MMS 3 Marketing Project On Consumer Durable Products

Industry: Fitness Equipment Product: Cardio Equipment such as a Treadmill Product Type: Consumer Durable

Prepared by: Anuj Kaul (507) Bertilda Fernandes (508) Rahul Dsa (544) Wayne Soares (561)

Xavier Institute of Management and Research July 2011

Acknowledgements:
We would like to thank Prof. Dr. Vaidyanathan for giving us this opportunity to research on a consumer durable and devising our very own marketing plan. We would sincerely like to thank all the respondents who were extremely cooperative in taking our survey and the retail outlet owners for their patience and time rendered.

Abstract:
Cardio Equipment is an item which is not bought frequently but however cherished, and hence this report talks about the gap which exists in such an industry along with the recommendation to fill that gap.

Methodology:
We conducted a consumer research survey hoping to achieve 50 respondents, however through our meetings at various gymnasiums and health clubs we were successfully able to achieve only 38 responses. Their inputs have been recorded and analysed. The findings have given us deep insights into the consumer mindset and the opportunities which lie in the cardio equipment industry. We have subsequently tried to fill up the gap which we have observed and the offering which would successfully fill that gap. The following are some extracts of the survey conducted and the findings of the same.

Introduction:
We as a group after a lot of thought process came up with the idea of having Cardio Equipment as our consumer durable product. We thought of this product as most of us at sometime have pondered going to a gymnasium or having our very own gym equipment at our place of stay. The cardio equipment is more of an aspiration purchase due to the fact that almost everyone wants to stay lean and at the same time look good. We acknowledge that there is a huge potential to this market and that the opportunities are vast, however the price issue will always be a detrimental factor. That being said, it was imperative to conduct a consumer research to understand the consumer mindset and the thought process attached into their needs and aspirations. The research brought out a few facts which we have accounted for in this report. A Gap has been identified and subsequent methods of reducing the gap have been noted.

Results and Findings from the Customer Research Survey

Sample Size: 38 ongoing and potential gym goers Location: Gymnasiums across Mumbai City 1. Respondents were quizzed about their motives to go to the Gym

Of the respondents who answered we found that 92% of them visited a gym to stay fit and remain healthy while 8% felt the Trend of Working out existed. Inference: People are health conscious and workout for the purpose of staying fit only 2. People were asked their preference of working out at Home or a Gym

Here 63% of the respondents preferred to visit Gyms while the remaining 37% preferred their Homes. Inference: Although people prefer their Gyms to their Homes, there is a considerable number who prefer staying at Home and working out. This could be mainly due to the price of treadmills being expensive and thus people join Gyms to negate the price barrier. 3. Preference of Options

We see a varied amount of preferences by people here and that is promptly displayed in the percentages. We see that the majority of 47% would happily join Gyms while the next best option would be to take up the alternatives like yoga and Dancing. Inference: Price issue comes into matter here as the price of taking up yoga or dancing would be comparatively much lesser and more enjoyable compared to gym.

4. Past Purchases of Cardio Equipment

From the graph it is very evident that people do not usually purchase cardio equipment. Inference: Price Issue, the cardio equipments are too expensive and hence a majority of the people indulge in going to gyms

5. Influence of Purchase Decision for Cardio Equipment

Considering the different factors which influence purchase decisions we took price, features and durability into consideration. We found that half the sample size was extremely price conscious. Inference: We see again that the price is something that dominates the consumer mindset. People find it difficult to afford a high priced product and hence may even settle for a product which may not be very high on features.

6. Presence of a Financing Option changing Purchase Decision

People would change their minds if offered a financing option. Inference: Very clearly indicates that people would not mind investing in a equipment but due to the possibility of the high prices at one go, they shun away from the same

7. Preference of a Financing Option or Discounts Offered

Here we see a split in terms of people who prefer finance options to discounts. Inference: As we have seen all the current retailers offer discounts at purchase. This seems to be a norm for them to follow to attract customers and entice them. However due to the heavy initial investment, the customers are quite open to the idea of a financing option

Porters Five Forces Model

Barriers to Entry: Barriers to entry are low in the sense that there are many retailers and if the retailer possesses the capital and infrastructure available, then entry is easy However the attractiveness also is low because of saturation of competition and crowded market. Due to the presence of many players, there would be cut throat competition and hence we see a lot of discounts being offered at retail outfits The attractiveness of the industry with respect to the channels of distribution are also high as there are a lot of dealers and have huge no. of dealer networks Due to the capital requirement being on the higher side, it would be semi attractive to enter this industry The switching costs which come into effect here make this a highly attractive industry due to the fact of prices not being differentiated

to a large extent and availability of discounts offered at most retail outfits Due to the fact that most buyers are unaware of the product in question and do not have basic information, it makes this a very attractive industry to enter

Bargaining Power of Suppliers: This industry has many suppliers. There are innumerable manufacturing companies from many foreign countries. This makes the attractiveness low. The substitutes like yoga, dance, aerobics, home fitness videos which have plenty of takers in India and thus the attractiveness of the bargaining power of suppliers in terms of the availability is low From a retailers point of view the attractiveness of suppliers threat of forward integration is high due to the fact that suppliers will not integrate forward, in the sense that they require retailers to sell the machines to the gym owners, corporate and others

Bargaining Power of Buyers In terms of the availability of substitutes, again the attractiveness is low due to the other low cost methods like yoga and dancing etc. The switching cost attractiveness in terms of bargaining power of buyers is low due to the various substitutes and also the issue of cost cropping up. A person might prefer going to gym rather than buying a machine or doing yoga or dance The attractiveness of buyers threat of forward integration is high as its not possible for gym owners to possess the adequate resources or inclination The attractiveness of retailers forward integrating is extremely low as its not possible since many of the retailers wont be able to invest in space as well as running gyms as well as selling equipment are two entirely different propositions

Threat from Substitutes

As far as the substitutes are concerned, the availability is high in terms of there being yoga, dance, aerobics, and home fitness videos. Thus the attractiveness is low. Since there are various substitutes and also the issue of cost crops up, a person might prefer going to gym rather than buying a machine or doing yoga or dance and hence the switching cost attractiveness is low Usually yoga, dance and aerobics or even playing a sport is much cheaper proposition and the customer can even then do it at home. Hence the attractiveness in terms of substitutes price value is low from the retailers point of view.
A class of yoga, dance costs nothing and multiple classes are taken at no investment in equipment and hence the attractiveness in terms of the profitability of the products of substitutes

Barriers to Exit In terms of the asset specialization, we feel that there is no asset specialization as there is nothing really invested in for apart from the place and the machines can be disposed of and hence the asset specialization attractiveness is high.

Government Actions We have not considered the Government Actions as we feel there is no relevance to the retailers apart from the legalities of the venture which will be on par as any retail venture as per the Government of India rules and regulations

Structured Tables for the Five Forces Model Table 2: Barriers to exit
Attractiveness Low 1 Asset specialization 2 3 4 High 5 There is no asset specialization as there is nothing really invested in for apart from the place and machines can be disposed of. Not relevant Remark

Government Restrictions

Table 3: Barriers to entry

Attractiveness Low High Remarks

1 Economies of Scale Product differentiation Switching cost

5 No relevance No relevance Prices do not differentiate and discounts given are the same. There are a lot of dealers and have huge no. of dealer networks

Access to channels of distribution Capital requirement Access to technology Access to raw material Government protection

No relevance No relevance No relevance

Table 4: Threat from substitutes

Attractiveness Lo w 1 Availability of substitutes Switching cost 2 3 4 High 5 There are various substitutes like yoga, dance, aerobics, home fitness videos which have plenty of takers in India Since there are various substitutes and also the issue of cost crops up, a person might prefer going to gym rather than buying a machine or doing yoga or dance. Remarks

Substitutes price-value

Usually yoga, dance and aerobics or even playing a sport is much cheaper proposition and the customer can even then do it at home. A class of yoga, dance costs nothing and multiple classes are taken and no investment in equipment.

Profitability of the products of substitutes

Table 5: Bargaining power of buyers

Attractiveness Low 1 Number of buyers Availability of substitutes 2 3 4 High 5 Assumption There are various substitutes like yoga, dance, aerobics, home fitness videos which have plenty of takers in India Since there are various substitutes Remarks

Switching cost

and also the issue of cost crops up, a person might prefer going to gym rather than buying a machine or doing yoga or dance. Buyers threat of backward integration Not possible as gym owners do not have the resources or even the inclination to do so. Not possible since many of the retailers wont be able to invest in space as well as running a gym as well as selling equipment are two entirely different propositions.

Industrys threat of forward integration

Contribution to quality Contribution to cost Buyers profitability

Table 6: Bargaining power of suppliers

Attractiveness Low 1 Number of suppliers 2 3 4 High 5 The number of suppliers i.e. manufacturers is pretty high. Remark

Availability of substitutes

There are various substitutes like yoga, dance, aerobics, home fitness videos which have plenty of takers in India Suppliers will not integrate forward, in the sense that they require retailers to sell the machines to the gym owners, corporate and others. Subject to company

Suppliers threat of forward integration

Contribution to quality Contribution to cost Industrys importance to supplier

Check with manufacturer

Table 7: Government actions

Attractiveness Low 1 Industry protector 2 3 4 High 5 No Relevance Remark

Industry regulation (pollution, etc.) Customs and tariff restrictions abroad

No Relevance

No Relevance

Marketing Plan
Segment: Since we plan on going mass market, our segment will be people who are looking at being health conscious. Target Market: From our segment of those customers who plan to stay healthy, we are targeting first and foremost the fitness enthusiasts.

We then move to the overweight customer who is looking at losing weight and wants to have a health secure future. We are targeting customers who also are borderline customers, those who are unsure if the gyms and cardio equipment. These customers who see their friends and peers going to the gym but feel that they are healthy enough to continue with their regular standard of living Our last and final target customer are actually non-customers, those customers who are do not view working out and fitness as a hobby and would actually spend their time in eating and drinking out, or would watch television as a past time while they ignore the health related issues which could trouble them later

The GAP:
From the survey conducted and the responses from the respondents we found that currently the Treadmills which are on sale are all initial payment tools which due to their high price are major put offs to the clientele seeking to buy them. However we thought of increasing sales and the number of buyers by successfully offering financing options like zero interest EMIs which would then make it easily available to the customer to purchase. The Argument: Customers are a tricky bunch and they can throw the argument of paying a monthly instalment which would be similar to enrolling in a gym class. However the treadmill at home will be available to multiple users, it will be available at the convenience of the buyer and also the treadmill having a warranty and larger life span will stay with the customer for a much longer time.

Positioning Statement:
For those who value health our cardio equipment provides affordable fitness because of our easy to buy EMI solutions and extended warranty schemes.

4 Ps of Marketing Simplified
Product The product portfolio is quite diversified in the fitness equipment market. There are a number of producers such as Horizon Fitness, Magnum, Fitness World, Vector X, Yasaka, VX sports, Body sculpture etc. these companies are based either in USA, UK or Japan, hence for them it is not a financially feasible option to set up a base in the Indian market which is still in a very nascent phase. They therefore sell their products through retailers. The product line is diversified into 3 categories:

The Commercial Equipment The Home Equipment Accessories

The product line is highly diversified with main emphasis on (a) Motor capacity (b)Dimensions (c) Maximum user weight The price differences between products between different companies and different products within the same company portfolio are based on modulations and modifications in the 3 above mentioned points. Some examples of the products are: FITNESS WORLD (1)001E cross trainer (2)007 multifunctional treadmill (3)M2 motorized treadmill (4)M1 motorized treadmill (5)Family walker motorized treadmill VIVA FITNESS
(1) T-1500 Light commercial treadmill

(2)T-1060 motorized treadmill

(3)T-950 motorized treadmill (4)KH-890 light commercial cross trainer (5)KH-690 programmable magnetic elliptical cross trainer ACCESSORIES (a) Power bander (b)Doorway gym bar (c) Skip ropes (d)Double exercise wheel (e) Pilates band (f) Anti burst gym ball MAGNUM (1)AC125 mtorized treadmill (2)ACO125 motorized treadmill HORIZON FITNESS (1)T901 Treadmill (2)T902 Treadmill

Place As currently the major retailers have a large presence only in tier 1 cities, our marketing plan proposes to move into tier 2 cities as well. Unlike earlier times where new fads and trends introduced in the market only penetrated deeply into the metropolitan cities, the emergence of new national icons from tier 2 cities has made these cities much more vulnerable to identifying with and adopting these new trends. So is the case of the new trend of being fit and staying healthy. Many of the new supermodels and actors have come from small cities and made a big impact on the national front. This has made people from these cities break off from their small town mentalities and try and experiment with new trends. Thus we see these cities as potential markets in the future and would want to start building a good base in these markets as soon as possible. However, we also realize that the per capita income and the purchasing power parity of people living in these towns and cities are not

comparable to that of the metros. The gymnasiums in these cities are lesser infrastructure and thus lesser equipment (one of the major reasons for us to be there combined with the growing aspirations to mingle and be the same as the metropolitan crowd), hence we plan to promote a new pricing strategy to have a competitive edge in the market.

Pricing The gap that we identified through our customer survey was that in the pricing mechanism. Currently the system is such that the producers of these equipments (majorly based in US) sell their products through retailers at a given price which is based on the producers costing and profit arrangements. After providing a retailers margin to retailers, it is upto the retailers to set the price at which they sell to the end consumer by modulating their profit margin. The retailers generally provide a discount to consumers and a further discount if it is a bulk purchase. For e.g. : a XTRACK 1312 treadmill of California fitness group sold by action sports(based in Mumbai) has an MRP of INR 75,000 whereas action sports provides a discount and sells it for INR 52,500. However these payments currently have to be one time payments. This is the gap we realized in the market and propose to introduce an EMI SCHEME in the purchase of this equipment. Currently the numbers of gyms in the country are not high as compared to other developed and developing countries where staying fit and being healthy is a part of their lifestyle; however we do see it to become a part of the Indian lifestyle very soon. Thus it is imperative to make it easier for customers to buy such equipment. This would enable other probable gym owners to open up gyms, which was not possible as the high payment was a constraint in opening up a gym and the same effect will be seen in the home products segment as individual consumers will also be able to purchase these equipments easily. Thus this mode of payment provides relief to both gym owners as well as individual consumers The other aspect is the practicality and feasibility of such a proposal. There are certain things we need to accomplish to make sure this proposal is practical: 1. Firstly we need to tie up with certain banks that help us provide this EMI solution at 0% interest rate.

2. We need to also increase our ACP with the producers as our payments are not based on the EMI scheme and now after the introduction of this scheme, we unlike before, will not be receiving the money at one time. Thus the cash flow will change. However this does not pose to be a problem as a retailer because as seen in the five forces model, the retailers have a high bargaining power because of accessibility to the market. Hence we can propose to go ahead with our new pricing policy.

Promotion The Promotion in the Marketing Plan will consists of banners and flexi vinyl boards outside the retail outlets which will come at a onetime cost and be durable in terms of their lifetime value. Similarly a couple of ads can be placed in Health and Lifestyle magazines which will cater to enthusiasts who are looking at losing those extra pounds and staying healthy. Pamphlets distributed in area centric newspapers are a wonderful way of reaching the target audience at a very reasonable cost. There could be cost effective Tear Drop Banners which would give a very intriguing feel to the whole store and that would increase footfalls due to the curiosity

Conclusion
We believe that with a proper financing option it would convert many non buyers into buyers and many non consumers to recreation customers, thus making the industry much more attractive and the job of a retailer easier and more profitable.