CASE 4 THE GENUINE CHARCOAL FILTER: SALES MONITORING CONTROL SYSTEM

Structure 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 Objectives Introduction About The Company Distribution System The Cigarette Industry Structure The Launch of Genuine Charcoal Filters (GCF) Tracking and Monitoring of Sales of The New Brand Evaluation of The Launch Scheme Conclusion Discussion Questions

4.0

OBJECTIVES

After going through the case, the students will be able to: Appreciate the need and nuances of sales monitoring system Get an exposure to planning a sales monitoring system Understand the evaluation criterion for sales tracking

4.1

INTRODUCTION

Albetross India Ltd. a cigarette Company had launched a new brand of cigarette with the intention of expanding its market share. In order to monitor the progress of the brand launch a sales monitoring system was introduced which also enriched the role of the salesman of the company. The case on `Genuine Charcoal Filters' (GCF) is a disguised case on `Sales Monitoring and Control'. The names of some of the organisations and the data have been altered for purposes of confidentiality. Inherently there is no best or correct answer to a case.

4.2

ABOUT THE COMPANY

Albetross India Ltd. is the no.2 cigarette company of India having a market share of around 13%. It is the market leader in North India & Rajasthan. First established in 1936 at Calcutta as a subsidiary of Albetross (UK), it is well-established now. Its first factory came at Bombay in 1944. Before 1973 its selling operations were handled by Columbus & Co., after which they both got merged. And since 1979 the House of Sisodias looks after its management. Albetross India Ltd. (AIL) at present has a turnover of around Rs. 1000 Cr. and a sales turnover of around 135000 million units. Its 3 factories are located at Mumbai, Ghaziabad & Hyderabad & its seven sales branches are at Delhi, Chandigarh, Mumbai, Ahmedabad, Hyderabad, Bangalore & Calcutta.
This case has been prepared by Dr. Harish Chaudhry. Associate Professor. School of Management. IIT Delhi.

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4.4

DISTRIBUTION SYSTEM

The product reaches the company godown / C & F Agent from the Factory. The Wholesale Distributor collects the material from the godown and then passes on to the Dealers or the Salesman, who then separately sell their stock to the retailers. Retailers are classified into 4 categories A, B, C, D on the basis of the amount of sales / day. The 'A' class has a sale of Rs 1000 or more per day while `D' class has sales less them Rs 200 per day All over India AIL has 4000 Wholesale Dealers (WDs) & 2200 salesmen to make its brands available to the market. The salesman channel is preferred by the company over the Dealer channel because it is the active channel while the latter is a passive one. Through the salesman channel the company can push slow-moving brands, create brand shifts, introduce new brands, enhance brand visibility at the outlet and get feed back from the market. The salesman channel is also more effective in the replacement of dented, damaged and out of date cigarette. The under sale Distributor, on the other hand, is more concerned with immediate benefits. For him selling through the dealer channel is easier. He is able to sell larger volumes through this channel with much less effort. Hence a vertical conflict exists between AIL & its wholesale Distributors. A Horizontal channel conflict also exists, this is between the dealers and the salesman. Both of them are trying to sell the stock to the same retailers. Dealers are in a position to offer a cut rate on their sales, since they operate in high volumes. They are also able to give higher credit to the retailers. The salesman, on behalf of the company, gives schemes, displays, glow - signs and point of sale material to decorate the outlets. They also give model outlet to the retailers. The salesmen sell stock at market prices which can very consequently both the channels remain attractive to the retailer.

4.5

THE CIGARETTE INDUSTRY STRUCTURE

Cigarettes are one of the highest taxed products in the country. They contribute about Rs 4000 Cr per annum to the national exchequer. At present there are four major companies who manufacture and sell their brand of cigarettes in India. In march 1987, the government of India imposed excise duty based on length, instead of the earlier advalorem duty based on the printed price. The change helped increased relaxation's as duty was fixed and reduced litigation. The Budget `98 continued to target the non-premium, non-filter segment - below 60 mm - which commands a 19 percent share of the market. In fact., the 11 percent hike in excise is actually a relief after two backbreaking budgets (excise hike in Budget '96 - 25% & Budget `97 - 20 %) . Over the past two years, the growth rate of this segment had dipped sharply : from 177% to 25%. While bidimanufacturers have the benefit, most domestic companies are hit as the non premium segment accounts for 85% of their sales. In particular the companies which are the key players. in the price sensitive microcigarette segment are hit hard. With stiff competition in the segment, as well as a losing volumes battle with the bidi - segment, there is only a slim chance of these companies passing on the hike to the consumer. The Indian Market for Cigarettes has been expanding constantly, however the cause of concern for most cigarette companies is that although their sales in absolute numbers are increasing, they are constantly loosing market share to the industry leader - ITC.

4.6

THE LAUNCH OF GENUINE CHARCOAL FILTERS (GCF)

It was in this back drop the `Genuine charcoal filter' a new brand was launched by AIL this July in Hyderabad. The reason for selecting Hyderabad for the launch was that it is a vibrant town that is socially and economically upcoming with a substantial number of people having a high disposable income. Hyderabad was also witnessing a metamorphosis under the leadership of the dynamic Chief Minister and was becoming a base for a number of MNCs which were opening shops there. Consequently there was a lot of influx of young executives in Hyderabad, who worked in these companies. Hence a fair proportion of the 5.2 million population was comprised of young and trendy males who were aware of what they wanted and style was an integral part of their being. The population growth rate also was 9.5%. The 260 sq. km city was 93% urbanised. Another reason for the management's choice of this city was that it serves as a very good test market since it does not affect other markets. (Indore,

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Bombay and Pune are far off from Hyderabad). The other brands prevalent in the same segment was GFK of ITC. A packet of GCF costed Rs 1210 but when sold loose it costed less than Rs 1.50 per unit. The packaging was node very different from the conventional design and colour combinations and given a new very attractive look. The existing sales set up had 6624 retailers, of which 5604 were covered daily by a strong sales force of 114 salesmen. There were 6 depots, 3 sales officers and I ASM in AIL Hyderabad. A multipronged strategy was carried out for promotion of the new brand. The idea was to create an excitement about the brand and ensure a lot of visibility and induce maximum trial of the new cigarette. Six prominent hoardings of 30 X 15 ft were put up at prime locations, half page coloured ads were given in local newspapers twice a week for 3 months. Free passes were given for movies, cultural evenings were organised at prestigious hotels. A team of 12 smart young girls were hired and trained to carry out brandswitching through direct marketing at corporate offices. The total promotion budget exceeded 100 lakhs.

4.7

TRACKING AND MONITORING OF SALES OF THE NEW BRAND

A unique method of sales tracking was introduced for the first time. The objective was to track the daily sales of GCF cigarettes and also identify the brands which were loosing ground to it. A daily retail buyout log book was maintained by keeping a sales book so as to monitor and analyse retailer wise sales on weekly as well as monthly basis. This facilitated immediate corrective measures to be taken to maintain the sales and availability targets. A culture of retailer - wise analysis of the sales team could also be developed. Retailer wise and class wise analysis was started for Genuines, in which low buying / non buying retailers and those not keeping sufficient stocks were tracked A few other activities were also usefully tracked. Stock placements with the help of credit extension, Facings and Merchandising, awarding of displays. With the help of this the depots prepared daily and weekly reports giving the status of the availability, sales and productivity of Genuines. Initially a verbal commitment had been taken from the salesmen for maintenance of the sales book. The success of the programme developed on the acceptability level by the salesmen. In order to maximise this they were given special training and all support by sales officers who used to cover each depot once a week. Weekly meetings were held to take stock of the matters pertaining to salesman books and GCF performance. Strict actions were taken against the salesmen who were not taking the initiative to develop the sales of Genuines. Training was also imparted to those salesmen who were unable to sell the Genuines. The Conclusions Obtained from This System of Sales Monitoring It was found that Genuines GCF had a very high level of distribution and availability (84%) but the brand movement was slow. The productivity of the depots was found to be ranging from 9% to 27% with an average of 17% and productivity of outlets was 10%.

4.8

EVALUATION OF THE LAUNCH SCHEME

A survey through questionnaire was done to assess the status of Genuines in the market ( in Hyderabad). Genuines was found to have made maximum brand conversions from Gold Flake.& GFT, (Perhaps due to similar appeal). Majority purchases of GCF was loose (due to the trial factor) Majority of the customers were below 30 yrs. 70% of the respondents had been using GCF for more than 20 days hence it had influenced repeat purchase. The reason' quoted for dropouts were Brand Loyalty, Strong and tasteless.

4.9

CONCLUSION

The expenditure on sales promotion and creating brand awareness had been enormous but still the results have not been upto the expectations. The top management is at a loss as to how to draw out a one to one correlation between various sales promotion schemes and the actual sales and what should be the proper mechanism for tracking sales.

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4.10 DISCUSSION QUESTIONS

1. 2. 3. 4. What are the success factors for such a launch ? Can the sales tracking mechanism be improved? What factors should be tracked and how? How can the performance of a brand be evaluated ?

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APPENDIX Retention Rate Tracking for 0CF A. questionnaire-based study was done to track the retention rate of OCF in Hyderabad. The details of the project are as follows: Total Mandays: 21 Duration of Study: 4 days Total contacts: 260 Found Smoking OFC: 26(10%) Contacts per manday: 12 Brandwise Conversion

It can be observed that the basic cannibalisation has been from the ITC brands of Gold Flake. The appeal has been such that the smokers of Gold Flake find appealing enough reason to switch to a cigarette with a similar appeal.

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OCF smoker purchasing pattern in percentage:

A majority of the purchase has been in loose cigarettes as can be expected of a new brand because of the trial factor. One would not generally buy a full pack of what is not his regular brand.

More than 70% of the respondents have been smoking OCF for more than twenty days. The brand has generally been able to influence repeat purchase after the initial trial phase.

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The demographics of the smokers are true to the intended brand appeal towards the youth and the not so old generation. 65% of the smokers are below thirty years of age which reflects that the purchases have indeed been in the segment where the brand was positioned.

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Industry totals are likely to be marginally higher than the totals indicated above. Official source underestimate the size of this industry, and as a result have been rejected. Data for New Tabacco Co. (earlier a division of Ducans Industries ) is not available . International Tabacco manufactures cigarettes for Godfrey philps, the

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holding company. Saks of International Tobacco is lower as it manufactures cigarettes for Godfrey Phillips for a Ne.2

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