Marketing:

BMW's "Company of Ideas" Campaign: Targeting the "Creative Class"

Case Details:

Price:

Case Code : MKTG137 For delivery in electronic format: Rs. 400;For delivery through courier (within India): Rs. 400 + Rs. 25 for Shipping & Handling Charges

Themes

Auto and Ancillaries Case Length : 17 Pages Period : 2004-2006 Pub Date : 2006 Teaching Note : Available Organization : BMW of North America LLC Industry : Auto & Ancillaries Countries : USA

Abstract:

This case is about the "company of ideas" advertising campaign of BMW of North America LLC (BMW LLC), which was unveiled in May 2006 in North America. The communication in these ads were different from the company's communications in the past as the new ads downplayed BMW's performance and strived to project its design prowess, independence, and corporate culture that fostered innovation - promoting BMW as a "company of ideas." In doing so, the company said that they wanted to take their brand beyond its traditional association with yuppies and attract a wider section of luxury car buyers in the US

The company's new marketing communications campaign was aimed at the creative class, an influential demographic segment in the US. The case highlights the rationale behind the company's new advertising campaign and the initial reactions it received from analysts, marketing experts, and consumers.

Issues:

» Understand the rationale behind the "company of ideas" advertising campaign of BMW of North America LLC.

» Understand the marketing communication strategies adopted by a car manufacturer when targeting a new customer segment.

» Understand the issues and challenges faced by a strong and well-defined brand in changing its brand image/positioning.

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"We are eager to unveil this smart and original campaign that communicates BMW's culture of creativity so thoroughly. BMW has carved out a unique niche in the industry by placing a premium on constant innovation and inspiration, and this campaign will reveal the company behind The Ultimate Driving Machine." 1

- Jack Pitney, Vice President, Marketing at BMW of North America LLC, in 2006.

"What a load of manure. BMW long lived by the power of the idea of performance driving. Now they've decided to jettison that history in favor of New Age marketing mumbo-jumbo... They've sold their birthright for a bunch of Bangled2 pottage. A great pity." 3

- Professor Stephen Bainbridge, Professor of Law, UCLA,4 in 2006.

'Fixing What Ain't Broken'?

In May 2006, BMW of North America LLC (BMW LLC), the North American arm of German automobiles major BMW AG, released a new advertising campaign promoting itself as a "company of ideas". This move took many by surprise. The tone and tenor of the new campaign were a huge departure from the company's communications in the past. The series of new ads no longer stressed BMW's performance, but strove to project its design prowess and corporate culture that fostered innovation. In doing so, the company said that they wanted to take their brand beyond yuppies5 and attract a wider section of the affluent class.

Many analysts were surprised as 2005 had been a good year for BMW in the US, and companies didn't usually deviate from a strategy or formula that had proved successful. In 2005, BMW LLC reported record annual sales of 307,020 vehicles (BMW and MINI6 brands combined) in the US, up four percent over the 296,111 vehicles sold in 2004.

The annual sales in 2005, for the BMW brand (BMW automobiles and BMW SAV7 combined), was 266,200 units, up 2.4 percent when compared to 260,079 units in 2004. Tom Purves (Purves), Chairman and CEO of BMW (US) Holding Corp., commented, "This is a strong finish to a year marked with numerous model changeovers. We've only had full availability of our new award-winning 3 Series sedans8 in the past two to three months. Given that, and changeovers in the 7 Series9 and 5 Series,10 we are especially pleased with the annual increases."11

Despite the good sales performance, Jack Pitney (Pitney), vice president, marketing at BMW LLC felt that almost 75 percent of luxury car buyers in the US were not considering BMW as they still strongly associated it with the yuppie phenomenon of the 1980s. Thus, the company was banking on this new "company of ideas" ad campaign to redress this situation and expand its market.

Though the ads received rave reviews from various quarters, some analysts felt that BMW was losing its soul by moving away from the theme of "driving" and "performance." According to marketing expert Al Ries (Ries), BMW owned the word "driving" and this had been etched in the minds of consumers over a period of three decades with the tagline "The Ultimate Driving Machine."

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Others felt that the ads fell under the heading of "preventive maintenance" as it came at a time when there was no real need for BMW to upset the cart. A few other analysts felt that

Background Note

BMW Group AG

BMW was founded in 1913, when Karl Friedrich Rapp (Rapp) set up Bayerische Flugzeug-Werke to manufacture aircraft engines in the Munich district of Germany. In 1916, during World War I, the company entered into a contract to manufacture aircraft engines for the Austrian-Hungarian army. In 1917, to meet the need for additional funds, Rapp gained the support of Camillo Castiglioni and Max Friz and the company rechristened itself as Bayerische Motoren Werke GmbH

In the same year, the company ran into difficulties because of over-expansion. It was taken over by Franz Josef Pope and in 1918 he named it BMW AG.

In 1918, BMW manufactured its first aircraft engine, the Type IIIa. This engine could power a biplane12 to reach an altitude of 5000 meters in just 29 minutes, creating a world record. After the World War I, the Treaty of Versailles (1919) put a ban on production of aircraft in Germany.

Thus, in 1919, the company started to manufacture railway brakes. In the same year it designed its first motorcycle engine. In 1923, it started manufacturing motorcycles and its first model R32, a 500cc shaft-driven motorcycle, designed by Max Friz, was launched. BMW forayed into car manufacture in the late 1920s. (Refer to Exhibit I for BMW's Logo). In 1928, BMW set up a car manufacturing unit in the Eisenach region of Germany and started manufacturing a small car called 'Dixi', based on the Austin Seven car13 under license. In the following year it acquired the Dixi Company.

It was BMW's first car and was marketed under the name BMW 3/15. Over the next decade, BMW launched a number of successful models. Its cars, especially the 327 saloon and 328 roadster, were considered very advanced for their time, and the roadster was even nominated as the 'Car of the Century' in 1999 by some auto experts.

With the start of World War II, BMW's car business took a back seat as it started manufacturing aircraft engines once again. Its aircraft engines and motorcycles were extensively used by the German army. Toward the end of the war, the company's plants were heavily bombed and those on the eastern part of the country were captured by the Soviet Union...

BMW - The Ultimate Driving Machine

For long BMW had been associated with the words "driving" and "performance". The company's taglines in English were "The Ultimate Driving Machine" and "Sheer Driving Pleasure". The original German slogan was "Freude am Fahren," which translated to "Joy in Driving" in English. BMW's association with "driving" was so strong that Ries believed that BMW became a synonym for "driving" in the mind of the consumer. "What comes to the mind when you think about BMW?" said Ries. "A car that's fun to drive. The ultimate driving machine. BMW owns the word "driving" in the mind.

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In fact, according to Ries, it was the consistency of the communication and logo over decades that led to the success of BMW. He said, "BMW has been the ultimate driving machine for twenty-five years. What's even more remarkable is the fact that BMW retained its strategy even though the brand was driven through three separate advertising agencies. A change in agencies usually signals the end of the brand's consistency."...

Going Beyond the "Yuppies"

In 2005, BMW branded automobile sales in the US were 266,200 units when compared to 260,079 units in 2004.

In fact, over the last five years BMW's sales in the US had increased by 62 percent far more than any competitor.

The company's new products were also well received. However, an inhouse research study, in 2005, revealed that a large percentage (75 percent) of luxury car buyers in the US did not consider any BMW vehicle at the time of purchase...

Targeting the "Creative Class"

According to the company, the dynamic campaign was aimed at the creative class -consumers who shared many of BMW's principles -an independent spirit, a drive to challenge conventional wisdom, and an appreciation for a brand's ability to offer both substance and style.

The economic role of this 38 million strong class in the US included creating new ideas, new technology, and new creative content. According to Richard Florida (Florida), a Carnegie-Mellon University professor, the people of this class were distinct from other classes through the nature of their work...

References:

1] "BMW Unveils New Ad Campaign," www.strategiy.com, May 9, 2006.

2] In the 2000s, BMW made some changes in the design of its vehicles under their new design chief Christopher Bangle (Bangle). The new designs were referred to (often derogatively) as "Bangled" after the name of Bangle, by the press and BMW traditionalists.

3] "BMW Losing its Soul," www.professorbainbridge.com, May 8, 2006.

4] The University of California, Los Angeles, popularly known as UCLA, is a public, co-educational university located in the city of Los Angeles, USA.

5] Yuppie, short for "Young Urban Professional," describes a demographic of people primarily comprising of the children or grandchildren of the baby boomer generation (people born between 1945 and 1964). In general the yuppies are highly-educated and upwardly-mobile and are aged from early twenties to early-to-mid thirties as of 2006. They tend to hold jobs in the professional sectors, with incomes that place them in the upper-middle economic class. The term "Yuppie" emerged in the early 1980s. Although the original yuppies were "young," the term now applies as well to people in middle age.

6] MINI is car produced by a subsidiary of BMW.

7] SAV is the acronym for Sports Activity Vehicles. BMW calls its sport utility vehicle (SUV) as SAV. An SUV, is a type of passenger vehicle which combines the load-hauling and versatility of a pickup truck with the passenger-carrying space of a van.

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8] A sedan car is one of the most common body styles of the modern automobile. At its most basic, the sedan is a passenger car with a separate hood covering the engine in the front, and a separate trunk for luggage at the rear. The BMW 3 Series is a line of compact luxury cars manufactured by BMW since May 1975. Luxury cars are vehicles that lay more emphasis on comfort, appearance, and amenities than on performance, economy, or utility. They usually offer cutting-edge technology, higher quality materials, and are often built in smaller numbers than more affordable mass-market vehicles. As of December 2006, to qualify as a luxury car, the Mean Selling Price of the car had to be in excess of around US$ 36,000.

9] The 7 Series is BMW's flagship car. It is a luxury sedan.

10] The 5 Series is a series of midsize luxury automobiles manufactured by BMW. They are available as sedans and station wagons (a car body style similar to a sedan, but with an extended rear cargo area).

11] "BMW Sets All Time Annual Sales Record in 2005," www.internetautoguide.com, January 4, 2006.

Browser Wars II: The Release of IE 7 (BETA 2)

Case Details: Price:Case Code : MKTG138 For delivery in electronic format: Rs. 300;

For delivery through courier (within India): Rs. 300 + Rs. 25 for Shipping & Handling Charges

Themes

Computers, IT and ITeS

Case Length : 17 PagesPeriod : 2004-2006Pub Date : 2006Teaching Note : AvailableOrganization : Microsoft CorporationIndustry : Computers, IT & ITeSCountries : Global

Abstract:

This case is about Microsoft Corporation's (Microsoft) release of a new Beta version of its Internet Explorer (IE) web browser, IE 7 Beta 2 (IE 7) in April 2006.

Though Microsoft was a late entrant in the web browser market, in the late 1990s, it used its dominance in the Operating System (OS) market to gain a 96% market share in the web browser market by June 2004.

However, the release of Firefox, an open-source browser, in 2004, and the security concerns regarding the IE6 browser led to a decline in IE's market share.

The case examines the rationale behind Microsoft's release of the new version IE browser. The case also highlights the competition between Microsoft and Google Inc. for the search-based online advertising market.

Issues:

» Understand the nature of competition in the global web browser market.

» Understand the challenges faced by a market leader with regard to the threat of new entrants.

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I think IE 7 brings the browser to parity with Firefox in terms of features, and the security's a big improvement over IE 6. I think it will be good enough to stop some of IE's market share loss to Firefox, and perhaps bring some switchers back to IE." 1

- Matt Rosoff, Analyst with Directions on Microsoft,2 in April 2006.

"There's a big chance right now to switch people to Firefox and it might not last very long-- Microsoft has a new version of Internet Explorer on the way and lord knows what they'll be doing in Vista to force people to use it. Firefox has to get a big foothold right now." 3

- A Group of Firefox Advocates, Massachusetts, in April 2006.

Microsoft's New Browser

On April 25, 2006, Microsoft Corporation (Microsoft), the world's largest software company, released a new Beta version of its Internet Explorer4 (IE) web browser, IE 7 Beta 2 (IE 7). The browser offered tighter security control when compared to previous versions and offered advanced features to navigate the Web.

It allowed users to open more than one site in one browser window, and provided support for RSS5 feeds that could be incorporated in the page design. Color coded warnings were also provided in case the user accessed a website that was suspicious or known to be fraudulent.

The browser development team at Microsoft considered IE 7 to be a significant improvement over the IE 6 version. "IE 7 is feature complete and has been through significant compatibility and reliability testing. People (especially technology enthusiasts) will have a good experience with it,"6 the team added. Experts were of the opinion that Microsoft's new browser was the company's response to growing criticism that its IE 6 browser had serious security flaws, which made users vulnerable to attacks from malicious viruses and online phishing7 scams.

In January 2005, Secunia, a Denmark-based computer security company, which tracks vulnerabilities in over 9,000 software products, had given the IE 6 their highest rating of "extremely critical" because of the high number of flaws detected in the browser.

Microsoft's decision to revamp the browser was also seen as a response to the growing threat from rival browser, Firefox, an open source 8 browser, officially released in November 2004 by the Mozilla Foundation.9

Microsoft had earlier released two test versions of its IE 7 browser named "Internet Explorer 7 Beta 2 Preview" in February 2006 and March 2006. The final version of IE 7 is expected to be released in the latter part of 2006 and to be included in Windows Vista, Microsoft's new operating system scheduled for release at the end of 2007 (Refer to Exhibit I for a brief profile of Microsoft and its products).

Analysts also felt that the IE 7 had further increased the rivalry between Microsoft and Google Inc.10 (Google), as Microsoft integrated its Internet search service, MSN Search as the default search engine in the browser. Google described the move as monopolistic and anti-competitive. The move was seen as a severe threat to Google as it could hamper its online

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search advertising business in a market worth over US$ 10 billion (in 2005). Google filed a complaint with the Department of Justice11 (DOJ) in the US and European Commission12 (EU) in Europe in May 2006. The DOJ ruled out Google's objections in the same month.

History of Web Browsers

In 1990, Tim Berners Lee developed the first web browser called, WorldWideWeb at CERN13 (Centre Européan de Recherche Nucléaire).

The browser had a built-in editor that created hypertext documents and had the ability to support documents only with text, without any graphics.

In November 1993, Marc Andreessen, developed a web browser called Mosaic1 at the National Center for Supercomputing Applications14 (NCSA), which became the first browser to support the graphical user interface15 (GUI).

NCSA released the first pre-beta version of Mosaic in February 1993 and 1.0 version in September 1993. The browser provided support to Windows and Macintosh operating systems. In 1994, Marc Andreessen resigned from NCSA and formed Netscape Communication Corporation16 in collaboration with Jim Clark.17

The period from 1994 to 1997 marked the dominance of Netscape as several versions of browsers were released. The first web browser developed by Netscape was called as Netscape Navigator (Netscape).

In December 1994, Netscape1 browser, which supported advanced HTML18 tags and multiple TCP/IP19 connections, was released. In March 1996, Netscape1 was succeeded by Netscape2, supporting JavaScript20 followed by Netscape3 in August 1996, which supported mouseover21

features.

In August 1995, Microsoft released its first Internet explorer version IE1 followed by IE2 in December 1995. These browsers did not match the capability of Netscape3 standards. IE3 was the first browser that supported cascading style sheets22 (CSS). This helped Microsoft increase its market share but Netscape's technical superiority ensured continued dominance for Netscape.

However, the market share of Microsoft's browser grew rapidly, primarily due to the incorporation of the browser in its Windows operating system (OS).

Microsoft had a near monopoly in the OS market and the incorporation enabled it to command 96 percent of the total market by June 2004. Also, Microsoft viewed its competency in developing OS as the key factor that attracted customers to its web browsers.

In December 1997, Opera, a web browser, was developed by a telecommunications company Telenor in Oslo, Norway. The company developed this browser to counter the increasing threat of phishing attacks.

Opera provided better CSS support than Netscape and IE. It operated on the open-source model, which made it capable of running on any operating system. In addition to features like

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tabbed browsing23 and pop-up blocking24, Opera provided better security protection by supporting a Secure Socket Layer25 (SSL) version and 128-bit encryption, which was the highest security available to a browser...

The Browser Wars

The term 'browser wars' describes the competition between the different web browsers to maximize their own share of the world browser market. It is also commonly used to denote the competition between IE and other browsers at two different periods of time. The first war was fought between IE and Netscape in the late 1990s and the second (ongoing) is between IE and Firefox, which began in 2004. The first round of the browser wars was won by Microsoft. Industry experts pointed that this was mainly due to its near monopoly in the OS market.

The second round of the browser wars started with the increasing popularity of browsers like Firefox and Opera, which competed with Microsoft by providing advanced features and better security. The release of Firefox 1.0 in 2004 (Refer to Exhibit II for the versions of Firefox) posed a threat to Microsoft's IE as it spread through word-of-mouth buzz, was easily available to Internet users, was less vulnerable to viruses and spyware, and had the capability of running on any operating system. By mid-October 2005, Firefox had achieved its 100 millionth download and around 8.7 percent share of the browser market.

Asa Dotzler, the community coordinator for the Mozilla Foundation, said, "This is a great milestone. Our massive, worldwide community of grassroots marketers and users - not to mention the developers -have helped to put out a product that's really kicking butt."...

Security Concerns in IE6

In April 2006, Secunia reported that IE6 had twenty vulnerabilities when compared to Firefox, which had four vulnerabilities. These vulnerabilities could severely compromise the security of systems or networks. One of these security flaws enabled fraudsters to pull off phishing scams. According to Secunia, the flaw was a result of the way web pages and macromedia flash animations were loaded by IE6 using CSS. CSS was used in designing the web layout and the availability of CSS source code on the web enabled hackers to access the hard drive, making it susceptible to browser bugs and malicious software.

Microsoft stated that it took steps to investigate the newly reported flaw. A representative of Microsoft said, "Our initial investigation has revealed that customers who have set their Internet security settings to high, or who have disabled active scripting, are at reduced risk from attack as the attack vector requires scripting."

The Release Of IE 7 Beta 2

On February 15, 2005, Microsoft's Chairman, Bill Gates announced a proposal to release a new version of IE browser to be called IE 7. The new web browser was proposed to counter competition from Firefox and address the severe security problems that affect IE6.

Gene Munster, an analyst said "The big point is that IE's been losing market share to

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Mozilla's Firefox." He added, "Now Microsoft is trying to catch up and regain user loyalty from people who have embraced Firefox's simple and more secure format."

Microsoft released a pre-IE 7 Beta 2 Preview on March 20, 2006 as a test version for users and another version, IE 7 Beta 2 was released on April 25, 2006. With the release of IE 7 Beta 2, Microsoft had increased the security features of its web browser considerably.

Microsoft's security response team said, "We have been trying to get this fix into the next IE release, but it's been a lot of work to do that, as it's relatively late in the cycle. It looks like it will make it in though."

The Search Wars

The release of the Beta 2 version of IE 7 had intensified the war between Microsoft and Google. Microsoft had integrated its Internet search service, MSN Search as the default search engine in IE7. Google alleged that Microsoft's move would give it an unfair advantage in the online search market. The search-based advertising market was worth US$ 10 billion in 2005 and search-based advertising was Google's primary revenue generating business. Google complained to the DOJ and EC that Microsoft's move was monopolistic and anti-competitive...

The Outlook

Microsoft acquired three security companies in order to improve the security features of its products. On February 8, 2006, Microsoft acquired Sybari software, a company that developed software that filtered viruses and spyware. Security software firms GeCAD and Giant Software were also bought to bundle anti-spyware software with the browser. With these acquisitions Microsoft aimed at handling all the issues related to security and counter the growing threat from Firefox.

Exhibit

Exhibit I: Brief Profile of Microsoft and its ProductsExhibit II: Earlier Versions of Firefox (As of June 2006)Exhibit III: Features of IE 7Exhibit IV: Brief Profile of Google

References:

1] Foley, Mary Jo. "Microsoft Refreshes, Broadens IE 7 beta," www.microsoft-watch.com, April 25, 2006.

2] Directions on Microsoft is an independent organization that tracks the products, strategies, and marketing initiatives of the Microsoft Corporation.

3] Beer, Stan. "Firefox Zealots Offer Websites Money to Switch users from IE," www.itwire.com, April 26, 2006.

4] Internet explorer is the leading web browser with a market share of 85% as on March, 2006.

5] RSS is an acronym for Rich Site Summary or Really Simple Syndication. It is a system that generates automated feeds such as weblogs or

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news, specified in XML language.

6] "Microsoft Expands Browser Testing," www.bbc.co.uk, April 25, 2006.

7] Phishing is characterized by attempts to fraudulently acquire sensitive information, such as passwords and credit card details, by masquerading as a trustworthy person or business in an apparently official electronic communication. (Source: www.wikipedia.org).

8] Open source software is computer software available with source code.

9] Mozilla Foundation was formed by Netscape, a former browser, in 1998.

10] Google Inc., was co-founded by Sergey Brin and Larry Page in 1998. Google is the world's most popular Internet search engine and has a diversified range of products such as E-mail, blogs, etc.

11] Established in 1870, the US Department of Justice (DOJ) enforces the law and protects the interests of the US. It ensures safety against foreign and domestic threats and seeks to punish the guilty ensuring fair and impartial administration of justice to US citizens. The divisions of the DOJ are the Antitrust Division, the Civil Division, the Civil Rights Division, the National Security Division, Criminal Division, the Environment and Natural Resources Division, the Justice Management Division, and the Tax Division.

12] European Commission is the executive body of the member countries of the European Union. Its main function is to propose and implement legislations, and also act as guardian of the treaties signed by European Union.

13] CERN, the European Organization for Nuclear Research, is located in Geneva, Switzerland.

14] National Center for Supercomputing Applications (NCSA) is a department in the University of Illinois at Urbana-Champaign (UIUC). It has been a leader in the development and deployment of new computing applications and software technologies for the scientific and engineering community.

15] Graphical user interface is a graphics user based interface that issues commands to a computer. It has the ability to resize application windows and activates graphical images on a monitor.

16] Established in 1994, Netscape Communications Corporation was the publisher of Netscape browsers, internet and intranet client and server products.

17] Jim Clark was the founder of Silicon Graphics, Inc. The company was established in 1982 and was a maker of graphics display terminal.

18] Hyper Text Markup Language is a markup language that is used extensively on the WorldwideWeb (www). It is used to structure text and multimedia documents and sets hyperlinks between documents.

19] Transmission Control Protocol/Internet Protocol is a communications protocol developed under a contract from the U.S Department of defense. It is used as a standard to transmit data over a network.

20] JavaScript is a scripting language that enables scripting access to objects embedded in other applications.

21] Mouseover features are dynamically provided by Dynamic Hypertext Markup Language (DHTML). When the user places the mouse over a hyperlink, sub links to the hyperlinks appear on the web page.

22] Cascading style sheets (CSS) design the web layout. It allows users to attach fonts, spacing to structured documents such as HTML and XML.

23] This feature allows users to open more than one site in one browser window.

24] Pop-up blocking refers to any software or application that disables any pop-up, pop-over or pop-under advertisement window that the user would see while using a Web browser. (Source: www.webopedia.com)

25] Secure Socket Layer (SSL) is used to transmit private documents over the Internet. It uses a cryptographic system that is provided with two keys to encrypt and decrypt the data. This ensures that the message transferred would be securely received by the recipient.

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Crisis Management at Bausch & Lomb - The 'ReNu Moistureloc' Controversy

Case Details: Price:Case Code : MKTG129 For delivery in electronic format: Rs. 400;

For delivery through courier (within India): Rs. 400 + Rs. 25 for Shipping & Handling Charges

Themes

Eye Care

Case Length : 21 PagesPeriod : 2005-2006Pub Date : 2006Teaching Note : AvailableOrganization : Bausch and Lomb Industry : Eye CareCountries : USA, Asia

Abstract:

This case is about the crisis faced by Bausch & Lomb (B&L), a leading eye care company, in the wake of reports linking its contact lens cleaner, ReNu with MoistureLoc (ReNu MoistureLoc), to a fungal infection of the eye called Fusarium keratitis. B&L decided to suspend the US shipments of this product and asked US retailers to temporarily remove ReNu MoistureLoc from their shelves. The case discusses the views of some marketing and branding experts who highlighted the inadequate action taken by B&L when the initial reports of the infection came out in Asia.

The company's critics felt that B&L had not handled the crisis well and was likely to pay the price for it in terms of loss of sales, loss of image, and lawsuits. However, there were others who pointed out that B&L was not all to blame because there was no clear link established between B&L's product and the infection.

Issues:

» Understand the challenges faced by a company in managing a product crisis.

» Understand the importance of clear and effective communication with customers in the event of a controversy/crisis.

The 'ReNu Moistureloc' Controversy "Bausch & Lomb's first priority is the health and safety of consumers. If there is a problem with our product (ReNu with MoistureLoc), we'll find it and we'll fix it. If there's not, when we come back, you'll be able to know with absolute certainty that we've taken every possible step to ensure your safety." 1

- Ronald Zarrella, Chief Executive Officer of Bausch & Lomb Inc. (B&L), in April 2006.

"They (B&L) couldn't have done a worse job. It's almost as if they looked at the handbook on crisis management and threw it out the window." 2

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- Paul Argenti, Professor of Corporate Communications, Dartmouth College's Tuck School of Business, 3 in April 2006.

Bausch & Lomb in the Public Eye

On April 10, 2006, eye care company Bausch & Lomb Inc. (B&L) temporarily suspended the US shipments of its contact lens4 cleaner, ReNu with MoistureLoc (ReNu MoistureLoc) produced at its Greenville, South Carolina, U.S.A, manufacturing facility. This was done in order to facilitate a US Food and Drug Administration (FDA)5 investigation into reports of a fungal infection, Fusarium keratitis6 (keratitis), among contact lens wearers in the US.

B&L voluntarily suspended its US shipments of ReNu MoistureLoc following an FDA warning to the consumers to use ReNu MoistureLoc with caution. The FDA had issued this warning on the basis of an investigation by the U.S. Centers for Disease Control and Prevention (CDC),7 which was reviewing 109 cases of suspected keratitis in the US. Though the CDC did not directly link the infection to ReNu MoistureLoc, it said that when it interviewed 30 affected people, a high proportion (26 out of 30) of the affected people had used B&L's ReNu MoistureLoc solution.

B&L's CEO, Ronald Zarella (Zarella), said, "The CDC has not determined if these reports represent an increase of Fusarium keratitis infections and is continuing to investigate the association, if any, of these cases with any product. Nonetheless, in the interest of public health, we will voluntarily suspend U.S. shipments of ReNu with MoistureLoc while we pursue all appropriate steps to bring this investigation to a definitive conclusion."8

On April 13, 2006, B&L voluntarily asked US retailers to temporarily remove ReNu MoistureLoc from their shelves. It also recommended that consumers switch to other lens care solutions, so as to prevent any confusion among contact lens wearers about what to do while the investigation was going on. B&L stressed the fact that the report of such cases was linked only to the ReNu MoistureLoc manufactured at its Greenville plant and did not apply to any other B&L products -other lens care solutions of ReNu or to the ReNu MoistureLoc made in factories outside the US. (Refer to Exhibit I for some key sub-brands of B&L and Exhibit II for its lens care products).

However, B&L's corrective action did not impress analysts, marketers, and medical specialists, many of whom felt that the eye care company had not done enough to inform the 30 million wearers of contact lenses in the US about the full extent of the problem. Analysts felt that B&L should have informed the public about the health issues linked with ReNu MoistureLoc as soon as it had come to know about it.

They also felt that B&L should have recalled the product from the market in February 2006 itself, when it first came to know about the association of keratitis with ReNu MoistureLoc. They believed that B&L might have to pay the price for not acting promptly in the face of this crisis. The analysts feared that B&L might have damaged its customer relations and that its brand name might have been permanently tainted due to this incident.

Background Note

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Bausch & Lomb Inc., based in Rochester, New York, USA, is an eye care company. The company came into being in 1853 when a German immigrant, John Jacob Bausch, set up an optical goods shop in Rochester, New York. Bausch borrowed US$60 for the purpose from a friend, Henry Lomb, who eventually became a partner. In the early days, B&L manufactured rubber eyeglass frames as well as a variety of optical products that required a high degree of manufacturing precision. By 1903, the firm had received patents for microscopes, binoculars, and even a camera shutter based on the eye's reaction to light

In the 1900s, B&L produced the first optical quality glass made in America. Its sunglasses were used by the military in World War I. B&L is also credited with developing the lens of the cameras that took the first satellite pictures of the moon. In 1971, B&L introduced the first soft contact lenses.

As of April 2006, it was the largest global provider of eye care products. B&L's product lines included Vision Care, Surgical, and Pharmaceuticals. Its Vision Care business manufactured and marketed soft and GP (gas permeable) contact lenses, lens care products for soft and GP lenses, eye care products (such as eye drops and ointments) and vision accessories (such as magnifiers and eyeglass accessories).

The company offered a comprehensive line of products for ophthalmic surgery in the surgical market segment. It developed and marketed prescription and over-the-counter (OTC) drugs9 used to treat a wide range of eye conditions, such as glaucoma, eye allergies, conjunctivitis, and dry eye.

The 'Bausch & Lomb' name is one of the best known and most respected healthcare brands in the world and B&L leverages on this brand name. In 2004, it employed approximately 12,400 people worldwide and its products were available in more than 100 countries. Its 2004, revenues were US$2.2 billion. (Refer to Exhibit III for B&L's logo and Exhibit IV for key financial data of B&L).

In late 2004, B&L launched ReNu MoistureLoc, its newest brand in the lens care segment (Refer to Exhibit V for a brief note on ReNu MoistureLoc and Exhibit VI for a pack shot of the product)...

ReNu Eye Infections - The Initial Reports

In January 2006, Singapore health officials noticed a sudden increase in the number of reported cases of keratitis in contact lens users. On February 17, 2006, Singapore's Ministry of Health alerted the public that 18 of the 22 patients, who were affected by keratitis, had used ReNu MoistureLoc.

Between January 2006 and February 2006, they discovered 39 cases of keratitis. Of these, 34 patients said that they used ReNu MoistureLoc. Similar cases were also reported in Malaysia and Hong Kong...

In February 2006, B&L stopped shipments of ReNu MoistureLoc to Singapore and Hong Kong although they maintained that the infection was not linked to their product. B&L partnered with health authorities and researchers to investigate the extent and cause of the outbreak.

13

In a press release in March 2006, B&L announced that it was collaborating in a scientific investigation with health authorities and leading experts around the world including the CDC, Bascom Palmer Eye Institute, Johns Hopkins Wilmer Eye Institute, and the Ministries of Health in Singapore, Hong Kong, and Malaysia, to determine the extent and cause of the increase in infection among contact lens wearers.

It, however, claimed that the cases reported in Asia involved examples of poor patient compliance with lens care regimens and contact lens wear, such as wearing expired lenses and re-using disposable contact lenses. These investigations did not reveal any cause-and effect relationship between ReNu MoistureLoc and keratitis (Refer Exhibit VII for B&L's press release).

A Hazy View At B&L?

As B&L stopped shipments of ReNu MoistureLoc, US retail giants like Sears Holdings Corp. (Kmart, Sears Essentials, and Sears Grand stores), CVS Corp. (CVS), Wal-Mart Stores, Inc.,, Walgreen Co. (Walgreens), Rite Aid Corp. and all Albertson Inc.'s owned chains, including Jewel-Osco and Shaw's, pulled ReNu MoistureLoc off their store shelves. Walgreen went a step further and took all ReNu products off its shelves, not just the ones with the ReNu MoistureLoc formulation line, to prevent confusion among customers. Synsam and Specsavers Blic Optik of Sweden also pulled ReNu MoistureLoc off their shelves...

Competitors Eye B&L's Market Share

As of April, 2006, more than 30 million people wore contact lenses in the US and the estimated global market for lens care solutions was US$1.8 billion. In terms of market share, B&L, Alcon Inc. (Alcon), and Advanced Medical Optics, Inc. (Advanced Medical) held the top three positions in the market (Refer to Table IV for Global market share of top three players in Lens Care). B&L's ReNu MoistureLoc alone accounted for 9.2% of the market share in U.S. lens care solutions...

References:

1] Jeff Tannenbaum and Kerry Young, “Company Ends Sale of Lens Cleaner,” www.philly.com, April 14, 2006.

2] "Bausch & Lomb Withdraws Lens Cleaner from U.S. Market (Update2),” www.bloomberg.com, April 13, 2006.

3] Darmouth College, located at Hanover, New Hampshire, USA, is a private academic institution. Founded in 1769, it is a member of the Ivy League. The Tuck School of Business Administration was founded in 1900 at Dartmouth College. It is one of the six Ivy League business schools.

4] A contact lens is a corrective, cosmetic, or therapeutic lens usually placed on the cornea of the eye.

5] The Food and Drug Administration (FDA) is a government agency in the US responsible for regulating food, dietary supplements, drugs, cosmetics, medical devices, biologics and blood products.

6] Keratitis is an infection of the eyes caused by fungus. It can scar the corneas, potentially leading to blindness. Symptoms can include blurry vision, pain or redness, increased sensitivity to light and excessive discharge from the eye.

7] The Centers for Disease Control and Prevention (CDC) in Atlanta, Georgia, USA, is recognized as the leading United States agency for protecting the public health and safety of people. The CDC provides credible information to enhance health

14

decisions and promotes health through strong partnerships with state health departments and other organizations.

8] Bausch & Lomb, Press Release, “Bausch & Lomb Temporarily Suspends U.S. Shipments of ReNu with ReNu MoistureLoc Produced at Greenville, S.C., Manufacturing Facility Pending Investigation of Reports of Fusarium Infections Among Contact Lens Wearers,” www.bausch.com, April 10, 2006.

9] OTC drugs are sold across the counter for which prescription is not needed.

Destination Marketing: Tourism Australia's Controversial Campaign

Case Details: Price:Case Code : MKTG197 For delivery in electronic format: Rs. 400;

For delivery through courier (within India): Rs. 400 + Rs. 25 for Shipping & Handling Charges

Themes

Tourism Marketing/ Destination Branding/ Marketing Communications

Case Length : 21 pagesPeriod : 2006-2008Pub Date : 2008Teaching Note : Available

Organization : Tourism AustraliaIndustry : TourismCountries : Australia/ Global

Abstract:

This case is about an advertising campaign started by Tourism Australia in 2006, the controversies it created, and its eventual withdrawal. The case revolves around the 'So Where the Bloody Hell are You?' campaign that was withdrawn in early 2008.Australian tourism had been facing the unique problem where the interest shown by the people in visiting the country was not translating into actual tourist inflows. The campaign was intended to solve this problem by translating the huge interest shown by the people to visit Australia into actual tourist inflows. The theme of the campaign was to invite the people to visit Australia and enjoy the diverse range of experiences available there.

The campaign was launched through multiple media channels and Australian model Lara Bingle was the face of the campaign. The campaign was developed after extensive marketing research and strove to target 'Experience Seekers' -- early adopters who played a major role in influencing the purchasing behavior of other people.

The campaign became controversial right from the time it was launched and was even initially banned in some countries such as UK and Canada. The campaign attracted the wrath of the regulators in these countries because of the use of swear words such as 'Bloody' and 'Hell'. These words were part of the Australian slang but their use in the ad campaign was perceived as offensive in some of the target markets. Tourism Australia was criticized for not taking the cultural aspects into account before developing an advertising campaign for the international markets.

15

In addition to being controversial, the campaign failed to show any significant results though the experts were divided on the effectiveness of the campaign. Faced with increased criticism from various quarters, Tourism Australia withdrew the campaign in February 2008. Tourism Australia said that a new advertising campaign would be released in the place of the withdrawn campaign and all precautions would be taken to avoid any controversies in its future campaigns.

Issues:

» Understand the issues in Tourism (destination) development and marketing and how Tourism Australia addressed these issues

» Understand the issues and challenges in destination branding

» Understand how Tourism Australia planned an implemented a bold advertising campaign to promote Australia as a destination brand

» Appreciate the importance of taking into account cultural issues in target markets while developing a global marketing communication

» Understand the challenges faced by a public sector organization/governmental organization in sustaining an innovative program

"In an increasingly competitive and tough commercial environment we must be bold, aggressive, and distinctive to win the business. But we also must be credible -- we must be true to what we are as a destination and focus on why the world loves us -- and our marketing must be authentically and distinctively Australian... This exciting new campaign provides a compelling and uniquely Australian invitation to the world that celebrates our personality, our lifestyle, and our place. It has been carefully designed to cut through the clutter and motivate international tourists to stop putting it off and visit Australia now."1

- Scott Morrison, Managing Director, Tourism Australia, on the controversial 'So Where the Bloody Hell are You?' campaign that was launched in 2006.

"They [Asian visitors] didn't get the joke at all, it wasn't funny to them to have this word bloody which can be a serious word to others. It came across as a demand for people to visit Australia, not an invitation and that's not at all culturally appropriate in many of the countries in which we are working to encourage people to come and see us."2

- Desley Boyle, Queensland's Tourism Minister, in 2007.

"In awareness, in some areas it was very good. But it seems from everything that we see and hear from the industry that it was not strong enough to really go on from here."3

- Harold Mitchell, the Executive Chairman of the Mitchell Communication Group, in 2008.

End of an Innovative & Controversial Campaign

16

In February 2008, Tourism Australia4 announced that it was discontinuing its controversial advertisement campaign, 'So Where the Bloody Hell are You?' (Bloody Hell). The announcement put an end to the contentious campaign launched in 2006 by Tourism Australia, a statutory authority of the Government of Australia set up to promote the country as a tourist destination. Through the campaign, which featured well-known Australian model Lara Bingle (Bingle), Tourism Australia sought to promote Australia as a rough and wild but friendly place for tourists.

It said that the brand proposition of the campaign was, 'Australia invites you to get involved'.5

The announcement of the campaign's withdrawal came amidst a fall in tourist numbers attributed to the fact that the Australian Dollar (A$)6 was growing stronger.

The advertisement campaign received wide media coverage and was also accessed online by many people. Though it was initially termed a success and as having helped spur tourists to visit the country, it proved controversial in some of the target markets. The use of the swear words 'Bloody' and 'Hell' particularly incensed many. However, Tourism Australia defended the use of the words, saying they were part of Australian slang and were intended to portray Australia as 'warm, friendly, and inviting'.

The advertisement was banned in some countries like the UK and Canada. While the UK banned it for the use of the word 'bloody', Canada banned it for the opening line in the advertisement of the campaign, "We've bought you a beer" which, it said, implied the consumption of unbranded alcohol.

Singapore insisted that Tourism Australia remove the words 'bloody' and 'hell' before releasing the campaign in that country. The first year of the launch of the campaign saw an increase of A$ 1.8 billion in tourist spending.7

However, some analysts believed that the campaign had failed to live up to expectations. Even as marketing experts remained divided in their opinion on the campaign's effectiveness, Tourism Australia decided to pull it out under pressure from various stakeholders and amidst concern that the A$ 180 million campaign was a complete failure.

Excerpts

History of Australian Tourism

Australia is an island continent located in the earth's southern hemisphere comprising the world's smallest continent of Australia, the island of Tasmania, and a number of other small islands (Refer to Exhibit I for a brief note on Australia). Over the years, Australia made a name for itself as a strong destination brand (Refer to Exhibit II for a brief note on Destination branding).

Realizing the importance of tourism to the nation's economy, Australia had been promoting its tourism industry since the 1960s (Refer to Exhibit III for history of Australian tourism: A timeline). In 1967, the Australian Tourism Commission (ATC) was established with a funding of A$ 1.5 million...

The Problem

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Despite Australia being a strong destination brand, the problem that the newly formed Tourism Australia faced was that the number of tourists actually visiting Australia did not match the number of people who had shown an interest in visiting the country. Australia performed well in a number of destination ratings and scored high on brand recall...

Preparing for the New Campaign

The 'Bloody Hell' campaign was started by the Australian Government in 2006 to increase the tourist inflow into the country. The campaign was designed by the Sydney office of the advertising agency M&C Saatchi (Saatchi) .

Saatchi had earlier designed the successful campaign, "100% Pure New Zealand" for promoting tourism in New Zealand. The important objective of the campaign was to cash in on the awareness created through previous advertising campaigns and convert them into actual travel bookings...

Launching the New Campaign

The campaign was launched by Fran Bailey (Bailey), then Australian tourism minister, on February 27, 2006. The advertisements of the campaign featured a total of eleven scenes and thirteen still images. The images and scenes showed the diverse range of experiences on offer in Australia...

Controversy and Criticisms

The 'Bloody Hell' campaign attracted controversy immediately after its launch. The campaign was criticized in some of the target countries for using swear words like 'Bloody' and 'Hell' and for its allegedly crude content.

The advertisement campaign was released in the UK, Australia's most valuable market, in March 2006. (Refer to Exhibit VI for the top 10 source countries for short-term visitor arrivals into Australia) The advertisement was banned in UK for using the word 'bloody' and, UK's Broadcast Advertising Clearance Center (BACC) instructed Tourism Australia authorities to drop the word 'Bloody' from the ad...

The Results of the Campaign

Many critics described the campaign as a failure right from the first year of its launch. In the first year of its launch the number of tourist arrivals actually fell. In October 2006, the number of UK tourists who visited Australia fell by 2.3 percent compared to the preceding year. The number of Japanese tourists fell by 5.7 percent while the number of German tourists dropped by 4.7 percent...

Outlook

Some experts felt that the failure of the 'Bloody Hell' campaign had dented the image of Tourism Australia as its predecessor, ATC, was considered an expert in destination branding.

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Analysts said that apart from the loss in tourist numbers and revenues, the controversy might tarnish the image of brand 'Australia' itself. They said that Australia should take urgent steps to control the damage caused by the failed advertising campaign and design a new campaign to stop the decline in tourist numbers, more so in view of the emergence of new tourist hot spots like India and Malaysia...

Exhibits

Exhibit I: A Brief Note on AustraliaExhibit II: A Brief Note on Destination BrandingExhibit III: History of Australian Tourism: A TimelineExhibit IV: Logo of Tourism AustraliaExhibit V: Some Scenes from the 'So Where the Bloody Hell are You?' CampaignExhibit VI: The Top 10 Source Countries for Short-term Visitor Arrivals as of February 2008

Honda's Marketing Strategies in India

Case Details: Price:Case Code : MKTG098 For delivery in electronic format: Rs.

500;For delivery through courier (within India): Rs. 500 + Rs. 25 for Shipping & Handling Charges

Themes

International Marketing

Case Length : 19 PagesPeriod : 1998-2004Pub Date : 2004Teaching Note

: Not Available

Organization : Honda MotorsIndustry : Automobile (Two

Wheelers)Countries : India

Keywords:

Honda Motors, Indian Two Wheeler Industry, Foreign Two Wheeler Manufacturers in India, Marketing Two Wheelers in India, Marketing Mix, Positioning, Customer Value, Pricing , Distribution, Advertising Campaign and International Business.

Abstract:

The case discusses the marketing strategies of Japan-based Honda Motor Company Limited (HMCL) in India. Though HMCL had entered India way back in 1984 by entering into joint ventures with leading two-wheeler companies, the company established its wholly owned subsidiary - Honda Motorcycle and Scooters India Limited (HMSI) in October 1999. Within a couple of years after the launch of its successful products including Activa, Dio and Eterno, HMSI had emerged as the largest scooter company in India. The case describes in detail the product, pricing, distribution and promotional strategies of HMSI. It briefs the challenges faced by the company and its recent foray in the motorcycles business in India.

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The case also includes a brief note on the Indian two-wheeler industry describing the leading players and their marketing strategies.

Issues:

The case is structured in a way so as to enable students to:

• Understand the competitive landscape in the Indian two-wheeler industry and study the marketing strategies of Honda in particular.

• Study the entry strategies of two-wheeler manufacturers in India.

• Examine and analyze the marketing mix of Honda Motors.

• Compare and contrast the marketing strategy of Honda with other leading players in the Indian two-wheeler industry including Bajaj Auto and Hero Honda Motors.

"Its symbol, the Wings, represents the company's unwavering dedication in achieving goals that are unique and above all, conforming to international norms. These wings are now in India as Honda Motorcycle & Scooter India Pvt. Ltd. (HMSI), a wholly owned subsidiary of Honda Motor Company Ltd., Japan. These wings are here to initiate a change and make a difference in the Indian two-wheeler industry."

- www.honda2wheelersindia.com.

The Launch

In September 2004, Honda Motorcycle and Scooters India Limited (HMSI), the wholly owned subsidiary of the Japan-based Honda Motor Company Limited (HMCL),1 launched its first 150cc motorcycle named 'Unicorn.'

Priced at Rs 50,043 (ex-showroom price, Delhi), Unicorn had a four stroke 13.3 bhp engine with five gears.

The new bike was available in five colours and was designed to achieve a speed of 0 to 60 kmph in five seconds. Unicorn was promoted with the caption "Be a wing rider." (Refer Exhibit I for a visual of Unicorn).

Targeted at youth, Unicorn looked sportier than all the existing motorcycles in the premium segment and was pitted against Bajaj Pulsar, the leader with 75 percent market share in that segment. The other bikes in this segment were TVS Fiero, LML's Graptor and Hero Honda's CBZ (Refer Exhibit II for a comparison of leading motorcycle models in India). HMSI expected sales of 56,000 units of Unicorn in the first year of launch.

The Indian two-wheeler industry, traditionally considered a scooter market, witnessed a gradual migration towards motorcycles from the 1990's. When HMSI was incorporated in late 1999, the Indian motorcycle market was booming, compared to the scooter market.

Still, SI announced that it would initially concentrate only on the scooter market and would

20

enter the motorcycle market in 2004, the year when the HMCL joint venture agreement with the Hero Group2 was due for revalidation. HMSI was credited for reviving the scooters market in India. Within three years of commercial operation, HMSI emerged as the market leader in the scooters segment.

The company's scooter models included Activa, Dio and Eterno. Appreciating the efforts of the company, Veeshal Bakshi, an analyst with Financial Express, a leading business daily in India, said, "Honda has stirred the Indian automobile markets in many ways. Its wholly owned subsidiary Honda Motorcycle and Scooter India (HMSI) single handedly revived the two-wheeler scooter market, at a time when even the likes of Bajaj were unable to prevent the slide in scooter sales."3

Background Note

The history of HMCL could be traced back to 1946, when Soichiro Honda, a mechanical engineer, established the 'Honda Technical Research Institute' in Hamamatsu, Japan.

The idea was to develop and later produce small two-cycle motorbike engines. Honda's first product, an A-type 50cc bicycle engine, was produced in 1947.

In 1948, HMCL was incorporated with a capital of one million yen. Soon, the company started to design and produce lightweight motorcycles.

Honda's first motor cycle, D-type two stroke 98cc, was produced in 1949. In the early fifties, the headquarters of the company was shifted from Hamamatsu to Tokyo and the company got listed on the Tokyo Stock Exchange. In 1959, the American Honda Motor Company Inc. was established in Los Angeles.

The American venture started modestly with a staff of six and sales figure barely touching 200 motorcycles.

In 1963, American Honda launched the "You meet the nicest people on a Honda" advertising campaign, which revolutionized the US motorcycle industry.

A few years later, Honda established motorcycle assembly plants in Germany and Belgium.

During the 1960s, HMCL expanded its product line by introducing light trucks, compact cars, out board motors, power generators and several new models of motorcycles and motor scooters.

New production units were started in Thailand, UK, Malaysia and cumulative motorcycle production reached 10 mn units by 1968. During the 1970s, HMCL entered the Philippines, Indonesia and Brazil...

The Product Launch

After coming out of the joint venture with KEL, HMCL planned to introduce its own two-wheelers in the market. In October 1999, in a major strategic initiative, HMCL established

21

HMSI. The company made an initial investment of Rs 3 bn to establish a plant with an annual production capacity of 200,000 units...

Activa

Launched in 2001, Honda Activa was the first scooter model of HMSI for the Indian market. A 102 cc scooter, Activa was specially designed keeping in view the needs and preferences of Indian consumers who expressed that the conventional Indian scooter was too big and difficult to handle and that the scooterette was too small and similar to a moped..

Dio

Dio was launched in 2002 as the first motoscooter in the Indian market...

The Marketing Strategy

Thanks to the success of its joint venture with Hero Group and KEL, 'Honda' was already a household name in India. Hence, rather than putting major efforts into brand building, HMSI's marketing strategy emphasized on offering innovative products at competitive prices, novel promotional campaigns and developing an extensive distribution network...

Looking Ahead

After the launch of Unicorn, HMSI announced plans to introduce a 135cc motorcycle in 2005. Confirming this, Yukihiro Aoshima, COO and MD, HMSI said, "The Unicorn is just the beginning.....We do not want to restrict ourselves to any specific category.

We would like to have full line-up covering right from the entry level low-cost motorcycle to a motorcycle for people with strong taste and fun elements into it." With plans to launch its own motorcycles in India, analysts feared that HMCL may not renew its ties with the Hero Group..

Exhibits

Exhibit I: The UnicornExhibit II: Comparison of Leading Motorcycle Models in IndiaExhibit III: A Note on the Indian Two-Wheeler IndustryExhibit IV: The ActivaExhibit V: The DioExhibit VI: Print Advertisement on DioExhibit VII: Web Promo of EternoExhibit VIII: Scooter Sales in India (2002-04)Exhibit IX: Comparison of Features of Leading Scooter Models

References:

1] The Tokyo- headquartered HMCL is one of the leading manufacturers of automobiles and power products and the largest manufacturer of two-wheelers in the world. It has more than 120 manufacturing facilities in 30 countries worldwide, manufacturing a wide range of automobiles. The extensive range of business has brought the company into

22

contact with over 17 million customers annually.

2] The Hero Group of Companies was started by the Munjal brothers in 1956. Their first venture was Hero Cycles Limited. Hero is today a multi-unit, multi-product, geographically diversified group of companies. Apart from rolling their own steel, making components such as wheels for their bicycles, the group diversified into other ventures like product designing, IT-enabled services, finance and insurance. The group comprises 18 companies, 300 ancillary suppliers, over 5,000 outlets and 23,000 employees. For the fiscal 2003-04, the group's turnover was US$ 2.2 bn.

Lipitor: How Far Should Pfizer Push The Pill?

Case Details: Price:Case Code : MKTG140 For delivery in electronic format: Rs. 500;

For delivery through courier (within India): Rs. 500 + Rs. 25 for Shipping & Handling Charges

Themes

Pharma and Biotech

Case Length : 27 PagesPeriod : 1995-2006Organization : Pfizer Inc.Pub Date : 2006Teaching Note : AvailableCountries : USA, EuropeIndustry : Pharmaceuticals

Abstract:

The case is about Pfizer's blockbuster anti-cholesterol reducing drug, Lipitor, the largest selling pharmaceutical brand in the world. Despite Lipitor being a late entrant in the statin market, it managed to become the market leader due to the aggressive marketing strategy adopted by Pfizer. However, Pfizer's marketing of Lipitor came under intense scrutiny, when in March 2006 some labor unions in the US sued Pfizer for alleged off-label marketing of Lipitor. Pfizer also faced a class action lawsuit from some consumer advocacy groups regarding its promotional activities that were targeted at women and the elderly.

Pfizer was also accused of withholding information about the potential side-effects of Lipitor. Lipitor was also the subject of controversy regarding its allegedly over-zealous direct-to-consumer (DTC) advertising.

In addition to this, the case also discusses the concerns regarding the slowing down of Lipitor sales, the delay in launch of the Torcetrapib/Lipitor combination, the ongoing patent litigations with generic manufacturers like Ranbaxy Laboratories Ltd. over Lipitor, and the expected generic competition from substitutes like Pravachol and Zocor, which had gone off-patent.

Issues:

» Understand the nature of the global market for statin drugs and the major players.

» Understand the issues and concerns with regard to Pfizer's marketing of Lipitor.

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» Understand the legal and business challenges faced by research based global pharmaceutical companies.

Keywords:

Pfizer , Lipitor (Atorvastatin), Direct-to-consumer (DTC) Advertising, Class Action Lawsuit, Off-label marketing, Patent Litigation, Cholesterol-reducing drug, Statins Market, Zocor (Simvastatin), Ranbaxy Laboratories Limited, Marketing Ethics , Torcetrapib, Consumer Activist Advocacy Groups, Food and Drug Administration(FDA), Dr. Robert Jarvik

"This is a classic case of unjust enrichment. Pfizer has built colossal sales of Lipitor through the pipeline of third-party payors1 such as our clients and countless other drug plans - including Medicaid2 and Medicare3 - much of it based on prescriptions that the FDA's4 guidelines say never should have been written in the first place." 5

- Jay Eisenhofer of Grant & Eisenhofer, P.A.6 , in March 2006.

"Pfizer has and continues to take seriously its responsibility to provide appropriate information to physicians and patients and to comply with all federal laws and regulations regarding the promotion of our medicines. Based on the information provided to us, we believe there is absolutely no merit to the claims regarding the promotion of Lipitor." 7

-Pfizer Inc. in March 2006.

Lipitor Marketing - Under A Cloud

In March 2006, some labor unions in the US sued Pfizer Inc. (Pfizer), the largest pharmaceutical company in the world, accusing it of fraudulent marketing of its cholesterol-reducing drug,8 Lipitor (Atorvastatin). In a class-action suit,9 the plaintiffs accused Pfizer of off-label10 promotion of Lipitor, which led to the unions and other third-party payers, as well as Medicaid plans at the state-level in the US, paying billons of dollars in unwarranted Lipitor prescriptions between 2001 and 2006. They claimed that Pfizer had illegally marketed Lipitor to people who had high blood cholesterol but with low risk of heart attack. 

In such cases, according to federal guidelines, only lifestyle modifications like diet and exercise were warranted. The US Attorney's Office in Brooklyn, New York, USA, was investigating Pfizer's marketing practices for Lipitor. Pfizer denied the allegations of off-label marketing and said that there was no merit to the case. They also announced that they were fully co-operating with the federal investigation.

With sales of US$ 12.2 billion in 2005, Lipitor was the largest selling pharmaceutical brand in the world. The huge success of the brand was attributed to Pfizer's strong marketing efforts. But in late 2005 and early 2006, Pfizer's marketing of Lipitor came under close scrutiny.

In early 2005, its decision to combine its experimental drug11 Torcetrapib with Lipitor12 raised concerns as it was seen as a ploy to extend the patent of Lipitor which was due to expire in

24

the year 2011.

In September 2005, a class action suit was initiated by consumer advocacy groups against Pfizer for promoting Lipitor to women and the elderly.

The plaintiffs accused Pfizer of deceptive marketing as there was no evidence that Lipitor reduced the risk of heart disease in these segments of the population.

Pfizer was also a subject of national debate in the US for its direct-to-consumer (DTC) advertising of Lipitor. In April 2006, the Prescription Access Litigation Project13 (PAL), which draws attention to pharmaceutical companies that promote prescription drugs "excessively", gave its Bitter Pills award under the "Got Cholesterol?"14 category to Pfizer, for its DTC advertising of Lipitor.

In June 2006, two people sued Pfizer accusing it of withholding information about the potential side-effects of Lipitor. They alleged that Lipitor's side-effects included serious problems such as memory loss and damage to the nervous system.

Lipitor also had its share of legal battles with generic manufacturers. Pfizer was engaged in patent litigation over Lipitor in many countries against the Indian drug company Ranbaxy Laboratories Ltd. (Ranbaxy). The original patent of Lipitor was upto 2006, but Warner-Lambert (WL) who owned the patent then, had managed to extend it to 2011 by adding a calcium salt to Atorvastatin. Ranbaxy challenged the Lipitor patent saying that it was invalid. Ranbaxy contended that the molecule for which the second patent was awarded was very similar to the first patent and should not have been issued at all

It said Pfizer had deliberately misrepresented some details in its patent claim. In the court battles that followed, Pfizer prevailed over Ranbaxy in the US, the UK, Norway, Romania and Peru. However, Ranbaxy tasted success in April 2006, when a five-judge panel of the Supreme Patent and Trademark Board of Austria unanimously affirmed an earlier ruling invalidating Pfizer's claims for patent protection of Lipitor in Austria. Another cause of concern was the slowing down of sales of Lipitor after October 2005. Analysts attributed this slackening of sales to product substitution as more patients were being put on competitor brand Zocor (Simvastatin) by doctors, as they were expecting a low-priced generic version of Zocor to come on the market soon.

Zocor was scheduled to go off-patent on June 23, 2006. The launch of Pfizer's combination drug of Torcetrapib/Lipitor was delayed beyond its 2008 scheduled date. Some analysts said it would not be launched before 2010, and this delay was expected to be a major setback for Pfizer. Pfizer denied the allegations about improper marketing of Lipitor. The company said that it took its responsibility of providing appropriate information to the medical profession and patients seriously and complied with all federal laws and regulations while marketing its drugs.

A Pfizer spokesman said that the case was without merit. Pfizer also vowed to contest the lawsuits regarding Lipitor's alleged side-effects in an aggressive manner when they came to court as the allegations lacked any scientific basis.

Pfizer was also optimistic about Lipitor's prospects in 2006. The company had set a global sales target of US$ 13 billion for Lipitor in 2006, i.e., a growth of 6.5 percent over the

25

previous year. The company announced that despite the challenges, it was adopting an aggressive marketing strategy and was confident of achieving the targets set.

Pfizer's chairman and CEO, Henry A. McKinnell (McKinnell) said, "We are committed in our efforts to reach our full-year revenue goal for Lipitor, although it is an aggressive target given a challenging environment and a slower-than-hoped-for start to the year." However, some analysts felt there was insufficient basis for such optimism.

Background Note

Pfizer's beginnings were very humble. The Charles Pfizer & Company was set up in Brooklyn, New York, in 1849 by cousins Charles Pfizer and Charles Erhart (Erhart), two young entrepreneurs from Germany. Santonin, a palatable anti-parasitic was the company's first product. In 1862, during the American Civil War, Pfizer increased production of its chemicals and drugs, which doctors of the Union Army used, to treat wounded and sick soldiers. After Erhart's death in 1891, Charles Pfizer bought the company's shares from Erhart's son, William, to consolidate his ownership of the company

By 1899, Pfizer had become a leader in the American chemicals business with a product portfolio comprising citric acid, camphor, cream of tartar, borax, and iodine. It had also begun to export to a number of countries.

In 1900, Pfizer filed an official certificate of incorporation in the state of New Jersey, with an authorized capital of US$ 2 million. In 1906, Charles Pfizer died, leaving behind a company with sales that exceeded US$ 3 million. In 1914, John Anderson was appointed as the company's first Chairman and he served in this capacity until 1929.

In 1936, Pfizer became the world's leading producer of Vitamin C. By 1939, Pfizer had come to be recognized as a leader in fermentation technology. During World War II, Pfizer became popular across the world as it was the world's largest producer of the 'miracle drug', penicillin...

Lipitor -The Super-Blockbuster

The Rise of the Statins

In the 1950s, a connection between heart disease and hypercholesterolemia was established. After the discovery of Low Density Lipoprotein (LDL) and High Density Lipoprotein (HDL), researchers linked elevated levels of LDL in the body to increased risk of heart attack, while elevated levels of HDL were found to be protective. Scientists found that an enzyme in the body known as HMG CoA reductase helped in the conversion of a compound HMG CoA into another compound that was a precursor to the development of cholesterol.

With this discovery, the search for potential drugs that inhibited the HMG CoA reductase and stopped cholesterol production in the body began. Such drugs were called 'HMG CoA reductase inhibitors' or 'statins'. In the 1960s, the first statin, Pravastatin was discovered by Sankyo Co., Ltd. (Sankyo) of Japan. Pravastatin was later launched in the US, under the brand name Pravachol, by Bristol-Myers Squibb (BMS)...

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Illegal marketing?

In March 2006, the Fund of Teamsters Local Union 863 filed a class-action suit against Pfizer in the US District Court in New Jersey accusing Pfizer of illegally marketing Lipitor. The lawyers representing the plaintiffs claimed that Pfizer encouraged the use of Lipitor for patients with high blood cholesterol but otherwise at low heart attack risk and was thus 'unjustly enriched'. According to federal guidelines, in such cases, lifestyle modifications like diet and regular exercise were enough to reduce the risk of a heart attack. This prompted a federal investigation into the marketing of Lipitor by the US Attorney's Office in Brooklyn, New York. The Wall Street Journal reported that Pfizer was under increasing pressure because of off-label sales of Lipitor...

More Problems for Lipitor

Zocor and Pravachol Go Off-patent

As of end 2005, the statin market was looking good. According to IMS MIDAS Quantum, the class of 'cholesterol and triglyceride reducers' was the biggest therapy class of 2005, with an estimated global sales of US$ 32.6 billion and growth of seven percent (Refer to Exhibit VIII for the top ten therapy classes in 2005).

The major brands competing in the market were Lipitor, Zocor, Vytorin, Crestor and Zetia (Refer Figure III for the four leading statins of 2005 by revenue).

All the other brands were trying to nip at the market share of the leader Lipitor. However, the market would face significant changes as two major brands, Pravachol and more importantly Zocor, were to go off-patent in 2006. This would leave the market open to generic versions of these brands...

Pfizer on the Marketing Offensive Again

Pfizer had set itself a stiff target of more than US$ 13 billion for Lipitor in 2006. It felt that its slow growth in the first quarter of 2006 notwithstanding, it could achieve the target. Sales of Lipitor in the first quarter of 2006 were at US$ 3.11 billion with a growth of one percent as compared to the first quarter of 2005. Analysts said that the sales of Lipitor were slow due to tough competition from Vytorin, jointly marketed by Schering-Plough Corp. and Merck.

Outlook

Analysts felt that Pfizer could face more lawsuits regarding off-label marketing of Lipitor in the future as states battled with the costs due to expanded Medicare drug coverage. "States are going to tighten up this sort of thing because it's a way to control Medicare costs. If suits like this start proving to be successful, then you'll start to see a cascade effect," said Les Funtleyder (Funtleyder), analyst for Miller Tabak.

Exhibit

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Lipitor Marketing - Under A CloudBackground NoteLipitor -The Super-BlockbusterIllegal Marketing?More Problems for LipitorPfizer on the Marketing Offensive againOutlookExhibit

References:

1] The person by whom a note or bill has been or should be paid (also known as payer). (Source: Merriam-Webster's Dictionary of Law, www.dictionary.reference.com)

2] In the US, Medicaid is a program managed by the states and funded jointly by the states and the federal government to provide health insurance for individuals and families with low incomes and resources.

3] Medicare is a health insurance program administered by the US government, that covers people who are either aged 65 and over, or who meet other special criteria (e.g. disabled).

4] FDA or the Food and Drug Administration of the US is the government agency responsible for regulating food (human and animal), dietary supplements, drugs (human and animal), cosmetics, medical devices (human and animal), biologics, and blood products in the US. It approves drugs for certain indications and provides guidelines for use of the drugs.

5] "Off-label Marketing for Lipitor's Now the Focus of a Class-Action Suit," www.pharmamanufacturing.wordpress.com, March 30, 2006.

6] Grant & Eisenhofer, P.A., based in Wilmington, Delaware, USA, founded in 1997, is a law firm experienced in handling civil suits in state and federal courts across the US. It was founded in 1997.

7] Jim Edwards, "Teamsters Sue Pfizer over Alleged Illegal Marketing," www.brandweek.com, March 28, 2006.

8] Cholesterol is a fatty substance synthesized in the human body. Increased level of cholesterol in the blood is associated with a high risk of heart diseases. A number of drugs are used to reduce the level of cholesterol. Of these, the statins were the most popular. Lipitor belongs to the statin group of drugs.

9] A class-action suit is a lawsuit brought by one or more plaintiffs on behalf of a large group of others who have a common interest. (Source: www.thefreedictionary.com)

10] In the US, the FDA requires numerous clinical trials to prove a drug's safety and efficacy in treating a given disease or condition. If satisfied that the drug is safe and effective, the drug's manufacturer and the FDA agree on specific language describing dosage, route and other information to be included on the drug's label. Off-label use is the practice of prescribing drugs for a purpose outside the scope (most often concerning the drug's indication) of the drug's approved label. Though off-label use of a drug by a doctor is not illegal, it is illegal for the marketer to promote or market an off-label use of the drug.

11] A drug still in the experimental development stage.

12] Torcetrapib is a drug that was being developed to treat elevated cholesterol levels and prevent heart disease. It results in higher levels of "good" cholesterol and lower levels of "bad" cholesterol. As its action complements that of Lipitor, Pfizer planned to launch it as a combination pill that was expected to be very effective in the treatment of elevated cholesterol levels.

13] PAL, established in 2001, is a national coalition in the US of around 120 organizations, including consumers, seniors, healthcare, labor, legal services, women's health and human service groups. It works to make prescription drug prices more affordable for consumers, using class-action litigation and public education. (Adapted from www.prescriptionaccess.org)

14] The "Got Cholesterol?" award was one category of the 2006 Bitter Pills Awards for "overpromoting expensive brand-name statins." It is a clever take on the US dairy industry's famous marketing campaign titled "Got Milk?"

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Marketing Viagra in India

Case Details: Price:Case Code : MKTG130 For delivery in electronic format: Rs. 500;

For delivery through courier (within India): Rs. 500 + Rs. 25 for Shipping & Handling Charges

Themes

Pharmaceutical and Healthcare

Case Length : 26 PagesPeriod : 1998-2006Pub Date : 2006Teaching Note : AvailableOrganization : Pfizer Inc. Industry : Pharmaceutical and

HealthcareCountries : India, USA

Abstract:

This case is about Pfizer's launch of its popular drug, Viagra, in India. Viagra was first launched in the US, in 1998, with an extensive public relations campaign. Pfizer's promotional efforts also included celebrity endorsements and Direct-to-Consumer (DTC) advertisements. Though Viagra was a huge success for Pfizer initially, after seven years since its launch, the worldwide sales of Viagra had become stagnant. Pfizer introduced Viagra in India with a view to improve the sales of the drug. The market dynamics in India were very different from that of the US

Viagra had to face competition from other low-priced generic versions of the drug. Moreover, brand-specific DTC advertisements were not allowed in India. The case discusses Pfizer's marketing strategy when it launched Viagra in India.

Issues:

» Understand the critical success factors for a pharmaceutical company to make a successful entry in a new therapeutic segment.

» Understand the issues and constraints faced by pharmaceutical company in launching a globally successful brand in a new market.

» Understand the challenges faced by a company when launching its product in a price competitive environment.

Keywords:

Pfizer Inc, Product Launch, Marketing Communications Strategy, Premium Pricing, Niche Marketing, Price Competition, Viagra, Sildenafil Citrate, Erectile Dysfunction, Indian Pharmaceutical Industry, Cialis, New Product Development, Celebrity Endorsement, Business Environment, Drug Discovery

"We strongly believe that there is an unmet need of the doctors. Patients are actually seeking introduction of the original Viagra." 1

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- Kewal Handa, Managing Director, Pfizer Ltd. (PL),2 in 2005.

"I don't think doctors will prescribe Viagra. When we have economical options available, why prescribe the costly one?" 3

- Dr. B.K. Roy, Endocrinologist and Hormone Specialist, Sex and Hormone Center, New Delhi, in 2005.

'Vitamin V' For India

On December 26, 2005, Pfizer Inc. (Pfizer), the largest pharmaceutical company in the world, rolled out its blockbuster drug Viagra (Sildenafil citrate) in India. Viagra, a popular and widely used drug to treat erectile dysfunction4 (ED) in men, is also known by various nicknames such as 'Vitamin V' and 'the little blue pill'.

Pfizer launched Viagra in India seven years after the launch of the drug in the US. The process patent regime 5 prevalent in India at the time the drug was launched in the US made Pfizer apprehensive about generic competition from Indian companies and hence its reluctance to launch Viagra in India earlier.

As a result, various Indian pharmaceutical companies had launched their own generic clones of the drug since 2001.

As of 2005, there were more than 40 local versions of the drug available in the Indian market.

Pfizer also surprised most industry analysts and doctors by pricing Viagra at Rs 594 for a 100 mg tablet and Rs 463 for a 50 mg tablet. And this when most of the local versions of the drug were available at Rs 20 or less (for a 50 mg tablet). Some industry experts felt that Pfizer's launch of Viagra in India had come too late as there were already many local versions of the drug available.

Many doctors too were of the opinion that ED patients did not get any additional benefit out of Viagra, when compared to local versions, to justify its high price. However, despite its late entry and premium pricing, Pfizer was confident of capturing 10%-15% of the ED market in India within the first one to two years of Viagra's launch. The launch of Viagra in India came at a time when the drug's global sales were stagnating. Competitor brands Levitra co-marketed by GlaxoSmithKline plc (GSK) and Bayer AG, and more particularly Cialis developed by ICOS Corp. (ICOS) and marketed by Eli Lilly & Co., (Eli Lily) were eating away Viagra's market share.

Pfizer was targeting India's huge patient pool, as it was a new market that the company could tap to improve Viagra's overall global sales. "India is expected to be a big market for us. It is estimated that about 70-90 million men suffer from erectile dysfunction and this market is only going to grow," said K.G. Ananthakrishnan (Ananthakrishnan), Senior Director of PL. Within two months of its launch in India, Viagra seemed well on its way to surpass its target for the year.

PL reported that Viagra had already cornered a 1.8% of the ED market in India. "We are excited with the response we have received for Viagra. The value that Pfizer brings to the

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table, with its extensive research and knowledge on erectile dysfunction and its management is reflected in Viagra's excellent performance. Our YTD all India sales are Rs 1.50 crore (Rs 15 million) with Viagra doing well in all the cities we have launched it," explained Ananthakrishnan.

Background Note

Pfizer's beginning was humble. The Charles Pfizer & Company was set up in Brooklyn, New York, in 1849 by cousins Charles Pfizer and Charles Erhart (Erhart), two young entrepreneurs from Germany. Santonin, a palatable anti-parasitic was the company's first product. In 1862, during the American Civil War,6 Pfizer increased production of its chemicals and drugs, which doctors of the Union Army used to treat wounded and sick soldiers.

After Erhart's death in 1891, Charles Pfizer bought the company's shares from Erhart's son, William, to consolidate his ownership of the company. By 1899, Pfizer had become a leader in the American chemical business with a product portfolio comprising citric acid, camphor, cream of tartar, borax, and iodine. It had also begun to export to a number of countries. In 1900, Pfizer filed an official certificate of incorporation in the state of New Jersey, with an authorized capital of US$2 million. In 1906, Charles Pfizer died, leaving behind a company with sales that exceeded US$3 million

In 1914, John Anderson was appointed as the company's first Chairman and he served in this capacity until 1929. In 1936, Pfizer became the world's leading producer of Vitamin C. By 1939, Pfizer had come to be recognized as a leader in fermentation technology. During World War II, Pfizer became popular across the world as it was the world's largest producer of the 'miracle drug', Penicillin.

In 1950, under the Chairmanship of John E. McKeen, Terramycin, a broad-spectrum antibiotic that was the result of the company's first drug discovery program, became the first pharmaceutical sold in the United States under the Pfizer label. In the same year, Pfizer began its expansion into the overseas markets through the establishment of its International Division. Between 1950 and 2000, many drugs were launched under the Pfizer label and marketed across the world. This period was marked by rapid global expansion and explosive growth...

Viagra - A Success Story in Marketing

Viagra was launched in the US in April 1998. And within a week of its launch, it had become the fastest selling pharmaceutical drug in the country. Initially Viagra was developed as a cardio-vascular drug, but the chance discovery of its 'unexpected side-effect', and subsequent launch raked in billions for Pfizer (Refer to Exhibit III for Viagra's Timeline: From Chance Discovery to Huge Commercial Success). Viagra contains the active pharmaceutical ingredient (API) Sildenafil citrate, a phosphodiesterase type 5 (PDE-5) inhibitor, in tablet form in two strengths 50 mg and 100 mg.

Viagra was the first scientifically proven oral drug for ED (Refer to Exhibit IV for How Viagra Works). Media experts quipped that only a pill developed for immortality could possibly upstage the buzz generated by the launch of Viagra...

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The PR Campaign

Pfizer launched Viagra in 1998 in what was seen as a huge Public Relations (PR) exercise. As Viagra was the first approved drug for ED, Pfizer had to deal with the social and emotional aspects of ED. Impotence was very touchy topic with a lot of stigma attached to it. Any discussion on the subject was embarrassing for the men who suffered from it. The issue also had religious and moral undertones, making it an extremely sensitive one. Pfizer's foresight was evident when it sought approval from the Vatican and other religious institutions for release of the drug...

Problems for Viagra

The Side Effect Scare

Even when Viagra was launched, there were reports in various medical journals that some people who had taken the pill had suffered from heart attacks and 'sudden death'. Subsequent studies associated this problem with people taking nitrates. Hence, Pfizer added nitrate contraindication to the label of Viagra. In 2005, Viagra was associated with a rare form of blindness called Non-arteritic Anterior Ischemic Optic Neuropathy (NAION)...

Market Dynamics for Ed in India

In 2005, it was estimated that over 90 million men in India suffered from ED . There was a deep social stigma associated with ED in India. ED was considered as an emasculating failure rather than a disease that could be cured. Therefore most people avoided talking about it openly and only a few would have ever admitted to having ED. A majority of the population considered the very subject of sex taboo. Small wonder then that very few people sought medical attention for ED. However, analysts felt that given India's huge population, the absolute number of people opting for treatment would still be high...

Marketing Viagra in India

PL's marketing strategy for Viagra in India was different from its strategy in the US, which was Pfizer's biggest market for Viagra. This was because the market dynamics in India were significantly different from that of the US.

Another aspect was that while Viagra was the first such drug to be launched in the US, there were already many generic low-priced versions of the drug when PL launched Viagra in India. PL also had to consider the fact that DTC advertisements of pharmaceutical products were not allowed in India.

Premium Pricing

Prior to its launch in India, PL announced that it would price Viagra competitively. This gave rise to speculation among various analysts. Some believed that Viagra would be priced at around Rs 20 per tablet. Others believed that Viagra, being the original brand, would be priced at around ten times the price of the local versions of the drug.

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However, PL launched the brand at a price of Rs 463 (for 50 mg) and Rs 594 (for 100 mg) for a single tablet. Although this price was on a par with its price in other Asian countries, it was about 20 times higher than the prices of some of the local generic versions available in the Indian market (Refer to Table V for Price Comparison of Viagra with Other Sildenafil Citrate Brands in India).

Future Outlook

Due to its late launch in India, analysts felt that Viagra had surrendered its first mover advantage. In 1998, when Pfizer launched Viagra in the US, it did not have to fight off competitors. In India though, PL was like a new entrant fighting against well-entrenched players in a multi-competitor setting and a "me too" environment.

Many doctors were skeptical about Viagra's prospects in India, in view of its high price. "The colour is the same, the effect as well as the side-effects are the same," said Dr. Prakash Kothari, a renowned sexologist, who had treated over 5,000 men with ED. Some doctors even said that they would not prescribe Viagra because more affordable versions were available.

Exhibit

Exhibit I: Pfizer's Three Year Financial SummaryExhibit II: Global Top Ten Pharmaceutical CompaniesExhibit III: Viagra's Timeline: From Chance Discovery to Commercial SuccessExhibit IV: How Viagra WorksExhibit V: Pfizer's Promotional Initiatives for ViagraExhibit VI: Pfizer's Efforts to Ward off CounterfeitersExhibit VII: Viagra ADS- From Creating Awareness to MischiefExhibit VIII: Competing Brands & New Entrants in the ED MarketExhibit IX: Brief Note on Viagra's Competitors in India

References:

1] Mrinalini Datta and Paresh Jatakia, “Despite Viagra's Cost, India Beckons Pfizer,” www.iht.com, December 22, 2005.

2] Pfizer Ltd. (PL) is the Indian arm of the global pharma major, Pfizer Inc., USA (Pfizer). Pfizer established its business in India in 1950 and was ranked 8th in India in terms of sales, with a market share of 2.7% of the Indian pharmaceutical industry in 2005.

3] "Counting on the Viagra Brand in India,” www.iht.com, December 22, 2005.

4] Erectile dysfunction is the inability to develop and maintain an erection for satisfactory sexual intercourse or activity. Erectile dysfunction is the preferred term rather than the more commonly used term 'impotence'.

5] Before 2005, India only recognized process patents, not product patents. As a result, Indian companies were free to manufacture and market a copy of the drug as long as the process of manufacturing was different from the original drug.

6] The American Civil War (1861-1865) was a civil war between the United States of America, called the Union, and the Confederate States of America, formed by eleven Southern states that had declared their secession (withdrawals) from the Union. The war resulted in approximately 560,000 deaths. The Union won a decisive victory.

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Amway's Indian Network Marketing Experience

Case Details: Price:Case Code : MKTG003 For delivery in electronic format: Rs. 300;

For delivery through courier (within India): Rs. 300 + Rs. 25 for Shipping & Handling Charges

Themes

Direct Marketing

Case Length : 9 PagesPeriod : 1994 - 2000Pub Date : 2001Teaching Note : Available

Organization : Amway Indian, Eureka Forbes

Industry : Business Services & Equipment

Countries : India

Abstract:

The case 'Amway Indian Network Marketing Experience' examines in detail the experiences of the leading global direct marketing major Amway in India. In the initial stages, Amway had to face a host of problems, which are explored in detail. The case then studies the remedial measures taken by the company to counter these problems. The case also provides a brief introduction to the concept of multilevel marketing, with a note on the Indian MLM industry.

Issues:

» Multilevel Marketing

Keywords:

Amway Indian Network Marketing Experience, global, direct marketing, Amway, India, problems, remedial measures, multilevel marketing, Indian MLM industry, multilevel marketing, traditional distribution, FMCG sector, Amway

Our biggest challenge is not how to expand the market in India, but how to convince the indifferent Indian consumers about the world-class quality of Amway Products. The quality of the product is Amway's strength."

- Sudershan Banerjee, CEO & MD, Amway India in 1999.

A Dream Gone Awry

In the late 1990s, the global direct selling giant Amway had to contend with increasing doubts regarding its survival in India. The company that had become synonymous with network marketing or multi-level marketing (MLM)1 the worldover was beset with problems.

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Media reports were quick to point out Amway's failure to sell the basic concept of direct selling to the Indians.

Though the company managed to rope in a substantial number of distributors, the attrition rate was at an alarming high of 60-65%. Most of the products that the distributors bought, they consumed themselves. Estimates put the percentage of self-consumption at almost 50-60% of the total volume.

(There were rumors that some distributors enrolled just to take advantage of the distributor's margin of 18-30%). In the initial stages, when trials were the only criterion, this worked well. However, this self-consumption did not translate into repeat purchases.

This was because the percentage of 'active' distributors at any given point of time remained at a low level of 35-40%. Many people who joined in the initial frenzy returned the product kits within the first month.

Company sources claimed that the returns constituted just 1% of the total strength, but rivals and ex-employees put the figure at over 5%. Of the total distributors, only about 10% showed reasonably high levels of activity.

To top it all, Amway was burdened with an image that had little basis in fact. Its products began to be perceived as being very expensive and meant only for the premium segment.

A Dream Gone Awry Contd...

This was identified as the single biggest reason for the high attrition rate. What was overlooked was the fact that almost all Amway products were concentrates. When used in the proper diluted form, the cost per use of each product worked out to be at par with (and in some cases, even lower than) the nearest competitor's products.

For instance, the product named LOC (priced above Rs 320 for a 1-liter pack), when diluted gave around 165 bottles. The cost per usage was thus very low. Either the distributors were themselves not aware of this fact, or they were unable to communicate this to the customers. Since the distributors themselves were unsure about the price-value equation of the products they were selling, they could not effectively convince the consumers either. Amway also had to contend with customers complaining of poor customer service on the part of the company. Analysts commented that as long as the volume of products that moved through the network was high, network market such as Amway were satisfied.

Even though customers complained of the lack of services, the company deemed it more beneficial to go for higher salesforce motivation programs rather than undertake customer service initiatives. This was largely due to the fact that the company was almost never involved directly with the end-consumers and the sales volumes were the end of all discussions.

Making of The Dream

Privately held by the DeVos and Van Andel families of US, Amway, short for American Way, was set up in 1959. Amway and its publicly traded sister companies supported 53

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affiliate operations worldwide. About 70% of Amway's sales were outside North America.

With over 12,000 employees around the world, Amway was renowned for its strong R&D centre in Michigan, which had 24 laboratories. Amway was present in over 80 countries and its manufacturing plants were located in US, Hungary, Korea, China and India

The company had over 3 million distributors across the world. Besides its direct selling portfolio of 450 products, Amway promoted around 3,000 products through catalogue sales2 as well. Amway had received permission from the Foreign Investment Promotion Board (FIPB) in 1994, to invest $15 million in the Indian operations and to source products from India...

Picking Up The Pieces

Amway soon woke up to the reality that it had to take steps to put its MLM machinery back to the track. For this, it had to first identify where it had gone wrong. Amway realized that like most direct marketing networks, it had hoped to leverage the global promise of the lucrative business opportunity for its distributors...

'Network'ing Its Way Into The Future

By 2004, Amway planned to become a Rs 1000 crore company with a physical presence in 198 centers across India.

The company also revealed that by 2002, it would be selling all the 450 Amway products that were available abroad, in India.

As part of its plans to tap unexplored markets, Amway announced an ambitious expansion of its distribution infrastructure in Andhra Pradesh, which included setting up a warehouse.

Once the marketing business in urban areas was strengthened, Amway planned to turn tis attention to untapped rural areas as well...

The Indian MLM Journey

MLM was the fastest growing sector of the direct selling industry worldwide. In 1988, the total revenue generated by MLM was $ 12 billion, which doubled to $ 24 billion by 1998. The direct-marketing industry in India was about Rs 6 billion in 1999. This was a growth of 62% over the previous year.

In the pre-liberalization era, network marketing in India was usually in the form of various chit fund companies like Sahara India. These had a system of agents, who simultaneously mobilized deposits and appointed sub-agents for further deposit mobilization.

Companies such as Eureka Forbes and Cease-Fire pioneered the direct selling system in the country with a sales force that was trained to make direct house-to-house sales.

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Oriflame International was the first international major to begin network marketing operations in India in 1995. This was followed by the entry of Avon India in late 1996

Exhibits

Exhibit I: Amway Products Available In India (April 2001)

References:

1] The MLM system utilized a multi-tiered salesforce of independent distributors - none of them employees - to sell products directly to consumers. These distributors earned commissions at two levels - the first, the difference between the distributor's cost and selling prices, and second, a proportion of the commissions earned by other distributors recruited. MLM thus completely bypassed the retail chain and cut costs of the traditional distribution system.

A typical MLM setup began with the recruitment of a group of distributors who paid a registration fee and picked up product kits. Once these goods were sold, the distributors were given the next lot. The more a distributor sold, the higher the commission. Besides selling the goods, the distributors were also expected to hire new distributors for selling the company's products. The recruiting distributor also got an extra commission based on the sales effected by the distributors hired by him/her. As for the company, the compulsion on the part of the distributors to recruit more and more distributors led to its network penetrating very deep among the consumers. Also, the actual cost of marketing never exceeded 25% of the selling price on an average. As the distributor's primary commission was a mark-up on the selling price, the only outgo for the MLM team was the commission, which averaged at 9% and at peak levels stood at 21%. These distributo in turn, paid commission to the 'down-the-line' distributors out of their own earnings.

Fast moving consumer goods targeted at niche markets such as specialist cosmetics or premium fragrances were typically the most suitable for a MLM setup. Also, if the products were portable and needed to be demonstrated-vacuum cleaners for instance the personal interaction that MLM facilitated, helped a lot. Products, which were neither purchased very often nor very rarely, and were neither too expensive nor too cheap could be marketed well through this system.

New Product Development at Schwan Food Company- Innovation through Communication

Case Details: Price:Case Code : MKTG082 For delivery in electronic format: Rs.

500;For delivery through courier (within India): Rs. 500 + Rs. 25 for Shipping & Handling Charges

Themes

Innovation

Case Length : 17 PagesPeriod : 1952-2003Pub Date : 2004Teaching Note

: Available

Organization : Schwan Food CompanyIndustry : Food & BeveragesCountries : USA

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Abstract:

In 2003, the world's largest frozen pizza processing company, the US-based Schwan Food Company (Schwan), won a lot of recognition for one of its new products, Red Baron Stuffed Pizza Slices. In the light of this, the case discusses how new product development was carried out at this company, focusing on its unique 'innovation through communication' formula. After providing information on Schwan's history, it examines the reasons why companies in the US frozen pizza industry were forced to look at product development as a differentiating factor in the early 21st century. Thereafter, it describes in detail Schwan's new product development approach with respect to Red Baron Stuffed Pizza Slices.

Finally, the case provides some information on the company's product innovation led future plans. The teaching note provides detailed guidelines as to how this case can be used for explaining the new product development process.

Issues:

• Analyze the frozen pizza industry in the US and study the evolution of Schwan as one of the leading players

• Understand the reasons why product development became a tool for deriving competitive advantages for players in this industry

Keywords:

2003, world largest, frozen pizza, US, Schwan Food Company, Schwan, Red Baron, Stuffed Pizza, Slices, new product development, innovation through communication formula, Schwan's history, differentiating factor , 21st century, Red Baron Stuffed Pizza Slices, product innovation, future plans

One of the first things we did was arrive at a process that would allow us to develop world-class products through cross-functional teams."1

- Joe Gruber, New Product Development Manager, Schwan Food Company, in April 2003.

"This patent-pending technology, proprietary crust, triangular shape and microwave susceptor make it the only retail product of its kind."2

- David Rettey, Senior Product Development Technologist, Schwan Food Company, in October 2003.

An Effort Well-Rewarded

In October 2003, Prepared Foods3 declared the US-based snack foods company Schwan Food Company (Schwan), as the winner of the '2003 Spirit of Innovation Awards.'

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Schwan was given this award in the retail category for its newly launched product, Red Baron Stuffed Pizza Slices.

Another leading industry publication, Stagnito's New Products Magazine4 too adjudged this product as the best new product of the year. To top all these achievements, the renowned publication, Refrigerated & Frozen Foods named Schwan the '2003 Processor of the Year.'

For the year 2002, Schwan also led the entire US food industry in terms of the maximum increase in the number of new products launched. The company was way ahead of seasoned food giants such as Kraft Foods, PepsiCo and Unilever (Refer Table I).

Interestingly, it was the only brand among the top nine rank holders that was not popular at the global level. These developments meant a lot to Schwan since it had reportedly been working hard for over two years towards introducing Red Baron Stuffed Pizza Slices.

Thanks to these awards and recognitions, the $3 billion, privately-held company established itself firmly as one of the most innovative players in the intensely competitive US frozen foods business.

In mid 2003, the company was the world's largest frozen pizza processor, and in terms of market shares, was next only to the country's largest food company, Kraft Foods

More importantly, many of the new products introduced by Schwan were reportedly doing well in the US market. Red Baron Stuffed Pizza Slices got off to a very good start with customers across the US taking to them in a major way. In an industry where 75% of the new products launched failed, this was indeed appreciable.

Industry observers were unanimous in their opinion that Schwan had taken the exercise of new product development to never-before heights. Schwan sources too agreed that its customer-centric approach towards developing new products was a unique one in that it involved the entire company as well as certain external parties.

Darci Eckerman (Eckerman), the National Brand Manager for the Red Baron brand, had this to say about the product development efforts behind the Red Baron Stuffed Pizza Slices, "This is the most significant and innovative of Red Baron's products to date. The product is a prime example of long-term strategy and teamwork.”

Background Note

About Schwan

Schwan was started as Schwan's Home Service (SHS), an ice-cream home delivery business in March 1952 by the Marshall-based (in Minnesota, US) Marvin Schwan (Marvin). The primary motive for starting this venture was to help Marvin's family dairy business survive in the wake of unfavorable changes in the regulatory set-up.

Focused efforts on the part of the family helped SHS grow rapidly. In 1965, Marvin started selling frozen pizza as well from the ice-cream delivery trucks to expand his product portfolio.

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The frozen pizza business proved to be very successful and Marvin decided to further explore the possibilities in this area.

In 1969, SHS acquired a pizza factory in Salina (Kansas) and started selling pizzas to retailers as well as to institutional buyers such as schools, universities and hospitals.

Over the next three decades, the company grew largely through the acquisitions route.

The SHS label marketed frozen pizzas under three brand names: Tony's, Freschetta and Red Baron. The Red Baron range was introduced in 1976 as an umbrella brand to offer 'throughout the day' snacking solutions to customers...

Excerpts

The Need for Product Innovation

The US pizza business had grown at a healthy pace since its inception in the 1960s (Refer Exhibit V for information on the pizza business till the 1960s). In 1985, pizza was ranked as the fifth most popular food in the country. By the late 1990s, the industry was growing at 8% per annum with yearly sales of $2 billion.

In 1999, pizza became the most popular food in the US. Significantly, of the four broad segments, dine-in, take-away, home-delivery and frozen, the last was growing at the fastest rate. In fact, frozen pizza was growing the fastest within the entire US frozen food industry (Refer Table III for information on frozen food industry trends and Table IV for a comparative look at frozen pizza segment's growth).

The reason behind the fast growth of the frozen pizza segment was the introduction of the 'rising crust' technology in the mid 1990s. By using this technology, it became possible for customers to get restaurant/take-away/home-delivery quality pizza at home...

The Red Baron Style of New Product Development

While it was true that competition made it important for Schwan to focus on developing new offerings, there was another factor that fueled its decision to launch a truly innovative product. The company was quick to realize that the single-serve segment lacked a good quality, convenient and universally appealing product...

Innovating its Way into the Future

Though detailed information on the sales performance of Red Baron Stuffed Pizza Slices was not available in late 2003, media reports indicated that customers had taken to the innovative and convenient product in a major way.

Some analysts believed that the slices could be a major revenue generator for Schwan in the near future. Meanwhile in November 2003, Schwan revealed plans to double overall sales by 2008. This was to be done on three fronts - globalization, product innovation and marketing.

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Exhibits

Exhibit I: The Spirit of Innovation Awards - Judgement CriteriaExhibit II: Schwan Food Company - Product/Brand Profile*Exhibit III: Schwan Food Company - The StructureExhibit IV: A Few Products from the Red Baron StableExhibit V: The Pizza Industry in the US - Early Days

References:

1] 'Red Baron Soars with Teamwork,' www.foodprocessing.com, April 2003.

2] 'The Slice of Life,' www.preparedfoods.com, October 2003. A susceptor refers to a metallic patch that is attached to microwaveable food packages.

3] Prepared Foods is a US-based business-to-business publication that tracks companies/organizations involved in developing, manufacturing, processing, packaging and marketing of prepared foods. Every year, it sponsors the 'Spirit of Innovation' awards for the most innovative food products launched in the retail and food service businesses. These awards are highly regarded by players in the foods business (Refer Exhibit I for the criteria on which the competing entries were judged).

4] Another respected publication in the food and beverages industry devoted exclusively to new product related issues, Stagnito's New Products Magazine is a tabloid published by the US-based Stagnito Communications Inc. The magazine Refrigerated & Frozen Foods is also published by the same company, focusing on the latest developments in the refrigerated and frozen food industry.

5] 'Red Baron Soars with Teamwork,' www.foodprocessing.com, April 2003.

Price Optimization at Northern Group Retail

Case Details: Price:Case Code : MKTG085 For delivery in electronic format: Rs.

300;For delivery through courier (within India): Rs. 300 + Rs. 25 for Shipping & Handling Charges

Themes

Innovation

Case Length : 9 PagesPeriod : 2002-2003Pub Date : 2004Teaching Note

: Available

Organization : Northern Group RetailIndustry : RetailingCountries : Canada

Abstract:

The case discusses the implementation of price optimization software at Northern Group Retail, a major clothing and accessories retailer based in Toronto, Canada. The Northern Group was experiencing a decline in performance due to its pricing strategy, which followed nation-wide pricing rather than zonal pricing.

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Due to this, the company was not tuned-in to local conditions and implemented the prices uniformly. This led to the company losing out on substantial revenues by implementing mark-downs in places where the goods had the potential to sell at full price.

Issues:

• To understand the critical nature of pricing strategy, especially in the retail sector.

• To compare zonal pricing strategy with uniform pricing strategy and analyze the suitability of each in different situations.

Keywords:

Implementation, price optimization, software, Northern Group Retail, clothing, accessories, retailer, Toronto, Canada, pricing strategy, zonal pricing, tuned-in, local conditions, prices uniformly, substantial revenues, implementing, mark-downs, goods, full price

Price is the number one profit lever in any company."

- Daphne Carmeli, co-founder, president, and CEO of Metreo1 in 20032.

"After a few early implementations estimating returns in the millions, companies are looking at pricing applications as a way to do the unthinkable in a sluggish economy: Grow profits by increasing revenue, not cutting costs."

- Kevin Scott, senior research analyst at AMR Research in 20033.

"We've adopted a mentality that selling is not just about merchandising anymore. We're adding scientific tools to the human merchandising process."

- Michael Stanek, CFO of Northern Group Retail in 20034.

New Software Begins to Pay

During the holiday shopping season in December 2002, Northern Group Retail (Northern Group), a major clothing and accessories retail chain based in Toronto, Canada, recorded an additional gross margin of $60,000 on the sale of its merchandize, courtesy, a new price optimization software that the chain had installed a few months earlier.

Traditionally, the chain would have marked down prices of some of its winter merchandize by 30 per cent in mid-December. However, the new software suggested going at full price, for some more time because it calculated that the merchandize still had demand potential at full price

The management decided to take this advice and was able the sell the entire stock at full price, benefiting from the greater margins that the decision reaped.

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Had they gone ahead with marking down the prices, their revenues would have been $60,000 lower. “Traditionally, companies mark down items before Christmas. The system told them, based on consumer demand, to sell at full price. They trusted the system and got a much more meaningful margin,” said Anthony Karabus, the CEO of Karabus Management Inc (Karabus), a retail consulting firm of Canada, which helped Northern deploy the price optimization software.5

Price optimization software was expected to help put the ailing Northern Group back on its feet. Although the Northern Group brands had good recognition and demand, the company was unable to make enough profits from them.

The new software was expected to enable the company to reap the best possible returns from each SKU6, by selling it at the highest possible price in relation to demand. Northern Group was expected to post its first profit in three years in January 2004.

Background Note

Northern Group was set up in 1985 as a subsidiary of FW Woolworth Company (Woolworth). Woolworth was founded in the US in 1911, by Frank and Charles Woolworth.

It was five-and-ten cent7 store selling general merchandize. The stores became very popular in the US and Canada.

The business peaked in the 1950s and 1960s, when there were over 1000 five-and-ten cent stores in the US. Woolworth also founded a discount chain called Woolco in 1962.

However, due to increased competition from other discount stores, notably Wal-Mart8 and increased urbanization, Woolco lost its appeal and business began to fall. Eventually, the chain was shut down in the US in 1982. In Canada, however, it operated till 1994, when the 144 stores operating in the country were sold to Wal-Mart.

In addition to Woolco, the company ran general merchandize stores; it also operated a number of other retail chains, including Foot Locker, Champs sporting goods, Kinney Shoe, and Northern Group apparel shops.

The Woolworth company ran into trouble in the early 1990s due to outdated business methods and increasing competition. In 1994, the newly appointed CEO Roger Farah, undertook a restructuring of the company to put it back on its feet.

He realized that the five-and-ten-cent store concept had lost its appeal and shut down 400 stores operating in the US and Canada.

In 1997, he changed the name of the company to Venator Group Inc. (Venator). In the late 1990s, the performance of the Northern Group stores also began to decline. Analysts attributed the decline to its outdated pricing and inventory management systems and increasing competition in the apparel market from a growing number of speciality dealers...

43

Excerpts

The Northern Group under York

Soon after taking over the Northern Group, York conducted a research to analyze the reasons for the poor performance of the stores. The analysis revealed that the Northern Group brands had a loyal customer following and good brand recognition in Canada. The poor performance was a result of inefficient internal processes. Too many retail locations also diluted the brand...

The Price Optimization System

York implemented a price optimization software called Pricing4Profit, which was developed by a company called ProfitLogic.

The integration of the software with the business processes used at Northern Group began in August 2002 and continued upto mid-September.

Northern Group provided ProfitLogic with three years of SKU data to allow the software vendor to establish a pattern for inventory movement and develop predictive models.

Northern Group also installed a new Sun platform in the company's technical environment to run the new technology (Refer Exhibit-II). After dealing with tool interaction and configuration needs, ProfitLogic began a four-week project of adjusting the analytical engine of the software to meet the specific needs of Northern Group.

Within that time frame the retailer finalized business process, tested strategies and developed training materials to accelerate the deployment of technology in the company. The new technology was formally rolled out in mid-November...

Benefits Obtained

Northern Group obtained significant benefits through the implementation of price optimization software. Firstly, it allowed the company to maximize returns and obtain the highest margins possible, by providing a scientific tool which determined the ideal prices at which to sell the given merchandize. The price was fixed on the level of demand that the software expected for the merchandize. If it anticipated that the demand would fall, it recommended a corresponding lowering of prices, so that customers were always offered what they were ready to pay for a given item at a given time...

Exhibits

Exhibit I: The Northern Group BrandsExhibit II: The Technology Environment at Northern GroupExhibit III: The Future of Price Optimization Applications

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References:

1] Metreo Inc. aids industrial manufacturers in optimizing negotiated pricing for industrial products such as electrical control and power distribution equipment.

2] Emily Kay, Optimize Pricing to Maximize Profits, Solutions Frontline, September 1, 2003.

3] Emily Kay, Optimize Pricing to Maximize Profits, Solutions Frontline, September 1, 2003.

4] J. Bonasia, New Software Manages Price Cuts, www.khimetrics.com, March 2003.

5] Emily Kay, Optimize Pricing to Maximize Profits, Solutions Frontline, September 1, 2003.

6] SKU stands for Stock Keeping Unit and is a number associated with a product for inventory purposes.

7] Five-and-ten-cent stores sold discounted general merchandise at fixed prices, usually five or ten cents.

8] A very successful discount store based in the US, Wal-Mart was well known around the world for its huge stores which carried a large variety of general merchandize at very low prices. By 2003, Wal-Mart had over 4000 stores around the world.

Repositioning Dabur

Case Details: Price:Case Code : MKTG099 For delivery in electronic format: Rs.

400;For delivery through courier (within India): Rs. 400 + Rs. 25 for Shipping & Handling Charges

Themes

Repositioning

Case Length : 17 PagesPeriod : 2001-2004Pub Date : 2005Teaching Note

: Available

Organization : DaburIndustry : FMCGCountries : India

Keywords:

Dabur, Brand Repositioning, Brand Architecture, Brand Equity, Umbrella Branding, Brand Management, 4Ps of Marketing, FMCG Industry, Vision, Strategic Intent, Core Values, Vatika, Anmol, Real and Hajmola.

Abstract:

The case deals with the restructuring initiatives Dabur took in the early 2000s. In order to cater to a wider audience, Dabur decided to reposition itself as an FMCG company with a herbal plank, moving away from its earlier image of an Ayurvedic medicine manufacturer.

In order to convey a new vibrancy, the company has adopted new product offerings and new packaging. Dabur's promotional campaigns includes leading Bollywood actors and sportstars.

45

Dabur moved away from an umbrella branding strategy and went in for individual branding. It pruned products which were not aligned with its brand architecture.

It also took concerted steps towards geographical expansion to international markets, and within India, focused on regions like southern India, which it had earlier neglected. The company's revenues in 2004-05 reveal that the changes undertaken by the company have started showing results.

Issues:

The case is designed to help the students to:

• Understand why a company moves away from its core platform.

• Understand the strategies adopted by a company to change its core platform.

• Understand how confusion about a brand sets in in the mind of consumer because of the use of the same brand name for diversification into different areas.

• Understand how a brand is repositioned.

• Understand how alignment of product, price, promotion and place is brought about.

• Understand the marketing activities undertaken to rejuvenate a brand.

• Understand how changes in demographics and psychographics affect an organisation's vision.

• Understand how acquisitions can add value to the marketing strategy of a company.

Our research showed that consumers found it difficult to distinguish Dabur as a corporate brand and as a master brand. The positioning was unclear to the public. So, we decided to embark on a brand recast to identify brands based on their product properties. This essentially means that Dabur is shedding its age-old umbrella brand strategy, where its entire product portfolio was under one roof.

- Sunil Duggal, CEO, Dabur India Limited in 20041.

Introduction

In 2004, Dabur India Limited (Dabur) which started as a medicine manufacturer in 1884, was ranked at number four in terms of sales among the Fast Moving Consumer Goods (FMCG) companies in India. The company now has interests in hair care, health care, oral care and foods as well (Refer Exhibit I). Though its spread into various segments has ensured that the company's bottom-line has improved over the years, Dabur's positioning was not clear. In the early 2000s, the company went in for a restructuring which included aligning Dabur's brand

46

architecture2 with Dabur's brand equity3; pruning products that did not align with the brand architecture and launching new products (Refer Exhibit I and II).

The company focused on improving its sales revenue from southern India, which contributed only 8 percent of the company's total revenue in 2003. At this time, Dabur identified its ayurvedic platform as a driver of future growth and got its business units better aligned.

Moving away from using Dabur as an umbrella brand, the company shifted to individual branding and came out with a new logo. The company tried to bring to its consumers its Ayurvedic legacy with a contemporary feel. All these changes have improved the financial performance of the company in 2004 as compared to 2003.

Background Note

Set up in 1884 by Dr S K Burman in West Bengal as a proprietary firm for the manufacture of ayurvedic drugs, Dabur (an acronym of the name Dr Burman), started off with a direct mailing system to send medicines to villages in Bengal.

Initially, the company marketed an allopathic drug, Plagin, to combat the then prevalent epidemic of plague. In 1896, Dr. Burman set up a small manufacturing plant at Garhia near Calcutta for mass production of chemicals and Ayurvedic drugs.

In the early 1900s, the next generation of Burmans took a conscious decision to focus more on the Ayurvedic medicines market, as they believed that it was only through Ayurveda that the healthcare needs of poor Indians could be met. In 1919, Dabur set up a Research & Development laboratory to conduct research on Ayurvedic medicines and their manufacturing processes as described in ancient Indian scriptures, and to develop processes utilizing modern equipment to manufacture these medicines without reducing their efficacy. The following year, Dabur set up manufacturing facilities for Ayurvedic Medicines at Narendrapur (near Calcutta) and Daburgram (in Bihar).

Dabur also expanded its distribution network in Bihar and the North Eastern regions. In 1936, the company was incorporated under the name Dabur India Pvt. Ltd. In 1940, Dabur launched Dabur Amla Hair Oil, and in 1949, the company launched Chyawanprash in a tin pack making it the first branded Chyawanprash in the country.

The company expanded its portfolio by adding oral care products in 1970. Dabur Lal Dant Manjan was the first product to be launched under its oral care portfolio. In 1972, Dabur shifted base from Kolkata to New Delhi and started production from a hired manufacturing facility at Faridabad.

In 1978, Dabur launched the Hajmola tablet. Dabur set up 'The Dabur Research Foundation (DRF),' an independent company, in 1979 to spearhead its research needs. In the same year Sahibabad factory became operational and this unit was one of the largest and most modern production facilities for Ayurvedic medicines in India at that time.

Dabur became a public limited company in 1986 and launched its first public issue in 1994 (Refer Exhibit III & 1V for the shareholding pattern, Vision, Strategic Intent and Core Values of Dabur). In 2004, Dabur had three strategic business units: Family Products Division

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(FPD), Health Care Products Division (HCPD) and Dabur Ayurvedic Specialties (DASL) which contributed 45 percent, 28 percent and 27 percent respectively to Dabur's sales revenue in 2003-04...

Excerpts

The Restructuring Exercise

Though Dabur diversified into number of areas, the image of Dabur was that of an Ayurvedic company. In the public perception, Dabur products were associated with the 35-plus age group. With almost seventy percent of India's population below 35, it appeared that Dabur would be missing out on this mass market, which also had high disposable income...

Aligning the Brand Architecture

Dabur was looking for growth drivers which could leverage the herbal brand equity of the company. "We decided to set the scale high, targeting at least a strong double-digit growth," said Sunil Duggal (Duggal), CEO, Dabur speaking about the growth plans the company set in 2003.

In order to achieve the targeted sales of Rs 20 billion by 2006, which translated to annual growth of 15-20 percent for three years from 2004 to 2006, the company identified personal and healthcare products as growth drivers. But there were gaps in Dabur's product range...

Getting the 4Ps Right

In 2004, Dabur launched a new range in juices called Coolers which included traditional preparations like Aam Ka Panna, along with others like pomegranate and water melon juice. "Consumers perceive this as the next best thing to having a fresh fruit...

Outlook

Dabur's repositioning exercise seemed to have achieved some success with a perceptible increase in sales and net profit margin of the company in 2004 (Refer Exhibit IX).

Nikhil Vora, Vice President, Research, SSKI Securities commented, "What the company had done is pretty positive and credible; it continues to innovate and renovate.

However, the company needs to keep the growth momentum in the categories in which it leads like Chyawanprash, honey and herbal digestives.".

Exhibits

Exhibit I: Products of Dabur in 2004Exhibit II: Products of Dabur in 2000Exhibit III: Shareholding Pattern for Dabur India Ltd.Exhibit IV: Vision, Stratgic Intent and Core Values of DaburExhibit V: Summary of Financials from 1998-99 to 2002-03 for Dabur (Fmcg + Pharma)Exhibit VI: Financials for Dabur FMCG for 2002-03 and 2003-04

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Exhibit VII: The old and New Logo of DaburExhibit VIII: What the New Logo Stands forExhibit IX: Earnings for Dabur for 2004-05

References:

1] Zachariah, Reeba, Datta, Kausik, "Dabur to do away with umbrella brand plan," Business Standard, October 6, 2004.

2] How an organization structures and names the brands within its portfolio.

3] The sum of all distinguishing qualities of a brand, drawn from all relevant stakeholders, that results in personal commitment to and demand for the brand.

Promotional Strategies of Cellular Service Providers in India

Case Details: Price:Case Code : MKTG106 For delivery in electronic format: Rs.

300;For delivery through courier (within India): Rs. 300 + Rs. 25 for Shipping & Handling Charges

Themes

Marketing, Advertising and Sales Promotion

Case Length : 11 PagesPeriod : 2000-05Pub Date : 2005Teaching Note

: Available

Organization : -Industry : Cellular IndustryCountries : India

Keywords:

Indian Telecom Sector, Bharti Tele-Ventures Limited, Bharat Sanchar Nigam Limited, Hutchinson-Essar limited, Idea Cellular limited, Reliance India Mobile, Global System for Mobile Technology, Code Division Multiple Access, Celebrity Endorsements, Department of Telecommunications, National Telecom Policy, R-World, “RIM Celebrations”, MTNL, Telecom Regulatory Authority of India.

Abstract:

The case gives an insight into the various promotional strategies implemented by the major cellular service providers in the Indian cellular market. The GoI's decision to liberalize the telecom sector in 1994 transformed the entire telecom industry, with many private companies foraying into the sector.

With the consequent grant of licenses for providing cellular services, there was a surge in the

49

number of cellular services providers which continued till the late 1990's. By the year 2000, stiff competition between players in the cellular market prompted each player to formulate more novel strategies in order to retain their market share.

Most of the promotional strategies revolved around capturing the younger generation who formed a major part of the target market. Celebrity endorsements, special season offers, festival discounts, and innovative advertisement campaigns were used by the cellular service providers as tools to push back the competition and increase their market share.

Issues:

• The evolution of the Indian telecom industry.

• The factors that played a major role in the establishment of the cellular services market in India.

• Compare the various promotional strategies implemented by the major players in the cellular services market.

What other operators have achieved in one to two years, Bharti has done in just over a month. In July 2002, one out of every two people buying a mobile across India chose AirTel. We are truly proud to be spearheading the mobile revolution in the country."1

- Sunil Bharti Mittal, Chairman, Bharti Tele-Ventures in 2002.

"It is the technology advantage and not the lower rates that is attracting more and more customers to Reliance India Mobile."2

- Kaushik Roy, Head of Marketing, Reliance India Mobile in 2003.

"Today's consumers do not want to hear the virtues of a brand, they are interested in specifics and that's what our campaigns always do."3

- Samuel Selvakumar, CEO, Hutch - South India in 2004.

Introduction

After the liberalization of the Indian Telecom Sector in 1994, the Indian cellular market witnessed a surge in cellular services. By 2005, there were a total of 12 players in the market with the five major players being Bharti Tele-Ventures Limited (Bharti), Bharat Sanchar Nigam Limited (BSNL), Hutchinson-Essar limited (Hutch), Idea Cellular limited (Idea) and Reliance India Mobile (RIM) (Refer Exhibit I). All the players except RIM offered services based on the Global System for Mobile (GSM)4 technology. RIM provided services based on Code Division Multiple Access (CDMA)5 technology as well as GSM. As competition in the telecom arena intensified, service providers took new initiatives to woo customers.

50

Prominent among these were - celebrity endorsements, loyalty rewards, discount coupons, business solutions and talk time schemes. The most important consumer segments in the cellular industry were the youth segment and the business class segment.

The youth segment was the largest and fastest growing segment and was therefore targeted most heavily by cellular service providers. Bharti Tele-Ventures adopted celebrity endorsement as its chief promotional strategy. By 2004 it emerged the unprecedented leader commanding the largest market share in the cellular service market. (Refer Exhibit II).

Hutch implemented the celebrity endorsement strategy partially, relying primarily on its creative advertising for the promotion of its brand. BSNL, on the other hand, attracted the consumer through its low cost schemes. Being a state owned player, BSNL could cover rural areas, and this helped it increase its subscriber base

Reliance was another player that cashed on its innovative promotional strategies which included celebrity endorsements and attractive talk time schemes. Idea, relied heavily on its creative media advertising sans celebrities.

Background Note

The Department of Telecommunications (DoT) was set up by the Government of India (GoI) in the 1980s. Its function was to manage all telecommunication services within the country. In 1986, the GoI sought to modernize the telecommunications facilities in the country, and established Mahanagar Telephone Nigam Limited (MTNL) to look after services in Bombay and New Delhi, and Videsh Sanchar Nigam Limited (VSNL) to handle overseas services. The rest of the nation's services were to be run by the DoT. In 1994, India ranked sixth in the world in terms of number of installed fixed lines.

The GoI introduced the National Telecom Policy (NTP) in 1994 with a view to improving India's position in global telecommunications. The introduction of the NTP led to a metamorphosis of the industry as it allowed the private sector to invest in telecommunications.

In the course of liberalization, licenses were granted for providing cellular mobile service in the metro cities of Delhi, Mumbai, Kolkata, and Chennai. To avoid overlaps, the NTP stated that not more than two cellular providers could operate in a given telecom circle.

In 1997, the Telecom Regulatory Authority of India (TRAI) was established to regulate all telecommunication services. The NTP of 1999 further relaxed the norms for cellular providers.

Service providers were now free to provide all types of mobile services including voice and non-voice messages and data services in their service area of operation

Bharti, a part of Bharti Enterprises6, was the first to launch its cellular service on July 7, 1995. Bharti's cellular services were launched under the brand name ‘AirTel'and were categorized as pre-paid7 services and post-paid8 services. The postpaid service was launched under the brand name “AirTel” whereas its prepaid services were launched under the brand name “Magic”...

51

Excerpts

The Promotional Campaigns

In 1995, the Indian cellular industry looked very promising. With ever increasing globalization and expanding business activities, cell phones became a necessity for business on the move. The younger generation also began to flaunt the cell phone as a status symbol. Soon cell phones were being used not only as a tool for communication but also as a source of entertainment...

Year 2000-02

In the year 2000, AirTel formulated an advertising campaign which was arguably the first of its kinds from the cellular service sector. AirTel roped in famous movie actors Shahrukh Khan and Karishma Kapoor as brand ambassadors for its prepaid service “Magic”.

The company felt that celebrity endorsement was a suitable way to promote the brand and an effective tool for expanding market share.

On February 16, 2001, AirTel launched a massive Rs.25 million launch campaign -“You Can Do Magic” featuring the two Bollywood actors.

Year 2003 (Cricket, Bollywood and Celebration)

By 2003, the cellular service market had ten major players and the situation demanded that service providers come up with novel ideas to attract the consumer. Festivals and special occasions were times when cellular service providers offered a range of schemes. In February 2003, AirTel launched a Valentine's Day Promotion Contest, which was targeted primarily at youth celebrating Valentine's Day...

Year 2004 (Special Plans and Loyalty Schemes)

With a view to reaping the benefits of the pre-paid segment, RIM launched its prepaid service in 2004. The launch campaign involved a rally of motorbikes and cars bearing the RIM prepaid flags along with the RIM catch line “Mujhme Hai Wo Baat” (It's There Within Me). The first cavalcade was flagged off by famous model Katrina Kaif. Commenting on the positioning of the RIM prepaid service, Kaushik Roy, marketing head, Reliance Infocomm, said, “The RIM pre paid is primarily targeted at the youth, and we hope that by these on ground promotional activities, the youth becomes more aware of our fantastic value proposition.

Exhibits

Exhibit I: Cellular Service ProvidersExhibit II: Market Share & Subscriber Base of GSM Service ProvidersExhibit III: Market Share & Subscriber Base of CDMA OperatorsExhibit IV: Top Ten Advertisers in the Year 2003Exhibit V: Top Ten Advertisers on Television 2004

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References:

1] India Telecom, www.convergenceplus.com, September 4, 2002.

2] Brandspeak, www.exchange4media.com, February 8, 2003.

3] Brandspeak, www.exchange4media.com, July 3, 2004.

4] GSM is the most widely used digital mobile phone system. It was originally defined as a pan-European open standard for a digital cellular telephone network to support voice, data, text messaging and cross-border roaming. GSM is present in more than 160 countries and accounts for approximately 70 percent of the total digital cellular wireless market. This system is a time division multiplex (TDM) system that can be implemented on a frequency ranges of 800, 900, 1800 and 1900 MHz.

5] CDMA is a digital wireless telephony transmission technique that allows multiple frequencies to be used simultaneously (Spread Spectrum). The CDMA idea was originally developed for military use over 30 years ago.

6] Established in 1976, Bharti Enterprises was India's leading Telecom and Healthcare conglomerate. It had profits of $320 million and revenues of $ 1,790.776 million for the financial year 2004.

7] Pre-paid services are the mobile service where the user needs to purchase a “prepaid” card that offers talk-time and other services depending on the talk- time value of the card.

8] Post-paid services refer to mobile services that are billed on a monthly basis. The user needs to pay the bills at the end of the month's usage of the service.

Zee Telefilms' Competitive Strategies

Case Details: Price:Case Code : MKTG107 For delivery in electronic format: Rs.

400;For delivery through courier (within India): Rs. 400 + Rs. 25 for Shipping & Handling Charges

Themes

Marketing, Marketing Strategies, Television Media

Case Length : 17 PagesPeriod : 1992-05Pub Date : 2005Teaching Note

: Available

Organization : Zee Telefilms LimitedIndustry : EntertainmentCountries : India

Abstract:

The case analyzes the competitive strategies adopted by Zee Telefilms in relation to rival channels and the extent to which the channel has succeeded in its approach.

Zee recorded unprecedented success during the initial years of its launch (1992-2000). However, in 2000, Star with its improved programming content succeeded in establishing itself as the No.1 entertainment channel.

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Sony also emerged as a strong competitor. The case provides an insight into how Zee managed to regain its position through its effective competitive strategies.

Issues:

• The factors that played a key role in the establishment of Zee as a successfully integrated media company.

• The competition in the television media segment.

• The marketing strategies adopted by Star and Sony, and the reasons for their success or failure.

• The strategies adopted by Zee to regain its position in the Indian television media segment.

Keywords:

Zee Telefilms Limited, Star TV, Sony TV, Essel Group, Sony Entertainment Television, Rupert Murdoch, Amitabh Bachchan, "Kaun Banega Crorepati?", Zee MGM, "Sawaal Dus Crore ka", AirTel, AirTel Magic, Department of Telecommunications, Videsh Sanchar Nigam Limited, Bharti Enterprises.

It is my ambition to make Zee the world's largest integrated convergence company and to achieve this we are building our business through a combination of access and content."

- Subhash Chandra, Chairman, Zee Telefilms Limited, in 2000.1

"Star, the entire company, rests on three and a half hours of Star Plus. It is doing extremely well and so there is no debate on that. We are definitely trying to improve and work on the programming to raise the ratings of Zee TV itself. As a company, we are definitely far more broad-based. We have many success stories. We have a successful oversees operation, we have successful Zee Marathi, we have successful Zee Cinema. So, it is a little more broad-based than the other bouquets, which is a good thing in the long run. Yes, I will be a lot happier if Zee TV regains its old position."

- Pradeep Guha, CEO, Zee Telefilms Limited, in 2005.2

Introduction

In 2005, Zee Telefilms Limited (Zee) was India's most broad-based TV channel network with an offering of 23 channels. The other major players like Star TV (Star) and Sony TV (Sony) offered less than half the number of channels offered by Zee. Zee's flagship channel, Zee TV was launched in 1992 and by 1994 Zee's prime-time3 audience share was 37% compared to 39% combined share of the national channel Doordarshan4 and a meager 8% share of the Star channels.

After its success in the domestic market, Zee, in 1995 ventured into the overseas market to

54

capture the NRI audience. From its launch in 1992 till 2000, Zee commanded the highest market share.

However, by mid 2000, competition from Star and Sony began to intensify, and in 2000 Zee recorded the lowest market share of 5.19%, with Star and Sony having a market share of 18.49% and 11.29% respectively.

Zee needed to formulate new strategies to claw back its market share. The new strategies Zee adopted, such as brand extension, brand re-positioning and re-branding, pushed its revenues up once again (Refer Exhibit I) and its share price rose steadily during the period 2003-04 too (Refer Exhibit II).

In 2005, Zee re-branded a host of its channels to bring them under the Zee brand. Trendz was renamed ZEE Trendz, ZEE English was renamed as ZEE Café, Smile TV was named as Zee Smile and all the Alpha channels were prefixed with 'Zee' brand name. It also repositioned Zee, with a new catch line-"Jiyo Zee bhar ke". All these moves were aimed at expanding its viewership.

Background Note

Zee, an Essel Group5 company, launched Zee TV, the nation's first Hindi channel by a private organization. Zee TV evoked a massive positive response from Indian viewers, since it brought them a much wider choice of programs compared to Doordarshan. Zee TV's broadcast content ranged from film-based to educational programs.

Zee's mass appeal was in direct contrast to Star (launched in 1991) which aired programs exclusively in English. Catering to the needs of the vast Hindi-speaking Indian audience, Zee TV's popularity grew by leaps and bounds during the period 1992 to 2000.

Zee TV won The Economic Times' "The Emerging Company of the Year" award in 1998, for its remarkable success within 6 years of its launch. In the same year, Zee TV won the FICCI6 award for creativity in visual media. Within a span of 3 years (1998-2001), Zee TV expanded its network further, introducing a number of channels both in India and overseas.

By 2004, Zee was a fully integrated media corporate with a major presence in TV programming, Films, Music, Print, Broadcasting, Internet Portals, Internet Service Provider (ISP) service, Events, Cable Distribution, DTO, etc7. Zee channels had a viewer base of over 250 million across the globe. It operated in 5 continents across 120 countries8.

Zee's Initial Success

In October 1995, Sony Entertainment Television9 (SET) made its entry into India. Star, which was launched in 1991, was also making an effort to attract larger numbers of the non-westernized Indian viewers. Zee had to come up with a new strategy to counter this competition. While Star and Sony were concentrating more on improving their programming content, Zee planned the launch of two channels dedicated to news and cinema, respectively. Zee had its action plan ready but it did not have the funds for expansion. It therefore entered into a partnership with Rupert Murdoch (Murdoch), the man behind Star, in 1995.

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With this deal Murdoch acquired a 50% stake in Zee. Once the Zee-Star deal was finalized, Zee launched the nation's first round-the-clock Hindi news Channel - Zee News and a Hindi movies channel - Zee Cinema. Zee News aired news every hour and its programs ranged from interviews with corporate personalities to discussions on the country's social and political issues...

Excerpts

Competition from Star and Sony

In September 1999, the Star and Zee partnership came to an end, and this left Star to go its own way. Sony, meanwhile, launched its sports-cum-movies channel "SET MAX" in 1999. Star tried its best to pull in the viewers. But the scene seemed uncertain for both Star and Sony, as all their efforts were not quite paying off...

Zee Fights Back

In order to compete with Star and Sony, Zee implemented a two-pronged strategy from September 2000 onwards. One element was to reform the programming content and the second was to redefine the prime time band (which was usually taken to run from 9 PM to 11PM) by extending the programming slots to 45 instead of the existing 30 minutes.

Explaining these moves, R K Singh, chief executive officer of Zee Network, said that this initiative was a continuation of Zee's efforts to provide clean, wholesome family entertainment

Consequently in October 2000, Zee came out with "Sawaal Dus Crore ka" (SDCK), two months after KBC was launched. Zee also launched two new channels Zee English and Zee Movies in 2000. Zee Movies was re-launched the same year as Zee MGM...

The Re-Branding Exercise

Early 2005, Zee initiated the re-branding of the entire Zee range of brands. In line with this strategy, all the channels of Zee sported a new logo, and new on-air packaging and promotions were introduced. This sprucing up was expected to increase the TRP of all its channels.

As a part of this exercise, the three English channels were also renamed. dz was renamed ZEE Trendz, ZEE English became ZEE Café and ZEE Movie Zone was named Zee Studio. Also, Smile TV was now ZEE Smile...

Exhibits

Exhibit I: Zee: Growth PatternExhibit II: Zee's Reviving Stock Market Performance: 2004Exhibit III: Zee News-Viewership 1999Exhibit IV: Zee-Overseas SuccessExhibit V: Scenario Before "Tehelka"

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Exhibit VI: Aaj Tak Vs. Zee NewsExhibit VII: Zee Tv's Viewership During "Zee Cine Awards 2004"Exhibit VIII: Zee Revenues: An OverviewExhibit IX: Zee's Regional Reach: A ComparisonExhibit X: Zee: Global ReachExhibit XI: Re-Branding Exercise

References:

1] Agarwal, Alok, "Zee targets to become the largest integrated convergence company", www.domain- b.com, September 26, 2000.

2] Interview, www.indiantelevision.com, May 23, 2005.

3] Prime-time, the time slot which generally extends from 9PM to 11PM wherein the channel telecasts its most popular television programs.

4] Includes Doordarshan National Network and Metro Channel.

5] Essel Group of companies, the parent company of Zee has operations in entertainment broadcasting, cable TV, films, theme parks, publishing, education, retailing, manufacturing and real estate.

6] Federation of Indian Chambers of Commerce and Industry.

7] www.zeetelevision.com.

8] www.zeetelevision.com.

9] Sony Entertainment Television, first venture of Sony Pictures Entertainment, the biggest entertainment powerhouse of America.

Pricing Fuzeon - Cost of Innovation?

Case Details: Price:Case Code : MKTG121 For delivery in electronic format: Rs.

500;For delivery through courier (within India): Rs. 500 + Rs. 25 for Shipping & Handling Charges

Themes

Case Length : 28 PagesPeriod : 1990 - 2006Pub Date : 2006Teaching Note

: Available

Organization : Trimeris Inc. and RocheIndustry : Pharmaceutical and

HealthcareCountries : USA, Europe

Abstract:

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This case is about Fuzeon, an innovative 'first of its kind' drug used for the treatment of HIV/AIDS. The drug was developed by Trimeris and marketed by Roche.

Though Fuzeon was considered a 'breakthrough' drug, its price was very high. The case discusses the reasons as to why the company had decided to price the drug at a premium.

Fuzeon's pricing also raised ethical concerns as it was priced out of the reach of people who needed it the most. The case also discusses the challenges faced by Trimeris and Roche in marketing this drug.

Issues:

• Understand the issues in drug pricing, particularly for anti-AIDS drugs.

• Understand the risks that pharmaceutical companies face in developing and launching a new product in the market.

• Understand the challenges faced by companies in marketing a new product at a premium price.

Keywords:

Trimeris Inc., Roche, Fuzeon, Fusion Inhibitor Technology, Anti - AIDS / HIV drugs, New Product Development, Pharmaceutical Healthcare, Product Pricing, Marketing Management, Antiretroviral Drugs, Research and Development, ACT UP/NY, Clinical Trials, New Product launch, Distribution Network

"We need to make a decent rate of return on our innovations. This (Fuzeon) is a major breakthrough therapy. I can't imagine a society that doesn't want that innovation to continue."1

- Franz Humer, Roche's Chairman and Chief Executive, in 2003.

"Roche claims that Fuzeon is more expensive to produce than other anti-HIV2 drugs, but that doesn't justify this excessive price. Roche claims it spent $600 million developing the drug, but they refuse to open their books to verify that. Our research suggests they spent closer to half that amount, and also that significant portions of the research costs were paid for by the NIH3 including the drug's discovery and the initial phase I clinical trial4."5

- Eustacia Smith, AIDS Coalition to Unleash Power (ACT UP/NY),6 New York, in 2003.

"This price (of Fuzeon) is clearly above our expectations and shows that the limited amount that can be produced is supposed to be sold at the highest possible price in the industrialized countries."7

- Patrick Burgermeister of Zuercher Kantonalbank,8 in 2003.

Fuzeon Gaining Ground

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In March 2006, Trimeris Inc. (Trimeris) announced that its net profit for the fourth quarter of 2005 (ended December 31, 2005) was US$ 3.8 million. It had incurred a loss of US$ 5.7 million in the corresponding period of the previous year.

For the financial year 2005, the company registered an 80% reduction in losses when compared to 2004 (Refer to Table I for a summary of Trimeris' financial position).

Analysts attributed the company's improved financial performance primarily to the increase in gross profits from the sale of Fuzeon, a drug used in the treatment of HIV/AIDS9 (Refer to Table II for Sales of Fuzeon).

In 2005, Fuzeon's sales grew by 54% to US$208.2 million as compared to US$ 135.2 million in 2004. In January 2006, the Chief Executive Officer of Trimeris, Steven D. Skolsky, commented, "We are proud to have surpassed the $200 million mark for a product that is in its second full year from launch.

These results were driven by several factors including the growing acceptance of Fuzeon as a core component of highly suppressive HIV therapy, synergy with new agents and the success of ongoing patient support programs."10

Fuzeon, a breakthrough product of Hoffmann-La Roche (Roche) and Trimeris, was used in the treatment of HIV/AIDS and was Trimeris' only product. However, the sales figures for the drug were far below the initial projections made by various analysts. In 2003, some analysts estimated that if 12,000 people were to take Fuzeon, spending US$ 20,000 each in the first year of its launch, Roche would earn US$ 240 million in revenues in the first year itself.

It was estimated that by 2005, Fuzeon's sales would grow to around US$ 480 million. Analysts also estimated that Roche could make a profit in three years as against the industry average of 16 years for a new drug.14 But at the end of 2005, Fuzeon had annual sales of only US$ 208.2 million, much lower than the forecasts. Analysts believed that Fuzeon's pricing, coupled with its drug delivery system15 was to blame.

Background Note

In 1990, Dr. Dani Bolognesi (Bolognesi) and Dr. Tom Matthews (Matthews), who were leading research teams searching for potential HIV vaccines at Duke University Medical Center,16 discovered that a molecule derived from a portion of the HIV virus was capable of blocking reproduction of the virus. This molecule, T-20 (Enfuvirtide), now marketed as Fuzeon, was successful in stopping the virus from fusing with the immune cells17 of the host. In 1993, Bolognesi and Matthews established Trimeris in Durham, North Carolina, U.S.A, with a vision of creating a biopharmaceutical company based on fusion inhibitor technology.18

Bolognesi and Matthews also received the US patent for the T-20 structure and composition in 1990 after which laboratory and animal studies of T-20 were started. Phase I clinical trials of T-20 began in 1996. The following year, Trimeris launched its initial public offering.

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In 1998, the Phase II clinical trials19 of T-20 were started. In 1999, Trimeris presented the results of the first T-20 dose ranging phase I/II study at the 6th Conference on Retroviruses and Opportunistic Infections20 in Chicago, U.S.A. Impressed by the presentation, David Reddy (Reddy), HIV Head of Roche, arranged a meeting with representatives from Trimeris.

In the same year, Trimeris and Roche formed a collaboration to develop and commercialize T-20 and T-1249 (another fusion inhibitor) on a global scale. Roche, headquartered at Basel, Switzerland, is a global healthcare company which operates worldwide under two divisions: pharmaceuticals and diagnostics.

It belongs to the Roche Holding AG. Roche was founded by Fritz Hoffmann-La Roche in 1896. In 2005, its sales from continuing business was CHF21 35,511 million., Roche had a global market share of 3.4% based on the company's sales for the 12 months ending June 2005 According to IMS MIDAS Quantum.22 (Refer to Exhibit I for Roche's Three-Year Financial Summary)...

Excerpts

Fuzeon - An Innovation

Fuzeon was the 'first of its kind' drug for the treatment of HIV infection in treatment-experienced patients with evidence of viral replication despite ongoing therapy. It was to be used in combination with other antiretroviral (anti-HIV) drugs for the treatment of HIV. (Refer Exhibit III for different brands of antiretroviral drugs and how they act)...

Limited Supply

According to Roche and Trimeris, Fuzeon was difficult to manufacture as it involved an extremely complex process. Fuzeon was a large peptide composed of a precise 36-amino acid sequence.

Large peptides were difficult and expensive to manufacture because the process of creating commercial quantities of these was lengthy and complicated.

It involved 106 steps and 44 ingredients. According to them, it was the first time that such 'synthetic peptides' had been produced on such a large scale...

Pricing Strategy

Fuzeon was launched at a premium price of 18,980 euros (US$ 20,570) per patient per year in Europe and just under US$ 20,000 per patient per year in the US. This was a record price for an antiretroviral drug and was twice the price of the most expensive HIV treatment drugs available on the market at that time (Refer to Exhibit V for list of some high priced AIDS drugs)...

Fuzeon's Pricing - The Other View

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AIDS activists and doctors in general appreciated the development of Fuzeon but were critical of its pricing. "We don't think we can add Fuzeon (to our drug list) without cutting something else.

We are excited about the drug, but we aren't sure we can afford it," said Michael Montgomery, who oversaw California's state government-funded AIDS Drug Assistance Program (ADAP).

AIDS activists insisted that Fuzeon's complex manufacturing process did not justify its price.

Problem for Fuzeon

Despite being a breakthrough product, Fuzeon had more than its fair share of problems. Analysts felt that Fuzeon's price was out of reach for most of the people in the industrialized countries let alone those in the developing countries. Because of its high price, some ADAPs refused to put Fuzeon on their formularies...

Marketing Initiatives

Fuzeon was launched at the International AIDS Society (IAS) conference in Paris in July 2003. Prior to the launch, Trimeris and Roche used the services of Ignite Health to develop a pre-launch website, TargetHIVFusion.com, with the objective of educating PLWHA about Fuzeon and preparing healthcare professionals treating PLWHA for the launch of Fuzeon. TargetHIVFusion.com was later changed to Fuzeon.com.

The Fuzeon Arcade, comprising 1980s-style arcade games mixed with important product messages and trivia, was created as the final closing act of Roche's national sales meeting to get the sales team excited about the upcoming FDA approval of Fuzeon.

Those who scored the highest were presented with Sony Playstations (Refer to Exhibit IX for Promoting Fuzeon). Initially Bioscrip Inc. (Bioscrip) was appointed as the exclusive pharmacy source for Fuzeon in the US and Canada. Roche announced a "Progressive Distribution Program" which included reimbursement assistance programs for patients who could not afford Fuzeon.

Future Outlook

Although Fuzeon had crossed the US$ 200 million mark in worldwide sales, this figure was still well below the expected figures. According to some analysts, Roche and Trimeris had not addressed the key problem of price.

The high price of Fuzeon compared to other anti-HIV drug treatments, was affecting the demand for it.

Higher prices could also limit Roche and Trimeris's ability to receive reimbursement coverage for Fuzeon from third-party payers, such as private or government insurance programs.

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But some analysts believed that Roche was unlikely to bring down the price of Fuzeon significantly to make it more accessible.

Roche had recognized that it could afford to set such a high price point because Fuzeon was an innovation in the field of anti-AIDS drugs...

Exhibits

Exhibits I: Roche's Three Year Financial SummaryExhibits II: Overview of the Relationship between Trimeris and RocheExhibits III: Different Brands of Antiretroviral Drugs and How They ActExhibits IV: List of Some High Priced Aids Drugs*Exhibits V: Protests against Pricing of FuzeonExhibits VI: Fuzeon - Studies Supported by Public Funds*Exhibits VII: Trimeris Monthly Share Price (US$) - The Year of FuzeonExhibits VIII: Promoting FuzeonExhibits IX: Advertising Awards Won by the Fuzeon CampaignExhibits X: Current and Future Fuzeon Clinical TrialsExhibits XI: Competition for Fuzeon

References:

1] "Anxiety over Cost of New AIDS Drug," www.cbsnews.com, March 13, 2003.

2] HIV (Human Immunodeficiency Virus) is the virus that causes AIDS. A person infected with HIV is called HIV positive. In the long run HIV leads to AIDS.

3] The National Institutes of Health (NIH) is the primary agency of the United States government responsible for medical research. The Institutes are responsible for 28% of the total biomedical research funding spent annually in the USA.

4] Phase I trials are the first-stage of testing a drug in human subjects. Normally a small (20-80) group of healthy volunteers will be selected. This phase includes trials designed to assess the safety, tolerability, etc., of a therapy.

5] "ACT UP Creates 'Fuzeon Graveyard' at Roche Headquarters," www.users.ultinet.net, March 13, 2003.

6] ACT UP/NY based at New York, USA, is a "diverse, non-partisan group of individuals ... committed to direct action to end the AIDS crisis." It was formed in March, 1987.

7] Ben Hirschler, "Record High Price Set for New Roche AIDS Drug," www.aidsmeds.com, February 24, 2003.

8] Zuercher Kantonalbank based at Zurich, Switzerland is a major European financial institution. In 2005, its net income from interest operations was CHF 1,030 million.

9] AIDS (Acquired Immunodeficiency Syndrome or Acquired Immune Deficiency Syndrome) is a collection of symptoms and infections resulting from the specific damage to the immune system (the system of specialized cells and organs that protect us from outside biological influences such as bacteria, toxins, etc.) caused by the Human Immunodeficiency Virus (HIV).

10] "Trimeris Reports 2005 Fuzeon Sales Results: Global Sales Exceed $200 Million," www.trimeris.com, January 31, 2006.

14] "Anxiety Over Cost Of New AIDS Drug," www.cbsnews.com, March 13, 2003.

15] Drug delivery systems are responsible for delivering drugs to patients using various methods such as vials and needles. Fuzeon needs to be injected sub-cutaneously (below the skin) twice daily. Patients found this inconvenient.

16] The Duke University Medical Center (formerly Duke University Hospital and Medical School) is based in Durham, North Carolina, U.S.A., and is affiliated to the Duke University. It is ranked among the top ten health care organizations in the US. It was established in 1930.

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17] The immune cells refer to the CD-4 cells that are attacked by the HIV virus. The CD-4 cells are a part of the immune system.

18] The core technology platform of fusion inhibition was based on blocking viral entry into host cells.

19] Phase II trials are performed on larger groups (100-300) and are designed to assess clinical efficacy of the therapy as well as to continue Phase I assessments in a larger group of volunteers and patients. Phase II trials are initiated once the initial safety of the therapy has been confirmed in Phase I trials.

20] The Conference on Retroviruses and Opportunistic Infections (CROI) is regarded as one of the most important annual research and clinical conferences on HIV/AIDS in the United States. The 6th CROI was held at Chicago between January 31, 1999, and February 4, 1999. Over 3,400 participants from across the world attended this conference.

21] In April 2006, 1 Swiss Franc (CHF) was approximately equal to US$ 0.7820.

22] According to IMS MIDAS Quantum.

P&G's Vocalpoint - Using Moms for W.O.M

Case Details: Price:Case Code : MKTG136 For delivery in electronic format: Rs. 300;

For delivery through courier (within India): Rs. 300 + Rs. 25 for Shipping & Handling Charges

Themes

FMCG

Case Length : 19 PagesPeriod : 2001-2006Pub Date : 2006Teaching Note : AvailableOrganization : Procter & Gamble

CompanyIndustry : FMCGCountries : USA

Abstract:

The case discusses about the word-of-mouth marketing initiatives of Procter & Gamble Company (P&G), a leading manufacturer and marketer of consumer products. In 2001, P&G had recruited many teenagers to create buzz about new products through its division Tremor. Subsequently, in December 2005, large scale recruitment for influential moms, also called as Tremor Moms, was started under the new name Vocalpoint. By May 2006, P&G had enlisted 225,000 teenagers in Tremor and another 600,000 moms in Vocalpoint.

Analysts opined that this strategy proved to be effective as research showed an increase in sale of products promoted through this network of people. The case also highlights the ethical implications of using people to market products through word-of-mouth recommendations.

Issues:

» Understand the importance of word-of-mouth marketing in the promotion of consumer products.

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» Understand the ethical implications of using people to market products through word-of-mouth recommendations.

» Understand the challenges faced by major companies in using word-of-mouth marketing programs.

Keywords:

Procter & Gamble, Tremor, Vocalpoint, Word-of-mouth, Buzz marketing, Customer-made, Connect and Develop, Consumer goods, Marketing Management, Ethics, Advertising, Connectors, Word of Mouth Marketing Association, Influencers, Social network, Women, Moms.

P&G started this idea of manufacturing word-of-mouth. They recruited a quarter million teens to talk about their products. Now they are in the process of recruiting mothers to do the same thing because they have suddenly realized that word-of-mouth is a powerful thing." 1

- Jerry Wind, Professor of Marketing, The Wharton School, University of Pennsylvania, in June 2005.

"The program is a state-of-the-art method for reaching the most influential group of shoppers in America: moms. At a time when companies need to find creative ways to get their message across to consumers, it's likely to be widely studied. But Vocalpoint also raises a serious ethical issue: Should the person spreading the product message disclose her affiliation." 2

- BusinessWeek, in May 2006.

The Power Buzz Moms

On December 6, 2005, Procter & Gamble Company (P&G), a leading manufacturer and marketer of consumer products, announced that it would enroll influential moms to be a part of an exclusive group of women. The group was named Vocalpoint and the moms were expected to provide their opinions and feedback on P&G's latest products, the products of other external clients like WD-40 Co.3 (WD-40), Animal Planet,4 etc., and other new product concepts. The members of Vocalpoint were also encouraged to share their opinions regarding these new products with their family and friends

"Over the years, Procter & Gamble has offered products that help moms run their households efficiently and economically, and we've often heard back from our customers about what they liked, or perhaps didn't like, about a particular product.

At P&G, we find this consumer feedback absolutely invaluable in helping us continuously offer products that best serve the needs of our customers. By developing Vocalpoint, P&G has set up a way for other companies to gain access to these very vocal and influential moms to gain access to their thoughts and feedback as well,"5 said Amy Donges, marketing manager of Vocalpoint.

Though word-of-mouth (WOM) marketing6 is a recognized marketing tool, which has been used for a long time, analysts credit P&G with pioneering this approach on a large scale. As

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early as 2001, P&G had recruited hundreds of thousands of teenagers to create a buzz about new products through its division Tremor. Subsequently, Tremor Moms were also recruited and in December 2005, large scale recruitment for such influential moms was started under the new name Vocalpoint. By May 2006, P&G had enlisted 225,000 teenagers in Tremor and another 600,000 moms in Vocalpoint.

Analysts opined that this strategy proved to be very effective as research showed an upward shift in sales of the products promoted through this network of people called "connectors". The success of this method at P&G and other smaller firms specializing in WOM has prompted many analysts to opine that WOM is fast becoming the hottest trend in marketing.

However, the use of this method by marketers has also drawn a lot of criticism. As P&G does not require its connectors to disclose their affiliations with P&G, it has been accused of deceptive marketing. Some marketing experts were also concerned about the ethical implication of using such a method as it could lead to commercialization of peoples' daily lives and their relationships, where people would treat one another as objects of manipulation, undercutting social trust.

Critics also took exception to the fact that Tremor used and targeted teenagers, who were at an impressionable age, for commercial transactions. P&G's policy of not requiring that connectors disclose their affiliation with the marketer even put it at loggerheads with Word of Mouth Marketing Association7 (WOMMA), who were pushing for such a disclosure.

P&G defended its stand, saying that it was taking the high road as it did not impose any such restrictions on its members, thus placing them in total charge of what they wanted to communicate to their peers. They also pointed out that members were not compensated in any way and the company did not influence what they wanted to say.

Background Note

In 1837, candle maker William Procter and his brother-in-law, James Gamble, a soap maker, merged their small businesses and established P&G. Their shop in Cincinnati was nicknamed "Porkopolis" because of its dependence on swine slaughterhouses as the shop made candles and soaps from leftover fats. By 1859, P&G had become one of the largest companies in Cincinnati, with sales of US$1 million. Since the very beginning, P&G placed great emphasis on marketing and developing brands. The earliest brands of P&G, which were advertised in a Cincinnati newspaper in 1838, were Palm Oil soap, Rosin soap, Toilet and Shaving soap, and Tallow candles.

In the same year, the company ran into difficulties because of over-expansion. It was taken over by Franz Josef Pope and in 1918 he named it BMW AG.

In 1918, BMW manufactured its first aircraft engine, the Type IIIa. This engine could power a biplane to reach an altitude of 5000 meters in just 29 minutes, creating a world record. After the World War I, the Treaty of Versailles (1919) put a ban on production of aircraft in Germany.

Thus, in 1919, the company started to manufacture railway brakes. In the same year it designed its first motorcycle engine. In 1923, it started manufacturing motorcycles and its first model R32, a 500cc shaft-driven motorcycle, designed by Max Friz, was launched.

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BMW forayed into car manufacture in the late 1920s. (Refer to Exhibit I for BMW's Logo). In 1928, BMW set up a car manufacturing unit in the Eisenach region of Germany and started manufacturing a small car called 'Dixi', based on the Austin Seven car under license. In the following year it acquired the Dixi Company.

In 1879, for the first time P&G introduced an all-purpose soap, Ivory. in the US. Ivory could be used for both personal cleansing and household cleaning. Soon Ivory emerged as the most popular soap brand in the US. By the 1880s, P&G sold brands like White, Famous, Perfect, Queen Olive, Topaz, Handy, Town Talk, Good Luck, Blue, Princess Olive, Duchess Olive, Very Good, Countess Olive, Toilet, Green Seal, Polo, Japan Olive, Simon Pure, Yellow Erasive, German Olive, Lenox, Velvet and Golden Bar.

By 1890, P&G was selling more than 30 different varieties of soap including 'Ivory.' At that time, P&G's advertising comprised of full-color print ads in national magazines. The advertisements were very creative, resulting in a growing demand for its soaps from consumers.

P&G encouraged rival brands within the company to compete against one another. In the early 1920s, when Lux, Palmolive and Cashmere Bouquet soaps were introduced by P&G's competitors, P&G introduced Camay. When Camay did not perform well, the management felt that it was because it had not been allowed to compete head-on with Ivory. This episode resulted in the development of a brand management system at P&G...

Tremor - The Beginning

Tremor was a marketing service launched in 2001 with Steve Knox (Knox) as the CEO. (Refer Exhibit III for logo of Tremor). It was a WOM program aimed at teenagers. When it was launched, P&G had very little information on the teen market. Thus, initially Tremor was more of an experiment that presented P&G with an opportunity to study that demographic segment. Tremor members were carefully chosen by P&G. Teens were drawn to the Tremor website (www.tremor.com) from the websites that these teens frequented, and then selected based on their response to a survey questionnaire.

P&G had done a lot of research to identify the people they wanted. The teens were greeted with questions that screened for eight key character traits including inquisitiveness, connectedness, and persuasiveness. The people P&G sought were called "connectors" in marketing parlance, and were considered the most influential of all consumers (also referred to as influencers, transmitters or bees)...

Vocalpoint - Taking Wom To The Next Level

Vocalpoint was launched nationally in March 2006 with Knox as the CEO. (Refer to Exhibit IV for the logo of Vocalpoint). Vocalpoint presented P&G with the opportunity to run campaigns for more of its own brands, thus filling the gaps in Tremor. Besides, the program gave it access to moms, the most influential consumer demographic segment in the US. Efforts to include moms as a part of the WOM program started in mid 2005 with P&G recruiting women with children aged 19 years or below. The idea was tested in three US cities- Columbus, Tulsa, and Buffalo.

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Wom - The Hottest Trend In Marketing...

Analysts were of the view that WOM was a powerful advertising tool. The early success of Tremor prompted Jim Stengel, P&G's global marketing officer to say that, "Word-of-mouth advocacy is the gold standard in marketing." The Advertising Age estimated that WOM marketing was a US$100 million to US$150 million industry. In 2005, it grew at a rate of 100% over the corresponding period of 2004. Analysts felt that, though the figures looked relatively small in dollar volume, the practice ranked among marketing's highest growth areas...

...Or a Case of Deceptive Marketing?

The use of the P&G's WOM method of marketing had its share of controversy in the US. In October 2005, Commercial Alert (CA), a non-profit public watchdog group filed a complaint with the Federal Trade Commission (FTC) regarding such forms of marketing. In its complaint, Gary Ruskin (Ruskin), the executive director at CA sought action against Tremor as P&G's policy did not require that connectors disclose their affiliation with the marketer. Critics argued that people who were exposed to such marketing were not aware that they were being marketed to and thus such form of marketing should come under the purview of "deceptive marketing."

"It's deceptive because people think they're talking to a regular person when they're really talking to a shill. That's the whole point, that shills have to disclose that they're shills," said Ruskin. (Refer to Exhibit IX for a summary of FTC policy statement on deception)...

Future Outlook

According to some analysts, with the formation of Vocalpoint in addition to Tremor, P&G had succeeded in its role as a trusted partner of the consumer and at the same time offering an instant WOM network to external clients. According to Justin Kirby of Digital Media Communications, P&G with its Vocalpoint and Tremors programs was far ahead of the curve than most corporations as far as WOM marketing was concerned.

Some analysts pointed out that, moms were the most influential segment among buyers and targeting them through networks such as Vocalpoint made good business sense. The popularity of the Internet had resulted in the increasing number of online social networks for moms. "From a business standpoint, it's a huge opportunity...

Exhibit

Exhibit I: Five Year Financial Summary of P&GExhibit II: Logo of P&GExhibit III: Logo of TremorExhibit IV: Logo of VocalpointExhibit V: The Vocalpoint WebsiteExhibit VI: Vocalpoint - Some Screening QuestionsExhibit VII: Vocalpoint Website Promoting 'What about Brian'Exhibit VIII: Vocalpoint FAQsExhibit IX: Summary of FTC Policy Statement on Deception

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References:

1] "What's the Buzz about Buzz Marketing?" www.whartonsp.com, June 3, 2005.

2] "I Sold it through the Grapevine," www.businessweek.com, May 29, 2006.

3] WD-40 Co., headquartered in San Diego, California, USA is known for its widely-used penetrating oil (cleaner, lubricant and anti-corrosive solution) marketed under the trademark WD-40. In the years preceding 2006, the WD-40 company acquired several household products companies. As of 2006, it marketed its products in more than 160 countries worldwide.

4] Animal Planet, launched in 1996, is a cable and satellite television network co-owned 80% by Discovery Communications Inc., and 20% by the BBC Worldwide. The channel is dedicated to programming that highlights the relationship between humans and animals.

5] "Savvy Moms Share Maternal Instincts; Vocalpoint Offers Online Moms the Opportunity to be a Valuable Resource to their Communities," www. phx.corporate-ir.net, December 6, 2005.

6] Word-of-mouth marketing (or WOM advocacy) is a term used by marketers and advertisers to describe activities that companies undertake to generate personal recommendations as well as referrals for brand names, products and services.

7] WOMMA is the official trade association for the WOM marketing industry in the US. It was founded in the year 2004. Its mission is to promote and improve WOM marketing by protecting consumers and the industry with strong ethical guidelines, promoting WOM as an effective marketing tool, and setting standards to encourage its use.

Red Bull's Innovative Marketing: Transforming a Humdrum Product into a Happening Brand

Case Details: Price:Case Code : MKTG141 For delivery in electronic format: Rs. 400;

For delivery through courier (within India): Rs. 400 + Rs. 25 for Shipping & Handling Charges

Themes

FMCG

Case Length : 21 PagesPeriod : 2001-2006Organization : Red Bull GmbHPub Date : 2006Teaching Note : AvailableCountries : Austria, UK, USAIndustry : Beverages

Abstract:

The Red Bull energy drink was launched in Austria in 1987, by Dietrich Mateschitz. He claimed to have experienced the invigorating properties of a popular Thai energy drink, Krating Daeng, on a trip to Thailand.

Realizing that a similar product could have good potential in Western markets, Mateschitz obtained the license to manufacture a carbonated version of Krating Daeng from its Thai owners. Obtaining permission to sell Red Bull in Europe was not easy, as it contained several ingredients whose effects on the human body were untested.

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However, permissions were eventually obtained, and Red Bull became exceptionally successful in all the markets in which it was launched.

It was generally acknowledged that Red Bull's success was the product of the company's innovative marketing efforts. This case study discusses the marketing strategy adopted by Red Bull GmbH, including the company's effective employment of buzz marketing in new markets, and its sponsorship of sporting activities, especially extreme alternative sports, to enhance its image.

The case also talks about Red Bull's target markets, and its pricing and differentiation strategies. It includes a section on the various controversies surrounding Red Bull, and the effects of these on its brand image. The competitive situation in the energy drinks market and Red Bull's position vis-à-vis competitors, is also discussed. The case concludes with a commentary on Red Bull's attempts at brand extension, and the company's future prospects in the light of its excessive dependence on a single product.

Issues:

» To understand how savvy marketing can transform an ordinary product into a powerful brand.

» To study the use of buzz marketing in establishing a product in new markets.

» To appreciate the importance of identifying suitable target markets, and designing marketing activities to reach them effectively.

» To examine the role of sports sponsorships in establishing brand image.

» To study the effect of controversies on brands and how, in certain circumstances, controversies can actually help in the growth of a brand.

» To analyze the potential effects of a large number of competitors on a powerful brand and the sources of differentiation in a crowded market.

» To understand the importance of brand extension and the pitfalls of being associated with a single product.

Keywords:

Red Bull, Dietrich Mateschitz, Energy drink, Brand, Grassroots marketing, Buzz marketing, Product extension, Sports Sponsorship, Formula One racing, Target market, Krating Daeng, Generation Y, Product promotion, Product differentiation, Advertising clutter, Taurine

In terms of attracting new customers and enhancing consumer loyalty, Red Bull has a more effective branding campaign than Coke or Pepsi. Red Bull is building a beverage brand without relying on the essential equipment of a mass-marketing campaign. Perhaps the indispensable tools of marketing aren't so indispensable after all." 1

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- Nancy Koehn, Professor of Business Administration at Harvard Business School, in 2001.

"When we first started, we said there is no existing market for Red Bull. But Red Bull will create it. And this is what finally became true." 2

- Dietrich Mateschitz, Founder and Managing Partner of Red Bull GmbH, in 2005.

Red Bull Acquires Second F1 Team

In September 2005, Red Bull GmbH, the manufacturer of the Red Bull energy drink, acquired Minardi, an Italy-based Formula One (F1)3 team for an undisclosed amount.

Dietrich Mateschitz (Mateschitz), the founder and managing partner of the company said that the Minardi team would continue under the existing management4 till the end of 2005, after which it would be renamed for the 2006 racing season. Red Bull GmbH already owned another F1 team, Red Bull Racing, at the time it acquired Minardi.

Red Bull Racing had participated in F1 as Jaguar Racing, until Mateschitz bought it from its previous owner, the Ford Motor Company (Ford) in November 2004. After the acquisition of Minardi, Mateschitz announced that Red Bull Racing would be the company's main team, and the newly acquired Minardi (renamed Scuderia Toro Rosso (STR)5 for the 2006 racing season) would serve as the 'rookie team' in 2006. Red Bull GmbH intended to use the team to train young drivers sponsored by the company.

Red Bull, widely acknowledged as the creator of the 'energy drink'6 category, maintained a close association with sports from the time it was launched in 1987. Red Bull GmbH was known for its sponsorship of extreme, alternative sports like white water kayaking, hand gliding, wind surfing and snowboarding -sports that involved elements of adventure and risk. Red Bull's association with F1 Racing, one of the world's most glamorous and expensive sports, also helped enhance its image as a trendy drink. Analysts said that the company's sponsorship of extreme sports that required stamina and energy was also just right for the image of the beverage.

For a product that did not have any extraordinary qualities, and was made of ingredients whose effects had often been called into question,7 Red Bull had a huge market presence. The company was reported to hold almost 70 percent of the worldwide market for energy drinks in 2005. Analysts attributed the beverage's success to the unconventional marketing strategy adopted by the company to promote it in new markets.

Background

Dietrich Mateschitz was born in 1944 in Austria, to parents who were primary school teachers. After graduating with a marketing degree from the University of Commerce in Vienna, he took up marketing jobs at Unilever and Jacobs Coffee, before becoming the international director for marketing at Blendax, a German company that dealt in FMCG products like toothpaste, skin creams and shampoos, in 1979. Mateschitz's job involved a lot of travel around the world, and during one of his trips to Thailand, he discovered an 'energy

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drink' called Krating Daeng, which was very popular among blue collar workers in the country

When he sampled it, Mateschitz reportedly discovered that the drink was good at combating jetlag. The idea for marketing an energy drink in Western markets came when he realized that energy drinks had a huge market in Asia and that there was no such product available in Europe.

These events were major attractions and were considered crucial for the business of fashion. Fashion weeks served as a platform for the entire fashion industry to display the upcoming seasons' collections to trade buyers (retailers, buying houses, wholesalers, etc.), the media, and individual customers. The central idea behind a fashion week was to showcase representative samples to the trade - quite unlike individual 'couture' fashion shows which tended to be more social/theatrical in nature. The 'all-business' nature of fashion weeks makes them popular among buyers who attend them to preview, plan, and order their lines for the next season.

Mateschitz approached Chaleo Yoovidhya (Yoovidhya), the owner of TC Pharmaceuticals, which made Krating Daeng, with a proposal to market the beverage in Europe. Yoovidhya agreed to give Mateschitz the foreign licensing rights to the drink in return for a partnership in the venture. In 1984, Mateschitz resigned from his job to pursue his new business.

Mateschitz and Yoovidhya each invested $500,000 to become equal partners, with a 49 percent stake each, in the new company. The remaining two percent was held in trust for Yoovidhya's son. The founders agreed that Mateschitz would run the company, while the Thais remained sleeping partners...

Elements of Red Bull's Marketing Strategy

Red Bull was generally acknowledged by marketing experts to be a good example of an ordinary product of uncertain worth that was transformed into a powerful brand through innovative marketing.

The emphasis Red Bull placed on marketing was evident from the fact that the company spent around 30 percent of its annual turnover on marketing - much higher than most other beverage manufacturers who spent approximately 10 percent. Red Bull was positioned as an energy drink that 'invigorated mind and body' and 'improved endurance levels'

The company's slogan 'Red Bull gives you wiiings' reinforced this positioning. The beverage was targeted at people who sought increased endurance, speed, concentration and alertness (Refer Table I for the 'benefits' of Red Bull as claimed by the company)...

Controversies

Red Bull had been a controversial product right from the start.

When Mateschitz first planned to launch the beverage in Europe, he had to wait for three

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years to get approval in Austria, his home country.

After that, it took another five years before it could be sold internationally, and Hungary became Red Bull's first foreign market in 1992. Red Bull's launches in new markets were almost always preceded by controversy, usually centering on the nature of the ingredients in the drink.

While exotic ingredients were acceptable in many Asian markets where food regulations were not stringent, in Europe, the beverage faced difficulties in getting approval from the authorities. As of 2006, Red Bull was banned in France and Denmark. In Norway, it was classified as a medicine that could only be sold in pharmacies.

The most controversial ingredient in Red Bull was taurine. Taurine, an acidic chemical substance, was an untested food product in many western countries and was thought by some to be harmful. The controversies were further fuelled by rumors that taurine was actually derived from the bile of bulls...

Threats to Continued Success

Red Bull was a market leader in its category in the early 2000s, garnering strong sales in its various markets around the world. Nevertheless, analysts were skeptical about the company's continued survival and growth as there were several factors threatening the brand's long term prospects.

Red Bull's success had spawned a spate of imitators, all wanting to cash in on the booming energy drinks market. Some of the knock-offs even had names that evoked the Red Bull brand -Red Tiger and American Bull being notable examples.

The US itself saw the launch of brands like Red Devil, NRG, Eclipse, Blue Ox, Niagara, Dynamite, Red Rooster, Energy Rush, SoBe Adrenaline Rush, Mad Croc, Hansen's Functional, and Jones Whoop Azz, among others, in the energy drinks market during the early 2000s. Not to be left behind, certain American celebrities like rap stars Cornell Iral Hayes, Jr. (known as Nelly) and Jonathan Smith (known as Lil Jon) also came out with their own brands. Nelly launched an energy drink called Pimp Juice, while Lil Jon launched the Crunk brand.Overall, it was estimated that as of 2005, there were 125 players in the energy drinks market in the US.

Major beverage companies like Coke, Pepsi and beer major Anheuser-Busch had also come out with new energy drinks. Coke and Pepsi launched KMX and AMP respectively, while Anheuser-Busch launched 180, in the early 2000s. Analysts said that competition from big companies might affect Red Bull, as these companies, with their greater spending power, had the potential to give the brand a run for its money. "Strategically, Red Bull could be vulnerable to such giants as Coca-Cola and Pepsi, which can't sit back and simply do nothing," said John Hudson, coordinator of the graduate business school at the University of Palermo. "They could wind up competing in the same segment. It would be hard to fight that battle."

Exhibit

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Exhibit I: Krating Daeng -The Thai Red BullExhibit II: Red Bull's IngredientsExhibit III: Red Bull Racing's F1 2005 CarExhibit IV: Red Bull Energy DrinkExhibit V: A Red Bull Print ADExhibit VI: Top Energy Drinks in the US by Brand - 2004Exhibit VII: 2005 Forbes -Vivaldi Partners Next Generation Growth Brands

References:

1] Anni Layne Rodgers, " It's a (Red) Bull Market After All," Fast Company, October 2001.

2] Kerry A. Dolan, "The Soda with the Buzz," Forbes, March 28, 2005.

3] Formula One, abbreviated to F1, and also known as Grand Prix racing, is the highest class of single-seat open-wheel formula auto racing in the world. The 'formula' in the name is a set of rules which all participants and cars must meet. http://en.wikipedia.org

4] Minardi was then owned by Australian millionaire Paul Stoddart.

5] Scuderia Toro Rosso means 'Red Bull Stable' in Italian.

6] Energy drinks are beverages that generally contain legal stimulants, vitamins, and minerals. Most of them contain taurine and glucuronolactone, and a high content of caffeine and sugar or glucose. Many energy drinks are flavored and/or colored to resemble soft drinks.

7] Red Bull's main ingredients taurine and glucuronolactone are extremely controversial.

……………………………………………………………………………………………………………………………………………

Snapple's Marketing - An Unconventional Brand's Claim to Fame

Case Details: Price:Case Code : MKTG148 For delivery in electronic format: Rs. 400;

For delivery through courier (within India): Rs. 400 + Rs. 25 for Shipping & Handling Charges

 

Themes

Brand Management

Case Length : 23 PagesPeriod : 1972-2006Organization : Snapple Beverage

Corporation, Quaker Oats, Triarc Group of Companies, Cadbury Schweppes Plc.

Pub Date : 2006Teaching Note : AvailableCountries : USAIndustry : FMCG

Abstract:

Snapple was a popular beverage brand in the USA and several other parts of the world. The brand was launched by the Unadulterated Food Company in New York, in 1972. Over the years, Snapple came to be known for its unconventional promotional efforts which

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earned the brand a substantial fan following.

The Snapple Beverage Corporation became one of the first companies to enter the ‘New Age Beverages'market, which included non-carbonated drinks like tea and juices in the late 1980s. Snapple changed hands several times over the years. However, barring a few bad years, the brand remained very popular among consumers.

This case discusses the growth of the Snapple brand under the management of the various companies that owned it at different times. It also talks about Snapple's sales decline under the management of Quaker Oats, and how Triarc, which took over the brand subsequently, managed to revive Snapple's image before selling it to Cadbury Schweppes. The case concludes with a commentary on Snapple's inability to become a leading beverage brand despite its strong fan following.

Issues:

» To understand how unconventional marketing can transform an ordinary product to a popular brand.

» To examine how an unconventional brand managed to tackle competition from brands from other corporate entities that followed more professional (and conventional) marketing practices.

Keywords:

Snapple, Cadbury Schweppes, New age beverages, Grassroots marketing, Ready-to-drink tea, Brand management, Unconventional marketing, Quaker Oats, Target market, Triarc, Celebrity endorsements, Distribution, Promotion, Brand revival, Brand loyalty

We don't always do things in an expected way and we always are looking for distinctive opportunities where our brand can appear. It's that little bit of element of surprise. You'll see us on pizza boxes. You might see us in a fortune cookie. Those are just some of the ways that we connect with our consumers."1

- Sheryl Adkins-Green, former Senior Vice President of Marketing, Snapple Beverage Group, in July 2003.

"We're not in the soft-drink business; we're in the fashion business."2

- Michael Weinstein, former CEO of Triarc Beverages Corporation, in December 1998.

Snapple - The Real Fact!

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On June 29, 2006, the Snapple Beverage Group (SBG), owned by Cadbury Schweppes Plc.3 (Cadbury Schweppes), launched its 'Snapple White Tea'4 with a unique representation of the product's characteristics.

In an event held at New York City's Bryant Park, the company harnessed several volunteers to helium balloons and let them rise several feet into the air. The event was intended to emphasize the attributes of its newly launched white teas, which were touted as the 'Lightest Teas on Earth'.5 Snapple announced that it would hold similar events in other cities across the US over the next few months to promote the white teas.

This was just one of Snapple's many unconventional efforts over the years to promote the brand. Since its launch in 1972, Snapple had captured the interest of professional marketers with its unconventional approach to promotion.

So much so that it was widely believed that taste was not the only reason for the popularity of Snapple's range of juices and iced teas - the brand's innovative promotions and advertisements were believed to be equally responsible for making it a favorite with the public.

Snapple was regarded as a 'fun' brand. As of mid-2006, the Snapple range was available in the US and in about 80 other countries around the world.

Snapple changed hands several times between 1992 and 2000. The Quaker Oats Company (Quaker)6, which acquired Snapple in 1994, did away with the off-beat marketing associated with the brand. Consequently, Snapple sales declined dramatically during the period the brand was with Quaker, and revived only after the next acquirer, the Triarc Group of Companies (Triarc)7, restored its 'wacky' image. Even after Snapple was acquired by Cadbury Schweppes in 2000, it continued to be promoted in an off-beat manner.

Background

In 1972, childhood friends Leonard Marsh, Hyman Golden, and Arnold Greenberg, set up a company that they named Unadulterated Food Products Inc. (UAF) to sell pure fruit juices in the New York area.

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They launched a range of juices, with names like Passion Supreme, Vitamin Supreme, Apple Crisp, and Cranberry Royale. In 1978, they paid $500 to a Texas company for the name "Snapple". The name was given to their carbonated apple drink which, however, did not do well in the market. The name was later extended to all their beverage products, and eventually, the name of the company itself was changed to Snapple Beverage Corporation (SBC).

In the late 1970s, there were many companies that manufactured and sold juices and health drinks, but Snapple stood out from the rest because of its unconventional marketing and distribution strategies.

From the beginning, the brand had differentiated itself from other beverages with its ‘amateurish'approach to marketing. By 1982, UAF added many more varieties of juices to its product portfolio in the non-carbonated drinks segment, which had remained untapped until then. By 1986, UAF had started distributing juices and health drinks through health stores. In 1987, the company launched Snapple iced teas, which became an instant success as the ready-to-drink8 tea segment was also a fledgling segment till then.

In 1994, Quaker purchased Snapple for $1.7 billion9, in a major move to strengthen its beverage portfolio, which at that time consisted only of the leading sports drink Gatorade.10 By then, Snapple's sales had risen to $700 million.11

However, according to analysts, the acquisition turned out to be one of the greatest debacles in the history of corporate mergers and acquisitions.

They said that the takeover was mistimed as Snapple's sales growth had just begun to slow down in the tea category after PepsiCo Inc. (Pepsi)12 and the Coca-Cola Company (Coca-Cola)13 had launched their tea products in the early nineties.14

Excerpts

Snapple Over the Years

Snapple had become popular over the years because of its unconventional promotion methods. Unlike beverage behemoths Pepsi and Coca-Cola who stuck to conventional marketing practices, Snapple adopted a more offbeat approach to promotion and followed a grassroots marketing strategy...

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Snapple's Beginning

From the beginning, Snapple was an unconventional brand. In the initial days of the brand, the company did not have much money to spend on traditional marketing campaigns. The owners therefore adopted an unconventional approach to promote the beverage. Consequently, everything about the beverage, from the name to the packaging and the advertisements was 'anti-establishment'. This unconventionality set it apart from traditional beverage brands, and won it loyal customers.

SBC's founders claimed that its juices contained only natural ingredients, except for the diet variants which contained artificial sweeteners.

The “If it's not found in nature it's not found in Snapple,” tagline was used across all product categories. (The tagline was later changed to “Made from the best stuff on earth”)...

The Quaker Debacle

Quaker purchased Snapple in 1994 to capitalize on the synergies between Snapple and Gatorade. Apparently, Quaker believed that it had the financial resources to expand Snapple's market. The company had already had a successful experience with Gatorade, which it had turned into a powerful global brand after purchasing it from Stokely-Van Camp, a canned foods company, in 1983. Reportedly, much of Quaker's success with Gatorade had come from its use of a traditional ‘textbook'approach to marketing the product. Quaker used the same strategies to market Snapple...

The Triarc Turnaround

Triarc acquired Snapple in early 1997, for $300 million. The company added Snapple to its beverages portfolio which already included the Mistic, Stewart's, and the Royal Crown brands. In May 1997, when Triarc bought Snapple, its sales were 42 million cases. Triarc named Mike Weinstein (Weinstein) as CEO of its beverages division and Kenneth Gilbert (Gilbert) as senior vice president of marketing...

The Cadbury Schweppes Acquisition

Triarc had reestablished Snapple as one of the

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leading ready-to-drink tea and juices brands by the time Cadbury Schweppes took over SBG. Snapple had a 28% market share in the premium beverages category as of mid-2000.

Cadbury Schweppes continued with Snapple's unconventional marketing. After the acquisition, Gilbert decided to take a break, and Weinstein was given an extended contract with SBG, but he too did not remain with the company for long. The changes in management did not affect Snapple's growth, as Cadbury Schweppes continued from where Gilbert and Weinstein had left off, in terms of branding and positioning...

Conclusion

Snapple was considered by many to be a good example of a conventional product that was marketed in an unconventional fashion. Over the years, the brand used various innovations and marketing strategies to remain popular in the market, and also built up a loyal fan following...

Exhibits

Exhibit I: Snapple's Portfolio of Drinks in 2006Exhibit II: Snapple's Retired FlavorsExhibit III: Snapple's Fruits Ad in 2001Exhibit IV: Sales and Market Shares of Ready-to-Drink Tea Brands in U.S.A in 2002Exhibit V: Snapple Kiwi Teawi Iced TeaExhibit VI: A Screenshot from Snapple's 'Real Experiences' Ad CampaignExhibit VII: Examples of Snapple Real Facts

References:

1] "The Snapple Lady," www.reveries.com, July 21, 2003. (Accessed on August 16, 2006)

2] Nikhil Deogun, "Snapping Back," The Wall Street Journal, December 14, 1998.

3] Cadbury Schweppes, a British confectionary and beverages manufacturer, owns many international companies spread across 200 countries. As of mid-2006, the company was the third largest beverages producer in the world behind Coca-Cola and PepsiCo, with annual revenues of $ 11.2 billion as of December 2005.

4] Snapple white teas were naturally light because they were made from leaves that were

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plucked from the first tender buds of the plant. Snapple launched its white teas in three flavors - Raspberry, Green Apple and Nectarine.

5] "Snapple Flies High," www.snapple.com/news shack, June 29, 2006 (Accessed on August 11, 2006).

6] Quaker Oats was a leading producer of cereal based breakfast foods and the leading sports drink - Gatorade. It was purchased by PepsiCo in 2000.

7] Triarc held diverse businesses like textile manufacturing, propane distribution, chemical and dyes, beverages business and Arby's quick service restaurants.

8] Ready-to-drink teas include both hot and iced tea.

9] Dollars ($) refers to US dollars in this case study.

10] Gatorade, a leading sports drink brand, is meant to re-hydrate and replenish carbohydrates and electrolytes. Though it was originally targeted at athletes, non-athletes also consumed the drink. It was marketed by Quaker Oats Company, which was acquired by PepsiCo in 2001. Source :www.wikipedia.org (Accessed on August 28, 2006)

11] "Quaker's Sale of Snapple Ends One of the Worst Merger Flops in History," Weekly Corporate Growth Report, www.findarticles.com, April 21, 1997. (Accessed on August 21, 2006)

12] PepsiCo is a global manufacturer and marketer of beverages and food. It was the world's number 2 carbonated soft-drinks maker in 2006.

13] Coca-Cola Company is the leading beverages manufacturer and marketer, and as of 2006, produced the world's Number 1 carbonated drink, Coca-Cola.

14] "Quaker's Sale of Snapple Ends One of the Worst Merger Flops in History," Weekly Corporate Growth Report, www.findarticles.com, April 21, 1997. (Accessed on August 21, 2006)

Naming a Pharmaceutical Brand: A Product Manager's Dilemma

Case Details: Price:Case Code : MKTG149 For delivery in electronic format: Rs. 100;

For delivery through courier (within India): Rs. 100 + Rs. 25 for Shipping & Handling Charges

Themes

Brand Management, Marketing Mix, Positioning

Case Length : 05 PagesPeriod : Not ApplicableOrganization : Not ApplicablePub Date : 2006Teaching Note : AvailableCountries : IndiaIndustry : Pharmaceutical

Abstract:

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The case is about the dilemma faced by Ramesh Nayar (Ramesh), a product manager of a medium sized pharmaceutical company in India. X-Neuro, a vitamin supplement used in the treatment of certain neurological disorders as an adjunct to standard therapy was a key brand in his portfolio. The drug was popular with its target segment comprising of neurologists and physicians.

However, when the company launched a brand extension of the drug, called as X-Neuro Plus, by adding two more vitamins to the existing composition, the new product did not make any headway with its target segment, the gynecologists.

The case describes the issues with regard to the name of the brand extension of the drug, which led to the product's failure in the market. The case also looks at the various options before Ramesh and the likely pros and cons of each course of action. This case is based on generalized experience of the authors.

Issues:

» Understand the issues and constraints faced by marketers with regard to deciding on a suitable brand name or any brand extension for a pharmaceutical drug.

» Appreciate the importance of customer interaction and understanding the behavior of the target customer segment.

» Understand the issues and constraints faced by a product manager in re-naming or withdrawing a pharmaceutical product from the market.

Keywords:

Brand Management , Consumer Behavior, Physician Prescribing Behavior, Brand Extension, India, Pharmaceutical Marketing, Segmenting and Targeting , Positioning , Brand Recall, Marketing Research, Combination Drug Trial, Sales Representative, Marketing Communication Strategy, Teaser Campaign, Yield per man

Ramesh Nayar (Ramesh) was having sleepless nights over how to increase the sales of his new brand X-Neuro Plus.

Ramesh was a product manager in a medium sized pharmaceutical company in India, and X-Neuro Plus was a brand extension of X-Neuro, one of the star brands in his portfolio. X-Neuro Plus had failed to live up to the high expectation of sales from gynecologists , who were the

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primary target segment.

The sales of the brand in the first three months after its launch were dismal, and way off the initial projections.

X-Neuro was used as a vitamin supplement in the treatment of certain neurological disorders; it was used as an adjunct to standard therapy.

The drug was popular with its target segment - physicians and neurologists. Its brand name too was a good fit with the neurological disorders for which the company had positioned the brand.

Ramesh often pointed this out to the sales force during sales review meetings and training programs. During the previous year's annual brand strategy meeting, he had said, “X-Neuro is synonymous with the (neurological) disorder it is intended for. Doctors say that its brand name is quite apt. Whenever they diagnose the disorder, they remembered X-Neuro.” Within a few years of its launch, X-Neuro had cornered 12 percent of the market, despite the intense competition. As it was a widely prescribed drug, it enjoyed good brand recall among members of the medical fraternity. Even doctors who did not prescribe this drug were aware of X-Neuro.

In May 2005, a clinical study showed that the addition of two other vitamins to the composition of X-Neuro made it a very good supplementary drug for treating some rare neurological and cardiovascular disorders. As these disorders were rare, the demand for this combination drug would be quite limited.

Ramesh put forward a proposal to launch this combination as a brand extension of X-Neuro. Ramakant Desai (Desai), the Managing Director of the company quickly shot down the proposal...

Nike's "Joga Bonito" Marketing Campaign

Case Details: Price:Case Code : MKTG150 For delivery in electronic format: Rs. 500;

For delivery through courier (within India): Rs. 500 + Rs. 25 for Shipping & Handling Charges

Themes

Advertising and Promotion, Brand

Case Length : 27 PagesPeriod : 2001-2006Organization : Nike Inc.Pub Date : 2006Teaching Note : AvailableCountries : Europe, USAIndustry : Footwear

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Management

Abstract:

This case is about Nike's "Joga Bonito" campaign for the 2006 FIFA World Cup that was held in Germany from June 09, 2006 to July 09, 2006. Through its Joga Bonito (Play Beautiful) campaign, Nike sought to promote the beautiful aspects of the game of football such as creative play, professionalism, courage, and team spirit.

It was a multi-pronged campaign, which comprised of a series of advertisements (ads) that featured a number of football superstars, an online TV channel dedicated to football called Joga TV, a social-networking website, Joga.com, and a Joga3 futsal tournament.

The case discusses the reasons that made Nike develop and launch this campaign and the competition it faced from Adidas. The case also discusses the reactions of fans and media analysts to the campaign.

Issues:

» Understand the advertising and marketing strategies adopted by global athletic footwear giants like Nike and Adidas to cash in on the popularity of the FIFA World Cup

» Critically analyze the pros and cons of Nike's Joga Bonito campaign for the 2006 FIFA World Cup

» Understand the increasing importance of online social communities and digital media as a cost effective tool for marketing communication

Keywords:

Nike and Adidas, FIFA Football World Cup, Joga.com, Ambush Marketing, Official Sponsor, online social communities , marketing communication, Advertising, Brand Management, social-networking, digital media, Futsal, Sponsorships, Team Jersey, Team Kits, Puma

"That (Joga Bonito campaign) goes way beyond somebody saying, ‘Oh, yeah, I saw a commercial' …Gone are the days where you can put an ad out and hope people see it. Anyone who doesn't understand the change in the landscape does so at their own peril."1

- Trevor Edwards, vice president for global brand marketing, Nike, Inc., in May 2006.

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"By enrolling consumers in shaping the marketing, Nike is figuring out what kind of microcontent audiences want and nurturing deeper bonds of loyalty and advocacy."2

- Pete Blackshaw, chief marketing officer, Nielsen BuzzMetrics3, in July 2006.

"Beyond its nakedly commercial intent, Nike's Joga Bonita strategy seems like a rather poignant attempt to impose a "play ethic" - no diving, no faking, no arguing; all skill, all imagination, all daring - on a game whose players are much less purist and noble, much more flexible and calculating, than even those figures venerated in the adverts."4

- Pat Kane, writer and creativity consultant, in July 2006.

Nike and the Beautiful Game

In March 2006, Nike, Inc. (Nike), the world's largest athletic shoe manufacturer5, and Google Inc.6 (Google) announced the launch of Joga.com, a social networking website for football7 fans across the world. This was part of Nike's "Joga Bonito" campaign, the company's global marketing initiative during the build up to the 2006 FIFA8 World Cup (2006 World Cup) to be held in Germany from June 09, 2006 to July 09,2006.

Through its Joga Bonito campaign, Nike sought to promote the beautiful aspects of the game of football such as creative play, professionalism, courage, and team spirit."Joga Bonito" is a Portuguese phrase that translates into "play beautifully" in English.

It was a multi-pronged campaign, which comprised of a series of advertisements (ads) that featured a number of football superstars, an online TV channel dedicated to football called Joga TV, and the social-networking website, Joga.com. As a part of the campaign, Nike also organized a Joga3 tournament, a short-field 3-on-3 futsal9 game.

Football, the world's most popular sport, is widely referred to as "The Beautiful Game". Prior to the start of the 2006 World Cup, Infront Sports & Media10 (Infront), the official holder of the broadcast rights for the event, said that the event would be broadcasted to over 200 countries and territories. Infront projected a cumulative viewing audience of 32.5 billion, which was a 10 percent increase over the 2002 World Cup11. Marketers were keen to showcase their brands and reach out to this huge captive audience. In addition to being a widely watched

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sport, the global market for branded football-related sports products was estimated to be approximately 2.5 to 2.6 billion euros12 (around US$ 3.3 billion) in 2005.

"That (Joga Bonito campaign) goes way beyond somebody saying, ‘Oh, yeah, I saw a commercial' …Gone are the days where you can put an ad out and hope people see it. Anyone who doesn't understand the change in the landscape does so at their own peril."1

- Trevor Edwards, vice president for global brand marketing, Nike, Inc., in May 2006.

"By enrolling consumers in shaping the marketing, Nike is figuring out what kind of microcontent audiences want and nurturing deeper bonds of loyalty and advocacy."2

- Pete Blackshaw, chief marketing officer, Nielsen BuzzMetrics3, in July 2006.

"Beyond its nakedly commercial intent, Nike's Joga Bonita strategy seems like a rather poignant attempt to impose a "play ethic" - no diving, no faking, no arguing; all skill, all imagination, all daring - on a game whose players are much less purist and noble, much more flexible and calculating, than even those figures venerated in the adverts."4

- Pat Kane, writer and creativity consultant, in July 2006.

Nike and the Beautiful Game

In March 2006, Nike, Inc. (Nike), the world's largest athletic shoe manufacturer5, and Google Inc.6 (Google) announced the launch of Joga.com, a social networking website for football7 fans across the world. This was part of Nike's "Joga Bonito" campaign, the company's global marketing initiative during the build up to the 2006 FIFA8 World Cup (2006 World Cup) to be held in Germany from June 09, 2006 to July 09,2006.

Through its Joga Bonito campaign, Nike sought to promote the beautiful aspects of the game of football such as creative play, professionalism, courage, and team spirit."Joga Bonito" is a Portuguese phrase that translates into "play beautifully" in English.

It was a multi-pronged campaign, which comprised of a series of advertisements (ads) that featured a number of football superstars, an online TV channel dedicated to football called Joga TV, and the social-networking website, Joga.com. As a part of the campaign, Nike also organized a Joga3 tournament, a short-field 3-on-3 futsal9 game.

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Football, the world's most popular sport, is widely referred to as "The Beautiful Game". Prior to the start of the 2006 World Cup, Infront Sports & Media10 (Infront), the official holder of the broadcast rights for the event, said that the event would be broadcasted to over 200 countries and territories. Infront projected a cumulative viewing audience of 32.5 billion, which was a 10 percent increase over the 2002 World Cup11. Marketers were keen to showcase their brands and reach out to this huge captive audience. In addition to being a widely watched sport, the global market for branded football-related sports products was estimated to be approximately 2.5 to 2.6 billion euros12 (around US$ 3.3 billion) in 2005.

Football was one of the few sports where Nike, the most widely recognized sports brand in the world, trailed behind its arch-rival Adidas-Salomon AG (Adidas)13. Adidas was the official sponsor of the 2006 World Cup. Wiser from its experience in previous World Cups and other sporting events, Adidas was prepared to block any attempt at "ambush marketing"14 by Nike.

Adidas spent an additional US$ 175 million to try to preempt any ambush marketing attempts by Nike during the World Cup. It bought up most of the airtime and billboard space, in order to shut Nike out of most of the traditional media for the duration of the event.

FIFA too announced that it was better prepared to clamp down on any form of ambush marketing and protect its official sponsors. However, Nike's Joga Bonito campaign was designed to sidestep this constraint and target the company's core group of consumers, young males, through non-traditional media like the Internet...

Background Note

In 1957, Phil Knight (Knight), an undergraduate student and middle-distance athlete at the University of Oregon and Bill Bowerman (Bowerman), his athletics coach, realized the need for a good quality American sports shoe. After graduation, Knight joined the Graduate School of Business at Stanford University. While preparing a class assignment paper, Knight hit upon the idea that low cost, high quality running shoes, imported from Asian

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countries like Japan, where labor was cheap, could be sold in the US and could end Germany's domination of the sports shoe industry...

Adidas - The Official Sponsor

For the 2006 World Cup, 15 companies were selected by FIFA as the official sponsors of the event (Refer to Exhibit V for a list of the 15 official sponsors). It was estimated that each sponsor had paid amounts ranging between US$ 38 million to US$ 63 million to be associated with the event as an official sponsor.

Adidas was one of the main official sponsors of the World Cup. Adidas had dominated the football sports goods market ever since the 1950s. Adidas also held the distinction of being the official sponsor in all the FIFA World Cups held since 1978. For the 2006 World Cup, Adidas reportedly spent US$ 200 million on its World Cup campaign, which included its efforts to block Nike out of TV ads in Canada and the US...

Bend It Like Nike

Nike began to show interest in the football market during the 1994 World Cup, which was held in the US. Analysts noted that Nike, despite being a late entrant, had managed to corner a large share of the market and was now second to Adidas. (Refer to Figure I for global market share in athletic footwear and Figure II for global market share in football)...

The Joga Bonito Campaign

In July 2005, Nike made its intentions clear about what it wanted to achieve through the 2006 World Cup. In a letter to all its retailers worldwide, Nike wrote: "The new season for Spring 06 will serve as the platform for launching Nike into the number one soccer brand in the US and the globe ... Prepare yourself and your business for a historic ride." Reiterating the importance of gaining the market leadership in the football market, Denson said, "Football is the No. 1 played sport, and so if we want to stay the No. 1 company in the industry,

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we are going to have to be No. 1 in football."

Nike Scores A Beautiful Goal...

In June 2006, Nike announced that its Joga Bonito campaign had struck a chord with consumers, given the record traffic to Nikefootball.com. The site recorded two million visits per week. The Joga Bonito site received 760,000 visits a week. The company claimed that 448,000 people participated in its Joga3 futsal tournaments...

...Or a Self-Goal?

Nike's critics, on the other hand, felt that the Joga Bonito campaign put style above substance. They said that Nike had created a community around football players who could play artistic football but did not give any credit to the less glamorous tasks that are equally important to the game. For instance, the site does not give any credit to defenders who save goals by making hard tackles. Some critics felt that Joga.com would appeal only to kids and people new to the sport, but not to serious supporters and die-hard fans of football.

Critics also felt that Nike's campaign was dampened by its association and over-dependence on the Brazilian team.

Outlook

Nike and Google said that they would closely watch how Joga.com fared. If it did well, they planned to launch similar sites for basketball, baseball, skateboarding, and other sports. The success of this network would depend on whether Nike succeeded in convincing the fans that Joga.com was not a mere marketing site for Nike. "It has to be of the people and authentic and credible. It's a self-governing community. Our job is to feed it, help it start, but then they'll fuel it. It's a long-term way of connecting with consumers," said Edwards...

Exhibits

Exhibit I: The Swoosh - Nike's LogoExhibit II: Key Financials of Nike Exhibit III: Nike's Key Financials (2001-2005)Exhibit IV: Nike's Revenue Distribution (Fiscal Year 2001 vs. 2005)Exhibit V: List of Official Sponsors of Fifa World Cup 2006Exhibit VI: Adidas' Logo

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Exhibit VII: The "Impossible Team" Campaign of AdidasExhibit VIII: Teams Sponsored by Nike, Adidas and Puma in 2006 World CupExhibit IX: Nike's Joga Bonito Ad Campaign

Exhibit X: Screenshot of www.joga.comExhibit XI: The Joga CompanionExhibit XII: Team-Kits of the Teams Sponsored by NikeExhibit XIII: Nike's Controversial Ad Featuring Wayne Rooney

References:

1] Sean Gregory, "Global Game," www.time.com, May 14, 2006.

2] "Nike: It's Not a Shoe, It's a Community," www.businessweek.com, July 24, 2006.

3] Nielsen BuzzMetrics is a leading provider of technologies and services that help companies to measure and analyze the performance of their brands on the Internet. (Source: http://www.nielsenbuzzmetrics.com).

4] Pat Kane, "Let Football Eat Itself," http://commentisfree.guardian.co.uk, July 18, 2006.

5] "Nike and Oregon City Hope to Get Along Again," http://www.iht.com, October 02, 2006.

6] Google, Inc. was co-founded by Sergey Brin and Larry Page in 1998. Google is the world's most popular Internet search engine and has a diversified range of products such as E-mail, blogs, etc.

7] Also known as association football or soccer.

8] The FIFA World Cup (commonly referred to as the football World Cup) is an international football competition contested by the men's national football teams of member nations of the Fédération Internationale de Football Association (FIFA), the sport's global governing body. The event is held every four years.

9] Futsal is the indoor version of association football.

10] Infront Sports, headquartered at Zug, Switzerland, is a leading international sports marketing company and specialist service provider to sport. It has offices in nine countries: Switzerland, Austria, Germany, Finland, Sweden, France, UK, Singapore and China.

11] "Record Broadcast Coverage for 2006 FIFA World Cup," www.infrontsport.com, June 07, 2006.

12] "Adidas to Buy Reebok, Challenge Nike," www.dw-world.de, August 03, 2005.

13] Adidas (founded in 1948 by Adi Dassler) is a German company that manufactures athletic shoes, apparel and sporting goods. In 2006, Adidas was the second largest manufacturer of sporting goods, behind Nike. Its 2005 revenues were 6.64 billion euros and its net income was 383 million euros. In

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August 2005, Adidas announced that it would acquire the US-based Reebok International Limited (Reebok) for US$ 3.8 billion.

14] Ambush marketing (or guerrilla marketing) is a tactic whereby a company attempts to associate itself or its brand with an event (often a sporting event) in order to gain some of the benefits associated with being an official sponsor without incurring the costs of sponsorship.

Tata Indica V2 Xeta: Competing in the Indian Small Car Market

Case Details: Price:Case Code : MKTG177 For delivery in electronic format: Rs. 400;

For delivery through courier (within India): Rs. 400 + Rs. 25 for Shipping & Handling Charges

Themes

Marketing Strategy / New Product Development / Brand Management

Case Length : 28 PagesPeriod : 2006 - 2007Pub Date : 2007Teaching Note : AvailableOrganization : Tata Motors LimitedIndustry : AutomobileCountries : India

Abstract:

This case is about the marketing strategy undertaken by Tata Motors Limited, (the market leader in commercial vehicles in India, and one of the major players in the passenger vehicles segment), in 2006 to sustain and enhance its market share in the burgeoning passenger car market. In January 2006 the company launched the Indica V2 Xeta Petrol (Xeta) car as a refurbished version of its existing petrol car Indica V2 Petrol MPFI. According to the company, Xeta was to benefit the customer by better meeting their needs compared to existing options in the market - specifically by rendering better fuel efficiency at a competitive price. Indica was an umbrella brand under which Tata Motors had developed both diesel and petrol cars.

Though the diesel driven Indica was performing well, its petrol counterpart - Indica V2 Petrol MPFI, had not reaped the intended results. Through Xeta, the company intended to create a unique brand identity in the customer's mind for the petrol variant of Indica.

Immediately after the launch of Xeta in January 2006, the passenger car business unit of Tata Motors reported a growth of 15 percent over January 2005 by selling the highest number of passenger cars till then. The Indica brand grew by 18.7 percent which was attributed mainly

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to the launch of Xeta. This success also coincided with the growing attractiveness of India as a global hub for small cars. The entry of Tata Motors' immediate rivals like Maruti Udyog Limited and Hyundai Motor India Limited into the diesel segment of the small car market was also expected to pose a strong challenge for the company.

This case discusses the rationale behind the development and launch of the Xeta. It also examines the product, pricing, distribution, and promotional strategies undertaken in this regard and the challenges faced by the company in sustaining its market share in the Indian passenger car market.

Issues:

» Understand the strategy adopted by Tata Motors to sustain the Indica brand in the highly competitive small car market in India

» Understand the rationale behind the launch of Indica V2 Xeta as an extension of the Indica umbrella brand

» Analyze the various marketing aspects that Tata Motors had to focus on in order to establish the Xeta in the Indian small car market

Keywords:

Tata Motors Limited, Automobile Industry, Automotive, Tata Indica, passenger car market, Tata Group, Petrol Diesel Engine, Tata Indigo, eXtra Efficiency Torque Advantage, Marketing Management, Indica V2 Xeta Petrol, New Product Development, Pricing Strategy, Promotional Strategy, Maruti Udyog Limited, Hyundai Motor India Limited, Launch, Retail network, Global Manufacturing Hub, India, Honda Motor Company, Toyota Motors

"The Tata Indica story resembles the fable of the ugly duckling in some ways, with one crucial difference: the country's first indigenously designed and manufactured passenger car never looked less than pretty. But, like the duckling of the fairy tale, it has emerged stronger and more beautiful than ever after overcoming global competition and a recessionary market."1

- K. A. Ananthram and Mohini Bhatnagar, independent columnists, in October 2000.

"All of us knew we would have to go through the learning curve. Our effort has always been to shorten that curve and get ahead of the competition. We never lost sight of our goal, which was to provide the customer with a product (Indica) that offers the best value for money."2

- Rajiv Dube, Senior Vice-President (Manufacturing & Commercial - Passenger Cars Business Unit), Tata Motors Limited, in October 2000.

"Tata Motors has always been known as a diesel carmaker, despite the fact that they know petrol too. Tata now wants to shake off that image and plant the Indica firmly in the minds of petrol punters too. And this is precisely the reason for the new Xeta variant."3

- Siddhraj Singh, an auto-analyst with Autocar India, in 2006.

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Introduction

In January 2007, it was reported that Tata Motors Limited (Tata Motors) beat close rival Hyundai Motor India Limited (HMIL)4 to capture the second position in the fast-growing passenger car market in India, behind market leader Maruti Udyog Limited (MUL). In December 2006, Tata Motors' car sales stood at 12,665 units against HMIL's 11,049 units.5

The growth for Tata Motors came in the compact car segment, primarily driven by the strong performance of the Tata Indica (Indica) range. In January 2007, the Indica reported its highest ever monthly sales since launch, at 14,466 units, a growth of 14% over January 2006.

Industry analysts said that this growth was mainly due to the launch of the Indica V2 Xeta (Xeta) in January 2006, and subsequently its revamped version in November 2006.

The Xeta was developed by Tata Motors as a pre-emptive move to fight competition, mainly from MUL and HMIL in the passenger car segment. The Xeta's "eXtra Efficiency Torque Advantage" according to the company, was proffered as an answer to the market demand for fuel-efficiency at a competitive price.

Xeta was a refurbished version of the company's Indica V2 Petrol car. Analysts said that through Xeta, Tata Motors intended to create a unique brand identity in the mind of the customer for the petrol variant of Indica. The company intended to make a major impact in the petrol driven compact car segment with the Xeta.

Analysts also felt that the Xeta had the potential to change Indica's image as a diesel car brand. Xeta's success coincided with the growing attractiveness of India as a global hub for small cars.

This led to the entry of a number of domestic and foreign players into this segment, which resulted in intense competition in the growing Indian automobile market. (For an overview on the Indian automobile industry refer to Exhibit I). Some of the companies which planned to

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launch small cars in India in and after 2007 were General Motors India (GM)6, Fiat, Toyota Motors, Honda Motor Co., Skoda India, and Renault7.

The entry of MUL and HMIL in the diesel segment of the small car market was expected to pose a strong challenge to Tata Motors which had the leadership position in this segment.

Background Note

On June 1, 1945, Tata Sons Limited (Tata Sons) bought the Tatanagar Shops (also called the Singbhum shops of the East Indian Railway) from the Government of India to manufacture steam locomotive boilers. It intended to extend its operations later to building complete locomotives and other engineering machinery. This project was set up as a new company by Tata Sons and was called the Tata Locomotive and Engineering Company Ltd. which was commonly known as Telco. Today, its manufacturing base is spread across India - in Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow (Uttar Pradesh), and Pantnagar (Uttarakhand)...

Excerpts

Indica: More Car Per Car

In December 1998, Tata Motors launched the first indigenously developed compact car, the Indica. The model was displayed at the Auto Expo'98 . To underline the "Made in India" image, the Tata Motors stall at the exposition had models and organizers dressed in Indian attire. At the inauguration function, which was attended by the then Union Industry Minister Murasoli Maran , hundreds of children waved the Indian flag. The Indica project was named Project Mint (short for Mini Telco), when it was commissioned. This car was partly designed and developed by Tata Motors, the original design being that of the French car manufacturer Peugeot...

Enter The Xeta!

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For the Indica, although the diesel-engined version continued to ring the cash registers, the sales of the petrol variant failed to gather momentum in spite of the engine having seen refinements since it was commissioned.

This, analysts said, could possibly be attributed to two factors: Tata Motors' lack of experience with petrol cars compared to other small-car manufacturers with established credentials in this segment, and the fact that the 'big and powerful' tag is not necessarily a positive attribute for a petrol car in the extremely fuel-efficiency conscious small-car segment...

Product and Pricing - Extra Efficiency AdvantageTata Motors strove to improve and refine its product continuously but customer feedback was not always positive in all respects. The Indica V2 Petrol's 1.4 litre engine had become a handicap as it was the biggest in the small car segment. Also, it shared the same block as its diesel counterpart, making it inherently heavy...

Promotional StrategiesXeta was promoted through various media: television, print, and the Internet. The television campaign 'You Gotta Be Dumb' was conceptualized by FCB Ulka. M G Parameswaran, Executive Director, FCB Ulka, said, "The creative team looking after Indica had a leap idea, that not looking at Xeta is like refusing to have a good time with four lovely women. When you see an advertisement like the Indica Xeta, you instantly remember the scene from Dumb and Dumber and it's this that the advertisers are aiming for. Now every time you think of Dumb and Dumber, you'll be thinking of the Indica Xeta as well."...

References:

1] K. A. Ananthram and Mohini Bhatnagar, "Putting the customer in the driver's seat," www.tata.com, October 2000.

2] K. A. Ananthram and Mohini Bhatnagar, "Putting the customer in the driver's seat," www.tata.com, October 2000.

3] Siddhraj Singh, "Xeta, the warrior princess," www.hindu.com, March 04, 2006.

4] Hyundai Motor India Limited (HMIL) is a wholly owned subsidiary of Hyundai Motor Company, South Korea.

5] The Indian Express, "Tata overtakes Hyundai," www.tata.com, January 19, 2007.

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6] General Motors India is the Indian arm of General Motors Corporation (GM), the world's largest automotive manufacturer (as of July 2007). GM was founded in 1908 and is headquartered in Detroit, Michigan, USA. GM manufactures its cars and trucks in 33 countries.

7] As of July 2007, Renault was in preliminary talks with Bajaj Auto to discuss the possibility of producing cars in India, including a small car priced at around US$ 3,000.

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