Saboon # 1*

Mr. Cheeranjiv Marketwalla has just been posted in Chhajjarpur, a dusty village in Madhya Pradesh. Two years back, he had completed his PGDBM from one of the well-known institutes of management in central India and had joined Etch-LL, a reputed company in the country. In the last two years, he proved his worth in the company and was due for a promotion. He did get a promotion but had never anticipated that he would be sent immediately to a place like Chhajjarpur. However, the company has a different mission behind sending him there. Right now, he reports to Senior Marketing Manager, who is under the direct supervision of VP, Marketing. Just a year back, Etch-LL had launched a product called Saboon # 1 all over rural India. Before the launch of the product their R&D department had done a thorough research on the attributes of the product. It was a kind of a dream project, because they expected huge sales proceeds from rural market. Had it been successful, the Anglo-Dutch parent company of Etch-LL would have launched that product in many African countries too. In rural India, people use very cheap soaps for washing purposes and use local brands for toilet/bath purposes. In most of the places of rural India, even Lux is a kind of a luxury, because Aishwarya, Kareena, and Priyanka (who dont represent masses) endorse it. Price-wise also, they find it to be a luxury item because at the same price at least three local brands of any detergent or bath soap could be bought. Etch-LLs R&D team thought if they can combine the cleaning attributes of a washing soap and cleaning attributes of a bath soap and if the product can be marketed successfully, it could capture a substantial portion of both washing soap and bath soap markets, which is huge and has tremendous potential. With this thought, EtchLL combined all the attributes and created Saboon # 1. It was also priced at three times the local brands, because it contained multiple attributes, which other local brands didnt have them individually. For Etch-LL it is an innovation in the sense that it is the only product in its category, which has got multiple purposes. The product could be used for both cleaning clothes, and for bathing purposes. No other brand existing today can boast of this feat. The chemical composition is such that it can clean the toughest of stains and has perfect pH balance so that it does not harm the body if used for bathing purposes. It is slightly larger than the local brands of detergent cakes or bath soaps. It is heavier than most other soaps giving an impression that it contains more stuff and can last longer. It has a lingering jasmine smell, which is the favorite of most of rural India. Recently, Etch-LL had roped in Salman Khan for various innovative ads in TV and hoardings to give a cleanliness, toughness, and smoothness image of the soap. In spite of all these care, Saboon # 1 failed in the market in terms of revenue generation. As most of the big shots (large multinational companies) are eyeing for rural market, which has an immense potential, Etch-LL team had thought that Saboon # 1 would give them an early lead. But, this product is giving them sleepless nights. Mr. Marketwalla has specifically been sent to identify typical characteristics of rural India and suggest ways if a modification in the pricing strategy (decrease or increase in price) is required. As the company has been hit hard in the revenue front, they have asked Mr. Marketwalla to look mainly into the pricing strategy of the product. Chhajjarpur is just a representative rural market for Mr. Marketwalla.
* It has been prepared by Prof. Pranab K. Pani for classroom discussion only.

On the basis of the observations in and around Chhajjarpur, he will have to devise pricing strategy for Saboon # 1 for the whole of rural India. In first few days, Mr. Marketwalla didnt get any clue. However, after few months, when he interacted more with local people he started getting what he was looking for. The job was challenging, in the sense that he had to look for behavior patterns of people of Chhajjarpur, which should be typical of any rural market. The things, which he observed in the last few months, are as follows. Chhajjarpur is a mofussil (rural) area, which is geographically centrally located. It has got concrete road connections to all the far off big cities. Thus, any new changes in the life style in the cities do not take much time to get reflected in their life style too. They are very quick in terms of adopting new things in cities. For example, TV has become very popular in the village since the assassination of Rajiv Gandhi. Most of the people remain busy in their vocation and travel less. However, they have got exposure to outside world through TV. For example, they know the changes in political scenario in the country and their likely impact. Through the TV ads they are aware of how many different brands are available for different products. If something catches their fancy, which is available anywhere in any city, they might go for it. Thus, city lifestyle has a very big influence on them. Because of slightly better level of literacy they are also aware of how many different uses a particular product has. Most of the people either do farming or are engaged in artisan type or sub-contract type works (carpentry, blacksmiths, gold smiths, etc.). A symbiotic relationship exists among all types of trades. So the working population knows, for example, how many different uses aluminum has. Because of their exposure to outside world they are aware of what their economic status is in the society. A mobike, TV, VCRs, and fridge are luxury items for them and they consider them to be expensive too. But, it is not that they are averse to it. At sufficiently high level of income, some of them have bought these items. However, most of the people believe in simple living and high thinking. Hence, only things, which matter to them, are food, clothing, and a decent quality of housing. They are not very keen about higher education. If some one has attained primary level of education and some skills for some vocation it is enough for them. Rest everything else is considered as conspicuous consumption. For them, any item, which is expensive; means conspicuous consumption. Because of this attitude, they are more inclined towards cheaper products. They can haggle for hours to get an item at a cheaper rate. That holds true for almost all kinds of products. There are many local brands available in the detergent cake category, such as, Ajooba, Chamatkar, Hero, Hum, Khiladi, Shakti, Shaan, Surf-rosh, etc. Likewise, in the bath soap category there are many local brands like, AnarKali, Chand ka Tukda, Chasme-Baddoor, Ganga ki Saugandh, Milee, Neel Kamal, Red Rose, Roopmati, Roja, Sharmilee, etc. Because of the above behavior, almost all the local manufacturers are engaged in price war to woo the local populace. Besides these, there are many other aspects in their lifestyle. And there is no end to their stories. It will go on and on.But, Mr. Market Walla puts a stop here.

Assignment
It is a group exercise. Mr. Market Walla has placed his observations before your group. You will have to make a detailed analysis of his observation and identify the factors, on the basis of which you will have to suggest a strategy: whether the price needs to be decreased or increased to boost the total revenue from the sale of Saboon # 1. (Use only Microeconomics concepts and tools). Submit a write-up (at most of 2 pages) on the factors you did consider for your pricing strategy.