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Symphony Room Coolers - Case -Short version

Research November 2017

DOI: 10.13140/RG.2.2.10883.60965

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Mukul P Gupta
Management Development Institute Gurgaon
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 SYMPHONY ROOM COOLERS
This case has been
prepared by Mukul P.
Gupta, Associate Professor
of Marketing at
International Management
Institute, New Delhi.
Cases are prepared to
serve as a basis for
classroom discussions
rather than illustrating
correct or incorrect
handling of an
administrative situation.
Copyright 1993 with the The product was an improvement over the existing room coolers
author.
Messrs Sanskrut Comfort Systems Pvt. Ltd., Ahmedabad (SCSPL)
had launched its SYMPHONY brand of room coolers in March
1988.
Room coolers as a product is a local improvisation developed around
a portable or a table fan. A fan is surrounded on three sides by wood
wool or other natural fibrous material that is kept drenched in water.
When the fan is switched on, it sucks air through these wet, soaked
screens. The air becomes cooled due to evaporation of water. The fan
thus delivers cool moist air. This improvisation works well only
when the outside air is hot and dry.
Over the years, through continuous improvement, very good products
have evolved in compact form where special cooler fans, exhaust
fans or even industrial air blowers have been used. Pumps are used to
flood the side screens with water. Normally a water storage is
provided at the base and excess water from the side screen pads
flows back into the tank. Facilities to run the fans at varying speeds
are also available.
Most parts of Northern, Central and Western India have long dry
summers where the demand for room coolers has been continuously
increasing. Some branded coolers have been sold by companies like
Electronics Ltd., Racold Appliances Ltd. and Blue Star Ltd. Due to
high quantum of manufacturing taxes, these manufacturers in the
organised sector found their coolers to be highly price uncompetitive
against those offered by the unorganised sector. Consequently major
sales have traditionally accrued to the unorganised sector. Certain
local brands did come into vogue from these small manufacturers.
For climate control equipment the Indian consumer has had very
little choice. He could buy a room cooler for prices varying from Rs.
1500 to Rs. 5000 or otherwise go for a small air-conditioner costing
anywhere from Rs. 20,000 to Rs. 30,000.
with innovations in design. Fiber reinforced plastic (FRP) was used
for moulding the body of the coolers. FRP is corrosion resistant,
shapes beautifully, light weight, maintenance free and electric shock
resistant. Two blowers instead of one were provided with beautiful
styling and design of grill. The product was promoted as a Window
Air Conditioner Look Alike.
 SYMPHONY ROOM COOLERS

Symphony was sold through a network of authorised retail dealers. The product was introduced
at a retail price of Rs. 4500/- inclusive of all taxes (approx. 10% of the price payable at last
point) which was later raised to Rs. 5000/- in 1991. The dealers of the company have been
advising the company to add at least two more models of room coolers to the product line, one
each at the higher and the lower end of the market.

In response, the company has designed two models, HARMONICA and KOOLERS that it
proposes to launch in March 1992 to coincide with the onset of the summers. SCSPL is about to
set the dealer's price and the retail price for HARMONICA and KOOLERS.

SCSPL has enough plant capacity to produce up to 40000 coolers each year in its factory. To
exceed this production limit, additional investments in new plant capacity would be essential.

SCSPL has already been using about 75% of its manufacturing capacity. However, SCSPL had
sold only 20000 units of SYMPHONY in the last year. The balance was sold to other brand
holders who had launched the marketing of these coolers under their brand names in the last
season.

The increase in Fixed costs per annum as a result of producing HARMONICA and KOOLERS
is estimated at Rs. 5,50,000 and Rs. 4,50,000 respectively. The direct costs are estimated to be
Rs. 2300/- Rs. 2100/- and Rs. 1800/- per unit for HARMONICA, SYMPHONY and KOOLERS
respectively.

Till the beginning of 1991, there has been no competition to SYMPHONY. However, 1991 saw
the launch of three more brands, A, B and C in head on competition with SYMPHONY. There
was no difference between product specification of SYMPHONY and A, B & C since the
marketers of A, B and C were buying the product from SCSPL. The differentiation was in the
brand name, retail outlets and the retail prices. While brand A was retailed at Rs. 5300/- B and
C were available at Rs. 4700/- and Rs. 4600/- respectively.

SCSPL does not anticipate any competition at the HARMONICA end of the market. This is
because no product exists in that segment now. SCSPL proposes to discontinue selling this
product to the brand-holders of A, B and C. Out of these brand holders, only the brand holder of
B is investing in the manufacturing facilities of its own and is not likely to become operational
in 1992.

At the KOOLERS end of the market, there have been old established brands retailing at Rs.
3500/- (Not with FRP bodies, etc.) as well as cheap design imitations from the unorganised
sector. Desert coolers and custom built coolers are available in the price range of Rs. 2000/- to
Rs. 8000/-. Cheap look alike of SYMPHONY were also seen in the market in 1991 in the price
range of Rs. 3000/- to Rs. 3500/-.

2
 SYMPHONY ROOM COOLERS

SCSPL has been giving 20% discount on retail prices to its dealers who get the goods directly
from the company. The company has been incurring about 25% of the total cost of production
as post manufacturing expenses and making a pretax profit of about 10% of its sales. It has been
pricing its sales to other brand holders on marginal cost plus 15% basis.

SCSPL had recently displayed all the three models at the `Living in Style' exhibition and the
India International Trade Fair at Delhi. Many consumer items were on display at these
exhibitions. Over 60% of the visitors had reported that HARMONICA seemed to be better than
SYMPHONY.

SCSPL would like to price HARMONICA at least Rs. 500/- above SYMPHONY to establish its
superior quality in the product line. It is planning to position KOOLERS in head-on competition
with the branded or non-branded products at that end of the market.

ASSIGNMENT

Keeping the cost considerations in focus and thus the various options available, recommend a
pricing strategy for the various coolers of SCSPL.

*****

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