cardio equipment project final
TRANSCRIPT
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MMS 3
Marketing Project
On
Consumer Durable Products
Industry: Fitness Equipment
Product: Cardio Equipment such as a
Treadmill
Product Type: Consumer Durable
Prepared by:
Anuj Kaul (507)
Bertilda Fernandes (508)
Rahul Dsa (544)
Wayne Soares (561)
Xavier Institute of Management and Research
July 2011
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Acknowledgements:
We would like to thank Prof. Dr. Vaidyanathan for giving us this
opportunity to research on a consumer durable and devising our very own
marketing plan.
We would sincerely like to thank all the respondents who were extremely
cooperative in taking our survey and the retail outlet owners for their
patience and time rendered.
Abstract:
Cardio Equipment is an item which is not bought frequently but however
cherished, and hence this report talks about the gap which exists in such
an industry along with the recommendation to fill that gap.
Methodology:
We conducted a consumer research survey hoping to achieve 50
respondents, however through our meetings at various gymnasiums and
health clubs we were successfully able to achieve only 38 responses.
Their inputs have been recorded and analysed. The findings have given us
deep insights into the consumer mindset and the opportunities which lie
in the cardio equipment industry.
We have subsequently tried to fill up the gap which we have observed and
the offering which would successfully fill that gap.
The following are some extracts of the survey conducted and the findings
of the same.
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Introduction:
We as a group after a lot of thought process came up with the idea of
having Cardio Equipment as our consumer durable product. We thought of
this product as most of us at sometime have pondered going to a
gymnasium or having our very own gym equipment at our place of stay.
The cardio equipment is more of an aspiration purchase due to the fact
that almost everyone wants to stay lean and at the same time look good.
We acknowledge that there is a huge potential to this market and that the
opportunities are vast, however the price issue will always be a
detrimental factor.
That being said, it was imperative to conduct a consumer research to
understand the consumer mindset and the thought process attached into
their needs and aspirations.
The research brought out a few facts which we have accounted for in this
report.
A Gap has been identified and subsequent methods of reducing the gap
have been noted.
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Results and Findings from the Customer Research
Survey
Sample Size: 38 ongoing and potential gym goers
Location: Gymnasiums across Mumbai City
1. Respondents were quizzed about their motives to go to the
Gym
Of the respondents who answered we found that 92% of them visited a
gym to stay fit and remain healthy while 8% felt the Trend of Working out
existed.
Inference:People are health conscious and workout for the purpose ofstaying fit only
2. People were asked their preference of working out at Home
or a Gym
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Here 63% of the respondents preferred to visit Gyms while the remaining
37% preferred their Homes.
Inference: Although people prefer their Gyms to their Homes, there is aconsiderable number who prefer staying at Home and working out. Thiscould be mainly due to the price of treadmills being expensive and thuspeople join Gyms to negate the price barrier.
3. Preference of Options
We see a varied amount of preferences by people here and that is
promptly displayed in the percentages. We see that the majority of 47%
would happily join Gyms while the next best option would be to take up
the alternatives like yoga and Dancing.
Inference: Price issue comes into matter here as the price of taking up
yoga or dancing would be comparatively much lesser and more enjoyable
compared to gym.
4. Past Purchases of Cardio Equipment
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From the graph it is very evident that people do not usually purchase
cardio equipment.
Inference: Price Issue, the cardio equipments are too expensive and
hence a majority of the people indulge in going to gyms
5. Influence of Purchase Decision for Cardio Equipment
Considering the different factors which influence purchase decisions we
took price, features and durability into consideration. We found that half
the sample size was extremely price conscious.
Inference: We see again that the price is something that dominates the
consumer mindset. People find it difficult to afford a high priced product
and hence may even settle for a product which may not be very high on
features.
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6. Presence of a Financing Option changing Purchase Decision
People would change their minds if offered a financing option.
Inference: Very clearly indicates that people would not mind investing in
a equipment but due to the possibility of the high prices at one go, they
shun away from the same
7. Preference of a Financing Option or Discounts Offered
Here we see a split in terms of people who prefer finance options
to discounts.
Inference: As we have seen all the current retailers offer discounts at
purchase. This seems to be a norm for them to follow to attract customers
and entice them. However due to the heavy initial investment, thecustomers are quite open to the idea of a financing option
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Porters Five Forces Model
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Barriers to Entry:
Barriers to entry are low in the sense that there are many retailers
and if the retailer possesses the capital and infrastructure available,
then entry is easy
However the attractiveness also is low because of saturation of
competition and crowded market.
Due to the presence of many players, there would be cut throat
competition and hence we see a lot of discounts being offered at
retail outfits
The attractiveness of the industry with respect to the channels of
distribution are also high as there are a lot of dealers and have huge
no. of dealer networks
Due to the capital requirement being on the higher side, it would be
semi attractive to enter this industry
The switching costs which come into effect here make this a highly
attractive industry due to the fact of prices not being differentiated
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to a large extent and availability of discounts offered at most retail
outfits
Due to the fact that most buyers are unaware of the product
in question and do not have basic information, it makes this
a very attractive industry to enter
Bargaining Power of Suppliers:
This industry has many suppliers. There are innumerable
manufacturing companies from many foreign countries. This makes
the attractiveness low.
The substitutes like yoga, dance, aerobics, home fitness videos
which have plenty of takers in India and thus the attractiveness of
the bargaining power of suppliers in terms of the availability is low
From a retailers point of view the attractiveness of suppliers threat
of forward integration is high due to the fact that suppliers will not
integrate forward, in the sense that they require retailers to sell the
machines to the gym owners, corporate and others
Bargaining Power of Buyers
In terms of the availability of substitutes, again the attractiveness is
low due to the other low cost methods like yoga and dancing etc.
The switching cost attractiveness in terms of bargaining power of
buyers is low due to the various substitutes and also the issue of
cost cropping up. A person might prefer going to gym rather than
buying a machine or doing yoga or dance
The attractiveness of buyers threat of forward integration is high as
its not possible for gym owners to possess the adequate resourcesor inclination
The attractiveness of retailers forward integrating is extremely low
as its not possible since many of the retailers wont be able to
invest in space as well as running gyms as well as selling equipment
are two entirely different propositions
Threat from Substitutes
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As far as the substitutes are concerned, the availability is high in
terms of there being yoga, dance, aerobics, and home fitness
videos. Thus the attractiveness is low.
Since there are various substitutes and also the issue of cost crops
up, a person might prefer going to gym rather than buying a
machine or doing yoga or dance and hence the switching cost
attractiveness is low
Usually yoga, dance and aerobics or even playing a sport is much
cheaper proposition and the customer can even then do it at home.
Hence the attractiveness in terms of substitutes price value is low
from the retailers point of view.
A class of yoga, dance costs nothing and multiple classes are taken at no
investment in equipment and hence the attractiveness in terms of the
profitability of the products of substitutes
Barriers to Exit
In terms of the asset specialization, we feel that there is no asset
specialization as there is nothing really invested in for apart from the
place and the machines can be disposed of and hence the asset
specialization attractiveness is high.
Government Actions
We have not considered the Government Actions as we feel there is no
relevance to the retailers apart from the legalities of the venture which
will be on par as any retail venture as per the Government of India rules
and regulations
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Structured Tables for the Five Forces Model
Table 2: Barriers to exit
Attractiveness Remark
Low High
1 2 3 4 5
Asset specialization There is no asset specialization
as there is nothing really
invested in for apart from the
place and machines can be
disposed of.
Government
Restrictions
Not relevant
Table 3: Barriers to entry
Attractiveness Remarks
Low High
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1 2 3 4 5
Economies of Scale No relevance
Product
differentiation
No relevance
Switching cost Prices do not
differentiate and
discounts given are the
same.
Access to channels
of distribution
There are a lot of dealers
and have huge no. of
dealer networks
Capital requirement
Access to
technology
No relevance
Access to raw
material
No relevance
Government
protection
No relevance
Table 4: Threat from substitutes
Attractiveness Remarks
Lo
w
High
1 2 3 4 5
Availability
of
substitutes
There are various substitutes like
yoga, dance, aerobics, home fitness
videos which have plenty of takers inIndia
Switching
cost
Since there are various substitutes
and also the issue of cost crops up, a
person might prefer going to gym
rather than buying a machine or
doing yoga or dance.
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Substitutes
price-value
Usually yoga, dance and aerobics or
even playing a sport is much cheaper
proposition and the customer can
even then do it at home.
Profitability
of the
products of
substitutes
A class of yoga, dance costs nothing
and multiple classes are taken and
no investment in equipment.
Table 5: Bargaining power of buyers
Attractiveness Remarks
Low High
1 2 3 4 5
Number of buyers Assumption
Availability of
substitutes
There are various
substitutes like yoga,
dance, aerobics, home
fitness videos which
have plenty of takers
in India
Switching cost
Since there arevarious substitutes
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and also the issue of
cost crops up, a
person might prefer
going to gym rather
than buying amachine or doing
yoga or dance.
Buyers threat of
backward
integration
Not possible as gym
owners do not have
the resources or even
the inclination to do
so.
Industrys threat of
forward integration
Not possible since
many of the retailers
wont be able to
invest in space as well
as running a gym as
well as selling
equipment are two
entirely different
propositions.
Contribution toquality
Contribution to cost
Buyers profitability
Table 6: Bargaining power of suppliers
Attractiveness Remark
Low High
1 2 3 4 5
Number of
suppliers
The number of
suppliers i.e.
manufacturers is
pretty high.
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Availability
of
substitutes
There are various
substitutes like
yoga, dance,
aerobics, home
fitness videoswhich have plenty
of takers in India
Suppliers
threat of
forward
integration
Suppliers will not
integrate forward,
in the sense that
they require
retailers to sell the
machines to the
gym owners,corporate and
others.
Contribution
to quality
Subject to
company
Contribution
to cost
Industrys
importance
to supplier
Check with
manufacturer
Table 7: Government actions
Attractiveness Remark
Low High
1 2 3 4 5
Industry protector No Relevance
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Industry regulation
(pollution, etc.)
No Relevance
Customs and tariff
restrictions abroad
No Relevance
Marketing Plan
Segment:
Since we plan on going mass market, our segment will be people who are
looking at being health conscious.
Target Market:
From our segment of those customers who plan to stay healthy, weare targeting first and foremost the fitness enthusiasts.
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We then move to the overweight customer who is looking at losing
weight and wants to have a health secure future.
We are targeting customers who also are borderline customers,
those who are unsure if the gyms and cardio equipment. These
customers who see their friends and peers going to the gym but feel
that they are healthy enough to continue with their regular standard
of living
Our last and final target customer are actually non-customers, those
customers who are do not view working out and fitness as a hobby
and would actually spend their time in eating and drinking out, or
would watch television as a past time while they ignore the health
related issues which could trouble them later
The GAP:
From the survey conducted and the responses from the respondents we
found that currently the Treadmills which are on sale are all initial
payment tools which due to their high price are major put offs to the
clientele seeking to buy them.
However we thought of increasing sales and the number of buyers by
successfully offering financing options like zero interest EMIs which would
then make it easily available to the customer to purchase.
The Argument:
Customers are a tricky bunch and they can throw the argument of paying
a monthly instalment which would be similar to enrolling in a gym class.
However the treadmill at home will be available to multiple users, it will be
available at the convenience of the buyer and also the treadmill having a
warranty and larger life span will stay with the customer for a much longer
time.
Positioning Statement:
For those who value health our cardio equipment provides affordable
fitness because of our easy to buy EMI solutions and extended warranty
schemes.
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4 Ps of Marketing Simplified
Product
The product portfolio is quite diversified in the fitness equipment market.
There are a number of producers such as Horizon Fitness, Magnum,Fitness World, Vector X, Yasaka, VX sports, Body sculpture etc. these
companies are based either in USA, UK or Japan, hence for them it is not a
financially feasible option to set up a base in the Indian market which is
still in a very nascent phase. They therefore sell their products through
retailers.
The product line is diversified into 3 categories:
The Commercial Equipment
The Home Equipment
Accessories
The product line is highly diversified with main emphasis on
(a)Motor capacity
(b)Dimensions
(c) Maximum user weight
The price differences between products between different companies and
different products within the same company portfolio are based on
modulations and modifications in the 3 above mentioned points.
Some examples of the products are:
FITNESS WORLD
(1)001E cross trainer
(2)007 multifunctional treadmill
(3)M2 motorized treadmill
(4)M1 motorized treadmill
(5)Family walker motorized treadmill
VIVA FITNESS
(1)T-1500 Light commercial treadmill
(2)T-1060 motorized treadmill
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(3)T-950 motorized treadmill
(4)KH-890 light commercial cross trainer
(5)KH-690 programmable magnetic elliptical cross trainer
ACCESSORIES
(a)Power bander
(b)Doorway gym bar
(c)Skip ropes
(d)Double exercise wheel
(e)Pilates band
(f) Anti burst gym ball
MAGNUM
(1)AC125 mtorized treadmill
(2)ACO125 motorized treadmill
HORIZON FITNESS
(1)T901 Treadmill
(2)T902 Treadmill
Place
As currently the major retailers have a large presence only in tier 1 cities,
our marketing plan proposes to move into tier 2 cities as well. Unlike
earlier times where new fads and trends introduced in the market only
penetrated deeply into the metropolitan cities, the emergence of newnational icons from tier 2 cities has made these cities much more
vulnerable to identifying with and adopting these new trends. So is the
case of the new trend of being fit and staying healthy. Many of the new
supermodels and actors have come from small cities and made a big
impact on the national front. This has made people from these cities break
off from their small town mentalities and try and experiment with new
trends. Thus we see these cities as potential markets in the future and
would want to start building a good base in these markets as soon as
possible. However, we also realize that the per capita income and thepurchasing power parity of people living in these towns and cities are not
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comparable to that of the metros. The gymnasiums in these cities are
lesser infrastructure and thus lesser equipment (one of the major reasons
for us to be there combined with the growing aspirations to mingle and be
the same as the metropolitan crowd), hence we plan to promote a new
pricing strategy to have a competitive edge in the market.
Pricing
The gap that we identified through our customer survey was that in the
pricing mechanism. Currently the system is such that the producers of
these equipments (majorly based in US) sell their products through
retailers at a given price which is based on the producers costing and
profit arrangements. After providing a retailers margin to retailers, it is
upto the retailers to set the price at which they sell to the end consumer
by modulating their profit margin. The retailers generally provide a
discount to consumers and a further discount if it is a bulk purchase. For
e.g. : a XTRACK 1312 treadmill of California fitness group sold by action
sports(based in Mumbai) has an MRP of INR 75,000 whereas action sports
provides a discount and sells it for INR 52,500. However these payments
currently have to be one time payments. This is the gap we realized in the
market and propose to introduce an EMI SCHEME in the purchase of this
equipment. Currently the numbers of gyms in the country are not high as
compared to other developed and developing countries where staying fit
and being healthy is a part of their lifestyle; however we do see it to
become a part of the Indian lifestyle very soon. Thus it is imperative to
make it easier for customers to buy such equipment. This would enable
other probable gym owners to open up gyms, which was not possible as
the high payment was a constraint in opening up a gym and the same
effect will be seen in the home products segment as individual consumerswill also be able to purchase these equipments easily. Thus this mode of
payment provides relief to both gym owners as well as individual
consumers
The other aspect is the practicality and feasibility of such a proposal.
There are certain things we need to accomplish to make sure this
proposal is practical:
1. Firstly we need to tie up with certain banks that help us provide this
EMI solution at 0% interest rate.
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2. We need to also increase our ACP with the producers as our
payments are not based on the EMI scheme and now after the
introduction of this scheme, we unlike before, will not be receiving
the money at one time. Thus the cash flow will change. However
this does not pose to be a problem as a retailer because as seen inthe five forces model, the retailers have a high bargaining power
because of accessibility to the market. Hence we can propose to go
ahead with our new pricing policy.
Promotion
The Promotion in the Marketing Plan will consists of banners and flexi vinyl
boards outside the retail outlets which will come at a onetime cost and be
durable in terms of their lifetime value.
Similarly a couple of ads can be placed in Health and Lifestyle magazines
which will cater to enthusiasts who are looking at losing those extra
pounds and staying healthy.
Pamphlets distributed in area centric newspapers are a wonderful way of
reaching the target audience at a very reasonable cost.
There could be cost effective Tear Drop Banners which would give a very
intriguing feel to the whole store and that would increase footfalls due to
the curiosity
Conclusion
We believe that with a proper financing option it would convert many non
buyers into buyers and many non consumers to recreation customers,
thus making the industry much more attractive and the job of a retailer
easier and more profitable.
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