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| AJAY SINGLA IIM RAIPUR |
The choice of marketing strategy depends on the
target market. India is a low middle income country where around 32.7% of the
total population lies below the property line. A lot of mobile phone brands
like Apple, Samsung, Micromax, Lenovo etc. hold majority of share in the
market. There is huge competition in the market. These companies are competing
using price cuts and new features in the mobile phones. For a new player to
enter the market and survive is a very difficult task. In such a scenario,
marketing a product on its cost seems logical.
Ringing bells is going to launch Freedom 251 mobile
phones for the Indian customers with a price of just Rs.251. The significant
share of population who could not afford mobile phones earlier is the main
target market for this product. The company has already received millions of
rupees in lieu of advance orders placed for buying the mobile phone. The
marketing of product on the basis of low cost will definitely help the company
grab significant market share from the already existing market players.
However, it is not ultimately the revenue which
defines the health of a business but the profits left after reduction of the
costs. It looks practically impossible to provide a mobile phone at Rs, 251
with dual camera, GPS and other facilities. If the company is not able to
recover the costs from the price at which the products are offered for sale,
the company will fail miserably albeit high revenues.
Overall, we can deduce that marketing a product
majorly on its cost can be the correct marketing strategy depending on the type
of target market and also the marginal profits obtained by using the strategy.
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| PRAGYA PAROMITA XIMB |
At the first look a marketing strategy based
on price, may seem very catchy and attractive from a customer’s viewpoint; and
disastrous from the seller’s. A case in recent times, “Freedom 251” a mobile
gadget that promises all essential features priced at an unheard of figure –Rs
251. The sheer incredulity of the price garnered much needed hype and publicity.
However, getting back to the basics – Was adopting a price point based
marketing strategy correct? There can be a lot of debate either for or against
such a policy. But the essential point here is to have a look at the industry.
Governed by the Moore’s Law, the industry poses
in itself a lot of challenges – rapid rate of technological innovation,
shifting tastes of customers and short product life span. The Indian Smartphone
industry is marked by stiff competition, highly attractive growth potential
(36% compounded annual growth rate in the upcoming 5 years) and ever increasing
Internet enabled services on Smartphone. In an industry such as this, being the
lowest priced product may seem an attractive proposition for short-term;
however for long term sustainability it’s the product quality, innovation in
features and customer experience that will be the front-runners in keeping the
product alive in the market.
Now, from the customer’s
viewpoint, a cheap product equates for two things – perception of lacuna in
terms of quality of the product, and no loyalty for the brand. This would be
the case even when the product supposedly functions well enough and meets all
the minimum specifications. According to a research conducted by Accenture (Feb
9th, 2016), Indian Smartphone users are giving more importance to
services offered as compared to owning newer gadgets. And thus, attempting to
woo the customer based on price alone would be like selling a hot dog without
the sausage.
