Personal care market and need for a blue ocean strategy

Personal care industry basically comprises of products like cosmetics, toiletries, skin care, hair care, after shaves deodorants etc. The basic objective of this given paper is to propose a Blue Ocean Strategy (hence forth referred as BOS) for the personal care products.

Personal Care market in India

The net worth of personal care market in India is about 4 billion us dollars (Rs 1700 crores). Personal care products use a wide range of products ranging from salts, bases to alcohols like isopropyl ,acetyl alcohol etc to high cost natural extracts and synthetic materials. These products are used for a lot activities such as skin care, hair care, hygiene, emulsifiers, moisturizing etc. In the present scenario it had been observed that the entire structure of the personal care product market in India is undergoing a paradigm shift. Earlier the focus was more on basic products like soaps and shampoos, but now it is going more towards specialized products such as skin whitener, sun block lotions, anti ageing creams etc. (though still primary products like soaps and hair care are showing a strong growth rate of 10% and 5% respectively and they constitute the major portion of the market).

The per capita consumption of such product is increasing rapidly. The very basic reason for this can be attributed to:-

1> Continuous growth of Indian GDP at 7- 8 % for the past few years.2> Up gradation in the living standards of Indian households.3> Upward mobility of a huge portion of Indian populace from poor to the lower and middle class strata.4> Entrance of large MNCS in India5> Huge expenditure made by these firms for building brand of their respective products.6> Creation of a “want for these products” in the Indian psyche.7> Entrance of organized retails first in big cities and then to the tier 2 cities.8> A large amount of Indian populace is getting exposed to the TV media these days.

Due to these above factors in the last few years there have been a lot of increase in the knowledge base and the desire of the Indian populace. The fact cannot be denied that no matter an individual belongs to whatever socio economic strata there is always an in built desire for various kinds of personal care products. This desire for personal care products is not only on account of their (personal care product’s) functional importance but also due to the high degree glamour, ego satisfaction, and brand names associated with these products. The present Indians are much more aware than their older generations, have got high degree image consciousness, and are much more exposed to the world of glamour and fashion.

Bottom of the pyramid customers in India

The awareness is true not only for the elites and upper middle class Indians but holds very much apt for people who are from the lower strata of the society. Even an individual who happens to be from the “Bottom of the pyramid consumer base “ may not have the capacity of purchasing most of such products ( baring the common products like soaps, shampoos etc) but there is no dearth in his knowledge regarding such products, he is individual who might not have a good amount of disposable income to spend on these luxuries but the fact cannot be denied that he is someone who is having a TV at his home , with the help of which he had been exposed to all the major events happening across, with the help of the plethora satellite channels he had been exposed to all kinds of films , soaps and commercials, like any other individual he used to get fascinated whenever he use to see to see a glamour and style packed commercial of any such product. He might be from the “BOP” but at the same time he should not be confused with the image of a poor man of 60’s and 70’s struggling hard to make his ends meet. He is definitely a new age man who is having his own ego, own individuality and own identity and he is ready to take an extra mile to nurture it further. Only thing he does not have is that he does not have a huge amount of money to spend, one should not forget that though he earns comparatively higher than his earlier generations but he also lives in the world of high inflation where a large amount of his income gets consumed in fulfilling the basic requirements of his and his family. In his case there is a mismatch between what he aspires and the amount of money he has to fulfill his desire.

One another factor that has to be taken into consideration is that these individuals should not be considered as someone who lives in his own isolated island. These individuals from the bottom of the pyramid in reality constitute a whole set of aspiration and desire. It should not be thought that he is someone who does not interact much with his counterparts spread across the geography. He is someone who has access to the modern mode of communications; he is someone who has his own friend circle working across various sectors with whom he does interact frequently. With these people he does share his own aspirations and are in turn influenced by them also. Thus his aspirations and desire are just not his own but it represents a set of common aspirations and desires that are very common among a huge mass of lower middle class Indians. These desires represent strength, a force that cannot be neglected at any cost. A latent potential that can make a lot of business sense for new age business.

It is very true that these people really do not have very huge buying potential but together they do constitute a buying potential that is really not small in absolute terms. Definitely they are not as well off as their rich counter parts and money is a very important factor that regulates their buying behavior but these new age “BOP” customers have their own budget which might be moderate (or even small) but definitely represents a market value. These people have a latent customer inside them for personal care products (for that matter for any other product). Only thing that matters is that they want a value proposition, they want value at low price. A product which if not very high on utility should at least be moderate on that scale, must be in a position to fulfill their requirements and should b priced low so that they can be afforded easily.

A matrix has been drawn to explain things better:-

HIGH PRICE

Value Proposition for a well off customer

Value proposition for a poor customer

Value proposition for a BOP customers(Moderate value at low prices)

MODERATE PRICE

LOW PRICE LOW VALUE MODERATE VALUE HIGH VALUE

In general a typical “Bottom of the pyramid customer” can be summed up as following:-

1> He is someone who has limited economic resources but still has his own aspirations.2> He is image conscious.3> As a buyer he has limited but definite market potential.4> He has TV, he has mobile phones, he is exposed to various channels of the media, he is exposed to the world of

cinema and due to all these things he is exposed to the branding exercises conducted by the big and small companies of various personal care brands.

( one very important point that has to be made clear over here is that there are various definitions for bottom of the pyramid, similarly there are various important definitions for the term of poor. When the term bottom of the pyramid is used in the given research work it basically includes 2 types of people:-a) People(households) who earn around 75,000 per annum (or slightly less than this )b) People(households) who earn somewhere between 75000-1,50000)

Similarly it should be known that when the term poor is used in the Indian context it means the 300 million (30 crore) population of India who are earning less than 1 dollar a day. )

After shave, Deodorants and Face wash

After shave, deodorants and face wash are very important constituents of the personal care market.

After shave:- is applied on the face after shaving. It is generally made up of alcohol and it serves the purpose of smoothing, protecting and taking care of the skin. It is also an astringent and helps in closing up of pores. (After shaving the skin gets cut and application of aftershave helps closing the open pores.) The content of alcohol plays a very important role in the functionality of after shave. An after shave with a very high degree of alcohol dries fast and hence makes the user feel comfortable but at the same time this high degree of alcohol can cause some burning. On the other hand there are after shave brands that don’t cause much burning on account of low alcohol content but they do not dry soon and can cause some degree of discomfort. After shaves also have anesthetic abilities.

Deodorant:- As the name suggests deodorant are applied to kill bad odor. Deodorant also constitute of alcohol along with aluminum chloride and other aluminum salts. There are various ways in which a deodorant works; some directly kills the bacteria responsible for perspiration, some tries to regulate the perspiration, some has aluminum based chlorides that reacts with the electrolytes in the body to form plug in the duct of sweat glands there by cutting off the secretion of sweat. Deodorants are also mild astringents.

(A point to be noted over here is that entities like deodorant & after shave are completely different from cologne. Cologne is simply a perfume or a fragrance. Cologne is made up of alcohol with 2-5% of some essential oils. Cologne is just a fragrance, it is not an astringent, and neither does it have bacteria killing or perspiration regulating qualities.)

Face wash:- a face wash as the name suggest is applied on the face for cleaning purpose. A cleanser is a facial care product that is used to remove make-up, dead skin cells, oil, dirt and other types of pollutants from the skin of the face. This helps to unclog pores and prevent skin conditions such as acne.(Wikipedia definition) . There is no hard and fast definition for face wash but in general it means lather creating lotions used for cleaning the face. Though if looked upon closely there is no need that a face washes should be lather generating lotion that moistens the skin. Even something like an alcohol can be used as a wonderful face wash. Alcohol has wonderful cleaning abilities(The only problem with alcohol is that it might cause some burning for the skin ,but this can be taken care by using acetyl alcohol instead of using isopropyl alcohol that are often used in cosmetics and other personal care products)

It can be seen that these three entities share a strong similarity among themselves both in terms of functional grounds and ingredients used. The given table attempts to show the various functionalities and major brands of the given three entities:-

Name of the product Salient features Leading brands(Both in India & abroad)

AftershaveAntiseptic ,Fragrance (longevity & Type) ,Dispensing Mode(generally as lotion)

Packaging (Generally high quality)Color,Cooling Effect,High Volatility,Astringent,

Addidas,Old Spice,Hugo Boss,Axe,L’Oreal,Park avenue,Denim

Deodorant Deodorant,Fragrance(Type & Longevity),Perspiration control,Cooling effect,Astringent,Dispensing mode(Generally as spray)

Park Avenue, Nike,Axe,Rexona,Garnier,Old Spice

Face wash Cleansing,Emollient,MoisturizerFragrance(Quality and longevity)Lather and Foam creation Face Glow

Pears,Jack Black,L’Oreal,Men Science

Blue Ocean Strategy for Aftershave, Deodorant & Face Wash

India as a nation holds a lot of potential for personal care market. But in spite of this it had been seen that the overall consumption of personal care products is not very high in India. Though there can be an end number of reason for that but primarily these are:-

1> Large amount of Indians still come under the lower middle class section with income less than 1, 50,000 a year. Though these people have aspiration for using such products but due to high prices of individual items such as aftershave and deodorants they cannot afford it.

2> Even among the upper crust the penetration of such product is not very high in spite of strong brand building initiatives taken by these companies. The reason being when it comes to grooming Indian men are still not very well aware. Often the personal care market is very fragmented and fraught with a very high degree of brand and line extension. There is specialty product for every individual requirement that makes this small market highly segmented.

The blue ocean strategy proposed in the paper wants to target this huge mass of non customers by providing them a value proposition that can fulfill their requirement. The paper wants to do a feasibility test for a single product that can at same time play the role of a deodorant, an after shave and a face wash.

Design frame work:-

1> Design of industry canvass for these products.2> Conduction of a detailed research work to understand the requirements of target as well as non target customer

base.3> Based on the inputs from the research work design an ERRC (eliminate, reduce, raise and create grid) frame work

to come up with a value proposition for the target customers.4> Once the prototype of the product is designed the research aims to analyze the prototype on various other “BOS”

frameworks such as “utility, pricing, cost, adoptability model, “Mental models” etc.

Factors favorable for “BOS” in the given case

Using of blue ocean strategy seems to be possible in the given case due to various reasons:-1> There are lots of common features between these products. For example all these three products are

associated with good fragrance, all of them have some sort of medicinal use, two of them that is after shave and deodorant have got astringent properties, due to presence of alcohol they provide cooling sensation to the skin etc.

2> There are lots of similarities between them on account of ingredients used. All of them contain alcohol in some form or other. They contain strong elements for fragrance and also contain antiseptic elements.

3> These products operate in the same kind of market structure and are generally associated with the same kind of market strategy. These are often high involvement products and are promoted both for utilitarian as well as hedonistic purpose. The brand building exercises are generally very costly with lot of emphasis on using high profile celebrity and expensive packaging support.

4> The market strategy for such products so far has been to use segmentation and product differentiation as strategic weapons, the industry had invested heavily on serving the niche segment and have literally ignored the fact that between various kinds of customers and non customers segment there is a lot of similarity. The given Blue ocean strategy plan will like to leverage on that.

5> The target customers have always been the elite and the middle to upper middle classes. There has hardly been any attempt to capture the lower middle class strata. As a result of which is a vast base of non customers who have the aspiration (along with limited market potential) but they are so far non customers because of unavailability of any suitable value proposition in the market that can fulfill their basic need and are at the same time affordable.

Advantages:-1> The strategy can cater to a huge market segment of some 30 crore (300 million individuals).2> It will cut the r& d expenditure:- personal care products like aftershaves, deodorants consumes a large

amount of money and resource for r&d purpose. Now coming up with one single product with multiple utility will cut down the r&d cost drastically.

3> Reduction in marketing expense over the long run:- Though initially the marketing expenditure will be quite high because newer products like this calls for an aggressive marketing expenditure but in the long run there will be a dip in marketing expenditure. The reason being since in this case a single product will be performing multiple functions rather than having separate marketing campaigns for each and every of the product only one campaign will serve the purpose.

4> Reduction in miscellaneous expenditures:- For personal care products lot of miscellaneous expenditure happens other than the usual expenditure in R&D and marketing. These include package design etc. In this case where a single packaging will serve the purpose for three products there will be some overall reduction in the cost.

5> Customers from the upper strata: - Though the product is basically for the lower middle class strata but it has huge potential of getting a large amount of customers from the upper strata as well. There are many people from the upper strata that do not want use because they find it difficult to maintain a whole range of such products with each having one specific role to play. But the given product that can serve three different purposes at a time will provide them a very hassle free and easy solution. Hence chances are high that a good percentage of people from the upper economic strata will also join in over the period of time.

6> A strategic framework that can be replicated for other personal care product as well:- The research idea has the potential to revolutionize the personal care industry. It can change the way business have been conducted so far in the given sector. Once being successful the strategy can be very well used in the other product categories of the given sector.

Replication of the model for global consumer

The model can be very well replicated for the global consumers.

Global personal care market

The major personal care products manufacturing nations include France, Germany, Italy, Spain, United Kingdom, United States, Russia and Brazil. The industry has a huge market and the demand for essential products like soaps, shampoos, moisturizers and lotions is the highest.

The personal care products industry is closely associated with two other industries, the health care industry and the chemical industry thus forming an important part of the value chain. It is also related to the petroleum industry as most of the raw materials used for making personal care products like Propylene Glycol and PVP/VA Copolymer are derived from petroleum products. As these products might contain some toxic elements, research and development is going on to make them less harmful and therefore healthy ingredients like herbal and other natural products are used. Now more and more companies are emphasizing on making products, using organic or herbal compounds instead of synthetic ones. Since the past few years, people have become more conscious about their appearance and look, leading to a huge demand for these products in the whole world. New products are launched by the leading brands to attract consumers.

(The given figure shows the breakup of the market for the year 2005-06)

The women’s beauty industry is growing at rate of approximately USD 202.254 billion every year where as the global market for cosmetics alone USD 30.33 billion. The global personal care products industry is growing at a very rapid pace; some of the factors responsible are:

1> Rise in Consumer spending power2> Rise in demand due to increase in awareness among the general public3> Paradigm shift of the industry from petroleum based products to herbal products4> Life style changes5> Massive promotion and brand building exercise.

Replication of the given model in other parts of the World

There is a huge bottom of the pyramid customers all around the world. Once the model will be implemented successfully in India it can very well be replicated in other parts of the world. Countries like China, Brazil, Pakistan, Arab nations, African countries can provide huge potential for such innovative products. One should understand that after the advent of satellite channel revolution all around the world there has been a massive surge in the awareness of the people, people want to spend provided they are bestowed with some sort of affordable value proposition. Even in nations like Venezuela have huge potential for personal care products, but the only problem is that its 80% of the population consist of bottom of the pyramid , so until unless a new innovative solution is not designed for them it will be tough to cater to them. All around the world there is a huge market size both in terms of volume as well as value for such innovative products. The total bottom of the pyramid population consist of 4 billion (400 crore) people. Out of which some 2.5 billion (250 crore) reside on less than 2.5 dollars a year. Though there is no exact figure available but it can be predicted that almost 1- 1.5 billion people earn around 1500 US (65,000 INR approximately) dollars a year. This figure is neither so big to accommodate all kinds of indulgence and luxuries but neither is this too small. With this kind of annual salary an individual beckons that “Listen I am also a potent consumer provided I am offered with some sort of affordable value proposition that can fulfill my need “

Now let’s see some of the individual nations that have the potential for the successful implementation for the given “BOS “:-

1> China :- China is the second largest economy in the world after US(in terms of ppp) .With around 1.3 billion population China is a huge market for any kind of product. Though In the past few years it has reduced poverty at a very phenomenal pace but still some 42% of the population lives on less than 2 dollar a day. But with the help of fast economic initiatives it has been continuously pulling out its population from poverty, on account of this in the past few years it has experienced a new phenomenon that is the emergence of lower middle class with an annual income lying between 3,500 Us dollars to 5000 US dollars. According to Mckinsey quarterly by 2011 the population of this class will be around 290 million (29 crore) .This huge lower middle class base in China can provide a fertile ground for the given product.

2> Brazil:- A very important constituent of the BRIC economy Brazil is a market that can never be neglected at any cost for any kind of market initiative. With a population of around 20 crore Brazil has a much differentiated economic structure. It’s differentiated among 5 classes namely A, B, C, D and E. There are around 25% household whose annual income lays between 2,500 us dollars to 5000 us dollars. This is lower middle class section can be used as prospective consumer base for the given “BOS” strategy.

3> Pakistan: - The classic lower middle class in Pakistan is relatively educated, with a world-view informed by Pakistani nationalism and a very contemporary moderate Islamism. He is relatively pious, but likes lascivious Indian movies and probably enjoys nehari, the famous western-Pakistani stew, and parathas, deep-fried savory pancakes. He is not particularly politically sophisticated, speaks Urdu or Punjabi not the elite's English but reads local newspapers and watches the new satellite television channels. The exact data for the lower middle class is not available but a study conducted by World Bank claims that from 2001 to 2004 some 8 million people got shifted from the poor class to the middle class. Though Pakistan is not up the radar when it comes to market strategies of big companies from the fashion and the personal care industry but with the help of glamour packed Bollywood flicks a lot of awareness and “desire for fashion” is getting inside the Pakistani homes. The new lower middle class of Pakistan which is becoming image and fashion conscious ,which is swiftly getting exposed to the globalization can definitely serve as a loyal customer base for the product which the paper is attempting to propose.

4> African Nations:- In comparison to other parts of the world Africa is definitely an outlier but over the period of time growth and development initiatives are catching pace in Africa as well. As a result of which a new middle class is emerging in African nations, according to African standards any one earning around 5 dollars a day is considered as a middle class. They have escaped the worst burdens of poverty. They are able to meet their basic needs in nutrition, health and housing and hence can be considered as a strong potent customer base for such value propositions which the paper attempts to provide. Africa’s middle class is strongest in countries that have robust and growing private

sectors. “Countries in East and Southern Africa that sustain a viable middle class and that hold governments accountable include countries like Tanzania, Kenya, South Africa, Botswana and Namibia. Mozambique’s middle class is small but growing in size and importance. In the past few years there has been a lot of increase in fashion and glamour related awareness in Africa. Lot of big multinationals are also eyeing to the African market, events like “soccer world cup” 2010 have helped in showing the collective strength of Africa to the whole world there by increasing the interest of MNCs further in it.