Boat is one of the most incredible brands in the Indian startup ecosystem and the most astonishing thing about this company is that within just Six years they have achieved such a strong position in the market that if you look at the TWS or true wireless stereo market as of q3 of 2021 while Bolt stands at 6% percent, Noise stands at 8%, Realme stands at 9%, Boat stands way ahead with a market share of 35%, which is literally more than the next three competitors combined. On top of that the revenue of the company has already crossed fifteen hundred crores in fy twenty-one and the profits have already shot up by 61% percent since fy twenty. Now considering the fact that Boat is now going for an IPO. The question is how Boat achieved such an extraordinary position in the crowded hearable market of India. What exactly was their business strategy? and as investors, and students of business what are the business lessons that we need to learn from Mr. Aman Gupta and his wonderful team?
BOAT MARKETING STRATEGY-
For Boat success is its genius market positioning and if you look at the rise of boat, it is very very similar to the rise of one plus phones in India. many of you must know that there was a time when the Oneplus brand was just one of the most functional underrated brands in India. and it is only popular among tech enthusiasts, but suddenly with the launch of Oneplus 7, the Oneplus tag became one of the most popular brands in India. And you could literally see Oneplus 7 phones everywhere in 2019. In fact at one point in 2019 Oneplus was selling more phones than Apple and Samsung combined.
Now the question is in spite of the phone market being so crowded with Vivo, Oppo, Samsung, Huawei, and Apple, how did Oneplus become a legend? If you look at the pricing of phones in India back in 2019. you will see that Iphone was the costliest with a pricing of 85000 rupees, then we had Samsung S10 priced at 55,000 rupees plus, and then straight away we had oppo, vivo other companies that were primarily focused on selling phones below 25,000 rupees.
Now although they had costlier phones in India. The focus of these companies was more on 25,000 rupees and below that price range. You see there is a huge gap that's left out between 25,000 rupees to 55,000 rupees, which was only being addressed by Samsung, Then as we all know Samsung phones do not offer as much value for money as its counterparts and this audience. This was the most premium unaddressed and more importantly a large audience, that was left untapped, and here's where we saw the rise of two phones number 1 was Xiaomi Mi 9 at 31,000 rupees. And One Plus 7 was priced at 35,000 rupees and both these phones positioned themselves exactly in between the 25,000 to 55,000 rupees price range, and they both had insane specs and offered way more value for money as compared to Samsung phones.
Now the question is why didn't MI9 become a market leader like Oneplus. Well, that is because Oneplus built a crazy level of aspirational value for its brand. Because of getting endorsed by none other than Robert Downey Jr himself. We don't know how many of you noted this. But then in the exact same year, the Avengers end game hype was at its peak, because when Endgame was about to release in 2019 and everybody knew what an insane fan base Robert Downey Jr has in India, and this aspirational value is something where Xiaomi lagged. Because of this Oneplus won huge support of Robert Downey Jr, but the fact is that the aspirational value that Robert downey jr's endorsement got to Oneplus, got enough people to see Oneplus as a premium brand, because of which it got enough people to buy the phone.
After that when people saw that the tech was genuinely the best. that you could find in that range, it eventually led to positive word of mouth. And hence Oneplus 7 became one of the best-selling phones in India in 2019. Now if you own a Oneplus you must have also noticed that you actually considered buying an Iphone but when you saw the stupendous difference between the price of Oneplus and an Iphone, Oneplus by default looked like an obvious and the most comfortable choice of all. Therefore the Oneplus brand was able to build an aspirational value in the minds of the premium customers in India, because of which it was able to beat Xiaomi. And was able to tap into those users who were premium customers but could not buy an Iphone.
Now the question over here is how is this related to Boat and what does Oneplus position have to do with Boat? Well if you look closely after Apple introduced the Airpods in 2016. Three important things happened in the exact same year.
1. There was a sudden boost in the fascination of wireless earphones.
2. The jio wave hit India in 2016 led to the skyrocketing of the screen time of Indians
3. Most importantly many many phone manufacturers stopped shipping earphones along with their smartphones, and if they did these earphones were the most basic versions in the market.
And all these three factors created a huge market for the hearable in India. So from 2017-18 onwards, many many companies started jumping into the hearables market. And if you look at the pricing of the most popular brands in 2018, this is what it looks like-
First, we had the ultra-premium wireless earphones category wherein we had Bose and Apple that had a base price of 17,000 and 15,000 respectively.
Second, in the premium category which is between 10k to 15k we had only JBL as a significant brand with its pod version being priced at 10,000 rupees,
Third, In sub premium that is between 5000 to 10,000 we had Sennheiser wireless earphones that started from 6400 rupees onwards.
Fourth, and In below this price point, that is below 5.000 there was no giant brand and yet there was a huge demand for wireless earphones in India. And this is where we saw four brands come in. Mivi was priced at three to four thousand rupees, Skull Candy was priced at 2000 rupees onwards, We had Boat rockers at 1.999 and then we had Noise shots priced at 3,999. And then we had several local brands including Bolt that were priced at 999 rupees and below.
Now the question over here is with these four competitive brands, what was so special about Boat that it is now the market leader by such a huge margin? Well there are two specific reasons-
While skull candy was only popular among enthusiasts and a very limited segment of the audience the other brands like Mivi and Bolt were barely known in the market, whereas Boat had become far more popular because they Endorsed Hardik Pandya in 2018 and this is where the power of celebrity endorsement comes in just like Robert downey jr's endorsement brought in an aspirational value for Oneplus. Hardik Pandya's endorsement by default built an aspirational value for Boat as a brand. As a result in the two to five thousand rupees category Boat became far more familiar than its counterparts.
Now some people might say bro “Just because some celebrities endorse why will we buy earphones? We are smart enough to make a good choice without endorsements”. Well you know what guys here are some basics of marketing for you, a customer knowingly or unknowingly determines the value of a product based on two types of values tangible value and perceived value.
Tangible value is the real value of the product. As in if the audio sounds great in one earphone it has a great tangible value and perceived value as the name suggests is basically the judgment that you make based on how the product is portrayed. For example, if a restaurant looks clean you subconsciously assume that it has a clean kitchen. And in our case, the fact about audio devices especially earphones is that only trained persons, as in only the people who are involved in video editing or sound editing can actually spot the intricate differences in audio, between two devices. As a result, you can barely spot the difference between the two products, as a result, the entire audio market from the customer standpoint is practically commoditized. And since there is no added tangible value to the product, you can spot the only value by which you will judge an audio product like your phone by perceived value. So if we place two earphones one of some random brand and the other that is being endorsed by Hardik Pandya, you are more likely to trust the brand Endorsed by Hardik Pandya. Even if you are not a diehard Hardik Pandya fan. So the only delta that inclines you to purchase a product like your phone is the perceived value of the product.
Now just to give you an idea about, how super powerful this is. Here's some simple math, merely because of celebrity endorsement if Boat is able to charge an average premium of just 200 rupees extra per product, here's what it looks like with 16.6 million Tws units shipped this
Year. And with Boat having 35.8% market share, Boat would have shipped close to 59 lakh units, so if they got you to pay an average premium of 200 rupees per product due to celebrity endorsement, Boat would have already made 118 crores extra in revenue. A fun fact is that the profit of the company in fy21 itself is 78.6 crores. This is the power of building a perceived value in a crowded commoditized market.
This is the reason why Boat obsessively focuses on presenting itself as a lifestyle brand. After Hardik Pandya, they also Endorse Rishabh Pant, Shikhar Dhawan, Bumrah and
Prithvi Shaw in 2019 followed by Neha Kakkar, Kiara Advani, and Karthik Aryan. After that, they also signed up Shreyas Iyer in 2020.
Secondly, Boat also collaborated with celebrity designer Masaba Gupta to launch a limited edition collection of spunky headphones at the Lakme fashion week 2020. And they're also
collaborating with Beera which is again one of the most favorite millennial brands in India. This is how just like Oneplus was able to present itself as a far more premium product, far more familiar product as compared to Xiaomi mi 9, Boat through its collaborations has been able to build the same aspiration value to stand out from the rest of the crowd.
For Boat, success was also the foundation they laid with an insane product called Boat Stone and these speakers are by far one of the best Bluetooth portable speakers in the market. And the reason why this is such a big deal is because boAT stone became popular without celebrity endorsements or any fancy marketing strategy. During that time while JBL Flip was priced at four thousand nine ninety-nine rupees, Boat Stone was priced at just two thousand rupees and Sound was also as good as JBL. This is the reason why Boat is standing tall in spite of powerful players like Real me and Oneplus in the market. And even today at the entry-level in the earphones market boat is still priced at a bare minimum of 299 rupees because of which a student is more likely to buy a boat and he loves it, three years later after he graduates, when his purchase power increases he is more likely to buy a boat product. Now after laying a solid foundation of positioning itself as a lifestyle brand, Boat is slowly
expanding its price range to position itself in the upper range of four to five thousand rupees.
secondly, it is also getting into the smartwatch segment which is again a huge market to be tapped into and you know what's very very interesting to note is that just like Boat created an aspirational value for hearables. After Apple created a huge market for smartwatches, Noise is now getting Brand ambassadors like Tapsi and Rohit Sharma and is even spending a ton of money in social media campaigns to build aspirational value for its watches and this is boosting not just its watch sales but also the hearable sales, because of which it is already the number two player in the market right next to Boat, so now the rivalry of noise and boat is something that's going to be very very interesting to watch.
By building a quality product, choosing a wonderful time to enter the market, by standing out from the rest of the competition through lifestyle marketing and through strategic collaborations, Aman Gupta and their team have turned Boat into a market leader in the hearable segment of the Indian market.
Lessons Learn From Case Study-
There are three very very important things that you need to learn from this case study
1. Whenever you launch a product in a crowded market, always try to figure out how you are going to differentiate yourself in the presence of the big guns. In this case, if someone had told Aman Gupta that dude there is JBL, apple, skull candy and so many other brands then what is so special about you? then on the outside it almost looks like there is no room in the market but the moment you take a pen and paper and you start noting down their price labs you will very clearly be able to see that the 1000 rupees to five thousand rupees lab is literally empty and you could actually make your mark over there. so take a pen and paper and do a thorough market research
2. Celebrity endorsements although look like a cash drain in some cases, even today it could be a game changer in a crowded commoditized market.
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