Saturday, May 9, 2009

Marketing management:pricing of onida washing machines

Marketing management
Pricing Strategy
Of
Onida washing machines









Introduction


History

Onida was started by G.L.Mirchandani and Vijay Mansukhani in 1981 in Mumbai. In 1982, Onida started assembling television sets at their factory in Andheri, Mumbai. Since then, Onida has evolved into a multi-product company in the consumer durables and appliances sector. Onida achieved a 100% growth in ACs and microwave ovens and a 40% growth in washing machines last year.


Onida Today

Today Onida is one of the popular electronics brands in India. Onida has a network of 33 branch offices, 208 Customer Relation Centers and 41 depots spread across India. As on 31st March 2005, Onida enjoyed a market capitalization of Rs.301.46 crore. As the Chairman and Managing Director of Mirc Electronics, Mr Gulu Mirchandani is responsible for formulating, incubating and delivering emerging technologies and services in the area of consumer electronics. Under his leadership and guidance, Mirc Electronics won an “Award for Excellence in Electronics” in 1999, from the Ministry of Information Technology, Government of India. Mr Gulu takes personal interest in conceptualizing and delivering various designs which appeal to Indian consumers. He also takes great pride in people management practices at Mirc Electronics and personally interacts with personnel at all levels, regularly guiding and motivating them to achieve greater goals. He is alumnus of BITS, Pilani, and holds a degree in B.E. (Mechanical)





Vision and Mission

Onida’s Vision

To build a brand around substance. To communicate simple truths that customers understand. To become a leader in our chosen field and become a globally recognized, prestigious company through synergistic business investment, differentiation through innovation, passion through empowerment, cost through economies of scale and world class systems and procedures that bring in delight of stakeholders.


Onida’s Mission

To benefit society at large through Innovation, Quality, Productivity, Human Development and Growth, and to generate sustained surpluses, always striving for excellence, within the framework of law, and in nothing but the truth in which we base every action.

Washing Machines

Prior to the advent of washing machines and high-tech detergents, which promised to rid clothes of every imaginable stain, there was water. It was the only resource available and it did a great job with dirty laundry. It loosened dirt with its inherent liquid form. The sheer force of water would scare away even the toughest of stains. Water was the scrubbing, washing and rinsing agent. all rolled into one.

It is this enormous power and potential of water that Onida exploits with its washing machines. All seven of its ultra models harness the power of water to give you the perfect wash. These machines have extremely powerful motors that increase water turbulance. This forces out all the dirt while washing and all the soap while rinsing. In fact, the turbulence makes for a very thorough wash and reduces the amount of harmful detergents that have to be used normally. So what you`re left with are impeccably clean clothes and the secrets of how to keep them that way.






Question: 1

For the assigned product and brand, delineate the pricing strategies adopted by the company. Also highlight the impressions as viewed by the competitors and customers, according to you?

Answer:

Price is the only element in the marketing mix of a firm that generates revenue. It is the only P out of 4 P’s which generates revenue. Price is cost at which company sell their products. Price is all around us. Price includes rents, fees, rates, wages, salaries, commission etc.
In the given case study my product is washing machine and brand is Onida. Now I will explain the price strategies adopted by Onida for washing machines as below. But before answering the question there are few things to get familiar with like:

Objective of Onida washing machine

Because of the recession going on the main objective of Onida washing machine is survival like any other company. But this survival is their short term objective. But their main objective is to maximize their market share. They are doing this because due to increase in sales their overall cost of production will decrease. This leads to proper utilization of resources.

Demand for Onida washing machine:

The demands for washing machines are more elastic. (Elastic means percentage change in price is less as compare to percentage change in demand.) Because if there is less change in price the demand for washing machines is largely affected. For example the prices of washing machines are less in festival session then there will be more demand for these products

Price elasticity of demand:

Price elasticity of washing machines is more elastic because consumers are not purchasing it for short period usage these are kind of our fixed assets. While purchasing it consumer will check the prices of different brands of same quality then consumer will purchase only that product which is of least price.

Cost:

Cost which was incurred in production of washing machines also plays important role in setting the prices of washing machines. Cost includes cost of production and selling and distribution expense etc. Every firm wants to decrease their overall cost so that they increase their profit. They are doing this by demanding high price than the cost of their product

PRICING STRATEGIES OF ONIDA WASHING MACHINES:

Target Pricing Strategy:
It means targeting a particular segment.Under this strategy Onida introduced
 Washing machines with prices costing from 3,490 rupees for people with low income,
 For middle class people with washing machines costing price of 6000 rupees and
 Washing machines with costing price of 18500 rupees for people of higher segments which are having good incomes.

Discount Pricing Strategy:

Trade discount:
 Onida provides trade discount to those customers if they do purchasing on cash basis.
Festival discount:
 Onida like other companies also provide festival discount to their customer which increases their sale.

Promotion Pricing Strategy:
 Onida promote their sales by adding a free or low cost warranty or service contract. Onida provide warranty card along with their washing machines and also provide after sales services for a stipulated time period for free.




IMPRESSION OF ONIDA PRICING STRATEGIES ON THEIR COMPETITORS AND CUSTOMERS:

From Competitors point of view:
 For Onida Samsung, LG, Whirlpool, Videocon etc are their competitors. According to me in today’s business world every organization is aware of their competitor’s strategies if they are not than they should in order to compete with them and survive in the market. Than naturally Samsung, LG and other competitors also plan for some attracting price strategies which attract customers towards them like promoting their products through intense promotions, by reducing cost, by giving some attracting gifts with the sale of every washing machines like give them some coupons or scratch cards etc.

From customer’s point of view:
 Consumers often question the motivation behind price changes. Due to the strategies like target pricing strategy Onida people are covering almost all people who can afford washing machine right from people of lower class with low income to higher class with high income. Onida also provide festival discount to their customers because generally consumer buy those product which they can get at low price with high quality or with which they get something extra or more at same price.


Question:2

For the assigned product and brand , identify and choose two
Product or brand, one which is above in price and the second which is below in price w.r.t assigned product and brand. Explain why there are different prices (pricing strategies) adopted by the company/ companies? Substantiate it w.r.t 3Cs (Customer, Cost & Competitor).

Answer:

In this I am comparing Onida washing machine with washing machines of Samsung whose price is more than Onida and LG washing machine whose price is less than that of Onida. The prices and features of these company’s washing machines are given in the table given below. These washing machines are of same capacity and almost have same features.


Onida 6.0 Hydrosoak

LG WP-9031

Samsung WT 7600







Price (Rs)* 8,690 7,690 8,490
Main Features
Type Semi Automatic Semi Automatic Semi Automatic
Loading Type Top Top Top
Loading Capacity 6 kg 6 kg 6 kg
Program Options
Auto Restart <> <> <>
Automatic Drainage <> <> <>
Child Lock <> <> <>

Prewash Soak <> <> <>
Heavy Wash <> <> <>
Normal Wash <> <> <>
Light Wash <> <> <>
Number of wash baskets NA NA NA
Other Features

Spin Shower Facility <> <> <>
Detergent Dispenser <> <> <>
Auto Power Off <> <> <>
End-of-Cycle Buzzer <> <> <>
























From the above table we see that Samsung provide high price washing machine than Onida and LG where as LG provide less price or below price washing machine than Onida and Samsung. The main reason for price differentiation is as below:

From customer point of view:

SAMSUNG:

The reason for the high prices of Samsung washing machines is that they have high brand image in the market and they are cashing their customer’s loyalty.
Their customers are because the washing machines of Samsung are of higher quality that is why they are charging higher prices and offers product of premium value.
Their product fall in high price quality. So people are willing to pay higher price.

ONIDA:

Onida provide their product at medium price, although there washing machines are of medium qualities in comparison to Samsung but still people prefer to buy these machine because of the additional features and offerings provided by Onida people like warranty for more period of time in comparison to other companies.
Free service for longer period of time.
Onida provide discount and after sale services for longer duration.
So customers prefer to purchase this product.

LG:

They provide low price product because they face tough competition from Samsung and Onida etc. So LG reduces their prices because they want to increase the demand of their product and maximize their sales. And people who can’t afford Samsung and Onida because of their prices are going for washing machines from the companies like LG.

From cost point of view:

SAMSUNG:

Out of these three companies Samsung charging high price because of their brand name and existence in the market from long period of time. Samsung is an foreign company, some of the parts of machines are imported so they have to pay import duties etc by this there cost of production increases so they charge high prices to earn high revenues.

ONIDA:

Onida sell their products at lesser cost than Samsung because it is an Indian company. Their technology is not as innovative as Samsung i.e. quality is medium in comparison to Samsung. They provide medium quality at medium prices.


LG:
LG provides their product at good stage as they provide their product at low price with medium quality. They are keeping their prices low in order to capture the maximum market. As they know in the Indian market middle class people are maximum in number so they are keeping their prices low to do maximum sales.

From competitor’s point of view:

SAMSUNG:

Samsung set their prices after considering the prices of the products of their competitors to prevail in the market. They also provide seasonal discount or some attractive gifts.

ONIDA:

Onida provide wide range of products to their customers. They provide washing machines from minimum prices to maximum prices. Onida target the customers from all sectors.

LG:

LG have to face a tough competition from the other companies which are engaged in production of same products. LG reduces the prices of their washing machines due to spending less on the operating cost to increase the demand.
















BIBLOGRAPHY


www.mouthshut.com

www.truthatonida.com

www.rediffprices.com

www.wikkipedia.com

www.google.com

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