Pampers - Basic Demand Conditions - Report Example

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Pampers: Basic Demand Conditions

Introduction

The diaper industry in Australia is a huge industry that does not have many players. Owing to this, multinational company P&G (Procter and Gamble) would want to venture into the market through its leading product, Pampers. This paper aims to conduct a customer analysis by use of various strategies such as the Blue Ocean Strategy to determine various factors that the company should consider cutting their niche. According to a 2014 survey, diaper sales in Australia were at $317 million. The leading player in the industry was Kimberly-Clark Australia Pty Ltd that sells Huggies diapers with 67% market share (Euromonitor, 2015). The company also sells Snuglers diapers that compete with huggies.

a. Buyer Group.

Since pampers is a new product into the Australian Market, it is important to look at who the product will target. The primary focus group of the product is mothers. This is owing to the fact that they are the primary decision makers when it comes to whether the baby will use diapers or not (Lee, 2014).This applies in particular to working mothers who might not have the time to use reusable nappies on their children. So as to create a Blue Ocean, there is the need to diversify the market by looking beyond the target market (working mothers).

As such we can look into baby day care centers. This is because they would be a huge way to influence the buying patterns of mothers since they can make recommendations to them. In the diaper industry, it is important to realize that consumers will make decisions primarily based on word of mouth exchange (Cobb, 2014). Owing to this important factor, it would be imperative to increase the buyer group by looking at non-buyers such as men, who would have some influence in deciding what diapers their children will use. By doing so, there is a huge probability that the primary market responds more positively to the product.

b. Complementary Products.

There are various additional products that could be used alongside diapers. These include skin care products, diaper bags, breast pads, breastfeeding singlets and laundry products. Additional products are an important consideration especially for the creation of a blue ocean since they add value to the product (Cobb, 2014). For instance, skin care products such as baby powder would be important in marketing Pampers and give it a competitive edge over other products in the market. This is owing to the fact that baby skin often gets rashes due to the heat (Hymowitz, 2016). Diaper bags would also be another important complementary product to any mother. This is owing to the fact that every mother has to be armed with diapers every time that they are with their child. Breast pads and breastfeeding singlets too are important to any breastfeeding mother. In the creation of a blue ocean, offering pampers alongside these products or offering them as a sort of discount to customers is one way of attracting customers.

c. Functional Emotional Orientation.

The functional orientation of a product lies in the premise that it can fulfill a clear need at a reasonable price. The emotional orientation of a product lies in the consumer buying a product for emotional reasons such as the prestige that comes along with the purchase of a certain product (Hymowitz, 2016). In creating a blue ocean, there is need to link functional and emotional utility of Pampers so that the product can carve its niche by going against the current market orientation. Often, when customers get emotionally connected with a product, they will worry less about the price of the product. In achieving this, Pampers will have to be the brand that every mother prefers since it fulfills a certain emotional need. To achieve this, marketing strategies would have to be directed towards creating an emotional connection with the target market. This would be well linked by the use of complementary products. For instance, offering pampers alongside baby powder would create the impression that the product is mindful of the baby’s skin, which is a huge bother to any mother. They would hence be attached to the product even if it does not offer the baby powder anymore.

d. Tiers of non-customers.

In understanding the three tiers of non-customers in the Australian market, we need to understand alternatives and substitutes to the product. The first tier non-customers would be those that use diapers for lack of a better option (Hymowitz, 2016). The second tier involves those that have used the diapers but no longer consider them. Finally they include the ones that have never used diapers and prefer alternatives. Understanding this lies in realizing that there is a market segment that prefers to use reusable nappies owing to the fact that they consider diapers to be a nuisance to the environment, and they think disposable diapers are harmful to the baby skin. It would hence be important to make the diapers environmentally friendly and also ensure that Pampers baby diapers do not damage the baby’s skin. By fulfilling these two factors, Pampers creates a Blue Ocean since it now has consumers that the competition does not target.

e. Porters Five Forces.

The application of the Porter’s five forces can be used to understand the demand of the product. The forces of horizontal competition involve the threat of substitute products such as private labels like Mamia, which have offered considerable competition against Kimberly-Clark products (Euromonitor, 2015). Second is the threat of established rivals such as Kimberly Clark offering Huggies and Snuggles baby diapers. The final threat is that of any new market entrants that may also demand a market share. Vertical forces will be the bargaining power of suppliers and that of customers. Buyers will have the ability to push prices downward owing to the availability of alternatives and competition. The pricing strategy will hence be influenced by competing for products.

f. Market Segmentation and Strategy.

Another key factor in understanding the market is through segmentation. It would also be important to realize that there are several classifications of diapers, these are; regular diapers, newborn baby diapers, disposable diapers, junior diapers and adult diapers. According to Australian Bureau of Statistics, the average birth rate in 2014 was 1.80 babies per woman with a record 299, 700 births that year (Australian Bureau of Statistics, 2015). The strongest birth patterns were in the major Australian cities. The highest birth rates were in the suburbs while there were low birth rates in the inner city where high numbers of young people live. This is relevant information as it informs the marketing strategy that should be used. Since diapers are used during the first twenty four months, the total target market would be between 500-600 thousand babies.

The geographical location of the market is Australia specifically in urban areas where many families live. The demography of the target market is females between 18-40 years. This is owing to the fact that this segment is in their productive years (Raghunathan & Sarkar, 2016). The income level is important in describing the market. It would be from the lower middle class to the wealthy because diapers are not expensive, and they are a necessity. All these are important factors in determining the how the product can be marketed. For instance, to capture the lower middle class, the company can have the product packaged into smaller quantities. It would also be important to consider the government and other organizations which would request for massive orders.

It would be paramount to market Pampers diapers as affordable diapers, with high degrees of softness and little irritation to the skin, as extremely comfortable and good fit, environmentally friendly and disposable, faster absorption rates than the average diaper (Australian Bureau of Statistics , 2015). And easy to use the product with an efficient absorption core that will keep the baby dry for long periods of time. These are important elements that the target market will be looking for in the product. In also doing so, the brand cuts a niche in the market since the consumer will view it as a superior product compared to the average diaper (substitute for competition).

The target market strategy is also important in understanding market segmentation. For P&G to cut through the Australian market, Pampers will have to be available to its target customers at any time. It would be important to ensure that the pricing strategy of Pampers will take into consideration organizations that may have huge orders and that people appreciate that Pampers is a high quality product and that they are well aware of where they can order Pampers diapers from. It is imperative for P&G to realize that for successful market entry, there is need to establish good networks within the market (Hymowitz, 2016). Strategic networks with hospitals, clinics, and product wholesalers would be critical in ensuring that there is a constant flow of product orders.

g. PESTLE Analysis

Pestle Analysis is a concept for marketing principles that companies can use to analyze the environment that they are introducing a new product to. The mnemonic stands for Political, Economic, Social, Technological, Legal and Environment. Political factors are those factors that are heavily attached to the political situation in Australia which may influence the operations of

P&G in the new market. Australia has a stable political. As such policy shifts that would lead to an increase in the amount of taxes that products are charged, the amount of interest that banks charge directly affect the operations of P&G in Australia. Other political factors include regulatory agencies which would influence how the company conducts itself. Political change such as change in government could also influence P&G operations in Australia. Australia is a liberal-capitalistic democracy where the state constantly interferes with the economy through fluctuating import taxes, employing protectionist policies or creation of environmental policies. For P&G may choose to headquarter its operations in either Sydney or New South Wales owing to several factors (Australian Bureau of Statistics, 2015). First is that these areas have world class infrastructure, they have a favorable tax system, business costs are competitive, they are relatively stable. Sydney is the business capital of Australia. Hence, it would be easier to conduct business there. Australia has a stable political environment.

In terms of legal factors, the country has an efficient and transparent legal framework with the lowest corruption rates in the region. There has also been the constant increase in the minimum wage of employees and regular legislation requiring firms to recycle products when possible. All companies have to comply with government policy on sanctions.

Economic factors may include the level of economic growth, which may influence the pricing of P&G products. For instance since the World Economic Crisis of 2008, the Australian economy has constantly been growing. International trends in economic growth such as inflation and depression directly affects operations since raw materials may get expensive or inavailable (James, 2014). There may also be changes in trade cycles. Another important factor is the availability of labor in the market. P&G will have to consider the availability of labor in Australia and the cost of this labor. The availability of highly skilled labor is certainly an advantage to the company. Economic factors are important considerations as they could boost operations, inform pricing and production.

Social factors may include consumer trends i.e. the attitude and behavior of the consumer towards the product. This is an important consideration for P&G in determining to market and advertising strategies since they could be used to reinforce consumer attitude or demystify the product. Lifestyle trends could also be another important factor that the company should look out for.

Ethical issues such as materials that are used to make the product or how P&G treats its workforce could make a huge difference between P&G and its competition. The company will also have to create a strong brand image for Pampers by ensuring that they offer quality products. Another way of ensuring that the company has a strong brand image is ensuring that they conduct various corporate social activities directed towards the target market to ensure that they are viewed as a company that cares (Lee, 2014). Trends that P&G may be keen to look out for in the market is the Australian’s consumer’s tendency to save more and spend less hence they always looking out for discounts. The main social classes in Australia are the working class, the middle class, and the upper class. In terms of the socialization aspect, child rearing in the country is heavily dependent on the class, religion, level of education, occupation and country of origin of parents. Although fathers are involved in child rearing, mothers are the primary and most preferred caretakers of children.

Technological factors that may inform P&G may include the amount of innovation in the market which may ease the way in which the company manufactures the product. Another technical factor is Australia’s technology maturity that may be a major consideration in determining the manufacturing, advertising and sales strategies that the company will use (Australian Bureau of Statistics , 2015).Other important technological factors may include telecommunications, the rate of technological change in Australia and technological incentives been offered either by the market or by the economy. Trends that P&G should include the growth of internet marketing in Australia where consumers can easily compare the pricing of similar, competing and alternative products (James, 2014). There has also been increased environmental protection in Australia owing to drastic climate changes due to global warming. It becomes necessary for P&G to ensure that Pampers is environmentally friendly or otherwise risk low sales.

Reference

Australian Bureau of Statistics (2015). Births, Australia, 2014. Retrieved on 2016, May 18 from www.abs.gov.au

Cobb, J (2014). 6 Paths for Leading your Education Business to Blue Ocean. Retrieved on 2016, May 16 from www.tagoras.com

Cowan, N (2005). Risk Analysis and Evaluation. London: Global Professional Publishing.

Euromonitor (2015) Country Report: Nappies/Daipers/Pants in Australia. Retrieved on 2016, May 16 from www.euromonitor.com

Hymowitz, C, (2016), 'Just Don't Call Them Diapers', Bloomberg Business week, 4463, pp. 16-17, Business Source Premier, EBSCOhost, viewed 16 May 2016.

Lee, M (2014). Disposable Nappies: Are they stinking up our planet? Retrieved on 2016, May 16 from www.australianscience.com.au

James, C (2014). 8 Big issues for the Australian Economy in 2014. Retrieved on 2016, May 18 from www.afr.com

Raghunathan, S, & Sarkar, S (2016), 'Competitive Bundling in information Markets: A Seller-Side Analysis', MIS Quarterly, 40, 1, pp. 111-A45, Business Source Premier, EBSCOhost, viewed 16 May 2016.