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ITC INTERROBANG BINGO MAD ANGLES CASE SOLUTION

N Shriram
NSCG

IIM CALCUTTA
August 7, 2012

Contents
Objective of the Analysis ..................................................................................................................... 1 Background of the Case ....................................................................................................................... 1 SWOT and Five Forces Analysis ............................................................................................................ 1 SWOT Analysis ................................................................................................................................. 1 Porters Five Forces Model Analysis ................................................................................................. 3 Marketing Strategy .............................................................................................................................. 4 Consumer Segmentation by Age and Likely Attributes ..................................................................... 4 Elements of the Marketing Strategy ................................................................................................. 4 Conclusion............................................................................................................................................... 5

Objective of the Analysis


The objective of this case analysis is to understand the factors that drive growth and profitability in the salty snacks category of the Food and Beverage industry, analyze ITCs strengths and opportunities with respect to its product Bingo Mad Angles and suggest strategies aimed at the continued success of this product. The questions posed by Satya in the case will be used as guidelines to channel the analysis in a relevant direction. The methodology followed in this case analysis is 1. Describe the backdrop of the case 2. Analyze the product, company and industry 3. Create a Marketing Strategy consistent with insights from the analysis

Background of the Case


Bingo Mad Angles made its entry in a sector that was populated by several large players, although only one of them, Frito Lay, could claim to be a truly national player. In this sector, several players of varying sizes existed who had a more local focus, having bulk majority of their sales in a few states or a specific region of the country. Some of them are also value players, i.e., they gave more quantity of the product at every price. Balaji and Yellow Diamond are examples of these. Some local players commanded a premium price, for example Haldiram. Hence the consumers have a lot of choice with respect to the price and brands of packaged salty snacks available to them. Additionally, packaged and unpackaged non-branded snacks (for example local cottage industries and bakeries) as well as unpackaged snacks prepared at the point of sale (such as small restaurants and road-side eateries) are a source of competition to Bingo Mad Angles.

SWOT and Five Forces Analysis


Given the diversity and intensity of competition faced by ITC in this sector, to generate insights, it is useful to apply a SWOT analysis of Bingo Mad Angles with competitor comparisons. This is followed up with a Porters five forces analysis to get a summary glance of the business dynamics and the levers of profitability in the industry.
SWOT Analysis

Given the heterogeneity in business models and geographical spread among the competitors, the SWOT analysis is best done in a relative manner. For this, we identify the various SWOT aspects of Bingo Mad Angles and compare ITC on these aspects with the competitor. Strengths Organizational Capabilities o Reliable organization led by professional and experienced managers o Pan-India Sales and Marketing expertise of parent organization o Access to capital and capability in detailed planning and control Long Term Focus o Not constrained by need for short term profitability o Ability to invest in R&D, supply chain and brand equity Late entrant/Small size
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o Brand novelty and flexibility in brand positioning o Ability to reconfigure Sales and Distribution to suit current needs Among the strengths listed above, Organizational capabilities and Long term focus separate ITC from the discount and/or local players, whereas the late entrant advantage gives it an edge over Frito Lay. Weaknesses Late entrant/Small size o Resistance to adoption by consumers due to lack of familiarity with the brand o Hesitance and demands of channel partners due to uncertain prospects o Non-viability of huge advertising campaigns due to cost pressure o Learning curve in understanding consumer preferences o Break-even pressures due to up-front investments in S&D and manufacturing

The weaknesses identified are all due to the small size and late entrance of Bingo onto the salty snacks scene, and hence are not shared with the other players. While some of these should be expected to become less important with increasing size and development of capabilities and experience in the segment, the first two of the weaknesses listed should be tackled aggressively in the short term as they stand in the way of growth. Opportunities To grow the sector and capture market share o Develop brand equity to counter Frito Lay and local players o Penetrate the traditional hot snacks space and offer an alternative o Improve scale and efficiency to rival quantities per pack of discount players o Scale up to capture previously unserved geographies o Customize on flavors to offer scope while retaining scale of base product

These opportunities have a synergetic effect on each other, where exploiting any one makes some others more attractive as well. Hence the strategies to be developed could be aimed at a combination of these opportunities with no one opportunity having priority. Threats Frito Lays ability to counter strategies o Price based competition to exacerbate cost pressures o Mimicking new product launches coupled with costlier branding strategies o Leveraging existing distribution network for superior market presence Stability of distribution channels o Distributors turning to other companies due to slow growth o Retailers developing resistance in the face of better promotions by competitors o Glitches in supply chain due to scaling up and geographic expansion

Threats arising from the opponents counter strategies are expected in a highly competitive market. For a new entrant facing a large established competitor, these take on a special
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significance. The exit of the new entrant being a real possibility, the established competitor may resort to price based competition by cross subsidizing loss leaders from more profitable brand lines. The established competitor may also be able to easily appropriate product innovations of the new entrant by leveraging existing R&D capabilities and may even be able to market them in a more effective manner.
Porters Five Forces Model Analysis

A five forces model helps clarify how the firms business environment is affected by five important groups of stakeholders: Competitors, Buyers, Suppliers, New entrants and Firms with substitute products. Of these Competitors, Customers and Substitute products are probably more relevant than the others, and hence will be analyzed. This is because ITC itself can be considered a new entrant into the industry and is also reputed to have an excellent supplier management system, especially since its introduction of the e-chowkpal. Competitors: The competition has been described in the Case Background on page 1. Some aspects relating to the margin and profitability of the competitors deserve mention: o Premium packaged branded products command the highest prices, but have to maintain this with high advertising costs (at least in the case of Frito Lay) that sustain the brand value that generates the premium. o Discount players with branded products cut down on the advertising expenditures to earn their profits despite charging a smaller price. As a result their revenue is completely dependent on pricing. They are also regional players and their ability to scale up and spread out while maintaining the pricing point is suspect. Bargaining power of buyers: Buyers include both the final consumers as well as distribution channel partners (distributors, wholesalers and retailers) who buy the product from ITC. o Consumers: Consumers have a variety of options in terms of prices and brands to choose from. To extract a premium from consumers, the product needs to be augmented with other attributes. Frito Lay does this by means of expensive advertising (mainly celebrity endorsements), to generate brand equity. o Distribution channel partners: For a new entrant with a young product yet to establish itself as well as its better known competitors, the distribution channel partners have a great deal of bargaining power. Retailers too would require more persuasion to stock the product; since the demand pull form consumers for a product with relatively less brand recall is likely to be less, leading to less turnover as opposed to an established brand. Substitute products: A substitute for packaged snacks is hot traditional Indian snacks, which has a history longer than any packaged snack brand, and a brand equity that derives from habit, tradition, customs and other cultural bases. This is a highly dispersed group, and the major competition to Bingo from this sector would be in the form of small tea shops, roadside eateries and local bakeries, which provide a product similar in its mode of consumption to Bingo.

Marketing Strategy
Consumer Segmentation by Age and Likely Attributes

The consumers may be segmented by age to identify certain target groups and to identify the marketing levers to broaden the appeal of Bingo to wider audiences. The characteristics attributed to each group are based on the personal perception and experiences of the author of this report, and are not the result of marketing/consumer research. 1. Children/Kids (5-12): Brand name makes them empowered while asking for product at retailers, value for pocket money, possibly influenced by TV ads, celebrity endorsements may matter, lots of brand recall, possibly no brand loyalty, instant gratification, learns from and influences friends, tastier is better, like a toy/tattoo inside. 2. Teens (13- still in school): Possibly brand loyal, knows his brand names, choosy, aspirational, any brand still better than no brand, informed by TV ads, influenced by peers and own judgments, naughty/mischievous ads may appeal, taste may be enough. 3. Campus Youth (In college): Developed brand preferences, knows why they go for what they go for, would require persuasion to switch, taste may not be enough, receptive to naughty/mischievous ads, shouldnt be corny, individually needs to feel psychological satisfaction of good purchase decision based on well-informed choice, in group may not be choosy, can be an opinion leader, companionship over brand, brand over price. 4. Young Adult(Out of college 30): Know their brands and what they like, strong advocacy of personal brand preferences in groups, opinion leaders, may yet be more open than others to experiment, need variety and novelty, appreciate taste and quality (crispy, fresh), humor in adds effective, have money to spend, may be price conscious. 5. Adult (30+): Choosy, perception of quality and taste important, humor in ads welcome, brand a useful shortcut to perception, not brand loyal, any good brand, psychological satisfaction of good purchase important, value for money, but value includes brand value.
Elements of the Marketing Strategy

Have a lot of fun: In addition to the humor based advertisements running on Television as of now, a new campaign to highlight how Bingo Mad Angles is fun can be launched. The concept would be to run short one line ads alongside TV programs identified as being entertaining. A punch line could be added to indicate how Bingo is as much fun or more fun than the chosen program. For instance Not having fun yet? Try Bingo Mad Angles for a whole lot of fun! In the hours leading up to the sponsored show reminders of the same format could be telecast, for instance Not having fun yet, tune into Bingo Mad Angles Funny Show for maximum fun. All segments except campus youth and young adults would be natural targets for such a strategy. The objective would be to bring Bingo from the realm of individual outdoor convenience consumption to within the house as a snack for family consumption by coupling it with wholesome entertainment programs that are deemed suitable for the whole family. This would have the added effect of moderating any idea of Bingo purchase as an individualistic impulse purchase and lend it an aura of legitimacy and

sanctimony for outside the house purchases. This could effectively address Satyas concerns about broadening the base of consumers. Better From All Angles Challenge : In order to send the message across to the consumer groups of teens, campus youth and young adults that Bingo is tastier than the alternatives, a challenge may be held where random passersby in a mall or a similar social space are invited to try Bingo and a mimic product launched by a competitor, and decide which they would prefer. This approach has a self-confident and courageous quality to it. The righteous and gutsy undertones might resonate with the age groups targeted, who possibly have similar sentiments. The success in the challenge will also add to the desirability of the brand by adding a component of achievement to the brand identity. The motivation for this strategy is the R&D heads assertion that Bingo is a better product than those launched by competitors and that this fact has been borne out by tests. If in trial runs, more people are seen to prefer the competitors product, or there are legal implications that may deter implementation, this approach would have to be abandoned. If else, it can be replicated in a large number of places to create a buzz around the product among the audiences targeted. This strategy specifically targets the issue of copy-cat products, as identified by Satya. More is not better: Annexure 3 of the case shows how the discount players are formidable in Western India in the finger snacks category, whereas in the rest of India they have a much smaller share of the market. A print and radio campaign to popularize the slogan Zyada se no fayda, Bingo khao taste aayega (More isnt better, Bingo is tastier) or something similar and catchy to establish a sense of superiority in taste correlated with the higher price point for Bingo will help change this situation. The aim is to prevent the customer rationalizing that the value brands and Bingo are similar except for brand name, which prevents his aspirational purchases of Bingo, as this need is satisfied by value players at a lower price. Better in South and East as well: The case suggests that there exists opportunities for Bingo Mad Angles to do better in East and South India. The format for the Bingo Mad Angle snack was obtained from a North Indian snack. The challenge in changing this base product, in terms of the R&D effort and the loss of economies of scale, make its customization unviable. However, the flavors can be varied a great deal, without any great loss of economies of scale. Hence the flavors should be customized to achieve a greater penetration of Bingo Mad Angles into the Southern and Eastern states. Super Sambhar for the South and Chilli Chingri for the East may be probable candidates.

Conclusion
In this report, an effort was made to arrive at a marketing strategy aimed at increasing the sales of Bingo Mad Angles, the finger snack product of ITC in the salty snacks category. The provided case was studied to understand the case backdrop and the challenges faced by the management team. Then, a SWOT analysis and a Five Forces Model analysis were done to identify the business dynamics and profitability levers of the industry. These led to insights which, when coupled with an age based customer group segmentation, enabled the synthesis of a marketing strategy consisting of four elements that can be implemented separately or in combination. These strategies are expected to achieve the increase in sales growth that the management team seeks.