Thursday, October 3, 2019

Marketing Strategy for Low Income Consumers

Marketing Strategy for Low Income Consumers After evaluating the Case Study Unilever in Brazil(1997-2007): Marketing Strategies for low-income consumers the following points are credible. After the long recession period Brazils economy is growing and that is reflected on consumers purchasing power(Increased by 27% for the poorest 10%) and market is also growing with 17% annual rate. After analysing various options, I think it would be beneficial for Unilever to choose a strategy for Market development by introducing existing brand from its Latin American portfolio like Ala. New Marketing Mix should consist Good Quality, Low Price, Attractive packaging, Specialized Distribution system and Promotion. Changes in a new marketing strategy is urgently required for Unilever as PG is very aggressively reactive (By acquisition, re-imagining and re-positioning of brands.) Ala should be priced $1.55/Kg (Approx) and should be launched in both box and sachet packing. Sachet packing will be offered with free extra quantity due to cheap packaing cost. We can introduce 2kg 3kg bags with attractive price. Unilever should introduce a new distribution management system that includes both Generalist Wholesaler and Specialized Distributors. Unilever need to build direct relationship with 75,000 small shops by giving credit and incentive. Unilever also be having an option to start production of Ala in NE region, as government is providing lot of tax Incentives that will help Unilever to produce at low cost. Consumer Behaviour Like any other country Brazilian consumers also have their own beliefs, values and lifestyle. Washing is one of the major activity for women in NE and various sentiments and emotions like pride, care, pleasure and satisfaction are attached to it. Washing is a medium of socializing for women in NE, because only 28% household own a washing machine and mostly they wash their clothes in a public laundry, river or pond. Women in NE wash clothes using laundry soap and around 73% thinks that for cleaning clothes bleach is necessary. Current usage of detergent powder is just for giving good smell to clothes. Decision making process for buying a detergent powder in NE is based on several criteria as shown in Table 1. (Solomon et al, 2009 p.155) Table 1: Evaluation Criteria [Source: Exhibit 5 : Unilever in Brazil Case Study] 30% (51.06 Million) of Brazils population earn less than $125 a month. More specifically 25.4miliion in NE and 25.62 Million in the SE.NE consumers are very price sensitive. Diagram 1 Around 40% of Northeast population is illiterate and they generally buy products on the recommendation of local shopkeepers, word of mouth, television advertisements, visual identity and graphics. (Solomon et al, 2009 p.158) In spite of low Income, NE consumers are very self esteemed and sensitive about their social status and cleanliness, so they wash clothes more frequently 5 times a week compare to 3.9 times a week in SE. Washing can be considered as Ego need (Higher-Level Need) for NE consumers according to Maslows Hierarchy of Needs. Abraham Maslow (1970) in his study of Consumer behavior proposed a Hierarchy of Needs and related Products. And refereed Self esteem as Ego based need. (Solomon et al, 2009 p.161) Physiological Need (Water, Food, Sleep) Safety Need (Security, Shelter) Belongingness (Love, Friendship, relationships) Ego Needs (Prestige, status, self esteem) Self Actualization Higher -Level Needs Lower-Level Needs NE Customers needs with respect to washing is more Ego based (Pride, Self Esteem Status) Diagram 2: Maslows Hierarchy of Needs and related Products (Maslow, 1970) [Adapted and modified from Solomon et al (2009), Marketing Real People,Real Decisions,Page 161.] Market Analysis Major Brands in Market Unilever is a Market leader in Brazils detergent powder market with 81% Market share followed by PG with 15% market Other local brands(4%). In Northeast region Unilever is having 75% market share followed by PG 17.5% and others with 7.5% market share. NE Detergent powder market is growing with 17% annual growth. Table 2: Main Players in NE Detergent Market [Source: Exhibit 7 : Unilever in Brazil Case Study] But unlike NE Detergent powder market, Laundry market ($102 Million, 81,250 tons) is totally different and growing with 6% annual growth, Unilever is a market leader in Laundry soap market as well with one brand Minerva (19% market share) and major competitor for Unilever is ASA with a brand Bem-te-vi (11% market share). Table 3: Main Players in NE Laundry Soap Market [Source: Exhibit 7 : Unilever in Brazil Case Study] Strategic Competitive Analysis Unilever has segmented market by geo-demographic segmentation based on Income(High Income Low Income) and geographic locations (SE NE) and currently targeting the high income consumers in SE.(Solomon et al, 2009 p.215-220) Unilever has positioned their products in market with respect to various key features of products like Omo with remove stain with low quantity, Minerva with Emotional appeal and Pleasant smell and Campeiro with Low cost. Whereas PG has started reacting very aggressively after taking in consideration of growing Brazils economy by acquiring Quanto, Odd Faces and Pop from Bomrill. And after making some manufacturing changes, launched Quanto as Ace, Odd Faces as Bold and kept Pop (the low price brand) unchanged. PG positioned their products like Ace with Whiteness, Bold with Softness and Pop with low cost. Table 4: Current Strategies of Various Brands ASA (Local Brazillian Comoany), also segmented market by geo-demographic and currently targeting Low income consumers in NE. ASA positioned its brand (Invicto) in market by focusing the low income consumers. Invicto is one of the key competitor of Campeiro in low income consumer segment. After analysing the complete market situation, I found that currently PG is the most active player of the market though PGs market share is not much high (As they acquired all the three brands this year.). So I think PG will give very tough competition to Unilever in a long run. SWOT Analysis The SWOT analysis is the method of understanding Internal and External Environment of an organization (Kotler 2000, Page 46 and Solomon et al, 2009 p.66). SWOT analysis of Unilever provides a summary of Strengths, weaknesses, opportunities and threats. Strengths Threats Opportunities WeaknessesInternal Environments External Environments Diagram 1: SWOT Analysis Internal Environment Strengths Good Market reputation with 75% market share. High quality products Differentiated Products Brand Awareness Weaknesses Demographic market Segmentation Weak distribution system Lack of Expertise in Customer relationship Management Week RD and marketing expertise External Environment Opportunities NE is a very high potential market (48 million). NE detergent powder Market is growing by 17% annual growth. Unilever can capture NE low income market to enter first in it. Increase in purchasing power of poorest 10% consumers. Brazilian government providing tax incentives for encouraging investment in NE. NE women wash clothes more frequent then SE, so it leads to higher consumption. Threats Economic downturn might affect the growth and sales. PGs RD and Marketing Expertise Cannibalization Local NE detergent manufacturers. Marketing Strategy Segmentation Diagram 2: Distribution of Social Classes Northeast Southeast Unilever had segmented the complete Brazilian market into two segments based on location and Income (demographic Segmentation). (Solomon et al, 2009 p.215-220) But I think Unilever need to create a new segment that will focus consumer in Social class E- E+, because we have 53% (25.44 million) in NE and 21% (25.62 million) in SE. Both the region is having equal number of low income consumers (as per percentage of total population in region). So this new segmentation will target not only NE low income consumer but SEs low income consumers as well (30% (50.70 Million) of Overall Brazil population). Table 5: Distribution of population as per social classes [Source: Exhibit 2 : Unilever in Brazil Case Study] Targeting Market Till now Unilever is a Market leader by targeting High Income Consumer segment (SE). For entering into Low income consumer market, Unilever need to prepare and implement a new targeting strategy because its a very huge market segment (53% NE and 21% SE). So what will be the Unilevers possible targeting strategy? Igor Ansoff (1957) in his study on Strategies of Diversification suggested a marketing tool (Market growth Matrix) and as per Ansoffs market growth matrix, Unilever is having two potential options out of four: Unilever is targeting new market segment, so option 12 automatically neglected. (Ansoff, 1957 p.113) Existing Product New Product Market Penetration Diversification Market Development Product Development Unilever can launch a Completely New Product in NE after RD and according to NE customers need. Unilever can Re-position existing brands or launch brand from existing international portfolio. Market. Diagram 3: Ansoffs Market Growth Matrix [Adapted and modified from Ansoff ,(1965), Corporate Strategy ,Page 109.] Existing Product in Existing Market (Market Penetration) Unilever is already having 87% (National Average is 81%) market share in SE with three brands. New Product in Existing Market (Product Development) Unilever is a market leader in SE higher Income segment, so no need to launch Ala. Existing Product in New Market (Market Development) Market Development can be the best strategy for Unilever in current scenario because Unilever is already having a good brand image in NE. Unilevers main challenge is to develop a market and try to change the washing habit of Low Income consumers by shifting them to detergent powder from laundry soap. New Product in New Market (Diversification) Diversification is the most risky option compared to the others because we are moving into the market with a New Product in which company is having very little or no experience. Market Penetration Product Development Market Development Diversification Low Risk High Risk Diagram 4: Risk associated with Market strategies In the current situation Unilever should choose the 3rd Option (Market Development), because Unilevers existing market (SE) is already developed with 87% Market Share (Option 12) and currently Unilever is looking for expand his business in NE and to capture low income consumer in SE as well. What all options are currently available to Unilever in Market development? Positioning the Product (Marketing Mix) Positioning Positioning New Brand in NE market by fulfilling customers need Distribution Specialized Distribution High availability Price Low Price (affordable) Product Fulfill NE Consumers need Good Smell Low Price High Quality Promotion TV Advertisements Sponsoring local Events Sample distribution Diagram 5: Marketing Mix [Adapted and modified from Ansoff , Lars Perner, 2010 http://www.consumerpsychologist.com/cb_Segmentation.html.] Product Strategies Unilever is having four options to position Product in NE market. Brand Extension of Omo (A cheaper version of Omo): It is a very risky option and will lead to high cannibalization. (Solomon et al, 2009 p.290) Re-positioning Minerva: It can be an option but Minerva is a bit costly product ($2.40 WP) for Low income consumers and reducing price and compromising in Quality can damage a brand image and lead to cannibalization. Re-positioning/Brand Extension Campeiro: Camperio is available in the market since 1984 and having just 6% market share. It is currently positioned as a Cheap Low Quality product in NE consumers, so Re-positioning of Campeiro is very time taking and a costly affair. (Solomon et al, 2009 p.228) Introduce a brand from the international portfolio: Without taking risk with existing brands, this can be a potential option for Unilever to introduce a new brand from its international portfolio like Nevex, Ala or Marsella (Latin America). I think It can be Ala (Means WING in Portuguese), only brand that is having a meaningful name. Ala can be positions between Minerva and Campeiro in terms of quality and below Campeiro in terms of price by effective marketing planning. Since NE consumers like Omo very much and currently use detergent powder just for good smell, so the fragrance of the Ala should be same as Omo and if possible Unilever should launch Ala in 2 or 3 different fragrances. Alas Packaging should be Proper, Attractive and cost effective packaging. Ala should be available in the market in a pack of 1kg, 500gm in both cardboard pack and plastic pack (Save detergent from moisture) and 250 gm 100gm in plastic sachets. Plastic sachet cost just 30% of Cardboard pack, so Unilever can offer consumers an additional quantity in plastic bags in same price. Ala will be priced between $1.5 and $1.6 per Kg, so we can easily offer an extra 20% to 25% quantity in plastic bags as Cardboard box cost $0.35 and Plastic Pack $0.10. (Solomon et al, 2009 p. 307 and Kotler, 2009 p.195) Table 6: Product Packing Matrix *Extra Quantity on plastic bag because of low cost of packaging Consumers always get attracted by special offers and additional quantity of product and since Unilever is the pioneer in the market, it will help Unilever to achieve good market share. While launching Ala, we can give some introductory offers like buy 1kg and get 500gm and 2kg and get 1kg free. Pricing Strategies Currently Unilever has priced (Whole Sale) product Omo with 22.45%, Minerva with 11.63% and Campeiro with 9.68% profit. Ala will also be priced with 9.15% (Approx) profit to wholesalers at $1.55 (Approx) that will be the lowest priced detergent powder available in the market as per the data available in case study. Best quality product in the lowest cost will be the USP for this Ala. (Solomon et al, 2009 p.370-374) Table 7: Cost Profit Calculation Matrix [Source: Exhibit 10 : Unilever in Brazil Case Study] Plastic Sachet packing reduces total cost of production by 25%, but NE consumers are having special attachment with boxes and Plastic Sachet Packed Product is assumed as low quality product. So we will introduce Ala in both box and plastic sachet packing where on the latter we give 25% extra quantity. Table 8: Profit difference in Box Sachet Packing *will offer 25% extra quantity Promotion Strategies Currently Unilevers promotion strategy is 70% above-the-line and 30% below-the-line. But for Ala it need to be changed to 40% above-the-line and 60% below-the- line, as low income consumers more attracted and relies on word of mouth publicity, small shop displays, holdings, sample distribution, free gifts etc. But moving towards below-the-line promotion not only Unilever can achieve better results in a low income consumer market but can also save money on promotions. (Solomon et al, 2009 p.37, 398-406) Ala should be promoted with the key messages like best quality, good smell, Care, Pride and self esteem. Ala will Packed in colorful box and sachet with the indication of quality and good fragrance by showing flowers etc. Point of purchase also need to be modified accordingly because several time consumer make decision changes by viewing point of purchase promotion and shopkeepers advice. (Solomon et al, 2009 p.167) Shopkeepers also need to be taken in confidence by providing credit and incentive. Target Audience (Women between 20 -50 years) Budget and Promotion Objective ($0.20/kg and Emotional appeal (Like Care, Pride and Good Smell) Designing Advertisement Media Type (TV, Outdoor Advertising, Public Relations and Sales Promotion by sample distribution, shop displays etc). Evaluation of Promotion Diagram 6: Promotional Strategy development [Adapted and modified from Solomon et al ,(2009), Marketing Real People Real Decesion ,Page 109.] Distribution Strategies The most important thing to make any product successful and to increase revenue, sales and market share is a good distribution system. You cant sell, what isnt there7 (Solomon et al, 2009, Page 494) With the Ala, Unilever is targeting to gain business in a low income consumer market that will be possible only when the product will be available on traditional retail shops (Main point of purchase for Low income consumers). For targeting the high income consumers in the big supermarket Unilevers current distribution system is well sufficient but to target low income consumers Unilever should take help from specialized distributors as well. (Solomon et al, 2009 p.498-500) Unilever need to make some changes in the distribution system by creating the proper mix of Generalist Specialized distributors, so the product will be available at as many as locations possible. New distribution mix can be applied in SE as well because there are also 21% of low income consumers. New distribution system will not only captures more ground area but also reduce the cost of distribution.

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