the great marketing roulette ashutosh sinha, imrb international balendu shrivastava, imrb...
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The Great Marketing Roulette The Great Marketing Roulette
Ashutosh Sinha, IMRB International
Balendu Shrivastava, IMRB International
What is common in . . . What is common in . . .
Subsidized cost for Subsidized cost for razors but high cost razors but high cost
for bladesfor blades
Non Digital Non Digital Cameras - low Cameras - low
cost of cameras cost of cameras but high cost for but high cost for
films films
CDMA Phones - CDMA Phones - low cost handsets low cost handsets
but high tariffsbut high tariffs
Machine Machine Repellants – low Repellants – low cost Machine but cost Machine but high priced refillshigh priced refills
What is the advantage for marketers?What is the advantage for marketers?
• Consumer paying lower initial value – thus penetrate a larger market
• Assured revenue stream once the product is penetrated
But,But,
• Are they pricing it right?
• Is there a revenue loss due to lower product price or higher supplies price?
• Would new brand variants cannibalise or pull consumers from competition?
The Roulette and Marketing!!!!!The Roulette and Marketing!!!!!
√√They might lose everything
√√Pump money behind it!!
√√Poses faith on an assumed combination
√√Guesses a combination of numbers
GamblerGambler
√√
√√
√√
√√
Dual Dual Revenue Revenue Stream Stream
MarketersMarketers
Limited usageLost Revenue Lost Revenue OpportunityOpportunity
DisasterDisasterLower product Lower product penetrationpenetration
Just Just RightRight
And what could be the ramificationsAnd what could be the ramifications
High
High
Low
Low
Pro
du
ct P
rice
Pro
du
ct P
rice
Supplies PriceSupplies Price
In effect, arrive at a best possible combinationIn effect, arrive at a best possible combination
Product
Product
Product
Supplies
Supplies
Supplies
A Printer Case StudyA Printer Case Study
Pro
du
ct Price
Pro
du
ct Price
Su
pp
lies Price
Su
pp
lies Price
Introducing the charactersIntroducing the characters
Rs. 10,000 Rs. 50 p.a.
Rs. 2,500 Rs. 3,600 p.a.
Dot Matrix PrintersDot Matrix Printers
Ink Jet PrintersInk Jet Printers
Research ProblemResearch Problem
• The client HP, a leader in IJP space with a 50%+ market share
• Sound dual stream revenue model– High product penetration– High supplies price
Product Prod
uctProduct
SuppliesSuppli
esSupplies
• Smart Indians!
Given this the client wanted toGiven this the client wanted to
Decide on price of a printer and Supplies so that:Decide on price of a printer and Supplies so that:
• Maximize revenue– ensure minimal cannibalisation– maintain/improve market share
In effect, the decision points are aboutIn effect, the decision points are about– Price and Features for the Ink Jet Printer– One printer or more than one model– Price for the Black Cartridge– Price for the colour cartridge
Generalized Solution for Dual Revenue Stream Generalized Solution for Dual Revenue Stream Product Pricing ResearchProduct Pricing Research
• Can I charge more for the product?– By adding value added features OR– By reducing the price of supplies
• Can I get more revenue by lowering the price of supplies?– Will I get enough mileage by reducing price OR– Should I use a combination of reduced price and lower costs (by reducing
yield)
• Qualitative research to identify opportunity areas in - Enhancing value by adding features- Enhancing profitability by dropping “performance” level
• Converting value propositions into tangible choice cards (using orthogonal design)
• Customised Choice Modelling and Traditional Conjoint Design
• Revenue Simulator for the entire product life cycle
The Research SolutionThe Research Solution
• Customised Choice Modelling– Answering the basic “what if” questions– What printer– What price– Price and features of cartridges
• Traditional Full Profile Conjoint– Identify “importance” of features– Identify utility values associated with features– Optimum product combination– Internal validation for the choice modelling
Evolving the Value ParadigmEvolving the Value Paradigm
• Evolved the following features for printers:– Speed of the printer (pages per minute)– Printer Warranty (number of years)– Life of the Printer (number of pages)– Printer Resolution (dpi)
• Only two variations for the cartridges– Quantity of ink in the refill cartridge – Quality of print out (actual print out comparison)
Identifying Price Ranges and Value Identifying Price Ranges and Value AssociationsAssociations
• Quali research conducted amongst the segments of interest:– Households (owners and
intenders)– Micro-businesses and
Small Businesses
– Including those buying genuine and ‘refillers’
HOUSEHOLDS SMBMICROBIZ
MEDIUM
Product
Supplies
Product
Supplies
Supplies
Product
IMPORTANCE
• Printer Price Range– Rs. 2,500 to Rs. 6,000
• Cartridge Price Range– Rs. 75 to Rs. 500
Value EnhancementsValue Enhancements
Value EnhancementsValue Enhancements
Multiple Functions – Scanner, Fax, Copier
Long Lasting PrintersMore number of pages
per cartridge
Longer warranty period
Nothing too different from our initial brainstorming sessionNothing too different from our initial brainstorming session
Attributes and levels in the modelAttributes and levels in the model
AttributeAttribute LevelsLevels ExamplesExamples
Printer AttributesPrinter Attributes
1. Brand 5 HP, Epson, Canon, Samsung, HCL
2. Black Cart. Price 5 Rs. 280, 380, 520, 660, 800
3. Hardware Price 8 Rs. 2400, 3000, 3500, 4000, 4500, 5500, 6700
4. Warranty 3 1 year, 2 years, 3 years
5. Printer Life 2 30000 or 60000 pages
6. Speed 3 10 ppm, 20 ppm, 30 ppm
7. Resolution 3 1200 dpi, 2400 dpi, 4800 dpi
Cartridge AttributesCartridge Attributes
1. Quality 2 Regular (Normal), Everyday (Inferior)
2. Yield 3 250 pages, 450 pages, 600 pages
3. Genuineness 3 Refill / Original / Local
4. Type 2 Colour / Black
Traditional Booklet 12Traditional Booklet 12
Scenario 48Scenario 48
I will buy another printer
I will not buy a printer
HCL’s medium size Inkjet printer, suitable for all kinds of office. Can also be used by homes.
Rs. 3,500/-
Rs. 660 / 800Cartridge Price(Black/Color)
2 yearWarranty
60,000 pagePrinter Life
1200 dpiResolution
20 ppmSpeed
1
2
3
Traditional Conjoint Product CardsTraditional Conjoint Product Cards
The final utility values plotted on Excel PivotThe final utility values plotted on Excel Pivot
Inkjet Booklet 1
Scenario 73Scenario 73
I will buy another printer
I will not buy a printer
5
6
Epson’s compact Inkjet printer. Ideal for home &
small office use..
Rs. 2,500/-
3
Rs. 400/ 650Cartridge Price(Black/Color)
3 yearsWarranty
30,000 pagePrinter Life
2400 dpiResolution
20 ppmSpeed
Canon’s compact Inkjet printer. Ideal for home &
small office use..
Rs. 3,000/-
1
Rs. 400 / 650Cartridge Price(Black/Color)
1 yearWarranty
30,000 pagePrinter Life
4800 dpiResolution
10 ppmSpeed
HP’s compact Inkjet printer. Ideal for home &
small office use.
Rs. 2,400/-
2
Rs. 660/ 800Cartridge Price(Black/Color)
1 yearWarranty
30,000 pagePrinter Life
4800 dpiResolution
10 ppmSpeed
Card 2Card 2
The Customised Choice ModelThe Customised Choice Model
• Created choice tasks for printers
Office Booklet 1Office Booklet 1
Scenario 4Scenario 4
I will buy some
other cartridge
1
Original
Regular
Rs 800Price
600 pagesYield
Original
Regular
Rs 400Price
250 pagesYield
Local
Rs 80Price
250 pagesYield
Refill
3 5 6
7
Rs 520Price
250 pagesYield
BLACK CARTRIDGE
The Customised Choice ModelThe Customised Choice Model
• Similar cards created for Cartridges
Building a modelBuilding a model
• A multinomial logit model fitted to the results from choice tasks
• Model was run on aggregate data for a scenario, with alternate specific effects
• More than 20 models were analysed taking into account printer, colour and black cartridges in three segments (Homes, Microbiz and Medium Sized business)
Developing the Revenue SimulatorDeveloping the Revenue Simulator
• Results were summed up in a revenue simulator based on multinomial logit analysis
• Enabled the client to examine impact on volumes, market share and revenue
• Was able to examine some complex scenarios
• For example
Revenue SimulationRevenue Simulation
Less money per transaction
(-20%)
Hi Share as compared to
refills(30%)
20% drop in price of black cartridge
Increase the share of printer
(+10%)
Increase the volume of
cartridges used(+10%)
Net gain in revenues over 44 months(+20%)
4 sheets for the client with 4 sheets for the client with minimal clicks minimal clicks
(80 sheets working silently behind)(80 sheets working silently behind)
Increase H/W Price
Competition reaction
Shift in market share
Revenue share
Revenue SimulatorRevenue Simulator
Assumptions SheetAssumptions Sheet
Input sheetInput sheet
• Listed down assumptions • E.g.
– Printer sales are not seasonal
– Printers have a life of 44 months
• Allowed the client to create three scenarios.
• Current market scenario and the printer that they would like to introduce.
Revenue SimulatorRevenue Simulator
Result SnapshotResult Snapshot
Detailed Revenue SimulationDetailed Revenue Simulation
• “Test” models in actual marketplace.
• Conduct what-if analysis• Aggregated segments to
view the entire market in one go
• For the 3 scenarios• Printer Share• Printer Volumes (for the current year)• Hardware Revenue (for the current
year)• Cartridge Volume (Next 44 months)• Cartridge Revenue (Next 44 months)
EndnoteEndnote
• Simple problems may require complex designs but they need to offer simple and workable solutions
• A research is effective only when it is utilised
• Clients need not get lost behind complex mechanisms and make use of it to the extent possible
Client’s citationClient’s citation
In the words of Abhijit Patwardhan, Director – Marketing, Asia Pacific and Japan, HP Asia Pacific Pte Ltd.
“It is a very powerful tool for us to run financial scenarios and market simulations. Partially, we applied our business feel onto it. The volumes turned out to be lower than forecasted by a small margin (15%). The project still delivered on our estimates and is being deemed a success.”
Portability of the toolPortability of the tool
• As more and more marketers move into “servicing” clients than selling “products”, the need for optimum pricing research would only grow
• This is probably the most complex example for dual revenue stream product categories
• The other categories would not have as many features and hence, lesser choices for the consumers
The complexity for other categories may be The complexity for other categories may be less … but the fun would still be thereless … but the fun would still be there
Thank You!Thank You!