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The Great Marketing Roulette Ashutosh Sinha, IMRB International Balendu Shrivastava, IMRB International.

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Presentation on theme: "The Great Marketing Roulette Ashutosh Sinha, IMRB International Balendu Shrivastava, IMRB International."— Presentation transcript:

1 The Great Marketing Roulette Ashutosh Sinha, IMRB International Balendu Shrivastava, IMRB International

2 What is common in... Subsidized cost for razors but high cost for blades Non Digital Cameras - low cost of cameras but high cost for films CDMA Phones - low cost handsets but high tariffs Machine Repellants – low cost Machine but high priced refills

3 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, 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?

4 The Roulette and Marketing!!!!! They might lose everything Pump money behind it!! Poses faith on an assumed combination Guesses a combination of numbersGambler Dual Revenue Stream Marketers

5 Limited usage Lost Revenue Opportunity Disaster Lower product penetration JustRight And what could be the ramifications High Low Product Price Supplies Price

6 In effect, arrive at a best possible combination Product Supplies

7 A Printer Case Study

8 Product Price Supplies Price Introducing the characters Rs. 10,000Rs. 50 p.a. Rs. 2,500Rs. 3,600 p.a. Dot Matrix Printers Ink Jet Printers

9 Research 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 Prod uct Suppli es Smart Indians!

10 Given this the client wanted to 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 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

11 Generalized Solution for Dual Revenue Stream Product 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

12 The 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

13 Evolving 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)

14 Identifying Price Ranges and Value Associations Quali research conducted amongst the segments of interest : –Households (owners and intenders) –Micro-businesses and Small Businesses –Including those buying genuine and refillers HOUSEHOLDSSMB MICROBIZ MEDIUM Product Supplies Product Supplies Product IMPORTANCE Printer Price Range –Rs. 2,500 to Rs. 6,000 Cartridge Price Range –Rs. 75 to Rs. 500

15 Value Enhancements Multiple Functions – Scanner, Fax, Copier Long Lasting Printers More number of pages per cartridge Longer warranty period Nothing too different from our initial brainstorming session

16 Attributes and levels in the model AttributeLevelsExamples Printer Attributes 1.Brand5HP, Epson, Canon, Samsung, HCL 2.Black Cart. Price5Rs. 280, 380, 520, 660, Hardware Price8Rs. 2400, 3000, 3500, 4000, 4500, 5500, Warranty31 year, 2 years, 3 years 5.Printer Life or pages 6.Speed310 ppm, 20 ppm, 30 ppm 7.Resolution31200 dpi, 2400 dpi, 4800 dpi Cartridge Attributes 1.Quality2Regular (Normal), Everyday (Inferior) 2.Yield3250 pages, 450 pages, 600 pages 3.Genuineness3Refill / Original / Local 4.Type2Colour / Black

17 Traditional Conjoint Product Cards

18 The final utility values plotted on Excel Pivot

19 The Customised Choice Model Created choice tasks for printers

20 The Customised Choice Model Similar cards created for Cartridges

21 Building 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)

22 Developing 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

23 Revenue 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 minimal clicks (80 sheets working silently behind) Increase H/W Price Competition reaction Shift in market share Revenue share

24 Revenue Simulator Assumptions Sheet Input 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.

25 Revenue Simulator Result Snapshot Detailed 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)

26 Endnote 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

27 Clients 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.

28 Portability 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

29 The complexity for other categories may be less … but the fun would still be there Thank You!

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