Marketing Strategy for BRITA Water Filters

by artit (student)

University Degree Business and Administrative studies

BRITA WATER FILTERS – “HOME MADE BEVERAGE”

BRITA CASE STUDY – The Winning Strategy

Presented by

G-Force

TABLE OF CONTENTS

Executive Summary...................................................................................................3

SWOT Analysis..........................................................................................................4

Consumer review and findings from segmentation study..........................................6

Recommended target Segments................................................................................8

Recommended Strategies to achieve “double digit top line growth”.........................10

EXECUTIVE SUMMARY

BRITA GmbH was a German water Filter Company. The Clorox Company got the rights to market BRITA in 1988. The Company is a leading consumer products company with fiscal year 2005 revenues of 4.39 billion. With 7600 employees worldwide the company manufactures products in 25 countries and markets them in more than 100 countries. The Clorox Company was organized into SBU’s and BRITA is one of the SBU’s at Clorox. BRITA manufactures the PT (Pour-Through) water filter through which they achieved almost 200 million in revenues in the first 4 years. By 1999 BRITA was available nationally and the brand awareness stood at 70%. 18% of the 103 million US households were using BRITA. During the 1990’s BRITA was faced with stiff competition from numerous companies making water filters. The competition also introduced innovative products ahead of BRITA. In 1998 PUR launched the FM (Faucet mounted) filter that screwed on to the tap. This was an alternative to the PT filter which at the time was the only product BRITA had. The fact that PUR filter removed certain illness causing drugs which was of concern and in line with their positioning to remove impurities helped them pay dividends as it was the only brand that seemed to gain on BRITA, the market leader with 65%-75% market share.

PUR continued to grow and was acquired by proctor and gamble. In the late 1990’s the filtered water business changed with introduction of bottled water. Bottled water made up 8% of all the liquids that people paid to drink and was the industry’s fastest-growing category.

Sales of BRITA had declined for the first time since its launch. BRITA sales declined and declined abruptly. BRITA finally introduced the FM filter in 1999 and despite its growth it only achieved a 35% share in this category compared with PUR’s 65%. While the filtration business was growing the core pitcher business remained stagnant. The BRITA team tried several strategies to boost sales but all the attempts failed.

BRITA needs a winning strategy to increase sales and bring the brand back to the top position. In this report we are presenting the current market situation, consumer trends and segments and which segments to target as part of the new strategy. Long term and short term strategies and how we intent to implement them in order to rejuvenate the BRITA brand in the minds of people and thereby increase sales.

SWOT ANALYSIS

Below is the SWOT analysis of the BRITA case. Analysis of the company and its products current strength, current weaknesses and today’s opportunities and threats.

STRENGTHS

The original water filter company (The first in the industry) - Brita was the first company to introduce such a filtration system into the American homes. The fact that it was among the early players in this industry has added a sense of authenticity to its image and this will be positively reflected on the ongoing business processes.

Strong brand - Ever since its launch in the market in the 1980s, the main concern was to create the necessary brand awareness in the minds of its customers. This was clearly presented by the efforts of the branding team who spent almost the first 4 years organizing marketing campaigns to educate consumers on how to use the pitchers as well as explaining its importance to them.

Large market share - Brita was made available all over the nation through mass channels. Places with high traffic like supermarkets, drug stores, hardware stores, and mega outlets as Wal-Mart, Costco and Target have made it quite easy for consumers to locate those filters. This was a smart step as almost 18% of the 103 million households’ representing this market were Brita’s pitchers users and held 71% of revenue share from the industry that is worth $350 million.

Independent SBU & Support of Clorox - Being organized as a Small Business Unit is considered a strength point to Brita and its business operations. Instead of being lost in the hundreds of business activities of the mother company Clorox, this SBU system made a dedicated management team to look after its portfolio of products. Different areas in business like Marketing, R&D, Legal, or Sales will be taken care of by a group of people whom only mission is to accomplish what is right for the unit they are responsible of without being distracted by other brands of products.

Weaknesses

Lack of innovation - For almost 10 years, the pitcher that Brita was selling has never witnessed real improvements.

Product-focused not customer-led - The approach followed by focusing only on the product it tries to sell had minimized the horizon for Brita. It was so attached to its pitcher to the point that it partially ignored those who actually consume it. In fact even when it tried to engage customers throughout the Memo technology application it failed. And this was greatly due to focusing on its product rather than understanding those who will actually consume it and their needs.

Not targeted, Failure to identify target segments – Brita failed to identify the target segments and focus its attention to meeting the requirement of the particular segment.

Reactive to competition – lack of innovation. Brita didn’t realize the need to innovate and bring new products and were on a reactive mode to competition which is seen in the late entry of FM (Faucet mounted filters) after PUR released it.

Small compared to P&G – P & G is a giant in the consumer health care industry and BRITA doesn’t have the bandwidth to compete against them.

Threats

Increased Competition - The ...

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Not targeted, Failure to identify target segments – Brita failed to identify the target segments and focus its attention to meeting the requirement of the particular segment.

Small compared to P&G – P & G is a giant in the consumer health care industry and BRITA doesn’t have the bandwidth to compete against them.

Threats

Increased Competition - The first real competition began in 1998 upon the introduction of a new filter system by a company called PUR. The new FM system was the first serious threat to Brita’s product. This incremental product improvement has taken away some of the market share from Brita and it became even more difficult when PUR was acquired by the industry giant P&G. Competition also came in from the bottled water industry which was one of the fastest-growing business in the beverage industry.

Commoditization of the Filtration Technology - Even when Brita started making the new FM system, it still had no luck in becoming the market leader as the case was with its PT filters a decade ago. Consumers favour products that show development and uniqueness in their attributes or functionality.

Tap water is no different than filtered - The concept that tap water will provide the same water and that there is actually no difference between tap water and filtered water is a threat if people adopted this idea then it will affect Brita’s business as people will stop using their filtration systems.

Consumer review and findings from segmentation study

The Segmentation study has identified 6 segments as Tap traditionalist, Weary Tap Satisfied(WTS), Principled Filter Fans(PFF), Affluent Fridge Followers(AFF), Assertive Self Improvers(ASI) and Bottled Water Indulgers(BW).

Majority of the group prefers tap contamination free water. PFF consumers believe that filtered water is healthier than tap water. AFF believe that filtered water helps to control weight and prefers it cold while the ASI consumers believe that they need to consume huge amount of water to keep them self healthy. Filters are used mostly in urban areas. Most of the consumers drink water as it is perceived to have many benefits to the body.

The Assertive self improver’s ranks 1st in water consumption per day with a score of 14.34. It has also observed that most of the consumers drink water when they are at home. The Weary tap satisfied users have the least water consumption per day with a score of 4.02. If we take the total of all the 6 segments then the scores come to be 7.77 with 2.74 of them having water away from home while 5.03 consume water at home.

According to the source of water consumed, majority of the segment used tap water. The Principled filter fans ranked highest with 96.2 from the rest. The Bulk of bottled water was the least consumed.In the total consumption, the Tap water consumption was the highest with 67.7%, while the lowest was Bulk bottled water with only 24.4% consumption.

In the primary source report, Filtered water has been ranked the highest in the Principled filter fans segment. In total, the Tap water is ranked highest with 35.4%, while the 2nd is Filtered water with around 33.3% and the Bottled water stays last in the list with around 21.7%.

In the type of filtered water consumed graph, the Refrigerator filter stands the highest with 13.6% consumption. The Pitcher stands 2nd in the list with 10.6%. In the segment penetration report, 78.9% of the consumers prefer FW from Refrigerator process which is the highest. The Brita owned PT model is the highest when compared to PUR. Majority of the consumers using filters while consuming water has the knowledge of impurities in water supply. Most of the consumers believe that using water filters improves the taste of the water and using fridge makes it more convenient to consume filtered water.

All consumers agreed that they drank more water when it tasted good and less when it did not. 34.9% of PFF, 32% of AFF and 35.4% of ASI support to improve the taste of the water.

Brita use is not correlated with perception of tap water. Brita’s users were drawn to the brand because it gave them clear and clean water.

Brita use is not correlated with the desire for clean, clear, refreshing and good tasting water. As per Exhibit 4, The BW was given higher ratings than Pitcher water. 77% of the consumers believed that BW has a good flavour as compared to 32% of pitcher users. 63% of BW consumers believe that BW is pure as compared to 44% of pitcher users.

People see water as healthy and something that they should consume. The AFF and ASI users along with PFF consumers believe that consuming water is good for health. About 73.8% are AFF users. The filter system needs to be easy to use – to load and to know when to replace. Location of the indicator was not proper. It failed to show the relation between filter replacement and volume of water. As a result of the 46% of PT users who were likely to lapse within the 1st year of using the system, 71% decided not to use a water filtration system. 14% found it too expensive.

WFS owners tend to be people who have a hands-on hobby. They Cook more and eat at home more and tend to plan more. They tend to do the “right things” like eat organic, be vegetarian, take vitamin supplements and eat nutrition bars, exercise/do yoga.

Recommended target segments

Based on our study of the The Clorox Company, strategic segmentation study by consumer centric solutions Exhibits 7 – 14, below are the details of the chosen target segments

The Brita brand is focusing on providing clean, clear and good tasting water to everyone. The strength is being market leader in pitcher filter (as shown in Exhibit 12, 50.9 of the number of own pitcher filtering system using Brita) which led to strong brand awareness among customers in filtered water market. The three key factors that influence water filter system purchase are water quality, moving home and trying filtered water elsewhere (as shown in Exhibit 13).

According to Exhibit 7, from six categories of consumers the target segment has been narrowed down to 3 categories of Water Filtration System (WFS) segments since competing in tap segments would need time and budget to develop and change consumer’s attitude towards tap water by advertising and investing in R&D. BW segment will not be considered as a target market as it represents a small percentage and our strategy is to focus on core product strength which is filtered water and this strategy will eventually penetrate and influence customers of bottled water. Our target segments are PFF (Principled Filter Fans), AFF (Affluent Fridge Filters) and ASI (Assertive Self Improvers) which can be divided into two groups according to long-term and short-term strategies.

For short term strategy to boost sales of BRITA we are targeting 2 segments which are PFF (Principled Filter Fans) and ASI (Assertive Self Improvers) due to the fact that PT is concerned to be core product used by PFF (Principled Filter Fans) and the ASI (Assertive Self Improvers) uses a mix pitcher and faucet mounted filter so there is a potential growth of filtered water market which is 49.1% (as shown in Exhibit 9). Moreover, according to Exhibit 8, people tend to consume more water at home than being away from home. This could be implied that water filtered equipment market will grow in the future.

In a long run, we will target the AFF (Affluent Fridge Filters) segment which comprise of people in the thirties who are educated and busy and for whom drinking water is part of their lifestyle (Exhibit 7) require drinking water to be made more convenient. This segment being user of filtered water is a big potential to BRITA if this segment can shift to use BRITA’s filters. The

In order to identify the target segments there are 6 main factors to be considered.

Recommended Strategies to achieve “double digit top line growth”

In this section, the, recommendations of strategies for Brita to achieve double digit top line growth will be given.

Competitive positioning

Target Market

As mentioned in previous section, we have a short term and a long term strategy to help BRITA grow and sustain the business. For the short term target strategy we are targeting the , PFF (Principled Filter Fans) and ASI (Assertive Self Improvers) segments based on the information that both segments drink filtered water with the existing technology of Brita; pitcher or faucet mount. Both segments can cover 27.8% of total market size. Moreover, in order to sustain the company’s future growth, there’s an opportunity for Brita to enter into the AFF (Affluent Fridge Followers) segment in the future. The main reason is that this segment also drinks filtered water with another behaviour and technology; which is refrigerated filters water, and has low tap satisfaction index at 81%. Also, comprise a market size at 14.2%. Brita needs to improve introduce a new product to serve this segment in the future.

Competitors

Base on the segmentation study and consumer review, we can divide the competitors into two categories by the technologies which are

Direct competitors: Other pitcher brands.

Indirect competitors: Other filtered systems, Tap water, bottled water.

Competitive advantage

Short term strategy - Differentiate by new product and integration of branding

Base on the analysis mentioned regarding consumer review indicate that all consumers want good tasting water. Furthermore, considering the information of key benefits driving purchase (exhibit 14) show that contamination removal and improved taste are major points compared with the existing situation of Brita’s product quality.

There’re two alternatives to improve this issue. The first one is to improve the impurity removal which is currently behind the performance of the competitor; PUR. The second one is to improve the taste of water by focusing on removing taste violators. By considering the previous analysis, One of Brita’s weakness which it should avoid is the competition with PUR which is now owned by P&G, a giant in the health care FMCG (fast moving consumer goods) industry. We recommend focusing on the latter alternative to avoid the direct competition with P&G and become leader by providing better tasting water.

However, only the new product alone couldn’t lead Brita to achieve the double digit growth target. In the next section, we will provide the recommendation on marketing activities to achieve the goal by applying the 4P’s of the marketing mix analysis.

Long term strategy – Offer Breakthrough product (portable filter)

Since the inception of the first filter, Brita has had the same filter with minimal changes and then later joined behind PUR with the FM (faucet mounted) filter. This resulted in a drop in sales since 1999 and the sales have been stagnant ever since.

The long term strategy is to introduce a new filter in the market aimed at the AFF (Affluent fridge filter) users. This will help penetrate a new segment, shifting these people to use the new BRITA filter and the innovation also helps existing users to remain motivated and interested in what BRITA has on offer apart from the usual filters.

The AFF segment comprise of people in their thirties, well educated and employed. A detailed analysis of the particular segment is given below.

Key characteristics of the AFF demographic group identified from Segmentation Study

Source: The Clorox company, strategic segmentation study by consumer centric solutions

Busy people, always on the move and drinking more water is part of their lifestyle (Exhibit 7)

The percentage of tap water consumed is high indicating that since this segment constantly travels they are unable to get fridge filtered water wherever they go and they by the consumption of water when theu are out of home is less. (Exhibit 8 & 9)

Fridge filtered water being the primary source of water and the group being users of filtered water makes them a potential for shift to new water sources.

Making drinking water more convenient is of high importance to the group (Exhibit 14)

Marketing Mix

In the following section, 4P marketing analysis will be described.

Product

As mentioned in the competitive advantage that we should improve our products to deliver the best water taste. However, we recommend not to totally neglect removal of imputrities as this is still a key driver affecting consumer decision. Put a slight effort to keep the improvement. Moreover, idea to improve the taste of water should be the development of new filters with the value-added features e.g. the mineral filter, longer period filter, and fruit-flavour filter. Also, there are some critics from the customers who question about the reliability of Memo; usage indicator. We recommend improving the usability property by the visual display at the filter e.g. colour will change from white to red. With the value-added, Brita can increase the price of new filters. The company will receive more revenue in long run.

As of the key triggers of the purchase process for water filter system is the consistence of water supplied quality, we recommend to corporate with the tap water supplier; which is the original source of water, to provide the good quality of water which will support Brita’s business to improve the appropriate product based on the information of water supplier throughout the country.

For the long term strategy, we will develop a portable filter that can be fitted to a standard size water bottle currently available in the market and allowing consumers the ability to carry filtered water with them whenever they travel. It also allows customers to use tap water from any place as this will get filtered when poured into the bottle.

Price

From the information regarding segment penetration (Exhibit 12), Brita processes 50.9% volume share in PFF segment at the moment. For ASI segment, the customers have high revenue at $50,000 (Exhibit 6).

Therefore, we recommend maintaining the price at this stage. In the meantime, the company should also pay attention to the price gap with the main competitor to make sure that the price won’t be too high for the competition. However, the opportunity to increase the price comes from the improvement of filters. We can increase the performance of filter in terms of taste removal as well as several value-added benefits mentioned in product activities.

Place

Short term Strategy

There are several places which we can offer product to the customers based on their profile, lifestyle, and purchasing criteria.

By consider the information of water filtration system owner (WFS), the customers tend to have health-related activities. By consider their lifestyle, both target segments prefer cooking, reading, and love to learn. Furthermore, PFF segment is still young at the age of 20s, and doing exercise. Moreover, the target segments would like to buy water filtering system when they move to a new house.

From all information, we suggest to provide the availability of the products at the place which related to health concern activities which are drug store, organic and healthy food shop, and also fitness centre. Moreover, another place should be convenience store where the people can buy the food. To serve the people at young age and love to learn by themselves, online shop in Brita webpage is the strong recommendation to serve this group of people. Finally, to cope with the customers who consider buying filtering system when moving to a new house, warehouse and furniture shops should be another point of purchase of the products.

For long term strategy

The product will be made available at all of BRITA’s current distribution channels along with hotels, schools, community halls, tourist spots and the same can also be made available in vending machines which will be installed in all place frequented by people. This will help people who are paranoid about drinking filtered water and the sources of water to simply carry a filter or purchase it conveniently to drink filtered water.

Promotion

Promotion for target segments should be selected to comply with their preferences. All segments would like to drink safe water. For filtered water consumers; which are our target segments, they all tend to have the healthy concern in mind. They usually receive the media by TV, magazine, and internet.

We recommend Brita to create promotional campaigns to enhance the health of people. We have come up with the theme named “Homemade beverage”. Then, promote this theme through several media such as TV commercial focusing add intervals during cooking shows, Advertising campaigns targeting the busy and travelling consumer stressing the need for clean and healthy water, magazine focusing on home decoration and food & cuisine categories and Brita’s website. We also recommend providing on-site demonstration at the place where our target customers visit frequently. Fitness centre and convenience store. This approach will allow the prospect customers; which comprise of the ASI segment who has an indulgent shopping style, to have a chance to experience our product before they decide to buy. Ultimately, website and call centre are recommended as a channel to communicate product information, and receive customer feedback for either pre-sales and after-sales stage.

Organisation

In this section, we shall provide the recommendation for Brita to align the organisation to support the achievement of recommended strategies.

Information referring from Director of R&D shows that Brita should improve collaboration and communication among departments in new product development process to make sure that all related departments; especially R&D, understand customer requirements clearly. Cross-functional committee should be commenced as a model for new product development process. This approach will enhance the effectiveness as well as efficiency of the development process in terms of transformation of customer requirements into value added products.

Regarding Brand or product portfolio management, Brita should review the direction to branding multiple products within SBU which have different functions which are a pour-through group, a faucet mount group, and a new product group. The recommendation should be that how Brita is going to manage as “holistic viewpoint”, and then consider provide the appropriate resources.

In order to realize long term strategy; to enter the AFF segment with new product, the organisation should provide resources for R&D department to enhance competency and accelerate in new product development.