Cardio Equipment Project Final

8/6/2019 Cardio Equipment Project Final

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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


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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.


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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.


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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 ofstaying fit only

2. People were asked their preference of working out at Home

or a Gym


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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 aconsiderable number who prefer staying at Home and working out. Thiscould be mainly due to the price of treadmills being expensive and thuspeople 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


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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.


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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, thecustomers are quite open to the idea of a financing option


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Porters Five Forces Model


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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


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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 resourcesor 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


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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


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Structured Tables for the Five Forces Model

Table 2: Barriers to exit

Attractiveness Remark

Low High

1 2 3 4 5

Asset specialization There is no asset specialization

as there is nothing really

invested in for apart from the

place and machines can be

disposed of.

Government

Restrictions

Not relevant

Table 3: Barriers to entry

Attractiveness Remarks

Low High


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1 2 3 4 5

Economies of Scale No relevance

Product

differentiation

No relevance

Switching cost Prices do not

differentiate and

discounts given are the

same.

Access to channels

of distribution

There are a lot of dealers

and have huge no. of

dealer networks

Capital requirement

Access to

technology

No relevance

Access to raw

material

No relevance

Government

protection

No relevance

Table 4: Threat from substitutes


Lo

w

High

1 2 3 4 5

Availability

of

substitutes

There are various substitutes like

yoga, dance, aerobics, home fitness

videos which have plenty of takers inIndia

Switching

cost

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.


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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.

Profitability

of the

products of

substitutes

A class of yoga, dance costs nothing

and multiple classes are taken and

no investment in equipment.

Table 5: Bargaining power of buyers


Low High

1 2 3 4 5

Number of buyers Assumption

Availability of

substitutes

There are various

substitutes like yoga,

dance, aerobics, home

fitness videos which

have plenty of takers

in India

Switching cost

Since there arevarious substitutes


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and also the issue of

cost crops up, a

person might prefer

going to gym rather

than buying amachine 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.

Industrys threat of

forward integration

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.

Contribution toquality

Contribution to cost

Buyers profitability

Table 6: Bargaining power of suppliers


Low High

1 2 3 4 5

Number of

suppliers

The number of

suppliers i.e.

manufacturers is

pretty high.


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Availability

of

substitutes

There are various

substitutes like

yoga, dance,

aerobics, home

fitness videoswhich have plenty

of takers in India

Suppliers

threat of

forward

integration

Suppliers will not

integrate forward,

in the sense that

they require

retailers to sell the

machines to the

gym owners,corporate and

others.

Contribution

to quality

Subject to

company

Contribution

to cost

Industrys

importance

to supplier

Check with

manufacturer

Table 7: Government actions


Low High

1 2 3 4 5

Industry protector No Relevance


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Industry regulation

(pollution, etc.)

No Relevance

Customs and tariff

restrictions abroad

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, weare targeting first and foremost the fitness enthusiasts.


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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.


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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


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(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 newnational 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 thepurchasing power parity of people living in these towns and cities are not


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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 consumerswill 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.


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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 inthe 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.


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Cardio Equipment Project Final

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