The Indian Audio Market CASE STUDY SOLUTION

 The Indian Audio Market CASE STUDY SOLUTION

The Indian Audio Market

The Indian audio market pyramid is featured by the traditional radios forming its lower bulk.

Besides this, there are four other distinct segments: mono recorders (ranking second in the

pyramid), stereo recorders, midi systems (which offer the sound amplification of a big system, but at

a far lower price and expected to grow at 25% per year) and hi-fis (minis and micros, slotted at the

top end of the market).

Today the Indian audio market is abound with energy and action as both national and

international majors are trying to excel themselves and elbow the others, ushering in new concepts,

like CD sound, digital tuners, full logic tape deck, etc. The main players in the Indian audio market are

Philips, BPL and Videocon. Of these, Philips is one of the oldest and is considered at the leading

national brands. In fact it was the first company to introduce a range of international products such

as CD radio cassette recorder, stand alone CD players and CD mini hi-fi systems. With the easing of

the entry barriers, a number of new international players like Panasonic, Akai, Sansui, Sony, Sharp,

Goldstar, Samsung and Aiwa have also entered the arena. This has led to a sea of changes in the

industry and resulted in an expanded market and a happier customer, who has access to the latest

international products at competitive prices. The rise in the disposable income of the average Indian,

especially the upper-income section, has opened up new vistas for premium products and has

provided a boost to companies to launch audio systems priced as high as Rs. 50,000 and beyond.

Pricing across Segments

Super Premium Segment: This segment of the market is largely price-insensitive, as consumers are

willing to pay a premium in order to obtain products of high quality. Sonodyne has positioned itself

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in this segment by concentrating on products that are too small for large players to operate in

profitably. It has launched a range of systems priced between Rs. 30,000 to Rs. 60,000. National

Panasonic has launched its super premium range of systems by the name of Technics.

Premium Segment: Much of the price game is taking place in this segment, in which systems are

priced around Rs. 25,000. Even the foreign players ensure that the pricing is competitive. Entry

barriers of yester years compelled the demand by this segment to be partially met by the grey

market. With the opening up of the market, the premium segment is witnessing a rapid growth and is

currently estimated to be worth Rs. 30 crores. Growth of this segment is also being driven by

consumers who want to upgrade their old music systems. Another major stimulating factor is the

plethora of financing options available, bringing more and more consumers to the market.

Philips has understood the Indian listener well enough to dictate the basic principles of

segmentation. It projects its products as high quality at medium price. In fact, Philips had

successfully spotted an opportunity in the wide price gap between portable cassette players and hi-fi

systems and pioneered the concept of a midi system (a three-in-one containing radio, tape deck and

amplifier in one unit). Philips has also realised that there is a section of the rich consumer which

values not just power but also clarity and is willing to pay for it. The pricing strategy of Philips was to

make the most of its image as a technology leader. To this end, it used non-price variables by

launching of a range of state of art machines like the FW series, and CD players. Moreover, it came up

with the punch line in its advertisements as, “We Invent For You”.

BPL stands second only to Philips in the audio market and focuses on technology as its USP. Its

kingpin in the marketing mix is its high technology superior quality product. It is thus at being the

product-quality leader. BPL’s proposition of fidelity is translated in its punchline for its audio

systems as, ‘e-fi your imagination’ (d-fi stands for digital fidelity). The company follows a market

skimming strategy. When a new product was launched, it was placed in the top end of the market,

and priced accordingly. The company offers a range of products in all price segments in the market

without discounting the brand.

Another major player, Videocon, has managed to price its products lower even in the premium

segment. The success of the Powerhouse (a 160 watt midi launched by Philips in 1990) had

prompted Videocon to launch the Select Sound range of midi stereo systems at a slightly lower price.

At the premium end, Videocon is making efforts to upgrade its image to being “quality-driven” by

associating itself with the internationally reputed brand name of Sansui from Japan, and following a

perceived value pricing method.

Sony is another brand which is positioning itself as a premium product and charges a higher price

for the superior quality of sound it offers. Unlike indulging into price wars, Sony’s ad-campaigns

project the message that nothing can beat Sony in the quality and intensity of sound. National

Panasonic is another player that has three products in the top end of the market, priced in the Rs.

21,000 to Rs. 32,000 range.

Monos and Stereos: Videocon has 21% share I the overall audio market, but has been a major

player only in personal stereos and two-in-ones. Its history is written with instances where it has

offered products of similar quality, but at much lower prices than its competitors. In fact, Videocon

launched the Sansui brand of products with a view to transform its image from that of being a

manufacturer of cheap products to that of being a company that primes quality, and also to obtain a

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share of the hi-fi segment. Sansui is being positioned as a premium brand, targeting the higher

middle, upper income groups and also the sensitive middle class Indian consumer.

The objective of Philips in this segment is to achieve higher sales volumes and hence its strategy

is to expand its range and have a product in every segment of the market. The pricing method used

by Philips in this segment is providing value for money.

National Panasonic offers products in the lower end of the market, apart from the top of the

range. In fact, it reduced the price of one of its small two-in-ones from Rs. 3,500 to Rs. 2,400, with the

logic that a forte in the lower end of the market would help in building brand reliability across a

wider customer base. The company is also guided by the logic that operating in the price sensitive

region of the market will help it reach optimum levels of efficiency. Panasonic has also entered the

market for midis.

These apart, there also exists a sector in the Indian audio industry, with powerful regional brands

in mono and stereo segments, having a market share of 59% in mono recorders and 36% in stereo

recorders. This sector has a strong influence on price performance.

Questions

1. What major pricing strategies have been discussed in the case? How effective these strategies

have been in ensuring success of the company?

2. Is perceived value pricing the dominant strategy of major players?

3. Which products have reached maturity stage in audio industry? Do you think that product

bundling can be effectively used for promoting sale of these products?