Luxor Writing Instruments Private Limited Marketing Pens in India: Introduction

In 2002, Luxor Writing Instruments Private Limited (LWIPL) had emerged as the market leader in the premium pens2 segment in India, with a market share of 60%. The company held a 10% share in the writing instruments industry, next only to the market leader, Reynolds that held 12%. LWIPL had been in the pen industry for nearly four decades. The company adopted innovative marketing strategies that had made it one of the most popular pen manufacturers in India. LWIPL offered a widest range of pens with leading brands including Luxor, Pilot, Papermate and Parker. In December 2002, LWIPL launched the world renowned 'Waterman' brand of premium pens in India. This was possible after LWIPL's acquisition of a 50% stake in the Indian operations of Newell Rubbermaid3. The company planned to sell imported 'Waterman' pens for the next couple of years and then start indigenous production for these pens. The price of these pens ranged between Rs.3,500 to Rs.50,000 and was made available in nine sub-brands. LWIPL planned to sell these pens to corporate customers. Commenting on the prospects of the 'Waterman' brand, DK Jain, Chairman of LWIPL said, "Because of its price and brand name, Waterman will certainly have an edge over other premium brands in India."4 The company planned to launch an international advertising campaign for these pens. LWIPL was known for its heavy spending on advertising its products. It had entered into several tie-ups with multinational pen companies that helped in leveraging its current position in the industry. The fact that LWIPL was a debt-free company was another significant achievement. However, with the rising competition and negligible presence in the faster growing gel pens segment, analysts felt that LWIPL had an uncertain future. Analysts also feared that LWIPL's decision to diversify into the hospitality and packaged foods business in 2001-02, might lead to a loss in market share in its core business.

Background Note
The pens industry in India had passed through various phases with the changing tastes and preferences of customers. Till the late 1970s, only two categories of pens existed in the Indian market - fountain and ball point pens. During that time, people preferred writing through a pencil rather than a pen. Moreover, people preferred fountain pens, as it was perceived to write better compared to the ball point pens. Apart from domestic manufacturers, who manufactured fountain pens on a small scale and sold them at cheaper rates, branded fountain pens manufactured by leading international players such as Monte Blanc, Cartier and Parker were available in India through the grey market. However, owing to their high prices, not many people could afford to buy them. Camlin Limited was among the noted fountain pen makers in India during that time. By the late 1970s, fountain pens started loosing their popularity as people found it cumbersome to refill the ink regularly. The 1980s witnessed an increased acceptance of ball point pens and Wilson Jotter was considered to be the market leader in this segment. The pens manufactured by Jotter were popularly called Jotter pens. The market for ball point pens was also dominated by domestic players in the unorganized market. With the increase in demand, existing players started expanding their capacities while many new players began entering the market. In 1982, Deepak Jain, managing director of Luxor Pen Company (Luxor) entered into an agreement with the Pilot Corporation of Japan to officially launch Pilot pens in India. In 1984, Suraj Mal Jain5 started a manufacturing unit for ball point pens and refills in Kolkata and named it as Linc Writing Aids Private Limited. The company launched new varieties such as disposable pens into the market. In 1986, the French pen company, Reynolds entered the Indian market through its subsidiary, GM Pens International Limited by setting up a manufacturing plant at Chennai. It used the latest technology to make pens and refills of better quality and offered them at an affordable price. The Reynolds 045 pens became very popular among the regular pen users; especially among the school and college students.

Until the late 1980s, not much importance was given to the promotion of pens and there were very few recognized brands in the market. Companies did not consider it worthwhile to invest large amounts of money on promotional activities. The focus was more on pricing and distribution. Pens were manufactured in large volumes, and were priced competitively. By 1990, 90% of the market share in India was held by unorganized players. In the late 1990s, the pen industry witnessed several developments. The varieties of pens available in the market increased significantly. The new range of pens introduced included Fibre Tip Pens6, Gel Pens7, Roller Pens8 and Marker Pens9. A marked change was also noticed in the attitude of people, and they became increasingly brand conscious.

Background Note Contd... By early 2002, some of the most popular brands in the Indian pen market comprised of domestic brands such as Reynolds, Luxor, Cello, Rotomac, Kores, Today's, Montex and Add pens and foreign brands such as Mont Blanc, Flair (with Pierre Cardin), Uniball and more. Consumers now had a wider choice, both in terms of different variety and the number of brands available. Gradually, the competition among different pen brands intensified, which in turn, prompted these companies to increase their spending on promotional activities. According to the 2001-2002 figures, the writing instruments industry in India was worth approximately Rs.15 billion10. Studies11 on the industry had revealed that there were around fifteen organized players, which included both domestic and international companies and more than 600 unorganized players. Though, in the past, unorganized players accounted for a sizable share of the industry, their share had decreased significantly from around 90% in 1990 to just 20% in 2002. The huge potential that the industry offered prompted existing companies to expand their manufacturing facilities and encouraged new companies to enter the industry. This had led to intense competition in the industry. The studies also revealed that the companies in the organized sector were putting efforts in offering good quality products at competitive prices. At the same time, impetus was given to increase the visibility of their products in the minds of target customers. Established in 1963, Luxor had emerged as one of the leading companies in the pen industry. According to analysts, Luxor's marketing mix helped it to capture a sizeable share

of the industry. They also felt that Luxor's 50-50 joint venture with Gillette Company12 in 1996 helped it to strengthen its position in the industry. After entering into the joint venture, Luxor was renamed as Luxor Writing Instruments Private Limited (LWIPL).

The Marketing Mix Products and Pricing

LWIPL had launched its first brand in 1963 - the 'Artist' fountain pen. However, owing to its small scale of operations during that time, the pens were made available only in Delhi and surrounding areas. During the late 1960's, the Artist brand was renamed as 'Luxor.' In 1982, LWIPL launched Pilot 05 microtip pens with needle point13 technology. Priced at Rs.10, this was the first model of Pilot pens to be officially launched in India. The pens were manufactured at the Delhi plant of LWIPL. Though Pilot pens were available in India prior to the launch, they were available only in the grey market. LWIPL invested heavily to upgrade its technology to manufacture microtip pens. These pens were launched with the intention of bridging the gap between ball point and fountain pens. Microtip pen was similar to a ball point pen, with the ink filled within. This turned out to be a unique selling proposition for Pilot pens and they were quite successful as they were considered to be an ideal substitute for fountain pens. Background Note Contd... By early 2002, some of the most popular brands in the Indian pen market comprised of domestic brands such as Reynolds, Luxor, Cello, Rotomac, Kores, Today's, Montex and Add pens and foreign brands such as Mont Blanc, Flair (with Pierre Cardin), Uniball and more. Consumers now had a wider choice, both in terms of different variety and the number of brands available. Gradually, the competition among different pen brands intensified, which in turn, prompted these companies to increase their spending on promotional activities. According to the 2001-2002 figures, the writing instruments industry in India was worth approximately Rs.15 billion10. Studies11 on the industry had revealed that there were around fifteen organized players, which included both domestic and international companies and more than 600 unorganized players. Though, in the past, unorganized players accounted for a sizable share of the industry, their share had decreased significantly from around 90% in 1990 to just 20% in 2002. The huge potential that the industry offered prompted existing companies to expand their manufacturing facilities and encouraged new companies to enter the industry. This had led to

intense competition in the industry. The studies also revealed that the companies in the organized sector were putting efforts in offering good quality products at competitive prices. At the same time, impetus was given to increase the visibility of their products in the minds of target customers. Established in 1963, Luxor had emerged as one of the leading companies in the pen industry. According to analysts, Luxor's marketing mix helped it to capture a sizeable share of the industry. They also felt that Luxor's 50-50 joint venture with Gillette Company12 in 1996 helped it to strengthen its position in the industry. After entering into the joint venture, Luxor was renamed as Luxor Writing Instruments Private Limited (LWIPL).

The Marketing Mix Products and Pricing

LWIPL had launched its first brand in 1963 - the 'Artist' fountain pen. However, owing to its small scale of operations during that time, the pens were made available only in Delhi and surrounding areas. During the late 1960's, the Artist brand was renamed as 'Luxor.' In 1982, LWIPL launched Pilot 05 microtip pens with needle point13 technology. Priced at Rs.10, this was the first model of Pilot pens to be officially launched in India. The pens were manufactured at the Delhi plant of LWIPL. Though Pilot pens were available in India prior to the launch, they were available only in the grey market. LWIPL invested heavily to upgrade its technology to manufacture microtip pens. These pens were launched with the intention of bridging the gap between ball point and fountain pens. Microtip pen was similar to a ball point pen, with the ink filled within. This turned out to be a unique selling proposition for Pilot pens and they were quite successful as they were considered to be an ideal substitute for fountain pens.

Products and Pricing Contd... LWIPL was able to sell 1,00,000 Pilot pens in the very first year of their launch. However, the Pilot pens launched initially were not refillable. Due to the price conscious nature of middle class people in India, the concept of disposable pens was not cherished for long. This prompted the company to launch a new, refillable variant of these pens. The new product was well received by the middle class consumers as well as school and college going students, teachers, middle and senior level executives, resulting in a huge surge in demand for these pens. Within four years of launch, the annual sales of Pilot pens had increased ten fold to one million pens. Buoyed by the success of Pilot pens, in 1990, LWIPL decided to launch another product under the 'Pilot'

brand name, Luxor 0.5 mm Pilot V5. Priced at Rs.45. each, these pens were targeted at the middle and senior level executives. The attractive design of the pen and the superior technology (it had a liquid ink feeder14 system) used, contributed to the success of the brand. By 1995, the annual sales of Pilot pens had crossed 10 million. LWIPL decided to go for further brand extension in 1997, and launched the Pilot V7 which wrote bolder compared to V5. LWIPL's pricing strategy was determined by factors such as the demand for products, their brand image and the nature of the target audience. When Pilot 05 was launched in 1982, it was priced at Rs.10, and it was considered to be expensive at that time. However, in 1990, eight years after its launch, when the demand for these pens reached its peak, Luxor sold them at Rs. 25 each. The price continued to remain the same till early 2003, indicating the stagnant nature of its demand. On the other hand, Pilot V5 was priced at Rs.45 at the time of its launch. These pens were priced high due to its superior technology and the brand image that Pilot pens enjoyed. However, after 12 years of launch, the price of these pens had to be reduced by Rs.5. In 1996, LWIPL launched Parker pens in India. Though Parker pens were popular in India, they were available only in the grey market. Parker pens were primarily targeted at the upper middle class consumers, senior level executives and bureaucrats. The initial range of Parker pens launched included Sonnet, Rialto, Frontier, Vector and Parker Classic. The most crucial decision for LWIPL was pricing. At the time of the launch, the prices ranged between Rs.90 to Rs.10,000. Priced at Rs.90, the "Vector" brand of pens was the cheapest in the range. Within four years, "Vector" became the largest selling Parker brand in India. During the corresponding period, the price was increased to Rs. 140. In 1999, LWIPL launched the 'Papermate' brand of pens in India. Papermate was the largest selling brand in the US during that time. The brand strengthened the presence of LWIPL in the low priced pen segment. These pens were primarily targeted at the school and college students and were priced in the range of Rs 4 to Rs 13. The specialty of this product was that they possessed the Lubrigude ink technology15, which ensured that the ink did not leak, thereby offering a comfortable writing experience. In order to penetrate the Indian market, the company offered these global brands at lower prices. For example, the Parker Vector roller pens were launched at $3 compared to $9 in Europe.

Products and Pricing Contd... The Parker refills were priced at a rate of Rs.35 compared to $3 in Europe. Similarly, LWIPL launched the Papermate pens at nearly 1/3rd of the price in the US. In 2000, LWIPL launched the Parker Beta range, with prices ranging between Rs.50 to Rs.75. Targeted at the youth, the company sold around one million pens within a couple of months of its launch. In 2002, Parker pens were available in three broad price categories (Refer Table I). By that time, the Parker range of pens had emerged as the largest selling brand in the LWIPL pens portfolio, contributing 40% of its revenues. LWIPL also launched a series of innovative products in order to mark certain occasions. In January 2000, the company launched the "Millennium series" of Parker Vector roller pens. These pens had the world map inscribed on them and their unique design enabled people to determine the time difference between countries. Priced at Rs.250 each, these pens became very popular. In November 2001, LWIPL launched 'Special Moment', a gift pack consisting of Parker Vector and Parker Beta pens, which had the signature of the brand ambassador, Amitabh Bacchan inscripted on it. These pens were primarily targeted at pen collectors, who were fond of Parker pens. In February 2002, Parker launched the 'Black and White' range of Parker Vector ball pens which were priced at Rs.145.each. In mid 2002, the company launched the 'Football Legends World Cup edition' of Parker Vector pens in order to cash in on the popularity that the event enjoyed. The pens had photographs of famous football stars such as Maradona, and Pele inscribed on them. These pens were primarily targeted at avid football fans, who would be interested in collecting pens bearing photographs of their favorite players. In December 2002, LWIPL launched the "Gajgamini" range of Parker Sonnet fountain pens. The limited edition of pens (only 500 pens were released) was named after the paintings created by noted artist MF Hussain16 and also had his signature inscripted on them. LWIPL priced these pens at Rs.5000 each.

Distributing Pens
LWIPL adopted innovative, product - oriented distribution strategies to reach its target customers. The company had a wide network of 1200 distributors who supplied pens to 67,000 stationary shops (Parker pens were available in 7000 leading shops), spread over

800 towns and cities in India. LWIPL also exported its products to 50 countries all over the world. As the Parker pens were initially targeted at the premium segment and carried a high price tag, they were launched only in the four metros - Delhi, Mumbai, Kolkata and Chennai. The pens were made available in large stationary stores and point of purchase displays were attached a lot of significance.

Distributing Pens Contd... These pens were put on display in special racks so that people could notice the complete range of pens. As the demand of Parker pens grew, they were made available in other urban areas of the country. In order to increase the reach of Parker pens, the low priced versions were made available in small stationary shops. LWIPL later opened exclusive outlets of Parker Pens in all major cities in India. When LWIPL launched Papermate pens in India, it changed its distribution strategy vis-a-vis that of Parker pens. The pens were targeted at a wider cross - section of people, which included students, executives and elderly. Apart from relying on its existing sales force, the company tied up with Indian Shaving Products Ltd (ISPL)17 to distribute pens in the targeted one lakh retail outlets in the first year of its launch. While the sales people concentrated on traditional retail outlets such as stationary and bookstores, the tie up with ISPL ensured that the pens were available in FMCG outlets such as shops and supermarkets. This multi-pronged distribution strategy enhanced the reach of Papermate pens.

Promotion and Positioning

LWIPL promoted its products primarily through advertising in the print and television media. The company hired several advertising agencies in the past two decades. The first advertising agency hired by LWIPL in the 1980s was 'Creative Works18', to promote its Pilot pens. In the early 1990s, the company shifted to another agency, RK Swamy/BBDO. In 1996, the advertising account of Parker was awarded to McCannErickson19, while the Luxor and Pilot brands remained with RK Swamy/BBDO. However, in 1999, when Papermate was launched, the account of all the brands in the LWIPL portfolio was shifted to McCann-Erickson. In December 2000, the advertising account was split again. Contact Advertising20 was given the charge of Luxor, Pilot and Papermate

brands, while Lowe21 was awarded the Parker brand. However, in July 2002, the advertising account of Luxor, Pilot and Papermate brands was also shifted to Lowe. As a result, Lowe was made responsible for advertising of all brands in LWIPL portfolio. The theme of advertising differed according to the product brands. For instance, the advertising campaigns for Pilot brand stressed on the unique features of these pens. During the 1980s, the advertising campaigns highlighted Pilot's dual features of a ball point and fountain pen. In the 1990s, the campaigns stressed on the technology used in making Pilot pens. The campaign created by Contact advertising in 2002, featured the famous television actor Shekhar Suman22, who highlighted Pilot's 'three dimple technology23,' which helped in smooth writing. In July 2002, LWIPL felt that the students' memory had to be refreshed with respect to the Pilot brand. An advertising campaign, 'Pilot - Reads well, Writes well' was launched. The campaign was very successful and within six months, the sales of Pilot pens increased by 30%. Explaining the advantages of Pilot pens, Pooja Jain, General Manager, LWIPL said 24, "Today, the gel fad is dying and the consumer is coming back to a more dependable and reliable proposition for value for money, which Pilot offers.

Promotion and Positioning Contd... Pilot is in fact perhaps the longest surviving and successful brand in the writing instruments category as it writes four times more than any other needle point gel pen. Pilot contributes 15% to our total turnover." The Parker brand received maximum advertising support from LWIPL. Commenting on the target audience, John Hadley, senior vice-president (sales and marketing), LWIPL said25, "Parker's target group is the top 12 million families in India and that gives us a big market any way you look at it. Our aim is to provide a decent writing instrument to Indians." In early 2001, LWIPL roped in the famous film star and television icon Amitabh Bacchan to promote the Beta and Vector brands of Parker pens. The primary reason for choosing Amitabh as a brand ambassador was his popularity among all groups i.e. children as well as elders and masses as well as classes. According to media reports, he was paid Rs 50 million for featuring in the advertisement. The ad campaign was a huge success and had a high recall among television watchers.

In 2001, LWIPL roped in Shekhar Suman to endorse the Papermate brand. The advertising campaign highlighted its unique selling propositions such as trouble free writing, better quality and the rubber body of the pen, which enhanced its grip. It also conveyed the message of romance by highlighting the two heart shaped symbols, which formed a part of Papermate brand. Though the campaign attracted reasonably good attention from the viewers, it was not able to generate the kind of sales that the company expected and hence in July 2002, the advertising contract for Papermate brand was given to Lowe. In December 2002, an advertising campaign was aired, which featured Papermate as 'Americas Largest Selling brand." Through this campaign, LWIPL made an attempt to retain the American identity of the Papermate brand. LWIPL also made efforts to change the positioning of its brand, if necessary. For example, when Parker pens were launched, they were positioned as a premium brand targeted at the upper sections of the society, including senior executives, businessmen and so on. However, realizing that young people could also be the potential buyers for premium pens, LWIPL targeted its Vector brand at young executives and its Beta brand for the school and college going students. Explaining the necessity to change the positioning of the Parker brand, Sanjeev Goyle, VicePresident, Marketing, LWIPL, said26, "We want the Parker brand in the pocket of every youth. To make this happen we've a two-fold approach: one, shift Parker's positioning from a serious, daddy's pen to a youthful and vibrant brand; and second, give multiple price and product options to address the entire section of the consumers." Promotion and Positioning Contd... Pilot is in fact perhaps the longest surviving and successful brand in the writing instruments category as it writes four times more than any other needle point gel pen. Pilot contributes 15% to our total turnover." The Parker brand received maximum advertising support from LWIPL. Commenting on the target audience, John Hadley, senior vice-president (sales and marketing), LWIPL said25, "Parker's target group is the top 12 million families in India and that gives us a big market any way you look at it. Our aim is to provide a decent writing instrument to Indians." In early 2001, LWIPL roped in the famous film star and television icon Amitabh Bacchan to promote the Beta and Vector brands of Parker pens. The primary reason for choosing Amitabh as a brand ambassador was his popularity among all groups i.e. children as well as elders and masses as well as classes.

According to media reports, he was paid Rs 50 million for featuring in the advertisement. The ad campaign was a huge success and had a high recall among television watchers. In 2001, LWIPL roped in Shekhar Suman to endorse the Papermate brand. The advertising campaign highlighted its unique selling propositions such as trouble free writing, better quality and the rubber body of the pen, which enhanced its grip. It also conveyed the message of romance by highlighting the two heart shaped symbols, which formed a part of Papermate brand. Though the campaign attracted reasonably good attention from the viewers, it was not able to generate the kind of sales that the company expected and hence in July 2002, the advertising contract for Papermate brand was given to Lowe. In December 2002, an advertising campaign was aired, which featured Papermate as 'Americas Largest Selling brand." Through this campaign, LWIPL made an attempt to retain the American identity of the Papermate brand. LWIPL also made efforts to change the positioning of its brand, if necessary. For example, when Parker pens were launched, they were positioned as a premium brand targeted at the upper sections of the society, including senior executives, businessmen and so on. However, realizing that young people could also be the potential buyers for premium pens, LWIPL targeted its Vector brand at young executives and its Beta brand for the school and college going students. Explaining the necessity to change the positioning of the Parker brand, Sanjeev Goyle, VicePresident, Marketing, LWIPL, said26, "We want the Parker brand in the pocket of every youth. To make this happen we've a two-fold approach: one, shift Parker's positioning from a serious, daddy's pen to a youthful and vibrant brand; and second, give multiple price and product options to address the entire section of the consumers."

The Future
According to analysts, the major reason for LWIPL's success was its focus on offering superior products to its customers. However, in spite of LWIPL's current leading position, analysts felt that the company would face tough competition in future from other leading brands such as Reynolds, Rotomac and Today's (Refer Exhibit I). According to analysts, LWIPL lagged behind in tapping the full potential in certain categories. For example, in

the ball point pen category that contributed to around 50% of the total sales in the pen industry, LWIPL had just 5% share. Moreover, in the fast growing gel pens segment, the company had negligible presence. Analysts also felt that excessive dependence on the Parker brand, which primarily catered to the premium segment of the market, may not be fruitful for the company in the long run. But most importantly, analysts seemed concerned about LWIPL's decision to diversify into the packaged food and hospitality industry. In 2001, LWIPL established Hazel Foods Pvt. Ltd. with an intention to enter the packaged foods segment and launched dry fruits and spices under the 'Hazel' brand. In 2002, Luxor Hotels and Resorts Pvt. Ltd. along with the Hyatt group27 acquired Qutub Hotel in Delhi from the Indian Tourism Development Corporation28 (ITDC). The company also had plans to launch packaged water and enter into the convenience foods segment. For packaged water segment, LWIPL planned to tie up with an international company. Explaining the rationale behind these moves, D.K.Jain, MD of LWIPL and Vice Chairman of Luxor Hotels and Resorts Pvt. Ltd. said29, "Investments in categories which show promising potential for growth and family interests" prompted this move. Analysts felt that these industries demanded a different set of expertise and a totally different type of customers to be catered to. They felt that due to unrelated diversification, it would be difficult for LWIPL to focus on the writing instruments business, where its core strength lay.