Business / Strategic Marketing Gillete
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Autor: anton 31 March 2011
Words: 3298 | Pages: 14
TABLE OF CONTENTS
1 EXECUTIVE SUMMARY 3 -4
2 SITUATIONAL ANALYSIS 5
2.1 PESTE ANALYSIS 5
2.2 SWOT ANALYSIS 6 -7
3 MARKET SEGMENT 8
4 ALTERNATIVE MARKETING STRATEGIES 9
4.1 MASS MARKETING 9
4.2 DIFFERENTIATED MARKETING 9
5 SELECTED MARKETING STRATEGY 9
5.1 PRICING STRATEGY 11
5.2 PROMOTION 12 -14
5.3 PLACE 14 - 15
5.4 PRODUCT 15
6 TIMELINE OF ACTION DEVELOPMENT Ñ—Ñ‰Â»~! Â©|ÒÑ˜Â©wÑ‘qÂ®Ð¡Ð•Ð¢ÐŽC -17
7 CONCLUSION 17 -18
8 BIBLIOGRAPHY 19
1 EXECUTIVE SUMMARY
After the acquisition of P&G and Gillette in Oct 2005, Gillette GBU (Global Business Unit) had become one of the billion dollar brand under the P&G Personal & Beauty category. Together, they can offer many new benefits and solutions for clients all over the world. Now, more than ever before, consumers have a greater range of innovative products to choose from.
Fusion Power is the latest razor developed by Gillette in 2005. It has been designed with a feature of manual or battery power, on the front ÐŽV 5 blade shaving surface technology and the back ÐŽV 1 precision trimmer blade. The most advanced laser welding technology was employed to obtain the optimum standard for speed, precision and cleanliness.
The launch of Fusion Power is already imminent, despite internal split of views to this new product with such a premium pricing. The following message should be well-communicated by senior management of P&G - Gillette to all staff across the company.
â€žP The vision and objectives of the company.
ÐŽV Reliable long term performance
ÐŽV Sustainable Growth
â€žP The benefits of launching Fusion Power versus drawbacks.
â€žP The need for the new plants in Boston and Poland, and their establishment schedule.
Issue calls for attention is the efficiency of product development and innovation. Lead time should be shortened and a clear schedule and deadline need to be set for every product launch. Any slippage of deadline should be explained. They would help reduce the threat of competitor imitation.
2. SITUATIONAL ANALYSIS
2.1 PESTE Analysis
To the disadvantage of Gillette, the antitrust laws discouraged aggressive patent enforcement which in turn indirectly drove competitors like Schick to imitate GilletteÐŽÂ¦s product. This significantly shortened the first mover lead in launching a new product.
After the war in Iraq and the terrorist attack ÐŽÂ§911ÐŽÐ, oil prices, valuable metals and material were sky high and pushed up operating costs of most industries. Prices of by-products such as plastics were also affected.
With the rise in living standard and educational level, people became more concern about their appearances, especially in developing countries such as the former Soviet Union and China. To men, shaving has become a daily necessity; and to women, shaving was one of the essential steps in their pursuit of beauty. However, the decision of selecting a shaver tends to be perceived as low involvement by most people.
The basic equation of profit (or loss) is the difference between revenue and cost. Either pushing up revenue or lowering cost would have a positive impact on the bottom line. Here technology advancement comes into play, amongst other factors. For the razor industry, the ability to meet the standards of precision and cleanliness is crucial is gaining customer satisfaction. On the other hand, the ability to mass-produce the products would reflect on their production cost. The technological advancement, such as, the adoption of laser in manufacturing industries, has facilitated better quality, mass-produced products.
In the year 1990, environmental protection was not as hot a topic as in today. PeopleÐŽÂ¦s degree of acceptance to disposable products grew due to the convenience gained. However, there is a new movement that people are much more aware of the damage of disposable items can do to the environment. PeopleÐŽÂ¦s is slowly changing and asking for more environmental friendly solution.
2.2 SWOT Analysis
Gillette has been well-known for its brand and its market leadership in the shaver industry. In 2000, it had 63% of the US market share in dollar terms, and had been consistently exceeding 60% for the past thirty years, leaving its competitors far behind.
Gillette has its own R&D teams, one located in Reading, England and the other in Boston. The in-house teams enable Gillette to have dedicated and focused effort in designing new products and improving existing products. The responsiveness of the teams was demonstrated in the launch of Good News! in 1976, for competing with BICÐŽÂ¦s single-blade disposable razor launched in 1975. The most successful three thin blades in the history are the Mach3 in 1998 which was named winner of the American Marketing.
It has already been evidenced that customers were switching from cartridges to disposables within Gillette. The fear of cannibalization has created tension among different teams in the company, as in the case of Atra, Trac II and GilletteÐŽÂ¦s Good News! as opposed to Mach3 and Mach3 Turbo causing split views and less co-operative attitude.
It has taken Gillette more than 5 years to develop Fusion Power. To the rapidly changing demand of customer, it seemed not that capable in keeping up with the pace.
Its long term debt has accounted for 49% of its total liabilities which cost high level of interest expense. Operating cost was at its record high in 2000.
Consumption power of the average people has been raised with the favorable economic trend throughout the 2000ÐŽÂ¦s. People were more willing than before to spend money on quality products.
Although a leader in the market, Gillette should not underestimate its major competitors. Schick was able to produce blades that fit on GilletteÐŽÂ¦s razors and BIC shared 45% of the disposable segment in volume terms. Advertising campaigns were planned in year 2000 by both Schick and BIC for $20 million and $16 million respectively. Gillette also faced the challenge of product imitation. The antitrust laws made enforcement of patent rights difficult. Although the competitors tended to share the remaining market portion, this nevertheless hindered the further growth of market share by Gillette.
The increasing share of disposables confirmed the low involvement of customers in razor selection. This is obviously a threat to Gillette towards its launch of Fusion Power, which emphasized on quality and innovation
3 MARKET SEGMENT
In 2003, the sales forecast is 18 million razors and 3.4 million blades and approximately with cartridges account for 34% and, disposables for 27% and others blades for 9%. In the past three decade, Gillette had over 65% shares in dollar term for wet razor and in North Atlantic market is approximately 70% of the world market. At this stage, Gillette is still the leader of the market and the follower is Schick with only 17% share in term of dollar. Therefore, Gillette had the most competitive advantage among all competitors in near ÐŽVtotal control of the market.
For the new product, ÐŽÂ§Fusion Power, both manually or battery powerÐŽÐ the major market segment is male over 30 years with health financial background. This particular group of customer cares a great deal about closeness, comfort and appearance. Especially in the West European market, customers are much more prefer razor with replaceable blades then disposable razor.
Razor is a daily use product and the major distribution channel is the supermarket. Although customer could be sensitive to price, but the technological advance combined in this single shaving system will capture the current market share and create a new market segment because of Fusion Power uniqueness.
The disposables market had been experience the most rapid growth in the past decade. By 1998, it had grown to account for 60% of the wet-shaving units sold in the United States and 45% of dollar volume. The major competitor in the market segment is Bic Corporation and it account for 9% of the total dollar market share. This market target customer is price-sensitive, male below 30 and female shavers. In other word, they are not Fusion Power target customer. However, we should pay close attention to this market and understand how the customer behavior will change.
4 ALTERNATIVE MARKETING STRATEGIES
4.1 Mass Marketing
Product will be launch as a premium product with rapid skimming strategy. No discounting will be allocated, as the product is one of his kinds. Both factories will be built simultaneously to ensure maximum production to capture the market. For the existing products Mach3, Mach3 Turbo, Senor, Atra, TracП and disposable will remain unchanged.
4.2 Differentiated marketing
Product will be launch as premium product but with different pricing strategy base on geography. No discounting will be allocated, as the product is one of his kinds. First, the factory located in United States will be build and once the West European market is ready, the second plant in Poland will follow. This will lower our capital investment risk but most likely will affect the market share. For the existing products Mach3 Power, Senor, Atra, TracП and disposable, sales promotion will be adopted to maintain market share and brand awareness.
5 SELECTED MARKETING STRATEGY
At a different angle, Fusion Power is a product design for one market segment but the segment is so large. It is almost the whole market. Therefore, we should adopt the mass marketing strategy and in corporate the niche marketing strategy together. Also, Fusion Power had the greatest technological advances (16 different patents). It is almost impossible for the competitors to imitate in a short period this time.
The product will launch base on a mass marketing strategy and the global advertising campaign will launch base on niche marketing strategy simultaneously but it will pin point the different buying behavior in US and European market. The campaign will pummel weaker competitors into submission and leaving Gillette in near-total control of the market.
For the existing products Atra and Trac II is already in the decline stage but both system continue to hold sizeable share positions worldwide. The impact on cannibalization is minimal. For Mach3 Power, it is very different as it is still in the growth to mature stage. We expect Mach3 Power will continue to growth in the next three years. However, option is limited and sacrifice is necessary. Mach3 Power will eventually become a secondary product in order to make way for Fusion Power. The price will remain unchanged for the next two to three year and sales could drop due to customers switch to Fusion Power at the early stage. If necessary, Mach3 Power could be use as a tool to create a price war directly with the competitors for a 3 to 6 months period. Alternative, same principle can be adopted as special marketing campaign in the development market to encourage customers to switch to more quality blade and razor product.
As disposable is not Gillette target market, existing product will continue but all related development will be suspended.
5.1 Pricing Strategy
Facing keen competition in the industry, Gillette adopts premium pricing over quality while it plans to launch the product, Fusion Power into the market. The premium price is required to let its customers to differentiate the Mach3 Power from its competitorsÐŽÂ¦ product and at the same time to generate sufficient cash flow to cover the variable production cost and huge amount of advertising and R&D cost.
To better understand pricing strategy of Gillette, we should realize the pricing / quality strategy adopted by Gillette in the price setting process.
High Medium Low
High 5.1 Premium strategy High-value strategy Super-value strategy
Product Quality Medium Overcharging strategy Medium-value
strategy Good-value strategy
Low Rip-off strategy False economy strategy Economy strategy
The target markets of Fusion Power are men of over 30, whom are affordable of paying higher price for better product. With specific product feature of Fusion, premium strategy of setting higher price for delivering this high quality value to customers is adopted.
Importance of using consistent pricing strategy in different geographical locations is critical in hitting the right market segments. However, different sales promotion or advertising may be required for penetrating different location markets as elasticity in these markets may also be different. Majorities of US men, whom are price sensitive, are using Disposable product. Appropriate advertising is required for them to change their practice, on the other hand, European market is easier to penetrate as they prefer quality product.
For setting the price in different market, Gillette is also required to consider the currency effect in different markets. It is also subject to market risks of being exposing to changes in currency and interest rates in different locations. It regularly assesses these risks and has established business strategies to provide natural offset, supplemented by use of derivatives financial instruments to protect against the adverse market risks.
In the introductory phase of launching Fusion Power, marketing management of Gillette can set a high or a low level for each marketing variables (price, promotion, distribution and product quality). Considering factors of price and promotion, rapid skimming strategy is adopted. Gillette charges a higher price to recover as much profit per unit as possible. It spends heavily on promotion to convince the market of Fusion merits even at higher price. The higher promotion acts to accelerate the rate of market penetration.
This strategy makes sense when a large part of the potential market is unaware of the product (in US market); those who become aware (in European market) are eager to have the product and can pay the asking price. Gillette, being faced keen competition, wants to build up the brand preference through this premium pricing also.
Price High Rapid skimming strategy Slow skimming strategy
Low Rapid penetration strategy Slow penetration strategy
Gillette decides to launch its Fusion product both in US and European market simultaneously. It must well realize the different buying behavior well in order to design appropriate advertising and promotion program to hit its market. From the statistical data, it understands that their promotion program should be designed to influence the feeling of US men that it is the right time to switch from using Mach3 or disposable to Fusion which is of higher quality.
US men whom with age of over 30 are used to using disposable dust more promotion booths are required to set at major cities for a longer period of time to let them realize their necessity in changing their behavior. As most of them are price sensitive, promotion program should be first designed and taken up by aggressive sales force. Appropriate incentive should be considered at the beginning stage. Heavy advertising by spending money to create strong customer preference and awareness of the new product is required. Free trial use of Fusion Power is also an alternative to draw their awareness.
For European market as most customers prefer on using high quality product. Fusion can hit this market well with promotion program of informing them well the launch of this product. As for both market, TV advertising program is critical to pass the message. However, the focus must be ÐŽÂ§Consumer is BossÐŽÐ as it is the new media value chain.
The price of Fusion is not set at a very expensive level and it will be sold through majority of retail stores to enhance its accessibility to potential customers. Selecting the right distributing network, like Wal Mart, Close, Target and drug chain store can make the market penetration more efficiency.
In US market, most of the customers are used to use disposable in their daily shaving, distributing or selling through specific promotion counters manned by Gillette staff are required as it takes some time for explaining and drawing customersÐŽÂ¦ awareness to adopt the new product.
In European market, selling through ordinary retail store should be sufficient to ensure accessibility. More resources should be focused on customer service to ensure proper communication with customers upon specific request.
Gillette has invested huge amount of capital in R&D to enhance its features to suit customersÐŽÂ¦ need. It plans to build up its companyÐŽÂ¦s global image with this product as it believes this product with premium quality can help customers easily differentiate its product with its competitorsÐŽÂ¦. It has suspended all related development of disposable market as it anticipates that Fusion can finally penetrate the US market to replace the disposable. More resources are therefore re-allocated to support this product. At the beginning stage of launching, customer service takes an important role in ensuing the quality feedback from customers are well addressed.
For product packaging, Gillette adopts pricing over quality policy. To suit for this policy, more focus should be put on packaging the product through emphasising ÐŽÂ§State of ArtÐŽÐ with the use of Sensor. Its packaging design should be outstanding with eye-catching effect among other competitors to keep potential customerÐŽÂ¦s awareness.
6 TIMELINE OF ACTION DEVELOPMENT
The following table outlines the implementation plan for launching the Fusion product. The set up of plant in Boston and Poland is meaningful to the success launch of product as it set up the milestone for other related activities like global advertising and inventory building to be on schedule. For the area of advertising, different types of advertising are required for penetrating into individual market strategically.
The time frame of carrying out the advertising is critical to draw customerÐŽÂ¦s awareness gradually. Starting from global brand image advertising, leaflet advertising, sale promotion booth, the advertising program tactfully as it is believed to be an important process to compete with competitors during product launching.
Action Items Budget Who Completion Date
1. Plant Establishment (Boston / Poland) 95M Project Director / Consultant Feb ÐŽV June, 2005
Premises (50M already invested)
Equipment and machinery
2. Inventory 15M Production Director
Raw material Aug, 2004
Finished product Jan, 2006
3. Global Advertising / Promotion 100M Marketing Director
TV advertising (Global)
- US & Europe
Print media advertising (Global)
- US & Europe
- US & Europe
Jan ÐŽV Feb, 2005
Feb ÐŽV Mar, 2005
- US & Europe
4. Product Pre-launch Meeting with major supermarket chain stores Marketing Dept Oct, 2004
4. Delivery Schedule (including all markets) 3M Logistics Director One week after advertising launch
US market Jan, 2005
European market Jan, 2005
Asian market Feb, 2005
5. Product Post-launch Review Meeting 30 days after launch
6. Customer Survey Marketing Dept 90 days after product launch
Product innovation is one of the key factors for business to growth and profit in today business world. In 1988, Gillette senior management already believed in product innovation. Furthermore, global advertising is the way of the future. This is why Gillette must launch ÐŽÂ§Fusion PowerÐŽÐ in 2005. The other reason that Gillette must launch Fusion is the long term debt that accounted for 49% of its total liabilities. As a result, it leads to high interest expense. Therefore, Fusion will be the most advance weapon Gillette had to fight back and pummel the competitors. .
The market segment for Fusion is male over 30 years old with health financial background which care great deal about closeness, comfort and appearance. Because of this and Fusion is one of his kind products, we adopted the premium price strategy. For promotion, rapid skimming strategy will be deploying together with global advertising. Fusion Power will be distributed through supermarket chain around the world. The product will pack in a ÐŽÂ§state of the artÐŽÐ premium packing.
This marketing plan will been successful because of engender strong customer loyalty and perceived to be the best by consumers as a result of global advertising campaign. The command premium pricing due to technical leadership and a high profit margin return will ease the pressure from disgruntled shareholders and reduce the long term deft. Finally by launching Fusion Power, Gillette had further developed in growing global categories.
1) The Gillette Company, Annual Report 2001.
2) P&G, Annual report 2005.
3) The Procter & Gamble Company, Oct, 2004 Annual Meeting of Shareholders, Report on the Business by A.G. Lafley.
4) P&G ÐŽÂ§The future of MarketingÐŽÐ by Jim Stengel. Feb, 2004.
5) www.high-performance-marketing.com Case study Gillette.
6) www.strategy-business.com Global Cosmopolitans by Rosabeth Moss Kanter.
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