1 Consumer Products Limited Formulating Promotional Strategy In sanuary 1967, the marketing management of the Washing Products Group of Consumer Products Limited (CPL) was discussing the various waystof dealing with the latest develop- ents in the market situation brought about by a very attractive consumer offer launched by a competitive brand. ‘CPL was a public limited company and was set up in 1940. ‘The company had an authorized capital of Rs. 10 crores. The company was a leading marketing organization in the country ‘and manufactured and marketed all kinds of consumer products of household use. CPL was a professionally managed company and had a profit centre organization. Marketing was the coordinating function in this organization, and the marketing management 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 centres of the company is given in Exhibit 1 “The company's main entry in the washing powder market, ‘Dazzle’ 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 three-fourths of the washing soap. These small-scale Prepared by Labdhi Bhandari and Arun Nanda.366 MARKETING MANAGEMENT: CASES AND CONCEPTS manufacturers did not have any national distribution, and their products were generally sold within a radius of 100 miles of the plant location. They mainly sold inferior quality washing soaps fat 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 knowhow. The growth of this market since Dazzle was introduced 10 years ago is shown in Exhibit 2. Although in size the washing powder market was one-tenth of the washing soap market, it compared favourably 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 small towns; at the same time, the market in larger towns was highly competitive. Difficulties of distribution and the high cost of going to the smaller towns did not allow the manufacturers of washing products to employ their own distr bution 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: Dazzle, Bright, White, and Spark. Dazzle was the leading brand, and until September 1966 it enjoyed a market share of 80 per cent of the total washing powder market Bright had a 10 per cent share, followed by White with 7 per cent and Spark 3 percent, Whereas, Dazzle, Bright, and White were sold in similar carton pack sizes, Spark was sold only in bulk until September 1966. Exhibit 3 gives the pack sizes and the prices of the various brands. Technically, Dazzle had a superior formulation and was accepted as.a superior product by the consumer (as shown in consumer research). In quality, Bright and White were pract- ically on par and Spark was of the lowest quality with a techni- cally inferior, and hence much cheaper, formulation. The margin after variable cost for the different brands is shown in Exhibit 4. Dazzle, Bright, and White, 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CONSUMER PRODUCTS LIMITED 367 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. 300 per tonne as the ccost of the gift. The gift pack promotions generally were limited toa single carton of the large pack, the pack which accounted for over 50 percent of the sales of all the brands. Exhibit 5 shows the level of advertising and promotional expenditure incurred by the three major brands. Tn September 1966 the company manufacturing Spark in putk packing launched Spark in two carton packs identical in weight, siz, and price to the large and small cartons of the ther three brands. ‘The large carton was supported by an extremely heavy consumer promotion. The promotion was on Six cartons of the large pack for which the consumer received @ free, plastic bucket worth Rs. 6, although the cost of the bucket to the company was very much lower due to bulk buying. The dffer was a redemption offer. On each large carton of Spark, ‘gift coupon was printed. Six of these gift coupons could be exchanged at the retail store for the free gift. ‘The launching of Spark 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 700 per tonne for the gift alone, As a.consumer offer, this was the most ‘generous one ever given on washing powders by any manufacturer. ‘The market share held between the four brands altered drasti- cally over a period of four months. Exhibit 6 shows the market Share of the various brands between September and December 1966. Tt may be noted that both White and Spark were marketed ty the same company and that after the promotion, this company’s total market share rose from 10 per cent in September 1966 to 25 percent in December 1966. ‘The introduction of Spark with this offer took the other manufacturers by surprise, especially CPL initially the marketing management of Dazzle felt that Spark in carton packs would hot be able to do well, a Spark had a technically inferior formulation and the consumer offer given involved a very heavy purchase which would list the consumer easily for four months. Looking at the market share figures over the four months,368, MARKETING MANAGEMENT: CASES AND CONCEPTS the marketing management was in a quandary. The need to act was urgent. Some of the conversations that took place among the CPL's management are given below: MARKETING DIRECTOR ‘Well, having looked at the market shares upto December and the various reports of the success of Spark, what do you propose we do? MARKETING CONTROLLER I have thought over this problem, Despite our initial feeling that Spark would be a failure, we now see that itis doing very well. If they carry on at this rate, they will certainly be a major threat to our market share. They can afford such heavy consumer promotions due to their cheaper formulation. I personally feel that we should, as soon as possible, introduce a second brand which would have an inferior forniulation but equal to Spark. This new product should be heavily consumer promoted at about the same level of expenditure as Spark, This brand would be able to afford that kind of expenditure on promotions due to the higher margin we will make if sold ata price equal to Dazzle and Spark. Alternatively the product can be sold at a lower price than Spark. ‘MARKETING DIRECTOR Well, that is certainly an alternative which we must consider. I suggest that we start working on this straight away and meanwhile we could have a full scale meeting of our entire marketing team and try and decide the course of action that we must take to bring back our market share to its original level. ‘GENERAL SALES MANAGER Well, Pradeep, what is the situation of washing powders in your area?‘CONSUMER PRODUCTS LIMITED 369 SALES MANAGER Spark is making heavy inroads into our sales with their new pack. Inthe past with the bulk pack this brand represented an insignificant part of the market. The main reason for their success is the very generous consumer offer they have run. At this rate we will have to come down on our sales estimates. Iam sure I will not be able to meet my target. GENERAL, SALES MANAGER Well, you see, at the higher margin due to their inferior formulation they can afford to spend more than we can on consumer promotions, but our product is definitely superior and we should be able to win back our market share. SALES MANAGER Consumer promotion is a very effective sales medium to the retail stores and to the consumers. Tam afraid that if they continue at this rate, we will find it very difficult to keep pressure on our sales and achieve our estimates. We must counter immediately with a promotion as heavy as theirs or else we would lose out. GENERAL SALES MANAGER Well, your recommendation then seems to be that we enter the rat race and promote Dazzle heavily to the consumer. ‘Are you sure that we cannot get away with offering less due to our better product, giving promotions like the ones wwe have in the past? SALES. MANAGER, Tam convinced that unless we step up our expenditure per tonne to the level that Spark is spending, we will not bbe able to sell our product. - | | | i370 MARKETING MANAGEMENT: CASES AND CONCEPTS PROMOTIONS MANAGER John, I have come to discuss the results of the consumer Promotion that Spark has run for the last four months. ‘Their promotion has certainly been an outstanding success as one can sce from the market share figures as well as the reports we have received from our sales management throughout the country. I would like to get immediately an additional budget for promotion and promote Dazzle ‘at about the same level as Spark to win back our market share. Being better organized, we should be able to mount more effective promotions than theirs, but ultimately the gift should be as attractive to the consumer as the kind of gift that Spark is giving away and this will mean about the same level of expenditure. For this I feel that you should cut down on your theme advertising for Dazzle and divert some of this money to promotions straight- away. PRODUCT MANAGER Dilip, I don't agree with you here. I feel that we should not indulge in such heavy promotional expenditure as Spark has done because this will get us into a vicious circle. We have been selling Dazzle on the basis of its superior formulation and performance. This fact should be highlighted now more strongly and sharply 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 Spark with gifts of such high value, she does so by settling for an inferior product. For this, I would like to place all my money in press, cinema, and point-of-sale material. 5 PROMOTIONS MANAGER John, the reach of media in this country, as you well know, is very limited. Apart from point-of-sale material which can be put up in all places, you can only cover a very small fraction of your total target through press andCONSUMER PRODUCTS LIMITED am cinema, If, for instance, we had TV as widely as one does abroad, your point would make sense as the target con- sumers could then be reached through theme media. But looking at the difficulties and the inadequate reach of media in this country, it is essential that we consumer promote heavily now to win back what we have lost. Unless we do this, we will be on the losing end and Spark would do well mainly at our expense, we being the biggest brand in the market, We should, and I insist that we must start consumer promoting Dazzle at the level of Spark as soon as possible. QUESTIONS FOR DISCUSSION 1. What is the extent of loss in market share, sale volume, revenue and profits suffered by Dazzle in the last four months? Can it be recovered? 2, What should be the strategy of Dazzle to respond to the threat from spark? What short term and long term steps would you suggest? 3. What would be the financial implications for Consumer Product Ltd., if Dazzle were promoted with an offer like Spark's? 4. In your opinion, how effective is the strategy of the company which had introduced Bright in addition to White?312 MARKETING MANAGEMENT: CASES AND CONCEPTS EXHIGIT 1 ‘Torat: Tusnoven axb CoNTRIUTION 10 PROFT ——— ‘Total (urnover (196) 1s $00 milion Rs 0 (7 Group A turnover Group B turnover Rsi00 4, (3%) Rs 350 Washing products turnover Note: Contribution to company profit in brackets, EXHIBIT 2 |Wasaino Powonns MaxkeT Growrit Year Index 1986 100 1957 180 1958 230 1959 310 1900 300 1961 500 1962 520 1963 oso 1964 730 1965 820 1966 90033 CONSUMER PRODUCTS L:MITED EXHIBIT 3 Pack SiZis AND Prices OF VARIOUS BRANDS Oe Pack sizes Pack wt. Consumer price DavaleiBrght/White Lame 0g RSA.SO Medium 400g Rs 3.00 smal 200g RS 7S Spark Balk tkg Rs 6.25 Bulk akg RS 12.30 EXHIBIT 4 Manos Arten VaRIAnte Cost Rslonne Daz 1000 Brit 1100 Wihite 1100 Spark 1600 Exunrr s AoverrsiNo Am PROMOTIONAL EXPENDITURE {October 183 to September 196) pees tn ilions ots theme promot Total advert Heomared Theme | Promotions sing prome- promoted advertising Gifts) ignafexpenditure azile 30D 20 Bright ms Os 10 White 90 0.20 0.10 0.338 Bright, White Spark MARKETING MANAGEMENT: CASES AND CONCEPIS EXHIBIT 6 Manner Stans ny Weiont (7 September October November December 20 1s n 6 10 9 7 7 7 6 5 5 3 10 7 2