MM01
Marketing Management
Assignment I
Assignment Code: 2012 MM01 B1 Last Date of Submission: 15th October 2012
Maximum Marks: 100
Attempt all the questions. All questions carry equal marks.
Section A
1 a) What is meant by the marketing concept?
(10)
b) Explain what is meant by the terms social marketing and societal marketing?
(10)
2 a) What factors should marketer take into account in scanning the marketing environment?
(10)
b) Write short notes on the following:-
(i) BCG Matrix
(ii) Ansoff matrix
(iii) McKinsey 7s Framework
(iv) 4P’s and 4A’s of marketing
(4 x 2.5)
3 Do people know what they want? (And if they do will they tell you?) Then how does sales and marketing persons evaluate consumer needs and wants? Discuss.
4 a) A major detergent manufacturer proposes spending 150 crores approx. on a twelve month national advertising campaign to promote an environmentally friendly washing liquid. Advise the marketing director how the effectiveness of the campaign could be monitored?
(8)
b) Suggest appropriate ways of segmenting the markets for the following products or services : (a) rail travel; (b) banks; (c) ballpoint pens; (d) package holidays.
(6)
c) Is positioning helpful for not for profit organizations? If so, how should a charity select and implement a positioning strategy?
(6)
Section B
5. Case Study
Hyderabad Batteries Ltd.
It was the summer of 2001 and Mr Reddy, an application engineer from the high-tech battery company HBL-NIFE, Hyderabad was on vacation in his native place. He went to visit his friend who owned a factory there. On the day of the visit he found that his friend was in deep distress. The power had failed and the genset (the diesel powered standby generator) could not be started because the starting battery fitted near the genset suddenly went dead. The factory had come to a grinding halt and the entire raw material in the batch being processed would have to be discarded unless the power was restored immediately. The production manager was in a panic. Since the factory was located 40 km away from the nearest town, getting a replacement battery would take at least a couple of hours. This would not only mean the loss of material for one batch, but also the time lost in preparing for the next batch.
Mr.Reddy’s host was embarrassed and furious since this was not the first time that the battery had died on him. He had replaced the battery only a year ago and never expected that he would have a problem since the battery seemed to be working the day before when he started the genset. He asked Mr Reddy why battery manufacturers could not come up with a better battery for gensets considering that technological advancements could now fly a man to the moon. This set Mr Reddy thinking. Only the other day at HBL-NIFE he had received the Airforce approval for the new aeronautic battery, which was used for starting the aircraft. If it could start an aircraft, why not a stationary genset? This could be a new opportunity for his company.
Background
The requirement of power in the country is growing at a fairly substantial rate and the government-run power generation and distribution companies are finding it difficult to keep pace with the requirements. Consequently, the user is affected by way of frequent power outages due to overloading of the main utility power grid. This situation is more acute in some states when compared to others. Process industries that require power on a continuous basis, as a rule, started having their own captive power generation since they could not depend on power from this main utility power grid. Some smaller industries went for their own standby gensets. In a few cases, users even installed UPS systems (Uninterrupted Power Supply) that use batteries to store and generate the backup power on demand. However, since UPS power is very expensive, the UPS sytems are used typically to bridge the gap between power failure and genset starting. Oehr user segment such as telecom depend on gensets to prevent a disruption in communications when standby batteries cannot address prolonged power outages. Gensets are the most common standby power available today and it has become common for any industry utilizing electrical power to have its own gensets for providing backup power.
When the main power fails, the drill was to start up the genset promptly and the internal power distribution switched to the backup power so that essential operations could be continued. Starting the gensets typically requires the use of batteries to power the DC starter motor. This DC motor requires a high current for a very short time (typically less than 5 seconds for a healthy engine) to crank the engine so that its RPM (rotational speed) builds up adequately so as to be self-sustaining. The type of battery being used is the automotive battery with the most common rating of 12 volt, 180 ampere hour capacity, which is widely used in all large transport vehicles such as trucks and buses. The advantages of using these automotive batteries for genset starting are:
• They are available from any battery shop and sometimes even an auto garage in small towns. A lot of small battery-shops in remote areas refurbishing old batteries have also come up.
• The cost of a 12 V, 180 Ah battery is approximately Rs 2000 which is well within the typical cash purchase limits of an ordinary organization.
• Very competitive prices are given by some of the “backstreet boys” who recondition truck batteries and sell them to this secondary market-the genset and inverter.
• No special expertise is required for maintaining the battery during usage.
The disadvantages of these batteries are
• The life of the battery is only around 2 years for a new one and 1 year if it is a reconditioned one.
• The battery deteriorates if it is underutilized.
• Sudden death of a battery can be caused by corrosion of its terminals and leakage. Self discharge of the battery is high and increases with the age of the battery.
• A new battery needs to be formed (initial-charged) for 3 days before it can be put to use. Because of this long activation time, immediate or emergency replacement is not possible.
• Battery is heavy and difficult to transport.
• Regular maintenance is required to top-up the batteries with demineralized water and to carry out specific gravity checks on the electrolyte used in the battery.
• Battery causes acid fumes and spillage, with associated damage to its immediate environment. Even floor tiles and engine beds can be damaged.
Understanding the Consumer Needs
Back in the office, Reddy lost little time to discuss the opportunity with his colleagues and his GM and MD. A quick survey was conducted by the company by using the personal interview method to collect data from a wide user base and the manufacturers of the gensets. The following consumer needs emerged:
• Yes, almost all consumers will welcome a more reliable battery. (The battery should be able to start the genset whenever required and respond instantly. After all, the very purpose of the genset is to prevent disruptions due to break in power).
• The ideal battery for genset starting must be maintenance free. The genset maintenance staff are usually mechanically oriented with only peripheral knowledge of storage batteries. (Even topping up and specific gravity checks should not be needed).
• A one-to-one replacement for the battery must be available from the shelf in a ready-to-use condition. If this feature is assured, they can think of buying a second battery and keeping it as a replacement spare in the tools and spares rack. (There should be no delay for activation by acid filling and first charging of the replacement battery).
• It should have a very low self-discharge, suitable for storage on the shelf. It should not deteriorate by infrequent use or insufficient recharging. (It should be able to start the genset even if it (the battery) has not been used for a month. In many places the arrangement is such that the battery is charged only when the generator is in use with no provision for charging from mains during normal operation).
• It should be intrinsically designed to give a large burst of power for a short time and also restore quickly.
• It should not cost more than the battery presently being used.(User would not like to spend more than what he is currently doing whatever the other advantages may be)
• Smaller and lighter battery is welcome. (Not considered too important)
• Consumer would welcome features that will ensure safety while handling and in use. (No more nuisance of acid spills or corrosive fumes)
• Consumers have been conditioned to think that the capacity of the battery is somehow important and is an assurance for reliable starts. The engine room mechanics and electricians felt that a capacity of 180 Ah is necessary.
The HBL-NIFE Solution
The high-tech management of HBL-NIFE felt that here is a case where every one of the identified needs could be addressed and met. The company had the good fortune that it was already in the field of developing special batteries for special needs. Innovation and niche marketing have been the raison d’etre of the company. They have been supplying starter batteries to the acronautic industry and developed very compact and reliable batteries for use on board as well as on ground. The batteries were really compact, light weight, no-spill type and had extraordinary shelf-life and power. The batteries were specially designed to “pack a punch”. One such battery-the model XX could be used for starting gensets with slight modification.
The Business Equations
The derated capacity of batter XX was around 30 Ah. This would “appear” low but in supplying short bursts of power as starter battery it is in fact superior to the 180 Ah automotive battery. Due to its low leakage, and lower capacity its recharge needs are low.
HBL-NIFE, if it considers as having already recovered the hefty development charge, can afford to treat this new business as marginal and accept an ex-works price of Rs 1500 per battery for sizeable batch orders. There are six major manufacturers of gensets buying 10,000 batteries per year and the replacement market is another 6000. Even if 25% of this total can be captured, it would mean a new business of 4,000 batteries valued at Rs 6 million.
The main chunk of this new business will have to come out of the 10,000 automotive batteries of 180 Ah capacity sold by the established battery manufacturers to the siz OEMs, namely the genset manufacturers. Increasing chunks from the replacement market will follow once the XX is fitted as OEM. As far as competitor reaction is considered, there is nothing much to fear. For the large manufacturers of automotive batteries the genset OEM segment is so small that they may not react. The backstreet boys that feed the replacement market will react the only way they can do – that is using their local contacts and offering further price reductions. But in the long run they have to give way to technology.
Price intelligence was that OEMs are procuring branded batteries at Rs 1900 and for replacements users pay around Rs 2500 for branded batters and Rs 1700 for reconditioned ones.
Case Questions
1. Based on conventional wisdom, the entire market believes that 180 Ah capacity is needed. Should HBL-NIFE disclose the capacity of its battery?
(5)
2. How can brand awareness be created? HBL-NIFE is known only in the Defence and major power house sectors. Should they create a sub-brand for civil or genset market? How should they capitalize on the features of battery XX? (reliable, ready-to-use, packed with power, can be called up when needed, midget with the power of a giant, etc.). Will a new brand name be needed? (Many suggestions are being given-Vamana, Lightning, Acro, Alladin, Little Genie, Punch, Start Pack, Dynamic etc.)
(5)
3. Should HBL-NIFE concentrate on the OEM? What should be the strategy for getting the battery type approved and specified by OEM? The battery constitutes less than 1% of the cost of the entire genset. What will motivate the OEM, technology or price?
(5)
4. Should HBL-NIFE offer a price lesser than the competing 180 Ah or a price higher on the ground that the item is technologically superiors? The price policy should not upset the applecart by disturbing Defense, the main customer of HBL-NIFE. It should ensure long-term maximum profitability in the civil sector.
(5)
MM01
Marketing Management
Assignment II
Assignment Code: 2012 MM01 B2 Last Date of Submission: 15th November 2012
Maximum Marks: 100
Attempt all the questions. All questions carry equal marks.
Section A
1 a) To what extent can a brand rely solely on advertising to boost its fortunes?
(10)
b) Write short notes on the following
(i) Brand extension
(ii) Brand rejuvenation
(iii) Brand loyalty
(iv) Brand equity
(4x2.5)
2 a) Consider a major FMCG manufacturer that wishes to add to its range a savory crisps by introducing a new health food crisp that added vitamins and minerals. Discuss the nature of the test marketing that should be undertaken to minimize the risks associated with introducing such a new product? Take example of any Indian company?
(10)
b) Explain what you understand by price elasticity of demand. Give examples of inelastic and elastic products or services, discussing how the concept might be used in marketing situations?
(10)
3 a) There are many examples of the role of noise in human communications. One story concerns a communication exchange which purportedly took place during the first world war. The message sent by the source was `send reinforcements, we’re going to advance. As a result of `noise’ in the channel the message which finally arrived was `send three-and-four pence, we’re going to a dance’.
(10)
(i) What forms of noise may have contributed to this miscommunication?
(ii) State some ways in which this noise could have been reduced?
4 a) Write short notes on the following:-
(i) Sales Targets and sales quotas
(ii) Sales Territory
(iii) Sales control
(iv) Direct Sales
(4 x 2.5)
b) What are key differences between traditional media and internet?
(10)
Section B
5. Case Study
What Makes Titan Watch Tick
A watch denotes much more than a mere device to tell time. To the user it is a means or a tool for managing time and to plan the day. More than anything else, it is a personal possession and a constant companion. For an increasing number of consumers, the watch is becoming an expression of personality or a fashion statement. Consumers have come to depend on this particular item like none. There is no wonder therefore that world over consumers like to choose watches by personal involvement. They also will not like to be seen wearing a watch they dislike. The diversity in human behavior being what it is, every purchase of a watch is an exercise of consumer behavior. The consumer is always looking for the “good to wear” attribute along with the basic “good in keeping time” quality in a watch.
The general rise in living standards coupled with the pressure on time in modern society is making an accurate watch a necessity and an essential item. At the same time for those populations who are moving into higher classes or echelons or society, owning more than one watch is common and owning a latest expensive watch is a status symbol. It is quite common that a consumer in this class owns two or three watches at a time. Further, such a consumer may be buying up to a dozen watches during his life time.
Watches have also become a favorite gift item. Here, the giver as well as the receiver expect it to convey a value message, the brand itself being a significant part of the message.
With this background let us examine the scene in India which is at the same time a typically emerging consumer market and a developing country market.
The state owned Hindustan Machine Tools Ltd. (later renamed simply as HMT Ltd.) and also another state owned to Allwyn Ltd. went for two best collaborations that one can think of HMT went with Citizen of Japan and Allwyn went with Seiko of Japan. Both made good harvest during the two decades leading into the eighties. That was when the two companies lost way and there came the new bright and bold star Titan. Though Titan also had an effective French collaboration and a connection with the house of Tata, it went and built a brand of its own.
In the modest words of Xerexes Desai, MD of Titan for many years, luck played a very important part in favour of Titan. However, market watchers agree that it is the hard work and shrewd brand management and astute distribution in the first place that are responsible for the phenomenal success of Titan.
Every management student wants to known what is the secret behind this success. Nothing will throw better light on it than the following excerpts which we reproduce from the article “Clash of the Titans” published in Times of India (December 13,2000)
________________________________________________________________________
Date Line December 13, 2000, Bangalore.
Till barely a decade ago, HMT was the undisputed timekeeper of the nation. Today, that honour goes to Titan. Titan made watches into a fashion statement, and later go into the lower end with Sonata, where again the company has seen phenomenal success. Even global biggies like Swatch, Citizen and Seiko have so far had little impact on the company’s market share. Titan vice-chairman and managing director Xerxes Desai tells Deepanjali Bhas and Sujit John what makes Titan tick.
How is it that foreign watch companies haven’t set up manufacturing facilities in India?
As per the rules, if you want to call yourself a Swiss watch, 50 per cent of the movement components in a watch must be made in Switzerland and the watch itself must be assembled in Switzerland. The only company which could set up a manufacturing facility here is the Swatch Group. There’s been talk about this.
As for the Japanese, they have not succeeded in getting their act together. Citizen is making its third attempt in India. And it’s not working out well for them. Citizen and Seiko are very much on the backfoot worldwide. They have dramatically lost market share in Europe and the US. They are short of human resources. They are having trouble in their primary markets. So when they will actually make a dent in markets like ours, cannot be said. We have taken their share from them in markets like the Middle East and Europe.
What do you make of the Chinese Challenge?
The Chinese have no brands, but they make their watches incredibly cheap. Throughout the work we have people buying from China and putting their labels. They make their watches at very low costs, through heavy exploitation of labour, government protection and they enjoy an indulgent financial sector, which provides loans at low interest rates.
There’s also huge overcapacity in China. Each manufacturer tries to outbid the other on price. In fact, they are all doing rather badly. But they are a threat worldwide now. The world is flooded with cheap products from China. But it’s not sustainable, particularly because the Chinese haven’t built any brands.
At the lower end, we too have sonata, which is doing wonderfully. It is now outselling the Titan brand in volume. So we are very well equipped to handle the lower end.
You don’t foresee any major challenge to Titan in the near future?
Something of a challenge can come in the middle segment – especially the fashion brands. They buy their products from China, and they add their name. Like Esprit. Other brands in this segment include Guess and Fossil. But these have built their equity in the US and Europe at a certain price. These prices are high for India. And it’ll be difficult for them to sell them here at lower prices. I don’t know to what extent they’ll pose a challenge. We’ll combat them in the same way we have been combating all along with out brand name and marketing know-how. Our sheer size is also a barrier for them.
Have you just been plain lucky? A decade ago, watches were virtually identified with HMT.
Yes, luck has played a very important role in Titan’s success. HMT neglected the lower end of the market, and that helped us.
How is it that despite liberalization, in the watch industry Titan has held on to its huge market share?
Ever since quantitative restrictions on watches were taken off about three year ago, we’ve seen a fair amount of activity in terms of advertising and foreign presence in retail, but very little activity in terms of actual sales by our competitors. Among the national players, Allwyn is dead, HMT and Timex are on life support, Maxima comes and goes.
As for newcomers, I reckon there are formidable entry barriers for them. Foreign brands haven’t been successful because of such barriers, the fact that we have a strong grip on distribution, and the high prices of foreign watches. Among the Swiss brands, for instance, there are patricians and plebians, kings and commoners. But they are all expensive. The kings are beyond anybody’s reach. And the commoners are really not worth buying at the price range they are in.
But what about the brand value attached to foreign watches?
Yes. But if people buy these, its just once in 10 or 20 years, or once in a lifetime. There are hardly any repeat buys of a thing like that. And if one of those is less than Rs 40,000, it again does not make sense to buy it. Statistically, Indians do not put down a large amount of money to buy a watch. Percentage of people how are wiling to pay over Rs 10,000 for a watch I think would be really small.
However, what these Swiss watches would do is to create a market segment for us at the upper end. People who have so long not seen watches beyond Rs 6,000 – 7,000, are now exposed to watches priced at Rs 100,000 – 200,000. This we imagine would create a desire to own more expensive watches. And in turn create an opportunity for us in the upper segment. We are right now waiting for that opportunity to manifest itself, and it’s beginning to happen. We are looking at introducing a new brand in this segment, a luxury brand that would have an appeal greater than that of Titan.
We began with the Middle East, built a strong presence there. In our segment we are among the top three or four brands in the UAE and Oman. We are No. 1 in Oman in volume terms. We are doing moderately well in South East Asia, which now needs more attention. These markets have been neglected by everybody else. Bangladesh, Sri Lanka and Myanmar are markets that even the Japanese have neglected.
We are doing modestly well in Europe. Our initial heavy investments were in getting to know the market, establishing distribution. We expect current operations to break even this year. But with one important qualification: the ad spend continues to come from India. Two, three years from now, the volumes generated in Europe should take care of the ad spend too and the operation should start making profits. We are concentrating now in a few countries – Portugal, Spain, France and the UK. If you have to be a global player, you have to show your European credentials. Europe is a very demanding market.
Have you ever thought of having brand ambassadors, like the Swiss brands do?
Celebrity endorsement does make sense. Omega has 15 brand ambassadors but it’s a huge expense. We’ve looked at the possibility but right now, no. We might do it later for a really premium brand.
Case Questions
1. What aspects of behaviour of Indian consumers were addressed by Titan.
(4)
2. Why is Titan not keen on celebrity endorsement at this point of time.
(4)
3. If Citizen of Japan and Swatch of Switzerland were to enter India what will be the consumers’ brand perceptions vis-à-vis Titan?
(4)
4. Wrist watch is consumed by both men and women consumers but for different perceptions of need. Discuss.
(4)
5. Can Titan promote wrist watches as items of jewellery or as items of investment?
(4)
Marketing Management
Assignment I
Assignment Code: 2012 MM01 B1 Last Date of Submission: 15th October 2012
Maximum Marks: 100
Attempt all the questions. All questions carry equal marks.
Section A
1 a) What is meant by the marketing concept?
(10)
b) Explain what is meant by the terms social marketing and societal marketing?
(10)
2 a) What factors should marketer take into account in scanning the marketing environment?
(10)
b) Write short notes on the following:-
(i) BCG Matrix
(ii) Ansoff matrix
(iii) McKinsey 7s Framework
(iv) 4P’s and 4A’s of marketing
(4 x 2.5)
3 Do people know what they want? (And if they do will they tell you?) Then how does sales and marketing persons evaluate consumer needs and wants? Discuss.
4 a) A major detergent manufacturer proposes spending 150 crores approx. on a twelve month national advertising campaign to promote an environmentally friendly washing liquid. Advise the marketing director how the effectiveness of the campaign could be monitored?
(8)
b) Suggest appropriate ways of segmenting the markets for the following products or services : (a) rail travel; (b) banks; (c) ballpoint pens; (d) package holidays.
(6)
c) Is positioning helpful for not for profit organizations? If so, how should a charity select and implement a positioning strategy?
(6)
Section B
5. Case Study
Hyderabad Batteries Ltd.
It was the summer of 2001 and Mr Reddy, an application engineer from the high-tech battery company HBL-NIFE, Hyderabad was on vacation in his native place. He went to visit his friend who owned a factory there. On the day of the visit he found that his friend was in deep distress. The power had failed and the genset (the diesel powered standby generator) could not be started because the starting battery fitted near the genset suddenly went dead. The factory had come to a grinding halt and the entire raw material in the batch being processed would have to be discarded unless the power was restored immediately. The production manager was in a panic. Since the factory was located 40 km away from the nearest town, getting a replacement battery would take at least a couple of hours. This would not only mean the loss of material for one batch, but also the time lost in preparing for the next batch.
Mr.Reddy’s host was embarrassed and furious since this was not the first time that the battery had died on him. He had replaced the battery only a year ago and never expected that he would have a problem since the battery seemed to be working the day before when he started the genset. He asked Mr Reddy why battery manufacturers could not come up with a better battery for gensets considering that technological advancements could now fly a man to the moon. This set Mr Reddy thinking. Only the other day at HBL-NIFE he had received the Airforce approval for the new aeronautic battery, which was used for starting the aircraft. If it could start an aircraft, why not a stationary genset? This could be a new opportunity for his company.
Background
The requirement of power in the country is growing at a fairly substantial rate and the government-run power generation and distribution companies are finding it difficult to keep pace with the requirements. Consequently, the user is affected by way of frequent power outages due to overloading of the main utility power grid. This situation is more acute in some states when compared to others. Process industries that require power on a continuous basis, as a rule, started having their own captive power generation since they could not depend on power from this main utility power grid. Some smaller industries went for their own standby gensets. In a few cases, users even installed UPS systems (Uninterrupted Power Supply) that use batteries to store and generate the backup power on demand. However, since UPS power is very expensive, the UPS sytems are used typically to bridge the gap between power failure and genset starting. Oehr user segment such as telecom depend on gensets to prevent a disruption in communications when standby batteries cannot address prolonged power outages. Gensets are the most common standby power available today and it has become common for any industry utilizing electrical power to have its own gensets for providing backup power.
When the main power fails, the drill was to start up the genset promptly and the internal power distribution switched to the backup power so that essential operations could be continued. Starting the gensets typically requires the use of batteries to power the DC starter motor. This DC motor requires a high current for a very short time (typically less than 5 seconds for a healthy engine) to crank the engine so that its RPM (rotational speed) builds up adequately so as to be self-sustaining. The type of battery being used is the automotive battery with the most common rating of 12 volt, 180 ampere hour capacity, which is widely used in all large transport vehicles such as trucks and buses. The advantages of using these automotive batteries for genset starting are:
• They are available from any battery shop and sometimes even an auto garage in small towns. A lot of small battery-shops in remote areas refurbishing old batteries have also come up.
• The cost of a 12 V, 180 Ah battery is approximately Rs 2000 which is well within the typical cash purchase limits of an ordinary organization.
• Very competitive prices are given by some of the “backstreet boys” who recondition truck batteries and sell them to this secondary market-the genset and inverter.
• No special expertise is required for maintaining the battery during usage.
The disadvantages of these batteries are
• The life of the battery is only around 2 years for a new one and 1 year if it is a reconditioned one.
• The battery deteriorates if it is underutilized.
• Sudden death of a battery can be caused by corrosion of its terminals and leakage. Self discharge of the battery is high and increases with the age of the battery.
• A new battery needs to be formed (initial-charged) for 3 days before it can be put to use. Because of this long activation time, immediate or emergency replacement is not possible.
• Battery is heavy and difficult to transport.
• Regular maintenance is required to top-up the batteries with demineralized water and to carry out specific gravity checks on the electrolyte used in the battery.
• Battery causes acid fumes and spillage, with associated damage to its immediate environment. Even floor tiles and engine beds can be damaged.
Understanding the Consumer Needs
Back in the office, Reddy lost little time to discuss the opportunity with his colleagues and his GM and MD. A quick survey was conducted by the company by using the personal interview method to collect data from a wide user base and the manufacturers of the gensets. The following consumer needs emerged:
• Yes, almost all consumers will welcome a more reliable battery. (The battery should be able to start the genset whenever required and respond instantly. After all, the very purpose of the genset is to prevent disruptions due to break in power).
• The ideal battery for genset starting must be maintenance free. The genset maintenance staff are usually mechanically oriented with only peripheral knowledge of storage batteries. (Even topping up and specific gravity checks should not be needed).
• A one-to-one replacement for the battery must be available from the shelf in a ready-to-use condition. If this feature is assured, they can think of buying a second battery and keeping it as a replacement spare in the tools and spares rack. (There should be no delay for activation by acid filling and first charging of the replacement battery).
• It should have a very low self-discharge, suitable for storage on the shelf. It should not deteriorate by infrequent use or insufficient recharging. (It should be able to start the genset even if it (the battery) has not been used for a month. In many places the arrangement is such that the battery is charged only when the generator is in use with no provision for charging from mains during normal operation).
• It should be intrinsically designed to give a large burst of power for a short time and also restore quickly.
• It should not cost more than the battery presently being used.(User would not like to spend more than what he is currently doing whatever the other advantages may be)
• Smaller and lighter battery is welcome. (Not considered too important)
• Consumer would welcome features that will ensure safety while handling and in use. (No more nuisance of acid spills or corrosive fumes)
• Consumers have been conditioned to think that the capacity of the battery is somehow important and is an assurance for reliable starts. The engine room mechanics and electricians felt that a capacity of 180 Ah is necessary.
The HBL-NIFE Solution
The high-tech management of HBL-NIFE felt that here is a case where every one of the identified needs could be addressed and met. The company had the good fortune that it was already in the field of developing special batteries for special needs. Innovation and niche marketing have been the raison d’etre of the company. They have been supplying starter batteries to the acronautic industry and developed very compact and reliable batteries for use on board as well as on ground. The batteries were really compact, light weight, no-spill type and had extraordinary shelf-life and power. The batteries were specially designed to “pack a punch”. One such battery-the model XX could be used for starting gensets with slight modification.
The Business Equations
The derated capacity of batter XX was around 30 Ah. This would “appear” low but in supplying short bursts of power as starter battery it is in fact superior to the 180 Ah automotive battery. Due to its low leakage, and lower capacity its recharge needs are low.
HBL-NIFE, if it considers as having already recovered the hefty development charge, can afford to treat this new business as marginal and accept an ex-works price of Rs 1500 per battery for sizeable batch orders. There are six major manufacturers of gensets buying 10,000 batteries per year and the replacement market is another 6000. Even if 25% of this total can be captured, it would mean a new business of 4,000 batteries valued at Rs 6 million.
The main chunk of this new business will have to come out of the 10,000 automotive batteries of 180 Ah capacity sold by the established battery manufacturers to the siz OEMs, namely the genset manufacturers. Increasing chunks from the replacement market will follow once the XX is fitted as OEM. As far as competitor reaction is considered, there is nothing much to fear. For the large manufacturers of automotive batteries the genset OEM segment is so small that they may not react. The backstreet boys that feed the replacement market will react the only way they can do – that is using their local contacts and offering further price reductions. But in the long run they have to give way to technology.
Price intelligence was that OEMs are procuring branded batteries at Rs 1900 and for replacements users pay around Rs 2500 for branded batters and Rs 1700 for reconditioned ones.
Case Questions
1. Based on conventional wisdom, the entire market believes that 180 Ah capacity is needed. Should HBL-NIFE disclose the capacity of its battery?
(5)
2. How can brand awareness be created? HBL-NIFE is known only in the Defence and major power house sectors. Should they create a sub-brand for civil or genset market? How should they capitalize on the features of battery XX? (reliable, ready-to-use, packed with power, can be called up when needed, midget with the power of a giant, etc.). Will a new brand name be needed? (Many suggestions are being given-Vamana, Lightning, Acro, Alladin, Little Genie, Punch, Start Pack, Dynamic etc.)
(5)
3. Should HBL-NIFE concentrate on the OEM? What should be the strategy for getting the battery type approved and specified by OEM? The battery constitutes less than 1% of the cost of the entire genset. What will motivate the OEM, technology or price?
(5)
4. Should HBL-NIFE offer a price lesser than the competing 180 Ah or a price higher on the ground that the item is technologically superiors? The price policy should not upset the applecart by disturbing Defense, the main customer of HBL-NIFE. It should ensure long-term maximum profitability in the civil sector.
(5)
MM01
Marketing Management
Assignment II
Assignment Code: 2012 MM01 B2 Last Date of Submission: 15th November 2012
Maximum Marks: 100
Attempt all the questions. All questions carry equal marks.
Section A
1 a) To what extent can a brand rely solely on advertising to boost its fortunes?
(10)
b) Write short notes on the following
(i) Brand extension
(ii) Brand rejuvenation
(iii) Brand loyalty
(iv) Brand equity
(4x2.5)
2 a) Consider a major FMCG manufacturer that wishes to add to its range a savory crisps by introducing a new health food crisp that added vitamins and minerals. Discuss the nature of the test marketing that should be undertaken to minimize the risks associated with introducing such a new product? Take example of any Indian company?
(10)
b) Explain what you understand by price elasticity of demand. Give examples of inelastic and elastic products or services, discussing how the concept might be used in marketing situations?
(10)
3 a) There are many examples of the role of noise in human communications. One story concerns a communication exchange which purportedly took place during the first world war. The message sent by the source was `send reinforcements, we’re going to advance. As a result of `noise’ in the channel the message which finally arrived was `send three-and-four pence, we’re going to a dance’.
(10)
(i) What forms of noise may have contributed to this miscommunication?
(ii) State some ways in which this noise could have been reduced?
4 a) Write short notes on the following:-
(i) Sales Targets and sales quotas
(ii) Sales Territory
(iii) Sales control
(iv) Direct Sales
(4 x 2.5)
b) What are key differences between traditional media and internet?
(10)
Section B
5. Case Study
What Makes Titan Watch Tick
A watch denotes much more than a mere device to tell time. To the user it is a means or a tool for managing time and to plan the day. More than anything else, it is a personal possession and a constant companion. For an increasing number of consumers, the watch is becoming an expression of personality or a fashion statement. Consumers have come to depend on this particular item like none. There is no wonder therefore that world over consumers like to choose watches by personal involvement. They also will not like to be seen wearing a watch they dislike. The diversity in human behavior being what it is, every purchase of a watch is an exercise of consumer behavior. The consumer is always looking for the “good to wear” attribute along with the basic “good in keeping time” quality in a watch.
The general rise in living standards coupled with the pressure on time in modern society is making an accurate watch a necessity and an essential item. At the same time for those populations who are moving into higher classes or echelons or society, owning more than one watch is common and owning a latest expensive watch is a status symbol. It is quite common that a consumer in this class owns two or three watches at a time. Further, such a consumer may be buying up to a dozen watches during his life time.
Watches have also become a favorite gift item. Here, the giver as well as the receiver expect it to convey a value message, the brand itself being a significant part of the message.
With this background let us examine the scene in India which is at the same time a typically emerging consumer market and a developing country market.
The state owned Hindustan Machine Tools Ltd. (later renamed simply as HMT Ltd.) and also another state owned to Allwyn Ltd. went for two best collaborations that one can think of HMT went with Citizen of Japan and Allwyn went with Seiko of Japan. Both made good harvest during the two decades leading into the eighties. That was when the two companies lost way and there came the new bright and bold star Titan. Though Titan also had an effective French collaboration and a connection with the house of Tata, it went and built a brand of its own.
In the modest words of Xerexes Desai, MD of Titan for many years, luck played a very important part in favour of Titan. However, market watchers agree that it is the hard work and shrewd brand management and astute distribution in the first place that are responsible for the phenomenal success of Titan.
Every management student wants to known what is the secret behind this success. Nothing will throw better light on it than the following excerpts which we reproduce from the article “Clash of the Titans” published in Times of India (December 13,2000)
________________________________________________________________________
Date Line December 13, 2000, Bangalore.
Till barely a decade ago, HMT was the undisputed timekeeper of the nation. Today, that honour goes to Titan. Titan made watches into a fashion statement, and later go into the lower end with Sonata, where again the company has seen phenomenal success. Even global biggies like Swatch, Citizen and Seiko have so far had little impact on the company’s market share. Titan vice-chairman and managing director Xerxes Desai tells Deepanjali Bhas and Sujit John what makes Titan tick.
How is it that foreign watch companies haven’t set up manufacturing facilities in India?
As per the rules, if you want to call yourself a Swiss watch, 50 per cent of the movement components in a watch must be made in Switzerland and the watch itself must be assembled in Switzerland. The only company which could set up a manufacturing facility here is the Swatch Group. There’s been talk about this.
As for the Japanese, they have not succeeded in getting their act together. Citizen is making its third attempt in India. And it’s not working out well for them. Citizen and Seiko are very much on the backfoot worldwide. They have dramatically lost market share in Europe and the US. They are short of human resources. They are having trouble in their primary markets. So when they will actually make a dent in markets like ours, cannot be said. We have taken their share from them in markets like the Middle East and Europe.
What do you make of the Chinese Challenge?
The Chinese have no brands, but they make their watches incredibly cheap. Throughout the work we have people buying from China and putting their labels. They make their watches at very low costs, through heavy exploitation of labour, government protection and they enjoy an indulgent financial sector, which provides loans at low interest rates.
There’s also huge overcapacity in China. Each manufacturer tries to outbid the other on price. In fact, they are all doing rather badly. But they are a threat worldwide now. The world is flooded with cheap products from China. But it’s not sustainable, particularly because the Chinese haven’t built any brands.
At the lower end, we too have sonata, which is doing wonderfully. It is now outselling the Titan brand in volume. So we are very well equipped to handle the lower end.
You don’t foresee any major challenge to Titan in the near future?
Something of a challenge can come in the middle segment – especially the fashion brands. They buy their products from China, and they add their name. Like Esprit. Other brands in this segment include Guess and Fossil. But these have built their equity in the US and Europe at a certain price. These prices are high for India. And it’ll be difficult for them to sell them here at lower prices. I don’t know to what extent they’ll pose a challenge. We’ll combat them in the same way we have been combating all along with out brand name and marketing know-how. Our sheer size is also a barrier for them.
Have you just been plain lucky? A decade ago, watches were virtually identified with HMT.
Yes, luck has played a very important role in Titan’s success. HMT neglected the lower end of the market, and that helped us.
How is it that despite liberalization, in the watch industry Titan has held on to its huge market share?
Ever since quantitative restrictions on watches were taken off about three year ago, we’ve seen a fair amount of activity in terms of advertising and foreign presence in retail, but very little activity in terms of actual sales by our competitors. Among the national players, Allwyn is dead, HMT and Timex are on life support, Maxima comes and goes.
As for newcomers, I reckon there are formidable entry barriers for them. Foreign brands haven’t been successful because of such barriers, the fact that we have a strong grip on distribution, and the high prices of foreign watches. Among the Swiss brands, for instance, there are patricians and plebians, kings and commoners. But they are all expensive. The kings are beyond anybody’s reach. And the commoners are really not worth buying at the price range they are in.
But what about the brand value attached to foreign watches?
Yes. But if people buy these, its just once in 10 or 20 years, or once in a lifetime. There are hardly any repeat buys of a thing like that. And if one of those is less than Rs 40,000, it again does not make sense to buy it. Statistically, Indians do not put down a large amount of money to buy a watch. Percentage of people how are wiling to pay over Rs 10,000 for a watch I think would be really small.
However, what these Swiss watches would do is to create a market segment for us at the upper end. People who have so long not seen watches beyond Rs 6,000 – 7,000, are now exposed to watches priced at Rs 100,000 – 200,000. This we imagine would create a desire to own more expensive watches. And in turn create an opportunity for us in the upper segment. We are right now waiting for that opportunity to manifest itself, and it’s beginning to happen. We are looking at introducing a new brand in this segment, a luxury brand that would have an appeal greater than that of Titan.
We began with the Middle East, built a strong presence there. In our segment we are among the top three or four brands in the UAE and Oman. We are No. 1 in Oman in volume terms. We are doing moderately well in South East Asia, which now needs more attention. These markets have been neglected by everybody else. Bangladesh, Sri Lanka and Myanmar are markets that even the Japanese have neglected.
We are doing modestly well in Europe. Our initial heavy investments were in getting to know the market, establishing distribution. We expect current operations to break even this year. But with one important qualification: the ad spend continues to come from India. Two, three years from now, the volumes generated in Europe should take care of the ad spend too and the operation should start making profits. We are concentrating now in a few countries – Portugal, Spain, France and the UK. If you have to be a global player, you have to show your European credentials. Europe is a very demanding market.
Have you ever thought of having brand ambassadors, like the Swiss brands do?
Celebrity endorsement does make sense. Omega has 15 brand ambassadors but it’s a huge expense. We’ve looked at the possibility but right now, no. We might do it later for a really premium brand.
Case Questions
1. What aspects of behaviour of Indian consumers were addressed by Titan.
(4)
2. Why is Titan not keen on celebrity endorsement at this point of time.
(4)
3. If Citizen of Japan and Swatch of Switzerland were to enter India what will be the consumers’ brand perceptions vis-à-vis Titan?
(4)
4. Wrist watch is consumed by both men and women consumers but for different perceptions of need. Discuss.
(4)
5. Can Titan promote wrist watches as items of jewellery or as items of investment?
(4)
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