Baron - Rewriting Indian Consumer Electronic Goods Marketing

Details

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

Buy Now

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

Tools

<< Previous

Fighting it Out Contd...

Akai's sales soon jumped from 75000 to 180000 and it became the largest selling brand with a 17.7% market share in just 4 years reaching the third slot in the market. Not only the other marketers of consumer durable but the consumers were also completely taken aback by Baron's modus operandi. In a bid to regain lost market shares, almost all the major players adopted the Baron method and began offering discounts, free gifts and exchange offers.

Under Videocon's money-back offer, besides getting a Videocon TV in exchange for an old CTV with remote, the customer was also promised that the amount paid would be returned after a specified period of time. For instance, under the 'Own a Bazooka 21 free' scheme, the customer had to pay Rs 14,990 and give in an old CTV (20" or 21") with a remote.

The company promised to return the sum of Rs 14,990 after six years. The scheme was extended to other models as well. BPL also introduced two exchange offers - 'Exchange with Confidence' and 'Home-A-Loan Twin Offer.' In the first scheme, customers could choose from four models (ranging from Rs 27990 to Rs 7990) in exchange for their old CTVs.

In the second, BPL, in association with Countrywide Consumer Financial Services Ltd., provided interest-free finance, both for exchange and purchase, on a monthly installment basis. A host of other brands including Toshiba, Kalyani Sharp, etc all entered the fray with attractive schemes. With the Aiwa tie-up, Baron moved on to repeat its CTV success story.

The company began offering free software alongwith its products by entering into arrangements with companies like Sony and BMG Crescendo to buy their music CDs and offer them free to customers, alongwith the audio systems. For instance, the actual cost of a Rs 8000 Hi-Fi CD system effectively worked out to be Rs 6000, as Rs 2000 worth of free software was bundled alongwith the system. During this period, the cheapest Philips model carried a Rs 11000 price tag, and Sansui's cheapest model came at Rs 9000.

As before, Aiwa's entry triggered a price war in the market. Philips, Sony, Panasonic, Kenwood and other players not only slashed prices, but began offering free software as well. In the CTV segment, Baron repeated its Akai approach, resulting in Aiwa attaining a 10% market share in CTVs in 2000. Baron followed a similar strategy with the TCL offerings being made available in the market in 2000-01.

Baron's Mantra - Low Costs

If one were to summarize Baron's secret of success, it would be all about keeping the costs on the lower side and being able to sustain them. Baron's 'low maximum retail price (MRP) plus other charges' package was a major factor responsible for the smart pricing tactics. For instance, TCL products were imported in the form of CKD kits. The MRP of Rs 6490 on the 14-inch CTV attracted an excise duty of Rs 1162 as compared to the Rs 1618 on a 2-speaker model from BPL priced at Rs 8990³. Also, BPL paid Rs 250 more in sales tax as compared to TCL.

Unlike manufacturers such as BPL and Videocon, Baron outsourced its assembling, and this helped it to keep its costs on the lower side. All this was possible essentially because Baron's collaborators (Akai, Aiwa and TCL) were low cost manufacturers. Efforts on part of the joint venture partners to continuously reduce component costs helped Baron to come out with lower prices. Volumes were the main driver for all the parties concerned, as economies of scale facilitated cost reduction.

Next >>

3] 1999 Figures.