Get documents about "The Great Marketing Roulette Final
Document Sample
The Great Marketing Roulette
Ashutosh Sinha, IMRB International
Balendu Shrivastava, IMRB International
What is common in . . .
Non Digital
Cameras - low
cost of cameras
but high cost for
films
CDMA Phones -
low cost handsets
but high tariffs
Machine
Repellants – low
Subsidized cost for cost Machine but
razors but high cost high priced refills
for blades
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?
The Roulette and Marketing!!!!!
Dual
Revenue
Gambler
Stream
Marketers
Guesses a
combination √ √
of numbers
Poses faith on
an assumed √ √
combination
Pump money
behind it!!
√ √
They might
lose √ √
everything
And what could be the ramifications
Lower product
Product Price
High Disaster
penetration
Just
Right
Low
Lost Revenue
Limited usage
Opportunity
Low High
Supplies Price
In effect, arrive at a best possible combination
Product
Product
Product
Supplies
Supplies
Supplies
A Printer Case Study
Introducing the characters
Dot Matrix Printers
Supplies Price
Product Price
Rs. 10,000 Rs. 50 p.a.
Ink Jet Printers
Rs. 2,500 Rs. 3,600 p.a.
Research Problem
• The client HP, a leader in IJP space with a 50%+
market share
• Sound dual stream revenue model
Prod
uct Prod
uct
Prod
Suppli
uct
– High product penetration
Suppli es
Suppli
es
es
– High supplies price
• Smart Indians!
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
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
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
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)
Identifying Price Ranges and Value
Associations
IMPORTANCE
• Quali research conducted
Product Product
amongst the segments of Supplies
Supplies
interest:
– Households (owners and MEDIUM
intenders)
– Micro-businesses and
Small Businesses Supplies Product
HOUSEHOLDS MICROBIZ SMB
– Including those buying
genuine and ‘refillers’ • Printer Price Range
– Rs. 2,500 to Rs. 6,000
• Cartridge Price Range
– Rs. 75 to Rs. 500
Value Enhancements
Multiple Functions –
Longer warranty period
Scanner, Fax, Copier
Value Enhancements
More number of pages
Long Lasting Printers
per cartridge
Nothing too different from our initial brainstorming session
Attributes and levels in the model
Attribute Levels Examples
Printer 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 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 Conjoint Product Cards Scenario 48
I will buy
another printer
HCL’s medium size Inkjet printer, suitable for
all kinds of office. Can also be used by homes.
2
Speed 20 ppm
Resolution 1200 dpi
Printer Life 60,000 page
Warranty 2 year
I will not buy a
Cartridge printer
Rs. 660 / 800
Price
(Black/Color)
3
Rs. 3,500/-
1 Traditional Booklet 12
The final utility values plotted on Excel Pivot
The Customised Choice Model
• Created choice tasks for printers
Scenario 73
I will buy
another printer
Canon’s compact Inkjet HP’s compact Inkjet Epson’s compact Inkjet 5
printer. Ideal for home & printer. Ideal for home & printer. Ideal for home &
small office use.. small office use. small office use..
Speed 10 ppm Speed 10 ppm Speed 20 ppm I will not buy a
Resolution 4800 dpi Resolution 4800 dpi Resolution 2400 dpi printer
Printer Life 30,000 page Printer Life 30,000 page Printer Life 30,000 page
Warranty 1 year Warranty 1 year Warranty 3 years
Cartridge Cartridge Cartridge
Price Rs. 400 / 650 Price Rs. 660/ 800 Price Rs. 400/ 650
(Black/Color) (Black/Color) (Black/Color) 6
Rs. 3,000/- Rs. 2,400/- Card 2
Rs. 2,500/-
1 2 3 Inkjet Booklet 1
The Customised Choice Model
• Similar cards created for Cartridges
Scenario 4
BLACK CARTRIDGE
Original Original Local Refill
Regular Regular
Yield 250 pages Yield 600 pages Yield 250 pages Yield 250 pages
Price Rs 520 Price Rs 800 Price Rs 400 Price Rs 80
1 3 5 6
I will buy some
other cartridge
7 Office Booklet 1
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)
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
Revenue Simulation
Increase Competition
H/W Price reaction
20% drop in price of black cartridge
Hi client
4 sheets for the Share as with per
Increase the
Increase the
volume of compared to
Less money
minimal clicks
share of printer
(+10%)
cartridges used
(+10%)
refills
(30%)
transaction
(-20%)
(80 sheets working silently behind)
Net gain in revenues over 44 months
(+20%) Shift in
Revenue
market
share
share
Revenue Simulator
• Listed down assumptions
• E.g.
– Printer sales are not
Assumptions Sheet seasonal
– Printers have a life of 44
months
• Allowed the client to
create three scenarios. Input sheet
• Current market scenario
and the printer that they
would like to introduce.
Revenue Simulator
• “Test” models in actual
marketplace.
• Conduct what-if analysis
Result Snapshot • Aggregated segments to
view the entire market in
one go
• For the 3 scenarios
• Printer Share
• Printer Volumes (for the current year) Detailed Revenue Simulation
• Hardware Revenue (for the current
year)
• Cartridge Volume (Next 44 months)
• Cartridge Revenue (Next 44 months)
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
Client’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 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
less … but the fun would still be there
Thank You!
