21-07-2012, 01:47 PM
Cement Marketing in India: Challenges & Opportunities
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Introduction
India’s infrastructure will require investment of about USD 1 trillion as per 12th Five Year Plan (2012-17).
Economic growth and cement consumption are directly proportional. The factors that could trigger cement sales
are infrastructure demand especially for government projects, higher housing demand in rural and semi urban
areas. Higher realization and rising dispatches are considered to be conducive for higher profits for the cement
industry. All efforts are targeted to grow sales and reach the premium segment in prices. The major challenge
faced by the Indian Cement industry are higher raw material prices specially the price of coal, gypsum and
flyash. Whenever there is a lackluster demand capacity utilisation in the Indian Cement industry goes down
impacting profitability of the firms. Therefore effective marketing for a commodity like cement would
ultimately help in scaling up capacity utilisation, increasing dispatches and increasing realization. Cement may
be considered to be in the maturity phase of the Product Life Cycle and hence building brand preference is vital.
This paper therefore illustrates the fact that a commodity like cement could be marketed effectively. Principles
of marketing could be deployed effectively for gaining profits. Creation of differentiation in product or service
in cement and its importance by the customers will determine whether the brand can attain premium in price.
Indian Cement Industry
An Overview
The capacity of the Indian Cement industry as on 31 March 2011 is 234.30 Mn. T. The number of large Plants
in India as on 31 March 2011 is 139. In addition to the large plants there are about 365 mini cement plants.
Large cement plants, 139 in number, contribute to an installed capacity of 234 million tones per annum while
365 mini plants contribute to an installed capacity of 11.10 million tones per annum (Source: Website of
Cement Manufacturers Association www.cmaindia.org).
Review of Literature
Referring to cement business, Francois (2007) observes that the name of the game was not differentiation and
value proposition but protecting market share without triggering a price war that no one could afford.
This reflects the degree of rivalry that is evident in Global Cement Industry. Levitt (1980) suggests that there
is no such thing as a commodity and that all goods and services are differentiable. Creating differentiation is
possible either in cement or in the services rendered during the supply of cement. Francois (2007) stresses that
we no longer need to think of cement as a commodity – we can protect prices without compromising sales
volumes. Thomas (1982) has identified buying centres as Initiators, Users, Buyers, Gatekeepers, Deciders and
Influencers. In a typical construction project decision to procure a brand is not made by a single personnel in a
specific function. Hence identification of the roles played by various buying centers of cement and interaction
between them should be clearly understood. Onkvisit and Shaw (1988) is of the view that branding when
properly executed can be a viable solution to the problem of cut throat competition since brand names can
enhance the customer perception of the value of the product. This is applicable in Cement business as there are
number of brands in a particular region and the dealer and customer has a choice on preference of the brand.
Yankelovich & Meer (2006) points that effective segmentation concentrates on consumer needs, attitudes and
behavior which can change quickly rather than on personality traits which usually endures throughout a person’s
life. This explains one of the reasons as to why in a particular cement market over a period of time there is a
change in market leader. Christensen et all (2005) recommends that to build brands that mean something to
customers you need to attach them to products that mean something to customers and he suggests that
segmenting markets should reflect how customers actually live their lives. Therefore to evaluate ranking of
parameters of cement it is essential to involve all those involved in construction activities ranging from Mason,
Engineer, Consultant and Owner Kotler (1977) highlights that Sales Executives think in terms of sales volume
rather than profit; short run rather than long run; individual customers rather than market segment classes; field
work rather than desk work, whereas Marketing Executives thinks in terms of Profit Planning, Long run trends,
threats and opportunities, customer type and segment differences; good system for market analysis, planning
and control. In a typical firm if achieving sales target and cost control are given undue importance then long
term Marketing activities are neglected. Levitt (1983) is of the view that “There need be no such thing as a
commodity.”
Levitt (1980) lists and explains the range of possibilities that the product could take and its characteristics.
According to him a product could range from Generic, Expected, Augmented to Potential Product. The
fundamental, rudimentary, substantive thing is referred to as generic product; Customers minimal purchase
conditions like Delivery, Terms, Support efforts, New ideas as the expected product; the augmented product as
being the one that may be augmented by things the customer has never thought about; potential product as the
one which might be done to attract and hold customers, budget and imagination limiting the possibilities (Levitt
1980).
What’s “augmented” for one customer may be “expected” by another; what’s “augmented” under one
circumstance may be “potential” in another; part of what’s “generic” in periods of short supply may be
“expected” in periods of oversupply (Levitt 1980). Therefore a buyer who is building a house would behave
differently than a Quality Control Engineer of a large infrastructure project although both would be using the
same brand.
Challenges & Opportunities in Cement Marketing
Cement is a critical component of the major material used for concrete. Cement is generally considered to be a
commodity and as long as it’s a fine grey powder with ability to set and harden it’s considered to be sufficient.
Therefore there are personnel who believe that there is no scope for differentiation in cement. An analysis of
cement business from the perspective of various factors affecting Marketing would help us in identifying
opportunities to focus on customer requirements.
Price and Pricing Decisions
Cement price is not uniform throughout the country and varies from region to region. Price of cement also
depends on the distribution channel – whether it is sent directly to the project customer or through the dealers
outlets. Segmentation enables the Marketer to different market segments with separate price points rather than
serve the entire market with one price point. Amongst the constituent materials of concrete consumers are
generally sensitive to change in cement price. When prices of building materials increase there is a strong
resentment amongst the constructional professionals when price of cement rise. Predicting change in prices of
cement is difficult as supply and demand of cement in a particular region greatly influences price. Input
materials that go into the manufacture of cement are mainly controlled by the government and hence there is no
scope for negotiation. Continuous supply of power and coal has been a constant challenge. For manufacture of
100 tonnes of cement about 25 tonnes of coal is required. Coal which is normally imported from other countries
due to its high calorific value is dependent on rupee depreciaton. Coal prices procured from government through
relevant agencies are volatile. Most importantly pricing decisions has to be taken by taking into account the
competitors reaction to change in cement price.
Quality based on Perceptions
Laboratories with necessary accreditation to test cement are few and hence the professionals judge the quality of
cement based on the behavior of concrete. However concrete behavior is not entirely dependent on the quality of
cement alone. Other factors like quality of other constituent materials, workmanship, after maintenance of
concrete etc influence the quality of concrete. Quality perceptions vary with customer segments – Masons,
Contractors or Builders, Engineers, Consultant, End user, Customer like Individual House Builder. A customer
based on his experience may perceive the quality of cement based on colour, setting time of concrete, erratic
behavior when admixture is used, occurrence of cracks in concrete etc. Colour of cement is not a parameter in
cement test report and there is no specification regarding colour of cement. Setting time of concrete may vary
due to change in water content or weather variations, a particular admixture because of varying chemical
composition may behave differently with a particular brand of cement. These indirect measures may not be a
true indicator of quality of cement. Hence it is very important to understand the various quality perceptions of
the customer from a marketing viewpoint. A marketer should not be comparing the product relative to
competition but ensure that the product is of high value. A company must adequately empower the customer to
achieve value. Or some customers may be unwilling to pay for more information, access or service that is
needed.
Conclusion
The success of a firm in the Indian Cement industry is dependant on the degree of integration between various
functions of Marketing – Distribution, Pricing, Segmentation, Differentiation and Integrated Communication
Program. The above Marketing concepts relating to cement is dependent on the strategy followed by the firm
and the status of the industry which could be listed as follows:
Whether expansion of the Company was through greenfield projects or mergers & acquisitions
Whether the Company has fragmented capacities across the country or is a strong regional player
Whether the industry is on the boom –bust cycle of supply – demand
Whether the Company is a cement company or diversified to various areas
Whether other business of the Company complements the cement business for instance steel,