Slide 1 StaR Spend Effectiveness Problem Indore Industry Analysis Traffic vs. Sales Head...

StaR Spend EffectivenessProblemProblem IndoreIndustry

Analysis Traffic vs. Sales

Head Effectiveness

Recommendation

Star Marketing Spend Effectiveness

• Kent Van Horn• Dan Schwartz

Students

• Sourav Das• K Subramanian

• NV SaikumarTVS Mentors

• Suresh Chand, PhDKrannert Faculty



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Who Are We?Kent Van Horn

Kent is a junior economics student at the KrannertSchool of Management. He is also majoring in Management.

Dan Schwartz

Dan has completed his first year of the MBA programat the Krannert School of Management. His Concentration is in operations. Previously, he workedas a project manager at General Electric and as a consultant at Total Quality Logistics, a 3rd party logisticsprovider.



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Lets Look at the Agenda…

ProblemIndustry Analysis

Traffic vs Retail Sales

Head Effectiveness RecommendationIndore



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What is the Problem?

StaR Sales Decline

• Average of 500 less sales per month for the last 3 years

Unclear Effect of Promotion

• Many different promotion methods used• Results of promotions unclear



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Two Wheeler Economy Segment

05-06 06-07 07-08 08-09 09-100

20000

40000

60000

80000

100000

120000

140000

160000

StaR

Splendor

Platina/CT 100

CD Delux

Fiscal Year

Ret

ail S

ales



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Agenda

Problem Industry Analysis


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RecommendationIndore



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Marketing Microenvironment

Customer

• Mass market

economy• Favors

fuel economy

• Finances

Competitors

• Hero Hond

a•Bajaj

Collaborators

•Dealers

• Suppliers

Company• Largest

volume product for

TVS• 35-40

thousand sold per

month



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Economy Segment Marketing Mix

Product

• Star City• TVS Sport

Price

• Rs. 36,000 onwards ex showroom

• Rs. 34,000 onwards ex showroom

Placement

• Retail Dealers• Sub-

Dealers

Promotion• Many Sales

Promotions• Discounts,

Rebates • 10+

Advertising Schemes

• ATL-TV, Print, Radio

• BTL- Demos,

Activations



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Market Segmentation

Economy Segment

• <40,000 Rs ex showroom

• 15-49 years old• 2 million bikes per

year• Decreased in 2008-

2009 due to economy• Increasing again in

2010

Buy Decision

• Price• Fuel efficiency• High durability

• Specs not important



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Who is Our Target Group?

TVS StaR City

• Male, 25-35 • Married

• Self employed

• SEC BCD

TVS Sport• Male, 20-30• Unmarried

• Salaried/Self employed(2nd

Generation)• SEC BCD

Key Takeaway: TVS Sport targets a younger, wealthier market



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Situation/Opportunity Analysis

Strengths•Brand awareness•Reliability•TVS brand name

Weaknesses•Price point•Fuel economy•Limiting design•Price conscious consumers

Opportunities•Sell on reliability•Differentiate from competitors

Threats•Quality not perceived by customers



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Macro-EnvironmentEnvironment Threat Opportunity

Economic Tightening Lending Policies

Growing Middle Class

Demographic Socioeconomic Shift

Uniqueness Target

Political / Legal Environmental Regulation

Government Incentives

Technological Obsolescence, Alternative Power

Incremental Product Modification

Sociocultural Demand for Cars Dissatisfaction with Public Transit

Global Joint Venture or Import

Export trade with Pakistan



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Market Analysis

Hero Honda

• Splendor• Reliability• Undiffere

ntiated• CD Deluxe

• Value

Bajaj•Platina

• Fuel Efficie

ncy

TVS• Star City• Toughness• Lasts a

while• Sport• Sporty

Key Takeaway: Concentrated market with few players



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Market Analysis

CD Deluxe

Splendor

PlantiaStar City

Sport

Key Takeaway: TVS products are differentiated in this segment



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Agenda



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Look at the Distribution Channel

TVS

Dealer

Sub-dealer

30%

70%

Customer(Urban)

Customer(Rural)

Margin split 50/50 between dealer and sub-dealer



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Comparing Retail Sales Vs. Traffic

0 2000 4000 6000 8000 10000 120000

2000

4000

6000

8000

10000

12000

f(x) = 0.813710779102402 xR² = 0.989484086508745

Traffic

Ret

ail S

ales

Key Takeaway: Retail Traffic and Sales are closely related.



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Agenda



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Regional spend compared to sales:

Correlation = R2

Highly correlated spends have highest effect

Y=m x+b

Positive m values indicate sales increase

Negative m values indicate sales decrease

Both advertising and promotion



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Brand vs Promotion



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Weighted Sales

• Method to compare sales:

Weighted Sales = 0.5 x Month n Sales + Month (n+1) Sales + 0.5 x Month (n+2) Sales +0.25 x Month (n+3) Sales

Current month Previous month Month before previous month

3 Months prior 0

20

40

60

80

100

120

50

100

50

25

Percent



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West Bengal Regression Analysis

Key Takeaway: Print, advertisements, demos and hoardings appear to increase sales. There is a strong correlation between all India sales and West Bengal. Too many variables makes a difficult to use model.



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What About Tamil Nadu?SUMMARY OUTPUT

Regression Statistics

Multiple R 0.803728697

R Square 0.645979819

Adjusted R Square 0.504371747

Standard Error 500.4544063

Observations 8

ANOVA

df SS MS F Significance F

Regression 2 2285019.811 1142509.906 4.561744314 0.074571014

Residual 5 1252273.064 250454.6127

Total 7 3537292.875

Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%

Intercept 4004.047724 320.4351853 12.49565562 5.82318E-05 3180.342858 4827.752591 3180.342858 4827.752591

Weighted TV 0.000142536 8.98236E-05 1.586845974 0.173408604 -8.83627E-05 0.000373435 -8.83627E-05 0.000373435

Press 0.000744406 0.000311571 2.389202224 0.062449331 -5.65126E-05 0.001545325 -5.65126E-05 0.001545325

Key Takeaway: For every 1500 Rs. Spent on press, TVS can expect one additional sale. Combining variables leads to a cleaner model.

Sales = 4004 + 0.00014 x Weighted TV Spend + 0.00074 x Press



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Purdue

Item Indian Foreigner DanTaj 20 750 N/ARickshaw 30 90 150Spice Flaming Mild KetchupFood Naan Rice McDonald'sTravel Bus Rickshaw Honda CivicDrink Tea Coffee Beer



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Opportunity Breakdown

Key Takeaway: TVS Star City and Sport are Economically Inferior goods that decrease in sales in wealthier areas. There are some areas where there is opportunity for more sales.



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Key Takeaway: 73.2% of the sales in TVS City can be explained by its linear relationship with total market segment sales during that month. For every 9 products the market increases, 1 TVS City sale is expected.

0.00 10000.00 20000.00 30000.00 40000.00 50000.000

1000

2000

3000

4000

5000

f(x) = 0.113825080059844 xR² = 0.8951284343461

Sales

Market Segment Size

TV

S C

ity

Sale

s

Madhya Pradesh

Gujarat

Maharashtra

Uttar Pradesh

West BengalDelhi



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Key Takeaway: Uttar Pradesh, West Bengal and Andhra Pradesh all have very high potential for future sales.



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India Promotion Regression

Diwali



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India Advertising Regression



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Agenda



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Our Trip to Indore!

Field Study to Indore

Indore Consumer

Sub-dealershipPrimary TVS Dealership

StaR Spend Effectiveness



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Indore Consumer Feedback

Indore Consumer House 1 House 2 House 3Which bike do you own? Splendor StarCity Splendor

Why this bike?Mileage, road presence Mileage, max load

Mileage, bad TVS experience

What adds have you seen for Star City?

TV: Cricket Star, MS Dhoni Print: Paper and Magazines

TV: Cricket Star, MS Dhoni heavily influenced Print: Paper and Magazines

Print: Paper and Magazines

What do you think of the promotional gifts?

Good, but not enough to influence decision

Liked them, but not ecstatic about them Not impressed

Key Takeaway: Customer perceived mileage is key.



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Sub-Dealer

Store Traffic? 6-7/dayAverage Sales? 52/month, 62 YTDPay Cash First Visit? 25%What Impacts Sales? Diwali>Wedding SeasonIs Price a Factor? TVS Fixes PricesStar City Sales? 75-80%Stockout Loss? 2-4/month



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TVS Primary Dealership

Customer Service

• Greeted within 1 minute

• Follow up calls• Green/Pink

cards

Repairs• 300 Rs. Profit per bike repair

• 100-150 repairs per day• 10-20 service

bays



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Misaligned Priorities?

Top 3 Features that Affect Purchase IntentParty Primary Secondary Tertiary

Consumer 1 Mileage Road Presence PowerConsumer 2 Mileage Maintenance Max LoadConsumer 3 Mileage Maintenance PowerSub-Dealer Strong Sturdy Mileage MaintenanceTVS Primary Dealer Looks/Image Mileage Brand

Key Takeaway: Customer perceived mileage is key although dealers focus on other selling points.



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Summarizing Our Findings

• Sales based on perception• Wedding season increases sales• Sub-dealer closer to customer• Customer needs misunderstood



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Agenda



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Recommendations

Untapped Markets (West Bengal) Increase Spend Sponsor Dealerships

Too Many Advertising Heads Used Reduce Number Increase Demos

Consumer Perception Educate Consumer Below the Line



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Recommendations

Increased Sales

Improved Head

Selection

Capture Untapped Markets

Improved Customer Perception

StaR Spend Effectiveness



Head Effectiveness

Recommendation

TVS StaR Targets SEC-BCD

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