Competition in rural areas, where demand is picking up faster than other market segments, is forcing branded durable manufacturers to develop low-value products. This has also resulted in a decline in brand premium.
Consumer electronic companies are not only pruning the frills or the add-on features in products to make them more affordable, but also offering better prices to garner market share.
Hence, consumers in fringe and rural markets can now buy branded products at prices, which are competitive with non-branded products.
Bajaj Electricals, chairman and managing director, Shekhar Bajaj says, "We were selling fans for Rs 1,000, while local brands were available at Rs 500. Our fans were not selling because of the 'premium'.
Then we removed the frills and launched a fan for Rs 700. Now, our sales have surged because the customer chooses to pay Rs 200 extra to buy a branded product along with an one-year warranty."
|Fine tuning the marketing mantra|
Electronic firms are not only pruning add-on features, but also offering better prices
Bajaj Electricals has launched a no-frills fan for Rs 700
LG has developed models which are Rs 800-2,500 cheaper
Philips is also developing economical TV and audio products and has launched the 'Vardaan' range
Consumer Electronic and Television Manufacturers Association, secretary general, Suresh Khanna, adds: "The erosion in brand premium is taking place across segments. Affordable products drive up the aspiration levels of consumers, which in turn increases the penetration levels and helps raise the market size."
LG Electronics, for instance, has developed models across product categories to specifically target rural markets. These models are Rs 800-2,500 cheaper compared to that in urban markets.
In case of television, the company, with the help of its remote area offices, found that only picture and sound matter for people in rural areas and by changing the location of speakers and keeping the basic technology same, the product cost was brought down by Rs 800.
The company started the initiative in September last year and now 45 per cent of its sales turnover comes from rural markets, LG Electronics, head (marketing), Anil Arora said. He added that rural markets are showing a 70-80 per cent growth compared with around a 40 per cent growth in urban areas.
According to Arora, the strategy helped the company tap the rural markets where consumers wanted to buy but were price-conscious.
"Since these people are also literate, they don't want to compromise on the quality and thus these innovations help us offer products suited to the customer's needs," he added.
Philips is also developing economical products in both television and audio, which are its mainstream segments.
It has already launched the 'Vardaan' range keeping in mind the same logic and is targeting a significant share of the rural television market. The increased sales on this account is adding to the profitability of these companies.A consumer electronic company official said: "Dropping prices used to hurt bottomline but these product innovations are actually helping both topline and bottomline growth."