Marketing Case Essay Example

laundry soap) and Campers (Milliner's cheapest brand). More details of the company are presented in the following section. 1. 1.

Company Objectives and Marketing Objectives Milliner Brazil was looking to explore growth opportunities in the marketing of detergents to low-income consumers living in the Northeast of Brazil. The company wanted to explore other areas of growth since it already had 81% share of the detergent powder category. In order to design an effective marketing strategy they needed to: Understand the lifestyle, aspirations, shopping and laundry-habits of low income consumers. Extend or reposition its cheaper brands (Minerva and Campfire) or create a new brand Find the ideal positioning and marketing mix for low income nonusers 1. . 2 Screening Criteria The Head of Milliner's Home Care Division in Brazil was considering the following criteria to evaluate and decide on whether or not Milliner should target the low income segment: Profitability of the low income segment The Cannibalizing rate - percentage of new sales coming from existing Milliner brands Milliner skills and organization to compete in the low income segment How would the stock market react to Milliner's decision to enter a non-premium market segment 1. . 3 Company Resources This section includes the human, financial and facility/equipment resources of the Milliner group and Milliner Brazil that the latter can build upon to target the low- income segment in Brazil. Human Resources Qualified and experienced senior executives (egg. Robert Davidson - Head of Milliner's Home Care Division in Brazil, Learner Cards - Graduated in Business Administration from Fandango Gertrude Barras, alumnus of INSTEAD Advancement Management Program.

Marco's Dining - Sales, Antonio Coned - Finance, Raritan Ganglia's -

Manufacturing) Over 300,000 employees of Milliner worldwide Financial resources $ASS$ 56 billion company Facility/equipment resources Milliner is present in more than 150 countries It has a portfolio of 1,600 brands, including 45 key detergent brands 1. 1. 5. Marketing Collaborators Milliner's marketing collaborators include advertising agencies in which Milliner spend 70% of its communication expenditure, marketing research firms and the company's generalist wholesalers.

The wholesalers had nationwide coverage and supplied Milliner's existing detergents and a wide variety of other Milliner products. Milliner would also sometimes rely on secondary, smaller local wholesales to reach all stores, especially in hard to reach areas, thus increasing their costs. 1. 2 Customer Analysis In the Northeast region low income consumers evaluate detergents based on 7 criteria in the following order of importance: (I) Price; perceived power of the detergent, I. E. TTS ability to clean and whiten clothes with a small quantity of product; (iii) the smell of the detergent; (v) the ability to remove stains without the need for laundry soap and bleach; (v) ease with which the powder dissolver in water and the absence of residue on the fabric after rinsing; (vi) packaging - distinctive, simple, and ease to recognize packages that are ease to open and protect against humidity; and (vii) impact on colors. . 3 Competitor Analysis The Brazilian fabric wash market consists of two categories namely: detergent powder and laundry soap.

These are explored in more detail below. 1. 3. 1 Detergent Powder In the detergent powder, Milliner's main competitor in the NEE is Procter & Gamble (P) with 17. 5% market share mainly driven by Ace, which is the third highest selling brand

in this category with 11% market share and $2. 4 price/keg. P is a $40 billion company, headquartered in the Cincinnati (USA) with 98,000 employees and operations in 80 countries. It started operating in Brazil in 1988. Its major detergent rand in Brazil are Ace, Bold and Pop (the lowest priced brand). P has got formidable R and marketing expertise worldwide.

As shown in the chart below this market is dominated by Milliner (approximately 74%) and P (approximately 17%) with other competitors having as low as 3% market share. Invite is a local brand targeted at low-income consumers in the Northeast, and is produced by AS. It currently holds 5% market share. 1. 3. 2 Laundry Soap In the NEE this is a very fragmented market with a lot of small local Brazilian companies with less than 1% market share each dominating the market with 63. 6% market share in total. Milliner's main competitor was AS with its brand BEMA-et-vi with 11% market share.

Chart below shows the distribution of market share for each brand. 1. 4 External Market Environment 1. 4. 1 Economic Environment Brazil is the largest country in Latin America with a population of 170 million people that mostly live in two clusters on the Atlantic coast: Southeast (where the two largest cities - SAA Paulo and ROI - are situated) and Northeast (the main cities are Salvador, Recipe and Formulate). During 1995-1996 the purchasing power of the poorest 10% of the population grew by 27% per year as a result of economic transformations introduced by the Plano Real.

In 1996, Brazil per capita income was $4,420, however there were large regional

differences between the Southeast and Northeast regions of Brazil: In the South East Per Capita Income was around $6,600 while in the Northeast it was $2,250. 53% of the population in the Northeast lives on less than two minimum wages compared to 21% in the east The economy in the NEE was predominantly rural and remained heavily dependent on agriculture. In 1996 detergent powder was a $106 million market in the NEE, growing at 17% annually. The barriers to entry are high in this market because the manufacturing process is UAPITA intensive.

On the other hand, the Laundry Soap bar was also a large market with $102 million but growing at a low rate of 6%. In addition the barriers to entry in laundry soap market are low because it is relatively easy to produce from fats and oil. 1. 4. 2 Technological Environment There are large differences between the way clothes are washed in the Northeast and Southeast of Brazil. In Recipe (NEE) only 28% of households own a washing machine and 73% of women think that bleach is necessary to remove fat stains vs. in SAA Paulo (SE) where 67% of women own a washing machine and only 18% of women hind that bleach is necessary to remove fat stains.

Women in the Northeast scrub clothes using bars of laundry soap, then add bleach to remove tough stains and only add detergent powder to make clothes smell good vs. in the SE women mix powder detergent and softener in a washing machine and use laundry soap and bleach only to remove the toughest stains (similar to European and American habits) Clothes are washed

more frequently in the NEE (5 times a week vs. 3. Times in SAA Paulo) due to few clothes and more time Women in the NEE perceive washing as a pleasure activity often do their washing in public laundry, river or pond to socialize with their friend) vs. women in SE wash clothes at home and look for more efficient ways to make the task easier. These differences have huge implications for marketing strategy for the 1. 4. 3 Political and Legal Environment two regions.

In the asses the Federal and local governments started providing tax incentives to companies investing in the Northeast region of Brazil 1. 4. 4 Cultural and Social Environment There are large differences in terms of culture and history between the NEE and SE regions of Brazil. The NEE was the first region of Brazil to be colonized by the Europeans who brought a lot of West African to work as slaves on sugar cane and cocoa plantations.

On the other hand the SE was developed by Europeans who migrated in the asses to work on the coffee plantations As of 1996, 65% of the population in the NEE was of mixed African and European origins vs. 30% in the SE. The NEE lifestyle, culture and religion was very much rooted on the African influences while the SE was more influenced by the Europeans 40% of the population in the Northeast are illiterate vs. 15% in the Southeast 1. 5 Collaborators The main collaborators with Milliner are the store network and wholesalers.

The wholesalers are an important step in the distribution of Milliner's products, and also a cost consideration. The stores

themselves are an important collaborator in terms of promoting the products, stock management and positioning the products on shelves. 1. 6 SOOT analysts This SOOT analysis outlines the most relevant aspects in terms of strengths, weaknesses, opportunities and threats that can have an impact on Milliner's ability to compete in the low-income detergent segment in the Northeast. . 5. 1 Strengths Long presence in Brazil (started operating in 1929) - pioneer of the consumer goods industry 81% market share of the detergent powder category achieved with three brands: MOM, Minerva and Campfire. 75% share of NEE detergent market Brand awareness and brand recognition throughout the country - market leader Qualified and experienced senior executives Good reputation both worldwide and in the Brazilian market Consistent market research which is used as a tool to make decisions 1. 5. Weaknesses Milliner staff lacked knowledge of the low-income consumers and experience of a marketing strategy that work for this segment Milliner is perceived as a premium rand and not affordable for low income segments Milliner is facing a distribution challenge - it did not have the ability to distribute to the approximately 75,000 small outlets spread over NEE. However access to these stores was key because low-income consumers rarely shopped in large supermarkets like Walter or Careful.

Milliner generalist wholesales sometimes relied on secondary, smaller local wholesales to reach all stores, thus increasing distribution costs. MOM is perceived as being a high quality product but not affordable for the majority of the population while Minerva and Campers that were cheaper were perceived as not giving the main benefits that customers looked for. 1. 5. Opportunities High percentage (48

million) of potential low income consumers in the Northeast of Brazil During 1995-1996 the purchasing power of the poorest 10% of the population grew by 27% per year Tax incentives provided by the government to companies investing in Northeast region of the country In Recipe (NEE) only 28% of households own a washing machine and 73% of women think that bleach is necessary to remove fat stains In 1996 detergent powder was a $106 million market in the NEE, growing at 7% annually Clothes are washed more frequently in the NEE (5 times a week vs. 3. Times in SAA Paulo) due to families having fewer clothes, more time and the social aspect Women in the NEE perceive washing as a pleasure activity (often do their washing in public laundry, river or pond to socialize with their friend) The barriers to entry in the detergent powder market are high because the manufacturing process is capital intensive meaning that only big corporations can afford to compete 1. 5. Threats Low Per Capita Income ($2,250) in the Northeast region of Brazil 53% of the population in the Northeast lives on less than two minimum wages 40% of the population in the Northeast are illiterate The economy in the NEE was predominantly rural and remained heavily dependent on agriculture Laundry Soap bar was a large market with $102 million for 81 ,250 tons but growing at a low rate of 6%. P&G has got formidable R&D and marketing expertise worldwide and can lever on that to attach the low-income segment 2.

Marketing Plan Objective Given the situational analysis plan and analysis of our strategic options, as well as

our analysis of cannibalizing breakable and projected forecasts, our key marketing objective of this marketing plan is to drive business and increase sales and provide return on investment. We plan to increase market share from 75% to the 81% in line with the national market share, in the next 3 years and we are also looking to increase sales to $ 1,man in the next 3 years as per projections forecasted in Appendix 1. . 1 Strategic Options Existing Product New Product Existing Market Market Penetration: New Product Development: Focus on developing the market share MOM, Minerva and Campfire in the Northeast. Develop and launch a new high quality, low price based detergent or laundry soap product. Launch Brand extension. Repositioning Complier with promotional campaign.

New Market Market Development: Diversification: Move into foreign markets or different areas within Brazil with existing MOM, Minerva and Campfire brands Move into foreign markets or different areas within Brazil and launch detergent complimentary products The options of market development or diversification do not apply in this case, as Milliner wishes to explore growth opportunities in the existing Northeast market. Therefore any new market strategies are out of the scope of the Brazil management team, and only strategies relating to the existing market in the Northeast apply.

There are therefore 2 options available: Market penetration or New product development. 2. 1 Market Penetration Market penetration is not an ideal option. Firstly, MOM and Minerva are out of the price range of the market of the Northeast, and the penetration is already high for consumers who can afford the products. Secondly, Campfire is perceived to be a lower quality detergent that

cannot satisfy the washing needs of the Northeast. There is however the option to reposition the current brand of Campfire in order to gain access to low cost customers. More compelling points of difference would need to be established.

Milliner could reposition in order to: Improve Falling Sales Increase relevance to customer Differentiate from other brands As Complier is already know in the market by consumers as a price competing brand of low quality it would be very difficult to reposition, as the market perception would need to be changed. Even a successful reposition may not yield significant returns when compared to other options. Due to these reasons, further penetration of these brands into the Northeast market is not a recommended strategic option. 2. 2 New Product Development Therefore, this leaves new product development as the only strategic option open to

Milliner. Within new product development, there are two options for Milliner Brazil: 1. Brand extension. 2. New brand 2. 2. 1 Brand Extension An extension of one of their three brands could offer Milliner a number of advantages if planned and implemented well. As the low-income segment is being targeted and MOM and Minerva are priced high, these brands should not be extended to the low-income market, as this may cause damage to the premium positioning of those brands. If any extension were to take place it would have to be done with Campfire. Possible advantages of extension: Increase efficiencies in promotion expenditure

Reduce costs of introductory market programmer Avoid cost of developing an entirely new brand Packaging efficiencies Create customer variety Facilitate new product acceptance Reduce risk perceived by customer Possible disadvantages of

extension: Damage existing brand image Cannibalize parent brand Dilute brand meaning Confuse and frustrate consumers Cost of operating extension 2. 2. 2 New Brand Creating an entirely new brand is a costly exercise and would require high levels of initial investment. However, there are many benefits that a new brand would bring. Possible disadvantages of new brand:

New product would need to be produced in a costly R&D process New branding development costs New operational costs Brand launch programmer Cannibalizing of existing brands (Calculation in appendix 2) Possible advantages of extension: More targeted approach to Northeast customers Allow a new brand message to be conveyed Clear distinction between brands We believe the best strategy for breaking into the low cost segment is to launch a new brand. At present the low-income brand, Campfire, is not delivering in terms of the needs that low-income consumers demand.

A new brand would allow for a fresh aka on a targeted brand to the specific needs, culture and demands of the people of the Northeast region. The existing brands have been developed with the people of the Southeast in mind, while a new brand would allow specific targeting of the customers in the Northeast. As Campfire is positioned solely as a cut price brand, we feel the new product should be positioned as a higher quality low-cost detergent, delivering the required attributes at low cost to the consumers, while maintaining a reasonable margin.

We feel the product should be positioned on quality and product strength as opposed to price. We feel positioning the product on quality Just below Minerva will prevent cannibalistic of Minerva. Cannibalistic of Competitor is inevitable,

however this brand is performing poorly in the Northeast with low sales, and the high growth expected from the new brand will more than compensate for this. This new brand will give Milliner the growth opportunities in the Northeast by appealing to the customers and by converting them from laundry soap to the new brand.

Positioning The below exhibit shows the relationship of perceived quality and price and where our new brand would sit in relation the Milliner's other products and competitor's reduces. As per 4 As below we believe this new brand should be priced between Campfires and Minerva, with a perceived quality between these also. These position will explained in more detail below. 3. Marketing Mix 3. 1 Target Market The target market would be focused on the following consumer: Social classes E, E+ and E- Northeast region Woman between the ages of 16 and 60 3. Product In order to satisfy the needs to the Northeast customers, the new product developed (between the quality levels of Minerva and Campfire) would need to 1) Be strong enough to do the Job that laundry soap currently performs using the smallest Seibel amount of detergent, and it would need to be able to remove stains without the need of laundry soap or bleach (all to a acceptable range to not push the price too high). ) Have a distinctive and strong detergent smell 3) Easily dissolve is water and not leave residue after rinsing Since the detergent will only be used in hand-washing scenarios, the ingredients used for machine washing (specific enzymes and builders) could be removed in order to save on cost. This is

not an issue, as consumers who can afford washing machines will generally be able to afford the higher priced brands that still have these ingredients, such as MOM, and ill therefore not buy this product.

Before Milliner begins the R&D of this new product, they should do an assessment of whether a similar product exists in the global Milliner network already or not. It is possible that a similar product may have been developed in other developing countries, such as in Africa or Asia. In terms of packaging, boxes would need to be used since market research has shown that the consumers in the Northeast perceive boxes to be associated with a quality product.

A range of sizes should be available to give the consumers flexibility, especially engendering that low-income consumers do not have large amounts of disposable income to spend on large quantities. However, in order to prevent product complexity and consumer confusion, only 2 possible box sizes should be developed, small (approximately gig) and medium (gig). In addition to this, single serving sachets are another possibility that could be explored. This should however be explored in later phases once brand loyalty has been achieved.

In future years, as the brand recognition and loyalty is achieved, plastic sachet and plastic bag packaging could be trialed. Depending on the results, it may be more ideal implemented, bringing about a cost saving for consumers and higher margin for Milliner. However, this should only be trialed once customer brand loyalty has been achieved and should be tied together with promotional activities. 3. 3 Price The price of the new brand is a very important aspect. We believe

that the price should be below Minerva ($2. 40/keg) but above Competitor ($1. 0/keg) in order to show that the product is higher quality, but not too expensive and not too close to Minerva to cause cannibalizing. Looking at the competitors, the price should be above that of Invite ($1. 70/keg) and Pop ($1. 0/keg) to highlight that the new brand is higher quality, but not too much above to become costly. A breakdown of the costs would therefore be as follows: Cost area Cost Notes Formulation $1. 2/keg Assumption based on a cost between that of Minerva and Competitor Packaging $0. 35/keg In line with other products Promotional $0. 5/keg In line with other products (Above the line 5+0,1 Distribution $0. 05/keg See section 3. 5. Will use specialized distribution network. COST TOTAL $1. 85/keg Margin $0. 20/keg Assume approximately 10% margin (Similar to Minerva) TOTAL $2. 05/keg The price of MOM and Minerva should remain unchanged in order to maintain the gig quality positioning of those products. The market that those products target should be unaffected by the introducing of the lower end detergent, for a number of reasons. Firstly, they will still require a detergent that is machine compatible.

Secondly, they will want a product that is premium and high quality. Even though the new brand will be good quality, it will still not be high quality like MOM or Minerva. Finally, the retail outlets that these products are located in will mostly be different to that of the new brand. In terms of Campfire, the price should also remain unchanged, in order to keep the positioning of a cut-price brand. At

the recommended price level of 2. 05 we calculated a break-even cannibalizing rate of 69%, (as per Appendix. 2).

At this rate the new brand would be able to consume 69% of the current market offering of Milliner before it would become unprofitable to do so. Hence, we took this value into consideration when confirming the price we had selected. Also with growth rate of 17 %, we believe that there is sufficient, new market share from growth when added to taking market share from competitors do validate 31% uptake required to remain competitive. Also please Appendix 2 for how this was calculated. 3. 4 Promotion The promotion of the new brand is key in the potential success of creating a low- income detergent market in the Northeast region for Milliner.

The brand must resonate with the culture and way of life of the woman of the Northeast. The brand could consider elements such as the vibrant colors, festivals, music, and African culture links. It should also highlight the quality aspect, as well as the social washing aspect. The brand should have a clear differentiated name, strap-line, message and color scheme that resonates with the target market. There is the possibility that Milliner could leverage off an already existing brand. Due to the African links, a very compelling existing brand may be found in Milliner Africa.

However, this brand would need to be tested before it is implemented. The overall message that would be communicated to the target market has 2 aspects. Firstly, that this detergent is affordable, but still good quality. And secondly would be an educational aspect, outlining that the detergent is suited

to their needs, such as being strong and having a strong smell, and that it would be a better option than laundry soap. There will be phases to the promotion strategy, firstly a launch campaign, and secondly would be a ongoing engagement and awareness phase. . 4. 1 Launch phase: The purpose of the launch promotional campaign will be to build brand awareness of the new detergent brand. This would be a multi-channel approach, with promotional activities such as: Above the line brand awareness TV commercials, aired at times where the target market are likely to be watching. These would also need to resonate with the target market, and could therefore be set at the riverside emulating the social washing setting, or have vibrant colors, music and dancing.

Other above the line brand awareness channels such as billboards, radio and print media could also be used where applicable. These would all show a consistent message of a high quality, affordable detergent that meets the specific needs of the Northeast. In terms of below the line, activations could be done at some of the popular social washing areas, with promotional woman handing out sample sachets and educating the woman on the new detergent, or doing demonstrations. Similar below the line activations could be done at larger specialized distribution stores, with sample