The name of the game is numbers.
Earlier this month (July 4, 2002, to be precise), English daily The Times of India reduced the price for its Delhi edition. While the editions from Monday to Saturday were revised to Rs 1.50, the Sunday edition was pegged at Rs 2. Everyone waited for the Hindustan Times (HT) to react. It did, quite in the manner expected. Within two days (July 6), the Hindustan Times brought down the price for the weekday editions to exactly the same level as TOI. The Sunday edition's price was revised to Rs 2.75, that is, Rs 0.75 more than TOI's Sunday edition.
Before exploring the reasons for the price cut, here's a quick look at the prices of TOI and HT right before the announcement. For TOI, the break-up was like this: Sunday Rs 2.90; Monday and Wednesday Rs 2; and Tuesday, Thursday, Friday and Saturday was Rs 1.50. That is, TOI was available to the reader at the cost of Rs 12.90 a week.
For HT, the break-up was like this: The Sunday edition was priced at Rs 3.50; Monday and Friday Rs 1.50; Tuesday, Wednesday, Thursday and Saturday was Rs 2. In short, an HT reader shelled out Rs 14.50 per week, that is, Rs 1.60 more than TOI. And now, with the revised rates, this difference has been brought down to Rs 0.75. So, while the TOI would cost Rs 11 for the entire week, the HT would cost Rs 11.75.
The first questions is, since TOI was cheaper than nearest competitor HT in any case, why did it make the first move to slash its price? R Sundar, director, Times of India, Brand, has a simple answer. "The decision to reduce the cover price is part of the market expansion programme, which took off with the redesign of the paper in May 2002. Sprucing up the editorial followed this. The sports and the business sections were packed with more news. Alongside, we ran some promotions to attract readers. 'Win With the Times' was one of them, wherein people who owned the TOI or showed a copy of TOI were given prizes. This created a lot of excitement around the brand TOI. Then we decided to announce the price cut to give readers more value for money."
Give readers more value for money, and beef up the readership and circulation figures on the way! Here are the latest figures from the recently released NRS 2002. The readership of TOI this round has gone up by 5.7 per cent (from 9.4 lakh in 2001 to 9.9 lakh in 2002). That is, TOI has added another 54,000 readers. In contrast, HT's readership for the same period has gone up by 3.6 per cent (from 12 lakh in 2001 to 12.4 lakh). While it has added 10,000 readers less than TOI, HT has refused to vacate the top slot.
A look at the circulation figures for Delhi shows TOI's circulation has gone up by 27.2 per cent (from 3.9 lakh in January-June 2001 to 5 lakh in July-December 2001, ABC). HT's circulation for the same period has gone up by 11.7 per cent (from 4.9 lakh in January to June 2001 to 5.5 lakh in July-December 2001, ABC).
In short, TOI is catching up pretty fast.
And the price cut is aimed at hastening the process. Sundar puts it succinctly, "The price cut is intended to bridge the gap. This would bring in more readers and increase the circulation. This, in turn, would interest more advertisers."
But HT is not taking all this lying down. "HT has always been the trendsetter," claims Mrinalini Gupta, vice-president, marketing, Hindustan Times. "The readership and circulation figures are a clear proof who the leader is. In fact, in Chandigarh, HT had announced a price cut first."
Prior to the price cut in Chandigarh, two days out of the seven, HT was priced at Rs 1.50, and at Rs 2 for four days. On Sundays, the price was Rs 3. The price was brought down to Rs 1 for all weekday editions on April 19, 2002 and the Sunday price was fixed at Rs 2. The very next day, TOI followed with a price cut of its own. Before the cut, TOI was priced at Rs 1.50 for five days of the week (Monday, Tuesday, Thursday, Friday and Saturday), and for Rs 2 on Wednesdays. The Sunday price was Rs 2.90. The price cut brought the weekday price down to Rs 1, while the Sunday price remained the same. "Just a couple of days ago, TOI went back to its previous cover price," says Sundar.
"The price cut is a clever way to initiate trials among non-readers," points out a Delhi-based media observer. "It works like this. Earlier one household had 'x' amount of money to buy a newspaper. Now, with the two papers trying to undercut each other, with the same 'x' amount of money, the household can buy two papers. The possibility of duplicating readership increases simultaneously."
Agrees HT's Gupta, "By reducing the price, TOI is clearly trying to get a stronger foothold in the HT households." "So what is bad in that?" retorts TOI's Sundar. "If Coke is expanding its market, it is also targeting a Pepsi drinker, and therefore cutting into Pepsi's market share. That's how it is," he shrugs.
Indeed. The duplication of readership (those who read both HT and TOI) has risen steadily in the last three years. In 2000, the duplication figure was 30,200; it went up to 39,500 in 2001. And in 2002, the duplication figure was 45,800. "If more readers of HT are reading TOI, it is good news for us," says Sundar. HT's Gupta adds candidly, "We cut price to safeguard our numbers."
In all this excitement, what goes unnoticed very often is the fact that such price cuts are for a brief period only. Even after their price war of 1999 both these had increased their prices. As Bashab Sarkar, managing director, Maximize India, puts it. "This is a short-term marketing tactic. It is the last bid to bridge the gap as the circulation and readership figures are narrowing between TOI and HT."
Since such low prices also mean lower and lower revenues from circulation, will the two look at increasing their advertising rates? While no clear-cut answers were available from HT, TOI seems to have a specific mandate. "That is done by all dailies every year. The issue, however, is not increasing advertising rates; the issue is increasing the advertising volume. And that is our mandate," says Sundar. © 2002 agencyfaqs!