Saturday, July 28, 2012

Marketing strategy

A couple of days back, one of our faculty instructors was explaining the concept of cost-quality-time triangle. According to this concept, if a company increases say the quality of a product, then the cost as well as time-to-market increases. On the other hand, in order to reduce the cost and time-to-market, the company will have to reduce the quality. 

It might be surprising for some, but companies in fact follow the second strategy and that too very shrewdly. Assume, for example, that a particular consumer measures the quality of a hand-wash pack in terms of its cleansing ability and the amount of liquid available per unit price. A company may not change the liquid fill, but may reduce the amount of liquid filled per pack and also reduce the price slightly. Initially if a company sells 250ml for INR 49/- and subsequently reduces the price to INR 28/- for 135ml fill, then the % decrease in price is just 42.8% whereas size reduces by 46% and consumers are more attracted by the reduced price, so the sales increase.

I inquisitively happened to open the cap and realized that though the bottle looked big, it was only about 2/3rd filled. (See the picture below carefully). The net volume was indicated as 135ml whereas it could accommodate even a 185ml pack that is sold as a refill pack for INR 34/- (The company also sells a 250ml bottle for which the same 185ml refill pack can be used). 

In order to compliment this strategy, the company sells the liquid wash in an opaque white bottle, so that the level of liquid is not visible even when held against a bright source of light.

This marketing strategy is used by almost all FMCG companies and is a very successful and proven strategy, so in future whenever you see a reduction in price, don't forget to check the reduction in size! :)