Indian Institute of Management Rohtak

No. IIMR-C3-01/2018
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Mobonik

On 1st September 2014, Mr. R. S. Joshi (Zonal Head, Mobonik India) was watching a torrential
downpour from his office window in Mumbai. His mind was preoccupied with his recent
conversation with his boss, Mr. P. K. Bose (Country Head, Mobonik India). Mr. Joshi was well
aware that his company, though market leader in mobiles, was facing fierce competition from
Heo, the challenger. He was equally aware of some Chinese brands making a foray into the
Indian market with big advertising budgets. To combat this situation, Mobonik had embarked
upon a new product development strategy and had decided to change visual displays in
exclusive outlets to maintain market leadership. Mr. Bose was planning to visit on 3rd
September, to learn whether the strategy was reflected in numbers obtained from the market.
Mr. Joshi knew that an analysis of the marketing plan using the sales data would guide
Mobonik’s future course. He also knew that he was expected to comment on whether Mobonik
should continue with its current strategy or change its course of action. He knew time was short
and the decision crucial. Mr. Joshi called his team to discuss and analyze the situation and
formulate an appropriate strategy to recommend to Mr. Bose.

The top management of Mobonik was well aware of the scenario. The company had launched
Mobi K5 and L2 on 1st May and 31st May, 2014 respectively to maintain its market
dominance. To create market buzz, Mobonik had created a promotional campaign through mass
mediums, social networking websites, and point-of-display materials. The company made sure
that in stores across India sales of K5 started 1st May and for L2 on 1st June. Mobi K5 was
launched in the premium category, priced at Rs. 23,320/-. L2 was a smartphone in the mass
category and was priced at Rs. 11,780/-.

Mobonik Performance
As a company, Mobonik was the market leader in the mobile phones category. From its earliest
entry, Mobonik tried to capture the largest piece of the mobile market by offering both feature
phones at lower price points and smartphones at higher price points. The company invested
10% of its revenue in research and development to remain on the cutting edge of technology.
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Prepared by Professor S. K. Pandey and Mr. Avnish Rana, Academic Associate, Indian Institute
of Management Rohtak. This case has been prepared as a basis for class discussion. It is not
designed to present illustrations of either correct or incorrect handling of administrative
problems.

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With good quality mobiles at affordable prices, Mobonik became the leader in the Indian market.
The company was doing good business when Chinese companies started entering the Indian
market in January 2014 with good phones at attractive price points. (For information about
Mobonik’s performance, please see Table 1 for monthly sales data since March 2014.)

Distribution Strategy
Mobonik classified the dealers based on sales potential and performance. The company sold
mobiles through exclusive stores as well as multi-brand outlets. Multi-brand outlets often
stocked mobiles of many competing brands. Multiple options allowed customers a lot of choices
and deals. Price-sensitive customers often visited multi-brand stores. On the other hand, high-end
customers visited the exclusive showrooms, as the shopping experience in these was much better
as compared to the multi-brand stores. Shopping in the exclusive outlets was a richer experience,
as the salespeople were knowledgeable about the products and the ambiance and displays were
much more appealing. Mobonik focused on overall customer experience and shopping
experience as well, as after sales service they were an integral part of attracting and retaining
customers. Mobonik had clear specifications regarding the area required for a particular category
of outlet, the interior decoration, the sales- and service people’s knowledge and experience, and
so on. Mobonik preferred to provide short-duration training to the dealers' staff, which they
contracted up with a premier management institute. Apart from training, Mobonik also provided
the point of display (POD) materials to dealers. Dealers earned commission based on the number
of mobiles sold, as well as on the models. Dealers were given commission on models (mobiles)
sold as well as based on their category. Exclusive dealers were given 10% commission extra over
and above multi-brand dealers. Mobonik sold almost 85% of its mobiles through category one-
star outlets, which was a cause of concern for the company. Chinese phones with a better value
proposition could take away a significant portion of those dealers and consumers. (For a
classification of Mobonik dealers, please refer to Table 2.)

Display Strategy
Mobonik provided a planogram to its dealers to present various models. A planogram is a
diagram that indicates the placement of different products on retail shelves. Regarding displays,
a commonly used phrase is ‘eye level is buying level’. Planogram design includes shelf heights,
product placements, and the number of facings of the product visible to the consumer. Shelf
height depends on the size of the products and ease of reach for the consumer. The location of
mobile models in an aisle is also important. There is a school of thought that products placed at
the start of an aisle do not sell as well. Planograms are beneficial, as they provide better visual

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appeal for customers and better product experience with the live unit. As the company launched
the two new models and wanted to provide better visibility for its new products, it changed the
planogram for the May-June period. (For the changed planograms of May-June for various
dealer categories, please refer to Tables 3 and 4.)

Mobonik gave its dealers a demo unit at a discount of 45% off the MRP (maximum retail price).
This demo unit was utilized by the retailer to demonstrate product features to prospective
customers. Mobonik also provided terms and conditions along with demo units. One such
condition was to display the products according to the planogram, but Mr. Joshi knew that
retailers often did not follow the planogram. To maximize overall sales, they often changed
displays based on their own judgment. This tendency was highest among 1-star category dealers
and reduced up the scale to category 5-star dealers. (To see an actual planogram, please refer to
Exhibit 1.)

Product Performance
Mr. Joshi was aware that K5 and L2 were not just recently launched models but were also inputs
to the future business strategy for the entire company. K5 and L2 were significantly improved
versions of the company’s earlier products, K4 and L1, respectively. Another question hovering
in Mr. Joshi's mind was whether cannibalization of K4 and L1 had happened due to K5 and L2.
Mr. Joshi knew that his boss, Mr. Bose, was interested in knowing the level of success of the K5
and L2 launches. Mr. Joshi gathered the data from the 3-star, 4-star and, 5-star categories to
answer these questions. 1-star and 2-star category dealers were often small retailers with no
direct connection to Mobonik. The 3-star and above dealers were connected with Mobonik’s
Management Information System, and collated sales data was available for ready reference from
these dealers. (For dealer related performance since March 2014, please refer to Table 5. For
comparison of L2 sales with L1 sales, please see Table 6. Table 7 contains a comparison of the
performance of models K4 and K5.).

As Mr. Joshi sat down with his team to find answers, he thought of first putting questions to the
team members. The first question in his mind was whether the company should continue with
new product launches, additionally, should Mobinik target mass markets, premium markets, or
both? Should there be a change in dealer composition, as currently, a large percentage of the
dealers were in the 1-star category? Were the new launches successful? Was the modified
planogram successful? Mr. Joshi knew that Mr. Bose would ask these questions, and perhaps
others, and he was due to arrive in only 48 hours.

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List of Abbreviations Used
• POD – point of display
• % VolCont – percentage of volume contribution
• % ValCont – percentage of value contribution
• ASP – average selling price

Tables and Exhibits

Exhibit 1. Planogram in Action

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Table 1. Historical Performance of Mobonik According to Dealer Category Since March 2014

Value 4980,59,831 5011,21,648 5901,43,280 4824,55,616 6738,05,391 6617,75,177

Volume 91125 92078 95158 73789 84910 99914
Total 5509 ASP 5466 5442 6202 6538 7936 6623
Dealer Dealer % Parameter Aug-14 Jul-14 Jun-14 May-14 Apr-14 Mar-14
Category Count Dealer
Value 764,83,050 917,99,750 1390,52,970 1084,18,290 1401,46,832 1413,79,263

Exclusive % Val Cont 15.36% 18.32% 23.56% 22.47% 20.80% 21.36%

65 1.18% Volume 6761 7313 10365 7911 9342 10765
Outlet
% VolCont 7.42% 7.94% 10.89% 10.72% 11.00% 10.77%
ASP 11312 12553 13416 13705 15002 13133
Value 380,34,480 266,67,080 482,20,850 330,63,900 431,63,190 413,12,190

5 Star % Val Cont 7.64% 5.32% 8.17% 6.85% 6.41% 6.24%

8 0.15% Volume 3484 2610 3958 2375 3370 3516
Club
% VolCont 3.82% 2.83% 4.16% 3.22% 3.97% 3.52%
ASP 10917 10217 12183 13922 12808 11750
Value 437,96,490 409,81,580 630,95,250 475,32,510 699,38,440 653,67,090

4 Star % Val Cont 8.79% 8.18% 10.69% 9.85% 10.38% 9.88%

20 0.36% Volume 4592 4277 6685 3827 5379 6550
Club
% VolCont 5.04% 4.64% 7.03% 5.19% 6.33% 6.56%
ASP 9538 9582 9438 12420 13002 9980
Value 1830,97,548 1859,85,484 1992,83,390 1599,86,935 2494,13,967 2418,12,850

3 Star % Val Cont 36.76% 37.11% 33.77% 33.16% 37.02% 36.54%

218 3.96% Volume 28296 29169 31467 21927 28731 33640
Club
% VolCont 31.05% 31.68% 33.07% 29.72% 33.84% 33.67%
ASP 6471 6376 6333 7296 8681 7188
Value 820,00,712 914,53,814 859,11,530 717,65,890 1027,72,632 972,25,341

2 Star % Val Cont 16.46% 18.25% 14.56% 14.88% 15.25% 14.69%

513 9.31% Volume 21922 24630 24098 16750 17760 20379
Club
% VolCont 24.06% 26.75% 25.32% 22.70% 20.92% 20.40%
ASP 3741 3713 3565 4285 5787 4771
Value 746,47,551 642,33,940 545,79,290 616,88,091 683,70,330 746,78,443

1 Star % Val Cont 14.99% 12.82% 9.25% 12.79% 10.15% 11.28%

4685 85.04% Volume 26070 24079 18585 20999 20328 25064
Club
% VolCont 28.61% 26.15% 19.53% 28.46% 23.94% 25.09%
ASP 2863 2668 2937 2938 3363 2980

Table 2. Dealer Categorization

Dealer Category Revenue per year

Exclusive Outlet Variable
5-Star Club >= 120 Lakh
4-Star Club >= 45 Lakh & < 120 Lakh
3-Star Club (A, B, & C) >=6 Lakh & < 45 Lakh
2-Star Club >=3 & < 6 Lakh
1-Star Club < 3 Lakh

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Table 3. Planogram for May-June 2014: Retailer Category 5-Star Club & 4-Star Club

June ’14 Tab S-8.4” Mobi Grand 2

May ’14 Tab 4-7” Mobi Grand 2
POD 1 POD 2 POD 3
Front Counter
POD 4 POD 5 POD 6
May ’14 Gear Fit Mobi K4 (I9500) Note 3 (Black)
June ’14 Gear Fit Mobi K5 (G900) Note 3 (Black)

Table 4. Planogram for May-June 2014: Retailer Category 3-Star Club

June ’14 Tab 4-7” Star Pro

May ’14 Tab 4-7” Star Pro
POD 1 POD 2
Front Counter
POD 3 POD 4 POD 5
May ’14 Mobi L1 Mobi Grand 2 (White) Trend/Mobi K5
June ’14 Mobi L2 (G355) Mobi Grand 2 (White) Trend/Mobi K5

Table 5. Revenue since March 2014 according to Dealer categories

Dealer Dealer MARCH APRIL MAY JUNE JULY AUGUST

Category Count Val Val Val Val Val Val

5-Star Club 8 413,12,190 431,63,190 330,63,900 482,20,850 266,67,080 380,34,480

3-Star Club 218 2418,12,850 2494,13,967 1599,86,935 1992,83,390 1859,85,484 1830,97,548

4-Star Club 20 653,67,090 699,38,440 475,32,510 630,95,250 409,81,580 437,96,490

Grand Total 246 3484,92,130 3625,15,597 2405,83,345 3105,99,490 2536,34,144 2649,28,518

Table 6. Sales (Volume) for L1 & L2 Models according to Dealer categories

Dealer I8262 L1 I8262L1 I8262L1 I8262L1 G355L2 G355L2 G355L2 G355L2

Category May June July August May June July August

5-Star Club 207 0 0 0 0 135 212 294

3-Star Club 892 161 166 10 0 1080 1377 1437

4-Star Club 273 84 87 0 0 208 327 324

Grand
Total 1372 245 253 10 0 1423 1916 2055

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Table 7. Sales (Volume) for K4 & K5 Models according to Dealer categories

Dealer I9500 I9500K4 I9500K4 I9500K4 G900K5 G900K5 G900K5 G900K5

Category K4 May June July August May June July August

5-Star Club 68 73 87 87 18 148 34 85

3-Star Club 125 125 221 144 90 415 171 129

4-Star Club 54 19 40 22 4 130 41 87

Grand
Total 247 217 348 253 112 693 246 301