Wednesday, October 31, 2007

Price Point Strategy

In this post I would like to highlight the strategy adopted by Maruti Udyog Limited (MUL) to dominate the market. It follows a price-point-strategy where in they have products available in almost all possible price points. If one were to study the number of variants and products available

1. Maruti800 from 198460 to 222272 (4 variants, including the metallic & non-metallic)
2. Alto from 239029 to 294175 (6 variants, including the metallic & non-metallic).
3. Zen Estilo from 325626 to 383162 (6 variants, including the metallic & non-metallic).
4. WagonR from 332982 to 456815 (14 variants, including the metallic & non-metallic).
5. Versa from 368162 to 479419 (3 variants)
6. Esteem from 451374 to 516 (3 variants)*
7. SX4 from 625000 to 731000 (3 Variants)
8. Swift from 405763 to 531458 (7 Variants)
9. Grand Vitara from 1393805 to 1493085 (2 Variants)

* Withdrawn

A total of 46 variants covering the price range from sub 2 Lakh to 7310000, and two variants in the 14-15 lakh bracket....

And further the news paper reports on the future plans of the company says that it has plans to introduce Swift Sedan shortly , which will be priced lower than SX4, It also plans to launch a big car in the range of 10-12 lakhs which seems to be an apparent whole in the price range offered by the company.

The logic provided by the company is that this strategy enables them to ward-off competition, retain customers in their fold when they want to upgrade and to give a feeling to the customers that MUL can provide them with variants at all price points.

The question which comes to my mind is this based on understanding the needs of the customers of a strategy driven by competition and market forces.....??

Tuesday, October 30, 2007

Segmentation and Demographics

If one were to actually try and understand the progression of the various bases on which segmentation is done, it initially started with use of basic demographic variables like age, income, education levels to segment the market. And moved on to non-demographic traits like values, tastes and preferences with the hope that these variables would have more influence on consumer purchases than their demographic traits.

The recent article in Harvard Business Review "Rediscovering Market Segmentation" has criticized that segmentation has become more of psychographic profiling diverting it from the original and true purpose of discovering customers whose behavior can be changed or whose needs are not being met. And the purpose of segmentation has become narrowly focused on the needs of advertising, which it serves mainly by populating commercials with characters that viewers can identify with.

But coming to the Indian context one can see many successful applications of the most elementary of segmentation variables that is sex or gender to design and market products which have been very successful in catering to a new segment of the markets which had not been tapped by the industry. The example of this trend is the case of the introduction of Emami Fair and Handsome, a fairness cream targeted at men. This was based on the findings that men were using fairness cream meant for women and there was a need to introduce a new fairness cream for men. And companies like Madura Garments which introduced the Allen Solly Women's Wear based on their finding that women buyers were behind the rapid sales of sizes 26 and 28 in its men's trousers.

Though one might want to keep moving to more and more complicated bases on which to segment the market but going back to basics in terms of understanding differences in consumer needs might not be a bad idea..............

Thursday, October 25, 2007

Window Shopping for a Fridge and a Water Purifier

We are in the middle of the peak festival season and everyone is in a festive mood, and most of the companies have come out with schemes to capitalize on this festive spending mood. Yesterday I decided to do a market visit to check-out the festival offerings, driven by a friend who wanted to purchase a fridge.

We went to the nearest consumer durables shop and were caught by the Philips water purifier guy wanting to sell purifiers. A need which had been there but had not seriously considered buying it due to various reasons. Found the guy at the small promotional counter quite well informed, but couldn’t take a decision as we wanted to compare the offer with the market leader Eureka Forbes….

Inside the shop we were shown many models of Samsung and told about the local scheme which was running and how last week itself nine of his customers had won Mobile phones. We couldn’t compare Samsung with LG and went to check that out in another shop nearby. The response from the shop sales person was not good, so we decided that Samsung was better.

On the way back we saw another promotional stall put up by Eureka Forbes, found the price to be similar to what was being offered by Philips, but it has the hassles of the getting an annual service contract and the salesman couldn’t provide us with the brochures and product information, maybe the fact that they have the water purifier market for themselves for a long time has made them complacent, again we decided that Philips was a better deal…

As a marketer when I was reflecting back on our experience I could clearly see that as consumers we didn’t see much difference between the fridge brands or the water purifier brands, and what made us decide in favor of one brand over the other was the experience we were getting at the POS while interacting with the sales people, and these sales people will not be directly appointed by the companies themselves they would be more of dealer appointed sales persons, though the company would give them special incentives to push their brands..

But at the end though we did so much of information collection we didn’t make the final purchase, we had taken a decision on the brands but the final purchase is still pending and who knows what might change…

Update : My conviction that a good sales person at the POS can lead to more brand switching compared to the effort one has to put to create the same kind of difference through mass media is getting reinforced. In one of our recent trips to the market we were looking for a room heater and had only two brands in our mind, USHA or Bajaj, but the owner at one the older shops in the city convinced us to buy an unknown brands of the room heater , the name which i have forgotten and all my efforts to remember it and it put a link here should be an adequate proof on the ability of the POS sales person to make the consumers switch brands....

Tuesday, October 23, 2007

Motorola Mobile India and US Market

A brand becoming the number two brand from No 5 with market share going up from 2.6 to 15% in a year in a market as highly competitive as the Mobile handsets market is a story which catches attention, which is what it did when I read it in the Business Standard-Strategist today. The company we are talking about is Motorola. The success in the market was attributed to the fact that could move people away from the feature driven compare-and-buy approach to making people buy the product for style and design making it a cool brand to buy. The article also says that it helped that Motorola’s sub-brands have catchy names like Razr, Pebl and Flip which helped it differentiate from competition. A combination of good promotions involving a celebrity's also helped the cause.

But in the youtube I found Al Ries the Marketing Guru criticizing Motorola for its branding strategy,It provided me with a contrast on the situation, which forced me to think are the fundamentals in marketing in these two countries so different??

At the end of the article in Strategist on the sucess of Motorola in India is given the fact that Motorola never had phones in the below 5000/- range and the launch of MotoFlip W220, which was priced under 4000/- only in August 2006. The launch was backed up with a good ad. It makes me wounder if consumers were just waiting for a sub 4000/- handset to be launched or was a mix of things ............

Monday, October 22, 2007

More on the Small Format Debate

In one of my recent posts I had written about how the small format is being favored by most retailers in the country adding more insights into the issue is an article, “Big Impact in a Small Format” article forwarded by one of my friends and also available at Strategy and Business. The article comes out with the major reasons why after years of the hype about “big box retailing” small format retailing is making a comeback in Europe and Latin America. The first reason is that the customer experience that one gets in a massive retail establishment is becoming increasingly unattractive. Second is that with the improvement in technology and economics, enable the small stores to procure at almost the same price and quality that the big box retailers are able to do because of their economies of scale. And the last reason given is the intimate relationship which the small retailers are able to provide to their customers. The article also provides more support on why the big retailer would not wipe out the small mom-n-pop stores in the country.

Previous Post on the Issue

Sunday, October 21, 2007

Paras Pharma Succeeding Through Segmentation

According to the Chairman and MD of the company Mr Girish N Patel “Most of the products of Paras have in fact been formulated based on the perceived needs and requirements of the common man.” This identification of consumer needs and satisfying them with new products has enabled the company to create many categories.

As a conscious strategy the company has stayed away from the ethical pharma segment and instead decided to focus its energies on the OTC segment. Stopache was the one of the initial successful products that the company launched in the late 1960's, but the company waited for many years before its next flurry of product launches came.

It started with the launch of Krack cream in 1993. The company found that the market was served by petroleum jelly and there was a need for a product specifically targeted at cracked feet, and thus Krack was launched backed by a well designed communication campaign to convince consumers that its use in the initial stages would reduce damage. Krack registered an sale of 3.8 million tubes in the first year which shot upto 8 miilion by 1996 and now the brand is pegged at around 32 crores.

Second brand which did well in the a competitive market was Moov, it differentiated itself against Iodex as colorless ointment in a tube and attacked Iodex with its positioning as a "stain-free" option. From that it has moved on to “Ek minute MOOV ki malish” proposition for its consumers. Moov single offer to the consumer of "pain relief" versus the multiple benefits being offered by other competing creams in the marketplace has also helped it become a market leader.

The experince from launching two products which exploited the basics of marketing of good segmentation, targeting and and positioning helped it do well in other products which it launched later on, like Dermi cool with a crystal clear positioning: immediate cooling sensation. The cooling sensation came from the mentholated formulation. Other sucesful brands in the posrtfoplio include Itch guard and Rung guard.............

Wednesday, October 17, 2007

Road-side eateries in the shadow of the Mc Donalds and Pizaa Huts

I was observing the presence of the small road-side eateries near a posh mall in Lucknow. The mall is one the older ones in the city and has many eating joints including McDonald s and Pizza Hut, and a few of the traditional eateries. In the by lane just besides the Mall there are series of road side eateries which do good business. The main customers for these road side eateries include the staff of the various retail outlets within the Mall and many visitors to the mall who would like to visit the mall but find the food stuff available inside too costly. You can find quite a few of the them having their tea and snacks in these eateries before or after their visit. As a marketer in spite of the hype which is created on the emergence of the mall culture in the country the question which comes to my mind is what percentage of the population are they catering to? and when would we able to have avenues to cater to the majority of the population of the country.

Tuesday, October 16, 2007

More on the Two Wheeler Market

The issue of the downturn in the two-wheeler market, whether it is temporary and reasons for that have been debated out by three experts in the economic times today, the link is provided below,
Two-wheeler Industry: Facing a Crisis?

Link to the previous post on the issue and comments..

Changing Marketplace - Two-wheelers

Tuesday, October 9, 2007

Indian Retail and the Issue of Size

Back to the Indian Retail Scenario, one aspect in which our organized retail differs from those in the advanced economies is the physical size of their set-ups. The Malls in UK and US are much larger in size and the area that they end up covering is many times more than the average mall in the country. One of the major constraints that we have is the availability of space in urban centers and if we were to locate the malls at some distance from the main heart land of the city we would find it difficult for consumers to come because of the lack of personal transport.

The other trend one can observe in the market place is the slow shift from the commitment to large formats to much smaller formats. Initially most of the players were bullish of the larger hyper mart formats but now most of them have started talking about operating much smaller formats. Though reliance with the opening of reliancemart a 1,65,000 sq ft hyper mart in Ahmedabad is bullish and plans to open over 30 such marts by the year and expand it to 500 by 2010 across the country. But with its retail plan coming unstuck in many states it is to be seen if it would be able to stick to it's expansion plans.

The largest player in the organized retail Pantaloon Retail is also planning to come-up with 1500 200sq ft no-frills KB fair Price shops in the next two years across the country.They propose to provide branded products at 10% less than the mrp and 20% off on the local brands, which is similar to what has been Subhiskha's proposition for a long time. Subhishaka the predominaltly south based chain has always followed the low-frills small shop size format. Spencer's Retail has it Spencer's daily which is small format and the bigger Spencer's hyper mart.

My feeling is that as with most new initiatives be it retail or telecom, we cannot copy what had worked in other countries and try to plant it in into India, we have go through the tough trial-and-error process to understand what would work for India and suitably adapt and change. And whoever is able to master the art sooner would lead ............

There is a good article written by Sunil Jain in Business standard on the 'Big Retail's Blunders'

Monday, October 8, 2007

Update on the Tata 1 Lakh Car........

The much awaited 1 lakh car of Tata's would soon be launched and this is generating a lot of buzz in the media . The company has managed to keep the details of the project under wraps and the Chairman Ratan Tata himself is supposed to be personally looking into the project. This sort of hype and buzz creation helps in a new product launch. The latest information which is supposed to have leaked is that the car would have a rear engine and also sport the world’s first 800 cc, turbo-charged, CRDi diesel engine. The company is working on two engine options for the Rs 1-lakh car. The petrol version with a 600 cc engine will debut first in 2008. The diesel version will follow later, probably in 2009.

As we get nearer to the launch we will keep getting more information and details about the car. It is not only people like me and you , but automobile manufacturers across the world are keenly watching..................

Previous Post on the 1 Lakh Car

Sunday, October 7, 2007

Marketing Durbales in Rural Areas...........

Despite all the potential that rural areas hold , marketing in rural areas is challenging. Among various things the nature of product to be marketed in terms of its weight and cost has an over whelming influence on strategy adopted. The nature of distribution would be different for FMCG versus durables. In the case of distribution of durables, one can afford to restrict the reach to towns with population between 99999- 20000 population, which would be around 1900 of them. Through then you can service your rural consumers, because certain studies have show that close to 90 percent of the durable purchase by villagers happens in these 1900 towns.

Suppose your task is to promote a certain brand of cement in the rural markets of Bihar and UP. You have certain details about how the villagers purchases and who all influences him, the mason in the village, other villagers and the dealer. You also know that the cement usage is tied-up with the agricultural cycle and the quantities purchased by the farmer is small and more frequent compared with the purchases of a urban consumer. The problems with low literacy levels and low brand awareness are also there. But you also know that what works well in the rural areas is the word-of-mouth, and once a brand is accepted as a good one your competitors would find it difficult to dislodge it , and you would enjoy the first mover's advantage. But then how would you go about promoting the product??

My opinion would be to target the Masons in the village by organizing meets in the nearby small town through the local dealers. In the meets the Masons could be provided with some training on new techniques in usage of cement and then some information on the company and its cement could be shared. Certain incentives and schemes could also be provided to promote the company's cement. The local Haats and Melas could be used to demonstrate the product and highlight the qualities and promote the brand name. Consumer schemes could be run to designed to increase the off take of the farmers and promote brand awareness and recall. All communication , whether it is the brand name written on the wall paintings or the dealer shops should be in the local language and so must be the infomercials which can be used to promote the brand in the villages. These combined with demostartion could help generate good word-of-mouth for the company.

With regard to distribution one could also think of accessing the informal channel of distribution of fertilizers and seeds which exist within bigger villages. In these villages the Village Mukhia or the bigger farmer would sell fertilizer's and seeds to other villagers during the agricultural season. These sales would happen from the house of the villager itself and usually no formal shop is set-up for that and the activity would stop after the end of the season. If one were to have access to this channel, then maybe the villagers could be supplied right up to the village directly.

Suggestions on how to develop a rural marketing plan for this cement company.....

Tuesday, October 2, 2007

Changing Marketplace - Two-wheelers

The dynamics of the Indian automobile market is changing, especially the two wheeler market. In the pre-liberalization era the market was dominantly a scooter market with the market share of scooter touching 70-80 percent of the two-wheeler sales . That changed with liberalization and the ratio changed and it was the motorcycles within the category whose sales dominated the product category. The company which rode the changed preference of the consumers towards motorcycles was Hero Honda, with their best selling Splendor and CD 100 they were able to witness unprecedented growth in both their top as well as bottom line. The change in consumer preferences were driven by both the fact that motorcycles were more fuel efficient and also were technologically superior. The introduction of Honda Activa did revive the scooter segment, but it could never reach it is previous levels. As of 2005-06 data the motorcycle sales are 85% of the total combined scooter and motorcyle sales, which is reverse of what was there 15 years back.

The latest sales figures for September show that there is a fall in the sales of two-wheelers as whole. Though the market leader Hero Honda has shown a small growth but they are cannot be compared with the phenomenal growth that they have had in the last few years and at the other end TVS motor company has shown a substantial drop of 29.04 percent in the overall two-wheeler sales and in motorcycles the drop is to the tune of 49.53 percent. The economy as a whole is doing very well, if one were to look at the sales of consumer durables and also the sales of cars (Though in cars there is a expectation that may be there would be a decline in the near future), so why is this decline in the sales of two-wheelers?

One of the reasons when one reads the newspapers is the rising interest rates and the tightening of finance from company's end for the 100 cc segment. But the market has also witnessed a shift in consumer preference from 100cc to the larger 125/150cc, as can be seen by the success that products like Pulsar, Discover have had in the market place. Companies are claiming that their new launches in the next few months would shore up the sales, but then one wonders if the lowered interest in the segment is due to poor marketing effort by the major players, in terms of new launches, campaigns ................... Hopefully the companies will pull up their socks and ensure a better performance in the upcoming festive season

Monday, October 1, 2007

Is the Honeymoon period in Indian Retail over????

Till now we have been only reading about the positive and good side of the Indian retail revolution, but now on we can slowly see the problems and issues being faced by the retail industry, and if one were to list a few of the not so positive the news items on the retail scenario in the country,

Reliance Retail sacks 400 employees in West Bengal

Reliance Retail to shelve UP, Orissa Plans
RIL wobbles in UP
Metro Faces Protests in Bangalore
Pantaloon retail expansion slows down due to high rentals

Though the first few case of problems which RIL is facing in UP might seem to be a isolated case with a single company and the second one relating to with only one aspect of the retail industry, but in my opinion these are just indicators of the problems which the retailers would face in the near future and would impede the speed with which the expansion would take place. The worrying factor is the implicit support of various state governments to the protests aimed at the organized retail, with their eyes on the forthcoming elections...

Second issue is the issues related to high rentals which are being charged by the Mall developers and the problems it is causing for retail chains which are expanding. Though there has been talks about developing a revenue sharing model, but it still in the development stage and more work needs to be done on that .

It is very important that these issues be sorted out in the next few months and the right signal sent to investors and companies anxious to make and entry into retailing. Outcome of these issues and the reluctance of the central government to move on the opening up of FDI in retail is that it is making India a less attractive destination for world-wide players and they would be more reluctant to enter the country...........

It seems we are on our way to move out of the initial honeymoon period and now need to get down to deal with the harder issues .....

UPDATE: `Quit Retail` movement gains mass base, rally on Oct 10

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