Skin care spends and Kaya’s strategy

Indian customer spends anything between Rs 800 and Rs 1,000 in a skin care clinic. Affordability therefore, says the company, clearly isn’t an issue. Positioned as a premium experience, prices are adjusted for inflation. The skin care company Kaya can’t drop prices because their costs are high and need to maintain standards. But then, they are not really in a very price sensitive market. Even so, the downturn in the economy over the past year or so seems to have taken a toll on the business revenue in the second half of 2008-09 was up just 10 per cent, though it bounced back 26 per cent in the first three months of the current financial year.
That may not be exciting on a small base. The company makes special offers from time to time in order to drive revenue. For instance, customers were offered a discount if they opted for a second package. It is also now possible to gift someone a Kaya package for occasions such as Valentine’s Day, Mother’s Day or even Raksha Bandhan. Moreover, to drive the sale of products which now account for around 15 per cent of revenues, an online home delivery model has been created in 200 towns. However, for Kaya to be able to sustain revenue growth at 35-40 per cent, it has to scale up as well as improve capacity utilisation.
The company’s strategy is to increase penetration within cities rather than spread to more towns. Today, Kaya has a presence in 24 cities in the country either through standalone outlets or a shop-in-shop in department stores such as Lifestyle or Shopper’s Stop. But the real need is for more clinics within a city because people are averse to traveling long distances. That has to be balanced with a branch size that’s viable.
Currently, the business is skewed towards Mumbai and Delhi which bring in half the revenue. On an average, capacity utilisation is just around 50 per cent. In other words, many clinics are not as profitable as they ought to be. Same clinic revenue has been virtually flat in recent months. In a bid to push up utilisation, one idea that is being toyed with is Happy Hours lower prices at timings that may not be convenient.
Currently, just around 40 of the 87 clinics in India make money. The management believes its new information technology solutions package which will focus on customer relations management will do the trick. Kaya needs a better way to target clientele and are toying with the idea of introductory pricing. A differentiated loyalty program and schemes to reward customers are also on the cards.
Kaya has also tied up with Jet Airways and HSBC to offer their customers special benefits. And since the average ticket size of such customers is fairly hefty at Rs 6,000, Kaya has tied up with ICICI Bank and HDFC bank to offer customers zero-interest loans. A key focus area will be to reduce lapses; in other words, prevent customers from dropping out midway through the treatment.
To attract new customers, Kaya has roped in Riddhima Kapoor as brand ambassador. Although not a star, she is considered approachable with some star quality because of her parentage she is the daughter of yesteryears’ film stars Rishi Kapoor and Nitu Singh. And, of course, she has good skin.
Customer events organised with Riddhima since she came on board in April this year brunches at tony restaurants have been well attended. The choice of Riddhima as a brand ambassador is a good one. Kaya is not a brand that can be endorsed by a big star; the endorsement needs to be credible. Riddhima’s like the girl next door but with some aspirational quality and adds credibility to the brand.