Home Lites Case Study

  • May 2020
  • PDF

This document was uploaded by user and they confirmed that they have the permission to share it. If you are author or own the copyright of this book, please report to us by using this DMCA report form. Report DMCA


Overview

Download & View Home Lites Case Study as PDF for free.

More details

  • Words: 1,887
  • Pages: 5
Case: HOMELITES If, in a fiercely competitive market, a company finds that its production capacity has been frozen, that the excise duty structure is heavily tilted against it, what can it possibly do? Part of the answer to that question lies in the study of Homelites form Wimco Ltd. Background Wimco initially marked its presence in India in the early part of this century by importing matchsticks from Sweden. The first factory was set up in 1928 and today, there are five manufacturing units in Ambanath, Calcutta, Madras, Dubri and Bareilly. Although a flourishing matchstick industry in Sivakasi generates countless brands every years, Wimco has been the long standing leader in the industry and is the only unit in the mechanized sector to date. Changed Scenario Up to 1977, the company had a dominant 29 per cent market share (by volume) and growth was satisfactory. However, following a shift in government policy, production was reserved for the cottage sector. Wimco's production capacity was frozen at 5,000 million match boxes per year. That, plus the excise burden tilted the odds against Wimco. One indication of the impact of these steps: the company's share dropped to 17 per cent by volume in the Rs 400-crore match market by 1989. New Strategic Directions Ever since government restrictions were imposed, the company management realized that it would have to overhaul its marketing strategy and give a new direction to it. Aware that the urban consumer is more discerning and would be receptive to better value and quality matches despite a price differential - Wimco's matches are more expensive than than the others - the company gradually began withdrawing from rural areas. In 1975, for instance, only 35 percent of Wimco's market by volume lay in urban areas. By 1989, the figure had risen to 80 per cent. The bulk of Wimco's rural market is concentrated in the north east where its wooden match boxes continue to be popular. Simultaneously, attention was paid to another problem: product differentiation. Traditionally, branding in matches is weak - brands are used for identification and little else. This is, in a sense, inevitable since a match is a low value low involvement product. But if a consumer was to be persuaded to buy a quality match at a marginally higher price, he would first have to be persuaded to ask for it by name from the plethora of brands available. In 1978, Wimco decided to discard the wooden matchbox (outer and inner) in favour of a cardboard one. This was a necessity prompted by the steadily declining availability of timber. The

company also decided to do something about a long standing problem with Indian matchboxes. The friction - the surface on which the match is struck, and the base material of which is phosphorous - until then was painted. After repeated strikes, it quickly gave way much before the stock of lights inside was exhausted. Together with the cardboard box, Wimco introduced printed friction - "246 high friction hot spots" with the promise: "The last stick burns as well as the first." The new matchbox was heavily advertised for the first time in the industry and quickly gained in popularity. However, the hope that the competition would not be able to catch up with this new development was belied, and quite soon. By 1979-80, the manufacturers of Sivakasi had started replicating the new friction by resorting to silk screen printing. Karborisation Wimco continued with its efforts to provide that extra advantage that would distinguish its matches from the rest of the competition. In 1982, it adopted karborisation, a chemical treatment which stops a burnt stick from curling and breaking into two after it is extinguished. This reduces the risk of burnt matches with an after glow accidentally falling and burning holes in garments. Karborisation was further strengthened in 1986 and a communication was created to the effect that each stick of a karborised match had a 'Shield of Safety' built around it.' In spite of these innovations, it was evident that the possibilities of product differentiation were gradually becoming limited. What else could be done to distinguish Wimco matches from the rest of the pack? Could the market be segmented? Could a product plus be created which would have a strong appeal to a segment of users? Homelites Of Wimco's total sales, as much as 80 percent is contributed by urban areas. And 70 percent of the matches consumed here are for household use (through grocers) while only 30 percent go into the pockets of smokers (via pan shops). The urban household was undoubtedly Wimco's strongest consumer segment. What made the company's products popular with the urban housewife? While the urban housewife scrutinizes costs, this factor is cancelled out by her quality consciousness. She also tends to be more brand aware than the urban male smoker who is indifferent will ask for a matchbox, any matchbox and almost never by name. And finally, safety ranks higher in her list of purchase considerations than her husband's. It was logical, therefore, to concentrate further efforts at higher value addition in this segment. Would the urban housewife possibly be interested in longer, thicker and safer matchsticks? This

concept of longer matchsticks for household usage was well accepted in the West. But could it work here, in India? Wimco decided to create and sell the concept to the discerning housewife who cares for quality and is willing to pay for it. To begin with, splints were imported from Europe - In the new product, the matchsticks were to be 48mm in length as opposed to the 42mm in an ordinary matchbox. A new brand, "Ship Maxi Match", was created and tested among Bombay housewives. The matchbox design, too was different, being of the lid top open variety as against the common shell and slide type. Each housewife was given a fortnight in which to try it out and decide what she felt about the product. At the time of products testing this new concept in 1985, a pack of a dozen matchboxes - or 600 lights - of Ship was available for RS 2.50. How much should the new product - with 300 lights - be sold for? At the end of the fortnight, while 97 per cent of the housewives had accepted the product concept, an overriding majority also felt that the traditional shell and slide model was preferable. Eighty per cent of them felt that the new match was safer than the regular one. In order to give the new matchbox an upmarket image which would set it apart from the generic identity of matchboxes and create a brand pull as well, the name was changed to Homelites with a modern pack design. ƒ ƒ ƒ

Positioning Strategy : Premium product - through safety, convenience and reliability. Modern packaging, value for money - premium price and performance. Advertising Task : Establishing brand personality of a premium matchbox while basing the communication primarily on safety. Media strategy : Target urban housewives in the Rs 750 plus monthly income group, with greater emphasis on those in the Rs 1,500 plus segment. Concentrate on towns with a population of 50,000 and more. The primary medium would be TV with select women's magazines and heavy merchandising support.

Segmentation It was decided to first introduce Homelites with 300 sticks. Three months later, a smaller box under the same brand name, was introduced with just 50 lights. This was to fit the purchase pattern of housewives who did not buy matches in bulk. The 50-sticks pack also offered convenience and usage. Smokers ere not targeted at all though time was to show that they would come in as bonus consumers.

The Launch Homelites 300s was launched in March-April 1987 with a substantial house-to-house effort, in shop selling and portable shops being set up at heavy consumer traffic points to induce trial. the price of each pack: Rs 3. The market share objectives: Convert 10 per cent of Wimco's bulk buyers to 300s in the first year. And convert 20 per cent of the rest to Homelites 50s. The initial response was enthusiastic. But marketing tragedy, when it stuck, came from a totally unexpected direction. Disaster To add gloss and take care of wear and tear, the 300s box had been polylaminated. The friction was stuck on only after the polymination process. Some 20,000 pre-paid inland letters had been distributed among first-time Homelite buyers to gain their reactoin. But within days, letter of complaint started trickling in. The grievance was common: the friction was coming off after using only about a hundred sticks. What did the company expect housewives to do with the remaining 200 sticks? And did the company expect consumers to pay a premium price for a product which wasn't even as good as the usual matchbox (friction surface too inadequate to light all the sticks)? The tricks soon turned into a flood of angry letters and dissatisfaction with the product soon began to reflect on sales. In march 1987, Wimco sold Rs. 20 lakh worth of Homelites. The figure rose marginally in the following month to Rs 22 lakh. After that, the dip was quick: by June, sales were down to Rs 6 lakh, and still falling rapidly. It looked like a marketing disaster from which the company would find it impossible to recover. Consumer rejection was frighteningly strong. The morale of the sales force, which had to face the wrath of the retailers, was abysmally low. Even if the quality problem was solved and the price reduced, would the consumer give Homelites another chance? The consumer found itself pushed into a corner. Its market share in the regular matchbox segment was becoming difficult to hold. Product differentiation possibilities were increasingly limited. If higher value addition was the solution, the answer lay in Homelites. But if this product was withdrawn from the market - and the company admitted defeat - what other alternatives did it have for the future? Relaunch It was therefore decided that the company would put in all it had to make Homelites succeed. To begin with, a massive exercise was undertaken to withdrew Homelites form over two lakh outlets

across the country. Polylamination was done away with, and the price of the 300s reduced drastically to Rs.2 (this meant that the company would be losing money to support this product. Although there were moments of suspense when the product was relaunched in July 1987, sales soon started picking up. Over 1988, the sales graph continued to climb steadily, touching a high of Rs 75 lakh in Feb 1989. Thereafter, the product has steadily gone from strength to strength. Homelities is now a Rs 9 crore brand ( and the 300s is priced at Rs 250) and can be truly regarded as the first national brand in the match industry. But success had crated its own problems, the main one being splint shortages. Initially, imported aspen splints were used for Homelites matchsticks. Subsequently, Wimco invested in popular plantations in India - the results of which however will show only in 1992. But for now, demand has outstripped production. In 1990, the company has targeted sales of Homelites at Rs 13 crore. A far cry indeed from June 1987 when national sales were Rs 6 lakh - and still falling.

Related Documents

Case Study
April 2020 41
Case Study
May 2020 38
Case Study
June 2020 28
Case Study
May 2020 37
Case Study
June 2020 33