HOUSEHOLD PRODUCTS (INDIA ) LTD ( C )

Introducing a new product On 9 February, 2008, Mr. Rahul, the Marketing Manager for Toilet soaps, was exa ining !raft "Test Market #roposal$ for a new toilet soap, whi%h was prepare! by the #ro!u%t Manager. Mr. Rahul ha! alrea!y %leare! with the Marketing &ire%tor the %o en%e ent of test arketing aroun! i!'year. (e knew that test arketing a%ti)ities were expensi)e an! therefore wishe! to learn as u%h as possible fro the test about )arious aspe%ts of the arketing ix, for e)ol)ing a suitable ix for use, on full s%ale nation'wi!e arketing. (e felt that it woul! be useful to ake a list of *uestions for whi%h he wante! answers fro the test an! then list the types of infor ation whi%h woul! be re*uire! to answer these *uestions. (e wante! to !o a proper e)aluation of the test arket a%ti)ity to enable hi to ake soun! re%o en!ations for a national operation. Compan !ac"ground (ousehol! #ro!u%ts +,- .t!., is a publi% li ite! %o pany whi%h was set up in /900. The %o pany has an authorise! %apital of Rs./00 %rores. The %o pany is a lea!ing arketing organi1ation in the %ountry an! is engage! in the anufa%turing an! arketing of all kin!s of %onsu er pro!u%ts of househol! use. (ousehol! #ro!u%ts +,- .t!., is a professionally anage! %o pany an! has a #rofit 2entre Organisation. Marketing is the %oor!inating fun%tion in this organisation an! the arketing anage ent has the profit responsibility for a parti%ular pro!u%t3pro!u%t group. Toilet soaps 4roup is one of the i portant !i)isions of the %o pany. Toi#et Soap $ar"et The toilet soaps arket %onsists of a large nu ber of bran!s arkete! by organise! se%tor of the in!ustry either nationally or regionally. 5early 90 per %ent of the toilet soaps arket +by weight- is a!e up the bran!s selling at aroun! Rs./6 a %ake. The rest of the arket %o prises of bran!s pri%e! between Rs./8 an! Rs.60 per %ake, with a a7ority of the selling at aroun! Rs.20. 8lthough the high pri%e se%tor a%%ounts for only /0 per %ent of the arket by weight an! 26 per %ent by )alue, it is growing at a rate of /6 per %ent per annu , whereas the large low'pri%e se%tor is only growing at 0 per %ent per annu . The %o pany sells three bran!s of toilet soap, two of whi%h are pri%e! at Rs./6 an! the thir! at Rs.90 per %ake. The for er two bran!s a%%ount for 00 per %ent of the low pri%e se%tor of the toilet soap arket an! are the a7or profit earners of the !i)ision. The %o pany$s entry in the high pri%e se%tor represents a )ery s all share of the toilet soap
Case written by Late (Prof) Labdhi Bhandari IIMA and updated by Dr. S.R. Singh i in !"#"

arket. ,t is howe)er, growing )ery fast an! earns substantially higher profit argins per tonne than the two a7or bran!s in the low'pri%e se%tor. The %o petition in the low'pri%e se%tor is )ery intense an! the %o pany has ha! to step up a!)ertising an! pro otional expen!iture signifi%antly to aintain its lea!ership. The anufa%turing %osts ha)e also risen o)er the years, with the result that in spite of in%rease in sales )olu e, profits of these two bran!s ha)e arginally !e%line!. ,n )iew of the fier%e %o petition in the %ountry, the %o pany !oes not see any prospe%ts of a pri%e in%rease. Appointment o% $r& Ra'u# ,n :anuary, 2009, a new Marketing Manager was appointe! for the toilet soaps group. (e ha! two pro!u%t anagers assisting hi . The Marketing Manager reporte! to the Marketing &ire%tor, who was also responsible for two other pro!u%t groups, in a!!ition to toilet soaps. The new Marketing Manager, Mr. Rahul, soon %a e to a %on%lusion that apart fro a %ost're!u%tion progra e to i pro)e the profitability of the two a7or bran!s, the %o pany ust plan to intro!u%e two or three new bran!s in the high pri%e se%tor, whi%h offere! growth as well as high profit argins. This, in his opinion, woul! pro)i!e not only a stable profit base but also potential for growth. ;e%ause the high pri%e se%tor is a )ery frag ente! arket with )arious bran!s offering !ifferent %onsu er benefits, he felt it woul! be ne%essary to intro!u%e two to three bran!s in the ain seg ents of this arket. Mr. Rahul, while going o)er the past %onsu er resear%h an! a!)ertising %a paigns of !ifferent bran!s in the high pri%e se%tor, obser)e! that the bran!s %oul! be %lassifie! in three ain seg ents. There were so e bran!s whi%h offere! e!i%al benefits of skin %are, pre)ention of skin !iseases, pi ples, bo!y'o!our, et%. be%ause of their e!i%ate! properties. These roughly a%%ounte! for 90 per %ent of the arket. 8nother se%tion %onsiste! of bran!s selling on the appeal of perfu es. These were ainly singleton perfu es, floral an! others. ;ran!s with san!al woo! perfu e appeal were the biggest, with 7as ine, rose an! khus, following in that or!er. There were so e bran!s with la)en!er an! eau !e %ologne perfu e appeals as well. The thir! se%tion %o prise! of bran!s with %os eti% appeals < beauty, gla our, et%. These bran!s by an! large !i! not base their %lai s on any spe%ial ingre!ients, instea! they offere! a luxury soap with a goo! perfu e, shape an! %olour, attra%ti)e pa%kaging an! ri%h'%rea y lather. ,n for ulating his strategy for entering the high pri%e se%tor, Mr. Rahul felt that the "perfu e se%tion$ of the arket offere! goo! opportunities an! a bran! whi%h %ontaine! a popular ,n!ian perfu e %oul! be )ery su%%essful. (e %ite! the exa ple of a %o petition bran! whi%h %ontaine! strong 7as ine perfu e with attra%ti)e pa%kaging an! ha! a%hie)e! /0 per %ent share of the high pri%e se%tor within two years. (e was of the opinion that there was %onsi!erable potential in this area whi%h %oul! be exploite!.

(e !is%usse! his )iews with the Marketing &ire%tor an! the #ro!u%t Manager an! there was general agree ent that one of the propose! new bran!s shoul! be base! on perfu e benefit. They all felt that 7as ine was one of the ost popular fragran%es +in a!!ition to rose an! san!alwoo!- in ,n!ia an! ha! %onnotations of luxury. The #ro!u%t Manager, howe)er, felt that a bran! offering "7as ine perfu e$ benefit alone woul! only be a " e' too$ to a %o petition bran! with nothing ore to offer. (e was of the )iew that the new bran! shoul! offer so ething ore than the "7as ine fragran%e$ in or!er to ake itself %o petiti)e against the %o petition bran!. (e suggeste! a new benefit whi%h he thought woul! appeal to the ,n!ian %onsu ers whi%h was= ;ran! a!e fro "pure )egetable oils$. (e argue! that in )iew of the wi!esprea! )egetarianis as well as religious feelings, a toilet soap whi%h was free fro ani al fats woul! be uni*ue an! ha)e spe%ial appeal to a large part of the population, parti%ularly in north an! %entral ,n!ia. 8s it stoo!, all soaps %ontaine! ani al fats +tallow- an! the for ulations were unlikely to be without tallow in future, !ue to the %ost !ifferen%e between ani al fats an! )egetable fats. (e also suggeste! that the pure )egetable oil %lai woul! appeal to the sa e "tra!itional %onsu ers$, who are the likely target group for the "7as ine appeal$. The Marketing anager an! Marketing &ire%tor thought it was an interesting %on%ept, but were not sure whether it was )iable both %o er%ially as well as fro the point of )iew of %onsu er a%%eptan%e. The #ro!u%t Manager was gi)en the task of preparing a %o prehensi)e !o%u ent exa ining the feasibility of su%h a pro!u%t in arketing an! %o er%ial ter s. (e was also aske! to prepare a brief for the Resear%h an! &e)elop ent !epart ent for this pro!u%t. The #ro!u%t Manager sub itte! his report in three weeks along with a R > & brief an! suggeste! pro!u%t proposition. (e establishe! in this !o%u ent that a foil wrappe!, 7as ine perfu e, )egetable oil soap was a proposition at a %onsu er pri%e of Rs.22.60. The pri%e of the %o petition bran! with 7as ine perfu e was Rs.2/. The #ro!u%t Manager$s re%o en!ations were a%%epte! an! Resear%h an! &e)elop ent were aske! to !e)elop a toilet soap a!e fro pure )egetable oils an! 7as ine perfu e. ,t was to be pa%ke! in an attra%ti)e foil wrapper with two %olour printing. The a!)ertising agen%y was also briefe! to !e)elop a %a paign for this pro!u%t. Product and ad(erti)ing de(e#opment Resear%h &epart ent !e)elope! two !ifferent 7as ine perfu es whi%h they felt ha! better i pa%t than the perfu e of %o petiti)e ban!. They ha! infa%t %o poun!e! six perfu es whi%h they ha! s%reene! an! %hosen these two on the basis of their perfu er$s e)aluation. The !e)elop ent !epart ent ha! to experi ent with )arious for ulations in%orporating )egetable oils. They foun! that while a goo! toilet soap %oul! be a!e with )egetable oils, it ten!e! to wear out faster than a nor al soap. They were, howe)er, able to for ulate a pro!u%t whi%h was satisfa%tory on wear rate as well. 8fter the perfu e an! the for ulation were !e)elope!, the #ro!u%t Manager ha! a eeting with the Marketing Resear%h Manager an! re*ueste! hi to %on!u%t %onsu er resear%h to sele%t one of the two perfu es. (e also in!i%ate! that he woul! like so e reassuran%e that the sele%te! perfu e was better than the perfu e of the %o petition

bran!. ,n his )iew, perfu e was the %riti%al thing an! if %onsu er resear%h showe! that one of the perfu es !e)elope! by Resear%h !epart ent was better than the %o petiti)e < bran!' perfu e, he woul! in%orporate this in the new pro!u%t. (e also suggeste! so e *uestioning on %onsu er opinion about wear rate of the pro!u%t. 8 pro!u%t test was %on!u%te! by Marketing Resear%h !epart ent with two pro!u%ts %ontaining the two perfu es an! the %o petition pro!u%t. The %o petition bran! was repa%ke! in blank white wrappers so that it looke! i!enti%al to the two experi ental pro!u%ts. Three panels of %onsu ers <wo en in the age group of /8 < 96 years were %hosen. ?a%h panel e ber was gi)en two pro!u%ts to try. One panel teste! one experi ental pro!u%t against the %o petition pro!u%t, se%on! panel teste! the other experi ental pro!u%t against the %o petition pro!u%t an! the thir! panel trie! both the experi ental pro!u%ts. The results showe! that a signifi%antly larger nu ber preferre! one experi ental perfu e %o pare! to the other one. This perfu e was also like! by ore respon!ents %o pare! to the %o petition bran!, although the !ifferen%e were not statisti%ally signifi%ant. This perfu e was therefore, %hosen for in%orporation in the pro!u%t. The a!)ertising agen%y ha!, in the eanti e, !e)elope! a %a paign whi%h a!e the basi% pro ise of "7as ine fragran%e$ supporte! by the %lai of "purity$ be%ause it was a!e fro pure )egetable oils. The key %opy was= 5ow@ The fragran%e of a illion 7as ine flowers. The Aoap of Mat%hless #urity. The #ure Aoap a!e fro pure Begetable Oils. 8nother a!)ertise ent use! the hea!line "there is the soun! of we!!ing bells in the 7as ine perfu e of C..$ ,t was presente! in the %ontext of 7as ine flowers use! for !e%oration by wo en. The )isual !epi%te! a legen!ary bri!e !e%orate! with 7as ine flowers shown in a gar!en. The arketing anage ent like! the a!)ertising %a paign. They felt it %on)eye! the luxury of 7as ine *uite well. ,t was !e%i!e! to use the %a paign for laun%hing the pro!u%t. Te)t mar"et p#an)& The Marketing Manager an! the #ro!u%t Manager ha! been !is%ussing the nee! for test arketing the pro!u%t to get so e fee!ba%k on the effe%ti)eness of the arketing ix as well as to get so e in!i%ation on the share that the bran! %oul! a%hie)e nationally. They were not )ery keen on %o itting large resour%es at this stage an! were therefore thinking of re%o en!ing a town test. (owe)er, be%ause of the uni*ue pro ise of "#ure Aoap a!e fro #ure Begetable Oils$, they felt it was also ne%essary to test it in a arket whi%h was not likely to be parti%ularly responsi)e to this benefit. The #ro!u%t Manager suggeste! that ,n!ore an! (y!eraba! %oul! be sele%te! as the test towns, ,n!ore being a arket whi%h is likely to respon! to this uni*ue benefit of purity an! (y!eraba! representing arkets whi%h ay not )alue su%h benefit so u%h. These were large enough towns for !rawing %on%lusions fro experien%e there. ,t was thus !e%i!e! to run the test in these towns for a perio! of 9'/2 onths. The arketing anage ent ha! to gi)e their re%o en!ations on extension of the pro!u%t nationally on the basis of its perfor an%e in test arket. The #ro!u%t Manager

!e%i!e! to use the sales of the %o pany$s existing bran! as a ben%h ark to e)aluate the perfor an%e of the new pro!u%t. (e howe)er, feare! that sales !ata woul! not be suffi%ient to e)aluate the perfor an%e of the new pro!u%t. (e therefore, arrange! to %olle%t infor ation about pur%hases, sto%ks an! sales of this pro!u%t an! other bran!s of toilet soaps fro a panel of shops in ea%h town e)ery onth. (e also talke! to the Marketing Resear%h anger an! re*ueste! hi to arrange for a sur)ey a ong %onsu ers after six onths of the intro!u%tion of the pro!u%t in test towns to fin! out their opinion.

#ossible *uestions ?)aluate the !e%ision to intro!u%e a pro!u%t in the pre iu pri%e se%tor of the arket &o u agree with the %o$s %hoi%e of pro!u%t benefits, i.e., 7as ine perfu e an! pure soap a!e fro )egetable oils &i! the %o pany ha)e a!e*uate info at )arious stages of the new pro!u%t intro!u%tion effort Dhat info u woul! nee! to e)aluate the test arket an! re%o en! a !e%ision on extension of this pro!u%tE Dhat resear%h woul! u suggest for the purposeE