Nirma Case free essay sample

Playing by the wisdom of the popular maxim – ‘the product should be available within an arm’s length of the desire’, Patel recruited local housewives to sell his product. Once the product started garnering name and sales, he started to look to expanding his distribution network. The product’s sales were steadily climbing and soon the Nirma brand was selling everywhere in Gujarat, in little shops round street corners and even in the remotest villages. Soon, the Nirma brand came to be well accepted in Gujarat and neighboring parts of Maharashtra. Patel, meanwhile began diligently cultivating the low-to-medium consumer pockets – a whole new consumer segment for detergent category. It was a massive market segment that was starving for a good-quality detergent at an affordable price. Gradually, Nirma began to spread its footprint from the neighboring markets to more deeper recesses of the domestic market. Its handmade detergent packets had a price tag of Rs. 3 per kg, which was one-third of the lowest priced popular detergents then. Eventually, this strategy helped him to make a fortune from the volumes. For hardscrabbled homemakers struggling to balance their monthly budgets, the product was a boon. At the time, detergent and soap markets were dominated by multinational corporations with products like Surf by Hindustan Lever (now Hindustan Unilever). They were priced above Rs. 13 per kg, which was out of the reach of the majority of middle class homemakers. Seizing the opportunity, Patel kept his margins very low, and was happy to get anything between three and five percent, a strategy that helped him conquer a big share of the detergent market. In less than ten years, Nirma became the top selling detergent in India. Nirma came in the market when brand energy was missing and it did wonders in the bottom segment of the market, on the simple philosophy of giving value products at an affordable price,† says Harish Bijoor, CEO, HarishBijoor Consults. When Nirma washing powder was making a name for itself in the low-income market, HLL reacted in a way typical of many multinational companies. Senior executives were dismissive of the new product: â€Å"That is not our market. We need not be concerned. † Nirma’s marketing strategy at the time was to target its products at non-users of Surf. This way, it was able to avoid the attention of HLL while continuing to grow at a frenetic pace. By the mid Eighties, Nirma moved ahead of Surf to capture a large market share. When finally HLL executives were jolted into action to take a closer look at the low-income market, Nirma washing powder had become one of the most popular household detergents in many parts of the country. The achievement was all the more special for the company’s founder who had once said: â€Å"Nirma is not merely a brand or a product, it is a dynamic phenomenon, a revolution, a philosophy. The release of Nirma’s jingle on television in 1982 stoked the brand’s appeal even more. The simple and catchy jingle – ‘Dudhsisafedi Nirma se aye, rangeenkapdabhikhilkhiljaye’ was first aired on radio in 1975, and was broadcast on television in 1982. SumantoChattopadhyay, Executive Creative Director, South Asia, Oamp;M, says: â€Å"When it first came, Nirma shook its competitor s and the Nirma girl stole every housewife’s heart. † To this day and through the decades, the Nirma jingle has continued to echo in the drawing rooms of middle-class Indian homes. While the jingle stresses on the product, it also salutes the savvy and budget-conscious Indian housewife. Taken aback by the growing popularity of the Nirma brand, HLL was forced to come up with its campaign. The ad for its Surf detergent portrayed a smart housewife ‘Lalithaji’ telling the audience that good quality comes with a good price. HLL also launched its own mass brands (Wheel, in the detergent category), which led to price wars in the category. But by then the Nirma brand was firmly entrenched in the consumer psyche. In 1990, Nirma entered the Indian toilet soaps market with its Nirma Beauty soap. Later, by mid-Nineties, Nirma had successfully extended its brand to other product categories like premium detergents (Nirma Super Washing Powder and Detergent Cake) and premium toilet soaps (Nirma Premium, Nima Sandal, Nirma Lime Fresh, etc. ). All this while it followed its original marketing and pricing strategies in the economy as well as in the premium segment, believing in value-for-money proposition and in creating and maintaining long-lasting relationships. â€Å"Nirma has always remained committed to offer better products, at better value, for better living,† says Vijay Uppal, brand consultant and Director Upfront Advertising. By 1999, the company had become the largest detergent and the second-largest soap manufacturer in India. It had more than 38% market share in the detergent segment and around 20% market share in the toilet soap segment. Though way behind HLL’s share of 65% in the toilet soap segment, Nirma’s performance was remarkable as compared to Godrej, which had a share of 8%. With a thrust on new launches, sales promotion and distribution efforts, Nirma showed extreme consistency in not just maintaining its growth but also capturing greater market share. In 2000, the company entered the hair care market with Nirma Shikakai, Nirma Beauty Shampoo, and Nirma Toothpaste. In order to step up its foray in the toilet soap segment, Nirma rolled out innovative marketing strategies. Unlike detergents, soaps are a personal-care product and many customers develop deep psychological bonds with their soap brands. Also, the market was segmented by HLL by price, by scent appeal, and by brand personality. So, Nirma positioned Nirma Bath against Lifebuoy, Nirma Beauty Soap against Lux, Nima Rose against Breeze, and Nima Lime against Jai Lime. Taking a leaf out of HLL’s playbook, which had launched Wheel to counter and check the growth of Nirma detergent cake and powder, the company went into manufacturing high-fatty-matter soaps with the right scents, pricing them much lower than other brands. This way, Nirma effectively engineered the creation of the ‘sub-premium’ segment in toilet soaps. In order to boost its soap sales, Nirma also took to strengthening its retailer network, passing on the cost benefits from its products to retailers. It gave them huge margins. For instance, for Nirma premium soap, it offered 52% and for Nirma shampoo, it offered an unbelievable margin of 140%. It also removed the intermediaries to save cost of distribution. As a result the product went directly to the retailer from the factory. In 2000, Nirma acquired Kisan Industries at Moriya, Gujarat, to improve its packaging as well to save on packaging cost. The company also adopted backward integration strategy for the regular supply of raw materials, 90% of which it manufactured in-house. It also gave due importance to the modernization, expansion and upgradation of the production facilities. The company also made sure that it made use of the latest technology and infrastructure. However, at the time analysts felt that it would be tough for Nirma to break into the premium soap segment because of its brand image, which was anchored on the premise of â€Å"paisa vasool†. According to a market survey then Nirma was considered to be a cheap brand. Also, the advertising spend of the company was very low, as compared to the other FMCG competitors. Nirma spent only 1. 25-2% of its turnover on advertising as compared to the normal industry spends of 6-10%. To shed its downmarket image, Nirma released corporate advertisements worth Rs. 10 billion in the late Nineties, throughout India. Though Nirma was better known as a producer of low-cost economy range of products, it was successful in the middle- and up-market segments as well. But at the same time, competition was also increasing. While HLL continued to be a major competition, Pamp;G and Henkel SPIC also adopted aggressive measures. Players from unorganized sector were also adding to the competition in the detergents and washing powder industry. The company, until a few years back, was the second-largest player in the 11,000-crore detergents business, but has now been overshadowed by HUL and Pamp;G. Even in the soaps category, Nirma has been losing market share to players such as ITC, Godrej Consumer Products and Reckitt Benckiser. With both Pamp;G and HUL as well as homegrown firms like Godrej and ITC getting aggressive in terms of marketing and new product launches, Nirma will have to innovate in the product categories it is present in and also tinker with its pricing. Companies in the detergents and soaps categories, both multinationals as well as local players, have built their strategies around viability, affordability and visibility; Nirma’s focus has largely been on affordability. Can Nirma, with its cost-focused model, regain its lost heights and become successful again in the long run? Not unless it accepts that a common man ad that worked wonders a few back would simply be seen as rigmarole tacky in modern times – for even to tell a consumer that one is the best value for money proposition in the market, one needs snazzy ads Now the question is, will they accept this reality?