The factors that determine demand for blades are:
The desire to improve image
The influence of western grooming practices
The influence of trend-setters such as college students and graduates
Influences on razor purchase:
Effectiveness: reduced shaving time, no cuts…
Shelf life (re-usability without reducing effectiveness)
Affordability (value for money)
Perception of grooming products
Availability of the products
Visibility of the products
The size of the urban population
Rate of hair growth in Asian beards
Rising income levels
When considering the socio cultural environment in which Gillette operates, it is clear that their lies significant opportunities for growth. There is currently a very low rate of shaving (only 80% of males shave in urban, less in rural areas, and they average just 5.5 times a month, up from 66% and 4.5% respectively in 1993), which is changing as a result of western influence in the region. However, it is also worth noting that Indonesian men are typically less hirsute than their western counterparts, so growth may not reach that of the levels within the western world.
Looking at the expansion of the market for blades up to 1995, there is a potential to increase Gillette’s market share, and demand further:
The incidence of shaving less than 4 times a month is more than 50% of those who were surveyed. Though there are various reasons for low incidence, introducing a good quality product for less and increasing the awareness of the product and promoting their brand name would help.
People using traditional methods also share a good part of the market. Increasing awareness of their product and emphasizing on the safety and comfort of using their product, Gillette has a good chance.
Introducing and marketing aggressively their products for hair removal in women, Gillette can effectively increase their market size. Utilizing various media for that effect is essential.
Advertising to promote first time shaving, a clean shaven face
Advertising to promote shaving products as everyday use items
A wider distribution
Increasing prominence of products and advertising in shopping centers
Showing the disadvantages of Inferior quality blades
What is the Lifetime Value of a Sensor customer?
The Lifetime Value of a Sensor customer is $26 dollars, this represents is the net present value of the cash flows attributed to the relationship with the sensor customer. For Gillette each sensor customer is worth $26 dollars. This information is useful for marketing managers because it can be a metric to find out exactly how much money the department should be willing to pay to acquire each customer.
Do you agree with Allan or Effio’s sales forecasts? Why? What are the constraints to growth?
To forecast Effio’s projections I made some assumptions (refer to image below for the forecast):
Gillette Blue Blade segment didn’t grow because Allan didn’t forecasted growth for this segment, so assume the same for Effio’s projections.
For Gillette Goal Blue, Allan forecasted a decrease in sales so I assume the same for Effio’s projections.
Taking into consideration that income levels are raising by 10% among the current user base, incidence levels are raising every year by about 20% and the population is increasing around 1.7% every year, I’m leaning towards Effio’s sales forecasts. I think Allan’s estimation of 19% doesn’t take into account the factors mentioned above and it is very conservative.
Strong economic growth of over 7% in the last 20 years in Indonesia has increased per capita incomes and improved standards of living. With a population of nearly 196million, Indonesia represents a significant market for Gillette in the Asia-Pacific region. Efforts to increase market share face a few challenges:
Affordability - roughly 80% of the population earn less than $10,000;
Shaving rate - incidence of shaving is low compared to developed countries (Indonesian shave on average 5.5 times per month compared to 12 times per month in Hong Kong and 26 times in the United States);
Regulation - restrictions on foreign companies and poor infrastructure impede the sales and distribution efforts;
Perception of grooming products as luxury items
Competition from cheaper brands
How should Gillette accelerate the development of the blade market in Indonesia?
Product
Gillette in Indonesia offers an entire range of shaving products in the market and enjoys dominant market share. However, Gillette should expand the market by introducing cheaper low end products to give a first time Gillette experience to current non-users.
Introduction of newer products is not possible in the short term as the company’s capacity is constrained. However, as and when the Gillette is able to bring greater capital expenditure, certain capacitates should be diverted towards designing cheaper low end products for mass market appeal, first time users and market expansion.
Promotion
Gillette should increase the marketing budget and adjust the marketing plan to increase the spent on marketing towards the following recommendations:
Promote current users to move towards premium and high end products:
Income levels in Indonesia are rising and this presents an opportunity to convert the existing users to adopt premium products.
Advertising in urban areas through concentrated efforts targeting these markets directly.
The company should continue with its promotion strategy of giving free samples of premium products to targeted consumer segments to try the product and increase awareness through word of mouth promotion.
Increase penetration of products by specifically targeting rural areas and small cities: Gillette Indonesia should try and increase incidence of use of its products by also targeting smaller cities and rural areas. Therefore Gillette should discard its global policy of using advertisements developed at the headquarters and should develop locally relevant advertising content for the rural Indonesian market.
Mass marketing appeal aimed at women in Indonesia
To help increase the usage and sales of shaving creams and foams, free sampling of the products and learn how to shave classes
Use multimedia and print advertising to increase shaving frequency targeting costumers who shave less than once a week
Have a local celebrity be the face for Gillette in Indonesia.
Place (Distribution)
Gillette should increase credit terms of distributors from 45 days to 60 days. This would allow distributors to carry more stock and reduce the reliance on only using distributors with large cash reserves.
Increase dealers in densely populated areas and improve existing distribution network. As observed in 1993, increase in dealer numbers and focus on specific target groups resulted in 60% increase in sales. Gillette Indonesia should try and increase the number of dealers in densely populated areas by carefully evaluating the dealer background before appointing them. To cater to the outlying rural areas which generally patronize mom and pop stores distribution methods need to be bolstered.
Additionally the variable component in sales persons’ compensation should be increased to encourage greater sales push.
Price
The current price strategy seems suitable for this market and its users.
by
agnahary (student)
