You are on page 1of 5

l--rD

Mrs. Srinivasan was surprised. Once again, she looked at her boss's itinerary; he isn't supposed to be in office today, thought she. Sum it Bhatnagar was her boss and for the last 11 years she had worked as a Secretary to all Vice PresidentsMarketing irrespective of who was there in office in that hot seat. In the last 19 days, Sumit has untiringly crisscrossed the length and breadth of the country meeting all Sales Managers and top distributors and dealers across India. She knew from today onwards he was supposed to be on a weeklong leave with his wife and kids in Shimla. She herself had done their flight and hotel bookings at Shimla. Naturally she . wondered why Sumit is back here in office when in fact he should have been in Shimla; it was different matter though her experience told her there must be something unavoidably urgent. Why else would Sumit cancel his trip so well planned in advance? Sumit looked tense, as he entered the office; he was a bit too early to office given his usual routine and his propensity to put long hours in the evening. Sumit picked up the phone and briskly responding to the formal salutation told Mrs. Srinivasan, "Arrange a meeting with Rahul and Manish ... immediately" . She had normally not seen her boss, Sumit in any kind of anxiety over the years for he was a very calm, cheerful and vivacious young man in his early40s. In her usual efficient manner, she located Rahul, GM-Sales and Manish, Brand Manager, and called them to be present in Sumit's office at 11 a.m. sharp with relevant reports and data that Sumit had instructed her for. She vaguely thought, as the other two gentlemen, that the meeting was called because of a virtual panic situation as a competitive brand-Glint had launched a very attractive consumer offer. This had led to

substantial erosion in market share of their leading profit making product-Amaze. Also, the company's sales force and trade partners were cribbing in no uncertain terms, and Sumit knew he could not afford .-to demotivate his own army. The mood in the meeting was grim but by then Sumit had his anxiety adequately controlled. However, without any preamble Sumit came straight to the point. Sum it: It's weird, Rahul, I mean your Sales department has landed me in a fix. I have your competitor assessment report that you submitted last week with me. It's all bogus. Your evaluation of failure of the launch of Glint in carton packs is not right as far as I am concerned. Contrary to your report, their heavy consumer promotion seems to be paying off and that too bloody well. I have just come from an all India tour and I have seen it all with my own eyes. I have this latest ORG-MARG report with me; the fact is Glint has gained 22 per cent market share, mainly at our expense. On top of that there are various reports of the success of Glint promotional campaign. Are we sleeping? Rahul: I admit that despite our initial assessment that Glint, in new carton packs, would be a failure, we now see that it is doing very well. You can't deny the fact that they are a major threat to our market share. They have a cheaper formulation and therefore they can afford such a heavy sales promotion .. For the last week or so, I have been ,.thin~in~ of few options. The very firstidea that comes to my mind is that to counter them we should introduce a second brand which would have an inferior formulation but comparable to them or may be marginally better as early as possible. We should promote this new product heavily, say at about the same level of expenditure as Glint. We can afford that kind of expenditure on promotions due the higher margin that we will make if we sell it at a

price equal to Glint. We can even sell the product at a lower price than Glint. Sumit: Well, Rahul I am willing to explore this alternative. Let's put a cross-functional team of marketing, production, sales and distribution guys on the job immediately, we should get a report in 10 days. Also, understand that while we know the formulation for such a product but then we have to procure materials and reschedule production. We may even have to procure some plant and machinery for that. Since, the proposal will have to go to the Board, even if I rush it, it is going to take at least a couple of months. Listen guys, I want my market share back to the previous levels within a month. Tell me how are you going to achieve this? Rahul: Our Zonal Sales managers submitted a report to me last evening. According to the report, Glint is cutting into our sales with their new pack. In the last 5 years, this brand with their bulk packs constituted an insignificant part of the market. We must acknowledge that the main reason for their success is their very generous consumer offer; otherwise we would be fooling ourselves. Rightnow, I strongly believe we may not be able to achieve our sales targets. However, we can get back our market share soon if we also run an aggressive promotion campaign immediately. Sum it: Rahul, please do not sound defeatist. Yousee, they can afford to spend more on promotion because they offer inferior formulation and in turn make higher margin by compromising on quality. Look at the positive side, our product is definitely superior; it istrusted by consumer and we have been there for ages. I think with the right strategy, we . should be able to win back our market share. Rahul: Sum it, you know. it as w'ellas I do it, in a bargain-conscious country like India, consumer promotion is a very effective sales medium to the retail stores and consumers. People love to lap up any freebies whether it makes economic sense .or not. I am afraid that if they continue at this rate, we will find it very difficult to keep pressure on our sales force and achieve our targets. We must counter immediately Witha promotion as heavy as

theirs or else it will be very difficult to regain our , market share. Sumit: Well, your recommendation then seems to be that we enter the rat race -mdpromote Amaze aggressively to the consumer. What about our timetested strategy of offering less quantity due to our . better product; it still makes better rationale to a consumer to get a powder which cleans twice as welldespite applying so littlequantity of it?Moreover, consumers are getting increasingly conscious of quality of fabric care of clothes that they so carefully choose to get their wardrobe in order. Do you think they will trust an inferior formulation in such a scenario? Don't you think, we should promote like we did in the past, emphasizing better product despite a bit higher prices; ddnt you think it makes better business sence to highlight better quality and consequently lot better value for money? Rahul: I get really flustered when I see Glint campaigns all over the place; they seem to be all over TV, print and outdoors. Going through the reports, I am convinced that we need to step up our expenditure per tonne to at least the level that Glint is spending to make an impact and win back our market share. Otherwise we will not be able to sell our product. Sum it: Manish, what do you think? Manish: I disagree with Rahul, Ithink we should run a new advertisement campaign educating the consumer that such a heavy promotion by Glint itself proves the inferiority of their product. We should not dilute our No 1 position by stooping to the level of a substandard brand. Rahul: Sum it, I have meticulously gone through the results of consumer promotion that Glint has run for the last four months. Their promotion has certainly been an outstanding success as one can see from the market share figures as well as the reports we have received from our sales team throughout the country. We have to be practical. We cannot keep articulating some nice fancy theories of brand values while someone takes our pants off in the cut-throat competitive jungle out there. I am not sure whether we can salvage the

situation if we don't act right now. We should first get back our market share whatever the cost, financial or strategic. Therefore, I would like to immediately get an additional budget for promotion of Amaze. I promise you our market share back because we are better organized. We should be able to mount more effective promotions than theirs, provided fj:hatO~ll" .gift is as attractive as Glint. This will mean about" the same level of expenditure. For this I feel that you should cut down on theme advertising for Amaze and divert money to a consumer promotion scheme straight away. Manish: Rahul, I am not sure I can second your opinion here. I feel that we should not indulge in such heavy promotional expenditure as Glint as this will get us into a vicious circle. We always sold Amaze on the basis of its superior formulation and performance and I see no reason why we should not continue to do so. In fact, we should shout even louder and focus consumer attention on this fact now all the more aggressively and sharply. We should highlight our superior product through heavier theme advertising. We should put as much of our money .as we can into theme advertising to convince the consumer that when she buys Glint with giftsof such high value, she is bound to get an inferior product. For this, I would like to place all my money in T\I, press, cinema, and point-of-sale material. Rahul: Manish, how many consumers you think you will be able to reach through the media? Do you realise the efficacy of mass-media in our media dark country especially upcountry markets? I know our sales team will toil hard and put point-of-sale material in all places but we can cover only a very small fraction of our target through press, cinema and 1V Keeping in view the difficulties, cost and the inadequate reach of media for theme advertising in India; I suggest that we promote Amaze heavily and win back what we have lost. We have got to do this now. Otherwise Glint would do well mainly at our expense because we are the No. 1 brand in the market. I implore that we must start a consumer scheme, promoting Amaze at the level of Glint : immediately.
/

}I
I

Kadilla Soaps Ltd. (KSL) was a public limited company and was set up in 1979. The company had an authorized capital of Rs. 110 crores. The company was a leading marketing organization in the country and manufactured and marketed leading FMCG brands of household products. KSL was a professionally managed company and for decades was well known for hiring talented MBAsfrom leading B-schools; it also had wonderful on-the-job training, job rotation and enrichment policies. It had a profit centre organization concept. Marketing was the coordinating function in the organization, and the marketing department had the profit responsibility for a particular product/product group. Washing Product was the major profit centre of the company. The breakdown of the total turnover and contribution to profit of the major profits centers of
Total Turnover And Contribution To Profit

introduced 11 years ago is shown in Exhibit 2~ Although, in size the washing powder market was one-fourth of the washing soap market, it compared favorably in profitability because of its higher margins. The use of washing powders was restricted to the urban population and within the urban population it was concentrated in large towns. The potential for growth of washing powders was high in smaller towns; at the same time, the market in larger towns was highly competitive. Difficultiesof distribution and the high cost of going to the smaller

1995 1996 1997 '1998 19,99 ~Q00

.~ ..
.To~ turnover',(20'05) Group A turnover

'! ;. ' ./.

200i
'2002 . .,2004 2005
Exhibit 2

100 180 250 310 360 400 520 .650

, ARS:7~cC;ro~ Rs.49-t:rores(7%) ~. 91E;roreS'.(13,%)' Group B~ turnover Wa$hingproducts turnover Rs. 420Crores (89;%)
Exhibit 1

',200;3

750
820 900

the company is given in Exhibit 1. The company's main entry in the washing powder market, "Amaze" accounted for one third of the profits made by the Washing Products Group. The fabric washing market consisted mainly of two product groups: Washing Soaps and Washing Powders, Small-scale units operating in very small localized areas contributed more than 77% of the washing soap. These small-scale manufacturers operated on low overheads and also did not have ), . any nationel distribution, and their products were generally sold within a radius of 200 kilometers of their plant locations. They mainly sold inferiorquality washing soaps at a substantial price advantage. On the other hand, the production of washing powders was located entirely in the organized large-scale sector of the industry requiring greater technical know how.
.

towns did not allow the manufacturers of washing products to employ their own distribution system in these towns. They left the transportation of stocks to the smaller markets to. the wholesale trade channels. There were four main brands. in the market: Amaze, Shine, Blanc and Glint. Amaze was the leading brand, and until April 2005, it enjoyed a market share of 82 per cent of the total washing powder market. Shine had a
Pack Sizes and Prices of Various Brands

~;:A;;t;;.rt~"'~e .
Shine/., 'Mecli~m :131anc ."Small ;:Glfnt:" ':'~:
Exhibit 3

750g
4509' 250g 1kg 2kg

Rs.50 RS.35

&.20
Rs.65 Rs.124

The growth of this market since Amaze was

9 per cent share, followed by Blanc with 6 per cent and Glint 3 per cent. Whereas Amaze, Shine and

_Blanc were sold in similar carton pack sizes, Glint was sold only in bulk until March 200S. Exhibit 3 gives the pack sizes and the prices of the various brands. Technically, Amaze had a superior formulation and was accepted as a superior product by the Margin After Variable Cost (Hs) Am~e Shine Blanc Glint
Exhibit 4

10,500 11;500 11,SOO 16,500

consumer (as shown in various consumer researches). In quality, Shine and Blanc were practically at par and Glint was of the lowest quality with a technically inferior and hence much cheaper formulation. The margin after variable cost for the different brands is shown in Exhibit 4. Amaze, Shine, and Blanc, as a part of their marketing strategy spent heavily on theme advertising and some consumer promotion. The consumer promotions run by these brands were mainly gift packs in which, some other company, product was given away free to the consumer along with the washing powder. These promotions were generally on the large pack and the expenditure incurred was around Rs.32, 000 per tonne as the cost of the gift.
Advertising and Promotional (April 1995 to March2005) Expenditure In Rs.crore

In ApriI200S, the company manufacturing Glint in bulk packing launched Glint in two carton packs identical in weight, size, and price to the large and small cartons of the other three brands. The large carton was supported by an extremely heavy consumer promotion. The promotion was on five cartons of the large pack for which the cOj1s~mer .received a free, plastic bucket worth Rs.S6, although, the cost of the bucket to the company was very much lower due to bulk buying. The redemption offer worked like this: On each large carton Glint, a gift coupon was printed. Five of these gift coupons could be exchanged at the retail store for the free gift.

at

The launching of Glint in cartons did not involve any change in the product formulation, and the same product which went into the bulk pack was put into the carton packs. The promotion cost to the company was Rs. 7,SOO per tonne for the gift alone. As a consumer offer, this was the Market Share by Weight (%)
-".~ --... r

_April Amaze Shine Blanc Glint 82 988

May 76

..June. 73

July 66 8

644
3 12
Exhibit 6

4
15
22

most generous one ever given on washing powders by any manufacturer. The market share held between the four brands altered drastically over a period of four months. Exhibit 6 shows the market share of the various brands between April and July 2005. It may be noted that both Blanc and Glint were marketed by the same company and that after the promotion, this company's total market share rose from 9 per cent inApril200S to 26 per cent in July 200S. The introduction of Glint with this offer took the other manufacturers by surprise, especially KSL. Initially the marketing management of Amaze' felt that Glint in carton packs would not be able to do well, as Glint had a technically inferior formulation and the consumer offer given, involved a very heavy purchase which would months. last the consumer easily for four

Amaze Shine

4.50 3.00 0.80


Exhibit 5

2.00 -1.00 0.40

6.5()

4.00 1.20

Blanc

The gift pack promotions generally were limited to a single carton of the large pack, the large pack accounted for over SS% of the sales of all the brands. Exhibit S shows the level of advertising and promotional expenditure incurred by the three major brands.