HOUSEHOLD PRODUCTS (INDIA) LTD. (C)

Introducing a New Product

On 9 FEBRURY, 1968, Mr. Rahul, the marketing manager for toilet soaps, was examining the draft ‘test market proposal’ for a new toilet soap which was prepared by the product manager. Mr. Rahul had already cleared with the marketing director the commencement of test marketing around mid-year. He knew that test marketing activities were expensive and therefore wished to learn as much as possible from the test about various aspects of marketing mix for evolving a suitable mix for use in full scale national marketing. He felt that it would be useful to make a list of question for which he wanted answers from the test and then list the type of information which would require to answer these questions. He wanted to do a proper evaluating of the test market activity to enable him to make sound recommendation for a national operation.

Company Background Households Products (I) Ltd is a public limited company which was set up in 1940. The company has as authorized capital of Rs. 10 crores. The company is a leading marketing organization in the country and is engaged in the manufacturing and marketing of all kinds of consumer products of household use.

Household products (I) Ltd., is a professionally managed company and has a profit centre organization. Marketing Is the coordinating function in this organization and the marketing management has the profit responsibility for a particular product/product group. Toilet soaps Group is one of the important division of the company.

Toilet Soap Market The toilet soaps market consist a large number of brands marketed by organized sector of the industry either nationally or regionally. Nearly 90 percent of the toilet soaps market (by weight)

Is made up of the brands selling at around 50 paise a cake. The rest of the market comprises of brands priced between 60 paise to Rs. 2.50 per cake. With a majority of them selling at around 80 paise.

Although the high price sector accounts for only 10 percent of the market by weight and 25 percent by value, it is growing at a rate of 15 percent per annum, whereas the large low price sector is only growing at 4 percent annum.

The company sells three brands of toilet soap, two of which are priced at 50 paise and the third at Rs. 1.00 per cake. The former two brands account for 40 percent of the low priced of the sectors of the toilet soap market and are the major profit earners of the division. The company’s entry in the high prices sectors represents a very fast and earns substantially higher margins per tonne than the two major brands in low – price sector.

The competition in the low price sector is very keen and the company has had to set up advertising and promotional expenditure significantly to maintain its leadership. The manufacturing costs have also risen over the years, with the result that in view of the fierce competition as well as the political climate in the country the company does not see any prospects of a price increases.

Appointment of Mr. Rahul In January 1967 a new marketing manager was appointed for the toilet soap group. He had two product Managers assisting him. The Marketing Manager reported to the marketing Director, who was also responsible for two other product groups, in addition to toilet soaps.

The new marketing manager, Mr. Rahul, soon came to a conclusion that apart from a cost-reduction program me to improve the profitability of the two major brands, the company must plan on introducing two or three new brands in the high price sector, which offered growth as well as high profit margins. This, in his opinion, would provide not only a stable profit base but also potential for growth. Because the high price sector is very fragmented market with various brands offering different consumer benefits, he felt it would be necessary to introduce two or three brands in the main segment of this market.

Mr. Rahul, while going over the past consumer research and advertising campaigning’s of different brands in the high price sector, observed that the brands could be classified in three main segments. There were some brands which offered medical benefits of skin care, prevention of skin diseases, pimples, body-odour, etc., because of their medicated properties. These roughly accounted for 30 percent of the market. Another section consisted of brands selling on the appeal of perfumes. These were mainly single tone jasmine, rose and khus following in that order. There were some brands lavender and eaude cologne perfumes appeal as well. The third section comprised of brands with cosmetic appeals – beauty, glamour, etc. these brands large did not base their claims on any special ingredients; instead they offered luxury soap with a good perfume, shape and color, attractive packaging and rich – creamy lather.

In, formulating his strategy for entering the high price sector, Mr. Rahul felt that the ‘perfume’ section of the market offered good opportunities and a brand which contained a popular Indian perfume could be very successful. He cited the example of competition brand which contained strong jasmine perfume with attractive packaging, and had achieved 10 percent share of the high price sector within two years. He was of the opinion that there was a considerable potential in this area which could be exploited.

He discussed his views with the marketing director and the product Manager and there was a general agreement that one of the proposed new brands should be based on perfume benefit. They all felt that jasmine was one of the most popular fragrances (in addition to rose and sandalwood) in India and had connotation of luxury. The product manager, however, felt that a brand offering ‘jasmine perfume’ benefit alone would be ‘me too’ to a competition brand with nothing more to offer. He was of the view that the new brand should offer something more than the ‘jasmine fragrance’ in order to make itself competitive brand with nothing more to offer. He suggested a new benefit which he though would appeal to the Indian consumer which was: ’brand made for pure vegetable oils’. He argued that in view of the widespread vegetarianism as well as religious feelings, a toilet soap which was free from animal facts would be unique and have special appeal to a large part of the population, particularly in north and central India. As it stood, all shops contained animal fats (tallow) and the formulations

were unlikely to be without tallow in future due to the cost differences between animal fats and vegetable fats. He also suggested that the pure vegetable oil claim would appeal to the same ‘traditional consumer’ who is the likely target group for the ‘jasmine appeal’. The marketing manager and marketing director thought it was an interest concept, but were are not sure whether it was viable both commercially as well as from the point of view of consumer acceptance. The product manager was given the task of preparing a comprehensive document examining the feasibility of such a product in marketing and commercial terms. He was asked to prepare a brief for the Research and Development department for this project.

The product manager submitted his report in three weeks along with R&D brief and suggested product proposition. He established in this document that a foil wrapped, jasmine perfume, vegetable oil soap was proposition at a consumer price of 75 paise. The price of the competitive brand with jasmine perfume was 70 paise.

The product manager’s recommendation were accepted and Research and Development were asked to develop a toilet soap made from pure vegetable oils and jasmine perfume. It was to be packed in an attractive foil wrapper with two color printing. The advertising agency also briefed tops develop a campaign for this product.

Product and Advertising Development Research Development developed two different perfumes which they felt had better impact than the perfume of competitive brand. They had in fact compounded six perfumes which they had screened and chosen these two on the basis of their perfumer’s evaluation. The development department had to experiment with various formulation incorporating vegetable oils. They found that while good toilet soap. They were however, able to formulate a product which was satisfactory on wear rate as well.

After the perfume and the formulation and the formulation were developed, the product manager had a meeting with the Marketing Research Manager and requested him to conduct a consumer research to select one of the two perfumes. He also indicated that he would like some reassurance that the

selected perfumes were better than the perfume of the competition brand. In his view, perfume was the critical thing and if consumer research showed that one of the perfumes developed by the Research department is better than the competitive-brand-perfumes, he would incorporate this in the new product. He also suggested some questioning on consumer opinion about were rate of the product.

A product test was conducted by marketing research department with two products containing the two perfumes and the competition product. The competition brand was repacked in blank white wrappers so that it looked identical to the two experimental products. Three panels of consumers-women in the age group of 18-35 years – were chosen. Each panel member was given two products to try. One panel tested the other experimental product against the competition product; second panel tested the other experimental products. The result showed that a significantly larger number preferred one experimental perfume compared to the other one. This perfumes are also liked by more respondents compared to the competition brand, although the difference were not statistically significant. The perfumes were therefore chosen for incorporation in the product.

The advertising agency had, in the mean time, developed a campaign which made the basic promises of ‘jasmine fragrance’ supported by the claim of ‘purity’ because it was made from pure vegetable oils. The key copy was: ‘Now! The fragrance of million jasmine flowers. The soaps of matchless purity. The pure soap made up of pure vegetable oils’.

Another advertisement used the headline: ;there is a sound of wedding bells in the jasmine perfume of………..’ it was presented in the context of jasmine flower shown in a garden. The marketing management liked the advertising campaign for launching the product.

Test Market Plans The Marketing Manager and the product manager had been discussing the need for test marketing the product to get some feedback on the effectiveness of the marketing mix as well as to get some indication on the share that the brand could achieve nationally. They were not very keen on committing large resource at this

stage and were therefore recommending a town test. However because of the unique promises of ‘pure soap made up of pure vegetable oils’, they felt it was also necessary to test it in a market which was not likely to be particularly responsive to this benefit. The product manager suggested that Indore and Hyderabad could be selected as the test towns, Indore being a market which is likely to respond to this unique benefit of purity and Hyderabad representing markets which may not value such a benefit so much. These were large enough towns for drawing conclusion from experience there. It was thus decided to run the test in these towns for a period of 9-12 months. The company’s market research manager suggested that an independent agency could be appointed to study the consumer opinion since historically the company’s cost attached with product failure was about Rs. 18 lacks per product. These were costs incurred for advertising, retail promotion and distribution. This cost was usually two times the benefit the company got when the product was a success in its first year. The company’s policy was to write off all expenditure related to R&D and test marketing in the first year itself of amortizing it. The research manager told that the probability that the product would be successful is 75%. A marketing survey can conducted at a cost of Rs. 3 lacs to find out whether the product would be successful. Past experience of such survey indicate that products that were successful have been predicated to be successful 80% of the time and unsuccessful product have been predicated to be failure 70% of times.Rahul and the marketing director were examining the logic of appointing such an agency for study in the test market given such distribution of probabilities. On the decision, the marketing manager had to give his recommendation on choice of its performance in the test market.Later on the product manager was to decide to use the sales of the company’s exiting brand as a benchmark to evaluate the performance of the new product. He however feared that the sales data would not be sufficient to evaluate the performance of the new product. He therefore arranged to collect information about purchases, stocks and sales of this product and other brands of toilet soaps from a panel of shops in each town every month. He also talked to the Marketing Research manager and requested him to arrange for a survey among consumers

after six months of the introduction of the product in the towns to find out their opinion.

Question for Discussion 1. Evaluate the company’s decision to introduce a product in the premium –

price – sector of the market?2. Do you agree with the company’s choice of product benefit, i.e., ’jasmine’

perfume and ‘pure soap made from pure vegetable oil’?3. Did the company have adequate information at various stages of the new

product introduction effort? Do you think the company should appoint the research agency to study the evaluation of the product idea?

4. What information would you need to evaluate the test market and recommend a decision on extension of this product? What research would you suggest for this purpose?