Advait Adopting Customer Centric Pricing


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Advait\'s customer centric pricing strategy

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Advait Adopting Customer Centric Pricing

  1. 1. Make a niche for yourself - Adopting Customer Centric Pricing Jan 2011 advait energy Affordable Clean Solutions. For Everyone.
  2. 2. Agenda <ul><li>Why customer centric pricing </li></ul><ul><li>Roadmap to strategic pricing in an organization </li></ul><ul><li>How customer centric pricing strategy helped a start up become sustainable </li></ul>
  3. 3. Why customer centric pricing? <ul><li>What products / services to offer? </li></ul><ul><li>What are the current market trends? </li></ul><ul><li>What is the future market potential </li></ul><ul><li>What are the barriers / drivers for growth? </li></ul><ul><li>What is the competition offering? </li></ul><ul><li>What best practices can we learn from competition? </li></ul><ul><li>What competitive gaps can we leverage? </li></ul><ul><li>What is the positioning or pricing for competitor products? </li></ul><ul><li>What should we as an organization do to create: 1. brand value and 2. high revenue? </li></ul>Know thy customer: needs, customer buying behavior and inclination price
  4. 4. Roadmap to Strategic pricing in an organization
  5. 5. Organizations need to think through the strategic as well as tactical implication of changing market dynamics <ul><li>Clear alignment with business objectives: Goal to achieve specific profit and optimize portfolio value </li></ul><ul><li>Supportive of overall long term industry strategy </li></ul><ul><li>Considers customer value, economics and costs, recognizes payers as customers </li></ul><ul><li>Addresses competition and next best alternatives </li></ul><ul><li>Establishes pricing basis, structure, and mechanism </li></ul><ul><li>Management of price over product life-cycle: high, low, off patent </li></ul><ul><li>Involves product life-cycle changes as well as changes in environment (e.g. competition, Govt subsidies, regulations) </li></ul><ul><li>Based on customer value relative to next best alternative </li></ul><ul><li>Can involve pricing for one base price and/or pricing for all segments </li></ul>Price setting Price management Pricing strategy & model Strategic pricing framework – to be aligned to overall business strategy
  6. 6. Customizing pricing strategy to meet customer needs <ul><li>Outcome-based pricing (optimize between risk and return) </li></ul><ul><li>Service bundling (e.g. bundling of Net, TV, phone by Singtel) </li></ul><ul><li>Subscription pricing (or contract pricing) </li></ul><ul><li>Product kits to providers </li></ul><ul><li>Pricing to value (perceived value to customer) </li></ul><ul><li>Skim vs penetration pricing </li></ul><ul><li>Volume quotas (volume based pricing) </li></ul><ul><li>Price drop before loss of exclusivity ( varying price before introducing new product or before substitutes enter market) </li></ul>Price setting Price management Pricing strategy & model
  7. 7. How customer centric pricing strategy helped a start up become sustainable in a short time frame
  8. 8. <ul><li>A large proportion of India’s population does not have access to the electricity grid </li></ul><ul><ul><li>Approx. 80,000 of the ~600,000 villages in India are currently off the grid </li></ul></ul><ul><ul><li>Most grid connected areas face the problem of an extremely erratic supply of electricity </li></ul></ul><ul><li>Kerosene and diesel are the most widely used solutions to this problem today </li></ul><ul><ul><li>More than 80 million households in India currently use kerosene lamps for lighting </li></ul></ul><ul><ul><li>Millions of shopkeepers and vendors use kerosene lanterns, petromax lamps or diesel gensets </li></ul></ul><ul><li>These existing solutions are unhealthy, expensive and inconvenient to use </li></ul><ul><ul><li>They are also very harmful for the environment </li></ul></ul><ul><li>OUR CUSTOMERS: Mid and low income </li></ul><ul><li>consumers in rural and semi-urban India </li></ul>As per Bloomberg, it is a US$2 billion market for solar lanterns / lights in India
  9. 9. Product Innovation Marketing Strategy <ul><li>Advait Energy offers a variety of solar products based on the principle of distributed micro-generation of power </li></ul><ul><li>In-house R&D has allowed us to develop solar lights that have unmatched light intensity at our price point (production outsourced) </li></ul><ul><li>Our flagship product, the Solarbatti TM is the first of its kind, that can be used in place of a lantern or a wall mounted light </li></ul><ul><li>Our products are to be tested by The Energy and Resource Institute of India (TERI). Discussions already in progress </li></ul><ul><li>Leveraging multiple channels to take our products to the customers </li></ul><ul><ul><li>Innovative marketing: http:// =_ZGG64Jsm1o </li></ul></ul><ul><ul><li>Retail network </li></ul></ul><ul><ul><li>Partnership with non profit organisations (e.g Advit foundation (HAREDA partner), Hope foundation (funded by Walmart)) </li></ul></ul><ul><ul><li>Microfinance Institutions </li></ul></ul><ul><ul><li>Corporate CSR programs </li></ul></ul><ul><li>Not relying on government regulation, subsidies </li></ul><ul><ul><li>Advait Energy is not present in the MW scale power production projects </li></ul></ul><ul><ul><li>Advait Energy’s products sell in the open market without subsidy, at price points below most subsidised products! </li></ul></ul><ul><ul><li>Our products – along with service – will be much more readily available to customers </li></ul></ul>Patent pending
  10. 10. Price Intensity of light / product quality <ul><ul><li>Focus on high intensity at low price with more backup time </li></ul></ul><ul><ul><li>( based on customer demand) </li></ul></ul>~ Non Profit models Rs 500 Rs 2,000 Rs 30,000 Advait Energy adopted a unique pricing strategy to create a niche for itself – that by researching the comfortable price point via its customers
  11. 11. <ul><ul><li>Shopkeepers / small business owners </li></ul></ul><ul><ul><li>Fruit / vegetable hawkers </li></ul></ul><ul><ul><li>Middle class households in tier 3 and below cities </li></ul></ul><ul><ul><li>Households with school going children </li></ul></ul>Monthly household income (Rs.) 3K 50K Solarbatti customers Premium product customers Target customer profile Categories within target segment Note: Rural customers in the income band Rs 3K-8K typically run small businesses such as kirana stores, cement shops, manure shops etc. To be addressed in 2 nd year via customized solar solutions Most of our target customers currently use mobile phones Home lighting system and Fan combo system customers Inverter battery charger customers To be addressed in future via foundations, grants and CSR We found out a niche category of customers who could afford to pay for their energy needs – one level above the base of the economic pyramid
  12. 12. Target customers currently paying high costs on a regular basis <ul><ul><li>“ We consume 6-10L of kerosene per month. Each household is entitled to get 3 litres at Rs. 11 per litre from the Public Distribution System, after which we purchase kerosene at Rs 30 per litre from the black market” </li></ul></ul><ul><ul><li>“ There are 2-3 mobile phones in every household of this village, but charging them is an issue. We go to the shop with a diesel generator for each charge and pay Rs. 5 per charge.” </li></ul></ul><ul><ul><ul><li>– Villagers in Eastern UP </li></ul></ul></ul>Solar lighting costs less than kerosene lamps in the long run <ul><ul><li>A solar light costs less than a kerosene lamp over a period of 8-16 months! </li></ul></ul>1. Cost of an LED based solar light that replaces a kerosene lantern while providing brighter illumination. The only running cost is battery replacement every 2-3 yrs (Rs. 75-100 p.a.) Solar 1 Kerosene Initial cost (Rs. approx) 2,000 100 Running cost (Rs. per month) n/a 120-250
  13. 13. The Solarbatti TM used an array of SMDs, producing much high intensity light equal to a 9W CFL 1. On medium mode. Very dim bed light option also available which gives up to 100 hours of backup 2. Basic model at Rs 550 does not include a battery, which must be purchased separately or rented locally 3. Source: Company reports, press releases. (Note: This list is NOT meant to be exhaustive) The Solarbatti stands apart, in terms of light intensity, back up, pricing as well as next generation technology compared to competitors Product Nova Aishwarya Star WonderLite ‘ In-Diya’ Solarbatti TM Company D.Light Solar Nest TataBP Solar Kotak Urja Schneider Electric Advait Energy Description LED light Cfl lantern Cfl lantern Cfl / LED lantern variants LED based lighting systems High Intensity SMD light Specifications <ul><li>Single LED (high power) </li></ul><ul><li>1.2 Wp panel </li></ul><ul><li>5-6 hrs backup 1 </li></ul><ul><li>3W Cfl </li></ul><ul><li>5 Wp panel; </li></ul><ul><li>7-9 hrs backup </li></ul><ul><li>3W Cfl </li></ul><ul><li>3.3Wp panel </li></ul><ul><li>6 hrs backup </li></ul><ul><li>7 W Cfl </li></ul><ul><li>10 Wp panel </li></ul><ul><li>4 hrs backup </li></ul><ul><li>45-90 LEDs </li></ul><ul><li>8 – 15 hours of backup </li></ul><ul><li>18 SMDs, </li></ul><ul><li>3Wp panel </li></ul><ul><li>8-10 hrs backup; </li></ul>Approx Price (Rs.) 1,800 1,600 1,945 3,300 Rs 550 2 – 4500 1,940 Sales data (if available) 3 Company established 2007, sold over 220,000 lanterns in 32 countries till date (main markets: India, East Africa) Began operations in 2001; Sold about 50,000 solar lanterns in India until 2007 with a sales of about 5000 lanterns per year in 2007 (Information not available) (Information not available) (Product just launched in Feb 2010)
  14. 14. Vinayak Arora Director – Strategy E: [email_address] M: +91 999 0 529 615 W: advait energy Affordable Clean Solutions. For Everyone.