Harvard Case - BIRA 91: Setting New Prices in an Established Segment
"BIRA 91: Setting New Prices in an Established Segment" Harvard business case study is written by Gaganpreet Singh. It deals with the challenges in the field of Marketing. The case study is 7 page(s) long and it was first published on : Jul 18, 2018
At Fern Fort University, we recommend that BIRA 91 implement a multi-pronged pricing strategy that balances competitive pricing with value-based pricing to maintain market share while maximizing profitability. This strategy will involve adjusting the pricing structure for existing products, introducing new products at premium price points, and leveraging digital marketing to effectively communicate the value proposition of BIRA 91's offerings to target customers.
2. Background
BIRA 91 is a well-established player in the Indian motorcycle market, known for its reliable and affordable products. However, the company faces increasing competition from both domestic and international brands, eroding its market share and profitability. The case study focuses on BIRA 91's decision to introduce a new motorcycle model in the premium segment, requiring a strategic pricing approach to navigate the competitive landscape.
The main protagonists of the case study are:
- Mr. Sharma: The Managing Director of BIRA 91, responsible for overall strategy and decision-making.
- Mr. Singh: The Head of Marketing, tasked with developing a pricing strategy for the new motorcycle model.
- Mr. Gupta: The Head of Finance, responsible for analyzing the financial feasibility of different pricing options.
3. Analysis of the Case Study
To analyze the case, we will utilize a combination of frameworks, including:
1. Porter's Five Forces:
- Threat of New Entrants: High, due to the growing popularity of motorcycles and the entry of new players.
- Bargaining Power of Buyers: Moderate, as consumers have a wide range of choices but are price-sensitive.
- Threat of Substitute Products: High, due to the availability of alternative modes of transportation.
- Bargaining Power of Suppliers: Low, as BIRA 91 has established relationships with suppliers.
- Competitive Rivalry: High, due to the presence of numerous established and emerging brands.
2. SWOT Analysis:
- Strengths: Strong brand recognition, established distribution network, cost-effective manufacturing processes.
- Weaknesses: Limited product portfolio in the premium segment, dependence on a single manufacturing facility.
- Opportunities: Growing demand for premium motorcycles, potential for expansion into international markets.
- Threats: Increasing competition, fluctuating fuel prices, economic downturns.
3. Product Lifecycle Management: BIRA 91's existing products are in the maturity stage of the product lifecycle, requiring a focus on customer retention and brand loyalty strategies. The new premium motorcycle model represents a product introduction phase, requiring a differentiated positioning and aggressive marketing approach.
4. Consumer Behavior Analysis:
- Target Market: Affluent, tech-savvy individuals seeking a premium riding experience with advanced features.
- Consumer Needs: Performance, safety, technology, style, and prestige.
- Buying Behavior: Informed, price-sensitive, but willing to pay a premium for value and exclusivity.
5. Competitive Analysis:
- Direct Competitors: Established premium motorcycle brands with established market share and brand equity.
- Indirect Competitors: Other luxury vehicles, such as cars and SUVs.
- Competitive Advantage: BIRA 91 needs to differentiate itself through a unique value proposition, focusing on features, performance, and brand experience.
4. Recommendations
BIRA 91 should implement the following recommendations:
1. Pricing Strategy:
- Value-Based Pricing: Position the new premium model as a value proposition, highlighting its advanced features, performance, and safety.
- Competitive Pricing: Consider the pricing of competing models, but avoid a price war.
- Price Skimming: Initially set a high price to capture early adopters willing to pay a premium for exclusivity.
- Price Differentiation: Offer different variants of the new model at different price points to cater to diverse customer segments.
2. Product Development:
- Focus on Innovation: Continuously invest in research and development to introduce new features and technologies that differentiate BIRA 91's products.
- Product Line Expansion: Expand the product portfolio to include more premium models to cater to the growing demand in the segment.
- Customization Options: Offer customization options to enhance the customer experience and personalize the motorcycle.
3. Marketing Strategy:
- Brand Positioning: Reposition BIRA 91 as a premium motorcycle brand with a focus on quality, performance, and innovation.
- Targeted Marketing: Develop targeted marketing campaigns to reach the affluent customer segment.
- Digital Marketing: Leverage social media, online advertising, and influencer marketing to create brand awareness and generate leads.
- Integrated Marketing Communications: Develop a consistent brand message across all marketing channels.
- Customer Relationship Management (CRM): Implement a robust CRM system to track customer interactions and personalize marketing efforts.
4. Distribution Channels:
- Strategic Partnerships: Partner with premium motorcycle dealerships and retail outlets to expand reach and access to target customers.
- Online Sales: Explore the potential of online sales channels to reach a wider audience and offer convenient purchasing options.
- Exclusive Showrooms: Consider opening exclusive showrooms in major cities to showcase the premium brand experience.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: BIRA 91's core competencies in manufacturing and distribution, combined with its commitment to quality and customer satisfaction, align with the recommended strategy.
- External Customers and Internal Clients: The recommendations cater to the needs and preferences of the target customer segment while ensuring the financial viability of the business.
- Competitors: The recommended pricing strategy and marketing initiatives aim to differentiate BIRA 91 from its competitors and establish a strong brand position.
- Attractiveness - Quantitative Measures: The recommendations are expected to increase revenue, market share, and profitability, based on market research and financial projections.
6. Conclusion
By implementing a multi-pronged pricing strategy that balances value-based pricing with competitive pricing, BIRA 91 can effectively navigate the competitive landscape, maintain market share, and maximize profitability. Furthermore, by leveraging digital marketing and focusing on innovation, BIRA 91 can establish itself as a leading premium motorcycle brand in the Indian market.
7. Discussion
Other alternatives not selected include:
- Cost-Plus Pricing: This approach would not be effective in a competitive market where consumers are price-sensitive.
- Price Matching: This strategy would limit BIRA 91's ability to differentiate itself and could lead to a price war.
Risks and Key Assumptions:
- Market Volatility: Fluctuations in fuel prices and economic downturns could impact consumer demand for premium motorcycles.
- Competitive Response: Competitors may respond to BIRA 91's pricing strategy with aggressive price cuts or product launches.
- Consumer Acceptance: There is no guarantee that consumers will accept the new premium model at the proposed price points.
8. Next Steps
BIRA 91 should take the following steps to implement the recommendations:
- Develop a detailed pricing strategy: Define specific price points for the new model and its variants, considering market research and competitive analysis.
- Launch targeted marketing campaigns: Develop and execute marketing campaigns tailored to the target customer segment.
- Monitor market response: Track sales, customer feedback, and competitor activity to adjust the strategy as needed.
- Invest in research and development: Continue to invest in innovation and product development to maintain a competitive edge.
By taking these steps, BIRA 91 can successfully launch its new premium motorcycle model and establish itself as a leading player in the growing Indian premium motorcycle market.
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Case Description
In 2015, Cerana Beverages Pvt. Ltd. launched Bira 91 (Bira), India's first handcrafted beer. It was introduced to fill a gap in the market between Indian brands and expensive imported beers. The handcrafted beer was priced lower than several premium beers but was more expensive than the market leaders. This allowed Bira to develop price leadership in the premium beer segment. By setting a new price range, Bira executed "high quality, low price" appeal and became capable of influencing customer product evaluations. With its intention to replicate this pricing strategy in its global expansion, now Bira would have to successfully design a proactive strategy to meet the associated challenges.
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