Harleen the urban male population that uses knives
Harleen Parmar Gillette Indonesia Chester Allan, Gillette’s country manager of Indonesia, needs to decide whether increasing spending in marketing beyond 12% of sales will cause a 20-25% increase in blade sales in 1996.
Despite the high market share of 48% and 97% brand awareness (See Exhibit 1) of Gillette-brand blades, the company needs to target several factors that hinder its growth by switching rural population to lower priced Gillette blades; targeting 48% of the urban male population that uses knives to start using blades; and increasing the productivity by improving the warehouses with new equipment and selecting better, more reliable distributors in order to eventually reduce expenses for the company.Gillette needs to capitalize on increased population and economic growth of Indonesia, which has resulted in improved income levels and demand for higher-end products. However, the populations in rural areas are still not able to afford grooming products, which are regarded as luxury products. In addition, government regulation prohibiting direct import or distribution of products and different cultural practices hindering partner relationships are presenting challenges in increasing profits for Gillette.Allan should focus on targeting segments that are not yet captured by the market share, including urban men who shave with knives and the rural population that cannot afford the expensive Gillette blades. Urban men who shave with knives account for 80% (total urban men who shave) X 60% (men who use knives) = 48% (See Exhibit 2) of the total urban men population.
Since these men live in a growing market where there is an increase in per-capita income, there is a high possibility that this group will be able to afford the Gillette blades. In addition, Allan should divert the marketing strategy towards lower-end blades to target the 65% rural market that uses the competitors’ brands. Even though there is a trend towards rising incomes, it would be hard to achieve 25-30% increase in sales in a year without reducing the price of Gillette blades.This marketing strategy assumes that the urban men who shave with knives will be willing to spend extra money on the Gillette blades since they have a growing income. However, 48% of urban male population accounts for a sizeable potential market for profits. In addition, reduction in cost of blades to target the rural population assumes that the high quality of the products will not be diminished. Forecasting increased sales due to decreased cost of blades can certainly avoid compromising the brand image.
In order to increase the profits in the urban males who presently use knives, Allan needs to promote Gillette brand through sales teams instead of focusing on derived demand from customers, thus providing personalized education about the benefits of using blades instead of traditional shaving techniques. In the long run, the company must take on initiatives to reduce the cost of blades to target a larger population by installing new equipment in warehouses to increase productivity and selecting distributors with a good working capital, banking credit and reliable transportation.Please see the attached timeline (Exhibit 3) for Allan’s workplan to increase sales of Gillette. Exhibit 1: Indonesian Male Consumer Awareness and Usage of Blades: 1995 Exhibit 2: Market Data Data| | Number of people| 40,000,000| % of people who shave| 80.
00%| Number of people who shave| 32,000,000| Type| % Surveyed| # Surveyed| % Pop| # Urban Males| # Urban Males/Knives| Knife Users| 60. 00%| 19,200,000| 48. 00%| 34,300,000| 16,464,000| Blade Users| 40. 00%| 12,800,000| | | | Exhibit 2: Timeline for Increasing Sales of Gillette