Gillette in Indonesia

Gilette And Indonesia

Gillette entered Indonesia in 1971 with majority ownership of a joint venture with a local company. Gillette´s razor plant was built in 1972 and was located one hour from Jakarta. The focus of Gillette and Indonesia is to introduce the concept of shaving with basic Gillette products.

The Gillette brand name was synonymous with high-quality double-edge blades.

Shaving was still underdeveloped in Indonesia, but the incidence of shaving was increasing. There was increasing awareness of western grooming practices, college students and graduates entering the workforce were especially important trendsetters of the society.

60% of Gillette's sales are in 5 major cities

In 1993 Gillette held 28% of the blade market by volume, by 1995 had grown to 48% and was expected to increase to 50% in 1996.

In October of 1995, Chester Allan, Gillette´s country manager in Indonesia was developing his unit´s 1996 marketing plan.

Market research showed that consumer marketers launched their campaigns in and expected most of their sales from the top five cities (the four in Java plus Medan on Sumatra), which together accounted for 35 million of the population. About 60% of Gillette's 1995 sales were made in these five metropolitan areas.

Case Gillette in Indonesia provides us with a lot of general and numerical data concerning the situation of the company and the country in 1995. In Case text it is clearly stated that ~17% growth is anticipated and questioned whether by sophisticated marketing strategy 30% growth could be achieved next year. From overall analysis we deduced that covering 35m people we are selling 69m blades (~2 per person covered). Using our strategy we would like to cover 83m people more and sell them 81m blades (~1per person covered). Some related calculations required for data analysis are attached (Appendix B).

Below are optimistic and pessimistic financial forecasts which determine our possible expenses and as a consequence marketing strategy.

2. Demand

Factors That Determine Demand For Blades

A few factors that influenced shaving incidence are stated below. These have helped us understand the market and have laid the ground works for our research on Indonesia.

• Increasing Awareness of Western Grooming practices
• Increasing number of MNC’s and overseas personnel
• Foreign Tourist
• Rate of growth of beard
• Rising influence of Western media
• Rising GDP
• Growing Population
• Culture and religion
• Gender ratio

Increasing The Demand

In a country as big and diverse as Indonesia, and given the fact Gillette is already a strong force there, we decided our best bet was simply to increase demand for our products. However that was not an easy task and required multiple solutions in order to maximise our performance in the region. The next sections will describe in detail are our plan to make sure Gillette is the major player in Indonesia for years to come.

3. Research

Swot Analisys

Pestle Analysis

Local Expertise

We decided that in order to understand the market better, we would have to know a lot more about Indonesia as a country, and the local customs and desires of the people.

Therefore, we devised a questionnaire that would enable us to get more insights into the mind of the typical Indonesian customer, supplier or wholesaler. The questionnaireon which we based our interviews may be found in Appendix A.

We presented this questionnaire to a few Indonesian students enrolled at Hult, as we thought they were our closest and most up-to-date (although the questions were asked as if it were 1995) source of information.

We now present our findings:

• Urban and rural areas are seen as completely different worlds.
• Target young women could work in urban areas but this will be difficult to do in rural areas.
• Jakarta has a huge population growth rate.
• Billboards, TV, Radio are effective advertisement tools.
• School and hospital events are very good means of promotion for rural areas.
• Education of merchants identified as crucial to our product distribution (kiosks, bicycle sellers) is powerful and is thought to work.
• Markets by the sea are rather popular.
• Indonesian people like to travel; traveling long distances for Indonesian merchants is not a problem at all.
• Every means of travel used (buses, boats, planes, cars, bicycles)
• Our estimated prices for bikes and kiosks are considered to be appropriate (see prices).
• Small shops work on credit - they are poor, but they can make lowest possible retail prices.
• Small merchants are still cheaper than supermarkets!
• Price is biggest selling point for rural areas > as a result, small packages (1 item) are preferred to large quantities even though that may reduce the price per item.
• If we manufacture in country we can count on government support
• People trust the national healthcare system and government affiliated test centres very much.

3. Strategy Creation And Synthesis

When we analysed the case what stuck to our mind was how can a MNC like Coca-Cola capture so much of market which no other company has ever achieved and reach places where still proper drinking water has not yet reached. When we analysed Coca-Cola we saw that the strategy was broadly classified in three ways which we call it Coca-Colasation.

Coca-colasation

Quality Is Gillette

“Quality is Gillette.” Is how we thought was the best approach to enter the market and not the other way around because:

• We want people to think Gillette whenever they think about quality, because we are the best.
• We are no way putting ourselves on the same level as the cheap Chinese products in the market, when our strength lies in the quality.
• We will get our product quality tested by a local health organization, WHO approved and even recommend Gillette as healthcare Hygiene product. This is possible because shaving is actually used in hospitals before any surgery.
• We will run a paid news ad in the newspaper of using a quality blade and not the cheap one. (Blades are made of steel and cheap cuts can cause tetanus and various other infections.)

After analysing the case, the SWOT and the PESTLE analysis, and performing primary research, we got some points on which to base our strategy:

• People consider Gillette to be a luxury. That basically means people want to have it but refrain from having it as it is with the other luxuries in and around.
• Indonesia’s average growth in gross domestic product is 7% every year. That means people are getting richer and may be targeted with higher-margin products.
• Government seeks to expand manufacturing by 9.4% every year. This can play in favour of Gillette if a production increase is needed.
• There is a definite increase in per-capita income and improved standards of living. This means not only are Indonesians prepared to buy more products, but they are also more keen to idea of shaving (and shaving often).
• Shaving rates are growing but aren’t up to Western standards.
• Students and young professional are the trendsetters, so they need to be targeted.
• Change the luxury item perception in Ad campaigns to show it is actually not a luxury to own Gillette razor blades
• Combat dry shaving.

Division Of The Market

Regarding the information we decided that the best approach is to create a strategy by dividing the market:

Urban Areas (Java and Bali)

• 66% of population and 75% of GDP.
• Higher standards of living compared to rest of country.
• Influenced by media.
• Students and young professionals are seen as trendsetters.

The idea of shaving here is quite developed. Therefore, less time and effort should be spent on developing the idea that shaving is good compared to other parts of the country. So our main strategy is to “Sell/Further penetrate the market”

As a result, in these areas the population is generally more subject to Western Standards, so our strategy will be based on the following:

“Be a Gillette Family”: A unique strategic plan that can spread like a forest fire. This will make people shift to us and have a big impact. In pestle analysis it is clearly stated that a lot more men than women live in cities though the overall ratio for the country is 1:1. Each distributor will be provided with product/products, he can use it for personal use or for selling it at the market price. The details for this strategy, including the financials are provided later on in this report.

Students and young Professionals – Universities/Hospitals/Schools: We will approach the students and professionals markets as they are seen as trendsetters and they are influenced by the media and by Western customs. Here is the most adequate market to change the customs and educate shaving. Education, seminars and free samples are part of this strategy.

Banks and Local Magazines: Changing human habits is not easy, Gillette has to spend more to increase consumer base. We are looking to make sure consumers use stuff once, because retaining a consumer is easier than changing human habits. Selling our products to banks and local magazines at our manufacturer´s price. Bank is a good target people because people have started earning and there are 2 million people entering jobs every year. This idea comes from the ‘Freeconomics’ in atom-economy. The bank can attract the customers by offering Gillette shaving systems for free. The Slogan used for the banks is ‘Shave and Save’

Supermarkets: Supermarkets are only prominent in urban areas. Gillette is already a dominant force in supermarkets: In fact, most of the high-end and more expensive products are sold there. Our strategy will be to further penetrate the supermarket area, and make sure our products are in the best position when it comes to shelf space. Promotion will be used for other shaving products, for example a free mini tub of shaving cream when buying a new razor. This should stimulate trial of the product and should convert the people who are still using knives for shaving.

Women: As a result of educational promotions demand for women shaving products will increase. Since we position shaving as a healthcare procedure which equally important for both genders women also will be attracted.

Rural Areas

• 60,000 small kiosks.
• Kiosk gets demand from customers àkiosk buys from wholesales à Gillette supplies wholesaler or they can be a part of the ‘Gillette Family Schema’
• Customers need to be educated to the idea of shaving (and doing it with cream).

Distributors control the communication and delivery of Gillette products, in addition to knowledge of the regions, its customs and its regulations. In these regions the concept of shaving is with knives and not with blades. So our main strategy is to “Change the shaving Culture.”

As a result, our strategy will be based on the following:

Chain of franchise Distributors: As a result, a chain of franchise distributors with the proper training and educating customer will be effective. The franchise distributors will become our new associates, and best of them will be given a kiosk or bicycle. First sales will be forced by giving out free test packs. The money invested in the franchise business would be recouped by increased sales of products. Our new associates will also be part of the Gillette Family.

Students and young Professionals – Universities/Hospitals/Schools: We will approach the students and professionals markets as they are seen as trendsetters and they are influenced by the media and by Western customs. Here is the most adequate market to change the customs and educate shaving Education, seminars and free samples are part of this strategy.

Gillette Branded Boats: Given the structure of the land and the many islands, we will have tiny Gilette-branded boats. The Blue colour of Gillette would contrast with the colours from other tiny boats. The owners of these boats would get their boat painted for free.. The investment of this strategy will be small and this further can be a part of Guerrilla Marketing Strategy.

4. Implementing The Strategy

Be A Gillette Family (everywhere)

People consider Gillette to be a luxury. That basically means people want to have it but refrain from having it as it is with the other luxuries in and around. “Be a Gillette Family” is a unique selling point and will spread like a forest fire. This will make people shift to us and have a big impact. We will start it in the Urban area and this will trickle down to the rural areas. (In pestle analysis it’s clearly stated that more no of men live in cities though the average ratio is 1:1. When we brain-stormed about it, we could easily conclude that: `People go to cities in search of jobs leaving their families in rural areas’

The ‘be a Gillette family’ schema.

This schema asks you to invest $ 100 with our MNC. We will provide you with goods worth $200 at the distributor price which he/she can use it either for personal use or for selling it at the market price. But it is costing us $50 with the profits.

Now, our plan is something this way. As in the analogy given on the top, for every three customer or members you join into the Gillette family you get $30 back if you are the direct parent and if you are indirect parent you get $5 until 100 members under your tree and then it reduces to $5 for 100 members henceforth. The reason is after Adam reaches 100 members he can multiply exponentially and the amount of work he needs to do would be very less.

Basically Adam has got $40 from Gillette for his tree and Eve & Adam have got $30 each.

So basically when Adam has 1000 people under his tree he will get:

$30 + 33*$5+ 9*$5= $240
So:

When we make 100,000 i.e 50,000 to shell out

We shell out let’s say $150 on an average to 333 people of 1,000 we actually shell out around 49,000.

Every member must renew their membership card every year. Losing some money on roots of tree we earn money at the end, also train our "family members" to be disciplined in payments (here they work not on credit), teach new entrepreneurs our ideas and save some money on inflation.

This schema will be carried out by, ‘quality product’ which will be registered with the Indonesian Government which will distribute Gillette Products. The company will be owned by a Indonesian who the company has full faith on. This is to safeguard the legal issues coming out in the PESTLE analysis about foreign companies refraining from its own distribution chain.

Schools, Universities And Hospitals (urban And Rural Areas)

First we have to take into consideration that from the 80% of the over-18 men population that shave, only 20% use blades and the remainder use knives.

In a developing country this is a question of education. Elders are used to shaving with knives and therefore this is what their coming generations are learning from them. To expand our market, one of our targets is to approach new shaving beginners so they acquire blade shaving habits instead of using knives. Also to distinguish our products from competitors quality and proved health benefits will be highlighted.

In the urban areas our target clients are teenagers whom are starting to shave. We will approach them at schools (graduating year) and at universities. We will teach them shaving habits and we will encourage them to use disposable blades instead of knifes or double-edge blades as well as shaving foam. These teenagers live in the most developed parts of the country, they attend school and university therefore they are more open minded, and possibly many of them have a reasonable purchasing power. This is why we want to encourage them to use disposables rather than double-edge blades, due to their benefits (less dangerous, softer skin...).

We will also provide one-day lecture to nurses in the main hospitals of urban areas on shaving matters such as cuts, diseases, skin care.We will provide them with a package of shaving sets that they can hand out to their concerned patients. These packages will contain one disposable blade, a shaving foam sample and a brochure.

In rural areas we will target schools and village hospitals. At schools we will give an education seminar on shaving habits and care as well as shaving health. We will give shaving sets containing 2 double-edge blades. Knowing that country is poor and people might use one blade for several people we will mark each end of double-edge blade with different colours. We have to consider that these students are a high potential market because they can introduce their second spare blade at home to their bothers or parents and our market can be expanded. At hospitals we will also hold a one-day open lecture for hospital staff and for village people. We will highlight the benefits from using blades instead of knifes. We want to encourage this people of rural areas to use shaving blades which are available to them from local kiosks.

We will reach the Indonesian shaving population in the following ways:

Chain Of Franchise Distributors (rural Areas)

Follow ups

Every month follow ups will take place, where not only the results will be analysed, but also a revision of each associate way to operate will be made. They will have a close look into their development and their improvements

Some of our new associates will be part of “Be a Gillette Family”, so this is the way they will gain their return.

Gillete Branded Boats (rural Areas)

Given the structure of the land and the many islands, we will have tiny Gillette-branded boats. The Blue colour of Gillette would contrast with the colours from other tiny boats. The owners of these boats would get their boat painted for free and would receive a small compensation for this service. This should pose no problem as the people are generally poor there and any source of income is welcome.

If the owners of the boats also decide to sell Gillette’s products they will also become part of “Be a Gillette Family”, this way they will get compensated.

Cost Estimation

After evaluating the demand, and the financial plans (see Appendix B) the conclusion that was made is that we have approximately $1.5 million available ($1,580,640)

$ 1.5 million available

Kiosk: $150

Bicycle: $40

No of Kiosks: 1000 =$ 150 000

No of Bicycles= 2000 = $80 000

No of Boats = 5000 = $20 000

Other Marketing Promotions = $250 000

Free test packages (Containing 2 Blue II Disposables and a packet of Shaving Foam)= $10000000. ( We can cater to 2.86 Million people)

Kiosks will be an incentive for the number of sales.

Note that the budget is subject to reassessment after half a year according the sales numbers. In case of high effectiveness fora particular part of strategy, its budget could be expanded by employing some of the profit as capital. It’s based upon Output Based Input.

5. Summary And Conclusion

We have seen that Indonesia is a huge and diverse country, where different kinds of people, who in turn have different shaving habits, all come together. Gillette is a major force in the country already, but there is certainly room for improvements. The following table summarises the actions we have decided to take, and these form our marketing strategy.

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