Case Study: Lintas in a Hornet's Nest

Karmakar, a cricket player playing in International Tests, was employed with Lintas Shoes Corporation. Karmakar faced a personal problem when playing and practicing in the humid climate in India and some of the countries abroad - the sports shoes which he wore became sticky shortly after he took to the field, and by lunch time they started smelling badly. He enquired of his fellow players whether this was common or his unique problem. He came to know that this was a common problem though, of course, varying in intensity and the timing of sweating. He also came to know that, like him, the other fellow players had also experimented with all kinds of shoes available in the market, but with hardly any success.

Karmakar brought this problem to the notice of his company and was persuasive enough to make the company interested in his problem. The company wanted to understand

1.         Was there a real consumer need for a highly improved kind of shoe for the purpose?

2.         Had the company necessary technological facilities and scientific ability to develop the product?

3.         Was the size of the market for this product large enough to make the new product commercially viable?

To confirm for itself, the company undertook market research in various forms like personal interviews, questionnaires, etc. The market research confirmed the opinion expressed by Karmakar.

The company ascertained that since it was already in shoe business it had necessary scientific and technological infrastructure to take up the project. The basic problems were, however, the justification of crores of rupees which would go in for research, development and mass production of shoes, will the likely demand be adequate enough to justify this investment, and, above all, the profitability of the venture. The company found, through the surveys, that besides the consumer need for the product and the technical capacity of the firm to undertake the production of such a product, there was a large enough potential market for the product it produced at a mass scale.

After the product development was accomplished, a pilot test was conducted by supplying a small quantity of these unnamed shoes and given free to some players. However, the results were not encouraging because the shoes were too thin to protect the feet from damage during play. So, the product was back to the product development department. After a year's efforts, the company came out with a revolutionary design of shoes, which were thick enough to protect the feet but thin and light enough to prevent sweating of the feet in humid climates.

The accountants kept the record of costs at each stage of the product development. The accountants, with the help of the advertising group, developed a price based on estimates of how many of these new shoes could sell in terms of total potential market (50 lakh shoes every year) and how many players would take to the new shoes.

The company test marketed the product in the states of Maharashtra, Karnataka, Delhi and West Bengal. The product was named Keep Fresh and priced at ` 350 in the test market. The response was quite discouraging. The consumers liked the new shoes but not its price.

The company again got stuck with a problem. Is the company charging more than what it should charge? Are the consumers poor enough not to pay the price? Such kinds of questions were raised in the company meetings. There was, however, an opinion expressed during the discussions that the price of ` 350 was fixed on the basis of production for test marketing, but when shoes would be mass produced, the production costs would come down.