‘How can we compete against cheap imports from large multinationals?’
Q: I am relatively new in brand management. My background is in the pharmaceutical industry where I started as a medical representative. Then, after four years I got promoted and became a product manager. After more than a year, I decided to transfer to a local FMCG company as a brand manager.
This year I was assigned to take charge of a brand of germicidal soap that is the third-biggest brand of our company. Our brand is now up against a very strong market leader and two challenger brands both from multinational companies.
Because of the entry of these big challenger brands, the sales of my brand suffered since February of this year. We were left behind by the huge investments of the two strong competitor players in TV ads, renting of generous shelf-spaces in trade outlets and special displays, very competitive promotional packs, and the endorsement from medical societies.
We tried maintaining our price advantage. But even this became irrelevant when the two multinationals engaged in a price war for their budget packs starting last February. I am aware that we cannot directly compete with them but I’m still being asked to see some growth for my brand. How can a local brand compete with such strong players considering the wide disparity of our marketing budget?
A: We’ll diagnose and prescribe based on the few details you’ve given about those two multinational price competitors who have recently entered your germicidal soap market.
Start with an understanding of why your price competitors decided to come. There are of course lots of likely reasons. But being price competitors, the most likely reason must be the more-than-ordinary and sustained profitability you’re enjoying in your product category. Price competitors, both local and from overseas, are always on the lookout for such opportunity for making quick money. So check if this is true. If it is, then accept the reality that the time has come to admit that your easy money-making days are about to end.
But of course that’s not the end of your competitive analysis. You have to go on so you can also decide what to do. How do you effectively respond to price competition?
First of all, our research and consulting experience tell us that the worst response is to match the competitors’ pricing move, that is, compete in discounted pricing. It seems clear that your two multinational price competitors both have the financial clout to weather the low-price-lower-margin-but-market-share-gaining game they’ve decided to play.
Resist this temptation even though our research also shows that it’s the first natural response that an attacked, at-risk brand like yours will take. It’s rarely effective.
The wiser alternative response is to counter by using a bundle of non-price marketing mix levers. During the height of our recession in 2009, this was what the detergent brands Surf and Ariel did against the price brands of Champion and Pride. Both resorted to advertising for brand equity reinforcement, aggressive trade placement and selling, and economy size packaging. Total shares declined but shares with loyal customers stayed.
But your two multinational price competitors are also into this kind of non-price competitive strategy. As you mentioned, both are into heavy “TV ads, renting of generous shelf-spaces in trade outlets and special displays, very competitive promotional packs, and the endorsement from medical societies.”
So it’s likely that this would not count as a better option for a competitive response on your part.
What about “doing a judo response?” Look for the two competitors’ market weakness or the business where they feel complacent and attack there. For example, you mentioned that your germicidal soap is your company’s third-biggest brand. So you must have other products that are selling well. If your two competitors also have marketed those other products, why don’t you attack one of those other products where it would hurt your price competitors the most.
Or if they’re not into your other bestseller products, why not participate in the low-end, low-price germicidal soap segment. You can do this relatively quickly by contracting for the license to be the “manufacturer’s representative” of another brand from the country of origin of your two multinational price competitors. This is a good or better competitive strategy because of its element of surprise. But it can be hard work getting that license. Set up for it and persist and you’ll get it eventually.
We have other options to suggest but space limits us to the foregoing which has anyway the most potential for a likely winning competitive response. For the other options and their details, you may wish to learn them by attending our seminar on this topic, “Competitive Analysis and Strategies in the Red Ocean Market.”
Keep your questions coming. Send them to us at [email protected] or [email protected]. God bless!
