Saturday, April 04, 2015

LPG Subsidy - Marketing lesson executed by Modern Politicians

Long long ago, Indian families & restaurants used wood, charcoal and other forms (like kerosene) of fuel to cook the food. Slowly, natural gas organizations made government to force alternate form of energy on people for their day to day need. Adoption was slow and steady and it took more than 2 decades to convert 80% of families to use LPG as their primary fuel.

At first LPG cylinder price was after government subsidy. Slowly, they brought two different type of cylinders - one for home use and another one commercial. Price of home use LPG was still having full subsidized price & commercial one is not much subsidized.

Recent years politicians played a smart psychological game in which they said you pay the full price without subsidy upfront & government will deposit the subsidy amount to your bank account. Two main groups that got benefited in this a) oil/natural gas organizations b) banks. The mental preparation of end consumer happened over past couple of years by paying the full amount up front & get their subsidy in their bank account. Another announcement came as a big blow stating subsidy will apply only for first 9 LPG cylinders in a year & in case families uses more they need to pay full amount. After much debate they increased it to 12 cylinders per year.

This helped the next government to play their advanced game - name it with any one of this - Brighter India, Wealthier India. As already the subsidy got separated in the minds of poor consumers, now politician says, 'give up subsidy'. Prime minister calling out certain working sectors (bank workers, IT workers) to give up the subsidy and pay the full price for wealthier nation. Soon we can expect an announcement that may say, there will not be any subsidy to any one from so-and-so date. If it happens, there will not be any surprise about it!!

Thinking about the way how LPG become part of Indian families, and now what issues it creates in their monthly economy, this is how organizations captures the market
1) First find a reason to make something as inevitable part of everyone's life by giving it very low price for some time,
2) once brand started picking up slowly add some small amount of cost,
3) next try to reduce the supply or increase the price
4) finally keep the price you want people will surely buy it

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