Download 1. INTRODUCTION

1. INTRODUCTION
“The aim of marketing is to know and understand the customer so
well the product or service fits him and sells itself”
- By Peter Druker.
The above sayings are absolutely followed by foreign consumer
durable firms in India. Indian consumer durable market is well known by the
foreign firms who converge foreign products and technology as per
preference of the rural as well as urban Indian. The fruit of the liberalisation in
the form of better quality products is tasted by consumers of metro cities and
mega cities in the early nineties but it has been now spread to rural markets
also. The image of the rural consumers of India is orthodox and laggards in
the beginning of the nineties which has been turned to matured acceptor of
technology and products.
“Huge
Population”
of
India
was
considered
a
massive
and
uncontrollable problem in the early nineties which had been seen by the
marketers like Samsung, LG and Whirlpool as opportunity and launched
products in Indian market and becoming the market leader resulting into
generating higher revenue from the Indian continent as compare to their home
country. In the Comtemptory situation the companies are not driven by the
chief executives but driven by the consumers. Core competence in the
“quality product” and “strong distribution” system in the Indian hinter land by
the foreign players automatically put them ahead as compare to Indian
players in the market. Consistent good monsoon for long period of time,
government initiatives and awareness due to television creates very positive
picture for the rural market in India in last five years. Indian urban consumer is
young energetic and good earner in the family which automatically increases
the demand of consumer durable earner. Sluggish growth or saturated market
condition in the urban area compel these markets to move towards the rural
market. The challenges of the rural market compel the marketing managers to
design and develop unique and effective and separate marketing strategies.
1
Gujarat is the state with the very high urbanisation rate of 42.3% which
indicates that there is very less disparity in the rural and urban consumer of
State for the consumer durable preference. The said report is an attempt to
understand the difference in the consumer behaviour in the rural and urban
Ahmedabad with specific reference to Consumer durables like Air conditioner,
Refrigerator and Television.
1.1.
MARKETING IN 21ST CENTURY
Twenty first century is the century of uncertainty.
Competitors come from across the seven seas with containers of cash
and assault rifles, ready, willing and able to blast competitors off the
marketplace. Globalisation has made the world one giant marketplace and
introduced two new words in business economics - deregulation and
privatisation.
Quality, services, attractive prices, customization, brand equity, higher
market share, product innovation, customer orientation, entering high growth
market and such strategies no longer give a guarantee of success.
Customer is no longer a "King". He is an emperor. Marketing jargon
now has a host of previously unheard of expressions.
Designing an effective marketing mix is becoming increasingly difficult,
two more P's - Politics and Public opinion have been added to the traditional
four P's - Product, Price, Promotion and Place.
Advertising and sales promotion expenses are going out of hand and
sales force is fast becoming one of the most expensive marketing
communication tools. Price wars break out unexpectedly. There is a growing
awareness about integrated marketing communications (IMC). Acquiring and
retaining profitable customers require new skills as customer loyalty
decreases by the day.
Technology is empowering the customers as never before and keeping
pace with technological advances is becoming increasingly difficult.
To keep pace with the fast changing market scenario, every
organization is being advised to be a 'learning organization'. Progressive
companies now have Vice Presidents 'Knowledge', 'Learning' and 'Intellectual
2
Capital'. These people are in charge of the "Knowledge Management" and
keep a hawk-eye on the factors influencing the behaviour of customers,
suppliers, distributors, competitors, etc. They are required to keep questioning
the tried and tested marketing techniques and strategies. Experts such as
Philip Kotler are asking the companies to benchmark against the best,
outsource, create multi-discipline teams, focus on value chain, become
market and customer obsessed, seek new advantages and keep an eye
outside the market place.
The marketers of today must be capable to cope with marketing
problems on a day-to-day basis. Their marketplace keeps on changing and
the winning strategy of yesterday cannot guarantee success today and
tomorrow. "Ability to change has now become competitive advantage" says
Richard Love of Hewlett Packard.
1.2.
SUCCESSFUL MARKETERS OF CONSUMER DURABLES AND
THEIR STRATEGY
Videocon as a group is enjoying leadership in the consumer durables
and home appliances in the country. The group is manufacturing highest units
of all the consumer durables. The major contributor in such case is “Washing
machines” and “Television sets” under the brand name of “Videocon” and
“Sansui”. Group is enjoying now fruit of Brand Revitalizing and Reposition
after changing logo and quality of products specifically in the region of the
LCD television sets. Videocon has very strong presence in the south India. As
well as non-domestic consumers are highly attracted by the group like
hospitality company, hospitals, government organisations and educational
institutes. Surprisingly the groups have not achieved such position in the
western part and specifically Gujarat. The Videocon has gone for organised
retailing of the consumer durable under the brand name “Next” which gives
direct push towards the sales of all the products of the consumer durables.
Key initiatives by the company:
1. Encashing brand ambassador effect of “Sharukh Khan “in the early
years which give very quick acceptance of brand in the Indian market.
3
2. The company’s policy of designing offerings which reduces extra cost
to the consumer work successfully which reduces the cost to consumer
and indirectly increases affordability.
3. Launching entire new series of television with longer warranty period at
very low price after obtaining cost leadership in the market.
4. Sales promotion of television set is made by offering free direct to
home connection and exchange offer for the old television. Such setup
box already contains the digital video disc player which functions
dually.
5. In case of refrigerator company is offering lowest price refrigerator of
single door which highly attract the rural consumers.
6. Availability of the product problem has been solved by appointment of
sub dealer’s though “next” and launching next in the tier three city of
the country.
7. Appointment of successful leader of LG K.R. Kim and strategic alliance
for supply of the raw materials and other components is playing key
role in smooth functioning and operation.
The Indian consumer durable market is dominated by Korean
electronics giants LG and Samsung. The market leadership is enjoyed by LG
group in overall consumer durables and home appliances business in India.
LG at the time of entry has focused on the Indian Megacities to greater extent
and then extend their product portfolio in the high-end technology based life
style consumer durables. Simultaneously the company under the influensive
leadership of Mr. K.R. Kim had developed plan for entering into the rural
market in the early nineties with brand “Samporna” a color Television for just
Rs.5000 for attracting rural consumer whose affordability is marginal. The LG
has dominance in the area of Television, Refrigerator, Mobile and Air
conditioners. LG has first spared in the market with Television and then
launching other products and capturing entire electronic market including
Branded Personal Computers. LG understood consumers of India very well as
company has made tremendous modification in the products which is
successful in the home country. The country like India where affordability is
the key issue as well as electricity consumption Is the most important and
influensive factor for the selection of rand company made an efforts for the
4
redesign the offerings of all segments as well as make it suitable to India
environment and consumer preference. The efficiency of the product is also to
be treated as prime requirement as the company is capable enough to launch
energy conservative products in the consumer durables. LG has first targeted
to great Indian lower middle class and capture market on the USP (unique
selling proposition) of low price and high performance.
Key Initiatives taken by company:
1.
Low prices Basic offerings in case of Semi Urban and Rural areas.
2.
Extensive distribution network in the entire country by appointing
Dealers and Sub-dealers.
3.
Using all the formats like Direct Marketing, franchising, Retail Chain
and multiband Retailers for making product available in the Rural and
Urban India.
4.
Integrated
marketing
communication
through
the
retailers
co-
operations
5.
Development of extensive after sales service centers at the district
level which provide key support to consumer for repairs and
maintenance which creates confidence in the brand.
6.
Encashing different festive time of the country and increasing sales by
giving direct discount and raise market share in the western and
northern region.
7.
Brand revamping though ad campaign of “Service at Door step”.
According to latest issue of Time Samsung is the world’s second
largest most diversified conglomerate across the globe. Samsung India has
successfully enjoyed third place in the Indian consumer durables and house
hold appliances market. Samsung is unlike other competitors has targeted
Indian middle class of the Metro and Mega cities of the country. Samsung has
emphasized much on the research and development and technology
development which provide him competitive advantage. It ultimately put
organisation on the different level. Samsung is offering little higher prices
offerings to consumers as to LG and Videocon in the Indian subcontinent. In
case of Air conditioner segment company has launched remarkably “Biosleep” model which is specially designed for country like Indian which
automatically set room temperature as per outside temperature and saves
5
electricity. Samsung is pioneer in the development of the new technology in
television industry. Company is pioneer in
development and launching LED
television and obtains clear-cut lead in the market share. Samsung has made
a big blow in launching 3D HD Led television in market. The Indian television
industry was facing a big gap in the technology development which result into
the increase in the sales of television sets at rocket speed. Whirlpool and
Electrolux had entered in the Indian refrigerator market in the early 2004 with
large range of products and made an attempt of capturing higher market
share but the LG Godrej and Videocon had restricted them by their respective
distribution network and Brand Equity. Samsung has entered in the
refrigerator market with all the preparations very late after 2007 more
aggressively and in this period of time enjoying second place at national level.
Key initiatives by the company:
1.
Launching product after due research and development which assures
the acceptance of the product.
2.
Giving due importance to the retailers and develop different category of
retailers and allow them to design sales promotional scheme at local
level which attract consumers in the rural and urban area.
3.
Tie-up with the financial service provider for loan or hire purchase
system which directly resolve problem of the affordability.
4.
0% finance scheme is most significant factor for acceptance of product
as well as key factor for brand switch over.
5.
Quick
after
sales
service
and
good
Customer
Relationship
Management practices retain consumers and cross selling of the
product made easy after increasing product portfolio in the other
segment.
6.
Durable and maintenance free products of company create a brand
loyalty amongst consumers.
1.3.
RATIONALE OF STUDY
Consumer behaviour is a study of consumer’s thinking and perception
towards particular product. The said study has been selected with intention to
know the various aspects of the consumer behaviour towards consumer
durable. Consumer behaviour is one the important area of the marketing
6
management. It gives an opportunity to the marketers to know what exactly
consumer wants as well as how consumers are reacting towards particular
product or brand. Consumer behaviour study assist the marketing managers
in many respect firstly it helps in developing separate segment of the
consumers or it helps in studying the particular segment. Secondly study is
also help full in developing and designing the marketing mix separately for
rural and urban market. Thirdly in present situation where market leaders as
well as market challengers are launching at least one new product or variant
in six month either in Television or Refrigerator or A/C at that time the study
will be helpful to design the product or determine the product features as well
as other P’s of the marketing. Fourthly the promotional activities in the rural
and urban areas are required to be designed differently as there are vast
differences in the education level, social dynamics, customs as well as
perception and exposure of brands. The present study can provide sufficient
information for determine marketing strategies for converting conventional
television set users into modern television sets owners and enhance market
share and deep penetration of television in the rural areas of Ahmedabad
district which is wealthy in terms of income as well as in terms of
infrastructure. Fifthly study will be helpful in finding reasons for low
penetration of Refrigerators and Air conditioners in Ahmedabad districts. The
importance of this report from marketers of consumer durable is very high as
the market leaders are getting its 40% sales from western part of country in
which Gujarat is prominent.
1.4.
RECENT TRENDS IN CONSUMER DURABLES IN RURAL AND
URBAN AREAS
1.4.1 RISING INCOME AND AVAILABILITY OF FINANCING
In this competitive era, the income levels of individuals are rising and
disposable income has increased to a great extent. Consumer financing has
become easier with all the banks coming forward to lend to the consumer at
affordable rates of interest.
7
1.4.2. IMPROVED AFFORDABILITY OF PRODUCTS
Advanced technology and increasing competition are narrowing the
price gap and the expensive appliances are becom-ing cheaper. Products that
were once beyond the reach of the middle class Indian are now affordable to
many. Growth in demand for products, once considered luxuries (airconditioners, washing machines and high-end CTVs) is a reflection of this
phenomenon.
1.4.3. HIGH-END CUSTOMISED PRODUCTS GAIN GROUND
The Indian consumer durables products market is going for high-end
customisation of products with aesthetic appeal. Manufacturers are steadily
going for inno-vations for developing advanced and user friendly products for
satisfying the needs of a varied class of customers. The trend is worldwide
and is mirrored in India too. The LCD TV demand worldwide is expected to
grow from 98mn units in 2008 to around 148 mn units by 2011.
1.4.4 COMPETITION TO DRIVE SALES
Major consumer durables companies are coming up with new product
lines. International companies such as Haier, as part of its expansion strategy
in India, plans to launch televisions, air-conditioners, refrigerators and
washing machines. This would provide consumers with ample choices and
drive up sales in the sector.
1.4.5 ORGANISED RETAIL GAINING MOMENTUM
Urban and rural markets are growing at the annual rates of 7%, 10%
and 25%, respectively, with organised retail expect-ed to garner 10% share by
2010, from a mere 3% share at present. While there are established
distribution networks in both rural and urban India, the presence of well-known
brands in the organised sector is increasing. The trend will also boost sales of
private label goods and will have a pos-itive impact on the consumer durables
industry, as organised retailing would not only streamline the supply chain, but
also facilitate increased demand, especially for high-end and branded
products.
8
1.4.6 ENTRY OF LARGE RETAIL PLAYERS
Low penetration in the consumer durables industry has allowed the
entry of large retailers to the Indian market. This is result-ing in rise in
competition due to large play-ers such as Croma, E Zone and Reliance
Digital. Part of the growth momentum in high-end segments of consumer
electron-ics could be attributed to the competitive evolution of organised retail,
stimulating the demand through exposure to high-end shopping experiences.
1.4.7. INCREASING DEPRECIATION OF THE RUPEE
The trend of rupee appreciation vis-a-vis the US dollar will continue to
prevail in the long run, thus it is expected to tight-en raw material costs for
Indian manufac-turers and benefit those addressing the domestic market.
1.4.8. DISTRIBUTION AND RETAIL
With the rural and semi-urban markets creating opportunity and an
almost sedentary urban market, the need to have a strong distribution network
is crucial for the companies to remain price-sensitive. Major Indian companies
are going for new ventures for retailing of consumer dur-ables and IT
products.
The retailers are coming out with new retail formats such as exclusive
brand out-lets and the international style multi-brand showrooms.
1.4.9. TAXATION REFORMS TO DRIVE SALES
The Indian Government has set in motion an array of taxation reform
initiatives across all sectors. The government plans to streamline the wide
array of indirect taxes across Central and state levels and would largely
benefit the manufacturing sector and enhance manufacturing activity. The
government plans to introduce the Value-Added Tax system across all states
by 2010. This move would help to drive up sales of consumer durables in the
country. Presently, the taxes are quite high and are mostly passed onto
customers, thus hav-ing a negative effect on the sales of the sector.
9
1.5
RECENT TRENDS IN CONSUMER DURABLES:
1.5.1 High-end Colour TVs
Plasma display panels and liquid crystal display TVs have registered
an average growth of more than 250% in 2006-07 and the trend is expected
to continue. The rise in income level, and easy availability of credit facilities
would further fuel the growth of high-end colour TVs in the country.
1.5.2 Split Air-conditioners (ACs)
Split ACs have been growing at a much faster rate than window ACs.
The growth was 97% in 2006-07 as compared to a 32% growth of window
ACs. The total AC mar-ket in India is expected to grow to 30-35% over the
coming few years.
1.5.3 Mobile Phones
Production of mobile phones is estimated to grow at Compounded
Average Growth Rate of 28.3% from 31 mn units in 2006 to 107mn units in
2011. Low mobile penetration and favourable government policies are driving
mobile phone Original Equipment Manufacturers to set up manufacturing
facilities in India. Growing demand for low-cost mobile phones and the need
for Execution Management Systems vendors to reduce their revenue
exposure to Nokia, Motorola and Sony Ericsson, are the key factors expected
to increase manufacture in India. New cell phone connections and handsets
sales have given a huge boost to the consumer durables sector.
1.5.4. KEY FACTORS
The following factors are critical for manufacturers in the sector:
1.5.4.1 Product Technology
While the market is continuously expanding, there are several
concerns that will have to be addressed while moving the focus towards Tier
III towns and rural areas. Total cost of ownership would be a key factor driving
purchases in these regions.
10
1.5.4.2. Distribution and Service Network
As the market spreads out from saturated urban regions to low
penetrated rural areas and Tier ll/lll towns, distribution network and brand
recognition will continue to play even more significant roles in determining
market share and profitability. The emergence of international style multibrand showrooms would help to drive sales of consumer durables as they
offer a wide range of products under one roof.
1.5.4.3 Innovation in Advertising and Promotions
Increasing competition and technology adoption has led to a situation
where the basic function of most of the consumer durable goods has been
largely commoditised. This has created a situation where identifying a unique
differentiating factor and promoting it effectively has become imperative. The
advertising and promo-tion spends in the industry have been growing steadily.
1.5.4.4 Attractive Locations
Since raw materials account for more than 75% of the manufacturing
cost of con-sumer durables and with a significant part of it being imported,
Maharashtra, Gujarat and Tamil Nadu’s proximity to ports, high demand for
durable goods and factor con-solidation in the manufacturing sector make
them amongst the preferred desti-nations for investment in manufacturing.
1.5.4.5 Long-term Growth
The 2009 Euromonitor International report on Consumer Electronics in
India says, sales growth in the consumer electronics sector over 2008-2013 is
not expected to be as strong as that experienced during the review period.
This is attributed, in part, to the economic slowdown that is expected to
continue until 2010. Several products that are reaching their saturation points
in India’s urban markets will need to make an impression in the country’s rural
markets, and that may be more difficult than some anticipate.
High-growth sub-sectors over the fore-cast period (2008-2013) are
likely to be receivers for DTH broadcasting, digital TVs, portable multimedia
players and portable DVD players. Sales of mobile phones are expected to
continue to grow based on increased consumer demand in rural areas.
11
Sub-sectors likely to be adversely affected over the forecast period
(2008-2013) include those with “big ticket” prod-ucts that many consumers
might consider wholly unnecessary. Replacement pur-chases for many
consumer electronics products are likely to be postponed. For example, a
family considering the pur-chase of a new larger LCD TV to replace their
existing analogue TV may decide to wait before purchasing, or a young
house-hold may decide to make do with their current computer rather than
upgrade. In addition, car sales are expected to decline, and this will have a
negative impact on sales of in car electronics products.
Many companies in high-growth sub-sectors like digital TVs and
receivers believe that, instead of seeing their sales double year-on-year as
had been projected earlier, sales growth may dip to 40% - 50%.
1.5.4.6. A Young Population
In 2008, there were an estimated 366 million people in India below the
age of 14, repre-senting 32% of the total population of the county. The mean
age was 27 years old, branding the Indian population as “young” in contrast to
the typical ageing populations of developed nations.
India’s young population has resulted in the rapid adoption of new
technologies as product prices have fallen to more affordable levels. Young
consumers have rapidly moved away from old analogue technology and have
embraced digital technology.
During the review period (2008-2013), personal entertainment systems
were more popular than in-home systems. Volume sales of portable
consumer elec-tronics grew at a CAGR of more than 43% during the review
period while value sales grew at a CAGR of more than 33%.
1.5.4.7. Low Household Penetration Rates
Among consumer electronics products, televisions and transistors have
the high-est household penetration rates in India. Overall, however,
household penetration rates for consumer electronics products continue to be
abysmally low in the country. Despite all of the growth wit-nessed during the
review period, by 2008 only an estimated 69% Indian house-holds owned a
small audio product, only 59% owned a TV and just 40% house-holds owned
12
a hi-fi system. Even with the phenomenal growth of the mobile phone
subscriber base during the review period, in 2008 mobile phones were owned
by only 26.5% of Indian house-holds.
Since old analogue products like VCRs and analogue camcorders
never reached significant household penetration levels in India in the first
place, not many con-sumers owned Video Home System cassettes and home
videos. This meant that there was almost no replacement market for these old
analogue products and, once prices of digital products fell, most new
consumers opted to buy the digital products straight away.
The only exception to this trend has been analogue cameras. With a
house-hold penetration rate of 6% in 2008, companies like Kodak are seeking
to keep the supply of these products going so that related products like film
and pro-cessing services have a longer life. Increased demand and
consumption is expected to raise household penetration and ownership levels
of digital consumer electronics products. There is much room for future growth
given the current low levels.
Low household penetration rates, together with increasing disposable
incomes, should result in significant sales growth for most consumer
electronics sec-tors in India. Let alone the large number of urban replacement
buyers, new, first-time rural consumers provide a large potential market over
the forecast period.
By 2013, it’s projected that 65% of Indian households will own mobile
phones, an estimate that translates into more than 300 million phones. DVD
play-ers are also expected to see a huge rise in demand over the forecast
period. Also, in 2013, the household penetration rate of DVD players is
expected to go up by 54%, overtaking hi-fi systems, the priority in-home
entertainment purchase of Indian households. To entice more rural
con-sumers, manufacturers and retailers are expected to widen their portfolios
of low-price product offerings.
13