Growth opportunities in detergent market

Growth opportunities in detergent market The case deals with Unilevers Home Care Cleaning range and is evaluating the growth opportunities in the marketing of detergents to around 48 million low income consumers living in the Northeast region of Brazil. Clearly, the aim of Unilever, like all profit making organizations, is to have a bigger piece of the pie. Its first step forward is to assess whether or not, its target market is lucrative enough. To do so we first understand the buying behaviour of the target users, analyse the current market scenario and Unilevers internal environment. The importance of knowing how people will behave is tantamount to knowing the secret of organisational success. The simplest description of consumer behaviour is the purchase and/or consumption decision of an individual and/or household who buy goods and services for personal consumption. In the case we analyse the behaviour of group of individuals in the Northeast of Brazil and the use of detergent and soap in order to evaluate whats not working for Unilevers growth in that market segment and decide the best positioning strategy to encourage increased consumption. Because we know comparatively little about human behaviour, we as marketers, tend to make some assumptions to know how consumers will react to what we do. The first one being, consumers go through a rational decision process when they buy. We assume the process to start with ignorance of the consumer and moving through awareness, information search, short listing alternatives and so on until the ultimate goal purchase is reached.. A distinction is further made between two types of products purchasing: high involvement and low involvement. Washing detergents are low involvement products where consumers may not go through the entire decision making process and either pick a brand out of compulsion, out of a desire to seek variety or because of their past preferences and experiences, or they may pick a brand due to some constraints such as income and amount allocation to household spending. Consumers put preferences and budgetary constraints together to determine their choices. The No rtheast Brazilian households are low income groups and thus the price of the laundry soap, bleaching liquid and detergent powder is a primary criterion for evaluation of the brand of laundry products. The women in this region of Brazil tend to pick a particular brand based what others in their social group are using (as they often do their washing in a public laundry or by the river with a group of friends) and their own past experience and satisfaction. The second assumption is that consumers are brand loyal either loyal to your own brand or loyal to your rivals brand. A wall street journal (19th October 1989) published that 48% consumers remain loyal to the laundry detergent they are already using. To penetrate and gain additional market share, Unilever will have to offer some extra inducements to get the NE consumers hooked and divert their loyalty towards its brands. The stimulus response model (Exhibit 1), the starting point for understanding consumer behaviour, has been used to understand the Brazilian household behaviour towards washing detergent powders and soaps. The stimuli enter the consumers consciousness and the buyers characteristics and decision processes lead to certain purchase decisions. Our task, as marketers, would be to understand what happens in the consciousness of the north-eastern Brazilians between the arrival of stimuli and the purchase decision. Exhibit 1: Stimulus Response Model Source: Marketing Management, Kotler, 2003, p.184. The women in this region of Brazil tend to pick a particular brand based on the performance of the product on the six attributes cleanliness, whitening, productivity; fragrance and softness; ability to remove stains; ability to dissolve in water; packaging of the product; and the ability to keep colours from running out. Cultural factors Culture, subculture and social class are the fundamental determinants of a persons basic values, perceptions, wants and behaviour. Majority (39.8 million) of the north eastern population of Brazil ranges from grade D to E- of social class. Brazilians are concerned about their position in a social class, because no class interacts with another social class unless it is in a professional way. Since the past many years, the vast income social stature difference has been impressed in the society.  Still, the north easterners take great pride in how they look and present themselves in the society, despite their poverty and inability to purchase a variety of clothes. It is perceived to be the duty of the lady of the house to maintain cleanliness of clothes of her family, as it is seen as an indication of the dedication of the mother to her family. It is the reason why the north eastern women spend a long and laborious time at doing the laundry. They first scrub the clothes with a soap bar, then bleach those clothes to remove tough stains, and finally wash the clothes with detergent powder to add a pleasant fragrance. This is opposed to women in the south eastern region who just simply mix detergent powder and softener in a washing machine. Social factors Consumers behaviour is also influenced by social factors such as the consumers relation to small groups, family, and social roles. Women from the northeast of Brazil do their laundry at a public laundry or at a nearby river or pond along with their friends. It is the most pleasurable activity as they get to meet and chat in their social network. It is here that these women discuss matters of personal and home cleanliness such as which laundry detergents they use, how their experience has been, and likely word of mouth promotions take place. Personal factors The characteristics of the individual consumer such as his age, economic situation, occupation and lifestyle play an influential role as well in assessing consumer behaviour. Of the 48 million, 25.4 million people of the north eastern region of Brazil have an annual income of less than $1700. In Recife, for example, only 28% households own a washing machine. Thus, having a push strategy for a detergent powder isnt going to be fruitful. Even though the per capita income for the whole Brazil was $4,420, it wasnt quite reflective of the north-eastern region, where the per capita income was $2,250 only. This translates to the fact that even though a product may have the right and required attributes, if not appropriately priced, people of this region would not pick it up from the shelf since they are constrained by their incomes. Also, since the people from the low income group own less clothes, their washing needs are frequent, and hence, a product that would be a success would be one t hat is affordably cheap, available in bigger quantities (for example, saver price or additional 20% pack) and removes dirt well keeping the colour from running. Psychological factors An individuals buying choices are manipulated by four major psychological factors motivation, perception, learning and beliefs and attitudes. The low income consumers of the Northeast have developed six key attributes (Exhibit 2) which would determine their attitude towards the brand of detergent they chose to use for their laundry. For them, the ability of the detergent to clean and whiten the clothes with a small quantity of the product is the most important attribute. The NE women often associate a strong pleasant fragrance with softening power and gentleness to fabric and hands. The ability to remove stains without the use of a soap bar and bleach, and the ability of the detergent to dissolve in water without any residue on the fabric, are equally important attributes. Packaging and the running down of colour are the least important features. Ladies perceive doing their laundry as a leisure activity where they meet and natter with their friends. They discuss and learn from each others experiences of personal and household cleaning habits and products. Main brands / players Competition is important in influencing how successful an organization can be. Merely producing a good product which matches consumer requirements and provides satisfaction should not be the goal. A firm must competitively position itself in the minds of its customers so that its products stand out. Unilever was the first to introduce laundry detergents in Brazil with Omo, followed by Minerva, Campeiro, Skip, Rinso, Drive, Puro and Unox to name a few. Competitive challenges came from Procter Gamble, ASA, and other small Brazilian companies. Market leading brands from PG included Ace, Bold Pop. ASA contested with its Bem-te-vi laundry soap and Invicto detergent powder. Even though PG entered the Brazilian market 59 years after Unilever, it entered the market quiet swiftly by strategically acquiring an existing Brazilian company, Bombril and its three brands Quanto, Odd Fasses Pop. With in-depth RD and investment for manufacturing improvements, PG rebranded Quanto to Ace, and Odd Fases to Bold, which are now key competitors with Minerva and Campeiro. In terms of market share, for the laundry detergent powder segment, Omo is the market leader with a 52% share, Minerva Campeiro collectively account for 23% share, while Ace, Invicto other PG brands take a 22% share jointly and other Brazilian brands take a 3% share. Unilevers 75% market share compared with competitors 25% share in the laundry detergent segment indicates a strong penetrative strategy that gives Unilever the competitive edge. Market share in the laundry soap segment is not so pleasing. Little console is that PG did not manufacture laundry soap. But local Brazilian companies posed enough competition. Even though Minerva had a 19% market share in this segment, smaller Brazilian companies, enjoyed the rest of the 81%. In terms of pricing promotion strategies, Unilevers premium brand Omo was the highest priced (whole sale price) at $3/kg. None of the competitors came in this price range. Because of its strong power to remove stains with low quantity, it became a market pioneer. It used a very simple yet direct advertising message which said removes stains on pockets, cuffs collar, clearly attracting consumers for whom cleanliness was of highest importance. It was meant to target the high income group. Minerva (Unilever), Ace (PG) and Bold (PG) fell in the same price category and probably targeted the upper middle income group; while Campeiro (Unilever), Pop (PG) and Invicto (ASA) targeted the lower middle income group. Minerva attracted consumers for whom the fragrance and softness were of key importance with its advertising campaigns. Pop used a Bundle promotion and Contest Strategy it ran a contest offering 200 washing machines and gave away 2 copies of the Viva! Magazine with its purchase. Table 1 below gives details on the Pricing strategies followed by the main brands in the laundry detergent segment. SWOT Analysis An analysis of Unilevers internal environment (strength weaknesses) and its external environment (opportunities threats) is depicted in Exhibit 3. Exhibit 2 : SWOT Analysis Strategy Suggestion With the above mentioned scenario, Unilever faces the following choices to cater to the low income group of the North eastern region of Brazil : Extending Omo Rebranding Campeiro Launching a new product Customising a product from its international portfolio Brand extensions are only profitable if the existing brands equity is strong and positive and it is likely to transfer its benefits to the new extension. Brand extensions face a serious challenge if not recognised and met with positive action will probably lead to death of existing brands. Before considering extension of Omo, Unilever should be aware of the fact that consumers get puzzled by the variety of identical products and may end up buying a rival brand. Omo already has its niche market with its Price-Quality inference strategy. It enjoys a 52% market share in the detergent powder product line. Even though the low income group of the NE likes Omo, but to target that segment, Unilever would have to reduce the price drastically and lower its profit margins. This would cannibalise its high margin sales with low margin sales in the short term and in the long term Omo would lose its price premium and would create confusion in the minds of people. Radically changing Campeiro and rebranding it does seem like a good option Exhibit 4 details the strategy. But, the perception of its brand value is not strong or positive with consumers of detergent powder. It only has a 6% market share. One of the lucrative options is to launch a new brand. Exhibit 5 evaluates the strategies of introducing a new product altogether. Unilever can introduce a new product to replace /or supplement Minerva Campeiro in its existing markets, and to serve new market the NE region of Brazil. The issues with rebranding Campeiro, repositioning Minerva would also be resolved. But before deciding to establish a new product, Unilever has to layout the profile of the target market, understand the problems they face and group them into segments, evaluate competition, identify core competencies, identify areas where competitor is vulnerable and define a new value proposition for the new target market. Introducing a new brand would be to Unilevers advantage, as its entering a target market which it has not catered earlier in Brazil. Another worthwhile option is to introduce a customised version of an existing and successful brand from Unilevers international portfolio of detergent powder. But the brand would have to be carefully selected one that caters to a similar demographics and similar income group; one that has high success rate with the right marketing mix. For example, Active Wheel Unilevers brand in India targets the low income group, stresses that with this product people will need to put less efforts to do their laundry, promotes the whitening attribute, is the biggest laundry brand with sales revenue of  £21million 2007. The advantages of considering this option are various. The same ingredients and basic formula can be used. Similar pricing strategy. Customisation required only in language on the cardboard boxes. Meaning and content of advertisements can be the same, only changes required would be to fit the ad to local environment. Probability of success is higher, although it is not guarante ed that a brand that works in one region will work in the other too. Even if the rumours of reducing brand portfolio are true, this option would still be lucrative as no new brand is being introduced; alternatively, Unilever could completely drop Campeiro and reposition Minerva, along with introduction of a brand from its international portfolio. The growing size of typical supermarket retailers such as Wal-Mart, Carrefour and Grupo Pà £o de Aà §Ãƒ ºcar in Brazil has produced extra shelf space that has allowed and encouraged such proliferation. The US magazine Business Week publishes an annual survey of the Best New Products. From the 38 noted for the years 1989, 1990 and 1991, there were only 13 brand extensions and 3 genuine product innovations that were titled under the best new products over the 3 years. Ehrenberg (Repeat Buying, 1988) found that most buyers buy several brands over a period of time. They buy some brands more often than others and some not at all, but they mainly buy a large range of acceptable brands. The frequency with which they buy each brand varies from consumer to consumer but, on an average, it matches the brands overall market share. Unilevers forward strategy should not appear to make a distinct product without a real difference and that merely tries to differentiate the brand from competitors.