Hello, dear friend, you can consult us at any time if you have any questions, add WeChat: daixieit

Marketing: Midterm

Customers

1. What are the differences between consumers in the NE and the SE?

Consumers in the NE and the SE demonstrate a number of important differences. First, NE consumers are significantly poorer (per capita income of $2,250 vs. $6,600 in the SE). Because of this, only 28% of NE households own washing machines (vs. 67% in the SE), so NE consumers mostly wash clothes by hand with soap and bleach, adding detergent mainly for scent. Additionally, clothes are washed much more frequently in the NE than the SE (5 times a week in Recife vs. 3.9 in Sao Paulo), as SE consumers primarily rely on detergent powder in machines. Furthermore, cleanliness carries strong symbolic value for mothers in the NE, and laundry is seen as an enjoyable task for these consumers. In the SE, on the other hand, laundry is typically viewed as a chore. The NE is much less developed than the SE, as 40% of the NE population is illiterate, as compared with 15% in the SE. Lastly, consumers buy laundry products in different places based on their geography- in the NE, consumers shop more at small stores as opposed to large supermarkets in the SE.

2. What do the customers in the NE value?

a. Functional:

• Cleanliness, whitening, productivity (most important: 24% importance).

• Smell/softness (20%).

• Ability to remove tough stains without extra soap/bleach (16%).

• Powder dissolving power / no residue (16%).

• Packaging ease & recognizability (13%).

• Low fading/harm to colors is least important (11%).

b. Emotional and symbolic value

• NE people believe cleanliness symbolizes pride and social status. They perceive clean clothes as a sign of a mother’s dedication and the family’s reputation.

• As washing in the NE is usually done outdoors, people enjoy this activity because they socialize with others in the community.

• Clean clothes reinforce self-esteem and social acceptance within the community.

• NE consumers avoid products marketed “for low-income people” because they believe this signals poor quality.

3. Is the NE segment attractive? Provide evidence from the case.

The NE segment is attractive since it's both large in scale and simultaneously growing. There are 48 million people living there and the purchasing power of the poorest households (poorest 10%) has grown “by 27% per year during this period”. This should be perceived as a positive sign- as incomes at the bottom are rising over time, NE consumers can spend more. NE consumers also wash clothes more often, at around 5 times a week, versus 3.9 in Sao Paulo. Since detergent/soap consumption is already high, this implies a high chance of heavy users if converted to Unilever products. Furthermore, Unilever holds an 81% share of the national detergent market, but its share in the Northeast is lower at 75%, making the NE region the most viable opportunity for expansion.

However, most households are still low income, since NE per capita income is $2250 compared to $6,600 in SE and over half earn below two minimum wages. Additionally, the illiteracy rate is pretty high, which can suggest lower margins and higher costs to educate and communicate with consumers. Taking everything into account, the NE is a strategically attractive segment due to its size, high usage and growth potential (converted sales), but Unilever would need a low-cost and tailored product to make it strategically/financially attractive.

Competition

4. Who are the competition? What are their strengths/weaknesses?

Unilever’s main customers in this case should be women in low-income families in Northeast Brazil, who mainly hand-wash clothes, plus similar low-income customers elsewhere in Brazil who may gradually upgrade from soap to detergent powder. These customers spend most of their time scrubbing clothes with soap, removing stains with bleach, and lastly using a little detergent powder for the good smell. Accordingly, the main quality of the new product should be the ability to generate bubbles easily to clean stains, with a long-lasting fragrance.

The main competitors at the product’s current stage:

Laundry soaps: Minerva soap and many cheap local soap bars are the main products.

- Strengths: Low price, wide availability in small neighborhood stores, and a good fit with hand-washing habits.

- Weaknesses: Cheap price suggests poor quality; have limited fragrance; might be harsh on hands and fabrics.

Bleach and whitening products: they are used to remove stains.

- Strengths: Low price; good for removing stains.

- Weaknesses: They can damage clothes and skin, and cannot be used for cleaning or perfuming by themselves.

Low-price detergent powders: such as Minerva and Campeiro powders, and local brands like Invicto and Pop.

- Strengths: Low price; Offers more foam and perfume than soap at an affordable price.

- Weaknesses: Perceived quality and brand image are weaker than premium powders; have a low market share in the NE area because of the low usage of washing machines.

Premium brands like Omo and P&G’s Ace are also important as aspirational benchmarks, but they are too expensive for everyday use for those low-income women in the Northeast. However, they could also act as competitors in the future field, because of the growing need for washing machines, as well as the current usage in the Southeast area. Moreover, if the low-income NE segment becomes more attractive, P&G could use its own experience (of the successful delivery of the low-end brands in other markets) to launch a dedicated mid or low-end offer for these consumers in Brazil, which would make it a very important future competitor for Unilever’s new brand.

Company

5. Can Unilever be competitive and make money in the NE segment? Examine the short and long-term strategic implications of entering the NE segment. Provide detailed analysis of the pros and cons involved.

Yes, Unilever can be competitive and profitable in the NE segment.

Key reasons why:

- NE is large and growing

- Opportunities exist for further detergent powder penetration, especially in the low-income segment

- P&G (and other competitors) are not yet invested in this market

- Unilever already has a strong market share (75%) in the NE, but there is still room for growth

Short-term Implications:

PROS:

• As the market demand for detergents is increasing at 17%, Unilever could leverage this opportunity to capture the remaining 25% of NE market share which essentially belongs to local and other brands.

• By doing so, they can block one of its biggest competitors, P&G, from entering into this domain (and could prevent the Nirma scenario in India).

• As the purchasing power of the poorest 10% grew by 27% during 1995-96, this gives Unilever an opportunity to price slightly higher while entering this market.

• Bringing in a cheaper brand could send a negative signal to investors, making it look like Unilever is slipping on its premium image.

• Internally, the idea may not be welcomed because young brand managers usually want to work on premium, aspirational brands, not low-cost ones.

• Unilever would also need to spend heavily upfront, including extra marketing costs for a new brand and money to build a distribution network, which puts pressure on short-term profits.

• This move helps Unilever build deep expertise in low-income marketing, which can be used across other categories and emerging markets, giving the company a long-term global advantage.

• By entering early, Unilever can lock in future consumers as incomes rise in the Northeast, creating lifetime value from a base of 48 million people while also expanding its portfolio.

• Adding another brand goes against Unilever’s global push to simplify its portfolio, making brand management more complicated and pulling the company away from its streamlined strategy.

FINAL EVALUATION & SUCCESS FACTORS:

YES! Unilever can be competitive and profitable in NE segment, BUT with conditions:

● Achieving differentiated positioning vs. existing Unilever brands

● Building specialized distribution for small retailers

● Focusing on attributes NE values that differ from premium brands without diluting Unilever’s value proposition

6. What is the company’s current portfolio of products? Specifically, what is each brand’s:

a. Market share

b. Price

c.   Positioning – how are they differentiated from each other?

d. Margins

e. Form

Margin = WP - (FC + PKC + PC + DC)

Strategy

7. Using your analysis of the current brand portfolio, analyze the tradeoffs between the two options that Unilever has: (1) Introduce a new brand with its own positioning to serve the NE segment or (2) reposition one of its existing brands/launch a brand extension.

Within Unilever’s current product portfolio, each brand already plays a distinct role with different importance. The new NE product should have a special formulation for hand-washing, with high foam, long-lasting fragrance, and good dissolving power.

Option 1: Introducing a new brand

A new brand should have a precise positioning: for low-income women who wash by hand in the Northeast, but should not have an indication of “low quality”. Branding, such as naming and packaging, should be built on empathizing with this particular positioning. Doing so could avoid diluting Omo’s premium performance image and national price premium, and also keeps Minerva powder and Campeiro in their current roles. Unilever can price this new brand in between Omo and Minerva, without changing the prices of the existing brands. However, the disadvantages would include high launching costs, such as advertising, promotions, or packaging. Also, launching a brand new product would also add burden to their current portfolio line. And even though the position of the new product is different from the existing products such as Minerva and Campeiro, there is still a risk of cannibalization.

Option 2: Repositioning existing brand

Repositioning an existing brand of Unilever’s would be cheaper and faster to launch initially, because it could reuse their current awareness, packaging, and distribution system, and fits better with the firm’s strategy of having fewer and stronger brands. However, doing so can confuse consumers about the core brand identity and exert pressure on their other brands’ margins in Brazil. For instance, Campeiro is already a low-priced value brand, so raising or lowering its price to meet the desired positioning might leave Unilever without a clear “middle” option between Omo and other cheaper brands.

Accordingly, the tradeoff is between a clear, NE-specific positioning with higher costs and complexity of the existing product portfolio (for introducing a new brand), and lower cost and faster execution but more cannibalization and brand dilution risk (for repositioning an existing brand).

8. If Unilever is to offer a new brand, how should it position it? Include a positioning statement. This will include your target market, the brand name, the value proposition to the consumer, and a brief statement on how all this will be communicated.
The key consideration here is whether Unilever can differentiate a product targeted at the new segment so that (1) it creates value for that segment and (2) it is profitable.

For low-income Northeastern Brazilian mothers who wash clothes by hand, Brisa (“Breeze” in Portuguese) is a mid-priced detergent powder that delivers rich foam, visible whitening, and a long-lasting fragrance while being gentle on hands. To show how we can keep Brazilian families looking spotless and proud every wash day, we will provide product demonstrations and samples so mothers can see, feel, and smell the detergent’s attributes.

9. If Unilever is to offer a new brand, at what cannibalization rate (percent of new sales coming from other Unilever brands) would Unilever start losing money?

i. Establish Assumptions：

A new brand competes with existing brands.  We assume the new brand looks like Minerva; they have the same formulation and wholesale price.

According to the case, developing a new brand adds $0.1/kg in incremental marketing costs, launching a brand extension would add $0.05/kg. Omo has the highest margin detergent powder, which means if the new brand can survive under Omo, it would also survive under any softer scenario.

ii. Margin Analysis:

From Q6:

- Minerva powder margin: $0.25/kg

- Incremental marketing costs for adding one new brand: $0.1/kg

CM (new)=0.25-0.1=$0.15/kg

The new brand’s unit margin will be $0.15/kg, and the margin unit of Omo is $0.55/kg (from Q6). If there is one kg sales shift from Omo to the New brand, Unilever loses $0.55.

iii. Calculate the Cannibalization Rate:

The profit impact caused by selling the new brand equal to:

Xkg*CM (new)- Xkg*CM(Omo)*Cannibalization rate

When they break even, the Unilever will not make money and not lose money：

Xkg*CM (new)- Xkg*CM(Omo)*Cannibalization rate = 0

Xkg*CM (new) = Xkg*CM(Omo)*Cannibalization rate

CM (new) = CM(Omo)* Cannibalization rate

Cannibalization rate = CM (new)/CM (Omo)=0.15/0.55=0.273=27%

iv. Conclusion:

When the cannibalization rate reaches 27%, Unilever would be losing money.

Marketing plan

10.  If Unilever is to offer a new brand, how would you design their marketing mix:

a. Product formulation – you can use the formulation for one of Unilever’s existing brands or create a new formulation. If you come up with a new formulation you will need to limit the attributes to three (see the discussion of the product in the text and exhibit 5).

b. Packaging

c.   Price (as a percent of OMO’s current price)

d. Promotion strategy

e. Distribution strategy—wholesalers or specialty distributors

Product Formulation

We would create a new formulation for this detergent powder brand that is built specifically for NE consumers who wash clothes by hand. Exhibit 5 reveals that the three most important product attributes for NE consumers are strong cleaning/whitening, a pleasant scent, and good dissolving power. From the text, NE consumers judge cleaning power by foam, value a long-lasting fragrance, and need a powder that dissolves easily in cold water without leaving residue. Stain removal is not a top priority because NE consumers use soap for tough stains. None of Unilever’s current formulations meet these needs, as Minerva focuses only on fragrance, and Campeiro’s strong emphasis is on cost-cutting.

Based on this, the new formula would emphasize:

1. High foam/visible whitening (strong cleaning power)

2. Strong, pleasant-smelling fragrance (smell)

3. Fast dissolution with low residue (dissolving power)

Packaging

First, the product packaging will remain the same as similar products: the small package sizes of 1kg & 500g. Second, the product color scheme will use bright and eye-catching colors such as yellow, red, and blue to maintain visibility. Most importantly, the front of the package must feature a large and prominent brand name with a visual including white foam to ensure that consumers can retain memory or form a potential impression. This design is more friendly for low-income and low-literacy customer groups. Third, we will use plastic packaging. Compared with the cardboard pack, plastic packaging has lower cost and provides moisture protection.

Conclusion:

1. Size: Plastic pack with small package sizes of 1 kg & 500g.

2. Design: Bright colors and large prominent brand name

3. Pack: Plastic pack

Price

Before setting the price, we need to estimate how much would the detergent costs to produce. The rationale here is:
PACKAGING COST RATIONALE ($0.15): Chosen because plastic sachets are cheaper and preferred by NE buyers.

PROMOTION COST RATIONALE ($0.25/kg): Heavy below-the-line spending is needed because NE consumers respond most to local awareness rather than expensive national media.

DISTRIBUTION COST RATIONALE ($0.05/kg): Specialized distributors offer the lowest cost-to-serve small stores and ensure deep reach into 75,000 outlets, which general wholesalers cannot deliver efficiently.

BRAND STRATEGY COST RATIONALE ($0.10/kg): A new regional brand requires its own upfront investment, but avoids cannibalizing Omo/Minerva and builds authentic NE cultural relevance key for winning loyalty.

Total Cost= 1.15(formulation) + 0.15 + 0.25 + 0.05 + 0.10 = $1.70

Factors to consider while setting price:

● The price needs to be competitive with respect to competitors, also between Campeiro (perceived to be cheap) and Minerva (because they might rather buy this if both are the same price)

● The median price between Campeiro and Minerva = (1.70+2.40)/2 = $2.05 (which is also covering the cost)

➔ We want to price the product at $1.99 (66.33% of Omo) because it will be perceived as superior to Campeiro, and help the low-income NE consumers view it as a product that is reasonably priced (but close to $2), and also doesn’t cannibalize Omo, which is priced at $3.00

Expected Results:

● Profit = $0.29 (margin = 14.57%)

● We won’t change the prices in near future and will provide consumers with free samples until our new brand penetrates deep in the market

Promotion Strategy

For promotion we should focus more on building the brand and more importantly getting people to try it. First, we could use simple Radio that is story based and also TV ads with local music and humor, which shows NE mothers getting bright, great smelling clothes from washing their clothes in our foamy “Brisa”. This ultimately emphasizes cleanliness, which should feel emotional and practical.

Secondly, we will have in-store promotions in small neighborhood shops, where we'll give out sample sachets and offer “first-wash free” packs. We can also utilise big and colorful displays of point of sales, so that low-literacy people can understand our message through clear icons.

Last but not least, we will generate buzz through word of mouth, by sponsoring washing events in public laundries and rivers. We can give out free samples or small gifts like buckets so early users talk about the brand to others.

Distribution Strategy

The new product would use specialized distributors rather than generalist wholesalers. This is because the low-income consumers in the Northeast rarely shop in the large supermarkets. Instead, they buy daily goods mainly in about 75,000 small local stores, and they rely on store owners for advice or even buy on credit. Moreover, specialized distributors focus exactly on these small stores, carrying all of one manufacturer’s brands in a few categories, and provide intensive “point-of-purchase” support, while generalist wholesalers mainly serve larger supermarkets and do little in-store activities. Also, in Exhibit 13, it is shown that the specialized distributors have a lower variable cost to reach the smallest stores ($0.05/kg, lower than $0.10/kg for the wholesalers), which is beneficial for a low-price brand for the sake of a higher margin.