Case Study: The Price war in Gujarat Newspaper Industry

In Gujarat, an Indian state, about 2000 newspapers were published in various languages,
primarily in Hindi, Gujarati, and English in 20011. Two Gujarati newspapers, Gujarat
Samachar and Sandesh, were the market leaders. Gujarat Samachar, started in 1932, had a
circulation of 1.47 million during the period July to December 2002. The circulation of
Sandesh for the same period was 0.75 m i l l i o n copies. Th e s e newspaper brands were
well established in the market and they enjoyed customer loyalty.

At the beginning of 2002, the Dainik Bhaskar Group (Dainik), a leading business house in the
country with a strong presence in the print media industry, decided to launch a Gujarati
newspaper Divya Bhaskar in Ahmedabad, the capital of Gujarat. Dainik launched the
newspaper in two phases. In the first phase, a consumer contact program through a door-to
door survey was initiated. The researchers surveyed about 1.15 million households in
Ahmedabad and the districts of Mehsana and Anand. After the survey results were analyzed,
Dainik decided to launch the newspaper according to consumer expectations. Simultaneously,
it conducted a mass media campaign to give publicity to the launch. The second phase of the
launch, named ‘chali tumhari marzi’ was done primarily with the objective of informing the
audience that the newspaper was being launched in accordance with their expectations. In the
second phase too, 0.75 million households in and around Ahmedabad were covered.
Bookings for the newspaper were taken in the form of guarantee bonds. These bonds required
customers to sign an order form of subscription for one year. However, the company did not
collect any money in advance from the subscribers.

Moreover, it assured them that the price of the newspaper would not be increased for one
year after its launch. Sudhir Agarwal, (Agarwal), managing director of Dainik, said in this
regard, “The decision to enter Gujarat was taken in the beginning of 2002. For almost a year
we studied the market, in terms of both product and advertising before we actually entered
the state. Further, Gujarat is one market, which still has huge untapped potential.”

On June 22, 2003 Divya Bhaskar was launched in Ahmedabad. It had a promotional price of
Rs. 1.50, with a freeze in rate for the next one year, at a time when the prevalent rate of major
newspapers in the Gujarat market was Rs. 2. Divya Bhaskar was launched with a confirmed
circulation of 452,150 copies, the highest in the country for any newspaper on its opening
day. It was a 16-page newspaper with an additional features supplement.

For decades, the Gujarati newspaper market had been ruled by Sandesh and Gujarat
Samachar. The launch of Divya Bhaskar led to many far-reaching changes in the Gujarati
newspaper industry. The leading newspapers till that time were being run as family
businesses and not by professionals. The entry of Divya Bhaskar forced these newspaper
groups to employ professional help. They also started investing more on infrastructure and on
promotional activities. The entry of Divya Bhaskar also led to the beginning of a price war
between the major competitors. Ramesh Agarwal (Ramesh), chairman of the Dainik Bhaskar
Group, said, “We are not targeting existing readers. I foresee Gujarati dailies having a
circulation of at least 50 lakhs. Divya Bhaskar will get at least 25 lakhs of this.”4 An AC
Nielson Org Marg report in August 2003 reported an expansion of the newspaper market in
Gujarat by 30%. With the entry of Divya Bhaskar, the newspaper market in Gujarat began to
expand.
Immediately after the launch of Divya Bhaskar, Sandesh reduced its price to Rs. 1.50. It also
increased the number of supplements and the total number of color pages. Besides, it started a
novel scheme under which representatives from the newspaper would make surprise visits to
households in Ahmedabad. If the residents were able to produce a copy of that day’s
Sandesh, they were given gifts on the spot. The price reduction by Sandesh did not get the
desired results. This was because many Sandesh customers started buying Divya Bhaskar too,
as the combined price for the two newspapers was only one rupee more than what they used
to pay earlier for Sandesh. Very soon, Sandesh increased the price again to Rs.2.

Gujarat Samachar adopted a different strategy. When the news of Divya Bhaskar’s entry
came in, the management of Gujarat Samachar strengthened its marketing team at the
national and local levels. It also gave a face-lift to the newspaper with a new design and
layout. After the launch of Divya Bhaskar, Gujarat Samachar launched a scheme wherein a
customer who paid the monthly subscription of Rs.75 would get a plastic bucket worth Rs.75
free of cost. This meant that the customers were in effect, paying nothing for the newspaper.
Gujarat Samachar also started a “mala maal dhamaka” coupon scheme under which the
customers could redeem a certain number of coupons to get some guaranteed gifts. Further, it
implemented various promotional schemes. In association with Ayur Herbals and Hindustan
Lever Ltd. Brand Active Wheel, it conducted beauty contests in various cities from where the
newspaper was being published.

More than the strategies adopted by competitors, Divya Bhaskar’s major problem was the
difficulty in getting advertisements, especially from the government. It had to depend more
on advertisements from private organizations as most of the government advertisements went
to Gujarat Samachar and Sandesh. Dainik therefore had to attract the advertisers by proving
its credibility in terms of Divya Bhaskar’s circulation.

The circulation figures for Divya Bhaskar were not available from the Audit Bureau of
Circulation (ABC). Dainik therefore sought the help of AC Nielson ORG Marg to conduct a
customer survey to find out the circulation of Divya Bhaskar. The study conducted in
Ahmedabad in August 2003 showed that Divya Bhaskar’s circulation had reached 0.486
million copies. On getting the survey results, Divya Bhaskar launched a promotional
campaign through various media channels like exchange4media.com.

In October 2004 Divya Bhaskar increased its cover price to Rs. 2 on Sundays, Wednesdays,
and Fridays5. It had plans to apply the new price for all days of the week6. Additional
editions of the newspaper were started in Surat (March 2004), and Baroda (September 2004).
In Surat, Divya Bhaskar was launched at Rs. 1.50. For the Baroda launch, the Bhaskar Group
decided to fix the price at Rs. 2 as they felt that the Divya Bhaskar had become an established
brand name in Gujarat and so it was not necessary to launch the newspaper at a reduced price
as it had done in Ahmedabad or Surat.

As a result of the promotional strategies adopted by the three newspaper giants, Gujarati
Samachar, Sandesh, and Divya Bhaskar, ABC refused to conduct surveys to establish their
circulation since such promotions were against its terms and conditions. Divya Bhaskar felt
the need for audited figures to reinforce the point to advertisers and advertising agencies that
it was one of the largest circulated dailies. It therefore approached Ernst & Young to conduct
a survey to establish its circulation figures. The survey results in November 2004 established
that Divya Bhaskar had a circulation figure of 1.13 million copies in Gujarat (Ahmedabad
0.566 million, Surat 0.252 million, Baroda 0.312 million.)
Regarding the survey figures of Divya Bhaskar in Gujarat, Girish Agarwal, Director, Dainik
Bhaskar said, “This is just to authenticate the claims that we have been making. There are
times when people have found it difficult to take our word and hence there was a need to
authenticate these figures by a trustworthy third party. We took this step because we were
sure of our numbers. To my knowledge, this is the first time that a publication firm is doing
this.”8 The latest National Readership Survey (NRS) 2005 also established the strong
position of Divya Bhaskar in Ahmedabad with readership figures of 5.132 million.
Commenting on this, Bharat Kapadia, Executive Director of Bhaskar Group, said, “We have
been able to grow the market since our first venture in 2003. Plus, we have a higher number
of female readers than Gujarat Samachar and Sandesh.”9 The Bhaskar Group was planning to
come up with more editions and more printing centers to help Divya Bhaskar strengthen its
position in the entire state of Gujarat.

Questions for Discussion:

1. Divya Bhaskar earned the distinction of being the first newspaper in India to reach the
number one position in a city on its opening day. How far do you think the price promotion
strategy adopted by the newspaper helped it to gain this unique position? [5]

2. How did competitors respond to the entry strategy of Divya Bhaskar? [5]

3. Cite some examples of non- price competition from the case. [5]

4. Quote any one instance of price war from real life situation. [5]