Pricing Strategy of Bajaj Pulsar Marketing Management
Introduction th
Bajaj Auto Launched its Pulsar in the executive Motor cycle Segment on March 6 , Pune. The new bike offered a top-speed of 120km/hr with a mileage 60km/litres. The launch was aimed at strengthening in the executive Motorcycle Market after having dominated in the premium bike segment with Discover and CT 100 in the economy end. Bajaj Pulsar is a motorcycle brand owned by Bajaj Auto in India. The two-wheeler was developed by the product engineering division of Bajaj Auto in association with motorcycle designer Glynn Kerr Tokyo R&D. Currently there are four variants available -with engine capacities of 135 cc, 150 cc, 180 cc and 220 cc. More than a million units of Pulsar were sold by November 2005. With monthly sales of more than 48,000 units in June 2009, Pulsar is the leader in the 150 cc segment in India with a market share of 43%.
Pricing Strategy: The pricing strategy was based on the brand positioning of Bajaj Auto in the automobile industry as shown in the BCG matrix in Figure 1.
Figure-1 History Before the introduction of the Pulsar, the Indian motorcycle market trend was towards fuel efficient, small capacity motorcycles (that formed the 80-125 cc class). Bigger motorcycles with higher capacity virtually did not exist (except for Enfield Bullet). The launch and success of Hero Honda CBZ in 1999 showed that there was demand for performance bikes. Bajaj took the cue from there on and launched the Pulsar twins in India on November 24, 2001. Since the introduction and success of Bajaj Pulsar, Indian youth began expecting high power and other features from affordable motorcycles. The project required approximately 3years for completion and cost Bajaj Rs 1 billion.
Target:
R.L. Ravichandran, Vice President (Business Development and Marketing) said Bajaj Auto Limited is supposed to sell around 70,000 motorcycles a month to gain a market share of 23% in the motorcycle segment.
Consumer Psychology and Pricing: Reference Price: Prices of CBZ was high, so the reference prices of Pulsar according to customers were lower.
Price-Quality Inferences: Features of both Hero Honda CBZ and Bajaj Pulsar were almost same, but Pulsar was relatively cheaper.
Setting the price: Step I: Selecting the price objective The objectives were survival, maximum market share and product-quality leadership. For these purposes the features were set as that of CBZ but the prices were kept a bit lower, which helped Pulsar to enter the market and gain maximum market share.
Maximum Market Skimming: Skimming is referred to as selling a product at a high price; basically companies sacrificing sales to gain high profits. This is employed by companies in order to reimburse their cost of investment put into the original research of the product. This strategy is often used to target early users of a product/service because they are relatively less price sensitive than others. Early users are targeted either because their need for the product is more than others or they understand the value of the product better than others. In any case, this strategy is employed only for a limited period of time as a way to recover most of the investment of a product. This is the reason why the prices of Pulsar were dropped within two years and consumer surplus of early adopters were captured. Step II: Determining the demand Price sensitivity:
Due to the presence of many bikes in the same price range the elasticity of demand was very high. Hence with the decrease of prices, the amount of sales increased in volume. The amount of sales in 2009 was 165049 units. Along with other market conditions, with the introduction of a lower version at a cheaper cost sales increased to 269488 units in 2010. This can be referred from Figure-2 and Figure-3.
Figure 2
Price 71000 69000 67000 65000 63000
Price
61000 59000 57000 55000 165049
269488
Figure-3 Step III: Estimating Cost In the short run company’s pricing strategy was to earn more profit and in the long run to invest that money for the technological advancement such as DTS-i technology. Step IV: Analyzing competitors cost, prices and offers From the mistakes of Hero Honda CBZ, Bajaj Pulsar was able to take share away from the market pioneer of power bikes in India, and command the price premium in the process because of its performances advantages-smoother driving experience. Step V: Selecting a pricing method Bajaj did a mix of pricing methodology of Going Rate Pricing and Value Pricing. It set its price slightly lower than its competitor following going rate pricing without compromising on any of the features provided by its competitor to attract value-conscious customers. Step VI: Selecting the Final Price While selecting the final price, Bajaj did set its price lower than its competitor to share the risk of launching a new product in the market.
Adopting the Price: Promotional Pricing: Special event prices were offered during festival seasons. Zero interest financing was offered for some speculated period to attract customer. Longer payment terms were provided to the customer so that the EMI would be less. Three free service contracts were offered at the time of purchase.
Differentiated Pricing: Market Research was done to differentiate among different income groups and their demand for Pulsars of different versions. This can be viewed in Figure 4.
Income vs %age Share 50 45 40 35 30 25 20 15 10 5 0
%age Share
Less than 5000 5000 - 350000
35000 600000
60000 and above
Income Group
Figure-4
From the above data, Bajaj has introduced different versions of Pulsar to meet different customer verticals and provide customer-segment pricing. This can be viewed in Table-1. Pulsar 135
Pulsar 150 DTS-i
Pulsar 180 DTS-i
Pulsar 200 DTS-i
Pulsar 220 DTS-Fi
Pulsar 220 FDTS-i
Pulsar 220S DTS-i
Power (bhp) Torque (N·m) Wheelbase (mm) Weight (kg)
13.5
15.10
17
18.2
20
21.04
21.04
11.4
12.45
14.22
17.98
18.7
19.12
19.16
1325
1320
1345
1345
1350
1350
1350
122
143
147
147
150
152
148
Top Speed (km/h)
115
116
124
139
140
144.5
145
Current Price (Mumbai)
59,000
68,000
70,000
80,000
97,000
80,000
70,000
Table-1 Launch of DTS-i engine: The second generation Pulsars featured Bajaj Auto's newly developed DTS-i technology, which increased the power rating of both versions by 1 bhp (0.75 kW) each and also increased fuel economy.
This was done to get a competitive advantage over the newly launched Hero Honda Karizma which posed a threat to the 220cc Bajaj Pulsar.
Launch of Hero Honda Karizma:
The Hero Honda Karizma is the flagship motorcycle of Hero Honda. It was launched in May 2003 and was replaced by a cosmetic upgrade Karizma ZMR. Hero Honda Karizma and Pulsar in same fray
Bajaj has launched the Pulsar 200cc and Hero Honda has come up with face lifted Karizma. In the Bollywood movie, Dhoom 3 both the bikes will be used under the same category. Karizma scores over the Pulsar when it comes to torque; the bigger engine provides healthy Pulsar 200cc clocks a top speed of 121kph against the 125kph offered by Karizma 223cc. The new Karizma will also continue to be priced at almost the same level as the previous version, with on-road prices for the regular variant working out to Rs 79,000-80,000. Bajaj has launched 52 Probiking outlets – which housed only high performance bikes. Pulsar 200cc is available at such Probiking showrooms at selected locations across the country for an attractive price of Rs.65,497 (ex showroom, New Delhi).
Price war between Karizma and Pulsar:
Initially Hero Honda Karizma launched its bike at the same price as the Bajaj Pulsar variant in 220 cc which was around 1 lakhs. But since both had the same features and were positioned in the same segment led to a price war. This was concluded by both of them decreasing the price significantly. With proven engine and completely new unheard features Bajaj Pulsar 200cc outsmarts the new Karizma. Also, the better pricing makes the Bajaj pulsar 200cc a perfect bike for the highway.
Conclusion The challenge for Bajaj Pulsar was to keep coming up with proprietary products that fuel its business model, which is based on innovation and R&D. Pulsar’s pricing strategies include setting the price high at the start of launching a new product. After gaining some profits from its early customers who are often fascinated with every new technology such as DTS-i, Pulsar seems to reduce its prices by introducing different versions in order to make it affordable and popular among other competitive products. Basically, the company adapts prices according to the customers’ ability to pay. It came up with different variants to cater to the needs of cost to value customers.
