Situation
- In an intensely competitive toothpaste market where Balsara was fighting with MNCs like Colgate, Levers and Ciba; Balsara's brand Babool found itself in a unique position in 1991. This brand, launched in 1988 with a platform of a good family toothpaste at a lower price with the slogan “Ghar bhar ke aaye kaam aur kitne kam daam - aab sirf das rupiye me“ ( Slogan : Good for the whole family and oh what a low price - now only Rs 10 ) found an immediate acceptance. Market share was 4% by 1989 and by 1992 the volume was 100 tonnes per month.
- But by 1992 it was clear that a strategic error had been made in pegging the price to an absolute norm of Rs 10. Further price increases were inevitable but on the other hand the farther we went from Rs 10, the more the market seemed to resist. We faced a no-win situation of stagnant or declining volumes on the one hand and no money to do anything about it on the other hand because we were unable to take price increase.
The key to achieving the price increase (in spite of the stiff internal resistance and in spite of the risks associated with abandoning the slogan and the positioning which worked and gave us volumes) was in realizing that 70% of the sale came from only 5 out of the 23 states - UP, Bihar, West Bengal, MP and Gujrat - The traditional conservative Hindustani heartland belt.
Through a series of informal evening meetings with the respective afield forces in the 5 states their support was obtained for taking a price hike and they were promised a good ad support.
the stage was thus set to take an unprecedented-in-the-industry 18% price hike in one single shot. The campaign to support the price increase was the key because without an active consumer pull a permanent price adjustment could not have gone through.
Re-positioned the product so that the previous strategic positioning error mentioned above could be corrected. Although we shall still be in the lower price area of the market, we did not want to be anchored to an absolute price slot. We decided that we should be seen as a good “value for money” “family” toothpaste. The pricing policy of the brand was precisely defined in terms of how much it should be below the brand leader Colgate.
Considering the slightly downmarket nature of the target audience, a slogan of "Babool, Babool, Paisa vasool" was coined and the TV execution was woven around a popular Hindi film and shot in a typical mushy Hindi film style because it was realized that the message format which they liked and responded to was the Hindi film format.
Even the pack was single mindedly focussed on this segment. All other languages were dropped. Only Hindi was used.
To clearly exemplify the theme of "paise vasool", a first-time-in-the-industry pack of 250g was introduced which was priced at par with the brand leader Colgate 200g and was branded as "Bada Babool". In keeping with the profile of the low price segment being attacked, a relatively less fashionable medium of radio was used which was heard and played in the street. A special sponsored program "Babool Film Bahar" was introduced on the Vividh Bharati channel in the main states with the feature of listener contests. In fact, the listenership of this program was built up by the company in its main towns through posters and mike announcements using autorikshaws.
Result
1. The price increase was successfully implemented without any backlash in spite of a very stiff hike.
2. The "price demonstration pack" of 250g became firmly entrenched pack contributing about 40 tonnes per month regularly.
3. Overall, the brand tonnage went up from 100 tonnes per month to about 180 per month over two years.
4. The profitability increased more due to the price increase.
5. The radio contest started pulling a response of over 40,000 letters per episode and this level remained the same over the entire period. The idea of the program and the fact that the company built up its listenership through their field force effort was judged to be the best in the world of Leo-Brunet advertising by their Chicago office.
6. In two out of the five states where we concentrated, Babool became number 3 brand in the market from its number 5 apposition. In the state of West Bengal in fact it even overtook lever’s brand Close Up to be the number 2 brand.
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STEPAN CHEMICALS LIMITED ( WHEEL )
Based on the meeting at Lever House on 1/10/93 with Vindy Banga, Ashwani Mehta, Jagdeep Sehgal. A description of Lever strategy behind SCL operations.
In the early 80s Levers realized that its attempts were turning out to be futile at fighting off the price-warrior Nirma through the typical MNC route of hitting at Nirma by projecting its brand Surf as costlier-but-better. They concluded that the battle with Nirma cannot be fought by remaining on the MNC-familiar high-value high-price battleground; and that they must go into a different battleground of low-price and fight Nirma on an unfamiliar turf. Nirma was an extremely low-tech, hence legally consuming less than 20 HP electricity, and therefore getting important tax concessions in addition to the advantage of being located in a geographical area where labor costs are lower. Thus, Nirma was already organized for low-cost production but HLL was
not.
SCL is a very very interesting case study of how the MNC HLL, inspite of its own fat-cat weaknesses, identified and leveraged its strengths, to create its own method of being a low-cost producer of popular priced detergent powder; and learnt an entirely new method of selling at low price and still make good money by HLL standards. It learnt how to make money not by higher price but by lower costs. HLL initially took advantage of the tax shield provided by the accumulated losses of SCL by taking it over when it was a sick company. Then it restructured the company by passing some functions to it but retained some sensitive functions with itself: R&D and brand ownership/management function was kept by HLL. HLL charges a fee to SCL for it. The Purchasing function is also retained by HLL because it gives economies of scale to SCL. For actual operations, it used the Wheel brand name which they already had in the rural-oriented popular-priced cake market and then put on a very good formulation which was competitive in quality as well as price with Nirma.
Apart from the benefits of low cost accruing due to:
1) Central purchasing,
2) R&D guidance in formulation and process cost reduction,
3) Financial tax planning;
they have taken remarkable corporate level decisions regarding
marketing which have reduced their marketing costs also. These
are in the areas of:
4) Selling manpower costs,
5) Trade margins.
These are described in detail below. Later on it is also described EXACTLY what enabled them to do it.
SELLING MANPOWER COSTSOut of the salesforce who sell SCL products in the market, 90% belong to the stockists and only 10% belongs to SCL. The costs of the this massive stockists' salesforce are NOT reimbursed or subsidized in any way and are borne entirely by the stockists and come out of their usual trade margins. Does it mean that the
stockists get good margins? Actually it is quite the opposite.
STOCKIST MARGINSAre the lowest in the consumer industry at 4%.
HOW DID IT HAPPENThe answer is that by adopting an extremely AGGRESSIVE and SINGLEMINDED pursuit of simultaneous twin objectives of HIGH VOLUME and LOW WORKING CAPITAL REQUIREMENT FOR STOCKISTS. The company is absolutely and completely consumer-satisfaction and trade-service oriented. Most companies design their stockist selling activities around their own requirements of primary sales and their own inventory requirements BUT this company does exactly opposite: it designs stockists' redistribution activities and its own dispatch and inventory activities around their stockists' requirements of ex-godown sales and their stockists' inventory requirements. When most companies claim to be customer-driven (but in reality are driven mainly by their own requirements of primary sales targets and need to move their own inventory) and are finding it difficult to market, here is SCL which took responsibility for its customers' rate of return (and thereby chose to be driven by the customers' secondary sale and customers' inventory movement) and has actually succeeded. Just as the Japanese manufacturers say that the pursuit of consumer satisfaction through quality actually reduces the costs rather than increasing it, I could clearly feel at SCL that the pursuit of stockist satisfaction through adequate ROI has actually reduced their selling costs and increased their sale.
HOW DID THEY DO ITThey did it through adopting important policy guidelines in five areas of marketing operations:
1/ Good product formulation developed keeping Nirma in mind.
2/ Affordable price.
3/ Heavy, nationwide, constant media for high sales volume.
4/ Constant monitoring and fast response.
5/ Different distribution and organization philosophy.
Good product formulation and affordable priceThe formulation was tested against Nirma with the target
customers and their opinions were taken into account.
Heavy, nationwide, constant media for high sales volumeThey have spent several crores of rupees every year in promoting this brand on TV and through outdoor and rural media to ensure that in every nook and corner of the country there is a very sizable and active demand for this product. Further they are doing this in a very large market (size : Rs 1000 crores +), and hence they have created a Rs 300 Crore sale through only one brand and four packs!
Constant monitoring and fast responseThey constantly monitor through MARKET RESEARCH consumer level information like their buying behavior, effects of competitive ads etc. They have INTEGRATIVE COMPUTERIZED themselves extensively right from the factories to main warehouses to C&Fs to ensure smooth and fast production and movement of finished goods. Now they are working on bringing computerization right upto the stockist levels where through hand-held modems, and through telephone links, their salesmen will be able to instantly know the depot stocks, place orders and get confirmation of the invoicing of the order; all within minutes; through the computerization. This will enable them to further pare their own as well as the inventories of the stockists; thereby increasing their ROI and thus make way for asking for more redistribution facilities from the stockists. Even right now, there data does not travel through floppies but through on-line links. Every week they know how much they sold till the previous evening. Most of the decisions related to customer service - whether accounting, distribution or sales - are DECENTRALIZED and take place CLOSER TO THE CUSTOMER in the branches where all these functions report to the Branch Manager. However, they do not treat the Branch Manager as a profit centre but a cost centre. They also have BANK ACCOUNTS NOT ONLY IN 50 DEPOT TOWNS where they have bank accounts
but they also have accounts in bigger nearby towns and have appointed "chasers" in some areas to ensure prompt transfer of funds to Bombay. Their national "float" is only 1.5 days.
Different distribution and organization philosophyNot only selling, but all activities connected with the trade customers, like distribution and accounting, are seen to be a part of a larger customer service activity and are decentralised and all people in these functions are trained to think of customer first.
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Simple Postcard to Boost Revenue and Add Prospects
SUMMARY: Marketers for companies that sell through through distributors and resellers have a hard time forging relationships with end users. They often don’t know who is buying their products or which prospects are open to receiving marketing materials. Read how a marketer used a direct mail campaign to promote a specific product line and capture names and email addresses for nurturing. The campaign more than tripled sales of one product and added more than 100 names to their prospect list.
CHALLENGEIMC Networks, a networking equipment company, sells exclusively through distributors and resellers. This constrained the efforts of Tim Templeton, Director, Marketing, who must abide by an IMC policy that prevents channel conflict by using a single pricing strategy with discounts based on volume of sales. Templeton can’t engage in widespread channel marketing with systems integrators and resellers. So, this makes it difficult to forge direct relationships with customers and prospects. His team uses search marketing and industry trade shows to reach out to customers, but that tactic also has limitations. “I’m trying to find [a] way to drive people to our products that may not be looking for a new vendor,” says Templeton. “When you do Google or Yahoo! ads, you’re only going to get people looking for a change. You’re not going to reach people who are happy with their product.” A major distributor for IMC offered a direct mail program that allowed vendors to send mailings to up to 5,000 customers who had purchased the same or similar products in the past. Templeton liked the idea, but the one-time list rental service still did not let him see who was on the mailing list. Templeton needed a tactic that would reach prospects not actively searching for a new vendor. His goals were to boost sales for certain product lines and collect email addresses from prospects to enter them into a lead nurturing process.
CAMPAIGNTempleton used a simple postcard with two goals: promote one of the company’s lower-cost products; invite recipients to go to a landing page to register for a related white paper and download more product information. Here are six steps they took:
Step #1. Choose product line to promote : The team built the campaign around the company’s SFP products – electronic transceivers that plug into network switches to accommodate fiber capacity upgrades. Without an SFP, network operators may have to replace all their switches when they upgrade their networks. They chose this product line for several reasons: - Relatively low price point, which meant they could see an immediate sales impact from their promotion. SFPs cost between $37 and $300. IMC’s SFPs tend to be cheaper than their competitors, providing an easy value proposition to convey in a direct mail piece. IMC wasn’t well known in the SFP category. Templeton wasn’t seeing strong sales for that product line through the distributor providing the mailing list. “That was really a flag to me that we were not reaching the market and they were not aware that we’re selling these products.”
Step #2. Use list of similar SKUs to assemble mailing list : To assemble a mailing list, the distributor provided up to 5,000 customers who had purchased a similar product, based on SKU. Templeton had a problem, though: The distributor didn’t have a unique category for SFPs. Instead, Templeton targeted:- Customers who had bought network switches with SFP ports, figuring they may also be in the market for SFPs. - Customers who had bought similar products from competitors. This required manually analyzing SKU numbers and having the distributor collect names from their database.
Step #3. Mail postcard promoting SFP product line : Templeton’s team created a theme for their postcard that highlighted the company’s larger choice of SFP products than its competitors. The campaign’s tagline was “Cast Your Vote for Choice.” Imagery on the card resembled a ballot, showing checked boxes next to bullet points detailing product capabilities. Key elements of the card also included: - Prominent text noting that SFPs start at $37 to underscore the company’s price advantage. - Table listing the four most popular SFPs, along with product numbers and a brief description of capabilities.
Step #4. White paper offer to capture email addresses : On the back page of the postcard, the team added a note about a “Bonus” offer – the opportunity to download a relevant white paper by visiting a unique URL.- They chose a white paper that detailed the benefits of a type of networking technology called single-strand fiber, because the company’s SFPs support that technology. - They created a new landing page for the campaign that included œ Same photo used on the postcard, with additional ballot imagery to match the tagline œ Registration form, requiring name and email address and with optional fields for company name, phone number and promotional code œ Link to a PDF of complete SFP product information, with product numbers for easy ordering œ Pre-checked opt-in box to request additional email communications. Visitors who registered for the white paper were sent an email with a link to download the PDF. That way, Templeton’s team could verify whether they had submitted a valid address. Bounce-backs were not added to the company’s marketing database.
Step #5. Nurture names collected in white paper registration : The team added the valid names and email addresses collected during the campaign to the company’s CRM system. From there, they could engage in further nurturing of those prospects. - The inside sales team could periodically call prospects to ask qualifying questions, such as whether they had any upcoming projects requiring SFPs or other equipment. - Registrants who opted in to receive additional email were sent œ NetNews, the company’s email newsletter that features new product information and technical articles œ Announcements of new white papers available œ Announcements of company appearances at trade shows
Step #6. Monitor sales through distributor to gauge impact : To determine ROI, Templeton’s team had to monitor sales of SFPs through the distributor. Because this was the only ongoing marketing at the time that drove prospects to that distributor, the team could be confident of attributing sales increases to the campaign.
RESULTS
The campaign achieved both of Templeton’s goals: There was an immediate impact on sales, and they added new names to their marketing database. - SFP sales jumped in one month to 14% from 4% of overall revenue from the distributor.- Overall revenue from that distributor also went up 30%.
“We’re pretty excited about that, because this tends to be a recurring purchase,” he says. “Every switch that’s sold, you need an SFP, and when you need to upgrade your networks, you need new SFPs.”
Initial sales allowed the campaign to break even.
The white paper attracted more than 100 registrations for lead nurturing – or roughly a 2% conversion rate, about average, according to MarketingSherpa benchmark data on direct mail to third-party lists. But Templeton expects their new, direct relationship with end users will continue to pay dividends.
“We’re getting some nice results and are already at breakeven for what costs are,” he says. “We figure we’ve got mind share with these people, and expect to see recurring revenue down the road.”
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