Pricing-indexing and strategy; Su-Kam Automotive Batteries

Abstract

India has one of the fastest growing automobile industry in the world and as of 2010 India is home to around 40 million passenger vehicles. By 2050, the country is expected to top the world in car volumes with approximately 611 million vehicles on the nation's roads. As a result aftermarket automotive ancillary business provides a huge opportunity for growth and automotive batteries are no exception. Currently Indian automotive battery industry is around Rs 20,000 Cr but still almost 60% of the market is occupied by unorganised sector. In the organised sector it’s a classic case of oligopoly with Exide and Amaron being the major players for a decade. However with burgeoning demand of the automotive batteries more players are coming in this industry and particularly in after sale or replacement market. Su-Kam is also a new entrant in the automotive batteries; however it’s an old player in battery industry having business in industrial batteries as well as other power solutions. The new product launch provides a unique challenge to the company, as on the one side it involves competing with strong established brands in the country and on the other end it also faces challenge from local manufacturer. Hence it’s important to not only bring a good quality product in the market but also to determine its unique selling point and prepare a marketing mix keeping in mind the 4P’s , price, product ,place and promotion. This project is based on one of the most important factor of the marketing mix, ‘price’. Positioning the product involves setting a price not only in accordance with its attributes but also by considering competitors offering and their prices. This project involves few basic steps required for developing a price strategy for Su-Kam automotive batteries. Fist, it involved calculation of cost of different products covered under the battery range that will be offered. The potential market price for the product based on the comparison of price on three level of distribution channel (distributor price, dealer price and MRP) of similar products offered by various brands was considered. The price finalised based on combination of factors such as cost calculation, required or expected margin from the business, market acceptance and positioning of the product. It also involved establishing margin for the channel partners distributor and dealers. Though price setting process is an iterative process, a competitive initial price can give a company head start in the business producing market acceptance not only by its consumers 2 but by its channel partners. In order to understand expectations of dealers and retailers regarding battery product, an exploratory survey was also conducted and important factors valued by the dealer regarding automotive batteries were identified. It helped to understand whether company’s approach is in the right direct regarding its product, prices, service policies and other attributes. It’s found that for most of the batteries in this range, overall return on investment may not be positive in the initial stage but in order to create market acceptance, products are priced at lower level or on par with other brands. This project gave an insight into one of crucial part of new product development, price setting. Different pricing strategies such as skimming, penetration pricing and other combination were identified for different products and based on the future changing environment or potential market response, recommendation and conclusion were formed.