Preschool Franchise Companies Exploring Varied Franchise / Other Marketing Solutions To Reach End Consumers.

Organised players go aggressive on branding, market segmentation and price differentiation

When Australia-returned Lina Asher came to Mumbai to volunteer as a teacher, she saw a terrific opportunity in the absence of an organised pre-school player in the market.

Asher then borrowed Rs 30 lakh from her dad to float her own chain of pre-schools— Kangaroo Kids Education (KKEL). “I promised my dad a good investment and today we are a chain of 60 schools in 17 cities across India, with centres in Dubai and Maldives,” says Asher.

While the segment is still dominated (95 per cent) by the aunty-next-door-model kind of pre-schools, organised players are focusing on branding themselves better to reach the target segment. At present, India has around 11 major chains and approximately 10 smaller players active in the space.

And most of them operate just like an FMCG or consumer durables firm would do in marketing themselves – be it in branding, product differentiation and market segmentation according to the specific profile of customers within a locality.

“Branding is vital for us as we aspire to be a national player. We market ourselves with women magazines, newspapers and television channels to increase the enrolment focus,” says Prajodh Rajan, Vice President and Project Head, EuroKids.

EuroKids, present in 258 towns with 650 pre-schools, will spend Rs 4.5 crore on branding and marketing compared to Rs 3 crore last year. Educomp Solutions has also launched a brand ‘Roots to Wings’ with 60 pre-schools at present. Educomp acquired a 50 per cent stake in Euro Kids in 2008 for Rs 39 crore.

These schools have evolved their own pricing model. So while a market like Mumbai may see four-five different pricing strategies, other towns may see uniform pricing. “We have divided our pricing model into four—A B C and D. While for A model pre-schools (upmarket locations) have a standardized fee structure between Rs 30,000 to 40,000 per annum, we charge Rs 20,000 to 30,000 in suburban Mumbai markets. For other locations our charges vary between Rs 12,000 to 20,000 per annum,” says Rajan.

While Kangaroo Kids is primarily a premium brand at an average annual fee of Rs 35,000-45,000, Kid Zee charges anywhere between Rs 100,000 and 500,000 per year for its schools in upmarket metro locations. However, in suburban Mumbai or Delhi or Bangalore, the school's charges could vary between Rs 10,000 and 20,000.

Pre-schools do not follow any structured curriculum. As pre-schools are neither a state or centre subject, the regulatory mechanism does not come in play. That is probably the reason why the sector has been receiving a flurry of investments from the private equity players.

According to a recent report on education by Kaizen Management Advisors, a private equity fund, pre-schools are estimated to be a Rs 2,300 crore segment, and the market is expected to grow to Rs 4,600 crore market by 2012 (35 per cent CAGR).

The growth is due to low penetration (one out of 100 children enrolled), of the 119 million children between the ages of one to four.

“The market is expected to expand by more than two times in size by 2012,” the study reports.

This is evident from the fact that Zee Learn, which runs the pre-school chain — Kid Zee — plans to expand from its 600 odd pre-schools at present, to 2,000 schools in the next three years.

“It’s a service market. If you focus on doing the right thing on child development, an image is being created automatically,” says Sumeet Mehta, CEO - Zee Learn.

Pre-schools require a low upfront investment. Rentals form the major expense along with staff cost.

Organized players have largely scaled up using the franchisee route — 1,700 schools catering to 200,000 students at present.

While these chains also formulate their own curriculum and train their own teachers, infrastructure offerings at the schools vary in accordance with the fee. So while the schools in upmarket areas might have an additional frill of an air conditioned class room and outdoor toys, the ones priced less would do sans these facilities. Teaching methodology and curriculum however, remains the same.

“The sector appears attractive due to its non-regulatory framework. With the kind of aggressive growth plans the organised players have in place, there is a lot of money chasing very few opportunities. It’s only going to get bigger and bigger,” said a senior executive from a private equity firm.

Tags:Franchise Marketing, Franchise Branding, Preschool Marketing, Franchise Advertisements, Lina Asher, Kangaroo Kids, Eurokids, Prajodh Rajan, Zee Learn,sumeet mehta,

Source:Pre-schools learn the ABC of promotions/Business Standard/Kalpana Pathak / Mumbai July 29, 2010, 0:54 IST

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