Gillete Indonesia Case

Summary Statement

Gillette should work proactively to meet its global vision of being a world leader in the Indonesian shaving market by targeting a growth of 30 %. This can be achieved by adopting aggressive marketing strategy in these areas namely: increased supermarket penetration, targeting hitherto untapped rural market and product repositioning.

Situational Analysis

Context: Gillette is on the throes of capturing 50% of the market share in Indonesia and market expansion is a priority. However, personal grooming products are regarded as a luxury by many.

Company: A world leader in consumer product categories like blades and razors, Gillette aims at expanding its business operations and dominate all markets it has operations in. In Indonesia where incidence of shaving is relatively low, it is facing challenges in meeting its growth targets.

Competition: It faces direct competition from low end double edged blades manufactured by companies like Tatra and also from disposables manufactured by Bic etc. Indirectly, dry and wet knives are potential competitors as they are being used by a large chunk of shaving population.

Collaborators: Collaborators are the distributors, wholesalers, retailers and supermarket chains. It deploys 23 distributors spread across the key provinces. Relationship management, recovery of dues and working capital flows are key concerns in distributor relationships.

Consumers: Most of the present consumers fit the �urban male over 18 yrs’ category. College students and workforce entrants are trendsetters and are influenced by western grooming habits.

Market size

Table 2 shows that in 1995 around 13 million people in Indonesia use Gillette blades across urban and rural areas. And table 3 estimates the total available market for Gillette. Accounting for local religious customs and conception about shaving, it can be deducted that at least 15 million (20% of 72) are potential costumers for Gillette in Indonesia. This huge untapped market suggests that more effort needs to go in marketing for Gillette.

Alternatives

Proposed changes in the distribution channel

Option 1: Reduce the number of intermediaries in the distribution channel. (Rejected)

Current chain: Manufacturer – distributor- wholesaler – retailer

Each intermediary adds his markup to the cost and as a result by the time the product reaches the consumer it becomes comparatively expensive. However in the past alternative distribution strategies have failed to meet the consumer needs. The large geographical spread of the target population, lack of distribution service technologies and immature market all add to the need of maintaining the status quo.

Option 2: Impart knowledge of optimum selling strategies to the sellers. (Accepted)

Optimum selling practices will lead to increased profit margins. Implementing this across the entire spectrum might prove challenging.

Changes in the advertising strategy

Option 1: Increase supermarket penetration with a focused promotion strategy for system blades (especially Contour) and Blue II disposables. (Accepted)

Selling through supermarkets will save Gillette 2 % of gross margins paid as sales commission (Exhibit 4 in casebook). Using Table A given in the case study, the number of prospective urban male buyers in upper income bracket comes out to 12.46 mn (196 mn * 15.9 % * 40%) (1 man in each household). In 1995 Gillette supermarket sales were 5.75 mn units. Assuming a single user uses 5.5 blades a year, the total number of users buying from supermarkets is 1mn. So, enormous opportunities exist (11 mn potential users).

Contour Life Time Value of a Customer

Assume brand loyalty of a supermarket customer for premium segment Gillette products to be 2 years. The price of Contour is $0.55. Given that a high end customer uses 15 blades/ year, we will earn $0.75 a month. So for 2 yrs we will get 0.75 * 24 = $ 18. COGS for the same time period will be 1.25*0.25*24 = $ 8 (Exhibit 2 in the case study)

Thus LTVC of a customer buying Contour blade is $ 18 - $ 8 = $ 10. From exhibit 5 we see that Contour has low brand awareness but high brand loyalty and high LTVC. Thus we should increase the marketing focus on the Contour brand.

Option 2: Target untapped rural markets. (Accepted)

The projections given in Table 3 clearly indicate that tapping the so far unexplored buying potential of the rural markets will result in increased revenues in