Situation analysis
Nature of demand
The mass market is what drives the sales of P&G consumer products. This explains why the company targets chain stores like Wal-Mart to get the attention of the larger mass market. The demand for consumer products is affected by numerous factors as indicated by the marketing case presented by P&G. according to this case, products prices are critically important in driving sales. Although P&G was used to pricing their products at a premium rate, they had to change tactics as their competitors had understood the consumer behavior towards pricing and were closing down on sales, edging out P&G products. The company therefore resorted to a lower price strategy, especially for its newly introduced PinBrush product.
The demand for the products in the market is also driven by the taste and preference of the consumer. Consumers like trying out a new product. For example, Spin Pop sold for millions despite its exorbitant pricing. This could be a result of its monopoly. When P&G introduced a similar product, with a much lower price, it outdid the Spin Pop products by selling very quickly to a larger market share. Taste and preferences also make some consumers go for more expensive products irrespective of the product costs.
Extent of demand
According to the recent sales report, P&G reached $200 million in their global sales of electric Crest SpinBrush. By the year 2000, there were 3 million U.S. electric toothbrush users. In the larger market share of all the consumer products, Colgate, P&G’s main competitor had a market share of 29.6% against 25.6% of P&G in 1998. However, with a low price strategy for its electric SpinBrush product that has visibly gained popularity, the company is presumably the world’s biggest maker of consumer products of toothbrushes and toothpaste.
With the increased dependency on technology, the electric toothbrush is likely to gain more popularity as globalization takes place, thanks to technology. P&G’s global strategy and lower prices have generated price wars. During this period, Colgate resorted to cut their prices from $19 to $12 due to the stiff competition, presumably from P&G. however, the current market situation indicates that many consumer products are best received by the market through market fragmentation. That is, the internalization of the target markets means that a wide range of consumers, with different tastes and preferences, have increased in numbers and therefore the need to segment them appropriately for proper market penetration.
Nature of competition
From the case study’s point of view, it is evident that the competition for consumer goods and services is generally becoming stiff daily. This is because consumers are becoming aware every day, creating more complexity in the marketing strategies for various products that are perceived to be affecting their lives in one way or the other. A typical sign of competition is seen where competitors like Colgate have decided to introduce a new product, similar and more of a SpinBrush’s look-alike with a similar price. While this approach is likely to generate more competition, the companies’ brand loyalty will play a big role in their success or failure in the market share acquisition. This is because a company that would be able to lock up their customers through strong brand and proper market penetration strategy will carry the day in the long run.
Environmental climate
Various factors are known to affect business environment and influence a firm’s ability to penetrate and succeed or fail in the market. These factors can be categorized into social, political, economic and technological. The economic factors entail availability of resources to continue manufacturing and increase innovations, income of the consumer, infrastructure, and the economic situation of the countries of operations and the global economy as well. Political factors are government policies, taxation, the political climate of the country or region of operations, and regional intergradations like European Union. The social factors are represented by demography, culture and social beliefs, and many more. The technological trends in the global and regional market is seen in the manner in which internet has revolutionized global trade, creating viral marketing opportunities for many firms in the global arena.
Stage of product life cycle
According to the P&G’s experiences, it is clear that the products life cycle is an important aspect of market success. For example, the initial development of numerous new products and making changes to the existing ones by the previous regime did not yield much result, thus creating a scenario where the brand identity is diluted. In other words, although new product life cycle may be attractive to the marketing prospects and consumers at first glance, their endurance is another issue all together. It therefore means old products should be retained as they define the brand identity, although some changes may be necessary to ensure the conformity to the market changes and trends, the most important thing to do is to retain the old products identity and make progressive changes as new products are introduced systematically. The point to note is that the company should never deviate from its core business that would adversely affect product life cycle of its old products. This is because consumers prefer familiar products, and thus building a new product from the perspective of the familiar old ones is the best strategy that would continue building the company brand.
Stage of product life cycle
The increased cost of production will lead to increased cost of the product as the company will be striving to pass the cost to the consumer. Subsequently, because the company cannot generate more income due to lower sales turnover, the amount of money set aside for marketing initiatives will be diminished. The marginal cost of production and supply may results from cost of transportation, labor and energy in a particular country of operation. If these costs are lower, the profit margin will be enough to support the marketing initiatives in place.
P&G managed to reduce the cost of acquisition of SpinBrush, by making a strategic buy-out that ensured the market was gradually organized, even incorporating the founders of the company into its management with installment payment. This helps the company to reduce the marginal costs, especially that which would have been used to pay new employees.
Skills of the firm
It is common knowledge that developing skilled manpower is one of the most challenging aspects for companies. This is because it’s quite costly to recruit new people and integrate them into the company’s culture. Its therefore advantageous is a company can outsource programs that are not within the core business of a company. For example, P&G has used their strategic approach to innovations by adopting a collaborative approach with competitors.
From the case of P&G, it realized that they have strong ability in marketing, distribution and innovation of new products. These areas can never be achieved without adequate and strong research and development to accompany them. Comparatively, the way P&G has developed in these areas has been credited to the exceptional management skills developed by its CEO Alan G. Leafy. These marketing and innovation skills have seen them dominate the global market within their areas of specialization.
Financial resources of the firm
Effective marketing program can only be achieved if the resources are available to do that. According to P&G’s current financial capability, it can launch an effective marketing initiative to reach the global market. This is because as indicated earlier, its SpinBrush product has exceeded the target sales limit, thus huge profitability is still projected as it continue with its global development and expansions. The funds for marketing should be made available when the company closes this financial year. That is, it should be part of the budget for the next financial years of the company.
Distribution structure
Channels of distribution help firms to move their products to the level of reach of their consumers and other businesses. These channels include wholesalers, retailers as well as sales agents, who help in making the products and services easily available and accessible to the consumers, i.e. they can access the products for sampling and purchase. Although P&G does not have its inventories around the globe for its internationalization strategies, the company has managed to use multiple distribution channels, involving retailer such as pharmaceutical stores, supermarkets, and wholesale distributors to help them reach a wider market. This has helped the company improve its efficiency of operations in its core areas of specialization. Although big retail stores like Wal-Mart have taken advantage of their market dominance to dictate terms of productions and costs, the strategic use of other distributors will ease the pressure as more and more small retailers get more market penetration. This will also put a lot of pressure for Wal-Mart to ease their demands as their customers will be demanding more of their favorable products from P&G.
These channels also offer good opportunity for promotional and marketing opportunities that is crucial for P&G. all the P&G has to do is to develop marketing and promotional teams to approach the segmented market as per the requirements of each distribution store. The current retail stores also have big promotional screens to advertise products. These screens will present an important aspect of promotions as the consumers are alerted of the availability of the P&G products. The distribution channels also help develop assortment criteria, and lessen the search time for clients.
Symptoms, Problems and opportunities
Key problem areas
The key problem areas that affect P&G are:
- lack of market segmentation. Although the market structures are important aspects of adequate marketing, P&G has failed to notice that globalization will require more structured approach, with different market segments developed for marketing;
- the other area is the lack of advertisement for its products and services. The company needs to embrace advertisements in both print and electronic media as their revenue base can support that;
- the company seem to rely much in the research and development, R&D initiatives. This may not be more strategic as it has been realized that development of new products is not adequate for the company’s success. Instead, a lot of emphasis should be put on the strengthening of the current products with increased marketing and promotions as the main target.
- powerful retailers like Wal-Mart has a stronger bargaining power hence pausing a lot of thereat to the profitability of P&G.
Key opportunities
- there’s an opportunity of segment their market and offer various products as per the segmented market demands. The best criteria will be to consider factors such as economic ability of different markets, gender and age of consumers.
- Advertisements and promotions on both print and electronic media
- to counter the threat of the bargaining power of retailers like Wal-Mart, P&G should adopt a strong marketing and promotions to strengthen their position as a brand that can not be missed by any retailer in its shelves. They also need to develop stronger association with small retailers and distribution stores.
Generally, the marketing situation for marketing is very favorable and the stronger marketing initiatives taken by the company, the better the profitability and successful expansion they will achieve in the long run.
Objectives defined
The objective of this analysis is to ensure a proper and effective marketing and promotional activities are designed to meet the company’s objectives. The target market is segmented mass market. Although the products will be directed to the mass market, the need to develop separate products for different market segment will be critically important. It is therefore necessary separate products that targets high end market from the low end markets. It is known that high end markets consume small but generate a lot of profit, while low end markets are high consumers. A specialized spinBrush product should be produced and sold at an average of $20 per unit for the high end consumers in exclusive enterprises while the other category of the product should target low end consumers at $6 per unit.
Evaluation of alternative marketing programs
Alternative One: Print and electronic mass media
This is important as it creates brand awareness and increase sales volume thus increased sales turnover and profitability. The disadvantage is that is a very costly approach to marketing and is likely to be biggest challenge to the marketing department. Again it may not be critical in the segmentation strategy for P&G.
Alternative Two: Online Marketing
It’s the fastest growing marketing for mass consumers. However, its reach is limited to accessibility of the target market segment. That is to say, the target market will be hampered if they do not have access to the internet, a common phenomenon in the developing market economies.
Alternative Three: On-store advertisement
On-store advertisements have been used by several companies to increase their brand awareness to the target consumers. It is characterized by several big screens installed in the retail stores, informing the consumer of the availability of that product. The disadvantage is that they only display products to limited groups of people who visit the stores. The other limitation is that not all retail stores have screens for advertisements.
Alternative Four: Sales Promotion
The decision to adopt sales promotion is critical as it has various advantages that can help P&G adopt strategic approach to penetrating market. First sales promotion can help us to adopt price discrimination. That is, different target markets are charged different prices in line with consumer behavior. It also takes care of regional differences in terms of consumer demand and ability. The problem with this approach is that it is a short term approach to marketing and is likely to tarnish the quality image. Again it increases the price sensitivity as consumers are likely to target only the promotion periods to buy.
Decision
Sales promotion will be the best alternative as it well takes care of the market segmentation that is presented as an opportunity for its marketing initiatives. Secondly, although its duration is short, the aim is to create more brand awareness hence it will come in handy for the promotional of P&G products. It’s also less costly as compared to print and electronic media advertisement. As stated earlier, the globalization of the P&G requires that it is focused on driving the sales through separate segment of consumers as markets are not uniform hence requires separation.