MS-63 Product Management Sample Paper

MBA - Master of Business Administration

Note: This paper consists of two sections A and B. Attempt any three questions from Section A. Section B is compulsory. All questions carry equal marks.

1. What are the decisions required in the operationalisation of a product life cycle? For a mature product category like cooking oil, how would you use the PLC to plan your future investment or divestment in the product category?

2. What are the limitations of BCG matrix that should be borne in mind while using this analysis for strategic product mix alternatives? Explain by taking suitable example of your choice.

3. What are the different motives for initiating a product change? Explain the concept of product architecture and its implications for product design, taking suitable examples.

4. You have been asked to advise on a company's new range of toilet soaps, for the highly competitive premium segment of the Indian market. What are the considerations that you would like to assess before advising on the pricing decision? Explain the factors that would influence your advice.

5. How would you budget for advertising and sales promotion while launching a new product? Assume that your product is a line of economy range office wear shirts, in creaseless cotton mix fabric.

What are the activities you would like to include in the sales promotion process and why?

SECTION B

6. Read the case carefully and answer the questions at the end.

THE PREMIUM DILEMMA

Vinod Tahil's mind was a riot. For the first time in many years, the marketing manager of while goods manufacturer Electra India was questioning the marketing theories he had always believed in. Was he right in wanting to abandon the super premium route to brand building, or was he, in fact, trapped in the classical middle-class mindset, which made him averse to premium Product?

The previous Sunday, Tahil had had a long discussion on the issue with Gautam Sarin, his squash partner and marketing head of Plimsoll Watches. Tahil had walked into the squash court right after a stiff debate with his CEO, Arun Raja, over Electra's plans to launch a super premium, multi-facility refrigerator from its international stable, the Eva 755.

In Eva 755 was a state-of-the-art multi-door fridge with lots of features and plenty of storage space. It had two zero-degree compartments, an ice crusher, a dispenser for chilled water, a built-n deodorizer and an alarm that went off if the door was not shut properly. The price: a cool Rs.1 lakh.

The previous year, the company had launched its three-and four-door refrigerators. It followed that up with a 7.5 kg fully automatic washing machine, Ergo, which also carried a premium price tag. This, in fact, was Electra's strategy. If preferred to enter with its premium range rather than follow with mass-market route, CEO Raja wanted to build brands first. Volumes would be a Natural consequence, he said.

But Tahil had his doubts whether Eva would cut much ice with the customer. In a market, which was skewed in favour of the value-for-money double-door refrigerator, the multi door refrigerator seemed very ambitious to him. It was unlikely to build much saliency for Electra, he felt.

To begin with, the very idea of a large sized refrigerator seemed irrelevant in the Indian context. In the West, convenience stores were last being replaced by supermarket chains. As a parallel behavior pattern, consumers there were using refrigerator not just for preserving foodstuffs, but also for long-term storage.

In India, however, the neighborhood grocer had gained in strength and supermarkets had not become the norm yet. For the same reason, the Western pattern of long-term storage could not be replicated here. "India is a tropical country and there are lots of vendors for fresh vegetables and fruit. So, who needs vast storage facilities in India?" he asked.

Raja was convinced that there was a clear consumer segment, which sought premium and super premium products. "There are 3 8 million households in the A1 and A2 socio-economic classes. It's not the 15O-million middle class but this super premium, super label conscious segment that I want to target. The self-employed and high-salaried people in this segment are virtually indifferent to high prices," said Raja.

Tahil would not buy the argument. "The so-called high-income group that you refer to comprises largely nuclear families. That means that these families consume less food than joint families do. There may be 3 8 million such families, but they are dispersed all over the country. A rich farmer from Gurgaon, who has a high disposable agricultural income and heads a family of 14, is the one who actually needs this product. But you have no means of getting your product to him."

An entry through a premium segment would entail lower distribution costs, but only if a mass product already existed. "If you have a mass product, you could piggyback on its distribution network and get your premium product to the rich farmer in Gurgaon,". said Tahil. "In its absence, reaching out to the dispersed consumer will be prohibitively costly. Also, it will be difficult to get the required volumes,"

Raja had other plans. He wanted to enter the super premium segment so that Eva could be Electra's image leader. "Why did Titan launch Tanishq? Certainly not for volumes." he argued. "The premium range has a positive rub-off on the medium range. If a company launches a super premium product, its image becomes so overwhelming that the consumer does not question the price or the quality of its other product." he said.

"That 'image leader' angle is a double-edged sword," countered Tahil. "If the super premium product fails to make a mark in three years' time, its image as well as the company's image will take a beating."

Raja cited the sample of BPL. "When it entered the refrigerator market, BPL was aware it was taking on the might of Videocon, a sturdy, reliable, home grown brand. To gain a quantum leap over Videcon's image perception, BPL first launched the three-door refrigerator. Its launch stoked the interest of consumers, who gushed and gawked and went home and told their neighbors about it. So, the next time someone wanted to buy a basic 165-litre refrigerator, he {first checked out a BPL fridge Soon after that, BPL launched its home entertainment system, another super premium product. No one questioned the price or whether the product would be successful because they all knew that there were buyers for the quality that BPL had to offer. Thereafter, every offering from BPL was viewed with respect," he said.

Brand building, Tahil felt, worked when it ran parallel to volume building. "The middle class is very aware and is continuously upgrading its information. It will want to know how many Indians are buying Electra and we need to answer that with some volumes," he said.

In such a scenario, the launch of Eva appeared to be a wasteful exercise. "The premium you can charge on a product must have a meaningful price to quality/value ratio," argued Tahil. "Price is no longer the deciding factor, it is value instead. As we go along you'll find consumers are less likely to compare prices than they did in the past," declared Raja.

Tahil disagreed with Raja on the significance of price. "Price will always be a key factor in the purchase decision. The people you are targeting for Eva watch the market, evaluate products and are very aware. They may buy a pair of Reebok shoes for RS. 2,000, but a refrigerator for Rs. 1 lakh? That's going too far," he said.

Raja left after coffee, but Tahil carried his disagreement to the squash court. "Raja is trapped in a mythical view of the Indian middle class," he said to Sarin. "All around us lie the debris of companies which overestimated the middle class' willingness to pay for global brands. Yet he believes that Eva has potential," he said.

Sarin felt Tahil was underestimating the market. "In the wake of liberalization, there was a lot of brouhaha - over the relevance of some of the products entering India.

People asked, 'Who needs KFC? Who needs Reebok? But we must realize that the consumers aspired for anything global. Now they are asking for particular features and design improvement, he said.

"Who are these consumers?" asked Tahil. "The glorious middle class?"

"Tahil, in durable you have to benchmark differently. When you are selling potato chips or corn flakes, you are looking at one set of consumer behavior patterns- But in durable, which can replace manual tasks, the consumer is seeking higher value delivery. Within this, there is also a segment which is indifferent to high price the self-employed and the high flying executive. They have access to soft loans and hefty perks. Money is no object for them. They are eating out twice a week, buying shoes worth RS. 2,000 and paying RS. 1 lakh for health club memberships."

Questions:

(a) Critically evaluate the price band being suggested for Eva. Do you agree with Rajan's assessment of the targeted consumer or with Tahil's? Justify you answer.

(b) What in your view are the target customers for this kind of product? What is the brand positioning that you would suggest for Eva in view of the target market identified by you?