DRAFT II

EXAMINING PRODUCT LIFE CYCLE & MARKETING STARTEGIES ADOPTED BY

PROMINENT FMCG PLAYERS IN INDIA AS WELL AS ABROAD
Nearly twenty years ago the Indian government undertook a series of
policies that would change the face of the country. The government opened
up a tottering socialist economy to the greater world and lierali!ed its
policies for industry. The critics to this step were numerous and one point in
particular always figured in the arguments that they made. The critics were
nearly unanimous that the insular Indian industry" nurtured on licences and
trade #uotas would soon e overwhelmed y the advent of the free market.
And one industry in particular was ig on this list i.e. the Indian F$%&
industry. It was widely e'pected that the advent of gloal F$%& ma(ors with
their e'pertise" international rands and e'perience of competing in the
world markets would sound the death knell for the nascent Indian F$%&
industry.
)ut the Indian F$%& players seem intent on proving all these predictions
wrong. For twenty years they held on even as the ma(or markets were taken
over y the likes of *+& + %oca,cola. They took the time to understand the
dynamics of competition in this new era and changed their strategies and
processes to e more relevant to the Indian consumer and now they seem to
e intent on taking ack their lost turf. From processed foods to milk
products to soaps the Indian players seem to e on a comeack trail. This
cover story attempts to chronicle the rise of this new rave reed of Indian
F$%&s from the viewpoint of three companies that seem to e on the
forefront of this revolution.
The interesting part of this entire story is that these companies have
followed entirely different strategies to counter the igger players. *layers
like $arico have successfully utili!ed the lue ocean strategy to estalish a
first mover advantage in fields like skin care via the -aya skin clinics while
&odre( has successfully leveraged its rand name and distriution strength
to play itself into a position of strength in the rural market for soaps. .ne
thing in common seems to e a new found understanding of the Indian
consumer. The Indian companies are putting great emphasis on
understanding the needs of the Indian consumers and tailoring their
products to those needs. This has helped some of them to discover niches in
the market that have een untapped y the $N%s and have helped them to
avoid competition. For e'ample /mami0s ayurvedic formulations for its
products like Fair and 1andsome have helped to stand out in the
marketplace and differentiate itself.
If the avoidance of completion y finding new differentiation strategies
seems to e the forte of some of the players others like &%*2 and Daur are
competing with the gloal ma(ors head,on. Daur particularly is in a difficult
industry with its oral care products with the market leader i.e. %olgate
commanding a huge market share of 34 percent compared to Daur0s 54
percent. It has managed to capture a significant percentage of the fast
growing rural market y asing its positioning on heral strategy.
These are e'citing times in the F$%& industry. The Indian players seem to
have stolen a march over their igger rivals with their uni#ue understanding
of the Indian consumer and different positioning ut it will not e long efore
the igger players react to this challenge. The ne't four years can prove to
e a trial y fire for these Indian ma(ors as they fight to sustain the gains
they have made and capture markets that have een fortresses of the
multinationals.
PRODUCT LIFE CYCLE
The product0s life cycle , period usually consists of five ma(or steps or phases6
*roduct development" *roduct introduction" *roduct growth" *roduct maturity and
finally *roduct decline. These phases e'ist and are applicale to all products or
services from a certain make of automoile to a multimillion,dollar lithography tool
to a one,cent capacitor. These phases can e split up into smaller ones depending
on
the product and must e considered when a new product is to e introduced into a
market since they dictate the product0s sales performance.
1. PRODUCT DEVELOPMENT PHASE
*roduct development phase egins when a company finds and develops a new
product idea. This involves translating various pieces of information and
incorporating them into a new product. A product is usually undergoing several
changes involving a lot of money and time during development" efore it is e'posed
to target customers via test markets. Those products that survive the test market
are then introduced into a real marketplace and the introduction phase of the
product egins. During the product development phase" sales are !ero and
revenues are negative. It is the time of spending with asolute no return.
2. INTRODUCTION PHASE
The introduction phase of a product includes the product launch with its
re#uirements to getting it launch in such a way so that it will have ma'imum impact
at the moment of sale. A good e'ample of such a launch is the launch of 78indows
9*: y $icrosoft %orporation. This period can e descried as a money sinkhole
compared to the maturity phase of a product. 2arge e'penditure on promotion and
advertising is common" and #uick ut costly service re#uirements are introduced. A
company must e prepared to spent a lot of money and get only a small proportion
of that ack. In this phase distriution
arrangements are introduced. 1aving the product in every counter is very important
and is regarded as an impossile challenge. ;ome companies avoid this stress y
hiring e'ternal contractors or outsourcing the entire distriution arrangement. This
has the enefit of testing an important marketing tool such as outsourcing. *ricing
is something else for a company to consider during this phase. *roduct pricing
usually follows one or two well structured strategies. /arly customers will pay a lot
for something new and this will help a it to minimi!e that sinkhole that was
mentioned earlier. 2ater the pricing policy should e more aggressive so that the
product can ecome competitive. Another strategy is that of a pre,set price
elieved to e the right one to ma'imi!e sales. This however demands a very good
knowledge of the market and of what a customer is willing to pay for a newly
introduced product. A successful product introduction phase may also result from
actions taken y the company prior to the introduction of the product to the
market. These actions are included in the formulation of the marketing strategy.
This is accomplished during product development y the use of market research.
%ustomer re#uirements on design" pricing" servicing and packaging are invaluale
to the formation of a product design. A customer can tell a company what features
of the product are appealing and
what are the characteristics that should not appear on the product. 1e will descrie
the ways of how the product will ecome handy and useful. ;o in this way a
company will know efore its product is introduced to a market what to e'pect from
the customers and competitors. A marketing mi' may also help in terms of defining
the targeted audience during promotion and advertising of the product in the
introduction phase.
3. GROWTH PHASE
The growth phase offers the satisfaction of seeing the product take,off in the
marketplace. This is the appropriate timing to focus on increasing the market share.
If the product has een introduced first into the market" <introduction into a
7virgin:market or into an e'isting market= then it is in a position to gain market
share relatively easily. A new growing market alerts the competition0s attention.
The company must show all the products offerings and try to differentiate them
from the competitors ones. A fre#uent modification process of the product is an
effective policy to discourage competitors from gaining market share y copying or
offering similar products. .ther arriers are licenses and copyrights" product
comple'ity and low availaility of product components. *romotion and advertising
continues" ut not in the e'tent that was in the introductory phase and it is oriented
to the task of market leadership and not in raising product awareness. A good
practice is the use of e'ternal promotional contractors. This period is the time to
develop efficiencies and improve product availaility and
service. %ost efficiency and time,to,market and pricing and discount policy are
ma(or
factors in gaining customer confidence. &ood coverage in all marketplaces is
worthwhile goal throughout the growth phase. $anaging the growth stage is
essential. %ompanies sometimes are consuming much more effort into the
production process" overestimating their market position.
Accurate estimations in forecasting customer needs will provide essential input into
production planning process. It is pointless to increase customer e'pectations and
product demand without having arranged for relative production capacity. A
company must not make the mistake of over committing. This will result into losing
customers not finding the product 7on the self:.
4. MATURITY PHASE
8hen the market ecomes saturated with variations of the asic product" and all
competitors are represented in terms of an alternative product" the maturity phase
arrives. In this phase market share growth is at the e'pense of someone else0s
usiness" rather than the growth of the market itself. This period is the period of the
highest returns from the product. A company that has achieved its market share
goal en(oys the most profitale period" while a company that falls ehind its market
share
goal" must reconsider its marketing positioning into the marketplace. During this
period new rands are introduced even when they compete with the company0s
e'isting product and model changes are more fre#uent <product" rand" model=.
This is the time to e'tend the product0s life. *ricing and discount
policies are often changed in relation to the competition policies i.e. pricing moves
up and down accordingly with the competitors one and sales and coupons are
introduced in the case of consumer products. *romotion and advertising relocates
from the scope of getting new customers" to the scope of product differentiation in
terms of #uality and reliaility. The attle of distriution continues using multi
distriution channels. A successful .product maturity phase is e'tended eyond
anyone0s timely e'pectations. A good e'ample of this is 7Tide: washing powder"
which has grown old" and it is still
growing.
5. DECLINE PHASE
The decision for withdrawing a product seems to e a comple' task and there a lot
of issues to e resolved efore with decide to move it out of the market. Dilemmas
such as maintenance" spare part availaility" service competitions reaction in filling
the market gap are some issues that increase the comple'ity of the decision
process to withdraw a product from the market. .ften companies retain a high price
policy for the declining products that increase the profit margin and gradually
discourage the
7few: loyal remaining customers from uying it. ;uch an e'ample is telegraph
sumission over facsimile or email. ;ometimes it is difficult for a company to
conceptuali!e the decline signals of a product. >sually a product decline is
accompanied with a decline of market sales. Its recognition is sometimes hard to e
reali!ed" since marketing departments are usually too optimistic due to ig product
success coming from the maturity phase. This is the time to start withdrawing
variations of the product from the market that are weak in their market position.
This must e done carefully since it is not often
apparent which product variation rings in the revenues. The prices must e kept
competitive and promotion should e pulled ack at a level that will make the
product presence visile and at the same time retain the 7loyal: customer.
Distriution is narrowed. The asic channel is should e kept efficient ut
alternative channels should e aandoned. For an e'ample" a ?@?? telephone line
with shipment y a reliale delivery company" paid y the customer is worth
keeping.
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MARKETING STRATEGIES OF FMCG COMPANIES
$arketing research" advertising and promotion are now considered some
fundamental processes that every company has to conduct in order to
cement their position in this competitive market. The top marketing
companies of India offer the est integrated marketing solution covering a
wide range of services including marketing strategy on the o(ectives and
goals" target client and e'pected growth.
&.DR/A %.N;>$/R *R.D>%T; 2TD.
Noted among the top Indian marketing companies" &odre( aims at innovation. It
deals in fast moving consumer goods and operates in India and other cities across
the gloe. The company provides variety in the rands like cosmetics" toiletries"
hair care" faric care" ay care" household care and many others. &%*2 " the
consumer products wing of the BC.5 illion &odre( group is well and truly making it
ig in the F$%& space. The Adi &odre( headed company operates primarily in the
1ome care and personal hygiene categories.
Rural focus6
&%*20s efficient penetration of the Indian $arket" especially the rural consumer
ase deserves special mention. 1air dyes and 1ennas which were once considered
lu'uries in rural households are everyday products now. And &%*2 has een
instrumental in ringing aout this metamorphosis through its amitious rural
e'pansion pro(ect Dharti" which was launched in early C??D. )eefing up an enviale
distriution network that spans 3?"??? plus villages and @??? small towns" the
company has ensured that almost half its revenues come from the rural areas of the
country.
&%*2 is second only to 1industan >nilever <1>2= in manufacturing ath soaps. Its
&odre( No65 rand is the est selling soap in the &rade,5 category. Apart from this"
it0s impressive array of )rands also include %inthol and a host of e'citing 1air care
products. The %ore competency of &odre( has een its aility to successfully create"
communicate and deliver a portfolio of value rands to the huge segment of cost
conscious customers. /ven in times of recession the company decided not to raise
prices and successfully managed rising commodity prices through efficient cost
management and s#uee!ing out efficiencies from its supply chain. It tailored the
si!e of the offering and not the product as such" and introduced them at price points
that the customers could afford.
Innovative promotions6
&%*2 innovated and customi!ed its %ommunication and promotional strategies in
accordance with its goal. ;hunning satellite channels" &%*2 decided to promote its
offerings on Doordarshan" All India Radio" local pulications and regional TE
channels. For its hair colour products" &%*2 depended more on word of mouth
pulicity. It engaged around 3?"??? arers spread across D states in a %o,randing
e'ercise. &%*2 provided them with grooming kits in e'change for prominent display
of its logos in the saloons. ;ince most people turn to their hair dresser for advice" it
made perfect sense to influence the influencer.
International ;trategy6
Another striking aspect of &%*20s success story has een its aggressive ac#uisition
drive. In the past few months" &%*2 has announced 3 ac#uisitions6 Indonesia,ased
$egasari $akmur group and its susidiary" the remaining shares of &odre( ;ara
2ee" Nigeria,ased Tura &roup" and the 2atin American ased groups Issue and
Argencos. It has envisioned a three,y,three strategy for its international
operations6 targeting the three continents of the developing world , Africa" Asia and
2atin America , and in three categories , personal wash" home care and hair care.
The decision to target emerging markets stems from the fact that they have
demographic and ehavioural profiles that are similar to that of India.
These three continents are now on a growth tra(ectory and the opportunities that
they provide for the consumer products usiness are too lucrative to e missed. An
additional incentive to invest in these markets can also e traced down to the fact
that multinationals like >nilever" 20.real and *rocter + &amle don0t have a
domineering presence which provides ample scope for the regional rands to grow.
Also the ac#uisitions provide &%*2 an opportunity to indulge in cross pollination of
randsF ringing some rands into India and taking some rands to these markets.
The Road Ahead
The emerging market centric ac#uisition focus has strengthened &%*20s rand
portfolio y roping in strong rands like &ood -night and 1IT which are among the
fastest growing F$%& categories. Also y ringing in &%*2" &odre( 1ershey and
&odre( ;ara 2ee operationally into a single fold they can e'pect to achieve
distriution synergies and develop pioneering supply chain solutions.
The increased scale of operations would fuel the pace of innovation in the e'isting
portfolio and help leverage randing opportunities. The strong commitment that
&%*2 has to the &odre( &roupGs core values" ethics" employees and consumers will
e instrumental for its success. /ven though concerns may arise with regards to
&%*20s e'posure to currency risk and its aility to ensure an appropriate cultural fit
of ac#uired rands" it is well positioned to ride the growth wave. &%*20s decision to
venture into emerging markets may e a small step for the company" ut it may
well provide the fodder for Indian F$%& companies to take a giant leap in the near
future.
IT%
The IT% is undoutedly one among the premier marketing companies of India. The
company has a market capitali!ation of aout B5D illion and turnover of more than
B5.3 illion. It is also rated among the worldGs est ig companies. It speciali!es in
hotels" agri,usiness" F$%& products" personal care" and randed apparel. Their
usiness motive is to create multiple drivers from corporate strategies. They have
peerless distriution reach" great supply chain management" and effective rand
uilding.
IT%Gs diversified status originates from its corporate strategy aimed at creating
multiple
drivers of growth anchored on its time,tested core competencies6 unmatched
distriution reach" superior rand,uilding capailities" effective supply chain
management and acknowledged service skills in hotelier. .ver time" the strategic
forays into new usinesses are e'pected to garner a significant share of these
emerging high,growth markets in India.
IT% *ricing strategy6
The pricing of the IT% food division depends upon the %ustomers0 demand schedule"
the cost function and the competitors0 price. The pricing of the company is such
that it caters to the need of all income groups of people ut special provision has
een kept for 2ow and middle income group" and their pricing are competitive with
respect to other players like )ritannia" *arle and )risk farm.The company follows
the &oing rate pricing that is the price of the product depends upon the competitors
price. The firm chooses pricing more or less the same as $arket leader.
IT% *romotional activities
A particular udget is allocated for the promotion of the products" the local
promotion scheme is decided y the Area ;ales $anages" it give its suggestion to
the District office and that is forwarded to the 1ead Huarter in -olkata.In another
promotional scheme for )iscuits a particular numer of cases is given freely to the
distriutors according to the amount of sale they make" this was a ,!'+ ,'01
+!'2'%'1 i.e. of the numer of free cases that a particular distriutors gets" off
them a
certain part is reserved for the retailers and customer if they uy a certain level of
iscuit
#uantity.
IT% Distriution
)uoyed y a strong distriution network IT% is likely to retain its market share in the
cigarettes usinessF the an on advertisements is likely to work in favour of IT%
thanks to the recall factor.The companyGs reliale distriution network also ensures
superior inventory turnover.
M"!%)'
The uncommon sense that $arico elieves in" has rought aout radical results for
the company. 2ed y 1arish $ariwala" the %ompany en(oys leadership positions in
most of the markets it is present in, vi!. %oconut .il" 1air .ils" Anti,lice Treatment"
*remium Refined /dile .ils" Faric %are etc.
)e it the convenient packaging for *arachute from the erstwhile tin cans of coconut
oil" the introduction of heart care with ;affola in the edile oil market" or the
starching process randed and eased y Revive" $arico0s innovation has helped it
e the pioneer" stay consumer centric and sustain a firm hold in the market space.
1air .il market6
8ith *arachute and Nihar" $arico holds more than 3?I market share in the
randed hair oil segment. It en(oys over C5I share of the 4??? crore hair oil
segment <composed of coconut hair oil" amla" light" cooling and tonics and gels=. In
the coconut oil market" *arachute itself controls aout 3?I share of the market.
In the coconut hair oil market they have capitalised on the fact that consumers test
#uality ased on the oil0s aroma. From showing the concept of handpicking
coconuts from -erala" to their Jgorgeous hamesha0 concept of celerating
womanhood" the rand has taken numerous leaps. The innovative packaging helps
the rand address changing consumer needs.
/dile .il market6
In the premium refined edile oil market" $arico0s ;affola faces fierce competition
from ;undrop in terms of volume" with the former holding close to 3?I share.
;afolla0s message has een clear. )y showcasing mild fear" its commercials aim to
introduce heart care through the edile oil. Its approach is preventive. The Jkal se0
campaign rought a #uantum leap in sales while the Jthief0 ad" and Jdil ka haal0
reinforced the same idea to slightly varying targets, ranging from heart patients to
the 4? year old man" who is likely to face heart prolems with the kind of lifestyle
he is leading. The J*rayaschit0Krepent ad <guilt after indulgence in food= directly
targets the housewife who is" most often" the uyer in this case.
1aving estalished ;affola as a healthcare product" $arico continues to leverage its
positioning into segments like packaged wheat flour" rice" and reakfast cereals
with a strong health #uotient.
Innovation6
The spirit of innovation coupled with the Juncommon sense0 in $arico is evident in
its uni#ue product designs. This covers the product idea" the packaging as well as
the product delivery. Innovation and uni#ueness encompasses ;affola0s range of
functional foods" *arachute Therapie <hair fall reduction through hair oil=" their -aya
product range" *arachute Advansed Night Repair %rLme" a ottle heater for
*arachute 1ot %hampi" *arachute massager for the working woman.
.verseas *resence
In addition to its presence in the domestic market" $arico has een strategic in
ac#uiring some international rands and leveraging its presence in foreign countries
in two ways, it not only taps newer markets ut also strengthens its e'isting
portfolios.
For instance" in Aanuary C?5?" the $alaysian unit of $arico ought the hair styling
rand J%ode 5?0 from %olgate *almolive %ompany marking $arico0s entry in
$alaysian hair styling market" at the same time growing its strengths in hair creams
and hair gels market.
In $ay C?5?" -aya ac#uired the aesthetics usiness of the ;ingapore ased Derma
R'. The deal" while stitching together an additional turnover of aout 3? crores and
4M??? customers" rings with itself access to an advanced range of skin care
products for -aya. This is complemented y access a network of suppliers of eauty
products from the developed nations.
In a similar case" the ;outh Africa susidiary of $arico ac#uired the healthcare
rand Ingwe in August C?5?. First" the rand goes well with $arico ;A portfolio.
;econd" the ac#uisition strengthens the companyGs distriution reach" particularly
with independent trade and step up its growth momentum.
$arico0s international usiness has shown healthy contriution to its revenues, C4I
of the groupGs turnover in C??D,5?. $oreover" thanks to such smart uys" the
international usiness witnessed a CDI sales growth during the Aune05? #uarter"
when its Indian sales posted a relatively meagre N.@I rise over the same period a
year ago.
8ay Forward
8hile a rand like ;affola may e priced for slightly higher income groups"
*arachute cuts across different income groups and yet has a premium appeal. In
the hair oil segment" the company has attempted to tackle the unorgani!ed
segment through low,cost and small,unit packs.
It also plans to make it igger in the cool oil segment <over 3?? crore market=
through its recent launches, *arachute Advanced %ooling .il and Nihar Naturals
%ooling .il.
In near future" $arico plans to enter rural markets to tap their potential in a much
igger way. It has already started adding to its distriution in areas of $adhya
*radesh" $aharashtra and -arnataka. It continues to foray eyond the prominent
towns and districts" not only in terms of its distriution ut also to understand the
rural needs and tune its portfolio to the same.
.n the international front" considering the recent developments in terms of
ac#uisitions" it can e noted that the company is attempting to streamline its
manufacturing ase and at the same time market its Indian rands through the
newly ac#uired distriution system. $arico is likely to continue with similar strategic
ac#uisitions adding to its revenue ase simultaneously.
In terms of revenues" $arico aims to clock in Rs C3?? crore turnover for the
financial year C?5?. This shall e a DI rise on its last year0s returns" inspite of food
inflation and weak monsoons.
P.#"&# 1'#3 *%& DRAFT %& %1 ",,%%'1 ' *#
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