``In the rural markets, customers are just graduating from a B&W TV to a colour TV set, there is a potential for low-priced sets. The idea is to re-sell the old model in the rural and semi-urban market after a complete overhaul of the the old appliance,'' says a Baron official. The scheme which initially started in major cities has now spread to hundreds of small towns all over the country.

This marketing technique is being spearheaded by some television manufacturers. And for that matter Mumbai-based Baron International is slowly making a marketing history in the Indian televisionindustry. In the fiscal 1998, a brand, hitherto, unknown anywhere in the world -- Akai -- shot up to number three position in the highly competitive Indian TV industry. The company is now set to erode the market share of the both market leaders -- BPL and Videocon -- thanks to its consumer-friendly price tags.

While the new entrants in the TV industry like LG and Daewoo started following Akai's track, companies from other industries and even competitors joined the `exchange' bandwagon. Now a consumer can exchange his old AC, car, scooter, refrigerators, washing machine or any other white good for a new one. "The Indian marketers have now realised the potential of the exchange schemes... we have exchange schemes even for cars,'' says a Maruti official.

The success formula of Akai was simple. It exchanged the old television sets of the consumers with a brand new set and gave him around 35 per cent discount on the exchange. While the market leaders in the TV industry were busy getting endorsements from thesuperstars to entice customers, Akai created a niche of its own, which was predominantly exchange schemes, cheap finance and other freebies. The old sets are diverted to other semi-urban areas and sold with a margin. ``There is good margin in selling old sets also,'' said a Mumbai dealer who exchanges three to four television sets daily.

It's a win-win situation for both the manufacturers and consumers. While the recession-hit industry can sell more goods, the consumer gets the latest model at a discounted price. The exchanged goods mostly go to the small cities where the consumers have low disposable income. Consumers say in most of the exchanged products, the quality is not up to the mark. Morever, Akai's competitors allege that an exchanged TV set is usually recycled by the company and its parts are cannibalised and fitted into a new set. Akai officials, though, vehemently deny this. Another allegation on the exchange business is that the industry was evading excise duties as it was showing thediscounted price of the new set for paying duty. Even as the central excise department started investigations into Akai's schemes, the BJP government, fearing loss of revenue, decided to step in. The Union Budget 1998 has proposed specific rate of excise duty on colour televisions which is expected to put an end to manipulation of retail prices in the highly popular exchange schemes, say industry analysts.

The Finance Bill 1998 says the specific rates of excise is applicable on television sets where the maximum retail price is not marked on the package or when the maximum retail price is not the sole consideration for the sale. The rates mentioned in the Finance Bill, being higher than that payable on regular maximum retail price, may also compel other TV makers to maintain a uniform price at all times and mark the price on the packaging.

For instance, if the retail price of a 14-inch television is Rs 8,000, under the new excise guidelines, the manufacturer will be required to pay excise at the rate of 18per cent on the 70 per cent declared maximum retail price, which uis about Rs 1,008. The most expensive 14 inch television currently available in the market is priced at Rs 11,500, and the 18 per cent excise on this set would work out to be Rs 1,449. If the manufacturer declared under exchange maximum retail price on any 14 inch television, it will have to fork out Rs 1,500 under the new tax regime irrespective whether the set is being sold under exchange or not. The new norm will ensure the government does not lose any excise revenue as the manufacturers would be required to pay either a specific rate of excise on the television or else the levy on the regular price. Officials say that these companies not only tricked the government but even took the consumers for a ride. Often, the announcement of `under exchange maximum retail price' in the advertising campaigns was preceded by a steep hike in the retail price. Thus, customers were thinking they were getting a good deal in an exchange scheme. Industryanalysts felt under the new regime, no company would announce a low retail price under exchange for the purpose of calculating excise, as it would be walking into the trap of paying a higher rate from their own pockets.

Post-budget, the consumers may see a higher price tag on the popular models of Akai and Videocon as their excise burden have gone up substantially. With the loophole in the excise calculation now being plugged, marketers say now more products will come into the market with an exchange offer. "Earlier, there was some confusion over the excise calculation, now even Maruti is planning to come out with an exchange scheme -- but through our dealers,'' said a top Maruti official.

Even the new entrants into the Indian automobile industry, Hyundai, Fiat and Daewoo are toying with the idea of launching exchange schemes. "We think there is a huge potential to sell new cars for old ones. But we will not get into the business of selling old cars ourselves,'' says a Fiat official. The idea is toprovide incentives to the dealers to conduct all the second hand business.

While in the West, the used products usually head for the junk-yards, in India it is being dumped into the smaller markets due to low income levels.For example, TVs and scooters from Mumbai are sent to markets in Nashik, Amravati and Ratnagiri. Similarly, white goods from New Delhi are catering to the markets of UP, Punjab and Bihar. In the years to come, marketers say that the market of second hand goods would go up. "If we do have a good monsoon, we are expecting demand from the rural markets to go up. More people would buy stereos and colour TVs -- provided we give them a discounted price,'' they say.

Cut to the urban markets, marketers say due to rising salaries and a deluge of new products being introduced every day, exchange offers are going to flourish. "In the urban markets, consumers have already bought second TVs and cars. We doubt whether there will be any place for the third set. The challenge of the future is to givethem a new commodity for the old one," say Godrej officials. A multi-product company can offer exchange for its various products. A TV can be exchanged for an AC or some other thing.As the Indian consumer, whether urban or rural, is extremely price sensitive, any discount or a freebie is always welcome. ``If a company wants to see its sales curve going up, it has to project an impression that its consumers are getting value for their money. An exchange offer or a discount always helps,'' sums up an Akai dealer.