It consists of marketing existing products in new markets. The firm tries to achieve growth by finding new uses for the existing products and tap new customers on that basis (within the country or outside the country). The firm can add new channels of distribution to expand the customer reach of the products. It can also enter new market segments by coming out with slightly different products for each price segment. Undertaking cosmetic changes in colour, taste packaging etc., (Hindustan Lever’s offering in toilet soap, detergent powder segments), changes in media selection, promotional appeals and distribution could also serve the same purpose. Du Pont’s nylon provides a classic story of new use expansion. Every time nylon became a mature product, Du Pont found a new use. Nylon was first used in parachutes, then as a fibre for women’s stockings later as a major material in women’s blouses and men’s shirts; still later it entered automobile tyres, seat upholstery and carpeting. The recent discovery that the use of aspirin may lower the incidence of heart attacks is expected to boost sales in the analgesic market tremendously. Another discovery that drinking tea boosts the body’s defence against infection and that the tea actually contains a substance that might be turned into a drug to protect against diseases – is likely to boost sales of tea throughout the globe (Times of India 22-04-2003). Nestle expanded the market for its product Milkmaid by advertising the new uses of the product aggressively (ingredient for a variety of sweets and pastries) in India.
Product development strategy tries to achieve growth through new products in existing markets. The new products in this case are not essentially new products but improved versions of an existing product or substitutes serving the same need catering to the same market as at present. Usually carried out through (1) quality improvement such as stronger, bigger, better, vastly improved product (2) feature improvements such as expanding product’s versatility, safety, convenience, changing size of products, its weight, materials and accessories etc (3) style improvement increasing the product’s aesthetic appeal such as new scooter or motor cycle models, new packaging etc. This strategy is often adopted to attract satisfied customers to prolong the life cycle of current products or to take advantage of a favourite reputation or brand name. A new car style, a second formula of shampoo for oily hair, new soap for fair complexion, a revised edition of a college text book are examples of the product development strategy.
This strategy can take various forms in actual practice.
One way is to supply new products which are closely associated with the products which the customers already buy from a supplier for example a computer manufacturer could add computer peripherals (printers, plotters, service contracts etc ) or consumables (paper, ink, discs etc) to its ranges with a view to offer a one stop shopping service.
Another option before a firm would be to categorize the purchases of customers and try to supply products which meet the customer’s requirements accordingly. For instance a retailer could display shampoo as a personal care item, as a fashion accessory or as a bath room product. Each categorization would provide different opportunities for the shampoo manufacturers to extended the range of associated products they supply.
Another way would be to focus on the technology base used to supply existing products and to identify other product needs customers might have which would be produced using current facilities and know how.
Intensification strategies of Nirma:
Over the years, the FMCG major, NIRMA chemicals has pursued various strategies –cost containment, back ward integration, economies of scale, innovation packaging, penetration, product development etc. to get ahead of its competitors. Ever since its launch in 1969 at Rs 3.50 a KG against Surf at Rs 15 the company’s premium product, NIRMA detergent powder has seen it all (even today it sells at Rs 17 a Kg). Nirma’s soap tonnages now equal 15% of the market and the company has individual brands to fight Hindustan Unilever’s brands across segments –Nirma Lime versus Liril, Nirma Beauty versus Lux, Nirma Rose versus Breeze. To gain control over the supply of crucial inputs, Nirma has pumped Rs 380 crore into a 75,000 tonne Linear Alkyl Benzene plant. To cater to the upper class market, Nirma has launched Nirma super detergent powder at Rs 38 a kg. At the lower end, Nirma has already tapped neighbouring countries to sell its products (Bangladesh, Nepal, parts of Africa where it sold Rs 20 crore worth of powder in 2001-02). To break the middle class image of its products it has used actresses Manisha Koirala and Sonali Bendre successfully and revamped the distribution structure as well (chemists, Paanwalas, retailers etc). Nirma’s core competency lies in delivering value for money and in a price sensitive market it has been able to keep its head high with over 20 per cent sales growth and 10-15 % profit after tax all these years. With its aggressive market penetration, market development and product development strategies it has been able to hold on to its ground (soaps 15% share; detergents 38% share) so far.
Here the organization tries to develop new products or services and thereby makes similar existing products obsolete – unlike product development strategy which extends an existing product’s life cycle. There could be radical innovations where the company tries to replace existing products or technologies in an industry. In the case of incremental innovations, the firm tries to put focus on new products or services that modify the existing ones. For example, compact disc technology has virtually replaced long playing vinyl records in the recording industry, and high definition television is likely to replace regular television technology soon. Again, the serial replacement of the vacuum tube with transistor, the transistor with the integrated circuit with the microchip has greatly enhanced the power, ease of use, and speed of operation of a wide variety of electronic products. Apart from such radical innovations firms, also carry out incremental innovations to differentiate their products. One example, is Toyota’s multi-utility vehicle Qualis. Although other Indian companies had similar products, Toyota, more effectively combined the styling an engineering that resulted in increased demand for its product (a great hit compared) to Sumo, Bolero etc as per latest sales figures in 2002-03) Technical and products innovations (changing appearance / performance of products of services) and process innovations (changing the way a product or service is manufactured created or distributed) are also quite commonly used by growth oriented firms. A strategy innovation could prove to be very costly because of high research, developments and premarketing costs of converting a promising idea into a successful product. However, if the firm is able to develop a superior product or technique successfully through innovation the benefits could be beneficially extended to its operations worldwide. Ford engineers for example found that dust interfered with the quality of its assembly line production in its Brazilian plants. To mitigate this problem the engineers there developed dust resistant techniques that other Ford plants worldwide adopted. Although most of the plants outside Brazil did not have severe problems from dust and therefore had not addressed this issue, they still benefited from the innovation produced in Brazil (Saloner et al). McDonald’s Indian Veg Burger and other variants found entry into its global menu list.
Marketing innovations in Hindustan Unilever:
Close Up toothpaste was launched in 1980. It was the first gel toothpaste which was transparent with a distinctive red colour (all others pastes were white). The market was dominated by Colgate which promised that it would fight tooth decay and bad breath. Close up promised the dual benefit of being a toothpaste and mouthwash in one and thus delivered fresh breath and white teeth. It was priced at a 40% premium to the market.
The brand did not find much success in 6/7 years it was able to establish a share of under 4%.
In 1987 they took a hard relook at what was going wrong and identified several reasons for the lacklustre performance. Firstly, this was obvious from the advertising, they had just replicated the international campaign. This meant that they ended up targeting only a very small group of metro based young, westernized people. The advertising expression too was not in keeping with the rather conservative value system of those days. There was no strong emphasis on functionality to justify the high premium that was being charged.
The only positive was that it looked different, with a unique red colour.
Close up was launched in 1989. In this they built on their strength of being distinctive in appearance by investing in packaging. It was the first brand to be launched in laminated tubes (all others including the leaders were in aluminium tubes). The appeal was increased by providing two flavours differentiated by the colours red and blue. Most importantly they tried to reposition conventional toothpastes as dull and boring in their advertising. They also focused very sharply on their key product that it- Contained Mouthwash and therefore the dual benefit of Fresh Breath and White Teeth.
The functional benefits of Fresh Breath / White Teeth were brought out very clearly. The mouthwash was dramatized by the Ha Ha mnemonic. It operated as a test of a fresh breath.
Finally, they moved away from a two person setting to a socially acceptable group environment and yet brought out clearly the emotional benefits of social confidence or being close to a person of the opposite sex.
The results: Their share increased every year. Since then by 1995, they had built a share of 23% (up from less than 4% in 1987).
Excerpts from Strategic Management