An Analysis of Ecovers Current Position in the Market Essay Example

of the customers were willing to buy Ecover products even if they had to pay more. The consumers in Western Europe were ready to contribute to a better environment through their purchase behaviour.

Threats

For most costumers the purchase of a detergent was not a considered choice. They found Ecover detergents to be time consuming and didnt have time to care about the environment, as they were busy in their works.

In countries like Japan only 42% of the existing customers were ready to pay more for eco-friendly products.US customers were more price conscious and they need to be educated. Most of the customers were not sure whether the eco-friendly detergents would do the job as effectively as other detergents.

Background

Ecover was founded in 1979 by Frans Bogaerts.It was a modest little detergent company in Malle in northern Belgium. Pierres Magnin a successful Swiss businessman dealing with pharmacies and health food stores, suggested Bogaerts to develop an eco-friendly detergent free of harmful chemicals (which was to be banned by the Swiss government as a part the proposed environmental regulations). Thus they entered the detergent market in Swiss and other key markets. Environmental disasters have made more and more people aware of the urgent need to protect the natural environment.

Marketing AuditMarketing audit give a picture of where the company is, how did it get there and where is it heading. It goes through the through the strength, weakness, opportunities and threat of the company. This analysis is called the SWOT analysis. It is divided into two major parts: External Factors and Internal FactorsStrength and weakness are concerned with the internal factors and opportunity and threat are concerned with the external

factors.

 External Factors

Here only opportunities and threats are analysed as these are supposed to be listed as anticipated events or trends outside the business that have implications for performance. These factors are not controllable by the company.Some of the factors discussed here are:

• Macro environment
• The Market
• Competition

Macro Environment

Macro Environment consists of Political (P), Economical (E), Social (S) and Technological (T) factors that affect the Company. Continuous monitoring of these variables is an important marketing function. As Corporations today, Ecover is also sensitive to Macro Environmental changes.

Some of the PEST factors that affected Ecover are discussed below. Political: Marketing strategy is deeply affected by political trends. Issues like new laws, regulations, change in foreign policies etc brings change to t he business world.

Opportunities

Ban on environmentally harmful chemicals (1980) contained in detergents by the Swiss government was an opportunity for Ecover to capitalise in the green detergent market.By 1990, all EU countries except France banned the use of phosphates in washing powders.Press reports told of the adverse effects of phosphates on river life.

ThreatsIn December 1991, the European Councils Environment Ministers agreed to set up an eco-labelling scheme. This was a major threat to Ecover as this would undercut the major difference between them and the conservative detergents.

• Economical: Economic trends affecting business include depression (world-wide economic collapse), interest rates, inflation unemployment, consumer price index real GNP, personal income savings rate and capacity utilisation. Companies must choose those economic influences that are relevant to their business and monitor them. Not only the national economic factors should be considered but also the regional and global economic factors.
• Social: Important aspects of social environment are beliefs, attitudes, lifestyle changes, age
  

distribution etc. The relevance of the social environment to a particular business will vary depending on the nature of the business. As Ecover is a consumer-products company, the impact of social environmental is very crucial.The society in which people grow up shapes their beliefs, values and norms. The people living in a particular society hold many core beliefs and values that tend to persist.

In USA, people are used to promotions and discounts and were price conscious. But recent cases showed that it could be changed with appropriate media interest.A medical research showed that over past 20 years the occurrence of allergies due to optical brighteners in traditional detergents has increased 5-fold.

Threats

People found the green detergents to be time consuming and were reluctant to buy the green products. Too less people knew about environment safety.The social environment is a challenge to Ecover as they need to educate the people about environmental pollution.

Technological: The factors that affect the technological environment are new product and process technologies, and materials. A marketing strategist should analyse technological changes and capitalise on them. New technologies that provide superior value in satisfying needs stimulate investment and economic activity.

As Ecover needed to introduce new products in order to compete in the market, they co-operated with Henkel and made use of their labs and other sources. As a result of this, they developed a phosphate-free-dish-washing machine powder.The re-invention of pre-war technology based on renewable natural raw materials offered a breakthrough for Ecover

Competition

Here we look into Ecovers competitors, their objectives and strategies, their strength and weakness and their size and shares. The weaknesses of the competitor are opportunities, and strengths are threats to Ecover.OpportunitiesNo too

much competitors for detergents in the health food stores and pharmaciesIn early 1990s in Belgium, the Netherlands the UK and Scandinavia, the competitors together had only less than 30% of the market.

Competitors only set up in no more than 5 countries, whereas Ecover operated in all European countries, Japan, USA and CanadaThreatsBy  1980s more than 20 producers followed Ecover in selling eco-friendly cleaning products through health stores, pharmacies speciality stores and even via mail.More health-oriented chain stores began to appear in Europe in the mid-80s expanding the number of competitors in the green market.By 1990, Ecover had number of competitors in the green market.

They were Held (Switzerland), Awalan (Germany), Urtekram (Denmark), Ark (UK), Planet (USA), and Akwarein (Netherlands).In the mass market Ecover saw the actual competitors. Companies like Unilever, P&G and Henkel were always a threat to Ecover.The giant companies products didnt offer much margin to the supermarkets. The supermarkets reacted to this by launching their own detergents for lower prices.

Reckitt & Colman turned out to be the first actual competitor in the green market as they were the first to react to the ban of benzene in detergents by launching a range of washing powder in Germany and Sweden.Competitors had more product line than Ecovers and occupied the major shelf spaces in Super markets.Ecovers competitors like Unilever had the advantage of huge advertisement budgets. The advertisement budget for Unilevers dishwashing liquid (only UK) was more than Ecovers world wide turnover.(please see appendix 2 for competitors market share.

Internal Factors

These are Micro factors that can be controlled by the company. Micro Environment Scanning is often practiced at the product/market or Strategic Business Unit (SBU) level. It

helps to assess the performance of the business based on environmental developments. This can be done by analysis of operating results, strategic issues analysis, marketing mix effectiveness, marketing structure and marketing system.

Operating Results

This look into the sales, market share, profit margin and costs of Ecover.StrengthsIncreased sales by four times in four years (BEF 50m in 1985,BEF 200m in 1990)Ecover accounted for more than 70% of detergents sold via health food stores in UK, Scandinavia, Netherlands and Belgium and around 50% in France and Switzerland.Ecovers dish washing liquid represented40% of Ecovers turnover.WeaknessesThe retail price was 4 times more than the ex-factory priceEcover was selling only 1000 tons of detergent powder annually (by 1992).

But this was not enough to enter the mass market.Market share in France, Switzerland, Germany and Austriawas low compared to Belgium, Netherlands, UK and ScandinaviaEcover couldnt match the large brands profit per square metre of shelf space in the supermarkets.

Strategic Issues analysis

These include Marketing objectives, market segmentation and competitive advantageStrengthsHad a specific marketing objective in the beginning-targeted a speciality stores, especially health food store.The eco-label was the key competitive advantage.Ecover enjoyed the segment consisting environmental conscious people.By 1992, Ecover was sold through 15000 stores worldwide.WeaknessEcover jumped into the mass market without a proper knowledge of the market segment.

I.e. when evaluating marketing segments, the company should examine two broad issues, market attractiveness and the companys capability of competing in the segment.Ecover couldnt recognise customers who liked promotional offers and couponing.

Ecover tried to make a major segment by educating the people about the harmful ingredients. i.e. didnt try to act according to the existing major segment (price conscious)3.2.3Marketing Mix Effectiveness:This can be evaluated by the 4

Ps .i.e. Product, price, promotion and place. This is basically the effectiveness of promoting the right product at the right price in the right place.StrengthPositioned at the right place-pharmacies and health food storesEcover products had the eco-friendly image.Re-filling tanks in health food stores helped clients to save money and shop better profit marginFree booklets explaining the competitive advantage were distributed.

Ecover was successful in reducing cost for each wash by 10% and thus almost equalising the price of normal detergents.WeaknessThe ease of use and the brightness were not up to the standard of the traditional detergents..Price of detergent was 20-30% higher than traditional detergents.

Lack of distributor support.Competitors were also operating via mail order but Ecover didnt offer this facility.Reckitt & Colman was the first to launch benzene free detergent powder in Sweden after benzene was banned in the hospitals. Being an eco friendly company Ecover could have used this opportunity.

Marketing

Here am evaluating the pluses and minuses of Ecovers marketing.StrengthsThe educational aspects of marketing strategy turned to be very successful. Marketing team was very successful in making customers loyal to Ecover. Expanded its marketing team in BelgiumEcover offered supermarkets a margin of four times than that of the traditional detergents Weakness. The marketing team of Ecover could not make use of Ecovers agents and importers in planning a marketing strategy for entering in supermarkets. Lack of advertisements. Ecover couldnt attract promotions & couponing loving customers. Marketing team was not successful in making the majority of the people green conscious.

Only less than 1% of detergent market aware of Ecover products. The changing competitive strategy of EcoverCompetitive strategy concerns how to create competitive advantage in each of t he

business in which a company competes (Porter, 1987)In the earlier years Ecover was well protected from large firms as the competitors were not interested in the small food stores market. This helped Ecover to build a reputation in the market. As the numbers of competitors were increasing, Ecover had to improve its Competitive strategies.By 1990, the green detergent market began to attract the attention of t he traditional detergent producers.

This was a major threat for Ecover and had to find an alternative marketing strategy that would succeed in competition with the traditional detergent producers strategy of massive advertising.The green manufacturers were competitive with the major brands in liquid cleaners. Ecover sold their liquid detergent for a lesser price than that of the supermarket leaders normal price.Although powdered detergent never gave a big margin, Ecover introduced it to make its product line bigger. As the making of powder was expensive, subcontractors were used for it. But, this cut Ecovers margin, and traces of banned chemicals were found in the final product.

Seeing this as a major threat, Ecover set up its own factory in 1990. This helped them to reduce the cost by about 50%.Ecover products were expensive than the traditional detergents and had to find out a new strategy that would help them to attract new customers. As a part of this strategy, Ecover decided to reduce its prices. The first step was to change its distribution style.i.e. they installed refilling stations(for both liquid and powder) in the stores so that the customers could refill the empty bottles.Secondly, advertising budgets were cut down as a part of cost reduction.Thirdly, the introduction of building block system  mixing

soap, water and bleach according to the customer need, was effective as it helped in reducing cost per wash by 10%. The powder included bleach for whites and ends up being unnecessarily as only 1 wash out of five was white.

At the end of the day, Ecover was successful in making cost per wash close to the level of traditional brands.In order to increase the turnover and compete with detergent giants, Ecover decided to enter the mass market, i.e. distribution through supermarkets. But Ecover knew that they will have to do more research and development to be successful in the mass market. Ecover even offered more margin to the supermarkets than they were making on the existing detergents.

Consumer Behaviour Towards Detergents

The figure below shows how to understand customers.Source: David Jobber, principles and practice of Marketing, 2nd edition, 1998From a marketing view, consumer behaviour is about human responses in a commercial world: how and why people buy and use the products, how they react to prices, advertising and other promotional tools.The first type of consumers Ecover had was eco-friendly people.

Consumers of Ecover products were primarily environment conscious people who had grown in age and wealth. Consumers were very loyal and kept an emotional bond with Ecover. Some were even willing to buy Ecover products even if the price was higher.Ecover consumers were even willing to forego supermarket shopping to purchase Ecover products at health food store.Quality was another matter consumers were looking for. They found green detergents didnt give much brightness as the other detergents did.

Some didnt even consider brands for detergents. They were more attracted to the promotional offers and couponing in the supermarkets.Some preferred

brand names. Advertisements had big effect on consumers. Big companies like P&G and Unilever had huge advertising budgets unlike Ecover.

The mechanical effort put on washing with green products was another concern. They wanted an easy to use product.The US detergent consumers werent green yet, but cases showed that with appropriate media interest things would change. They need to be aware of the eco-friendly products. They were more price conscious and looked for easy to use products.

Conclusions

Even though Ecover has a good turnover, the setting up of the new factory has made its financial position unstable. Ecover is enjoying the major share in the health food store and pharmacy market.The entry into the supermarket is will have to change severe competitions.7.

RecommendationsAs per the analysis done I would recommend the following for Ecover:

• Enter the supermarkets slowly
• Try to make more financial backup
• A deeper research about the markets
• Make sure the price and quality is competitive enough with the major competitors products
• Find more potential international markets
• New effective marketing strategy
• Think globally
• The new Marketing Strategy.

Many corporations now understand that the green phenomenon is not a fad but a serious marketing trend. To compete in the mass market, one needs huge budgets for marketing and establishing in new countries. As Ecover is terribly under capitalised lot of limitations are there to make a new marketing strategy. In order to enter the mass market Ecover need to think and act globally.Ecover has to concentrate more on countries like India, china, and other Asian countries where the consuming capacity is increasing every year.

I recommend Ecover to concentrate more on countries in Asia as

the markets are very huge and developing fast. Below, am trying to explain some entry strategies that Ecover should undergo as a part of entering into the supermarkets. Depending upon the conditions in each country, the decision should be made. Licensing: Ecover will have to make available the patents, secrets, know-how, trademarks and company name to the domestic firms. When exports no longer are profitable because of the intense competition, licensing provides an alternative. This needs less capital and easy entry to foreign markets.

This would help to cut the distribution/importing costs and thus allow Ecover to cut down the prices. This agreement is based on royalty. These royalties are guarantied and free from fluctuations of shared income from investments. Exporting: Exporting is good way to gain international experience. But as these exporting makes Ecover products more expensive than the competitors, I would not recommend Ecover to export into more price conscious markets like USA, and the new markets. But it should continue exporting within Europe. The next topic I want to look into is Market Segmentation.

Marketing segmentation

Segmentation allows the grouping of customers based upon similarities. As Ecover has decided to enter into the supermarkets, it should tailor a marketing mix package that meets the customer needs.

A marketing research should be done to understand the requirements and characteristics of the customers. Ecover need to concentrate more on benefit-sought segment.I have tried to develop the marketing mix in order to meet this segment.To be successful in both environmental performance and market share I suggest a green marketing mix.

Product strategy

For proper implementation of product strategies, co-operation among the finance, R&D, corporate staff and marketing groups are essential. In

many companies, the top management makes the product strategy decisionsMy product-positioning strategy goes as follows

Product-positioning strategy

Objective: To position the product in the market so that it stands apart from competing brands, it tells customers what we stand for, what we are. The term positioning refers to a brand in that part of market where it will receive a favourable reception compared to competing products. I recommend the following steps for positioning of Ecover products in the new marketEcover should concentrate on the leading supermarket chains in respective region/countries. For eg. Tescos/Sainsbury in Europe.

As Ecover is expecting new customers in the supermarket, those who have not inclined toward it yet, products should be presented with a different twist. Attract the new customers by highlighting Ecovers competitive advantage.  The addition of new users helps to enlarge the overall market and thus puts the product on a growth rate.The product should be placed at the entrance at the shops so that everybody notices it. Ecover being multiple brands should be placed head-on with the leading brand even though there is a high risk factor in it.

Product Improvement/modification

Objective: To meet more than customer satisfaction. The product, pricing, distribution and promotion strategies employed by the competitors are forcing Ecover for product improvement.Although Ecover products meet the quality of its competitors, it has to improve the quality a step ahead of its competitors. More research and reformulating are needed to meet more than customer satisfaction.Ecover products should be designed to be more easy to use.This strategy can help Ecover to distinguish it from competitors products.

New product line

Objective: To give a wider choice for customers. As Ecovers competitors have a very

big product line, it also has to increase the number of products. It is hard to withstand in such a market with a small product line.New products like car wash liquid, glass cleaner, detergent cakes, and cosmetics like bathing soap, shampoo, conditioner should be added to the product line. This will help customers to have a choice in Ecover products.

Pricing strategies

Objective: To seek such a cost advantage that any competitor cannot ever profitably overcome it.As the world is running behind an everyday low price strategy, the pricing strategy of Ecover products should be reconsidered.

I suggest the pricing strategy to build market share. i.e. setting up the lowest price possible.Ecover products being new in the mass market should be priced to improve experience and market share, with no compromise in quality. During the early stages, operations should be conducted even at a loss. As volume is gained, costs go down, and even at an initial low price Ecover can make money. The lower the initial price set by Ecover, the more rapidly Ecover builds up volume and a differential cost advantage over its giant competitors and the faster the market develops.

Distribution strategies

Objective: To reach the optimal number of customers in a timely manner at the lowest possible cost.

Ecover have to cut down the number of intermediates in order to cut down the cost and to have a good relationship with the distributors.Once settling down in the supermarkets,  Ecover should move into intensive distribution, making its products available at all possible retail outlets. This would increase turnover very fast.The new distribution channel

Promotion Strategies

Objective:  To move customers form unawareness of Ecover products to awareness, to comprehension, to strong

belief, to the buying action.

Firstly, Ecover should create brand awareness about its products by highlighting its unique features. Secondly, Ecover should support its licencees/dealers promotions. Thirdly, Promotional strategies like `value added pack` should be offered to the customers thus making the consumption more.Fourthly, Ecover should offer more educational and information with long-term objectives to facilitate and promote new values and behaviours. Finally, Ecover should induce environmentalists to recommend its products.