Harpic Case Study Analysis 1u5e5

RB HARPIC CASE STUDY ANALYSIS Tarun Agrawal

[email protected], +91 9777578075

XAVIER INSTITUTE OF MANAGEMENT, BHUBANESWAR

1 Reckitt Benckiser Case Analysis

Executive Summary Harpic has been the market leader in the lav care market for decades. However Harpic is recent times is facing the following problems 1) Stiff competition from national and international players which are eating away Harpic’s market share 2) Challenges of product penetration and creating a more robust distribution network specially in the rural market 3) To spend the marketing budget either for branding or mass media campaigning or rather invest the same in reaching out to more and more retailers 4) New competitive activity from private labels The analysis has presented the situation analysis of the product market Harpic operates in. It also presents an analysis on the nature and extend of demand. Further it explores the key problems and oppurtunities of product market in general and the brand “Harpic” in particular with the help of various tools such as the BCG matrix, GE matrix, Porters Five Forces Model and Swot Analysis. The analysis also infers that distribution and price are the two chief drivers of this product market in recent times and hence Harpic would do well to focus on these parameters more than branding efforts. There is a huge untapped potential in of institutional selling. With the introduction os eco-friendly toilet cleaners ( Harpic- green), institutional selling can be given a push to widen as corporate and governments across the country are looking to contribute towards the nature. The packaging of Harpic sachets has been suggested a change, and distribution models have been described in the analysis to reach huge untapped rural market and increase product penetration. The positioning of the flushmatic has been suggested in a subtle manner to fight the private labels in modern trade and increase usage of the same.

2 Reckitt Benckiser Case Analysis

INTRODUCTION: Harpic, a brand owned by Reckitt Benckiser, was launched in England and has been extended to more than 47 countries. It was launched in India 25 years back and was the first brand to offer lavatory cleaning products. The concept was pretty new then and hence it didn’t take off. But the product category has become more attractive in the recent past and more players are coming in to get a slice in this market. Harpic is still leading the market by far and has become synonymous to the toilet cleaner category. The awareness and relevance level of the brand is pretty high. Inspire of such a strong market presence and history of creating the product category itself, Harpic is lately facing many problems in of the market share, fall in sales (relative) and increase in competition from national and international players. SITUATION ANALYSIS: Nature of Demand: How do buyers currently go about buying Toilet Cleaner Products? As we understand from the case, the product is a Low involvement product. This is because customer does not seek much overt information for such products. They are usually aware of the benefits offered and about the top brands in the market. We see that only 2 players Harpic and Domex are major players in the market and hence the consumer has to make an easy choice.

The buyer would usually go to specific shops such as general stores to buy the product. We feel this is because it is a low involvement product and availability of the particular brand is the key, as the buyer can easily switch to the competitor brands. Brand Loyalty is also low. We can infer this from the case as we see that all the competitor brand have been able to eat the market share of Harpic with sales promotional offers. Domex did this with reduction in their price, Sanifresh and other private labels offered similar promotional offers to attract consumer.

The purchase decision for such products is mostly planned and hence mass media communications are important to a certain extent. The other sources are the door to door campaigns. However the purchase decision for a particular brand can be made both at home or at the point of sale (which justifies the rise in sales of private label brands). This implies the distribution and availability and point of sale promotions of the product is critical. In the Indian household usually the housewife or the maid is primary purchase decision maker for this product category.

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ROSSITER PERCY GRID Positive Reinforcement

LOW LOI

HIGH LOI

Negative Reinforcement Product placement on Rossiter Percy Grid, which explains the current buying behavior of consumers and defines the current advertising strategies by the brands Indian customers are price sensitive towards toilet cleaners segment. Harpic is priced at Rs. 52 for 500 ml which is the highest in the entire category which leaves an entry point for a smaller player. We can say that Harpic which is the market leader, it is not only because of its brand but because of its presence/availability in more than 90% of the stores (from Exhibit 10), also we can infer that 66% stores do not have Domex (the nearest competitor) but have Harpic.

Market Segmentation:

The market can be segmented into two broad segments: 1. Households ( B2C Market) 2. Institutional Buyers (B2B Market)

The B2C Market can be further segmented as:

a. Age of the buyers ( Women in the age group 25 – 50 years) b. Family life cycle – Married with or without children c. Light s (Average usage – 1 later per year)

From the case we understand the much of the marketing efforts have been focused towards household consumers and not towards the B2B segment. Marketing efforts must be channelized towards promoting institutional selling as well.

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Extend of Demand The total size of the market by value has been given in the table below and the market shares of the various players of the product category has been given in percentage

Market Share by Value Total Toilet Cleaning Market (In Million Rs) Harpic

2008

2009

2010

2011

2012 CAGR

1804

2164.8

2597.76

3117.312

3740.7744

20.00%

79.40%

74.13%

68.75%

63.27%

57.79%

-7.63%

10.50%

12.98%

14.56%

16.28%

18.00%

14.42%

6.30%

6.62%

6.91%

7.15%

7.39%

4.07%

1.70%

1.84%

2.06%

2.30%

2.54%

10.56%

1.60%

2.45%

3.98%

5.50%

7.02%

44.73%

0.50%

1.09%

1.64%

2.20%

2.76%

53.28%

0.00%

0.90%

2.10%

3.30%

4.50%

Domex Sanifresh Kiwi Kleen Others Bref Mr. Muscle Note: 2009-2012 data shown above are forecasted values based on annexure 9 of the case. Also assuming the product category growth rate to be constant at 20% for the next four years.

The above table clearly indicates that if the recent trends of the past few quarters continue, then the forecasted future of Harpic looks gloomy. Harpic has been forecasted to degrow at rate of 7.63% (CAGR). All the competitors will be eating away the market share of the Market Leader. The options available for the Market Leader (Harpic) are

1) Product Innovation (that is continuously attacking itself to develop better product or product formats) 2) Widen the size of the cake and not the slice.

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Value/Volume Ratio Total Toilet Cleaning Market ( Rs/Litre) Harpic (Rs/Litre)

2008

% Change in Market 2007 Share

99.4

96.6

104.1

100.0

Sanifresh (Rs/Litre)

83.5

92.5

Kiwi Kleen (Rs/Litre)

120.7

110.4

Domex (Rs/Litre)

80.9

74.7

% Change In No of stores stocking the Brand

% Change in price

19.9 -0.6 -0.4 -0.7

11.69%

2.87%

2.76%

4.12%

-19.71%

-9.72%

NA

2.3

9.30% 18.99%

8.24%

Note: The above table has been calculated from annexure 2, annexure 3 and annexure 10 of the case.

We note from the table above that tough Domes has increased the price of the product, it still gains market share, as the brand is available at greater number of stores. On the contrary Sanifresh has reduced its prices but has reached out to lower number of stores (relatively) and hence its market share has decreased. The above table shows that the product category is dependent chiefly on two parameters

a) Distribution and availability ( no of stores stocking the brand) b) Price of the Brand

So the strategy for Harpic is to make the brand available at more and more number of stores by probably cutting on mass media promotion. Also the point of sale promotions should be used at purchase decisions are affected by it. The Brand is already an established brand, so the focus should on making the distribution more robust rather than spending money on branding. Harpic can also look for giving higher margins to the retailers to enable and ask them to push Harpic over Domex and other competitor products. Since it enjoys a higher value/volume ratio, and it would cut down on the advertising budget, it is always a good option in the short run to give higher margin to retailers.

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Problems and Opportunities BCG MATRIX

Harpic is a STAR according to the BCG matrix as the market growth rate is very high(>10%) and the market share for Harpic is high.

PRODUCT LIFE CYCLE

The product is in growth phase now even after 25 years of presence in the market. The initial introduction phase was very long because the market was not ready to graduate to the next level. But now in last 5-6 years we have seen significant rise in the sales volume and hence it’s in the middle of its growth phase offering huge untapped potential.

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PORTER’S FIVE FORCES:

Supplier Power Threat of substitutes Buyer’s Power Barrier’s to entry Competitive Rivalry

•The product as mentioned is easy to manufacture and as not many players the supplier power is LOW •Is very high because of products like phenyl, detergent, acid which are relatively cheaper. •Is medium as they can have many options available but for some buyers the product has become a necessity. •LOW and we see rise in number of small players •HIGH and we have seen in the case many methods adopted by the companies (like price cuts, promotions etc) to gain market share.

GE MATRIX: Based on the porter’s 5 forces we can see that the industry attractiveness is medium in this case. The industry has tremendous growth potential but also has lots of new players coming in. Harpic as a company has very high competitive strength and has dominated the market since the beginning. Hence it’s worth growth/investing.

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Strengths:

Weakness:

- Product category creator (Watsonian First)

- Relatively high price

-Market Leader

-Less Usage levels

-Good distribution and stores covered

SWOT Opputunities:

Threats:

-Still major portion of the market not tapped

- Increase in local players

-Venture into newer offerings -Covering the rural and less developed towns

-Increase in low cost private labels -Strong marketing by competitors

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Evaluation of Alternative Marketing Programs A) Objectives for Harpic 1) To maintain or increase market share of Harpic 2) To increase penetration in the rural market. 3) To increase institutional selling

ALTERNATIVES: Increasing usage levels: The usage level of 3-4 times a month is very low. But considering the Indian market where Harpic is still used along with traditional cleaning agents (phenyl, acid) the number is not a surprise. All the marketing campaigns till now are mostly highlighting the various benefits of toilet cleaners. Harpic as per the consumer research is offering cleaner looking toilets, germ fighting and bad odour removal. This has been done for the past 6-7 years after the door to door campaign. Also as per Annexure-4, 60 % of the people using Squat and 67% of the people using Western, clean their toilets on a daily basis.

We feel that this is the right time when along with this the media campaign should speak about the usage pattern. Toilet cleaning of 4 times a month on average is pretty low and the company should try and educate the customers to increase it to 6-8 times a month. The campaign should talk about the benefits and telling the customers that the product should be used in 3-4 days for better protection. This will increase the sales level to 1.5 -2 times per year. The problem could be that directly telling the consumers might CREATE wrong impressions about the quality and hence the company can convey the same in the packaging (describing way to use).

Use of Sachets:

We see that around 90% of the consumption of toilet cleaners is in the urban area (rural areas 100,000 out of 1 million). This is a very big untapped market in India. Also the price of the product and its availability in packs of 200 ml and 500 ml are hindrance to trial. The customers who have relatively less usage levels, avoid going for a specialized cleaner and hence stick to phenyl, detergents etc. Also if we see the stores which stock Harpic currently, are either large or medium sized general stores. But the small sized stores do not have the working capital to invest in a whole pack of Harpic.

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Harpic had introduced sachets of 35ml each at Rs.4 few years back. But it was not distributed and marketed as well. The sachets concept was not tried in many smaller markets and hence did not boost the sales. Rural markets where penetration levels are very low are the best market for sachet. The sales can be made through the small traditional stores.

Reckitt Benckiser Case Analysis

The requisite calculations have been shown below. The margin per sachet comes to be Rs. 0.42, which is ~ 15%. The product can be distributed using the large network of RB easily across all regions. In rural regions this sachets can be sold through the small kirana stores, the local bazaars and other tea/snack stalls which are widely distributed.

It is still better than the Rs. 4 pack and the consumer will not have to more than what he wants for a single use. Cost-Benefit for Sachets Average number of consumptions per month Average total consumption per year Total number of uses per year Avg total consumption in one use Selling Price of 500 ml(taking as Cost) Cost per ml Cost for 20 ml Packaging and other cost (assumption) Selling price per sachet (suggested) Margin (apart from cost taken as Rs.52)

4 1 48 20.83333 52 0.104 2.08 0.5 3 0.42(15%)

litre ml Rs Rs

Rs Rs Rs. for 20 ml

Institutional Selling: As discussed earlier one of the other major segment which has been overlooked is the Institutional Selling. We are suggesting that along with Harpic which is sold to households, they can also target organizations and corporate with more customized products.

Organizations as big as Indian Railways which requires toilet cleaning in such a huge scale on a daily basis can be primary targets. They use cleaning agents which are low costs and yet very effective. Harpic can come out with a similar product, we call it HARPIC-C, which will be customized according to the needs and requirements of railways. Same can be done by entering into strategic partnership with local rural Panchayati and municipalities. For further details about institutional selling products please refer to Table A below.

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CONCLUSION: Table A Marketing mix/Program Product Decisions

Strategy

Reasoning

a) Develop New Product

New eco friendly toilet cleaner which uses safer plant based ingredients including natural oils of citrus, sassafras and pine etc

Though slightly more costly than the conventional product but can be sold to institutions like corporate offices, government offices and airports which are more and more concerned about environment and would like to follow the green way and sustainable living mantra. Brand name "Harpic Green"

b) Change current products

The current sachet size should be changed

To facilitate one time use and improve usage in Rural Markets in particular

c) Product Positioning

Positioning of flushmatic should be changed slightly

The consumer should be convinced that the flushmatic after being put in the cistern will work for a large number of usages/flushes which gives him better or equivalent value for money than traditional toilet cleaner bottles

d) Branding

Go Slow

It’s already an established brand leader and more ROI in other initiatives as mentioned above

Distribution Decisions a) Intensity of distribution

Strategy

Reasoning

More intensive than exclusive

As explained above

b) Multiple Channels c) Degree of Channel Directness

Yes, multiple channels should be tried More in case of institutional selling and has to be less in cases of B2C consumers

Promotion decisions a) Mass Media

Strategy Go Slow/ Spend Less

b) Door to Door campaign c) Point of sale/purchase promotion

will work more now in rural areas

Reasoning Established Brand. Mass media is more costly Urban households are increasingly aware of the toilet cleaning products. The challenges and opportunities exist in the rural arena

Should be more Tie up with rural Panchayati and tier III and tier IV town municipalities to distribute Harpic sachets in primary

Has been inferred above With the usage of affordable packs by the school authorities, the villagers will get aware of this products and this is expected to induce trial and usage

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c) New Channels of Distribution

To cater to the urban household markets, rural household and institutions

Reckitt Benckiser Case Analysis

and secondary schools

Price Decisions a) Price level

Strategy Maintain or reduce slightly

Reasoning

b) Price variation

Can be tried in some geographical regions based on purchasing power of the state/geographic region

As the product category is price sensitive, prices can be slashed for rural or low income per capita regions to enhance usage and product penetration

c) Margins

More margins to retailers can be an option in the short run

To increase retailer push and thus maintain your market share for the time being

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