A Very Intriguing Package CASE STUDY SOLUTION

 A Very Intriguing Package CASE STUDY SOLUTION

A Very Intriguing Package

It is not quite often that a positive product feature becomes an albatross around the neck of a company. VIP Industries had held sway for over two decades in the organised Indian luggage market on the basis of the durability of its moulded suitcases. Obviously, the customer perceives value-for-money in the long-lasting, reasonably-priced Alfa brand of VIP suitcases which sells 1.5 lakh pieces a month. But this means that having bought one suitcase the customer can do with it for several years. Market research by the company shows that an average Indian family pulls out the suitcase merely for outstation travel a few times a year. Hence, there is no pressing need for continual replacement of the old luggage.

The VIP products are made of virgin polymer as compared to the recycled grade I and II polymers used by the unorganised sector. They are subjected to stringent stress tests for quality control.

VIP has a presence in a wide range of the market segments within a price spectrum of Rs 295 to Rs 6,000 apiece. It is her that the competition from the unorganised sector hurts the company most. VIP’s economically-priced brand, Alfa is widely imitated and sold at much lower prices. This enables the unorganised sector to typically sell 20 times more than VIP can. The lower price threshold seems to be Rs 225 which in nearly impossible for VIP to achieve given its cost structure. In the Rs 1500 plus premium range, VIP has to contend with Samsonite which is a formidable competitor.

The obvious tactic for VIP has been to cut costs. Distribution and logistics is one area where valiant efforts have been made at cost reduction. VIP has four factories located in heart of India. The average distribution costs come to Rs 7 to Rs 8 apiece. Reduction in cost has been attempted through distributed manufacturing by having vendors making the product at different locations, thereby, avoiding transportation of high-volume suitcases across long distances and reducing inventory build-up in the channel.

Severe pressure on sales has resulted in VIP Industries offering discounts and unwittingly entering into a disastrous price war. Promotion of a high visibility product suffered and advertising expenditure has been ruthlessly curtailed from the earlier Rs 11 crore to Rs 2 crore now. Its lead advertising agency is HTA. Action on the promotion front has seen reorganisation of the brand portfolio. Incidentally, earlier its successful and popular Kal bhi aaj bhi campaign served to reinforce its durability theme.

There are several roadblocks that the company has to negotiate. Increase in population, rising propensity of Indian to travel, and the insatiable thirst of customers for state-of-the-art technological products with newer designs and innovation, all at an affordable price are the opportunities and challenges before the company. Introduction of new brands, Mantra and Skybags, product range of diversification to include children’s bags and ladies’ bags, strategic alliance with Europe’s leading luggage-maker—Delsey—are some of the steps taken by the company.

Yet, caught in its self spun web of past successes, VIP is today faced with an uncertain future.

Question

How should the VIP Industries get out of the bind that it finds itself in? Outline the contours of the marketing plans and policies that VIP needs to formulate and implement?