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Low price, high impact

india Updated: Jul 05, 2010 09:00 IST
Anita Sharan
Anita Sharan
Hindustan Times
Highlight Story

When you are the 14th entrant in a fast growing but highly competitive product or service category, how do you stand out? Or when you are almost the last to introduce a new product or service that competition is already pushing hard, what can you do differently? When you are an established player in a competitive business, what do you do to create fresh growth? And when you are standing at the doorway of a high-growth product category dominated by big, international brands, how do you get noticed and consumed?

When low pricing becomes a common solution for all four scenarios, you sit up and take note. So when Uninor, owned by the world’s sixth largest mobile services provider, the Telenor Group (Norway), entered India in partnership with Unitech Group as the 14th mobile service provider, it had to stand out noticeably.

It launched its unique variable discount plan, with discounts of five-to-60 per cent – 20-to-47.5 paise on a 50 paise per minute rate — on local calls. The variable rates are beamed to mobile phones by the different mobile towers, the discounts governed by a tower’s load at that time. Uninor has 21,000 towers covered in a tie-up with Tata Tele Services Ltd. and is talking to Reliance and Indus. It has a licence for all 22 circles.

“We are putting the power of the tariff in the hands of the consumer,” said Olav Sande, EVP – western hub, Uninor India. “Our discounts are supported by high technology. Our efforts are towards long-term excellence in 2G services.”

Also well thought out was Tata Sky’s low pricing on its high-definition DTH set-top boxes, when it launched its HD services after Sun Direct, Dish TV, Airtel DTH and Reliance Big TV had launched theirs. To offer the imported set-top boxes at a low Rs 2,599 — to speed up subscriber acquisition or upgradation — required hard negotiations with the manufacturers, said Vikram Kaushik, MD & CEO, Tata Sky.

“The business of DTH is in selling long-term subscription, not set-top boxes. The real expense for the consumer is on the HD TV set. He wouldn’t be willing to pay a high price for the set-top box as well. The HD experience is still to impact,” Kaushik explained.

Tata Sky’s move has triggered a price war, with Dish TV reducing its Tru HD set-top box price from Rs 5,990 to 2,990. Airtel Direct, is advertising Rs 2,250 now; it launched with Rs 2,840. Sun Direct’s HD box launched at Rs 9,990 and Reliance Big TV’s at Rs 7,990. Tata Sky claims demand has exceeded box availability.

Tata Housing Development Company launched its Shubh Griha scheme at Boisar, on Mumbai’s outskirts, to tap the lower end of the market. Popularly dubbed as the “Nano housing scheme”, Shubh Griha offers smaller, one room-kitchen-bathroom houses at Rs 3.9-odd lakh and larger, one bedroom-hall-bathroom-kitchen ones at Rs 6.7-odd lakh. Research showed a demand for 24.7 million houses in India, of which nine million are in metros and tier I cities.

“People with Rs 1-1.5 lakh annual incomes could not dream of owning a home. They stay in dreary shared accommodation, away from their families. We addressed them. The response was overwhelming: 17,000 applications for 1,000 homes, later increased to 1,350. There were 38 million hits on our website on day one,” said Rajeeb Dash, head – marketing & product development, Tata Housing.

The 65-acre, self-contained township has been planned meticulously. The Boisar MIDC area has 15,000 companies with ongoing employee requirements. Single-room accommodations have a ready partition to convert into two bedrooms for the night, and good storage facilities that leave floor-space free. Delivery of flats starts by December. Tata Housing tied up with Micro Housing Finance Corporation for loans to buyers. State Bank of India and HDFC are also offering loans.

Advertising has primarily dealt with the theme of how food is so much tastier in your own home. Shubh Griha will be taken to other locations such as Delhi, Bangalore, Pune, Ahmedabad and Indore. “And we make a profit of 20-25 per cent as against the 30-35 per cent from upper-end projects. The Assam government has signed a MoU with us and the Maharashtra and Haryana governments are talking to us for similar developments,” Dash said.

Similar has been the success of new, feature-rich Indian mobile phone brands that sell handsets accessed from China and Taiwan — Max, Micromax, Karbonn, Lava, Lemon, Spice and Zen, among others. Priced below Rs 10,000, these phones have dual SIM slots, higher battery life, and features such as MP4, Bluetooth, QWERTY keypads and trackpads.

“These handsets are not for entry-level, low ARPU consumers but for mid-range, young consumers who do not want to spend Rs 15,000-plus on a big brand’s smartphone,” said Prasanto K. Roy, chief editor, CyberMedia. “They may not compare with the big brands on quality and delivery but with the short handset lifecycles today, many buyers are willing to experiment.”

A survey by CyberMedia’s telecom journal, Voice & Data, found that Indian mobile handset brands garnered a 14 per cent share of the total Rs 27,000 crore worth of sales in 2009-10, up from four per cent of Rs 25,910 crore the previous year.

Zen has roped in Amitabh Bachchan as its brand ambassador. Its MD, Deepesh Gupta, said, “Indian mobile phone brands have brought alive a segment left wide open by the established MNC brands who offered either top-end feature-rich products or bottom-end basic handsets.”

What each of these brands — that used low pricing as a strategic agent — had in common were game-changing visions. None saw low pricing as an incremental advantage but as a powerful tool to break fresh ground in established, competitive, high-growth categories.