MARKETING STRATEGIES FOR LOW-INCOME CONSUMERS

Marketing Strategies for Low-Income Consumers

 

Part One: Question/Answer

Q1.      Unilever should divert premium products to invest in low margin section of the marketplace due to the following reasons. One positive thing from that margin segment is that low-income customers in the northeast have improved by 28% during the boom and therefore there is a chance for the company to become the leader in those low-income markets. Unilever must aim at low income segment of customers in the north east by building a new brand that is solely developed for about 48 million consumers. The reason is that most population in that segment is low income earners, and therefore by doing that it will capture large market. Unilever should also divert monetary resources from its premium products to invest in low margin segment of the market to avoid competition with companies like P&G. If the company is able to get its plans right, low income customers will be ready to pay for its product without cannibalizing its superior brands (The business school of the world, 2007, p.2).

Q2.      Unilever have the correct abilities as well as structure to be moneymaking in a marketplace which smaller local businesspersons fight to break even due to the following reasons. The company has an alumnus of INSEAS who took did advanced management programme. He had acquired theoretical skills before he joined Unilever. That is after graduating in Business administration. He therefore has marketing and seniority skills that are necessary for the project. Most significantly, he is equipped with current skills and technological experience; in fact he had not ever been convoluted in the old-style method to marketing the laundry detergent as well as having observed the achievement of Nirma1 in India, he knew of the any danger posed by the native brands at the low income customers. Concerning this noble project, Laercio managed to assemble an inter-corrective team comprising Airton Sinigaglia from Manufacturing, Antonio Conde from Finance, as well as Marcos Diniz from Sales (The business school of the world, 2007, p.2).

Q3.      Value position is a term used in marketing which mean an innovation, feature or service intended to make the company or the product to be attractive. While Brand extension is an occasion where the company uses established Brand trademark or name on new products in order to increase sales. Unilever should use brand extension to develop its new brand. This is because from exhibit 8, the graph show there is greater knowledge of the brand, which is followed by marketing penetration indicating the % of customers having purchased at least single unit of the product in the previous year. Lastly, top of mind knowledge is the least indicating the customers quoting the brand first. From this statistics, it can be seen that brand extension strategy will work well because already the brand has already penetrated to greater extent at the same time large consumers are aware of the brand. By Unilever using already established brand name it will be able to improve its sales (The business school of the world, 2007, p.4).

Q4. EQUATION:

BECP =

New product Unit Input/Old Product Unit Input

New product is a calculated totaling to the product line. This formula is a resultant from the fact that Break-even new unit contribution ×new unit volume= Cannibalization New Unit Volume × Old Unit Input. For example at break-even, sales profit of the new product is equivalent to the loss in revenue from trades of the old brands that would have occurred had the new product not been introduced?

Old Product is the produce that will lose sales to the New Product (if numerous old produces are affected then an average profit margin can be used as an approximation) (Navarra and Scaini, 2016, p.10).

Calculation

New unit product contribution =$ 0.10

Incremental =$0.05

Incremental Break Even Point=Incremental expenditures / unit contribution.

0.05/0.10×100=50%

In reverse=0.10//0.05× 100=2.00

In this case Unilever should sell about 2.00 of new product at $0.05 input for each lost unit of the old product at $0.10 input where 2 are cannibalized with 0 incremental units needed to make similar contribution as with the old product.

Part Two: Case Analysis Report Style

DAY 1: STRATEGIC DECISION GO/NO GO AND WHY

Unilever should avert its funds from its premium products to finance in lower-margin section market. To begin with, the company is the leader in the detergent powder market. It has a market share of 81% to its three brands which include Omo, Campeiro and Minerva. There has been an improvement of 28 percent during boom in the segment of low income consumers giving the company opportunity to become solid leader in the areas low income markets. In as much the company is working hard, it should aim to divert its premiums to low income segment to build a new brand that is mainly developed for about 48 million consumers. The reason is that high population in the low-income segment is will provide ready market for its products, and therefore capturing large market. Unilever should also avert money from its premium products to reinvest in low margin section of the market to avoid competition with companies like P&G. Since most low earning consumers will be able to identify with Unilever it will be quite difficult for other company to compete it in long run.  The company will also be able to get its plans right such that low income customers will be ready to pay for its product without cannibalizing its superior brands (The business school of the world, 2007, p.4).

Unilever have the correct abilities as well as structure to be profitable in a market in which small entrepreneurs struggle to break even. The market in North east is expanding at a recommendable yearly rate of 17%. This is a remarkable work of Plana. There are barriers to entry preventing other major companies to join that market. The process of drying consumes greater quantity of vapor which is created by resident utility. In terms of personnel, the company has an alumnus of INSEAS who took did advanced management programme. He had acquired theoretical skills before he joined Unilever. That is after graduating in Business administration. He therefore has marketing and seniority skills that are necessary for the project. Most significantly, he is equipped with current skills and technological experience; in fact he had not ever been convoluted in the old-style method to marketing the laundry detergent as well as having observed the achievement of Nirma1 in India, he knew of the any danger posed by the native brands at the low income customers. Concerning this noble project, Laercio managed to assemble an inter-corrective team comprising Airton Sinigaglia from Manufacturing, Antonio Conde from Finance, as well as Marcos Diniz from Sales (The business school of the world, 2007, p.3). The staffs who participate in manufacturing specifically laundry soap use multiple products which has numerous personal and home care uses. Laundry soap is used to wash all types of clothes which help to wash all the clothes. The acceptance of laundry soap is because of its softness in water.

In long run Unilever would gain a lot in the process of targeting low income consumers. Firstly, the company would increase its market share. By considering all low income earners it means that its products will cut across all consumers due the affordability of its products.  Secondly, the company sales volume will increase. By increasing its customers and targeting all consumers across the economy, the company will be able to increase its sales volume. Furthermore, the profits will improve due to large sales volume.

DAY 2: STRATEGIC DECISION ON VALUE PROPOSITION

Unilever should use brand extension to develop its new brand. The company has already three detergents that have distinct positioning. From the information the three brands of Unilever have distinct positioning. This is because from exhibit 8, the graph show there is greater knowledge of the brand, which is followed by marketing penetration indicating the ratio of customers having purchased at least single unit of the product in the previous year. Lastly, top of cognizance knowledge is the least indicating the customers quoting the brand first. From this statistics, it can be seen that brand extension strategy will work well because already the brand has already penetrated to greater extent at the same time large consumers are aware of the brand. By Unilever using already established brand name it will be able to improve its sales (Clarke, 2001, p.133).

The positioning statement that summarizes how Unilever plan to create value for low-income is that the company should strive to promote the product to the low income earners. That can be achieved by directly selling small unit product to small stores where most low income consumers can access.  Packaging small quantity creates enthusiasm among consumers to believe that they can afford the products such as omo (Levina and Ross, 2003, p.333)

DAY 3: TACTICAL DECISIONS

Product

Unilever can produce exceptional product comparable to Campeiro. Such products should be cheap, but would deliver the benefits to the low income earners. The company can use moderate Minerva’s design because it may be too costly to the low income earners. The Unilever experts could ripen a third strategy between Campeiro and Minerva so that they can remove some materials. Unilever should determine the attributes to be removed which must be reserved and which will actually need to be enhanced comparative to the current brand (Borden, 1964, p.3).

The company must also select the right packaging type and size. Largest sets would decrease the cost per kilogram but might help to value the product out of the weekly low-priced variety of the lowliest customers. It could still use elastic envelope which may cost about 30% of the value of earlier cardboard boxes, however, the market study indicated that low-income earners were viewed as people who use second rate products.

Price

Price- I would choose a wholesale price as the significant decision for Unilever. The price should be moderate such that it is not too high or too low, in this case it would reach for the target segment. The price set should allow the company to meet its costs and above all make profit.

Promotion

The main objective of communication should be to spread information to the consumers about the product in question. To ensure the right information reaches the right consumers in the process of advertising. The key message should be universal so that low-income consumers believe and understand that the product is advertised for everyone and it’s of low quality. The main objective of this is to avoid sending the message of products being directed to the low income consumers, which some of them may be reluctant to buy. The universal message could be meant to avoid the usage of typical aspiring communication of Brazilian products which may complicate the customers and lead to undesirable cannibalization (The business school of the world, 2007, p.3).

The company can also allocate adequate funds to media advertising. The benefit of media advertising is due to its low cost contact as well as high reach to the Brazilians, regardless of income. The best option will be 70% below line communication.  Large amount should be allocated to trade promotions, purchase marketing and events. Packaging should be hard plastic materials that are well branded. Unilever should purpose to tell the owners of the small stores that all its products are well accepted and the aim of packaging in small quantity is make its products affordable to all consumers. Unilever could present a message to store owners that it targets to satisfy its customers (Borden, 1964, p.5).

Distribution

Unilever should create low cost channel of distribution. It should also strive to distribute its products to small outlets and stores. That is to help the low income earners access to those stores because most of them rarely shop in the large supermarkets. The company can also rely on already established links of general wholesalers which originally supplied current detergents as well as broad variety of products and had international coverage. On the other hand, Unilever can contract with other specific distributers who would get exceptional rights to sell detergents from Unilever in particular areas. Selecting the right channel of distribution was significant because it was larger element of product cost, would have the capability to push sales and build brands (The business school of the world, 2007, p.5).

DAY 4: FINANCIALS / CANNIBALIZATION ANALYSIS

Incremental costing

0.10-0.05=0.05

BECR =

New unit product contribution =$ 0.10

Incremental =$0.05

Incremental Break Even Point=Incremental expenditures / unit contribution.

0.05/0.10×100=50%

In reverse=0.10//0.05× 100=2.00

In this case Unilever should sell about 2.00 of new product at $0.05 contribution for each lost unit of the old product at $0.10 contribution where 2 are cannibalized with 0 incremental units needed to make similar contribution as with the old product.

 

 

 

 

 

 

 

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