Sales & Distribution Management

Final Project Report

NIF Advanced Toothbrush

Contents
1. The Product 2. Project Objectives 3. Problem Definition 4. Methodology and Data Collection 5. Analysis a. Segments b. Channels 6. Recommendations a. Urban middle class b. Tourists and travelers 7. Questionnaire 03 03 03 04 06 06 07 08 08 09 09

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The Product:
The product is an Advanced Toothbrush with Toothpaste Dispenser. This unique product combines the toothpaste packaging within, the design of the toothbrush. The toothbrush column contains the toothbrush which can be obtained on the brush with the help of a patented piston technology. The user only needs to rotate the piston and the toothpaste gets squeezed onto the brush. The idea is extremely innovative which helps the user maximize the space utilization while at the same time saving him/her time required to apply the paste on a regular toothbrush. The toothbrush provides a nozzle with the help of which the toothbrush can be refilled when the toothpaste is finished. This gives an advantage of not having to carry the brush with the paste everywhere. The brush gives good value because the toothbrush comes with a removable head. The bristles also can be replaced without having to buy the whole brush again.

Project Objectives:
Our project entails defining a target segment, building a sales and distribution system for the product. The product is owned by NIF and hence doesnt have the backing of any known personal care company. Previously it has been sold through local vendors and retailers but the need is to find the appropriate market and a well defined sales and distribution strategy so that sales can be expanded in more regions. The product is one of a kind in the market, the concept of which has never been introduced before. But because of the setup the price of the product is bound to go higher than most of the toothbrushes that are sold today. The toothbrush market is dominated by mostly Colgate and Oral-B toothbrush whose prices range from Rs 10 to Rs 50-60. The entry price for our product was Rs 180 which was kept flexible depending on the market. So the need was to find a target where value of the toothbrush combined with the paste can be sold. The product currently is not backed by any known organization which makes designing the sales and distribution strategy a challenge. Based on the target segments mentioned below we have tried to evaluate each option and have given the recommendations.

Problem Definition:
We decided to focus on developing solutions to three main problems identified by us: Decide on the target segment for the product based on research Designing a distribution strategy that ensures that the product is given the right platform to reach the widest customer base of the target segment. It will also include an approximate price for the product with respect to each target segment. Providing qualitative constructive feedback to the innovators with regards to product development and packaging As given in the description of the project brief, the innovators have already mentioned the use of this innovative product in some spheres as a travel aid, for the use in military services, general home use and in tourism. We tried to expand this list by adding hotels and sports academies to the target segment which would be institutional sales (if the trade-off between the usual substitutes of the toothbrush and toothpaste

NIF Advanced Toothbrush

and the advanced toothbrush is justified both on the basis of price and comfort). Another option is selling through dentists and dental clinics. The product can be distributed either by the FMCG channel or the pharmaceuticals channel. One more channel that can be explored is the online sales channel which we have tried to evaluate. We tried to evaluate the target segments by interviewing retail store owners, chemists, dentists etc. we went to areas in and around Kolkata to cover maximum types of samples. We covered the questionnaire from which we realized that the current price of the product is too high and retailers were apprehensive about it. We then talked to the concerned person for the toothbrush and he clarified that if ordered in bulk the price can be adjusted to almost Rs 90 which is half of the present Rs 180. On this observation we have tried to suggest feasible price points for each segment and the distribution strategy there in.

Methodology & Data Collection:

After chalking out a plan as to what is to be done to achieve the objectives, we had decided to get information directly from the parties present in the sales and distribution system, namely the shopowners (retailers) and the potential customers. The method used by us to collect the required data was primary research. We visited various (over 30 in total) Retail stores, Chemists, Dentist Clinics and Hotels spread throughout Kolkata. The areas covered include Behala, Pailan, Thakurpukur, Taratala in Kolkata. Upon reaching the shops we conducted direct verbal interviews with the storeowners, dentists and also with the customers present at the store. We informed them of the product and the toothbrush was presented to them for inspection before the interview began. A set of standard questions as mentioned above was asked to keep the interview structured. Upon completion of our set of questions, the storeowners and the customers present were asked for qualitative feedback regarding the product. The questionnaire aimed at obtaining information about the potential customers, selling price according to the retailer/customer. It also enquired about the most sold brands of toothbrushes and toothpastes and of what SKUs in what amounts, to map it to the capacity of the retailer to stock/sell the product, and what were the criteria to set up extra visibility programs. We also tried to find if there were any local products in play so we could attempt emulating their sales and distribution strategies and channels, but no other product category other than food had any local suppliers which made it difficult to compare with the product-in-context (the advanced toothbrush) as the shelf-life, perception are very much different in these categories. In addition to this, we also tried asking about the anticipatory margin structure that the retailers were looking to, which resulted in startling replies ranging from a meager 5% to a staggering 30%. For further reference, the questionnaire is attached at the end of the report. Also, the field visits were divided and conducted over different days at different times to avoid any bias that might creep into our data. The data from the visits is consolidated and a select few are given in the later sections of this report. Along with the quantitative data, we also received a lot of qualitative feedback from the retailers and chemists, which is given below: a) b) c) d) Packaging of the product looks to be of very low quality The look and feel of the product is such that it looks handmade and unsophisticated The handle seems too big and the piece feels too heavy The customers will need to be convinced to switch to this new product

NIF Advanced Toothbrush 5 e) f) g) h) i) j) The toothpaste used seems not of a good quality and looks local-made Freedom to choose own paste reduces as it is pre-filled The company needs to heavily advertise the concept to make people familiar with it Hard to convince people to buy "local" tooth brush at such a high price point Retailers were not ready to sell any other product other than branded ones Margin structure for Pharmaceutical products was as high as 35%. However, for brushes projected as FMCG, it came around 15 %. k) The pricing given by the dentists was much higher than those given by retailers and chemists as there is more value attributed to their opinion. l) The dentists found the mechanism to be very interesting but were skeptical of the hygiene of the product especially at the dispensing mechanism of the toothpaste, as it had no lid/cap to prevent the paste from drying and does not prevent water to enter into the toothpaste compartment. They suggested improvements in product development to avoid these minor faults. Some of the more positive points mentioned were: a) A novel concept, would make mundane mornings interesting b) Customers will buy the product at least once just to see if it works well One of the over-riding themes that we kept facing when retailers would suggest an ideal price was the fact that they would simply add up the prices of an individual toothbrush and toothpaste. They did not seem to think that the synergy obtained from combining both would command too high a premium over the price obtained by simple addition. The table below has the consolidated version of our findings from most retailers. Retailers A to L were smaller retailers with shops the size of typical pan-shops or a bit larger, and retailers M through R are on the larger side having a wide variety of products. The visibility column in each group is different, where the former shows the level of interest the retailer shows in displaying the product where the bigger retailers mentioned the amount of money they would charge for said visibility.
Retailer Estimated Price Potential Customers Visibility in Store Max. selling brush
Colgate (Rs. 10) Colgate (Rs. 10) Colgate (Rs. 10) OralB OralB (Rs.50) OralB Colgate (Rs. 10) OralB OralB Colgate (Rs. 10) Colgate (Rs. 10)

Max. selling paste

Colgate 50gm. Pepsodent 100gm. Colgate Medicated Colgate 100gm. Colgate Colgate 100gm. Colgate Colgate Colgate Colgate

Local Product Channel

Wholesaler Distributor Distributor Distributor Distributor Distributor Distributor Distributor Distributor Distributor Distributor

Margin Needed

Brushes Sold (per mo.)

55 35 15 10 200 100 18 25 30 25 10

A B C D E F G H I J K

30 150 100 90 70 100 85 120 85 80 N/A

All All Families All Singles All All All All All All

High High High High High High High High High High High

16.67% 20% 20% 15% 14.30% 35% 20% 25% 20% 18.75% 20%

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L M N O P Q R

NIF Advanced Toothbrush

N/A N/A 100 30 65 40 50 All N/A Upper Middle Class All Upper Middle Class All Urban Middle class High N/A 400 500 500 300 350 1000 OralB Colgate Oral - B OralB Rs.50 Colgate Rs.30 OralB Rs.24 Colgate Medicated Colgate 100g N/A Anything 100g Colgate 100g Medicated Colgate, Dabur 100g Distributor N/A N/A N/A N/A N/A N/A 20% N/A 15% N/A N/A 20% 20% 25 75 N/A N/A 350 1200 350

The findings from the dentists are as follows:

Dentist
A B

Estimated Price
45 110

Potential Customers
Patients Patients

Visibility in Clinic
N/A High

Pescribed toothbrush
OralB Sefdent

Prescibed toothpaste
Colgate Sefdent

Local Product Channel

N/A Medical representatives N/A Medical representatives Distributor N/A Medical representatives

Margin Needed
N/A 35%

Brushes Sold (per mo.)

N/A 35

C D

120 90

Patients Patients

N/A High

Oral B Sefdent

Stolin R Sefdent

N/A 30%

N/A 55

E F G

130 100 85

Patients Patients Patients

High N/A High

OralB (Rs.50) OralB Others

Sefdent Medicated Ayurvedic Stolin R

14.30% N/A 35-40%

60 N/A 18

Data also shows that the major competitors are Colgate and Oral-B in toothbrushes, Colgate in toothpastes at retailers and Sefdent (Cipla) and Oral B (P&G)at the dentists.

Analysis:
Segments:
The segments considered during the project proposal stage regarded this products use as a travel aid, for the use in military services, general home use and in tourism, which gives us the defined segments as travelers and tourists, military training facilities (the government) and the section of the population who are interested in the product and can afford it. We extended the list by adding institutions like hotels and sports academies thinking Institutional sales are common for niche products as such. But on further analysis, we had to redefine this list eliminating many above discussed options and are left with a chosen few. The reasons for the removal of pre-discussed segments are as follows:

NIF Advanced Toothbrush 7 Military personnel: The toothbrush would be part of the military kit given to soldiers. And the suppliers would generally be interested in forming an ensemble which would cost them the least. So, a toothbrush and a tooth paste together obviously cost much less than the advanced product in context and the suppliers would not be concerned with the acceptance or innovativeness of the product as long as it doesnt fit their criteria of cost-reduction. We did try to get in touch with someone from the military but it seemed like a bureaucratic hassle. Hotels: The same goes with hotels as the sales to hotels come under Institutional sales and they always get their concerned products customized according to their needs and also at a lower price than the rest of the market, owing to the benefits they provide to the product owners. But, in our case we found it almost impossible to place the product with them, as it not only seemed a very costly affair to them, but also seemed a very unreasonable one, as their customers (visitors to the hotel) mostly tend to stay only for a day or two, and investing in such costly innovative products appeared inordinate.

Channels:
After finally deciding upon the feasible target segments, our next step was to design a Sales and Distribution system for the product. As a first step, we examined all the traditional channels in the current market, and had decided that most of them wouldnt suit our product. The reasons being: FMCG Channel: This channel with Carrying & Forwarding agents (CFAs), Distributors, wholesalers and retailers is a very well-established network of individuals and systems which require both higher involvement and a large man-power. Though the margins are not higher, this channel is mostly driven by volumes, and so is mostly adhered to well-known, well-spread products, mostly by Multi-national or large-scale Corporations. The opposite nature of the above stated features attributed to our product makes it difficult to use this channel as a medium to reach the target segment. Pharmaceutical Channel: The most striking nature of the Pharmaceutical channel in India is the fixed high margin structure given to the participants in this Sales and Distribution channel, which cannot be escaped even by the biggest Pharmaceutical giants. This is a serious thing to bargain on, as the product is new and there isnt much capital involved. Here also, there is a very high requirement for man-power in the form of medical representatives, if we are trying to portray the product as a medicated one. To avoid this, if we position it as an FMCG product in this channel, we still found a few difficulties. The main one being, there is no way to get the product to the Pharmaceutical distributors without the presence of a CFA, which is again a very costly affair. If we just target to place our product at the Chemists, there is again a need of extensive manpower which the company is presently lacking and also does not just cater to the defined target segments and so dilutes the desired reach. An example of Colgate Sensodyne following a similar strategy to crack the Pharmaceutical channel, stressing on the medical attributes of the product etc. through the FMCG way of doing things proved futile as told by a previous distributor of Colgate. Adding to the woes, the extremely complex nature of the Pharmaceutical Distribution system just seemed to complicate things further and we decided this cant be a feasible channel either. This analysis has led to the recommendations given in the next section.

NIF Advanced Toothbrush

Recommendations:
Urban Middle Class:
The main target segment is the upper middle class because of the premium pricing. The product is new so those people with more spending power will be willing to try the same. The product should be positioned as technologically advanced which gives good value for money because it is recyclable as one can refill the toothpaste and change the bristles when needed. It can be positioned as a hygienic product which will capture the attention of this kind of customer. They can be reached through the channels discussed below: Direct sales: This channel though can prove to be a little costly cannot be ignored. The most important factor in its favor is that the product is innovative and will sell better if people are explained how to use it. A demo will help not only the spot sales but will help in creating a market for the product. People will understand the product better and will be willing to try it because the idea is interesting. It cannot be used as a long run sales channel but now in the beginning when the product is new this channel should be explored. It should be employed in upper middle class segment where the housewives can shell out the extra rupee to buy it. Online sales: Though the scope for this channel is restricted in India, for a new and innovative product like this sites like flipkart.com can be explored. They have recently started selling personal care products and the site is very popular in India. The product will get good exposure in its target segment. It can also be placed at other popular online sites where personal care products are sold but only if the delivery charge is not charged to the customer because in most cases its around Rs 100 and couple it with the price of the toothbrush not many will be willing to buy it. The channel will also be less costly and that advantage can be used to reduce the price of the product. For flipkart.com they have free delivery above the purchase of Rs 100 so price should be set around that so customers are open to buying the product. Dentists: If we are to adopt dentists as a major distribution hub, then the most competition would be Sefdent (Cipla) and Oral B (P&G). As suggested earlier, the product should be launched under a brand name. If we wish to project it as a pharmaceutical product, Ranbaxy or Piramal can be approached as Ranbaxy, despite of having a whole range of dental care products, doesnt deal with toothbrushes, and so will consider it a good addition to its already existing basket of goods, and Piramal may think of it as yet another product extension. The advantage of this channel is that the product can be priced high because the positioning is such and since it will be backed by dentists, credibility will be high too. Supermarket retail chains like Spencers: One more possible channel to target the upper middle class is private branding by these stores. Most of these retail chains sell products under private brands. If for example Spencers agrees to privately brand this product and place it in their stores, it will greatly help the sales potential. Pricing also will not be an issue as it will be present in malls and the customers will be willing to pay Rs 90-100 for the product.

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Travelers and Tourists:

Another target segment who will be susceptible to the product is tourists and travelers. The positioning here would be a one-piece product which replaces two things, a toothbrush and toothpaste. It is also easy to carry plus it taps into the Indian mentality where next time they travel they will only have to refill the brush and not buy another toothbrush. The distribution system we are proposing here is through hawkers who sell products in railway stations, trains, bus stops and buses. But an important criterion for this distribution system is that product cannot exceed the price of Rs. 50 at any cost. How this can be achieved is by reducing the size of the brush which in turn will reduce the amount of toothpaste needed and also the production cost. Packaging for this need not be very fancy and cost-reduction can be achieved t all levels. This distribution system can be effective because travelers will appreciate the convenience of not having to carry the toothpaste along. It will also create word of mouth which will help the product in the long run. Along with hawkers the product can also be placed in small retail shops in and around railways stations and bus stops because according to our field visits, small retailers were ready to place the product without any extra amount that is generally charged for visibility by bigger retailers.

Questionnaire in context:
For Retailers: 1. What should be the optimum price if you were to stock it in your shop? 2. Who do you think will be the potential customers for this kind of a product? 3. How much would you charge extra for display and visibility and where will you be interested in placing it? 4. In you shop per day on an average how many toothbrushes and toothpastes sell and of what price and size? 5. Do you stock any product that is not marketed by a big well known company or an MNC? Do you have any local innovative product that you stock? 6. If yes, what is the sales and distribution channel for the same? 7. What kind of margin would you expect on the product? 8. Daily or monthly average for number of sale of toothbrush and toothpaste. For dentists: 1. 2. 3. 4. 5. 6. 7. 8. What should be the optimum price if you were to prescribe the product? Who do you think will be the potential customers for this kind of a product? Would you recommend the product and if you do how much will you charge for the same? Do you recommend any other toothbrush or toothpaste and why? Do you prescribe or also just recommend the product? How frequently do you recommend a product? Do you recommend only branded products or also local ones? Will you expect a commission on the sales and how much?