Page 222 - DMGT408DMGT203_Marketing Management

Unit 9: Managing Marketing Channels

Approximately 370 stereo-speaker makers compete for ` 5000 crore market in the country Notes
for audio equipment. Nearly 230 of these manufacturers sell to the low-and-mid-range
segments of the market. This accounts for 90 per cent of the market’s unit volume and about
50 per cent of its value. In addition to competing with each other, Indian manufacturers also
compete with Japanese and American firms that offer products at affordable prices. The
remaining 140 or so producers compete for the remaining 10 per cent of the market’s volume
and 50 per cent of the value – the high end – where Arvind hopes to find his customers.
To serve the audio-addicts segment, Arvind offers only the highest-quality speakers.
Woodstock has two models: the Elite and Percy. The Elite stands 18 inches high, weighs
8 kg and designed for stand mounting. The floor standing Percy is 46 inches high and
weighs 38 kg. Both models feature custom-made cabinets that come in natural or black
oak, and walnut. Arvind can build and ship two pairs of Elite speakers or one pair of Percy
speakers all by himself in a single day. In order to have adequate parts inventory, Arvind
has to spend ` 1.5 million of his capital on the expensive components.
Arvind set the price of Elite and Percy at ` 35,000 and 73,000 per pair respectively. He
selected these prices to provide a 50 per cent gross margin. Arvind believes that traditional
dealers would sell equivalent speakers at retail at nearly twice those prices. Customers
can call Woodstock on a toll-free number to order speakers or get advice directly from
Arvind. Woodstock pays for shipping or any return freight via First Flight. Round trip
freight for a pair of Percy costs ` 9,500.
Arvind offers to pay for the return freight because a key of his promotional strategy is a
30-day, in-home, no obligation trial. This trial period allows customers to listen to the
speakers in their actual listening environment. In a dealer’s showroom, the customer
must listen in the environment that is at best artificial and often feels pressure to make a
quick decision.
Arvind believes that typical high-end customers may buy speakers more for “non-rational”
reasons. They want a quality product and good reproduction of sound, and also to convey
an image. For these reasons, Arvind has tried to create a unique image through the
appearance of Woodstock speakers and to reflect the image in all of company’s marketing.
He has spent money on distinctive stationery, business cards, a brochure, and a single
display ad. He also designed a laminated label he places just above the gold-plated input
jack on each speaker. The label reads, “This speaker was hand crafted by (the technician’s
name who assembled the speaker goes here in her/his own handwriting). Made in India
by Woodstock Acoustic Systems, Delhi.”
To spread the word, Arvind concentrates on producer reviews in trade magazines and on-
trade shows organised for high-end Hi-Fi systems (including foreign brands). Those who
attend the show cast ballots to select the, “Best Sound at the Show.” In the balloting,
among 160 brands, Percy finished twelfth. Among the top ten brands, the least expensive
was priced at ` 94,900, and four of the systems were priced from ` 340,000 to
` 735,000. A reviewer of Hi-Fi systems in an issue of industry magazine Stereoline evaluated
Woodstock’s speakers and noted, “The overall sound was robust and dynamic, with a
particularly potent low end. Parts and construction quality of speakers appeared to be first
rate. Definitely a company to watch.”

Arvind made plans to invest in a slick, four-colour display ad in Stereo Review magazine
with highest circulation. He also expected another favourable review in Stereoline
magazine.
Reflecting on his first year of operations and the difficulties Arvind faced, he realised that
he has learned a lot. He faced typical challenges an entrepreneur encounters. There were
Contd...

LOVELY PROFESSIONAL UNIVERSITY 215