Case prepared by Harsh V Verma, Associate Professor, FMS, University of Delhi (harshverma@fms.

edu) Limited circulation only for Consumer Behavior Students Sanyo Refrigerator The following are some the news paper clipping that marketing research and intelligence department of BPL Sanyo has collected. These have been passed on the marketing team headed by Mr Peter. The team is currently in the process of finalizing the marketing strategy. There are a lot of questions that have sprung up in the course of discussion about the launch strategy that the company is supposed to adopt. Mr Peter has gave the following summary facts about the product that the company is about to launch. Peter is proud of the fact that BPL refrigerator is one of its kinds and has been built using the state of the art technology. He observed the following: While the marketers are busy segmenting the market, BPL has gone ahead and segmented the product itself. That too by temperature zones. The product is an outcome of technical collaboration with Sanyo. It is Indias first four door refrigerator as a part of the new range. The frost free four door refrigerator has separate compartments for foods that need different temperature and humidity levels. The independent chiller, freezer, vegetable and general compartment add up to a huge above 500 lts space. One of the critical decisions in the launch of the product is how it should be positioned. And the voices seem to support its positioning as the world class refrigerator. What should it be called? Obviously it is a refrigerator but it embodies new technology and new multiple door concepts. Some people feel it should not be called refrigerator. Actually the manufacturing team within the company calls it refrigerating system. A host of features have been added to the product to put it ahead of the competition. The company claims to have made it using super efficient tropicalized compressor. This is capable to adequately meet the challenge of the Indian summer conditions. It can withstand head and voltage fluctuations. For insulation material, integrated polyurethane foam has been used. There is an ozone generator deodorizing systems to absorb smells but retain flavor. Besides there are several other technological up gradations have been made. Its freezer works faster at minus 18 degrees centigrade than conventional systems. And it comes with non stick cubes. The chiller is at minus one degree centigrade and should be used for curds, fish and other foods that should not be deep frozen. The vegetable compartment boasts of a unique humidity control filter to keep veggies fresh. Leafy vegetables should remain crisp, not soggy. The potato and onion portion is slightly warmer than the other. The regular fridge section, at three to five degree centigrade has an array of functional innovations in design. However in terms of price the price of the refrigerator is high compared to the others available in the industry. It is priced at one lac twenty thousand. The company is aiming to capture the replacement market. Every year some ten percent of the refrigerators should actually retire and get replaced. But people have a tendency to cling on to the old fridges unless they totally start to malfunction. 1|Page

Case prepared by Harsh V Verma, Associate Professor, FMS, University of Delhi (harshverma@fms.edu)

On the positive side it is common understanding that double income families and live are a reality. The new family units are time short and therefore are more prone to buying bigger refrigerator. The lifestyle changes happening in the youth strata are reflect a change towards packed food. There has been a shift in favor of big infrequent shopping which demand adequate storage space. At the same time the refrigerated spaced is required to store frozen food. The cooking time is getting shorter. The product analysis reveals that BPL refrigerator is in no way inferior to any other present brand rather it scores well on many counts over competition. Peter believes that a superior product is essential but not sufficient for marketing success. The product which comes of the factory needs to be firmly placed in the consumer context. It must be perceived meaningful and relevant. The product would lead to sales only when the buyer reached to the act of buying. There are thousands of products which are absolutely brilliant and have potential to solve customer problems but languish on the shelves or in the warehouses in the absence of an effective marketing strategy. We also have similar problem, He continued, How can we get the customer to buy our brand? What specifics our strategy must attend to? How customers actually buy a product like this one? What is consumer reality regarding the product like the one we have? Do customers differ in their reality? The members present saw emergence of a division between two groups. One group in which the most vocal member was Mr Sumit belonged to the sales department. He said there is nothing to worry about the success of the said product because it is technically superior or at par with the competition. And good products find their own market. Consumers can always be lured into buying by selling efforts, discounts, and wide distribution. In this context advertising can play an important role. We simply have to flood the media with the glossy ads and the sales would follow. All what you have observed is all right but these are generic statements and tools. These need to be deployed in strategic manner. These must be given specific mandate. Without a clear mandate what answer do have for the following questions:, observed Peter. What should be the distribution? What should be advertising? What should be its contents, appeal, and visualization? What should be the brand name? Should be called it refrigerator or refrigerating system? Should we use verbal copy or visual copy? What should we state in the body copy of the ads? What problem should our product is seen to solve? How do we get the consumer or customers to have a look at our product? There is whole lot of unanswered questions. Peter believes that strategy making is not shooting an arrow in the dark and thinking it would hit the target. Rather it is an exercise in specifics. We need a complete understanding of specifics related to refrigerator buying. How does actually consumers approach buying of a refrigerator and what kind decision making does it involve? 2|Page

Case prepared by Harsh V Verma, Associate Professor, FMS, University of Delhi (harshverma@fms.edu)

Industry background Whilrpool Whirlpool India will be targeting a 26 per cent market share of the Rs 3,400-crore refrigerator market this year, according to Mr Arvind Uppal, Managing Director, Whirlpool India. Launching the company's new products in three categories, the Delight and Fusion refrigerators, the JetChef microwave oven and the Whitemagic Splash washing machine, he told the press that in 2005, the company had a market share of 23.5 per cent in the refrigerator segment. It also targets a 10 per cent market share in the Rs 50-60 crore microwave oven category and a 16 per cent share in the Rs 1,300-crore washing machine category. An investment of Rs 45 crore will go this year into the marketing campaign to promote the newly launched products, which includes an advertisement involving brand ambassadors Kajol and Ajay Devgan. Mr Uppal said the company witnessed a growth of 25.2 per cent in the nine-month period April to December 2005 over the same period in 2004. The net sales in the nine-month period stood at Rs 969.3 crore with an operating profit of Rs 1.52 crore. Of this, 60 per cent was in the refrigerator segment, 27 per cent in the washing machine segment, 30 per cent in other categories such as microwave ovens and air conditioners, and 10 per cent accounted for by exports. The Delight frost-free refrigerator models are priced between Rs 12,675 and Rs 19,050, while the Fusion models are priced between Rs 11,200 and Rs 16,900. The JetChef microwave oven is priced between Rs 17,990 and Rs 19,990 and the Whitemagic Splash washing machine is priced at Rs 10,490 THE last few years have seen stiff competition for leadership in the Indian refrigerator market, especially among Whirlpool, Electrolux Kelvinator Ltd (EKL), Godrej, LG and Samsung. After experiencing marginal growth for some years now, the segment is looking at a double-digit growth this year. "The segment saw a growth of 7-8 per cent in 2003 and this year the industry is hopeful of clocking a growth of 12-15 per cent," a Consumer Electronics and TV Manufacturers Association (CETMA) official said. The market size, as per CETMA, is estimated at 4.1 million units in 2004. Compared to the installed manufacturing capacity of the players at approximately seven million units per annum, the refrigerator market in India is still small. 3|Page

Case prepared by Harsh V Verma, Associate Professor, FMS, University of Delhi (harshverma@fms.edu) This has led to too many major manufacturers operating at lower capacity, resulting in significantly higher overheads, according to ICRA's Sector Analysis, April 2004. The total industry size during 2003 was 3.4 million units, consisting of 2.8 million direct cool (DC) units and 0.6 million frost-free (FF) units, as per ICRA. The past three years has seen a partial demand shift towards frost-free units. "Though the FF category has seen a growth, almost 80 per cent of the sales in India is from the DC category," a CETMA official told Business Line. In the FF segment, the major players are Whirlpool, LG, Godrej, BPL and Samsung. A look at the overall market share of the major players by ICRA reveals that Godrej lost its leadership position in 1998-99 to Whirlpool. Meanwhile, Whirlpool's market share has declined from 27.3 per cent in 2000 calendar year to 26.7 per cent in the 2003-04. After Whirlpool and Godrej, the brands owned by EKL occupy the third position. However, EKL's share has also seen a dip from 23.6 per cent in 1999 calendar year to 16.3 per cent in 2003-04. In the past few years, the refrigerators market has seen the influx of Korean companies, who have managed to capture a sizeable portion of the market from established players using innovative product lines and aggressive promotion campaigns. Among the Korean players, while the market share of LG increased to 14.5 per cent in 2003-04 (from 5.4 per cent in the 1999 calendar year), the share of Samsung increased to 5.9 per cent (from 3.3 per cent) over the same period. LG and Samsung have increased their market share at the cost of older players like BPL and Videocon in the DC category. The erstwhile market leader in FF segment, BPL, and one of the older players in the category, Godrej, have witnessed a decline in share in the last three years. LG is now the leader in the FF segment, having displaced Whirlpool in 2003-04. Its market share increased to 31.7 per cent from 20 per cent the previous fiscal. Whirlpool is the second largest player with a share of 25.7 per cent during 2003-04. Low end refrigerator The low-end entry level 165-litre direct cool refrigerator may soon fade into oblivion with most durable majors shifting focus to the value-led high end frost-free segment. Led by increasing purchasing power and easy availability of finance, the shift has seen the growth in frost-free category surpassing that of direct cool category. While the nine

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Case prepared by Harsh V Verma, Associate Professor, FMS, University of Delhi (harshverma@fms.edu) lakh units frost-free category is currently growing at 60% (ORG-Gfk Jan-April 05), the 30 lakh units direct cool refrigerators category is degrowing at 19%. Within the direct cool, the under 170-litre category which once constituted the bulk of the market has degrown by about 70% during the last one year. So much so that industry players say that the under 175 litre-segment is likely to fade away over the next one year or so. The refrigerator market is seeing some corrections as even at the entry level consumers are buying high-end products, LG Electronics India logistics head SN Rai said. The share of the direct cool segment in total refrigerator sales has dropped from 80% to 65% in the last one year, LG Electronics India product head-refrigerators Anil Arora said. In fact, LG, as part of its strategic decision to focus on the higher end of the market, has decided not to focus on below 175-litre range of models at all. There are no profits in the 175-165-litre segment...we want to be present only in the value game, Mr Arora said. Samsung India, incidentally, has vacated the 165-litre space much earlier. The companys entry level model in the direct cool category is 180-litre and 41% of its total frigde sales come from the high-end frost-free category. Upgradation is happening at two points in the market, one from 165 to 180-litre in the direct cool, second at 230-litre in frost free, Samsung India spokesperson said. The other two major players in the direct cool refrigerators market, Whirlpool India and Godrej Appliances, could not be reached. The trend, industry observers said, is very much like that of CTVs where constant upgradation of consumers has made 21 CTV as an entry-level product over 14 CTV. Samsung India has already exited the conventional 14-inch category. Meanwhile, concerned about the negative growth of the refrigerator market, manufacturers are banking on innovation to expand and drive growth. We are concerned about the degrowth and are planning some major innovations in both frost-free and direct cool categories, Mr Arora said. Samsung HYDERABAD: Samsung India is expecting a growth of 27 per cent in 2009 and is planning to clock a turnover of $2 billion in the country as against $1.7 billion last year. Addressing a press conference here after the national launch of Samsung Freshtech Ultima refrigerators in the market, Deputy Managing Director of the company R. Zutshi said that 27 models of air-conditioners were launched in February this year. The economic slowdown did not affect the home appliances business. 5|Page

Case prepared by Harsh V Verma, Associate Professor, FMS, University of Delhi (harshverma@fms.edu) Sales of frost-free refrigerators were growing at 42 per cent. The company would invest $8 million towards R&D in the home appliances segment. The 1,000-strong R&D staff worked for products for domestic market as well as the foreign countries. The company launched 71 refrigerators in the price range of Rs. 9,350-25,200. The company was looking at enhancing its market share from 18 per cent to 26 per cent. A new testing lab was set up in Noida. The cool pack technology, embedded in the new range of Freshtech Ultima models, would keep the items in the freezer cool in spite of longer hours of power cuts with the help of a coolant. Model Diya Mirza launched the new range of fridges. Our Delhi correspondent writes: According to Mr. Zutshi, all the frost-free refrigerators were equipped with a unique freshness lamp that keeps fruits and vegetables naturally fresh for a longer period. Given the growing environmental consciousness among consumers and Samsungs own initiative towards producing eco-friendly products, we have introduced 71 5 Star rated models that reflect the highest rating in terms of energy efficiency as awarded by the Bureau of Energy Efficiency (BEE). For saving energy when the refrigerator is not in use, these models have the E-Saver mode, which when switched on, keeps the freezer running but turns off the fridge, Mr. Zutshi said. Samsung is also planning to increase its market share. Based on our innovative new range introduction, our channel expansion and our new marketing campaign to support this range, we are looking at attaining a 26per cent market share in the refrigerator market in India by 2009, he added. Samsung is also aiming at establishing its leadership in the frost-free refrigerator market by achieving a 50-per cent growth in the segment.

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