22 kt but higher than 19 kt, she might swap it with the 22 kt jewelry from Tanishq by simply paying for charges.
Things began to improve for the company after implementing this method. In daily sales, a lot of stores started doing 1 crore. In that same year, when the stock was at 3 Rs, Rakesh Jhunjhunwala also took over the stake in Titan. Tanishq has expanded its portfolio in the coming years by adding Mia sub-brands for working women, Rivah for wedding jewelry, and Raga-a jewelry product.
Today, Tanishq has nearly 300 stores in India. Tanishq today reports revenues of nearly 16,500 crore INR from a loss-making entity, almost 85% of Titan’s total revenues. The stock price has risen from 3 Rs in 2003 to nearly 1200 Rs, making Rakesh Jhunjhunwala and other investors very wealthy recently.
Tanishq is a wonderful story about a reversal. And the most important aspect of any organisation is how to interpret customer behavior.