Palmolive Case Analysis

PMPC BA 115 A Case Title: Palmolive Naturals shampoo: Connecting with the Consumers Point of View: Ms. Gigi Alvarez Senior Product Manager of Palmolive Shampoo The Problem: Ms. Gigi Alvarez, senior product manager of Palmolive Shampoo, need to prepare marketing plan for Palmolive Shampoo in five days to be presented to the Marketing Review. Objective: To prepare a marketing plan for Palmolive Shampoo in five days to be presented to the Marketing Review. Areas of Consideration: 1. )Company Background The present company, Colgate-Palmolive, is an $8. billion consumer products company that serves people around the world with well-known brands that make consumers’ lives healthier and more enjoyable. Truly global in scope, its sales come from its international operations. The company focuses on five core businesses: Oral Care, Personal Care, Household Surface Care, Fabric Care, and Pet Nutrition. Now, it has become a leading marketer if not a leader in most product categories it competes in. The parent company has research and development (R&D) operations in Piscataway, New Jersey, but it also established a regional R&D base in the Philippines. . )The Shampoo industry In 1996, there were three major shampoo manufacturers in the Philippines. The category leader was Procter and Gamble with five shampoo brands (Pantene, Rejoice, Head & Shoulders, Ivory, and Vidal Sasson), Unilever (Sunsilk, Lux, and Organics), and Colgate-Palmolive (Palmolive Naturals, Palmolive Optima, and Gard). The three manufacturers control about 91 percent of the shampoo market. More than one hundred other shampoo brands compete for the remaining nine percent. The shampoo industry was long dominated by Colgate-Palmolive and Unilever.

Colgate-Palmolive was very strong during the 1960’s-1970 while Unilever took over the leadership briefly during the late 1970’s. Procter and Gamble entered the shampoo market by introducing Prell, quit the market and then re-entered the market through Rejoice in the late 1980’s. Palmolive was still the brand leader nationwide because of good distribution and popular pricing. However, in Metro Manila, Procter’s Pantene was number one in some studies. Procter with five shampoo brands became the shampoo category market leader in 1995. 3. )Marketing Mix Elements

In 1996, there were five variants of Palmolive Naturals Shampoo each catering to a specific hair type. Palmolive Naturals utilized a translucent plastic bottle with a label and full fliptop cap. Each had unique label and closure cover. Palmolive Naturals is the mass market shampoo of Colgate-Palmolive and was positioned as a shampoo made from natural ingredients that are hiyang (roughly translated, compatible). In 1990, Palmolive Optima 2-in-1 shampoo plus conditioners was launched with a hair scientist demonstrating the conditioning benefits of the shampoo to hair. Colgate-Palmolive also had a strong antidandruff shampoo brand in Gard.

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Product life cycles for shampoo brands are becoming shorter and “news” about a brand must be had at least every two years. Just recently, Procter and Gamble started importing shampoos from its subsidiary in Thailand. Colgate-Palmolive and Unilever continued to manufacture shampoo in the Philippines. Colgate-Palmolive had a good distribution system that matched the capabilities of its two competitors. Its relationship with its wholesalers and big retailers was quite strong. Allowances and trade support were adequate and competitive. Wholesalers and big retailers then supply the smaller account, mostly sari-sari (provision) storeowners.

To win the shampoo war the brand must have extensive coverage. To make a brand ubiquitous it must be carried by the sari-sari stores. However, company support for the small sari-sari- stores was weak and some regions in Visayas and Mindanao have poor coverage. Palmolive Naturals was priced 5 to 10 percent lower than Palmolive Otima and other brands of Procter and Unilever. The market can be divided into three pricing segments, namely: economy pricing, medium pricing, premium pricing. When Palmolive Naturals was launched, Lea Salonga was its image model and celebrity endorser. The first of the series of commercials was aired in December 1989.

It was shot in London and it was one of Lea’s first television commercial appearances in the Philippines. The campaign highlighted Palmolive Shampoo as being specially formulated for Asia long, black hair and it was called the “Palmolive shampoo with Conditioner: Special Care for Asian Hair” campaign. Palmolive aired several commercials with Lea Salonga. The campaign was aired on television and radio, and printed in newspapers. These were supplemented by campus tours where Palmolive promo girls distributed free Palmolive shampoo and soap, and flyers and catalogues featuring Lea Salonga.

Palmolive was not to be left behind in the hair salons. They obtained the services of hairdresser, Ricky Reyes, as an endorser and also sponsored his “Beauty School Plus” educational television show. He was also featured in commercials cum public relations in caring for the Asian hair and the “Palmolive Hair Crime News” campaign. Alternative Courses of Action: •The first alternative is to make a marketing plan based on the Price Strategies of Palmolive Shampoo. Advantages: Taking pricing decision is one of the critical factors of business for Palmolive Shampoo.

To take the pricing decision a proper research needs to be carried out such as on the product availability, competitor's pricing strategy, customer's perceived pricing, customer’s willingness to pay the price of the product, demand factor etc. The pricing decision influences the demand of the product in the market, the pricing strategy of the competitors, the profitability of the company and the most important is the customer decision on purchasing the product such as which brand product to buy and which not, which will give the major satisfaction to the customer by rendering the higher value at the lesser price then the competitors.

Palmolive Shampoo may indulge in skimming strategy, which allows the company to often start with a high price for their unique products. . For customers, who buy the product first, it is a status symbol & these customers are willing to pay a very high price. So the company can "skim" the market. Later, the company has to make a price reduction to get more customers. With this price reduction, Palmolive Shampoo can give different discounts to their customers. A customer who orders a large quantity on an item may receive a quantity discount.

A distributor who gives marketing information to the company or takes on other tasks of the company, for example, the transport, may receive a trade discount. The company can give a patronage discount for a customer who buys at this company for a long time or it offers a bonus if the customer buy a large amount during one year. Customers who pay cash may be given a cash discount. And the company can also give an employee discount for its own employees. Part of the price policy of Palmolive Shampoo is to decide who receives a discount.

This makes it difficult for customers to compare prices of different companies. If Palmolive Shampoo wants to penetrate a market, it starts with a low price. With this penetration strategy, Palmolive Shampoo wants to win a lot of customers and it often wants to beat the competitors with the low price. This is called a low-price strategy. Later Palmolive Shampoo tries to raise the prices to make more profit. After penetrating the market, Palmolive Shampoo, capturing strategy comes in; if a company offers products which are linked in some way it can use different prices strategies for the different products.

Disadvantages: The primary disadvantage to the company that engages in competition based pricing is that they are not pricing based on the value delivered to customers or--less optimally--on the basis of their costs. Thus, they are unable to effective manage revenue to a target, creating a chaotic income stream, with all the disruptions in management and customer experience that may entail. Additionally, competition based pricing is an efficient way to drive profit out of the entire industry.

Once a single company responds to a competitor with a price change, it is very difficult for other companies not to respond with price changes of their own. Almost always, those price changes are discounts, and become a race to the bottom. Another disadvantage is that Palmolive Shampoo would have fixed cost. The concept of fixed costs means that these costs never change. Rent and salaries are fixed costs. If the company produces and sells a thousand more products one month and sells fewer the next months, the fixed costs don't change.

That means if costs is the main factor in pricing, then the pricing should fluctuate from month to month. Raw materials and sales commission are variable costs or costs that change from period to period. Consumers can be sceptical of pricing fluctuations and it erodes brand trust. If costs of production decrease, cost plus pricing suggests that pricing should decrease. Then, you Palmolive Shampoo would lose on profits, this would mean that Palmolive Shampoo is not efficient in their pricing. It works the opposite if production costs increase. Cost plus pricing doesn't inspire efficiency.

As long as customers are paying production costs you don't have any incentive to lower costs or find faster, cheaper and more effective ways of producing products. It's easy for a company to become complacent. Meanwhile, competitors are taking steps to produce a better product faster, which allows them to steal market share. •The second alternative is to make a marketing plan based on the Distribution (Place) Strategies of Palmolive Shampoo. Advantages: If selling directly from the manufacturer to the consumer was always the most efficient methodology for doing business, the need for channels of distribution would be obviated.

Intermediaries, however, provide several benefits to both Palmolive Shampoo and consumers: improved efficiency, a better assortment of products, routinization of transactions, and easier searching for goods as well as customers. Intermediaries provide a second benefit by bridging the gap between the assortment of goods and services generated by Palmolive Shampoo and those in demand from consumers. Palmolive Shampoo typically produce large quantities of a few similar products, while consumers want small quantities of many different products.

In order to smooth the flow of goods and services, intermediaries perform such functions as sorting, accumulation, allocation, and creating assortments. In sorting, intermediaries take a supply of different items and sort them into similar groupings, as exemplified by graded agricultural products. Accumulation means that intermediaries bring together items from a number of different sources to create a larger supply for their customers. Intermediaries allocate products by breaking down a homogeneous supply into smaller units for resale.

A third benefit provided by intermediaries is that they help reduce the cost of distribution by making transactions routine. Exchange relationships can be standardized in terms of lot size, frequency of delivery and payment, and communications. Seller and buyer no longer have to bargain over every transaction. As transactions become more routine, the costs associated with those transactions are reduced. With these advantages, this could strengthen the distribution strategy of Palmolive Shampoo. And it would greatly improve the company’s poor market in the Visayas and Mondanao region.

Disadvantages: The main disadvantage of direct distribution is that Palmolive Shampoo typically lack retailing expertise, this greatly contribute to the poor coverage of the company in Visayas and Mindanao areas. The Company with a good product to offer the market may not be good at marketing it. By using other distribution channels to distribute their product, they are able to make use of the expertise of dedicated retailers and wholesalers. Not only that, the time that a manufacturer spends in retailing activities is time that might be better spent on production-related activities.

Another downside is the cost factor. Costs associated with selling directly to the consumers are high compared with using intermediaries for the same level of sales. This includes costs of hiring and training salespeople, travel and transportation, telephone and postage costs. In addition, the overheads of opening and maintaining retail outlets and hiring work force to look after such operations are high. With cost come to hand, time would be another factor. With Palmolive Shampoo researching on new customers and visiting them to sell the products consumes much time.

The salespeople spend most of their time haggling with customers over the price. Additionally, time is also spent following up on the existing customers to ensure repeated buying in future. Palmolive shampoo will most likely focus on the sales volume rather than targeting customer needs and their satisfaction. Additionally, the salespeople are driven by the need to earn large bonuses at the expense of customer satisfaction. Customer loyalty and poor brand image will result leading to declining sales in the long run. •The third alternative is to make a marketing plan based on the Promotions Strategies of Palmolive Shampoo.

Advantages: Promotion is a form of corporate communication that uses various methods to reach a targeted audience with a certain message in order to achieve specific organizational objectives. Nearly all organizations, whether for-profit or not-for-profit, in all types of industries, must engage in some form of promotion In the context of the marketing mix, promotion represents the various aspects of marketing communication, that is, the communication of information about the product with the goal of generating a positive customer response.

Marketing communication decisions include: Promotional strategy (push, pull, etc. ), Advertising, Personal selling & sales force, Sales promotions, Public relations & publicity, Marketing communications budget. New customers might learn to love Palmolive Shampoo’s product and become long-term clients. Such efforts may range from multinational firms spending large sums on securing high-profile celebrities to serve as corporate spokespersons; the benefit of using celebrities to endorse your brand is you can capitalize on the goodwill they elicit from the public.

Palmolive Shampoo having Lea Salonga promote their Shampoo products, Ricky Reyes also an endorser to the company; there is no question why consumers’ purchases of Palmolive Shampoo went up. Disadvantages: An obvious disadvantage to a promotional strategy is its potential for failure. Worse, the long-term benefits of Palmolive Shampoo might not offset the costs of the promotion. Careful research and expert advice from a marketing consultant can help maximize Palmolive Shampoo’s chances for success, but nothing’s guaranteed.

The longer a sales promotion lasts, the more likely Palmolive Shampoo will decrease the perceived value of their product. For example, if a restaurant offers a steep discount for children’s shampoo to attract families, parents might balk at paying more after they get used to the low prices. Palmolive Shampoo should keep promotions short to prevent long-term damage to their overall pricing strategy. If Palmolive Shampoo promotions occur in a predictable pattern, potential customers might wait for a sale rather than buy the product or service at full price.

For example, if a retail clothing store offers a sizable discount on most holidays, sales will be low between holidays, and relatively few customers will ever pay full price. Another, consumer might abandon as soon as the promotion is over and continue to hunt for bargains. Converting bargain hunters to permanent customers depends on developing brand loyalty. For example, if your excellent customer service or high-quality products impress them, they are more likely to stay with you after prices return to normal levels. The fourth alternative is to make a marketing plan based on the Product Strategies of Palmolive Shampoo. Advantages: Product strategy marketing deals with the tools, technology and methodologies a business uses to distinguish its products. With sound marketing, Palmolive shampoo may receive more attention for its efforts to woo customers and make its Shampoo products more desirable. With Palmolive Shampoo consistently comes up with sound product outlines and adeptly markets its merchandise is the darling of investors and securities exchange players.

Effective product strategy marketing enables Palmolive Shampoo to estimate potential cost and performance attributes for their products, as well as determine which attributes could spur profitability down the road. The goal for Palmolive Shampoo is to find out features that customers like and how much it will cost to add them to products, while keeping in mind profitability goals top leadership has set. This concept helps a business chart a product strategy compatible with other parts of its marketing plan -- meaning Palmolive Shampoo must make sure it designs goods it effectively can sell, promote and distribute.

Disadvantages: One of the disadvantages that Palmolive Shampoo would encounter is the higher cost of products. Related to the increased staff requirements are higher costs commonly associated with a product specialization strategy. Not only are there usually increased labour costs, but costs to customize products and research particular needs of each given customer market are expensive as well. Salespeople that sell to multiple markets also typically have to travel farther, which increases time spent travelling and costs associated with making sales.

These higher costs mean the companies must generate more sales and charge higher prices to net profit When Palmolive Shampoo uses a product specialization strategy, it is inherent for branding that the development and marketing of the product remains consistent across all customer markets. If the company fails to deliver an effective product solution to a particular market segment, the negative damage to the brand's image can have effects across all of the company's customer markets.

Thus, Palmolive Shampoo needs to maintain a consistent standard of quality and durability to maintain brand image. Another challenge of a product specialization approach is that Palmolive Shampoo can be too focused on product research and development and fail to react promptly to changes in customer demand and interest. With more customer-centric approaches to targeting customers, Palmolive Shampoo is more likely to keep up with changes within the marketplace to know how to evolve products and market them in a way that satisfies marketplace expectations.

Recommendation/Conclusion: I recommend the second alternative, which is to make a marketing plan based on the Distribution (Place) Strategies of Palmolive Shampoo. With the use of intermediaries to distribute the products, Palmolive Shampoo would increase its lead in the market over its competitors. This would help the company gain new market and new consumers. This also aids the search processes of both buyers and sellers. Palmolive Shampoo is searching to determine their customers' needs, while customers are searching for certain products and services.

A degree of uncertainty in both search processes can be reduced by using channels of distribution. In addition, Palmolive Shampoo can make some of their commonly used products more widely available by placing them in many different retail outlets, so that consumers are more likely to find them at the right time. Intermediaries, however, provide several benefits to both Palmolive Shampoo and consumers: improved efficiency, a better assortment of products, routinization of transactions, and easier searching for goods as well as customers.

Intermediaries provide a second benefit by bridging the gap between the assortment of goods and services generated by Palmolive Shampoo and those in demand from consumers. A third benefit provided by intermediaries is that they help reduce the cost of distribution by making transactions routine. Exhibit 1: Visayas Distribution Plan – Cebu is the main distributor. Distributing to neighbouring cities and provinces in Visayas. : Exhibit2: Mindanao Distribution Plan – Davao city is the main distributor. Distributing to neighbouring cities and provinces in Mindanao.

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