HARVARD BUSINESS | SCHOOL Tanishq On a warm spring day in March 2006, there was excitement in the offices of Tanishq, the jewelry division of India's leading watchmaker, Titan Industries, a subsidiary of the Tata Group, one of India's most respected business houses. C. K. Venkatraman (Venkat), head of Tanishq, watched his brand marketing team pulling the last of their presentation slides together before heading across the plaza of Bangalore's Golden Enclave to meet with Titan managing director, Bhaskar Bhat. Tanishq was the country's only truly national jeweler that sold gold and gem-studded jewelry in boutiques across India. Initially, Tanishq had targeted a more Western consumer, which had evoked a "Nice, but not for me" reaction from Indian women. The brand had undergone several strategic retoolings over time to reach out to the traditional but modern Indian woman segment and the Tanishq team was optimistic that they had finally positioned Tanishq squarely at the heart of the Indian wedding jewelry market. At the same time, a skunk works project team within Tanishq had successfully launched GoldPlus, a modest brand positioned to serve the plain gold wedding jewelry market in India's smaller cities. A visible strain had developed between the Tanishq and GoldPlus teams as both brands returned positive results. The Tanishq team, in the midst of a campaign to capture the wedding jewelry market, felt that the GoldPlus launch would confuse the marketplace and distract the organization. They were also reluctant to give up the opportunity for Tanishq to serve the smaller towns. The GoldPlus team argued that their model was superior to Tanishq's when it came to serving the wedding jewelry market. They wanted Tanishq to stay on course with an up-market focus on "jewelry for adornment" in the major cities and towns, while GoldPlus pursued the "gold jewelry as investment" opportunity in the smaller towns. Jewelry in India The Indian gold jewelry market was estimated at Rs.60,000 crores annually. Decades of socialist- style rule had meant steep taxation on income and assets, and many Indians had converted cash into gold. When the Indian government began to liberalize its economy in the early 1990s, imports of gold became easier and the industry started to thrive; demand surged 45%, to 737 metric tons, making India one of the fastest growing gold markets in the world. By 2000, according to the World Gold Council, India held at least 7% of the world's gold stock, or about 9,500 tons. Some sources put the actual figure at closer to 30,000 tons. Indian jewelers were essentially retail stockists. Vendors, who owned the inventories, supplied to the jewelers through a consignment arrangement. At the back end of the supply chain was a group of over 3 million craftsmen or karigars, most being born into the trade and working from their homes. A head karigar controlled 10 to 20 karigars, and a vendor controlled about 3-4 head karigars. When jewelers would show designs to the vendor, he would take the sketches back to the head karigar who used his knowledge of each of his karigar's specific abilities to allocate jobs. The head karigar priced work on the basis of complexity of design; karigars typically received Rs.30 per gram of gold for work, with the best karigars receiving up to Rs.40 per gram. Once the rates were fixed, the vendor then set a timeframe for delivery depending on demand. Jewelers had long- standing relationships with their vendors, and remained very loyal to their preferred vendors. Titan Jewelry In 1996, Titan management decided to manufacture and market precious studded jewelry under the Tanishq brand. Bhaskar explained, "plain gold jewelry offers little opportunity for differentiation. Also, everyone knows the price of gold. The customer then adds labor and wastage and establishes the base price leaving the jeweler with no pricing power. Studded jewelry is a different story altogether. Customers don't know how to value gems. There is also the opportunity to be innovative in design. Tanishq's decision to get into the studded jewelry impacted the choice of gold used. The Indian gold jewelry market was based on 22-karat gold and anything lower was considered junk. Studded gold jewelry, however, was based on 18-karat gold because 22 karat gold was too soft to hold gemstones. As the first national jewelry brand, the challenges were twofold and formidable: establish Tanishq's credentials as a differentiated jeweler; and, educate consumers and get them to make a paradigm shift in usage and attitude. Yet, the company forged ahead. Venkat explained, "We had successfully overcome similar barriers in the watch business. We felt confident that we could do the same in jewelry and change the Indian jewelry market standard from 22-karat to 18-karat; from predominantly plain gold jewelry to studded jewelry; from traditional designs to Western designs." Set up as a separate division, with an independent marketing team and a state-of-the-art manufacturing plant with specialist designers and the Titan retail network in place, all systems were go. In February 1996, Tanishq launched its first 18-karat exclusively-designed gem-set jewelry range. The offering was positioned as "adornment the both body and the mind." The jewelry was distinctly western in style and design. (Exhibit 1 shows a sample) In July 1996, Tanishq opened its first boutique in Chennai. Traditionally, Indian jewelers had used their family names, usually male, as their brand. Unlike this trend, Tanishq was markedly feminine: "tan" for body in Hindi, and "ishq" which meant love. Advertising campaigns focused on creating desirability, and communicating that the Tanishq boutiques "were as precious as the Tanishq jewelry itself." Accompanying ads depicted women as art forms to display Tanishq, and sought to create mystery and intrigue around the brand.