Hi everybody 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 five 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 Noise stands at 7.7 percent, Realme stands at 8.1 percent, Boat stands way ahead with a market share of 35.8 percent, which is more than the next three competitors combined on top of that, the revenue of the company has already crossed fifteen hundred crores. In FY21 the profits have already shot up by 61 percent since FY20. Because Boat is now going for an IPO, the question is: how did Boat achieve such an extraordinary position in the crowded hearable market of India? What exactly was their business strategy? As investors in students or business what are the business lessons that we need to learn from Mr. Aman Gupta and his wonderful team at Boat?
1. Boat’s Strategy similar to Oneplus
Now if you look at the rise of Boat, it is very very similar to the rise of Oneplus phones in India. Now many of you must have seen 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 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, despite the phone market is so crowded with Vivo Oppo, Samsung, Huawei, and Apple. How did Oneplus become a legend? The answer to this question lies in this pricing chart.
Now, if you look at the pricing of phones in India back in 2019, you will see that iPhone was the costliest. With the pricing of 85,000 rupees, then we had Samsung s10 priced at 55,000 rupees plus and then straight away. We had oppo v1 other companies that were primarily focused on selling phones below 25,000 rupees.
2. Oneplus filled the Pricing Gap
Now, although they had costlier phones in India, the focus of these companies was more on 25,000 rupees and below that price range. Now 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 a value for money as their counterparts, and this audience, ladies and gentlemen, 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 one was Xiaomi: mi 9 and 31 000 rupees and Oneplus 7, that was priced at 35, 000 rupees and both these phones positioned themselves exactly in between 25 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. Now I don’t know how many of you noted this, but then in the same year, the avengers end game hype was at its peak because when endgame was about to release in 2019 and everybody knows what an insane fan base Robert Downey jr has in India and this aspirational value is something where Xiaomi lagged, because of which Oneplus won a huge market share in India in 2019.
Now I'm not saying that everyone bought the Oneplus phone because 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 which got enough people to buy the phone. After that, when people say 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.
3. Hearables Market Expanded Post 2017
Now, if you own a Oneplus, you must have also noticed that you considered buying an iPhone, but when you saw the stupendous difference between the price of a 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 the Oneplus position have to do with the Boat? Well, if you look closely after Apple introduced, the AirPods in 2016, three important things happened in the same year.
There was a sudden boost in the fascination of wireless earphones number two: the Jio wave hit India in 2016 led to the skyrocketing of the screen. Time of Indians and 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 hearable in India. So from 2017-18 onwards many companies started jumping into the hearables market and if you look at the pricing charts 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. Then, in the premium category that is between 10 to 15k, we had only JBL as a significant brand, with its pod version being priced at 10, 000 rupees, then for sub-premium, that is, between 5000 to 10 000 we had Sennheiser's wireless earphones that started from 6400 rupees onwards and below this price point, that is below 5000 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 priced at three to four thousand rupees Skull Candy priced at two thousand rupees onwards. We had both rockers at one triple nine, and then we had Noise shots priced at three triple nine, and then we had several local brands, including Boat that was priced at 999, rupees, and below.
4. Reason for Boat’s Success
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 for that, while skull candy was only popular among enthusiasts and a very limited segment of the audience.
The other brands like Mi and Boat were barely known in the market, whereas Boat had become far more popular because they had roped in 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, the category Boat became far more familiar than its counterparts.
Now some people might say just because some celebrities endorsing. 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 the judgment that you make based on how the product is portrayed.
For example, if a restaurant looks like this, you subconsciously assume that it has a clean kitchen and, in our case, the fact about audio devices, especially earphones is that only trained, as in only the people who are involved in video, editing or sound editing can Spot the intricate differences in audio, whereas the knife ears will not be able to tell the difference in audio quality 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 that you can spot, the only value by which you will judge an audio product like your phone is by perceived value.
5. Increased Revenues for Boat due to Endorsements
So if I 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 latter than the former. 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 can 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 has already made 118 crores extra in revenue. The 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 to build an aspirational value for itself, both with endorsements and design. So after Hardik Pandya, they also roped in Rishabh Pant, Shikhar Dhawan, Bumrah, and Prithi Shaw 2019, followed by Neha Kakar, Kiara Advani, and Karthik Aryan, after that they also signed up Shreyas Iyer 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 now 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, a far more familiar product as compared to Xiaomi Mi 9, both through its collaborations, has been able to build the same aspiration value to stand out from the rest of the crowd, and we also know from the jockey case, study how powerful this aspirational value building is, and, secondly, one of the most underrated reasons 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 that both 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 was priced at just two thousand rupees and to my naive years both sounded as good as JBL. This is the reason why Boat is standing tall despite powerful players like Realme 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 when he loves it? Three years later after he graduates when his purchase power increases, he is more likely to buy a Boat product, whereas, in the case of Oneplus, the cost barrier itself is very high. And now, after laying a solid foundation of positioning itself as a lifestyle, the brand Boat is slowly expanding.
6. Rivalry Between Noise and Boat
Its price range positions itself in the upper range of four to five thousand rupees. And 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 valley for hearables after Apple created a huge market for smartwatches Noise is now getting ambassadors like Tapsi and Rohit Sharma and is even spending a ton of money in social media campaigns to build a spiritual value for its watches. And this is boosting not just its watt 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 between Noise and Boat is something that’s going to be very, very interesting. To watch this is how, by building a quality product, by choosing a wonderful time to enter the market by standing out from the rest of the competition through lifestyle marketing and strategic collaborations, Aman Gupta and his team have turned both into a market leader in the hearable Segment of the Indian market
7. Lessons from Boat
There are three very, very important things that you need to learn from this case study lesson number one: 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, 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 empty and you could make your mark over there. So, my homework to you is to take a pen and paper and do thorough market research of the smartwatches market, and you tell me how Noise and Boat have a solid chance of building a 1000 crore business.
Despite the presence of giants like Titan, Fitbit, Samsung, and Apple lesson, the number two celebrity endorsements, although looks like a cash drain in some cases, even today could be a game-changer in a crowded commoditized market.