Baron - Rewriting Indian Consumer Electronic Goods Marketing

            

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Themes : Innovation
Period : 1994-2002
Organization : Baron
Pub Date : 2001
Countries : India
Industry : Consumer Electronics

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Case Code : MKTG007
Case Length : 7 Pages
Price: Rs. 200;

Baron - Rewriting Indian Consumer Electronic Goods Marketing | Case Study

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The Other Side of the Story Contd...

The group's excessive thrust on cost cutting led its assemblers to believe they were being taken for a ride. One of the assemblers, Dixon Utilities, assembling the Akai 14" CTVs, parted way with Baron after disagreements on the margin issue. Atul Lal, Director, Dixon Utilities said, "We felt that the kind of manufacturing charges we were getting were not worth it. They gave us 65-70% of what others give."

On the customer front, there were frequent complaints regarding the 2-3 week gap in the delivery of Baron's products after the booking and the up-front payment. Baron's after sales support and service network was also reported to be very poor.

Though the group took various initiatives like providing mobile service vans and setting up customer support centers5 across the country, the issue continued to be a major concern.

Baron's dealers were also an unhappy lot, as in the 'exchange scheme' setup, the dealers ended up losing the most. In 1996, a Delhi based Akai dealer commented, "The company is not compensating us for the Rs 10000 trade-off we give to the consumers. Instead, it pushes on us two more sets, albeit at a discount, to sell."

As the dealers did not want to block their money like this, a majority of them even stopped offering the exchange scheme.

A leading dealer in Chennai commented, "In any exchange scheme, it is the customer who gains. There is nothing much in it for the dealer. Our margins during an offer fall from Rs 1500-1000 to anywhere between Rs 300-500 per unit. The only advantage of an offer being backed by the company is the advertising and visibility in the media."

Apart from this, the dealers found it difficult to sell the old units, as the second hand market was unable to absorb the high volumes generated by the exchange schemes. According to the dealers it was the customers who were getting the best deal. But Baron's competitors thought otherwise.

They claimed that the actual cost of its products worked out to be much higher than what Baron claimed. For instance, the 29-inch TCL television being sold for Rs 16900 worked out to be much costlier if one added the freight, local levies and sales tax amounting to Rs 2000. Also, there was the cost of the old television set to be considered. Thus, the prices of Baron products were in effect, similar to that of competing products.

Baron's rivals also cited the example of the 14-inch TCL CTV at Rs 7139 being much less attractive than the Rs 6990 BPL CTV, or the Rs 7200 Videocon CTV. Countering this, Sanjay Chimnani, COO, Baron International commented, "Since this is a 2-speaker model, there is still a price advantage over competing models, which cost upto Rs 8500." Reacting to this, Philips India's VP (Marketing), Rajeev Karwal had just this to say. "It is nothing but a mere gimmick."

5] By March 2001, Baron had established around 150 Baron points to support its 3000 strong aler network.