Marketing Strategy at Cromo Industries ltd - Term Paper Example

 Market Report: Cromo Industries ltd. Introduction This market report contains a discussion and analysis of the marketing plan for Cromo Industries limited, a manufacturer of soaps and detergents for home use. The report is based on the information gained from in-depth interviews of the marketing manager and market analyst of the company, as well as on the secondary research conducted about the detergent industry and market growth. The report is contains a SWOT analysis and end with recommendations for Cromo Industries to make its market plan and media planning more effective. Company Profile Cromo was established in 1991 by Allan Scott in Staten Island in New York, and has been manufacturing detergent washing powders and soaps for the home use. The company is a privately owned organization and it employs around 100 employees in its various departments and factories. The company has an annual revenue of $15,70, 000 in the year 2009 and is expecting to increase it by a 5 percent in the year 2010. Cromo was established with the following aims and objectives in mind: Organizations Mission and Objectives Cromos states its mission as “serving the home washing needs of the customers” and its main objectives include obtaining a leadership position in the local and the regional market. The company currently supplies to the dealers and retailers in the New York State but has a long term objective of expanding into more states. Structure of the Organization and the Marketing Department Cromo is a privately owned enterprise and the organizational structure is vertical at the higher echelons while it is horizontal at the lower levels. The following chart in fig 1 illustrates this: Fig 1: Organizational Chart of Cromo Industries It can be seen from the above figure that the owner of the organization, is Mr. Allen Scott who is also the MD. All the decisions relate to manufacturing and marketing are ultimately reviewed and enacted by the MD. Next, there are 3 general managers - GM administration (Adams, P. Mann), GM production (R. Behel) and GM marketing (Mebtlek K Sharne). All the three general managers directly report to the MD and in turn look after their own individual functions. The production general manager takes report from the operations managers and the purchase managers. The GM administration is responsible for the HRM manager and the administration in-charge. The GM marketing looks after the sales, marketing and media planning for the company’s diverse products and takes reports from the marketing manager and media planner. The next level of employees consist of the production employees, the administrative employees and the sales team. The marketing department has two different sales teams, one of which targets the retailers and the other targets the customers. The retail sales team is responsible for getting orders from the retailers while the customers’ sales team is tasked with door to door advertising and creating awareness. This team moves around in the assigned territory with samples of the products and also displays how the products can be used in washing machines. The sales team also targets the local restaurants and the laundries directly in order to sell its commercial range of products. The sales teams work on salary plus commission basis and they are assigned daily and weekly targets which are reviewed by the two managers. Financial Position of Cromo Cromo industries has established itself in the market in the past two decades and is a well known brand in the local market. The financial make up of the organization is of private ownership and limited liability. The investments in working capital as well as any capital investments are funded from revenues or bank loans. The company was performing well till recently when the financial crisis of 2008-2009 caused credit crunch and low cash flow that could have enabled it extend its market reach. It has achieved a sales of $15,70, 000 in 2009, but high interest bank loans and soaring raw material prices have cut into its profits. Croma is now struggling to maintain its market position as well as finding it hard to expand its distribution network as planned earlier. Target Market Croma Industries manufacturers a diverse variety of products and has penetrated the market of consumer washing powders effectively. Its main target customers are middle to high income households that have children and one or both the spouses working. It targets its market on the basis of the income levels of the target customers and their basic needs. For example, Cromo’s customers are segregated as low income household that have large family size and where the need is to get maximum amount of washing done in minimum budget. Next, its customers are also people who stay in nuclear families with both the spouses working and having little time to worry about washing or removing stains. They still like to do their laundry as they are unable to afford external services but they can be encouraged to pay a premium in return for the benefit of time savings and stain removals. Market Growth The US detergents market consisting of both liquid detergents and washing powders, is valued at $2500 million with an average growth rate of 4.7% (Highbeam Business Industry Report, 2010) in the past 5 years. Cromo Industries is placed in a market that is saturating and growing at a low rate. In addition, there are a large number of powerful competitors that are selling similar or slightly differentiated, in a market that has low brand loyalty. The market is led by large organizations like Unilever and P&G. The market is not growing at a very fast rate but there is scope for additional differentiated products that can cater for specific customer segments or for specific needs. This situation makes the Croma industries as a Question Mark (see fig 2 below) – where the market growth rate is fair but the company is not performing well. Fig 2: BCG business analysis matrix (Kotler, 2008) Competitors The detergents market is made up largely of large marketing organizations, like the Unilever Ltd., P & G, Church & Dwight, Dial and Henkel (The Procter & Gamble Company, 2010), who get the products manufactured from overseas or in other locations and sell it through the network of local distributors. In addition, there are a large number of small organizations that do their own manufacturing and then try and sell the products locally. The large marketing organizations benefit from their infrastructural facilities like having large number of vehicles, big sales team, ability to offer better discounts to the retailers and large amount of media budget. They also benefit from their R&D investments that ensure that they are able to launch a large number of new products regularly. The smaller organizations like the Carmine Enterprises and the Cleanox Ltd. are able to capture the benefit of local knowledge and understanding of the market, the network of distributors and the understanding of what the people really need and can afford. As such, the competition for Cromo is intense and it needs to strive for maintaining quality while managing its costs and also for ensuring that it is able to make the maximum use of its limited advertising and marketing budgets. Key Products The Budget Wash washing powder is priced at the lower end to cater for the needs of low income households and provides the quality of basic wash, cleanliness and hygiene. This is priced at $2 per a kg pack, and is a direct competitor for Henko Expert brand from the Cleanox Ltd that is also priced at the same amount. The Super Wash Detergent from Croma is targeted at the customers who have little time and want to get the washing out of their way – it provides high quality wash, works well with small washing machine cycles and gives the benefit of stain removal as well. It is positioned along with Tide from Unilever. The Deluxe powder is positioned as a washing detergent that provides all the attributes of excellent wash, germ removal and also leaves fragrance after each wash. It is positioned as competitor for Ariel, a product of P&G that is priced at the upper end. Key Competitive Advantages The personal detergent industry is characterized by low brand loyalty and point of sales factors are more important for the customers. This is more of a push strategy market, where the manufacturers need to push their products through the channels and also convince the retailers to promote them. The customers tend to buy products that are easily available and that fall within their budgets. The key competitive advantage in the industry lies with the organization that has a strong advertising channel that ensures that the products are available at the retail outlets all the times. Another advantage is having the ability to provide incentives to the retailers so that the products are given prominent shelf space, displays and that the retailers also recommend the products to the customers. The key competitive advantage with Croma is that it has been in the local market for almost 2 decades and it understand the customer needs well. However, it suffers from low funds and low resources that are needed to produce the product and market and deliver them to the customers. Its distribution network, though well entrenched into all the regions, is not very functional as the sales team either do not reach them in time or are unable to convince the distributors or the retailers. This in turn is partially due to logistical issues with the company and partially because there is little awareness about the products among the end customers due to relatively low advertising budget at the company’s disposal, and the retailers fear that the products will not make it in front of bigger brands from P&G or Unilever. Current Marketing Mix Marketing Mix consists of how the organization arranges its 4 Ps, namely, the product, price, promotion and place so that it is able to achieve its objectives (Kotler, 2008). The current marketing mix for Cromo Industries consists of product differentiation where the products are differentiated in terms of attributes and quality that they offer (Budget Wash, Super Wash and Deluxe Powder). It is also differentiated in terms of price which reflect the market trends. In terms of promotion and place, Cromo Industries undertakes the following activities: 1. Print and Electronic Media Advertisements 2. Outdoor Media Advertising 3. Personnel Selling to the retailers 4. Schemes and Offers to the retailers and to the end customers 5. Bulk purchasing discounts to the retailers Marketing Budget The marketing budget consists of 20% of the total annual budget for Cromo that is around $ 2,00,000. The reason for this large investment in advertising and promotional activities is because the market includes competitors like Unilever that have huge advertising budgets and also because the detergents and fast moving consumer goods do not encourage brand loyalty but the purchases are dependent on the recall, familiarity and availability of the brand on the shelf. For maintaining that the customers are aware of the brands and that they remember them easily, it is essential that organizations resort to continuous advertising and promotional activities. The total budget earmarked for promotional and marketing budget of $200,000 is broken down in the following manner at Cromo Industries. Table 1: Budget for Marketing 1. Distribution Activities related to distribution and making the products available to the retailers 25% 50,000 2. Marketing and Promotion Activities related to the advertising and promotion of the product to the customers 75% or around $1,75,000 The distribution activities are further divided into warehousing costs, loading and unloading costs, vehicle and transportation costs and costs related to maintaining wholesalers and retailers relations. The marketing and promotional costs are presented below: Total of $1,75,000 Table 2: Budget Allocation Promotional Activity Annual Budget 1. Print Advertisements $25,000 2. Electronic Media (TV and Radio) Advertisements $100,000 3. Outdoor Media Advertising $22,500 4. Personnel Selling to the retailers $ 6750 5. Schemes and Offers to the end customers $5000 6. Schemes and Offers to the retailers $8500 7. Bulk purchasing discounts to the retailers $7250 The above promotional mix consists of a large investment in TV and radio and print advertisements. SWOT Analysis SWOT analysis is a tool to assess the internal environment of the organization and its strengths and weaknesses and also to gauge the external environment and understand the opportunities and the threats that may be present (Blattberg, Getz and Thomas, 2009). The main objective of the SWOT analysis is to assess if the organization can make changes in its operations and marketing strategy in order to overcome the threats and take advantages of the opportunities. The SWOT analysis strengths and weaknesses part is evaluated using the interview data of the marketing manager and the marketing analyst, while the information on the threats and opportunities is also based on material presented earlier in terms of target market, market growth, competitors and key advantages etc. Strengths 1. The organization is privately owned and decisions are therefore easy to make and implement as it follows a top down approach. There is more control and monitoring. 2. Understanding about the end customers needs and ability to pay. This is information gained due to working in the local market for a long time, and it enables the organization to accurately position its products and offer targeted benefits to the customer segments. 3. Strong ties with suppliers that enable it to cut down operational costs. Weaknesses 1. Lack of training and development of employees, especially the sales team 2. Lack of using sales teams’ feedback and inputs into making marketing plans. 3. Expenditure on advertising not justified by results or past benefits. Instead, Coromo has traditionally invested a 20% of its costs for marketing related activities and around 60% of the marketing budget on TV and Radio advertising. The investments are not assessed in terms of the sales that are generated and there is no initiative taken to re-allocate the budget in a more realistic manner. 4. Lack of resources to reach out to distribution network partners – in terms of logistics and in terms of initiative. Opportunities 1. The market is still growing and it has scope to include additional products that target the customers with different benefits or features. This is taken advantage of by large organizations that can invest in R&D. However, Cromo too can strengthen its product line and launch larger products with minimum investments. 2. There is scope to target the commercial segment of small business like the restaurants or the laundries. These markets are price sensitive and Cromo can expect to make a foray with ease, based on the fact that it has access to cheap raw materials. References Blattberg, R. C., Getz, G. and Thomas, J. S. (2009).The Marketing Mix. Harvard Business School: Harvard Business School Press Highbeam Business Industry Report. (2010). Retrieved on 18 November 2010 from http://business.highbeam.com/industry-reports/chemicals/soap-other-detergents-except-specialty-cleaners Kotler, P. and Keller K. (2008). Marketing Management. New York: Prentice Hall. The Procter & Gamble Company. (2010). Retrieved on 18 November 2010 from http://www.answers.com/topic/procter-gamble Read More