harpic case study analysis

Reckitt Benckiser Case Analysis

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RB HARPIC CASE STUDY ANALYSISTarun [email protected], +91 9437327411Sujit Kumar [email protected], +91 9777578075XAVIER INSTITUTE OF MANAGEMENT, BHUBANESWAR


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Executive Summary

Harpic has been the market leader in the lav care market for decades. However Harpic is recent times isfacing 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 ruralmarket

3) To spend the marketing budget either for branding or mass media campaigning or rather invest thesame 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 alsopresents an analysis on the nature and extend of demand. Further it explores the key problems andoppurtunities of product market in general and the brand “Harpic” in particular with the help of varioustools 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 inrecent times and hence Harpic would do well to focus on these parameters more than branding efforts.There is a huge untapped potential in terms of institutional selling. With the introduction os eco-friendlytoilet cleaners ( Harpic- green), institutional selling can be given a push to widen as corporate andgovernments across the country are looking to contribute towards the nature.

The packaging of Harpic sachets has been suggested a change, and distribution models have beendescribed in the analysis to reach huge untapped rural market and increase product penetration. Thepositioning of the flushmatic has been suggested in a subtle manner to fight the private labels in moderntrade and increase usage of the same.


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INTRODUCTION:Harpic, a brand owned by Reckitt Benckiser, was launched in England and has beenextended to more than 47 countries. It was launched in India 25 years back and was thefirst brand to offer lavatory cleaning products. The concept was pretty new then and henceit didn’t take off. But the product category has become more attractive in the recent pastand more players are coming in to get a slice in this market. Harpic is still leading themarket by far and has become synonymous to the toilet cleaner category. The awarenessand 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 terms 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 becausecustomer does not seek much overt information for such products. They are usually aware of thebenefits offered and about the top brands in the market. We see that only 2 players Harpic andDomex 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 thisis because it is a low involvement product and availability of the particular brand is the key, as thebuyer can easily switch to the competitor brands. Brand Loyalty is also low. We can infer this fromthe case as we see that all the competitor brand have been able to eat the market share of Harpicwith sales promotional offers. Domex did this with reduction in their price, Sanifresh and otherprivate labels offered similar promotional offers to attract consumer.The purchase decision for such products is mostly planned and hence mass media communicationsare important to a certain extent. The other sources are the door to door campaigns. However thepurchase decision for a particular brand can be made both at home or at the point of sale (whichjustifies the rise in sales of private label brands). This implies the distribution and availability andpoint of sale promotions of the product is critical. In the Indian household usually the housewife orthe maid is primary purchase decision maker for this product category.


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ROSSITER PERCY GRIDPositive Reinforcement

LOWLOI HIGH LOI

Negative ReinforcementProduct placement on Rossiter Percy Grid, which explains the current buying behavior ofconsumers and defines the current advertising strategies by the brandsIndian customers are price sensitive towards toilet cleaners segment. Harpic is priced at Rs. 52 for500 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 ofits presence/availability in more than 90% of the stores (from Exhibit 10), also we can infer that66% 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 childrenc. Light Users (Average usage – 1 later per year)From the case we understand the much of the marketing efforts have been focused towardshousehold consumers and not towards the B2B segment. Marketing efforts must be channelizedtowards promoting institutional selling as well.


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LOWLOI HIGH LOI



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LOWLOI HIGH LOI



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Extend of DemandThe total size of the market by value has been given in the table below and the marketshares of the various players of the product category has been given in percentage terms

Note: 2009-2012 data shown above are forecasted values based on annexure 9 of the case. Also assuming the productcategory 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, thenthe forecasted future of Harpic looks gloomy. Harpic has been forecasted to degrow at rate of7.63% (CAGR). All the competitors will be eating away the market share of the Market Leader.The options available for the Market Leader (Harpic) are1) Product Innovation (that is continuously attacking itself to develop better product or productformats)2) Widen the size of the cake and not the slice.

Market Share by Value 2008 2009 2010 2011 2012 CAGRTotal Toilet CleaningMarket (In Million Rs) 1804 2164.8 2597.76 3117.312 3740.7744 20.00%Harpic

79.40% 74.13% 68.75% 63.27% 57.79% -7.63%Domex

10.50% 12.98% 14.56% 16.28% 18.00% 14.42%Sanifresh

6.30% 6.62% 6.91% 7.15% 7.39% 4.07%Kiwi Kleen

1.70% 1.84% 2.06% 2.30% 2.54% 10.56%Others

1.60% 2.45% 3.98% 5.50% 7.02% 44.73%Bref

0.50% 1.09% 1.64% 2.20% 2.76% 53.28%Mr. Muscle

0.00% 0.90% 2.10% 3.30% 4.50%


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Value/VolumeRatio 2008 2007

% Change in MarketShare

% Change In No of storesstocking the Brand

% Change inprice

Total ToiletCleaning Market (Rs/Litre) 99.4 96.6

19.911.69% 2.87%

Harpic(Rs/Litre) 104.1 100.0

-0.62.76% 4.12%

Sanifresh(Rs/Litre) 83.5 92.5

-0.4-19.71% -9.72%

Kiwi Kleen(Rs/Litre) 120.7 110.4

-0.7NA 9.30%

Domex(Rs/Litre) 80.9 74.7

2.318.99% 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 stillgains market share, as the brand is available at greater number of stores. On the contrarySanifresh 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 parametersa) Distribution and availability ( no of stores stocking the brand)b) Price of the BrandSo the strategy for Harpic is to make the brand available at more and more number of storesby probably cutting on mass media promotion. Also the point of sale promotions should beused at purchase decisions are affected by it. The Brand is already an established brand, sothe focus should on making the distribution more robust rather than spending money onbranding. Harpic can also look for giving higher margins to the retailers to enable and askthem to push Harpic over Domex and other competitor products. Since it enjoys a highervalue/volume ratio, and it would cut down on the advertising budget, it is always a goodoption 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%) andthe market share for Harpic is high.PRODUCT LIFE CYCLEThe product is in growth phase now even after 25 years of presence in the market. The initialintroduction 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 themiddle of its growth phase offering huge untapped potential.


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BCG MATRIX



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BCG MATRIX



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PORTER’S FIVE FORCES:

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 asa company has very high competitive strength and has dominated the market since the beginning.Hence it’s worth growth/investing.

Supplier Power

Threat of substitutes

Buyer’s Power

Barrier’s to entry

Competitive Rivalry


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•The product as mentioned is easy to manufacture and as not manyplayers the supplier power is LOW

•Is very high because of products like phenyl, detergent, acid which arerelatively cheaper.Threat of substitutes

•Is medium as they can have many options available but for some buyersthe 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 thecompanies (like price cuts, promotions etc) to gain market share.Competitive Rivalry


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•The product as mentioned is easy to manufacture and as not manyplayers the supplier power is LOW

•Is very high because of products like phenyl, detergent, acid which arerelatively cheaper.

•Is medium as they can have many options available but for some buyersthe 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 thecompanies (like price cuts, promotions etc) to gain market share.


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Strengths:- Product category creator (Watsonian First)

-Market Leader

-Good distribution and stores covered

Weakness:- Relatively high price

-Less Usage levels

Opputunities:-Still major portion of the market not tapped

-Venture into newer offerings

-Covering the rural and less developedtowns

Threats:- Increase in local players

-Increase in low cost private labels

-Strong marketing by competitors

SWOT


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Evaluation of Alternative Marketing Programs

A) Objectives for Harpic

1) To maintain or increase market share of Harpic2) 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 isstill used along with traditional cleaning agents (phenyl, acid) the number is not a surprise. All themarketing campaigns till now are mostly highlighting the various benefits of toilet cleaners. Harpicas per the consumer research is offering cleaner looking toilets, germ fighting and bad odourremoval. This has been done for the past 6-7 years after the door to door campaign. Also as perAnnexure-4, 60 % of the people using Squat and 67% of the people using Western, clean theirtoilets on a daily basis.We feel that this is the right time when along with this the media campaign should speak about theusage pattern. Toilet cleaning of 4 times a month on average is pretty low and the company shouldtry and educate the customers to increase it to 6-8 times a month. The campaign should talk aboutthe benefits and telling the customers that the product should be used in 3-4 days for betterprotection. 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 aboutthe 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 areas100,000 out of 1 million). This is a very big untapped market in India. Also the price of the productand its availability in packs of 200 ml and 500 ml are hindrance to trial. The customers who haverelatively 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 mediumsized general stores. But the small sized stores do not have the working capital to invest in a wholepack of Harpic.Harpic had introduced sachets of 35ml each at Rs.4 few years back. But it was not distributed andmarketed as well. The sachets concept was not tried in many smaller markets and hence did notboost 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.


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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 allregions. In rural regions this sachets can be sold through the small kirana stores, the local bazaarsand 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 asingle use.Cost-Benefit for SachetsAverage number of consumptions permonth 4Average total consumption per year 1 litreTotal number of uses per year 48Avg total consumption in one use 20.83333 mlSelling Price of 500 ml(taking as Cost) 52 RsCost per ml 0.104 RsCost for 20 ml 2.08Packaging and other cost (assumption) 0.5 RsSelling price per sachet (suggested) 3 RsMargin (apart from cost taken as Rs.52) 0.42(15%) Rs. for 20 mlInstitutional Selling:As discussed earlier one of the other major segment which has been overlooked is the InstitutionalSelling. We are suggesting that along with Harpic which is sold to households, they can also targetorganizations and corporate with more customized products.Organizations as big as Indian Railways which requires toilet cleaning in such a huge scale on adaily basis can be primary targets. They use cleaning agents which are low costs and yet veryeffective. Harpic can come out with a similar product, we call it HARPIC-C, which will be customizedaccording to the needs and requirements of railways. Same can be done by entering into strategicpartnership with local rural Panchayati and municipalities. For further details about institutionalselling products please refer to Table A below.


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CONCLUSION:

Table A

Marketing mix/Program

Product Decisions Strategy Reasoning

a) Develop NewProduct

New eco friendly toilet cleaner whichuses safer plant based ingredientsincluding natural oils of citrus,sassafras and pine etc

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

b) Change currentproducts

The current sachet size should bechanged

To facilitate one time use and improve usage in RuralMarkets in particular

c) Product PositioningPositioning of flushmatic should bechanged slightly

The consumer should be convinced that the flushmaticafter being put in the cistern will work for a large numberof usages/flushes which gives him better or equivalentvalue for money than traditional toilet cleaner bottles

d) Branding Go SlowIt’s already an established brand leader and more ROI inother initiatives as mentioned above

Distribution Decisions Strategy Reasoninga) Intensity ofdistribution More intensive than exclusive As explained above

b) Multiple Channels Yes, multiple channels should be triedTo cater to the urban household markets, rural householdand institutions

c) Degree of ChannelDirectness

More in case of institutional sellingand has to be less in cases of B2Cconsumers

Promotion decisions Strategy Reasoninga) Mass Media Go Slow/ Spend Less Established Brand. Mass media is more costly

b) Door to Doorcampaign will work more now in rural areas

Urban households are increasingly aware of the toiletcleaning products. The challenges and opportunities existin the rural arena

c) Point ofsale/purchasepromotion Should be more Has been inferred above

c) New Channelsof Distribution

Tie up with rural Panchayati and tierIII and tier IV town municipalities todistribute Harpic sachets in primary

With the usage of affordable packs by the schoolauthorities, the villagers will get aware of this productsand this is expected to induce trial and usage


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and secondary schools

Price Decisions Strategy Reasoninga) Price level Maintain or reduce slightly

b) Price variation

Can be tried in some geographicalregions based on purchasing power ofthe state/geographic region

As the product category is price sensitive, prices can beslashed for rural or low income per capita regions toenhance usage and product penetration

c) MarginsMore margins to retailers can be anoption in the short run

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

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harpic case study analysis