Goliath Vs Goliath: The upcoming Soap Wars

ITC to foray into soaps
The buzz about ITC plunging into the highly penetrated toilet soap market is getting louder by the day.It is learnt that the cigarette-to-hotels major is eyeing the mass segment of the soap category, which is why some existing players are said to be sitting on old stock and holding on to the price line.Sources said ITC plans to unveil its soap brand in the next two-three months. The name of the brand is being kept closely under wraps, and, it is not going to be the same brand, Superia, which the company was test marketing over a year ago in some rural areas, sources added.A senior industry official told TOI: "Companies are holding on to the price line for the moment, despite pressure building on the raw material price front. We don't want to get caught in a situation where we raise prices and ITC launches its soap brand at a lower price."Palm oil prices are currently ruling at around $650 per tonne. Industry analysts are skeptical whether I TC should enter the market at such high raw material prices.Dealers of fast-moving consumer goods (FMCG) companies said that the last price increase that took place in the soap segment was initiated by Hindustan Unilever (HUL) in July this year.HUL had taken a mid-year price increase on various products across categories. Prices of Pears soap and Lux were revised upwards. In the case of its popular soap brand Lifebuoy, HUL had reduced the grammage, keeping the price intact.HUL is the leading soap maker in the country, with a market share of 54%.As for Godrej Consumer Products (GCPL), the second largest soap maker with a market share of 10%, the company had recently said that prices would be raised soon.Industry analysts said ITC's entry is bound to create excitement in the Rs 4,400 crore toilet soap category.Decible levels on the advertising and promotion front are set to soar in the next few months.

ITC, as we have seen during the BINGO launch is going to enter the market with all its might. HUL is expected to preempt the same and come up with its own defensive strategy in a market it has ruled till date. Expect severe casualties when these two giants fight it out!!!!!

Factory outlets: A Parallel sales channel

Discount is no longer a dirty word. An economy that considers retail as therapy is shopping with glee at value stores. Companies which were quietly offloading factory surplus stock at discreet stores located on highways and city outskirts now acknowledge that surplus also sells, albeit at a discount. Thus, Mehrauli-Gurgaon Road and Mahipalpur in Delhi, Trimulgiri in Hyderabad, Marathahalli in Bangalore and Parel in Mumbai have become weekend shopping destinations.

Factory outlets can be company owned or franchised like an exclusive store. Traditionally, a factory outlet was a store, attached to a factory or a warehouse, but now these outlets are grouped together, either in a mall or on a highway. The cost saved on transport is generally passed on to the customer. Surplus stock occurs due to assortment problem, which may arise due to lack of variety in terms of colours in a particular range or the oddment problem because of odd size or fit that could not make it t o the retail outlet.

No wonder then, the Future Group's Brand Factory, a 60,000-sq ft mall in Bangalore, selling only factory surplus products of 120 brands, sees a footfall of around 2,000 people on weekdays and 4000-5000 on weekends. With Brand Factory up and running in three locations (Bangalore, Ahmedabad and Hyderabad) and three more ready for launch in the next 3-4 months, value retailing estimated at Rs 40,000 crore and growing at a healthy pace of 20 per cent per annum, consumers are surely in for a mega shopping spree. Prices are marked down by 20-40 per cent every day, apart from promotions such as `Buy one - Get one free' once in four-six months, which are considered great bargains by consumers. Most of the stocks are just one season behind in fashion and make little difference to shoppers. Sales statistics seem to agree with this. At Brand Factory, daily sales range from Rs 40-100 per sq ft occupied by the brand.

With such attractive footfall numbers and sales statistics, even top-notch names can't afford to ignore factory outlets. At Brand Factory, Adidas, Nike, Levi's, Pepe, Woodland, Wrangler, Esprit and Arrow merchandise are all stacked with value brands such as Peter England, Numero Uno and Ruff n Tuf.

Parallel sales channels

The factory outlets as parallel sales channels. The way exclusive store distribution is expanded, the expansion of factory outlets also becomes important. Factory outlets become a parallel chain to sell the `not so fresh' collection. Pant says in the franchisee kind of environment, the franchisee picks up garments at say a price 45 per cent lower than the MRP and sells it at 35 per cent lower. It's also true that the whole process is not very "tightly bound" as it always depends on what kind of rejection is available, the season's merchandise and so on. What is interesting is that the brand's value in the market is reflected in the factory outlet too. While consumers are boldly driving in their limos to a factory outlet to shop for the last season's shirt, some companies are still shying away from the `discount' word.

Sales contribution

• For Levi's, factory outlet sales contribute 5-7 per cent of its total annual sales.
  
• For Indus League, 6-7 per cent of its turnover comes from factory outlets.
  
• For Arvind Brands, says typically for any brand, about 25 per cent of its annual sales come from factory outlets.
  
• Arvind Brands has 51 factory outlets across the country. Called Megamart, these stores stock brands such as Arrow, Lee and Wrangler.
  
• Blackberrys, the men's premium apparel brand, does not have a presence in standalone factory outlets, it is seen at Brand Factory. Sales recorded is Rs 3-5 lakh per month per outlet, which is one per cent of its total annual sales.
  
• Internationally, factory outlets have done well, with brands recording sales close to 20 per cent in these retail formats. Some global big names in factory outlets are Chelsea, Tanger Fatctory Outlet, Belz Enterprises, Prime Retail, McArthur Glen Deisgner Outlets and Bicester Village.

The Future Group, which is shouting `value' from the rooftops, has coerced brands into channelising their surplus stock back into the market. With an expected turnover of Rs 60 crore in the first one year, and plans to set up 20 stores by 2010, brands don't have to worry about their `growing stock' anymore

PM - Give me some spectrum!!

The simmering tension over spectrum allocation among Indian telecom companies has erupted into a public spat with warring mobile phone operators leaving no stone unturned in their battle to acquire more air waves.

The fight is so intense that Vodafone chief executive Arun Sarin too jumped in, dashing off letters to Prime Minister Manmohan Singh and communications minister A Raja, complaining against the stiffer spectrum allocation norms proposed by the Telecommunication Engineering Centre, an arm of the department of telecommunications.

Reliance Communications chief Anil Ambani, whose company uses CDMA technology, too wrote to the Prime Minister. He accused some “large GSM players”, a reference to Vodafone and Sunil Mittal’s Bharti Telecom, of spreading “misleading and false propaganda” to block fresh competition in telecom, hoard spectrum and indulge in “anti-consumer practices like cartelisation”.

Now as if the coalition partners complaints are not enough, the CEO's have run to the PM with a long list of complaints. Like that's gonna make any difference..But as they say worth a shot!!

Procter and Gamble to launch CREST in India

With rumours of FMCG giant Procter & Gamble ready to launch its toothpaste, Crest, in India market leaders Hindustan Lever and Colgate Palmolive may soon begin to feel the heat. To add to this, smaller players are aggressively re pricing their products, the toothpaste market is all set for some bloodletting.The $44 bn Procter & Gamble, is getting set to give HUL and Colgate-Palmolive a run for their money by launching its multi-billion global toothpaste brand, Crest, in India at a price of Rs21-25 for a 135 gm pack. P&G delayed the launch of Crest as Ajanta, the watch manufacturer, entered the market with a 50 per cent price differential to the leading brands. Ajanta launched a 200 gm pack for Rs20.

Crest, launched globally in 1955 as the world's first fluoride toothpaste, is a part of P&G's global healthcare business unit. It is currently one of the leading toothpaste brands in markets like North America, Western Europe and China.Apart from this LG Care has also launched a range of household products in India including Cliden toothpaste priced on par with Colgate and Close-Up.Moreover, since the beginning of the year, small players like Anchor Beauty and Ajanta have been giving HLL and Colgate Palmolive a tough time with price discounting and freebies. The net result has been that the two MNCs have fought back on the pricing front as well as with new product launches leaving the smaller players with stagnant or falling market share. HUL and Colgate Palmolive have managed to retain their leadership in the market.The latest to fire the salvo has been the Gujarat-based Anchor Beauty and Healthcare. Despite being priced at the lower end of the price spectrum, the company has been losing market share. In a bid to increase its sales, the company has introduced a 60 per cent discount on the MRP for a combipack of Anchor White toothpaste along with an Anchor Premium toothbrush. While the MRP for a 200-gram Anchor White toothpaste and toothbrush is Rs54 and Rs15 respectively, the combipack is being offered at only Rs25. Though officials say the offer is initially open in Delhi, the company is offering discounts in several other markets. HUL's Close-Up and Colgate Palmolive's Colgate 200gm packs retail for Rs40. HUL with its Pepsodent and Close-Up brand has 36 per cent of the market while Colgate is the undisputed leader with about 50 percent share. The size of the toothpaste market is about Rs2,500-crore. Shah claims 14-15 per cent market share for Anchor White toothpaste while ORG figures put its share at 7.8 per cent. HUL and Colgate Palmolive, the former already suffering from price wars unleashed by P&G, may have to gear up for a prolonged battle now in toothpaste.

Brand Loyalty Vs Brand Stickiness

Marketers in the rural scenario often confuse Brand stickiness with Brand loyalty.

Brand loyalty is the consumer's commitment to repurchase the brand and they often help in a lot of positive word of mouth for the brand.

Brand stickiness on the other hand is the repurchase behavior shown by the customers due to the absence of viable alternatives or due to the fear of trying a new brand.

This is often the case of a rural consumer who does not easily switch brands due to the fear associated with it and hence marketers should carefully decode the spurious loyalty from the actual loyalty and work towards ensuring that the customers are not sticking to the brand but are actually loyal.

Interesting Rural Marketing Examples

Sitting through a class of rural marketing I came across a number of interesting examples of innovative marketing in rural areas. The examples were neat and can help people understand the vast differences between the rural and the urban psyche.

• Henko failed in maharashtra. Why?

It sound like "Hey Nako" which means No, giving the brand a negative connotation in Marathi.

• Dabur's health tooth powder containing Tulsi failed. why?

Tooth powder meant spitting the tulsi out which was considered sacrilege in the rural areas..

• Mahindra with its MAXX model offered metallic colours, aluminium footstep and an elegant spare wheel cover for rural market . Why?

An interesting observation showed that in rural India the cars are generally rented out for functions and ceremonies. The usage pattern necessitates the grandeur that is offered by MAXX with the aluminium footstep, colours and the spare wheel cover.

• In rural west U.P the sales of MP3 players among the farmers is very strong, especially the chinese models.

Chinese models have the perception of being cheap. Moreover the farmer is used to listening to the transistor and the availability of new technology has just substituted the existing need with the option of controlling the songs that can be played.

• Dabur traditionally paints the walls of the roads leading to the temples and mosques in the villages . Why?

The crowd aggregates during all the major festivals, and the huge traffic to enter the temple and mosque provides the marketer the ideal opportunity to tap into his mind space making use of the wall space available. Dabur did just that.

• Cadbury launched the biscuit ChocoBix which was a runaway sucess. Why?

Rural moms still feel that biscuits are very healthy and the child got attracted by the chocolated content. So this provided the perfect product satisfying the buyer and decision maker(mother) as well as the influencer(child).

• Although black is not a lively color and has a lot of negative conotation to it, it worked for "Chik" shampoo. how?

Perception that if the shampoo is black then the hair would be pitch black too. (Funny, but true. Percetion is all that matters)

• In part of U.P, there is a popular brand of gripe water called "daei jee ki 112 saal purani ghutti". What's special?

In rural india "Dae ji" or the mid-wife takes the dual role of acting as the gynaecologist as well as the paediatrician till the child becomes 1-2 years old. She is a huge influencer and positioning a product with "Dae ji" in focus was a big positive. Moreover villages believe in heritage and hence the 112 years mentioned in the positioning statement further cemented the positive impact that dae ji achieved thereby resulting in the sucess of the product.

A special thanks to my professor Mr.Karthik Raina for this lecture,which helped in writing the post.

Advertisement Vs PR

Advertisement is defined as a paid form of communication where a sponsor controls the message.

Public Relations is defined as generating goodwill in order to promote a product, service, company or person.

While launching a new product the question always remains as to the amount to be spent on Ads Vs amount to be spent on PR. Launching a product with Advertisement takes a totally different route in comparison to launching a product with PR. Letting go of the advertisments is not so easy for the managers. The big bang theory of launch is so ingrained in them that they would seldom go for a PR based launch. But wisdom suggests that a PR launch would help build the brand much better than ads. The PR launch involves seven steps

• The Leak
• The slow build up that increases curiosity
• Recruitment of allies (Enemy's enemy)
• The bottom up rollout
• Product modification
• Message modification
• The soft launch or the test market

But often market dynamics and the threat from competitors necessitates a quick launch of the product where PR is beaten hands down by the Ad approach. So more often than not the PR approach is seldom followed. But if pursued the probability of sucess of the brand increases multifold.

Origin of Brands

While writing my first post what better to write about than the first marketing book that I have read in my life - Origin of Brands. The book by Al and Jack Ries compares the Darwinian theory of Divergence with the current scenario of brands and how companies that have failed to adhere to the same have lost out in the game of survival of the fittest.

The author takes numerous examples to illustrate how in the long run products diverge into various categories to give rise to new brands just like how nature diverged into various species. She also shows how convergence as a concept has gained so much ground without any sucesss story to back the claims.

After forming a base elucidating the importance of divergence he moves on to showing how the first mover advantage is critical in branding. It is not important to introduce a new brand first but it is of the utmost importance to be the first in the minds of the consumer. In a perception dominated world all wars are won in the minds of the consumer. She takes examples of how McDonald's as the first hamburger chain, IBM as the first mainframe computer, Microsoft as the first software company, Coke as the first Cola captured the minds of the consumers and have never looked back.

The author does not discount the Survival of the second player, only that he mandates staying away from the leader rather than copying and staying close to it. He suggests that positioning a second brand as an enemy to the current leader provides a better chace of success than a copy cat posoitioning.

The major learnings from the book have been that, to build brands :

• One should think category first, and come up with generic name
• Create a small brand name and capture the minds of the consumer
• Try to be the first in the category - Survival of the firstest
• If late, try to go for an opposite positioning - survival of the secondest
• Create an enemy to the brand so as to create a stir
• Finally remember that brands always diverge to give rise to more brands and never converge unless convenience mandates it so.