Assignment
Strategic Marketing
Marketing Strategy for Onida TV in India
By1. Abhishek Tandon (2009A08)
2. Jerrin Jacob (2009A18)
3. Kumar Mithilesh (2009A44)
Objective
To frame Marketing Strategy for Onida TV so as to improve its position in the Indian market.
Industry Analysis
1. Industry dominant economic traits
A] Market Size
The TV market is currently estimated at `11,500 Cr. Approximately 10.5 million TV sets are sold per year in India. The market of TV is expected to grow at 9-9.5% in 2010-12.
B] Growth Drivers
TV sets are the fastest growing category among household durables. 11.5% of Indian homes bought a TV set in the last two years. Some of the growth drivers in the TV market are:
• Brand awareness and promotion - Innovative promotion like exchange offers, free gifts etc.
• Increase in disposable income – Indian middle class is growing in wealth and volume, both.
• Emergence of nuclear families- With families separating, no. of households needing TVs increases.
• Declining prices – More affordable prices resulting in volume sales in low-end markets.
• New product introductions – Attention of consumers is evoked. Also, interest towards upgrading is generated. Replacement demand (46% of overall) would be well served by new variants.
• Rise in organized retail – Consumers have abundant choices at the same store. Information search and Alternative evaluation while purchasing the TV becomes easy. MTOs will ensure quick sales.
• Festive Season sales - Demand for colour TVs usually picks up during the festive seasons. This period will continue to be the growth driver for consumer durable companies.
• Rural Market - Penetration of CRT TV (CTV) in rural markets is about 17%. 120 million households in India still don’t have CTVs, signifying tremendous potential for TV players in the rural market.
• Segmental Shift – More shift towards high-end TVs like Plasma, LCD etc. Flat screens are demanded more. Dimension-wise, trend is more towards the mid-size (20ʺ - 25ʺ) segment as the 14ʺ market is gradually shrinking. Affluent people and establishments are looking for big-sized TVs now.
• Events - ICC world cup and IPL will generate export demand in Sri Lanka, Bangladesh, Pakistan etc.
C] Cheaper Imports:
Sluggish global economic conditions are making imports (in CKD/SKD condition)cheaper. Of late, rupee is appreciating, which will further bring down the landed cost of imports. All this will result in reduced cost (Raw material costs 70% of overall cost of a CTV) of the product. The TV makers are capitalizing on this by marketing the latest products in India at competitive prices.
D] Cost Advantage:
Easy availability of low-cost skilled labor and the emergence of SEZs, which aretax-free zones, are some of the key factors that have resulted in growth of these manufacturing units. In fact, encouraged by tax-breaks, new manufacturing units are coming up in less-developed regions now.
E] Government Initiatives:
Government spending on rural and small town electrification program has increased considerably over the years. More electricity will be available to the people (60,000 MW additions by 2012). This will spur the demand for electronics products further.2. Competitive forces (Porter’s five forces analysis)
I. Threat of Intense Segment Rivalry
Competition is intense in this market with many brands available. There is very little differentiation in terms of product performance and technology. Foreign players (esp. Koreans) have put further pressure on margins. Entry of Haier (Chinese Company) has forayed in India will challenge even the established players now. While Mirc Electronics (Onida) has managed to hold on to its value-for-money strategy; competition is from Akai, Panasonic, BPL, Philips, Sansui, Toshiba etc.
II. Threat of New Entrants
The TV industry is capital intensive and huge initial investment is required. However, threat of new entrants is more because Tax-free zones and low import duty on electronic items is encouraging them to enter India. Also, the huge potential for CTV, Flat TV and HD TVs has attracted foreign players. Large incentives are required for new players to get recommended by the distribution channel members.
III. Threat of Substitutes
Internet is posing a potential threat as becoming a medium for infotainment. But its penetration is very low presently. The TV industry has responded well to this threat by introducing a TV that can provide functions of the Internet along with regular features, e.g., BPL digital that includes Internet and cellular facilities.
IV. Threat of Bargaining Power of Buyers
The cost incurred by consumer in switching from one TV brand to another is practically zero. Brand loyalty is shrinking. Also, exchange offers are giving consumers more reasons to look for newer products. Therefore, every effort should be made to retain customers.
V. Threat of Bargaining Power of Suppliers
Many manufacturers need to import color picture tubes (it constitutes around 50% of the cost of Color TV). As TV market is growing, so is the demand for colour picture tubes (CPT). It provides good opportunity of bargain for suppliers. Cheaper imports have rendered local component suppliers with little bargaining power. Moreover, since the picture tube has no alternate usage other than TVs, large players manage to negotiate good deals with these CPT manufacturers.
3. Change drivers and their Impact
A] Wide Choices: It is a Buyer's market now. There are plenty of options, both in terms of brands and the models. Advent of LCD and now 3-D, has helped in widening the product base of TVs.
B] Technological Change: Technological changes have helped the boom in the industry. In recent years, the market for televisions in India has changed rapidly from the conventional CRT technology to Flat Panel Display Televisions (FPTV). The split between CRT and FPTV is around 97:3 and is likely to be more towards FPTVs. Even 3D has made inroads in India now.
The flat panel television (FPTV) market (LCD and plasma TV) is witnessing a phenomenal growth.
C] Price Orientation: The drop in prices and large scale promotions has managed to maintain the sales. Sales have primarily been in the low-budget range (`8,000 - `15,000). Models priced above Rs 20,000 have not been sold in large numbers. Also, brand loyalty is giving way to value-for-money purchases. D] Changing Demographics: Good harvest would help improve rural income. Increasing nuclear families
E] Ready acceptance of foreign brands: A shift in consumer preferences towards higher-end, technologically advanced branded products has been quite discernable. The differential between the prices of branded and unbranded products is narrowing. There is growing preference towards foreign brands as consumers look for high quality of after sales service provided by the branded players.
4. Competitive position
The major players in the TV market are:
• LG
• Samsung
• Onida
• Videocon
• Sony
TV market is highly consolidated with the top five players controlling around 3/4th of the market.
Sony and Samsung have very strong presence in
the LCD segment. (Each having >20% Share).
Competitive position as per Arthur D. Little framework – Favourable. 5. Likely competitive moves
• The sector will continue to be characterized by intense competition and onslaught from MNCs. Players will go for introduction of state-of-the-art models, price discounts and exchange schemes. Companies are likely to promote financing schemes through their dealers even more.
• Market shares are expected to consolidate, though at a slower pace. While major industry players would continue to play on price in the low-medium range; advertising and promotional spends would continue to be an integral part of the players’ marketing programs.
• For improving margins, many players will shift their focus towards Flat TV and higher segments.(In fact, Samsung have exited the CCTV segment)
6. Key Success Factors (KSF)
A] Product Variety: Companies who have complete range will stand to gain. Also, focus on multiple categories will drive success.
B] Brand Strength: In this category, there is very low scope for product differentiation. Brand awareness matters a lot in TV purchase.
C] After-sales service: Companies like LG & Sony have been able to hold on to their market share because of their extensive service stations. Purchase of TV being a complex-buying process, availability of service instills confidence amongst potential consumers (Chances of post-purchase dissonance get reduced). E] Promotion Schemes: Sales are primarily seasonal. Schemes such as Discount, Exchange Offers,
Coupons, Free Gifts, and Lucky Draw etc. help to drive the sales. 7. Industry Attractiveness
There are many players vying for same market, leading to low net realizations in the industry. The net margins in CTV will be around 7-9% while in Flat Panel market, profits will be higher (12-15%).
LG 22% Samsung 14% Onida 12% Videocon 17% Sony 10% Others 25%
Market share
(by Volume, %)Competitor Strategy
Currently MNCs dominate the Indian TV market with more than 65% market share in the CTV segment. MNCs like LG, Sony, Samsung, Phillips and Videocon command a high market share. These companies are focusing on product differentiation, value added offerings and exchange offers.
These players have adopted the following strategies to compete on the Indian turf:
• Product Line: These companies (LG, Sony, Samsung, Phillips and Videocon) have a wider product range compared to Onida to target customers from all segment.
• Positioning: Their Image of a multinational company in the minds of consumer helped them to grab market share instantly. It gave a perception that these companies have better technology. Videocon on the other hand leveraged its MNC image by it tagline of “Indian MNC”.
• Advertisements: LG has Abhishek Bachhan, Samsung has Aamir Khan, Videocon had Amitabh Bachhan and now Sharukh Khan. All these players have used celebrities to a good effect to endorse their brands. On the other hand, Onida has an inconspicuous young couple which does not make an impact - the devil in this case would have been very powerful.
• Visibility: The companies are associated with events and sponsorships (LG and Videocon are associated with cricket). This has resulted in better brand visibility.
• Focus on high-end market: Many players have shifted their focus towards higher-end segments, as the pricing pressure is high in regular CTV. (In fact, Samsung have exited the CCTV segment).
Functional Strategy for Onida
SWOT Analysis for Onida TV
Strengths 1. High brand recall (The Devil) 2. Premium pricing (Price Value Strategy) 3. Good distribution facility 4. High quality LCD TV’s (Less service requirements) 5. Strong In Shop Training & Demonstration (ISD) Weakness 1. Less promotion 2. Volatility in positioning 3. Weak after‐sales service points 4. Hitherto known for superior technology 5. Not much focus on R&D Opportunity 1. Growing Middle class 2. Replacement market (CRT to Flat screen, LCD) 3. Growing semi‐urban and rural market 4. Easier financial assistance from banks 5. Increase in consumerism leading to increase in entertainment needs Threats 1. Increased Competition from MNCs 2. High bargaining power of Speciality stores 3. Increase in salary of Technicians in the industry 4. Obsolescence of technology, esp. in LCD 5. Large manufacturers might benefit from their scale, resulting in owering of pricesONIDA
STP Analysis
Segmentation
The TV market may be segmented based on technology used in product, e.g. CRT or Flat Panel. In the flat panel TV segment, sub-segments can be LCD, Plasma and 3-D.Technology Used> CRT LCD HDTV
Dominant Players > Videocon, Samsung, Onida, BPL Samsung, LG, Sony Samsung, LG, Sony
Since the lifestyle of consumers matters a lot in the decision of buying TV, they can also be classified based on their Lifestyle, Personality & Values (Psychographic), i.e. based on VALS2 framework.
Targeting –
Onida should target SEC C and SEC B households with their regular offerings i.e. CRT TV, SEC A2 and SEC B1 for higher-end TVs such as LCD. Age-wise, they should focus on the young and first-time buyers. As they graduate to the high end segment, they can target them with its high-end products. Out of all VALS-2 segments, they should target Thinkers (Who favor value in products) and Believers (Traditional, seeking familiarity).
Positioning
Onida TV should be positioned as a medium for entertainment providing advanced technology at affordable prices. The focus of the company would be to allow those people to upgrade who want to upgrade but do not have the means. Target consumers should see it as an aspirational home appliance. Onida TV should continue to be ‘neighbour’s envy – owner’s pride’!Onida owners are regarded in high esteem –they are special, and this can act as a strong differentiator.
Product Line Strategy
A] Line Extension: The Company should go for line extension in low-price value segment so as to target more customers there. Dimension wise, Onida’s portfolio should cover more sizes other than 14ʺ, such as 21ʺ, 29ʺ and more.
B] LCD market is the fastest growing segment and this is where Onida should focus immediately. These products will fetch higher realization than the low-priced TVs. They should launch high-definition, LED TVs. They should continue the USB supported TV which will be a good differentiator to project its technological superiority and user-friendly features.
D] Product Category: They should develop flat-screen, 29ʺ LCD while continuing regular 21ʺ CRT models.
Marketing Mix (4P) Strategy
Product: Greater focus should be on the LCD TV line. Instead of following the trend, the TVs should have really new features, e.g. Ultra slim TV with USB connectivity.
Price: The pricing doesn’t need to be altered much. They should keep the Landed Retail Price (LRP) of TVs the same but give more margins to dealers. The price for 14ʺ and 21ʺ should be kept `600 – 1,500 more than Videocon and BPL, so as to maintain its superior image (Videocon is generally priced lowest of all). In the LCD segment, the price should be 15-20% less than Sony and Samsung. This will help in grabbing the aspirational customers who would not like to spend much in their TV purchase.
Place: They should expand dealer network across market geographies. Also, in their target markets, they should establish Onida TV Service & Exchange stations. They should e
mploy service employees at least at
the market rate to bring about confidence in the minds of the dealer and consumers.
Promotion: They should bargain for more shelf space in speciality stores like Croma, eZone etc. They may negotiate with discount stores like Big Bazaar for promoting Onida TV. They should also invest more in dealer promotions (Videocon has had reasonable success due to aggressive dealer promotions).
• Consumer Promotion: Promotions like contests, lucky draw, exchange offers etc. will help in brand awareness and better brand recall. This way they can capture a good part of replacement demand.
• Celebrity Endorsement: The company can rope in a celebrity to endorse its brand in a fresh advert. This way the brand can be benefited from celebrities brand equity. We suggest rope in a sports icon or a bollywood star rather than the inconspicuous couple (as per the current ads) where the recall value is poor. This will also help in better brand awareness.
• Association with events: To regain old customers and to regain visibility, Association with events can help. Onida’s problem of low visibility will be solved with its sponsorship of events like cricket matches (ICC World Cup 2011 & IPL-4), rock shows, other games, marathons etc. (LG co-sponsored ICC World Cup 2003 and got tremendous mileage in terms of increased sales and brand building.)
• Innovative Advertisement: They should come up with catchy advertisement ahead of Cricket World Cup and IPL-4 season. Their decades old ‘Devil’ can be portrayed to find a connect with today’s mid-age generation, who are their potential customers.
Branding Strategy
1. Brand Positioning: They positioning strategy is different in each segment, e.g. Onida LCD TVs are not as expensive compared to Samsung, LG, Videocon, etc. but among the colour TVs, it is much more expensive and considered as a premium product. Consumers don’t have much clarity about what does Onida stand for? There is a disconnect between Brand identity and brand image.
Onida should stick to a uniform positioning strategy (One message –one voice) throughout..
2. Brand Image: Everything is fine with the brand. People recognize the brand. Even though exposure is limited, the brand enjoys immediate recognition. Onida is known as a quality brand of TV in India. It needs to only remind the target customers of its rich heritage. It should project itself as a good quality, value-for-money brand.
3. Brand Communication: The Company should go for a better adverting. The company can rope in a celebrity to endorse its brand. This way the brand can be benefited from celebrity’s brand equity. We suggest roping in a sports icon or a bollywood star rather than the inconspicuous couple (as per the current ads) where the recall value is poor. Nothing but the truth
4. Monitoring & Review: The conversion rate of Onida TV (during purchase evaluation) will be a good measure of efficiency of the strategy. Communication programs can be evaluated through the ‘Reach, Frequency & Impact’ analysis of Ads. The sales figures will indicate the consumer preference towards Onida brand, especially during purchase before World Cup and IPL-4. Unaided recall for brand salience can be used.
Possible New Product Development (NPD)
They can also focus on making the product with multi-functionality (e.g. TV with headphone). Middle class consumers would welcome a Many-in-one product as TV. New products with future technologies such as HD, LED can be launched.
