Assessment Front Sheet

IMPORTANT: Your assignment will not be accepted without the FRONT SHEET.
Campus: Bangalore Stream: Business
Level: PCL-2 Year/Semester 2010 / PG 4th Sem
Strategic Marketing Module Assignment
Module Name: Assignment Type:
Decision
Student’s Name: Assessor’s Name:
Reqd. Submission 04.05.2010
Issued on: 27.04.2010
Date:
Actual Submission Date: Submitted to :
Higher Level Skills
Students are expected to develop the following skills in this assignment:
• Cognitive skills of critical thinking, analysis and synthesis.
• Effective use of communication and information technology for business applications.
• Effective self-management in terms of planning, motivation, initiative and enterprise.

Certificate by the Student:

Plagiarism is a serious College offence.
I certify that this is my own work. I have referenced all relevant materials.
________________________
(Student’s Name/Signatures)
EXPECTED OUTCOMES Assessment Criteria – To achieve each outcome a Achiev
student must demonstrate the ability to : ed
(Y/N)
Understand the criticality of environment Identification of challenges for teleshopping.
analysis in new ventures
Using porter’s model to identify the 5 forces acting on teleshopping market.
factors which need specific strategies
Evolve strategies for survival and growth. Justification of strategies chosen.
Assignment Grading Summary (To be filled by the Assessor)
Achieved
Grades Grade Descriptors
Yes/No (Y / N)
P A Pass grade is achieved by meeting all the requirements defined.
M1 Identify and apply strategies to find appropriate solutions.
M2 Select/design and apply appropriate methods/techniques.
M3 Present and communicate appropriate findings.
Use critical reflection to evaluate own work and justify valid
D1
conclusions.
Ability to anticipate and solve complex tasks in relation to the
D2
assignment.
D3 Demonstrate convergent, lateral and creative thinking.

OVERALL ASSESSMENT GRADE:

TUTOR’S COMMENTS ON
ASSIGNMENT:
SUGGESTED MAKE UP PLAN
(applicable in case the student is asked
to re-do the assignment)
REVISED ASSESSMENT GRADE
TUTOR’S COMMENT ON REVISED
WORK (IF ANY)

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Date: Assessor’s Name / Signatures:

Case Study

The Teleshopping Business in India

"The basic concept of telemarketing is that you should be offering what is not available in the retail
market. Why would anybody buy from us, if we were offering what is available in the traditional
marketplace? We have to keep coming out with exclusive products practically every second month or
so."

- Mahesh Panna, Country Manager, Telebrands, in September 2002.

Offering 'Miraculous' Products!
"Interested in reducing that 'extra flab' on your body in a matter of hours? Would you like to grow hair
on that balding pate of yours in just a few days? All you need to do is watch the television (TV) and
order the 'miraculous' products being advertised through the phone." Welcome to the world of
teleshopping networks, a phenomenon that had become a part of the lives of Indian TV viewers by
early 2000. Day in and day out, customers were swamped with images of models showing off their
'fabulous flat abdomens,' 'blemish-free skins,' selling disease-curing teas, wondrous kitchen and
household equipment, on almost every TV channel.

Though teleshopping networks became operational in the mid-1990s in the country, their presence was
never felt as strongly as it was during the early 21st century. A majority of these infomercials1 were
dubbed versions of English (or other foreign languages).

Many consumers found it extremely amusing to see foreigners mouthing chaste Hindi (and other
regional Indian languages) while advertising these products. However, it was the nature of the products
being offered by these networks that attracted the maximum attention. Most of the infomercials
featured products that claimed to provide miraculous results. There were products, which could help
one reduce weight and get into shape without exercise or dieting.

There were other products that promised to make people give-up smoking and improve body posture.
The range of products included creams, potions, solutions, toys etc. Analysts questioned the reliability
of such personal care products that claimed to beautify and tone up the body in a matter of days.

They considered these infomercials, which depicted common people using the product and explaining
its effectiveness, a farce. They argued that, these people were paid to speak well about products.
Analysts criticized the teleshopping networks for trying to deceive the viewers into buying products
with the belief that those people had actually used them. Despite these allegations, teleshopping as a
concept was gaining popularity in India and more and more customers were showing readiness to try
innovative products.

Background Note
Consumer marketing channels can be broadly classified based on the number of sales levels between
the manufacturer and the consumer. One-two-three-four level channels are the most commonly used
and involve wholesalers and retailers (also called mass marketing).Direct marketing is a zero-level
channel, wherein marketers interact with the customer on a one-to-one basis.

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Direct response marketing motivates customers to take prompt action. The prerequisites for a
promotion technique to be considered as direct response marketing included placing an order directly

before the potential customer and prompting the customer to take immediate action (such as requesting
for additional information or making a purchase decision). Teleshopping is another name for Direct
Response Television (DRTV) shopping, a concept that originated in the US in the mid-1980s. It is one
of the direct response marketing techniques.

Other major direct response marketing techniques included catalog and direct mail retailing, and
interactive/online home shopping. While in catalog/direct mail retailing, product details are
communicated to the customer through a catalog or mailer (letters, brochures, pamphlets), in
interactive/online shopping, product details and pictures are sent directly to the customers through an
electronic medium such as the Internet. Since the 1990s, two types of infomercials have been used.
Some featured people from various walks of life, using the product and benefiting from it.

These were scheduled between TV programs. At the end of the infomercial, the teleshopping networks
provided their telephone numbers (usually toll-free), prompting viewers to call for further enquiries or
place orders. Other infomercials were 'in-studio' productions with a live audience. The companies
attempted to convince viewers that it was a regular show and not a mere commercial aimed at luring
them to buy their products.

Some teleshopping networks designed 30-60 minute programs, wherein they introduced their product
range and carried out in-depth product demonstrations. In countries like the US and Australia,
teleshopping networks had dedicated 24-hour home-shopping channels that offered extensive
information regarding their product range such as product details and price. Though the concept
received a lukewarm response in its early years, in the mid-1990s, it started gaining popularity.

By 2000, the teleshopping market in the US was valued at around $2 billion. Presently, there are two
major teleshopping networks in the US – the Home Shopping Network and QVC, which have their
own, exclusive 24-hour teleshopping channels. These channels offer products aimed at specific
customer groups at different time slots to enable viewers to plan their viewing time accordingly. In
2000, the teleshopping market in the US was valued at around $ 2 billion. However, teleshopping was
not as successful in other parts of the world as it was in the US. This was due to several problems,
which included low penetration of television, lack of innovative offerings, poor promotion and
advertisement techniques, and lack of awareness among the customers.

But with the growing popularity of satellite and cable television in the late 1990s, changes in lifestyle
and a general improvement in the standard of living, teleshopping picked up momentum. By 2001, the
total teleshopping network business in the world amounted to over $ 5.

The Indian Scenario

During the early 1990s, Indian laws prohibited customers to import products, without acquiring prior
permission from the regulating authorities. These laws also restricted the repatriation of money (out of
India), without the prior permission of the country's central bank, the Reserve Bank of India (RBI).
This was a major reason for the evolution of teleshopping in India, unlike the US, where teleshopping
evolved due to the changing societal norms. During the mid-1990s, Telebrands India, a 100%
subsidiary of Telebrands Corp., pioneered the concept of teleshopping in India and soon grew into a
leading teleshopping network in the country.

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In mid-1995, TSN (another major US-based teleshopping network) and Asian Sky Shop (ASK), owned
by the media giant - Zee also entered the market. The other major players in the Indian teleshopping
market were TVC, TSNM and Star Warnaco. All these net works adopted the following modus
operandi:

• Buying time slots on popular channels that had high penetration and enjoyed good viewership among
the target customers. These time slots ranged from two minutes to 1 hour and comprised
infomercials/product presentations, explaining the product's utility.

• Providing a special product code for every product and displaying it along with its price.

• Setting up call centers in various cities, on the basis of the scale of operations and the extent of
penetration expected.

• Providing viewers with telephone numbers of these call centers and asking them to call their nearest
call centre for further enquiries or to order the product.

However, the Indian teleshopping network grew at a very slow pace, on account of factors such as the
lack of education and awareness among people, low standard of living, low rate of women
employment, and low penetration of TVs/telephones. Moreover, unlike the Western countries,
shopping for an average Indian had traditionally been an occasion for 'social outing' and enjoyment.

The 'feel-and-touch' factor for buying almost anything had always been given great importance. Thus,
teleshopping networks initially had a tough time, to make the concept acceptable. The companies
developed several strategies with regard to product offerings, promotional practices, pricing and
distribution, to overcome the above hurdles and make a success of their teleshopping initiatives.

How the Indian Teleshopping Market was won

During the late 1990s, the traditional Indian societal setup of joint families gave way to nuclear
families. In the metros and even some smaller cities, the number of families where, both the husband
and wife were pursuing careers had increased substantially and there was little time available for
shopping outdoors. Teleshopping companies believed that this segment offered tremendous marketing
potential and would easily take to convenient shopping from their homes.

In addition, the networks decided to target the premium-end TV viewers, with high purchasing power.
The growing sophistication among these customers enhanced their readiness to try new, innovative
products, even at a premium. While deciding on the product-mix, teleshopping networks focused more
on offering innovative and value for money products, which were not available in the market
otherwise. These were primarily, impulse buying products, aimed at attracting viewers and inducing
them to take an buying decision promptly. Thus, a select range of imported products were offered that
mainly included electronic goods, fitness devices, home appliances and toys. The networks sourced
their products with help of their agents (both in India and abroad) who identified and certified the
quality of these products. In some instances, the manufacturers of the products approached the
networks directly for marketing and distribution of their products.

The India-based networks such as ASK also offered products made in India apart from their imported
range. In early 2000, many local players also entered the teleshopping market and began offering
products on local cable channels. However, the imported products were more successful as compared
to the Indian products being offered.
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Analysts attribute this to the novelty of imported products and the inherent customer orientation
towards foreign goods in India. In the early 2000s, the networks began offering various customized
products such as jewellery with birth-stone, which became very popular. New products were
introduced constantly to attract customer attention and ward off competition.

The products offered were broadly divided into two categories, Utility products (fitness devices,
healthcare/autocare products, household appliances and electrical devices) and Value-expressive
products (jewellery, apparels and, home decor). The range of product offerings increased through 2001
and encompassed many more products that included electronic goods, toys, clothes, books and music.
Utility products accounted for a majority of teleshopping sales in India, while value-expressive
products registered low sales. Explaining the rationale behind this, analysts said that Indian customers
were used to go to their trusted shop-keepers for buying such high-value products and liked to
ascertain the product's worth by physically handling and inspecting it.

Teleshopping networks adopted two types of persuasion modes to induce viewers to buy their
products, namely Functional Congruity and Self Congruity. While functional congruity aimed at
attracting consumers by emphasizing the utilitarian aspect of the product, self-congruity aimed at
attracting customers by matching the product user image with that of customer's self-image. The
products were advertised through infomercials which were aired in 1-2 minute time capsules between
scheduled programs (both national and regional) or in 30-minute time capsules on various TV
channels. Most of these infomercials were aired only on weekdays while a few were aired seven days a
week.

Since initially, only imported products were being offered and the market was very limited, companies
did not find it commercially viable to prepare detailed infomercials for them. Hence, they offered
dubbed versions (English, Hindi and other regional languages) of the original infomercials (made in
different foreign languages). As the product range expanded to include domestic products as well, the
networks developed (shooted) infomercials in India.

Most of these were developed in studios and featured well-known personalities such as former film
and TV stars. However, dubbed versions of infomercials were used even in the early 2000s, as foreign
products still formed a substantial part of product portfolio of all major teleshopping networks in India.

To ensure success, teleshopping networks paid special attention to their pricing strategies. In the initial
years, most of the products offered by these networks were lifestyle products that came last in priority
of a typical Indian household. Though the price of the products offered by various networks in the late
1990s was as low as Rs 500, most of them were priced at a premium to target the upper classes.
However, over the years, the number of utility products increased and the price of the products was
also brought down to make them more affordable. In 2002, the price of the articles offered ranged
between Rs 200 to Rs 12,000, with a majority of the products falling in the Rs 1,000-5,000 range.

The teleshopping networks competed with each other in terms of offering the same benefits at lower
prices. This was particularly observed for various weight reduction products. All the networks
marketed different gadgets that claimed to reduce weight derided the offerings of rival teleshopping
networks claiming to be cheaper and much more effective. Hectic activities took place on the
promotional front as well, with networks offering 'early bird' prizes, price reductions, money return (if
not satisfied with the product) offers, free accessories and double product packs at the same price. For
effective distribution of their products, the networks focused on strengthening their franchisee base

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across the country. All the major networks in India had their franchisers across major metros and semi-
metros in the country.

Towards the end of the year 2001, the franchisee network of Telebrands India extended to over 90
cities across the country, while ASK's network spanned across 60 cities. The networks provided the
telephone numbers of all their distributors at the end of their infomercials, so that the customers could
call their nearest distributor for further enquiries or to place an order.

On receiving a purchase order from a customer, the product was delivered to him/her through courier.
Payment was generally made on delivery of the product. Unlike the late-1990s, when products were
only delivered against cash payment, in the early-2000s, the networks began accepting credit cards to
encourage customers to respond to their offers.
As a result of all the above initiatives, the awareness about the merits of teleshopping increased.
Customers, who followed global trends in lifestyles and product usage, began to buy teleshopping
products, and the market picked up momentum. In 2001, the market registered an annual growth rate
of over 20% and amounted to Rs 500 million. In 2002, Telebrands led the market with an estimated
turnover of over 250 million, followed by ASK with a turnover of over 200 million.

Teleshopping Traumas
Though teleshopping market was showing positive growth trend, its growth rate was much below the
expectations of the players involved. According to a report, most of the teleshopping networks in the
country were not making any profits. In fact, TSN had closed its teleshopping activities in 2002 and
was concentrating only on online retailing (www.tsnshop.com).

According to market sources, Telebrands was the only network that was able to sustain itself and make
profits – though it was attributed by many to the strong support it received from its parent company,
Telebrands Inc. The reasons for the slow growth of the teleshopping market in India were many, the
most important being the abundant supply of imitation product. Local entrepreneurs copied the
products advertised on TV and very soon the markets were flooded with imitated versions of these
products. These products were not only cheaper compared to organized sector products, but also
offered consumers the facility to personally touch and appraise them. Mahesh Panna of Telebrands
said, "What happens is that we come out with a product and it is promptly copied by a local player. He
obviously sells it at a lesser price.

This way the whole market goes out of our hands." To address this problem, networks such as
Telebrands and ASK opened special retail outlets in all major metros and semi-metros to enable
customers to personally appraise the products offered, before making a purchase decision.

Apart from the new products, the companies also retailed those products, which had been taken off air
(to make place for new products) but still had potential for sale.

However, the local retailers still enjoyed a substantial price advantage over the teleshopping networks
due to local manufacturing, low transportation costs and elimination of distribution/delivery costs.
Though the teleshopping networks claimed that their pricing strategies were in tune with the target
customer's profile, the reality was very different. The higher prices were proving to be a major
hindrance for the growth of teleshopping networks. Most of the products were priced between Rs
1,000-5,000. Customers were found to be unwilling to pay this amount for lifestyle products that
ranked rather low in their household purchasing priority list.

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The differences in the culture and language also posed problems and hampered the prospects of
teleshopping market in India. As teleshopping networks needed to telecast their programs in different
regions, they dubbed most of their infomercials into the regional languages.

However, they failed to have any impact in prospective customers as they did reflect the native culture
of the region. Another major problem for the teleshopping networks was the growing criticism for
some of its products. There were a host of products that claimed to do 'seemingly impossible' tasks for
consumers.

For instance, products promising to reduce weight, remove unwanted hair, improve posture, improve
hearing and cure chronic diseases were eyed with suspicion by a majority of Indians. Also, the 'over-
enthusiastic' and 'chirpy' foreign models that appeared in the dubbed infomercials were criticized on
the grounds of being rather awkward mouthing dialogs in Hindi and other regional languages.

Problems were further compounded due to limited reach of teleshopping products. The networks
focused mainly on metros and B-class cities, neglecting towns and semi-rural areas which also had a
growing base of educated and premium end customers who aspired for convenience and novelty
products.

To address this problem, major teleshopping networks announced plans to expand their distributor base
and extend their reach to all corners of India.

Every distributor or franchisee was supplied with a minimum stock level, based on the expected
market of the product in that specific region.

The players also entered into marketing agreements with leading retail outlets in various cities, where
their range of products could be displayed. However, with all the networks preparing to leverage the
growth potential in the market, the competition was expected to intensify. To withstand competition, it
became essential for teleshopping networks to continuously innovate and offer new products. This
posed a serious challenge for them.

The biggest threat for teleshopping, however, seemed to be the emergence of interactive home
shopping, wherein the retailers and consumers used interactive electronic systems such as a digital TVs
or the Internet (popularly called e-tailing) to buy products online. The concept was still in its initial
stages in the early 2000s.

However, industry observers felt that it would not be long before this concept became popular, given
the growing techno saviness of Indian consumers and the increasing Internet user base in the country.
It was being increasingly felt that the networks which did not embrace this new phenomenon would
find it difficult to survive in the coming years.

Future Prospects
Despite all the above problems, the teleshopping market was believed to hold a lot of potential in
India. This was primarily on account of the increasing base of convenience-seeking people and the

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middle-class population. As the standard of living of these people improved, they became more
receptive towards trying out innovative products and concepts.

Teleshopping networks, therefore, focused on integrating their operations and increasing their reach for
these customer segments. The decision to offer online-shopping services through special retail
websites was made with the same objective.

By mid-2002, most of the major networks such as Telebrands and ASK were deriving their revenues
from three sources – websites (www.asianskyshop.com and www.telebrandsindia.com respectively),
teleshopping and retail outlets, with a major part of the revenues coming from the teleshopping
(franchise centers). The revenues from websites were low due to the lack of online purchase awareness
among the customers and the low rate of credit card penetration in India.

Since global teleshopping networks proved to be a huge success, there seemed to be a strong
possibility of their being successful in India, as well. But for that, teleshopping networks would need to
play their cards right. It would not be too far-fetched to think of 24-hour dedicated Teleshopping
channels in India in the future.

Questions:

Q1. Analyze the environment in which tele-shopping was attempted.

Q2 What were the strategies adopted to take on Michael Porter’s 5 force model?

Q3. Identify products and services well suited for teleshopping and justify your choice.

Q4. What are your views on the future of teleshopping in India for consumer goods and services?