Professional Documents
Culture Documents
Marketing Capability
Powerful ability to influence distributors relating powerful strategy of
advertising.
Market performance
According to the surveys in page 4, customers were buying 2 or 3 filters a
year. This information can be confirmed from the table of Brita Unit Sales,
1989 to 1998 with similar proportion between Systems and Filers in the
first two years at 2.35 filters in 1989 and 2.99 filters per System in 1990
respectively. Moreover, this proportion for the number of filter to systems
was increasing significantly during 1990s until 5.2 filters per system in
1998 with stagnating in the late 90s. That is to say, even though there
was significant increasing of sales quantities of filters during that time (,
the percentage which is the number of using filter to a system had not
changed.
Therefore, I believe that the saturation state of Pitcher style products
Limitation
What are the reasons for customers to buy Brita?
There is no a simulated test market of faucet filter.
Faced Issue and problem
Clorox fears that the introduction of the faucet filters would affect
negatively on the sale of pitchers and the associated revenue from
the filters.
The company had to continue to pay the royalty to Brita GmbH for
the use of the brand name.
The faucet filtered water did not taste as good as the pitcher
filtered water and Brita had established the brand based on its
value proposition of superior taste as compared to any other form
of water.
SWOT Analysis
The following marketing plan is a response to the current situation and the
addresses the current issues, analyzes the strengths, weaknesses,
opportunities and threats created by the current issues. This plan details
the positioning the new faucet mounted system and discusses the 4 P's
viz. Product, Price, Place and Promotion. The document also provides a
Brita is the market share leader of the pitcher system and filters. Brita's
market share of the pitcher ranged between 75% and 83% from 1992 to
1998. Brita's market share of filters was 75% from 1996 to 1998. The
filter sales have increased exponentially due to the continued use of the
pitcher. Market research indicates that 80% of the pitcher buyers were
still using the pitcher a year later. The average user buys 2.5 filters per
year.
Pitcher filter treats only chlorine and lead but does not remove
gallon
Filters for the pitcher system treats only chlorine and lead but not remove
microorganism or other chemicals such as pesticide, herbicide, benzene,
and trihalomethane. The pitcher filter treats less water than faucet-mount
system and therefore, costs roughly twice as much when comparing in
dollars per gallon treated. Another weakness is that Clorox needs to pay a
3% to 4% royalty depending on sales to Brita GmbH for using the Brita
name on any type of filters, although it might not buy the faucet filters
water
Another
systems
power to PUR
The external threats are from coming from several competitors. PUR and
Teledyne plans to heavily market their faucet-mount systems. PUR's and
Sunbeam's
pitcher
filter
would
remove
contaminants
such
as
PUR is a serious take over target for P&G, a leading competitor for Clorox
and the acquisition would give P&G an entry into the filtered water market
and also give PUR the ability to be more aggressive on its marketing and
other spends.
Target stores have started rating systems on level of protection offered by
various products and PUR scores the highest. PUR filter technology is
superior in that it has features that Brita does not including the ability to
filter cryptosoporum (the micro-organism responsible for 111 deaths), and
a mechanical device to indicate when a filter needs to be replaced.
reasons for emphasizing taste: 1) the health benefits halo when talking
about taste, perception of people that water with a good taste is healthier
2) the notion of bottled water industry lacking a reference to health, and
3) the ability of Brita to be "at the top of the mountain" by staying away
from the health benefit controversies.
By 1999, Brita has spent $100 million of cumulative advertising on the
taste claim and has established a leading position in this area. Brita has
promised and delivered clear, crisp, refreshing water through pure and
simple advertising by showing mountain streams, waterfalls, and the
outdoors.
Brita has become the owner of the waterfall imagery. The proposed
positioning targets 72% of adult consumers who are concerned about
household water supply quality.
It
"When a new
technology opens the possibility of a new market that may threaten the
existing one, a successful firm should consider entering the new market so
that it will have the first-mover advantage in it." By positioning as "BRITA
WATER", the company can take advantage of the established Brita brand,
and leave room to introduce further technologies such as the faucet
mount system under the Brita umbrella.
We therefore recommend that Brita spend the entire marketing budget in
promoting the Brita brand and the great taste rather than on a unique
product. The faucet and the pitcher systems will co-exist and will not be
marketed on product characteristics but will be marketed as a delivery
mechanism for the water with taste backed by the Brita brand.
Brita's costs for the system and each filter are assumed to be $15.00 and
$3.00, respectively. Scenario 7 provides the optimal result. This scenario
assumes a feature price of $34.99 (70% of units sold) and list price of
$39.99 (30% of units sold) for total net revenue of $43,970,450.
Advertising and promotional spending would total $26,400,000. Scenario
7 could result in a positive first year total gross margin contribution
(system and filters) of $6,725,000.
As consumers are become more health-conscious, bottled water and
water-filtration systems are becoming a necessity for most. There have
been cases in which many people have died due to contaminated tap
water and thus there is a significant emphasis placed on safe, clean water
these days. Some consumers appreciate the portability factors of water
more than the taste and health features. Others place a heavier emphasis
on taste. Consumers are becoming very well informed about healthy living
as more information regarding this matter is rampant in the market
currently.
The level of loyalty within the filtration systems market is high because
once consumers purchase a system, they tend to use it for many years
and only replace the filters. Some consumers are price sensitive and
prefer standard products that remove the most harmful contaminants
only. Other consumers are price-insensitive and demand maximum
performance out of their filtration systems.
Price sensitive consumers can typically be found at mass merchandisers
and department stores. Less price sensitive consumers can be found at
club stores, specialty stores, and drug stores. All of these segments can
be found in grocery stores but the less sensitive consumers are more
likely to purchase our products there as they are more impulsive and if
they see a quality product other than food, they may consider purchasing
it.
Our consumers are likely parents and health-conscious people. Typically
they are educated and understand all the health risks of unfiltered water.
They are likely most responsive to newspaper advertising, the radio and
direct mail. Using television for advertising could be effective too in
displaying the clarity and freshness of our water once its filtered with
water falls and more vibrant visual aids.
There are currently several segments in the industry:
1 Parents
2 Health-conscious singles or couples
3 Older age group (65+)
Older crowds are likely to be more price sensitive but still demand a highperforming product because they have more health-related issues. Parents
are also likely price sensitive but likely demand a standard product. The
health-conscious segment is looking for a high-performing product and are
likely the least price sensitive, since healthier products are typically
known to be more expensive. The most appealing market is the healthconscious consumers because they are the most likely segment to spend
a lot more money on our health products. We must ensure that they
perceive TASTE as synonymous for HEALTH with our advertising campaign
so we can capitalize on this opportunity. This segment is also likely to be
growing at the fastest rate as more consumers are becoming more healthconscious. These consumers likely value bundled products such as
additional filters. Perhaps a set of 3-5 is sufficient and they would likely
appreciate and LED light to remind them to change their filters. They are
likely the most loyal segment and their needs are stable and predictable.
We can continue to improve our filtration system over the years to better
satisfy them. Our competition is likely targeting this segment as well but
our dominant position in the market gives us very high brand recognition
that draws customers to us more than competitors. We still need to offer
our standard low price products to serve the other two segments and
maintain our market dominance, however, our resources must be weighed
heavily towards the health-conscious segment that demands highperformance.
Recommendation
OPTION 1: Launch faucet-mounted system
Pros
Cons
premium performance and is not concern with keeping the water cold in
the fridge (although the water could technically be stored in a jug in the
fridge anyways)
Will receive rapid market adoption since our Brita brand name is
quite recognizable
advertising budget
OPTION 2:
Cons
Will
require
more
R&D and customers may become more loyal to the PUR line by the time
we launch
OPTION 3: Implement both strategies Improve pitcher filtration system
and introduce the faucet-mounted filtration system
Pros
Cons
premium performance and is not concern with keeping the water cold in
the fridge (although the water could technically be stored in a jug in the
fridge anyways)
Will receive rapid market adoption since our Brita brand name is
quite recognizable
Will
require
more
R&D and customers may become more loyal to the PUR line by the time
we launch
contaminants. The company must spend on R&D and partner with Brita
GmbH to continually develop better filters.
Table of Contents
INTRODUCTION
CURRENT SITUATION
CURRENT ISSUES
MARKETING PLAN
SWOT ANALYSIS
PRODUCT POSITIONING
PRICE 9
PLACE 10
PROMOTION 11
CONCLUSION16
1. Introduction
Brita has been a leading brand in the filtered water since 1988. Brita was
marketed in the US by Clorox. Brita was licensed by Clorox from Brita
GmbH, a German company in 1987. Under the license agreement, Clorox
would buy filters from Brita and the first Brita product was a pitcher water
filter.
As of 1999 over 17 million Brita pitchers were sold in US and the Brita
brand was generating over $ 200 million revenues in a year, an estimated
13%-15% of the total US households were using a Brita Pitcher and Clorox
held a 70% market share of the total market.
2. Current Situation
In 1999, PUR, Clorox's competitor, launched a different water purification
product, which is a filter that screwed onto kitchen faucets. PUR was a
small firm in the industry, however were the only comparable competition
to Clorox and was a possible takeover target by other major consumer
products companies such as P&G. Clorox had its own version of faucet
mounted filters ready to launch and was debating if it has to launch the
same. The plan was to sell the faucet mounted filters at a deficit to build
the customer base, which would then provide a steady stream of revenues
through the sale of filters. This model was very successful in the case of
the pitcher system.
3. Current Issues
Brita was a strong contender in the pitcher market and was a new entrant
in the faucet filter market, a market in which PUR was the early entrant.
There was a fear that the introduction of the faucet filters would slow
down the sale of pitchers and the associated revenue from the filters. The
company had to continue to pay the royalty to Brita GmbH for the use of
the brand name. The faucet filtered water did not taste as good as the
pitcher filtered water and Brita had established the brand based on its
value proposition of superior taste as compared to any other form of
water.
4. Marketing Plan
The following marketing plan is a response to the current situation and the
addresses the current issues, analyzes the strengths, weaknesses,
opportunities and threats created by the current issues. This plan details
the positioning the new faucet mounted system and discusses the 4 P's
viz. Product, Price, Place and Promotion. The document also provides a
possible execution for the promotion strategy.
5. SWOT Analysis
Strengths
Brita is the market share leader of the pitcher system and filters. Brita's
market share of the pitcher ranged between 75% and 83% from 1992 to
1998. Brita's market share of filters was 75% from 1996 to 1998. The
filter sales have increased exponentially due to the continued use of the
pitcher. Market research indicates that 80% of the pitcher buyers were
still using the pitcher a year later. The average user buys 2.5 filters per
year.
Pitcher filter treats only chlorine and lead but does not remove
gallon
Filters for the pitcher system treats only chlorine and lead but not remove
microorganism or other chemicals such as pesticide, herbicide, benzene,
and trihalomethane. The pitcher filter treats less water than faucet-mount
system and therefore, costs roughly twice as much when comparing in
dollars per gallon treated. Another weakness is that Clorox needs to pay a
3% to 4% royalty depending on sales to Brita GmbH for using the Brita
name on any type of filters, although it might not buy the faucet filters
from Brita GmbH.
Opportunities
water
Another
systems
power to PUR
The external threats are from coming from several competitors. PUR and
Teledyne plans to heavily market their faucet-mount systems. PUR's and
Sunbeam's
pitcher
filter
would
remove
contaminants
such
as
PUR is a serious take over target for P&G, a leading competitor for Clorox
and the acquisition would give P&G an entry into the filtered water market
and also give PUR the ability to be more aggressive on its marketing and
other spends.
6. Product Positioning
To communicate the brand positioning, Brita will be positioned as "Great
Tasting water" from the "Leader in Water Filtration Systems". The
positioning statement is as follows:
"To all those consumers who are concerned about household water
quality, BRITA WATER is the leading choice in Filtered Water that gives you
Great Taste. With BRITA you can have crisp, clean tasting water that is
Reasons:
on taste
behind it
o
Brita promises and delivers clear, crisp, refreshing water & owns
the waterfall imagery
Consumers are interested in taste & Bacteria is way down the list
and therefore is not a major obstacle to overcome, the main pitch of the
competitors
o
reasons for emphasizing taste: 1) the health benefits halo when talking
about taste, perception of people that water with a good taste is healthier
2) the notion of bottled water industry lacking a reference to health, and
3) the ability of Brita to be "at the top of the mountain" by staying away
from the health benefit controversies.
By 1999, Brita has spent $100 million of cumulative advertising on the
taste claim and has established a leading position in this area. Brita has
promised and delivered clear, crisp, refreshing water through pure and
simple advertising by showing mountain streams, waterfalls, and the
outdoors.
Brita has become the owner of the waterfall imagery. The proposed
positioning targets 72% of adult consumers who are concerned about
household water supply quality.
It
"When a new
technology opens the possibility of a new market that may threaten the
existing one, a successful firm should consider entering the new market so
that it will have the first-mover advantage in it." By positioning as "BRITA
WATER", the company can take advantage of the established Brita brand,
and leave room to introduce further technologies such as the faucet
mount system under the Brita umbrella.
We therefore recommend that Brita spend the entire marketing budget in
promoting the Brita brand and the great taste rather than on a unique
product. The faucet and the pitcher systems will co-exist and will not be
marketed on product characteristics but will be marketed as a delivery
mechanism for the water with taste backed by the Brita brand.
7. Price
Brita pitchers will maintain their current pricing, as this line of Brita has
already been segmented. The Brita Faucet Filter will eventually have its
The
Also, Brita
receives high profit margin at the $39.99 list price. The direct cost of the
faucet filter is $18. Taking account of the 25% mark up from the standard
retailers like Target and Wal-Mart and 35% mark up from the more upscale
department stores, Brita can sell to the retailers at $29.62 and still earn a
65% profit margin.
direct cost, which includes the faucet mount system and the replacement
filter. The higher price would further reconfirm consumers' perception of
the superior product.
and perceptions of value for the Brita faucet mount were price inelastic at
both the $39.99 and $34.99 prices. Pricing at Brita faucet mount system
at $34.99 is forecasted to result in higher unit sales volume.
However,
the $39.99 price would generate a higher total sales amount (see Table A).
Therefore, Brita Faucet Filter is to be priced at $39.99. At this price, Brita
is comparable to its direct competitor PUR.
List Price
$ 39.99
1,245,000
$ 34.99
1,395,000
$
$
Total Sales
49,787,550
48,811,050
8. Place
Nationwide reach
Clorox has been selling the pitcher based filter system for over 10 years
and has a good reach nation wide. It has established a very good
distribution and dealer network for its current product. This gives the
advantage of positioning and channeling its new product through the
already established network. We recommend that Clorox leverage on the
existing infrastructure for the new faucet mounted filter and this will be
sold through the existing distribution network throughout the nation.
Because grocery stores already have a history of selling the pitcher
systems, we will continue to sell the pitcher systems there.
For mass
9. Promotion
For the promotion of the Brita products, we will be focusing on the taste
component for the pitcher system and the faucet mount.
With Brita's
original campaign for the pitcher, they focused on taste, and for good
reason.
The research showed that when they talked about taste, they
the taste. The competitors, such as PUR, actually recognized the success
of the taste campaign and decided to go for the health and safety
positions, mainly due to the alleged concern for contaminated water
creating illness as shown by the East Woburn, MA incident, where 403,000
people were made sick and 111 died due to the parasite cryptosporidium
found in the water.
materialize into increased sales and earnings. The taste idea is still the
best course of action to continue to reinforce the consumer perceived
value of Brita.
According to Vantis, this approach is estimated to return 1,245,000
in first year sales when priced at $39.99, and $1,395,000 in first year
sales when priced at $34.99.
$17,000,000
Consumer promotion
$ 4,000,000
Trade spending
$ 9,000,000
1.0
awareness and concern for clean, good tasting, and safe drinking water
led to tremendous growth in the bottled water industry beginning in the
mid to late Eighties.
Perhaps as an effect of the designer and brand label consciousness
consumer atmosphere, that existed in the late Eighties, buying water in a
bottle started to be the thing that you did.
As
bottled water moved from the classes to the masses, consumers began to
be more concerned with price and questioned the worth of paying a dollar
for water.
consumers' need for low cost, good tasting, and clean water (while maybe
still conveying a small sense of superiority.) Table 1 illustrates the size of
the bottled water market in 1999 still only an 8% segment of the total
44.5 Billion gallon beverage industry.
45%
Gallons
1,530,000,000
Appx. Spent
$
1,530,000,000
918,000,000 $
2,754,000,000
28%
952,000,000 n/a
3,400,000,000 Gallons
In 1988 the Clorox Company purchased the rights to the Brita water
filtration pitcher from a small German company, Brita GmbH. In exchange
for a 3-4% royalty on total sales and exclusive sales of filters, Brita GmbH
allowed Clorox to design and sell its own pitchers in the U.S. under the
Brita brand name. By 1999 the Brita water filtration pitcher had sold more
than 17 million units and when combined with its captive filter sales it was
generating close to $200 million in revenues per year. Also by 1999, the
Brita pitcher had a market penetration of 13%-15% and held the top
position in the water purification industry with 70% share of the $350
million industry.
Our case analysis will focus on Brita's decision to diversify, or not,
into the faucet mounted filter business. After 10 years of near dominance
in the water filtration industry, Brita was under attack from an upstart
company, PUR, who was positioning to gain market share by focusing on
the faucet mounted technology to deliver filtered water.
several alternatives.
Brita faced
focus on maintaining filter sales? Should they compete with their own
faucet mounted filter and potentially cannibalize their pitcher sales? Our
paper will investigate these questions and explore additional issues which
will aid in the development of our recommendations and conclusions.
We will need to understand the financial metrics related to the decision
making, such as how much profit came from filter sales; how long people
kept pitchers and continued buying filters, and how much revenue was
possible from the faucet systems? Additionally, we need to explore what
the market was doing and where it was going in 1999.
maintain its marketing emphasis on taste alone?
Could Brita
(refrigerators,
simpler
whole
house
systems,
cheaper
supermarket dispensers.)
2.0
Market Analysis
% of Americans
> 64 oz
20%
10,300,000
< 24 oz
44%
8,497,500
36%
Appx. Gallons
6,952,500 to 18,540,000
filtered
water.
Most
U.S.
consumers
are
currently
either
Pitcher System
Filtration Cost
Space Saving
Cold On Demand
Softens Water
Taste Good
Speedy Delivery
Ease of Installation +
Ease of Use -
+
-
Faucet System
Dispensed Quantity -
Financial Analysis
For the
graph, we assume that each filter buyer also buys two additional filters at
an estimated price of $6.00 and 1,205,000 units are sold. Brita's costs for
the system and each filter are assumed to be $15.00 and $3.00,
respectively.
This scenario
assumes a feature price of $34.99 (70% of units sold) and list price of
$39.99 (30% of units sold) for total net revenue of $43,970,450.
Advertising and promotional spending would total $26,400,000. Scenario
7 could result in a positive first year total gross margin contribution
(system and filters) of $6,725,000.
An alternative presentation of the ten scenario analysis is presented in
Graph 4.
The
shape of the plot is very similar to the 10 year growth pattern exhibited by
the original Brita pitcher from 1988 to 1998.
That
system did not break positive margin contributions until the seventh year.
year.
4.0
trendsetters for the country. The higher usage of faucet mount systems in
the western region, as compared to pitcher filtration systems, may be an
indication of future U.S. consumer trends away from pitcher filtration
systems.
Graph 6 | Usage of Pitcher Versus Faucet Mounted Filtration by U.S. Region
Source: 1999 Water Quality Association, National Consumer Water Quality
Report
If Clorox were to ignore the faucet-mounted business, they could stand to
lose a significant amount of the market-share to PUR.
In 1987, the Clorox Company obtained the US rights to sell a home waterpitcher and filter system made by the German company Brita GmbH. The
pitcher is made of two compartments, upper and lower, and a replaceable
filter. Water is placed into the upper compartment and is filtered as it
flows through to the bottom compartment. Though sales were sluggish in
the first few years of the product's inception, by 1998 the Brita pitcherfilter system had the highest return on sales (34%) of all of Clorox's
products with revenues of 200 million dollars. However, with slowing
demand for its household pitchers, Clorox now faces a threat from the
entry of new type of filtration system, the faucet mounted system, made
by its newly acquired competitor PUR. The faucet mounted system is a
filter that screws onto kitchen faucets with the ability to filter water
directly and, similar to the water pitcher system, requires replacement
filters for continued use. In anticipation of the entry, Clorox developed its
own faucet-mount system and is examining three strategic options:
continuing to build on its install base of pitchers, shifting its budget to
promote the sale of filters, or putting significant resources behind building
a new installed base for faucet-mount systems. An examination of the
Clorox Company, potential market and market trends, competitors, and
customers shows that the company should continue to focus on and
defend its install base by re-positioning itself and focusing on R&D for
filter technology.
The market for Brita systems includes nearly every household in the US
and is enormous at 103 million. In total, only 1/7 of the market had been
captured by all pitcher systems, with Brita enjoying over 75% market
share. Throughout the 1990's, consumer awareness to potential hazards
in drinking water was increased with several high-profile incidents. In one
area, an abnormally high rate of leukemia was linked to drinking water
contaminated with industrial solvents and in another 111 people died
when a parasite entered the water supply. In fact in 1998 the US EPA
declared
that
10%
of
sediments
under
US
surface
waters
was
healthy living has also emerged as the demand for bottled water and fruit
juice outstrips the demand for soft drinks, coffee and beer. In the water
filtration market specifically, technology has advanced dramatically to the
point where filters have the capability to remove previously un-filterable
micro-organisms.
The Clorox Company is a manufacturer and marketer of consumer goods,
operating predominantly in household goods. With over 3.9 billion in sales
the company acquired the rights from Brita GmbH to sell products, under
Brita
USA,
including
purchasing
filters
from
Brita
GmbH
and
manufacturing their own pitchers. The company's strategy is to deficitspend on the pitchers to build an install base and then make a continuous
stream of revenue on filters. Exhibit 1 shows a view of the contribution to
fixed costs of the pitcher and filter. Throughout the 1990's, as the install
base grew, the contribution from filters grew at an alarming rate. Although
the growth rate is showing signs of stabilizing, the 80% retention rate
combined with the revenue stream from filters puts modest projections to
combined contribution at just under 150 million in 2001. Brita's core
strengths are its first mover advantage, its ability to know its market, its
leverage and control of sales channels, and its size. As the first mover in
the industry, Brita has become an established product with a huge install
base. This is important in the filtration industry because there is inertia to
switch products due to the initial pitcher purchase required. The company
conducts extensive surveys to find out why their customers were buying,
how often they were replacing filters, and how many people were
retained. Management tracks information and is able to correlate survey
data accurately allowing Clorox to make accurate and timely decisions.
Brita is able to use its size and scale of Clorox to obtain shelf space in a
variety of sales channels. The company is able to use its size and position
to deficit spend to fight competitors on price. Brita's main weakness is the
lack of control it has over the Brita filters. Since the filters are
are
predominantly
interested
in
taste,
removal
of
better at filtering contaminants (even though they are not) and is cheaper
in terms of total replacement filter cost. PUR has just been acquired by
P&G which poses a serious threat because PUR will have access to the
deep pockets and marketing strategy/practices that P&G is known for.
Bottled water is showing dramatic increases in growth and is perceived to
be the best in terms of health benefits. Finally, conventional tap water
consumption is declining but still offers a free alternative.
Brita should not get into the faucet mount business as it is contemplating.
Exhibit 3 examines 10 strategies for potential entry into the faucet mount
market based on advertising and promotion spending, and competitive
pricing. Scenario 2 is the best in terms of profitability, even though all
scenarios lead to a loss in the first year. Exhibit 4 calculates the Customer
Lifetime Value of the Pitcher system and the Faucet Mount system. As
shown, the CLV of the Pitcher System and Faucet Mount System
respectively is $12.99 and -$11.01. The pitcher system is very profitable
to the company whereas the Faucet Mount System would require heavy
deficit spending to build an install base and may not be able to make it
back on filters. Also, cannibalization of Brita's Pitcher System market,
which would inevitably occur, would be extremely costly. Brita would not
have an installed base advantage as it does in the pitcher market since
PUR is actually already ahead of Brita in terms of development and
marketing of faucet mounts. Instead, Brita should defend its pitcher
system and attempt to grow its install base. Although the pitcher system
market is showing signs of leveling off, Exhibit 1 shows that modest
projections to 2001 are still very profitable. Three key recommendations
are: 1) Strategic Partnerships: There is still 6/7 of the market that does not
have a pitcher system and there is a potential to influence the rest of the
market. The company should partner with outlets such as restaurants and
coffee shops to supply pitcher and filters at minimal cost to gain more
visibility. 2) Re-position the brand towards health benefits: The threats
from bottled water and the PUR faucet mount are real. Brita must reposition the brand via advertising, towards health because customers
already perceive Brita as the best for taste. Plus, all customer trends and
market research highlight the emphasis customers are placing on health
benefits in choosing a system. Brita should advertise more heavily on
differentiating itself from faucet-mount systems. They must display the
fact that faucet-mount systems are not better on taste and health. 3)
Spend money on technological innovation: Brita is lagging in the ability of
its filters to remove contaminants. The company must spend on R&D and
partner with Brita GmbH to continually develop better filters.
Q1.
1.
share
-
Loss customers equity (ch3 p150 ). Its irony as first four years
they spent money, effort and time to simply explaining its product
(ads:How it works)
6.
Positioning concepts
Product
1.
1.
2.
:
PT&FM: Retailer store with good visual display
2.
center
Promotion
1.
3.
Loyalty program (if they returned the old filter get discount)
4.
PT&FM: advertising about the ease using it for daily life and create
Whitney Williams
MKT 428
MW 2:00-3:15
September 20, 2008
The Brita Products Company
John Deighton
January 15, 2002
1. To what do you attribute Britas success?
They didnt give up in the early years when sales were very slow
They were so much bigger than all of their competitors, and no one
could really compete on their level. PUR is the only one that comes close.
They have the R&D team that most companies only wish they had.
to have the best tasting water and according to their research, customers
are more concerned about that than removing contaminants.
Even
though the Brita products are a bit more expensive, people are willing to
pay that price for great tasting water. Because Clorox is so successful,
they have a significantly large marketing and R&D budget.
This gives
them a huge advantage over their competitors. They more money they
can spend on advertising, the more people are going to see the product
and potentially buy it.
3. What are the prospects for filter sales? What are the prospects for the
faucet-mount system? Which would you favor?
Filters have been on a continuous upward slope since being
launched, but from 1994 to 1998 they really took off and sales were very
high.
They
more pitchers they can sell the better chance of filter sales increasing
even more. There are basically two ways to increase filter sales. First,
you have to encourage people to use their pitchers more so that the filters
will need to be changed more frequently. Second, you have to sell more
pitchers.
The ACNielsen Vantis study showed positive signs for the faucetmount system.
someone buying a product from the Brita line. Even though it is higher
priced, people said they will still purchase it. Also, a great deal of people
said they will use both products together. Not only is Brita trying to target
new customers with the faucet-mount, but also existing ones. They can
be used together because the faucet mount is for convenience and
removing contaminants while the pitcher is for great tasting water.
Personally, I would have both the faucet-mount and the pitcher. I
dont always have time to stop and fill up the pitcher and wait five
minutes. I would want the faucet mount there for when I need a quick
drink from the faucet. Then when I do have time I would want the pitcher
for cold, great tasting water.
market them as a product that makes water taste great. Brita is a brand
that people know and trust and I dont see them losing many of their
existing customers to their competition as long as they continue to
produce quality products.
Conclusion
Courics final decision should be to put the weight of their resources
behind building a whole new installed base in faucet-mounts.
Reason
Launching a new product line of mounted-faucets will increase Britas
market share and have a positive impact on revenues.
Evidence
After calculating customer lifetime value and net present value for each
scenario, I chose to go ahead and launch the faucet-mount because it had
the highest CLTV and NPV. The numbers show that it will be a successful
product and have a positive impact on Brita. The ACNielsen Vantis study
proved that the faucet could live side-by-side with the pitcher and that it
would increase the likelihood of buying a product from the Brita line.
Because Brita has already acquired about 80% of the market they have a
huge advantage over their competition. They already have a steady
customer base and can use that as a starting point when launching the
faucet-mounts. Brita is unique because they use great taste as their
advertising strategy while everyone else uses contaminant elimination.
So far, it has been a successful strategy for Brita and they should continue
to use that to promote their products. In the following pages you will see
my calculations and reasoning behind choosing to launch the faucetmount.
Issue Identification
Role: A consultant to Charlie Couric of Clorox.
The water filtration industry was experiencing some shifts in the
competitive landscape and now Clorox, a market leader, is considering
several options to maintain its dominance in the market. Couric is
considering allocating resources to launch a faucet-mounted filtration
system in response to emerging competitors, notably PUR.
Our objectives are to consider the impact of not entering the faucetmounted filtration market on our market share, brand image and
profitability. We must consider the short-term and long-term implications
of different scenarios including: entering the faucet-mounted market,
increasing our current pitcher sales, and increasing our filter sales.
Our competitions strategies must be analyzed in terms of how much
expected market share they are going to take from us if we do not
respond and how we can respond most effectively. We need to asses our
returns on advertising expenditure to see how impactful our advertising
techniques really are and whether we need to project a different image in
order to satisfy the current market trends. Our distribution strategy must
be assessed and optimized to suit our position in the market.
The level of urgency at the moment is not severe as our major
competitors are still experiencing losses, however, it is expected that they
are going to become more aggressive in their advertising and thus we
need to formulate an effective strategy that will counteract their efforts. It
took the Brita line four years before it began witnessing success. Next
year will be the fourth year since our major competitors launch their
pitcher systems and so we need to implement an effective plan within a
year.
External Analysis
Market Environment
systems
can
be
found
in
department
stores,
mass
Strengths
PUR
Holds less than 10% of market share in the pitchers system This
is
our most feared competitor and they are converging on our market share.
The threat is low-moderate at the moment but can become very serious
soon so we must be very wary.
Rubbermaid
our filter sales with claims that their filters have a longer life cycle
but they are planning to advertise more aggressively. They have the
potential to converge on our filter sales and we must keep an eye on them
in the upcoming year.
Sunbeam
They
are
not
holding
any
Low,
Currently has the third largest market share in the filter sales
market
filtration market
carbonated water
threat level. Currently the market consumes bottled water outside of their
homes more than they do inside their homes. Our filtration systems are
more designed for in-house usage.
All Others
Low
Consumer Analysis
As consumers are become more health-conscious, bottled water and
water-filtration systems are becoming a necessity for most. There have
been cases in which many people have died due to contaminated tap
water and thus there is a significant emphasis placed on safe, clean water
these days. Some consumers appreciate the portability factors of water
more than the taste and health features. Others place a heavier emphasis
on taste. Consumers are becoming very well informed about healthy living
as more information regarding this matter is rampant in the market
currently.
The level of loyalty within the filtration systems market is high because
once consumers purchase a system, they tend to use it for many years
and only replace the filters. Some consumers are price sensitive and
prefer standard products that remove the most harmful contaminants
only. Other consumers are price-insensitive and demand maximum
performance out of their filtration systems.
Price sensitive consumers can typically be found at mass merchandisers
and department stores. Less price sensitive consumers can be found at
club stores, specialty stores, and drug stores. All of these segments can
be found in grocery stores but the less sensitive consumers are more
likely to purchase our products there as they are more impulsive and if
they see a quality product other than food, they may consider purchasing
it.
Our consumers are likely parents and health-conscious people. Typically
they are educated and understand all the health risks of unfiltered water.
They are likely most responsive to newspaper advertising, the radio and
direct mail. Using television for advertising could be effective too in
displaying the clarity and freshness of our water once its filtered with
water falls and more vibrant visual aids.
Distribution Channel Analysis
In terms of distribution channels department stores take one of the
highest margins next to speciality stores at 35%. They do draw a
significant portion of our performance-demanding consumers. Mass
merchandisers draw our more price sensitive consumers looking for
standard products and take a 25% margin. Other channels including drug
stores, grocery stores and club stores draw a diversified pool of traffic and
it would be difficult to target our efforts to a particular segment.
The higher volume channels such as mass merchandisers and department
stores likely have more bargaining power than the rest of the channels.
We have to keep them happy with acceptable margins, timely delivery
and post-sales support including warranties. We can, however, negotiate
some covenants as we did with the minimum advertised price with our
more premium products. As noted in the case, a breadth of distribution
was important to our company to support our ad budget and for future
prospective product entries. W must develop relationships with as many
channels as we can however maintain our focus on mass merchandisers,
drug stores and grocery stores as they are experiencing the most growth
in their sales volume.
Internal Analysis
High Performance
High Price
Low Price
Buyer Choice/Rejection Process
The choice/rejection process of the buyer is as follows:
Why not stick to tap water? Oh yes, it could potentially be harmful to my
health. What choices do I have in the market? Why should I choose pitcher
filters instead of faucet-mounted systems? I guess faucet-mounted
systems are more convenient but Id like to keep my water cold too. How
much money will I need to spend? Whats the highest performing product
at the best price? Ive heard good things about Brita, never really heard
too much about PUR but it looks like they have a healthier line. Why
should I choose Brita? I guess my friend is satisfied and they also say the
water tastes amazing so Ill make the same purchase. But wait, what
about a warranty? And how many times do I have to replace those damn
filters? Is it a complicated process? Well these visual aids on the box are
pretty helpful, and it does seem quite easy. Filters probably do not cost
that much anyways. Okay, Ill try it and see how it works...besides, I can
return it if Im not satisfied. (One year later) Im pretty happy with this
Brita Pitcher system...Id recommend it to my friends.
We can see the different questions the buyer may ask and thus have to
address all these concerns to satisfy their needs and attain their loyalty.
Advertising and word of mouth will have a great impact on the customer
and their dissatisfaction and rejection process of our competitors.
Alternatives
OPTION 1: Launch faucet-mounted system
Pros
Cons
premium performance and is not concern with keeping the water cold in
the fridge (although the water could technically be stored in a jug in the
fridge anyways)
Will receive rapid market adoption since our Brita brand name is
quite recognizable
advertising budget
OPTION 2:
Cons
Will
require
more
R&D and customers may become more loyal to the PUR line by the time
we launch
OPTION 3: Implement both strategies Improve pitcher filtration system
and introduce the faucet-mounted filtration system
Pros
Cons
premium performance and is not concern with keeping the water cold in
the fridge (although the water could technically be stored in a jug in the
fridge anyways)
Will receive rapid market adoption since our Brita brand name is
quite recognizable
Will
require
more
R&D and customers may become more loyal to the PUR line by the time
we launch
Positioning
Our strategy is going to be a multiple-segment strategy. We will have a
diversified line of products that cater to high-performance, less pricesensitive consumers as well as products that cater to our more price
sensitive consumers. We will still compete as the best TASTING brand as it
has been working for us for about a decade now. People often associate
great tasting water with a healthy product anyways.
Three words to describe our products: CLEAR, CRIPS and REFRESHING
WATER
These words have been effective in the past and thus should be used
consistently with the waterfalls theme.
Recommended Marketing Mix
Product Strategy
Our products are going to include a new and improved Brita Ultra, Brita
Standard, and the new Faucet-Mounted Brita system called The Brita Tap.
All these products will have long life cycles. The filters are going to have
short life cycles of course as they did in the past. Fridges are being more
designed to accommodate larger objects and thus we must measure the
standard fridge capacity and ensure our new products are as large as
possible to hold the greatest volume yet still fit inside the fridge.
The new Brita Ultra will look more aesthetically pleasing with an LED light
to indicate when the filter needs to be replaced in order to better compete
with the PUR Plus product. The Brita Standard can remain the same in
terms of features. The Brita Tap must communicate to the customer on
the packaging that it has a very high contaminant removal filtration
system (on that is at least as good as PURs system). The new Brita Ultra
should also communicate this improved filtration on the packaging.
50% on average and we can reduce this to 48% for next year. This will
allow distributors to offer further promotions of our products particularly
the introduction of our new Brita Tap. Since the Brita Tap is going to be a
more premium product, we must employ the same covenants as we did
with our Brita Ultra line. Distributors will not be allowed to promote the
product below the recommended minimum price. Distributors should be
compliant with this request as we are offering them slightly higher
margins. We will use mass merchandisers to market our Brita Standard.
Drug stores and grocery stores will hold our Brita Ultra and as for the Brita
Tap, it would be best to market it through the drug stores only for the time
being for a more premium feel or employ a similar distribution strategy as
PURs faucet-system.
Advertising & Promotions Strategy
In terms of advertising we will use radio, newspapers, television and direct
mail. This is to ensure our product awareness reaches all our multiple
segments. 80% of the advertising budget should be spent emphasizing
the TASTE aspect with more satisfied FACES of people enjoying the drink.
Also the waterfall theme will remain as it has been effective for many
years. Advertising budget must be increased to $45-$50K to compete
more effectively with PUR and because we are launching a new product.
Sales Strategy
-who is the sales force targeting and where are they located?
-what type of people do they need to deal with? (business people, party
animals, parents?)
-is it more important to understand our products and our value proposition
or their business dynamics and needs?
-what skills do our sales reps need to be better than competitor sales
reps?
-how should the sales forces time be split between existing and new
customers?
-how frequently will the salesperson need to call on accounts? How long
expected to contribute double digit top line growth. But in reality, there
was approximately a 5% decline in sales every year since 1998 and this
decline continued until 2006.
Faced the problem of losing customer faith in the Brita brand. Brita
had slowed established a string brand position among consumers over the
ten year period since 1988. It grew to be a $200m grossing company from
a small filter system provider. Brand awareness stood at 70% and 18% of
103m households in US used Brita pitchers. This reputation was at stake
due to the decline in sales and consequently losing its strong share
position in the market.
Heightened
pressure
from
competitors.
There
were
many
competitors who entered the market but failed to succeed against Brita.
Many competitors came up with the similar kind of filters but unable to
succeed due to strong branding of Brita achieved due to its first mover
advantage. But suddenly in 1998, competitors like PUR came up with the
FM product an alternative product to PT filter provided by Brita. This was a
success in the market. There was an increase in competition now and
most competitors pitched around health and safety, an issue sensitive to
consumers.
consumers had many choices to select a filter product, Brita did not adapt
its product to the changes in technology. Many of the Brita consumers had
complaints about the design of the product. Example: some were not sure
when to change the filter? There was no indication on the product when
the filter needed to be changed. Britas PT systems were also perceived as
inconvenient by some consumers.
innovation. This sector was fast growing and capturing the market share.
There was a tremendous growth of bottled water consumption in 1990s.
Many consumers were switching to use bottled water because it was
convenient, portable and clean.
Inability to turn the fortunes around until 2006. There were various
and
competition.
comprehensive
market
None
of
research
the
on
strategies
how
involved
the
doing
consumer
Looks like they were moving away from their initial brand
positioning of great tasting water and clean water. No market focus seen
on strategies attempted. They are trying to compete with soft drink
beverages. This is far from their safety and health focused positioning.
Most of the strategies were short term. No time given to see their
come up with a fix to the solving the existing flaws in the product designs.
This doesnt seem to have worked well to solve consumers issues.
downgrades the health and safety focused brand position. Brita is in the
business of removing impurities and a cheap product doesnt give
credibility about the product.
Market Segmentation
a.
b.
2.
Target Marketing
a.
b.
3.
Positioning
a.
b.
General attitudes
The study identified six possible segments among consumers. But some of
the issues with the segment study were:
a.
c.
owners. Only about 20% were non filtration owners. Inclusion of more non
filtration system owners would enable to understand why they wouldnt
want to use a filtration system.
d.
conscious rather than conservative. This goes to say that they would be
drinking filtered water.
Industry trends
Does the firms value proposition match with the benefits asked for
The ease with which you can reach this target segment.
Keeping the above criteria in mind, I recommend that Brita should position
itself to attract the following two segments:
Target Segment 1: Affluent fridge followers
Target Segment 2: Principled filtered fans
Value proposition and Positioning Strategy
Selected Target segment 1: Affluent fridge followers
Segment (customer) attributes and Preferences
One
of
the
products. Though this represents high penetration costs, this also means
that there is a very high potential to grow in this segment (Exhibit 12).
-
is increasing.
-
9).
-
1.
Great taste
2.
3.
Convenience
Pure
and
tasty
Need to design filters that will fit in fridges. A product that fits with
could be reaching its saturation point in its product life cycle. So,
introduction of a new product could hold the key to getting back on its
growth track.
Marketing mix (product, price and delivery)
Product
Price
-
Place
Service
-
This segments
They are frugal they wouldnt want to go for bottled water which
is expensive.
-
60% own Brita (exhibit 12). Brita brand awareness is really high in
this segment. Easiest market to target and build consumer loyalty. Not
much penetration costs for this segment.
-
Healthier
-
1.
Great taste
2.
3.
Good Health.
Product
Price
-
premium.
-
Cant price too low when being positioned as a great tasting and
healthy water.
-
Promotion
-
Target segment is tech savvy. So use of Internet ads, tech and science
This writing aims to present one possible solution to the dilemma that
Clorox Company faces. The Clorox Company was the market leader in
water filtration in the USA with the Brita Pitcher (one of the Cloroxs most
important product), but in 1999 they faced the threat of a new product '
the faucet mounted filter.
Clorox already had its own version of this new product ready to launch
into the market, so the issue was to decide the best of the following
strategies:
1. Continue selling only the current product;
2. Introduce their new faucet mounted filter in addition to the pitcher into
the market
2. The Analysis
Market Summary
Clorox launched in 1988 the Brita Pitcher and after a decade they were
the market leaders of water filtration systems with a market share of 69%.
After the Brita pitcher launch, the water quality became a growing
concern to consumers. This new attitude about the quality of drinking
water allowed the purified water market to grow in both bottled water and
filter systems. This growing on the water market, allowed Clorox
After overview
Has not defined product
Market segmentation