Marketing#2

GILLETTE

ABSTRACT

The purpose of this report is to analyze the importance of marketing in general and with reference to Gillette in New Zealand and further evaluating the internal and external environment of Gillette Company in the same country New Zealand. It is totally based on secondary method like books, journals and company and other useful websites were sourced and consulted.

Company has a critical role for its success in this highly competitive 21st century. Marketing has a central role to play in organizational strategic planning in all successful firms. Gillette is now targeting the New Zealand market where men are now becoming conscious of their looks and increasingly adopting the personal care products.

INTRODUCTION

This report attempts to analyze the importance of marketing with reference to Gillette in New Zealand and evaluating the internal and external environment of Gillette. Part 1 consists of brief company profile; importance of marketing, Gillette’s marketing techniques and the New Zealand male grooming segment. Part 2 contains studying Gillette’s external environment with the help of PESTLE and Five force models and internal environment using SWOT analysis and also analyzing the male grooming market of New Zealand.

PART 1 : COMPANY PROFILE

The Gillette Company is a manufacturer and supplier of men skin care & grooming products in New Zealand and globally. The products offered by the company include manual & power razors, shaving products, which include cartridges, blades, & aftershave products such as shave foams, gels and creams; and face washes, thermal scrubs, UV moisturizers, deodorants, body washes and antiperspirants. Gillette sells its offerings through retail outlets as well as online retailers. IN 1991Gillette Company was founded in Boston, Massachusetts. In 2005, Procter & Gamble Co. acquired The Gillette Company which now runs as a subsidiary of the former and has 287000 employees globally (Bloomberg, 2013).

P&G has numerous brands representing male grooming category throughout New Zealand’s supermarket and departmental stores. These include Gillette, Oral-B, Head & Shoulders, Braun, and their recently launched Olay Men Solutions. Procter & Gamble is the leading blades & razors manufacturer globally having the leadership position in most of the markets of operation. Their worldwide market share of blades & razors is nearly 70 percent primarily owing to Fusion & Mach3 of Gillette (P&G Annual Report, 2012).

Gillette has remained at the core of men’s grooming needs for more than 100 years. Every day over 600 million men across the globe use Gillette’s innovative shaving products & razors on their face and skin. They are committed for providing men with the very best have been carried into their array of personal care products which also include deodorants as well as body wash (Gillette, 2013). All Gillette products are designed keeping in mind the unique requirements of men and helping them in looking, feeling and being their best each day.

ROLE OF MARKETING

Effective as well as efficient marketing has a critical role for each organization’s (including Gillette) success in this highly competitive 21st century. Marketing entails managing customer relationships which are profitable. It aims for attracting new customers through a promise of superior value delivery and retaining existing customers by ensuring customer satisfaction. The process of marketing is continuous which helps firms in creating value for the customers and building strong relationships with the customer to gain customer loyalty and thus higher revenues.

Marketing according to Kotler (2002) refers how to identify and meet human & social needs. Amongst the shortest marketing definition include “meeting the needs profitably” i.e. a drive for turning a social or private need to a profitable opportunity for business through marketing. Marketing has been defined using the social and the managerial contexts. In the social context marketing has been defined as a societal process through which individuals or groups acquire according to their needs & wants when they create, offer, and exchange products & services having value freely with other people.

The managerial definition of marketing describes it as an art to sell products. However,  Drucker (1973) argues that marketing’s aim is for making selling superfluous, that is, understanding & knowing one’s customers so properly that the service or product offered fits the customer needs and thus it sells itself. In other words, the result of marketing should be a customer that is prepared to purchase the product. The American Marketing Association According to another definition in the managerial context marketing (management) refers to the process which involves planning & executing of the conception, promotion, pricing and the distribution of goods, services and ideas for creating exchanges which lead to individual & organizational goals satisfaction (American Marketing Association, 1995).

Marketing has a central role to play in organizational strategic planning in all successful firms. Strategic planning that is market-oriented is considered a managerial process to develop and maintain a feasible fit between the firm’s objectives, resources & skills and it’s constantly altering market opportunities (Kotler, 2002). Strategic planning aims to shape a firm’s businesses as well as products in order to obtain target growth & profits and keeping the firm healthy regardless of any unanticipated threats that might arise. Strategic planning refers to action in 3 critical areas. The 1^st area is to manage the firm’s businesses like an investment portfolio. 2nd area includes assessing all strengths of the business by considering growth rate of the market and the firm’s position as well as fit in the target market. And 3rd area is developing the strategy, that is, a game plan to achieve long-term goals and objectives.

Gillette’s marketing activities in New Zealand

The advertising campaigns used by Gillette showed that body shaving is masculine as New Zealand men only like to be associated with masculine activities. An increased interest has been seen in them to adopt grooming products. Procter & Gamble (P&G) undertook in New Zealand a  corporate brand marketing campaign, the first such campaign of its kind) for building consumer awareness about P&G being the organization behind many of the most well-known New Zealand brands. The campaign would involve placing P&G’s signature corporate logo in all the New Zealand television advertisements, with plans for expanding this campaign to include online & print, and also point of sale besides other marketing materials. The campaign would be rolled out for all P&G brands including Gillette, Olay, Vicks, Venus, Head & Shoulders, Pantene, Herbal Essences, Ambi Pur and Metamucil (impactpr, 2011). For the very first time Procter & Gamble  is promoting the corporate brand to its New Zealand consumers since commencing business there over 27 years ago. The firm’s corporate brand line which states “Touching Lives, Improving Life” would be seen along with the corporate logo that indicates P&G’s purpose to touch and improve the consumer’s lives through innovation as well as commitment towards a sustainable environment and corporate social responsibility.

Competitive Scenario

Competition also forms a crucial factor under marketing management and it includes all actual as well as potential rival substitutes & offerings which a consumer might consider. In 2011 value sales of New Zealand men’s grooming sector increased by 5 percent reaching NZ$101 million (Euromonitor, 2012). The growth in value sales in 2011 is in line with previous year’s growth highlighting that there still exists room for further expansion in the men’s grooming segment. Innovation along with new product development constitutes a major driver of growth for the men’s grooming category. In 2011 Procter & Gamble (P&G) led New Zealand’s men’s grooming commanding a 43 percent value share. P&G ranked first with a 68 percent value share in men’s shaving, though its presence was merely 5 percent value share in the men’s toiletries segment. The dominance of P&G in the men’s shaving segment is owing to Gillette brand which it acquired in 2005. IN 2011 the top performing brand in men’s shaving was Gillette Mach 3 having a 34 percent brand share. Additional Gillette brands are Gillette Series, Gillette Sensor Excel and Gillette Fusion. Procter & Gamble in 2011 was the leader among men’s blades and razors, accounting for 73% market share (Euromonitor, 2012).

PART 2: EXTERNAL ENVIRONMENT ANALYSIS

PESTLE ANALYSIS

The external environment for any organization comprises of external environment forces that might influence any of its business aspects.

Political

New Zealand has a vat rate of 13 Percent which is comparatively lower than other countries. New Zealand and Australia are now taking a leaf out of the European and the US laws for framing regulations related to the environmental sustainability, though both the countries are doing this at more of a consumer or competition level (Hitchcock, 2009). She further adds that instead of looking more at safety, the countries seem to be more interested in product claims.

Economical

Despite a subdued worldwide outlook, there still are present some underlying factors that could act in favour of New Zealand’s in the future, like the increased shifting of the global economic activities towards the Asian regions (Pask, 2012). According to BBC News (2010) Shaving Razor industry offers a high value-to-size ratio making the Shaving Company’s offered products in becoming the most shoplifted global product.
Social

Today’s young men of New Zealand are growing up with men’s grooming products and are integrating them into their daily consumption. According to a research by NZherald (2011) men seemed happy in using grooming products, although under certain rules which suited their masculinity image. The corporate cause of P&G in New Zealand & Australia is ‘Born to Live, Learn and Thrive’, which is in partnership along with Save the Children (P&G, 2013). The initiative according to P&G (2013) has its basis on the very belief that no child comes to this world to die. P&G and Save the Children foundation deliver programs which touch & improve the children lives in numerous ways. The 4Good Program, is another mentoring initiative by P&G, to work with the school children for developing leadership skills. Cultural as well as religious factors have an effect on the male grooming industry as some cultures or religions don’t encourage shaving. Brand loyalty also is high in the grooming industry, and about ten percent users generally experiment with different brands or formats. Quality as well as performance constitutes vital factors to consider for a user for switching to new brands or format.

Technological

No industry is untouched by technology. High-end product launched result in longer durability but also lead to lower replacement frequency thus reducing sales. Premium high-quality product having additional USP’s such as an indicator which tells the customers when the razor blades require replacement thus allowing the company to command a higher price. Gillette and P&G have always been associated with innovation. The company uses its expertise to combine new technology with consumer insights for bringing better and improved products to the market to make everything easier and more enjoyable.

Legal

The New York Times (2004), BBC (2006) report there has been a continuous legal battle in Shaving Razor industry. According to experts disputes are mainly because of advertising campaigns, company slogans, design patents of razor heads and trademarks. All legal battles have resulted in loss of money, time as well as brand reputation to a certain extent.

Environmental

The company is committed towards sustainably growth of their business in New Zealand with reduced impact on environment. The company has been able to reduce Gillette’s packaging’s plastic component 75% (P&G, 2013).

FIVE FORCES ANALYSIS OF THE MALE GROOMING INDUSTRY OF NEW ZEALAND

Threat of Substitution

The threat level from substitute products depends on numerous factors. The key factors include price, relative quality, customer’s willingness of using other product and the switching costs involved. The main Gillette’s substitutes would include straight traditional razors, electric razors, depilatories someone who doesn’t shave. The electric razors substitution threat is very low as Proctor & Gamble, who are the parent company of Gillette also own the successful Braun brand which is very successful in manufacturing of razors. (Cavallaro, 2008) suggested Methods or techniques are being effectively used by the firm’s to advertise and market their product ranges to men (Cavallaro, 2008). The advertising campaigns used by Gillette showed that body shaving is masculine (Birchall, 2009), as New Zealand men only like to be associated with masculine activities. Messages portrayed by the ad campaigns are often manipulated for the firm’s gain, and to draw the consumers away from buying substitutes.

Threat from Established Rivals

The rivalry intensity from the established competition depends on industry costs, competition structure, degree of differentiation, strategic objectives, switching costs, and also the exit barriers. The industry in which Gillette operates is considered unattractive as it consists of many aggressive & powerful competitors having high stakes to continue to stay in this segment, towing to high exit barriers. Such a scenario often results in numerous price wars, disputes regards to advertising, besides innovative, new product introductions, thus Gillette has to incur high costs for maintaining a large share of the market pie. The threat arising from the established industry rivals is limited because of strong brand image as well as brand loyalty to Gillette. Additionally, Gillette’s innovative R&D department continuously generates advancements in differentiation as well as technological. McCullough (2003) states Gillette’s success has resulted in successful rivals borrowing from Gillettes $1 billion R&D efforts.

Threat from New Entrants

The threat level from new entrants grooming industry depends on economies of scale, customer switching costs, investment requirements, industry distribution channel access, technology access, brand loyalty, and government regulations. Shaving Razor industry witnesses high levels of brand loyalty (Mintel, 2009), thus making the industry unattractive for the new entrants. Gillette reduces this threat by efficiently using economies of scale gains, distribution channels of P&G and access to enhancements in technology. Entry is also affected by high costs of set-up & exit barriers are, minimizing the ease of securing external finance.

Bargaining Power of Suppliers

The supplier negotiating power is dependent on supplier concentration, supplier branding and supplier profitability, forward integrating of profitability into the industry, backward integration of buyers into supply, and switching costs for suppliers. This threat is negated for Gillette as its products are manufactured by the company itself. Gillette identifies its raw material suppliers who have a proven ability of meeting its specification requirements (Evans, 2006). Being part of P&G it has the ability of establishing powerful supply-chain models and its global competitiveness allows it to have an upper hand on the suppliers. 

Bargaining Power of Customers

The customer’s bargaining power is dependent upon competition concentration, USP’s & differentiation, profitability of firms and customers switching costs. Buyers in this industry now possess strong bargaining power. Gillette has been under tremendous pressure from the retailers, because of their continuous growth, for e.g. Wal-Mart, the main retailer of Gillette, and industry mergers (DePamphilis, 2010), increasing their buying power. Also, the end consumers are price sensitive. Gillette’s pricing power has been further eroded due to channel migration as well as consumer resistance for paying premium charges for innovation (Chopra et al, 2010).

INTERNAL ANALYSIS

 SWOT ANALYSIS

Strengths

• Subsidiary of P&G. which is a market leader globally for blades and razors.
• Gillette’s brands have been category-defining icons.
• Strong international presence
• Broad distribution network Gillette has an innovative track record 

Weaknesses

• Only manufactures male products
• long product development cycles
• Expensive brand maintenance
• Heavy dependence on the high retail outlets
• High R&D costs

Opportunities

• Increased importance given by men to personal hygiene
• More men trying to have a fashion Look
• Mergers & acquisitions
• Female product line

Threats

• Manufacturing Prices fluctuations
• Lower priced substitutes
• Competition
• Government policies and taxes
• Continuous altering human needs, wants and desires

NEW ZEALAND MARKET ANALYSIS

In 2011 value sales of New Zealand men’s grooming sector increased by 5 percent reaching NZ$101 million (Euromonitor, 2012). The growth in value sales in 2011 is in line with previous year’s growth highlighting that there still exists room for further expansion in the men’s grooming segment. Innovation along with new product development constitutes a major driver of growth for the men’s grooming category. The estimated urban population of New Zealand was 86 percent of the total population (indexmundi, 2011) which would benefit Gillette as it has a premium line of products.

Competitive Analysis

Total New Zealand male grooming according to (Hales, 2011) was $13.746m in 2010 including $9.206m of total shaving preparations and $3.275m worth of total male defined facials.

Philips accounted for nearly 61 percent of the value market share in the men’s shaving segment with the market seeing 9 percent yearly growth in value terms. “Research has shown that attitudes of men show an evolving trend towards grooming (Mediaweb Ltd., 2011).

Right Royal shave have a range offering by the name The King of Shaves of male grooming products which redesigned its blades offering a V2 version which had lesser top clearance for getting under the nose for increasing precision. Packaging for ‘Azor’, their system razor, has also been changed. Right Royal shave is still the only male grooming manufacturer firm for offering the entire shaving portfolio which includes system razor, tube gels, blades, oils, cream, skincare canned gel, and their shaving preparation is continually growing and holds nearly 12 percent of Progressive shave preparation market. Their shaving hardware (that is, the Azor) shook the industry, boasting closer shave, longer lasting and at a cheaper price has gained popularity among New Zealand consumers.

Men’s Skincare segment has also seen a rapid growth over the last 5 years up increasing by 48 percent from 2007 (Mediaweb Ltd., 2012). Men Expert brand from L’Oreal has been the key driver for this growth, and accounts for 58 percent of the category growth. An 11.7% growth was seen in this category over the previous year Men Expert driving 40.2% of the growth. “For the Re-launch of Vitalift 5 moisturizer has been crucial for the growth of Men Expert.

Primal Earth has altered the New Zealand’s skincare segment by launching natural New Zealand-made products promising real results. Primal Earth consistently is outperforming international brands like Gillette, Olay for Men and Dove Men+ owing to its natural skincare offerings.

RECOMMENDATIONS

• Increase of skincare products line
• Introduction of natural product offerings
• Entering female skincare market
• Investment in R&D to reduce product development cycles

CONCLUSION

The Gillette Company, a subsidiary of P&G, is a manufacturer and supplier of men skin care & grooming products in New Zealand and globally. P&G has numerous brands representing male grooming category throughout New Zealand’s supermarket and departmental stores. These include Gillette, Oral-B, Head & Shoulders, Braun, and their recently launched Olay Men Solutions. Effective as well as efficient marketing has a critical role for Gillette’s success in this highly competitive 21st century. Marketing has a central role to play in organizational strategic planning in all successful firms. Gillette is now targeting the New Zealand market where men are now becoming conscious of their looks and increasingly adopting the personal care products. The company uses its expertise to combine new technology with consumer insights for bringing better and improved products to the market to make everything easier and more enjoyable. There intense rivalry among established players with little bargaining power of the suppliers but high bargaining powers of the customers.

REFERENCES

American Marketing Association (1995) Dictionary of Marketing Terms, 2d ed., ed. Peter, D. Bennett, American Marketing Association, Chicago.

Birchall, J. (2009) “Gillette online ads target increasingly lucrative male grooming market”, Financial Times, 20 June, pp. 9. NexisUK.

Cavallaro, M. (2008) ‘Marketing to Men’, Restaurant Business, 107 (6), pp. 20-22, Ebsco.

Drucker, P. (1973) Management: Tasks, Responsibilities, Practices, Harper & Row, New York, pp. 64–65.

Evans, J (2008) Quality and Performance Excellence: Management, Organisation and Strategy, 5th Edn., Thomson South-Western, US.

Depamphilis, D. (2009) Mergers, Acquisitions, and Other Restructuring Activities: An Integrated Approach to Process, Tools, Cases, and Solutions, 5th edn. Academic Press, CA.

Hitchcock, D. (2009) “De-toxifying the personal care product industry”, ISSP Insight newsletter.

Kotler, P. (2002) Marketing Management, Millenium Edition, Prentice Hall Inc., London.

McCullough, M.(2003) “Schick shaved off research, Gillette claims: Poised to introduce a razor with four blades, the company faces a lawsuit alleging patent infringement”, The Vancouver Sun, 11 September.

P&G Annual Report (2012) “Annual Report 2012”, Procter & Gamble.

The New York Times (2004) ‘Schick sues Gillette over razor technology patents’, The New York Times, p.4.

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Mediaweb Ltd. (2012) “Skincare: Health & Beauty Aisle”, [Online] accessed on 11^th March from http://www.fmcg.co.nz/features/category-reports/1435-skincare-health-a-beauty-aisle

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