Distribution Channels Case Study Chic Soap

You are asked to help formulate the marketing plan for the entrepreneur starting Chic Soap. The concept behind Chic Soap is simple; it sets out to incorporate fashionable perfumes such as Obsession, Raffinee and Opium into a high quality hite soap base. The product ould then be packaged using the logo of the perfume plus a Chic Soap common background. The ad!antages for the perfume supplier are" a guaranteed outlet for its perfumes at full retail prices; and a lo cost trial route for potential customers. The ad!antages for Chic Soap are" the use of already established perfume concepts to promote the soap; and access to the distribution achie!ed by the perfumes. You are asked to identify the segment to ards hich the product is directed, the product benefit that is on offer, the ay in hich the segment ill be ser!iced; ho the distribution channel ill be supported, hat promotional planning ill need to be included and an outline cash flo . #. The distribution channels a!ailable for the sale of toilet soaps of !arious qualities are independent chemists, department stores, multiple chemists, supermarkets, and grocers. There ere an estimated $%%,%%% outlets selling soap in the &nited 'ingdom. (ost of these sold mass market products hich retailed at )%.$* per #*% gm bar. +remium soaps made up only a small proportion of the market and ere a!ailable in a limited number of outlets hich included independent chemists and department stores. $. The main competiti!e products in the premium sector ere soaps such as Roger and ,allet, +enhaligon range, Yardley, (orley and three internationally a!ailable premium soaps. The prices for the #*%gm bar for the * main ranges ere" )#.-%, #..*, )#./*, )#.0*, )#.1*. There as some e!idence that the price elasticity of the premium product sector as fairly lo . Consumers bought the product primarily on perfume and image rather than any other product attribute. 2ery high prices ere charged for soaps that ere part of ranges such as Ri!e ,auche; around )3.%% for the #*% gram equi!alent. 4s the companies sold !ery little soap in these ranges they ere not particularly orried about the effects of other products cannibalising brand sales. They ere prepared to see Chic Soaps take on the sales of perfumed soap to a ider market. 3. The si5e of the total toilet soap market as around )#0% million at retail. The top quality premium soap market as estimated to be . per cent of the total; it as gro ing slo ly as the deodorant market came under pressure because of the en!ironmental problems associated ith aerosol sprays; other gro th factors included the e6pansion in sho ers, and the e6pansion in the number of single homes. 1. Retail outlets made about $% per cent gross on premium soaps. They tended to hold only limited stocks, and did not therefore ant the product in as large a quantity as mass market products hich ere a!ailable in cartons containing *% or #%% bars. *. (any of the independent chemists ere ser!iced through holesalers. Such holesalers accounted for about .% per cent of the market. 7holesalers e6pected to make around / per cent. There ere about #%% holesalers that ser!iced the independent chemist; of these around $% national chains accounted for /% per cent of the total business. The national department stores 8around 3*%9 bought product direct.

-. Research suggested that the main consumer of premium soaps as female 3*:, socio; economic group 4, concentrated in the South <ast of <ngland and in large cities else here. The a!erage purchase of the #*% gramme soap as once e!ery 3 eeks. 4n increasing proportion of the soap as bought as gifts, especially at Christmas. =n the pre!ious year, around $* per cent of the total premium soap sector as purchased during the period early >o!ember to late ?ecember. .. (ost ad!ertising in the sector as in omen@s maga5ines. =t as estimated that it ould cost around )#%% to reach e!ery $%%% consumers in the appropriate socio;economic group. The competition ad!ertised hea!ily; a!erage e6penditure for the leading companies as around )1%%,%%% per annum. /. 4 sales representati!e ould cost around )#$,%%% per annum; a company car ould be )3,%%% per annum. Such a sales representati!e could !isit either *%% outlets direct or deal ith #* chains of holesalers. 0. The costs of packaging ould be high. Aigh quality packaging ith the appropriate perfume design on the label ould cost )%.#1 per unit; ith a minimum print run of 1%,%%% units. =t as anticipated that gift packs of the fi!e perfumed soaps for the Christmas season ould be an additional )%.1* to produce ith a minimum production run of $*,%%% units. #%. The company had access to fi!e of the leading perfumes in the country. These accounted for appro6imately $% per cent of total fragrance sales ; the market has been and ill remain highly fragmented. The costs of incorporating the perfume in the soap as )%.1% per unit based on a minimum annual quantity of 3%%,%%% units; )%.-* per unit based on an annual quantity of $%%,%%% units, and )%./% on an annual quantity of #%%,%%% units. ##. The soap base as idely a!ailable from a number of alternati!e suppliers. Costs !aried considerably from year to year depending on the commodity market; in the year of the plan the base costs for a #*% gram bar ere )%.%/ for the highest quality. #$. Billing, molding and packing machinery could be bought from a !ariety of sources. 4 small but complete production line ould cost around )$*,%%%; it ould be able to produce #$%% units per hour, and ould occupy $%%% square feet of factory space. Changing the perfume and the packaging for each ne production run ould take around $ hours. #3. The production process ould require skilled staff to monitor quality. =t as estimated that three indi!iduals ould be needed, ith an annual base salary of )3*,%%%. #1. Research sho ed that the typical consumer percei!ed premium soap as @a touch of lu6ury@; an element of sophistication in an other ise boring e6istence; a lo cost ay of gi!ing a gift hich ould be appreciated. The main consumer interested in a changing range of e6otic soaps as the orking oman aged $* ; 1*; o!er that age purchase patterns tended to become static. #*. The company could use national parcel carriers to distribute the products to the customer. =t ould cost on a!erage )%.*% per kilo; though deli!eries outside the immediate area ould be considerably more e6pensi!e. The company had initially decided to locate near to the main source of demand in the South <ast of <ngland.

#-. There ere a number of sites that had pro!ed suitable for the location of the factory. The costs for the required 1%%% square feet ere on a!erage )$*%%% per annum. The ne business rate ould add )*%%% to these costs. #.. 2ariable production costs per soap bar ; in e6cess of ra materials and labor ; estimated to be )%.%$, consisting of energy and maintenance costs. Action You as the (arketing manager of the Chick Soap Company, ans er the follo ing questions" #9 7ho are your target audienceC $9 Ao are you intending to reach the target audienceC ill be pro!idingC are you intending to support ere

39 7hat is the product benefit that you 19 7hich distribution channels such channelsC

ill be most appropriateC Ao