Procter & Gamble Company, financials ($) (PG annual report, 2010)

 

Table 6. Procter & Gamble Company, financial ratios (PG annual report, 2010)

 P&G segment and product differentiation in China Hair Care market 

P&G’s Beauty Business is over US$ 10 Billion in Global Sales, making it one of the world’s largest beauty companies. The P&G beauty business sells more than 50 different brands including Pantene, Olay, SK-II, Max Factor, Cover Girl, Joy, Hugo Boss, Herbal Essences and Clairol Nice ’n’ Easy. In China, P&G’s hair care business mainly concentrate on Pantene, the world’s best selling shampoo, Head & Shoulders, the world’s best Anti-dandruff shampoo and Rejoice , the Asia best selling Shampoo. Beside the three main brand, the VS, the styling-function shampoo, and Clairol, the plant-based shampoo are also introduced in several big cities in China.

According to Z.Zhou(2011), the marketing director assistant of P&G China company, the P&G in http://www.ttc-switch.com/dissertation_writing/Finance/China mainly involved into the shampoo business in the hair care industry, along with a limited conditioner  products under the brand name of Pantene. All five brands have their special culture and functions, each brand would contain several mixture function in variants, to meet the requirement for each targeted marketing segment. 

PANTENE PRO V

 

                                        

 

Core Marketing Target 

The core marketing target of Pantene are female customer , between 18-34 years old, who need to take care of their hair quality.

Key Features & Benefits

Amino Pro-V Complex could makes hair much stronger than other customers.

Gentle enough for daily use, color-treated hair are also suitable.

 

Variants

Smooth & Silky for Straighter hair. This variant is a high conditioner level product, suit for straight hair and make it healthy and shiny looking.

Volume & Fullness for Thicker hair. This variant is high conditioner level, which would give the user a feeling of healthier, fuller and bouncier of the hair.

Lively Clean for Livelier hair. This is a low conditioner level product, which focused on clean the oil on hair, and keep it fresh.#p#分頁標題#e#

Long Black for the Long & Black hair look. This variant is high conditioner level. Particularly for black and long hair, it would darken each part of hair from root to tip make is looks healthier, and keep the hair long.

Hair Fall Control for reducing hair fall by 50%. This is a high conditioner level products, which specifically for the anti-alopecia purpose.

HEAD & SHOULDERS

 

 

 

Core MarketingTarget 

The core marketing target are the Male/Female customer, between 18-34 years old, and focus on the anti-dandruff efficiency of the shampoo.

Key Features and Benefits:

Super Anti-Dandruff shampoo 

Removes flakes, itchiness, irritation, dry Scalp & Oiliness- the five signs of Dandruff.

Variants:

Smooth & Silky for Straighter hair: this variant is high conditioner level. For straight hair, in the purpose of relieving hair dryness, and will make the hair smooth like silk.

Silky Black: this is a high conditioner level product. Derived essence from black sesame to nourish hair to maintain the black colour to make it looks more healthy. 

Clean & Balanced: this is a medium conditioner level product. Concentrated on clean and dry function, to offer the extraordinary clean look and feel. 

REJOICE :

 

Core MarketingTarget:

The core marketing target are the male/female lived in urban and rural, between 18-30 years old, who emphasis the smooth feeling of the hair. 

Key Features & Benefits

Contain the smooth material to make the hair twice as smooth and easy-to-comb feeling

Mixed surfactant with conditioner, suit for both wet and dry conditioning.

Variants  

Rejoice Rich for Extra-Smooth, This variant is high conditioner level, focus on the smooth feeling to customer, make the hair easy to comb.

Rejoice Silky Clean for oily hair. This is medium conditioner level product, focus on oil remove function for oily hair.

Rejoice Complete. This is medium conditioner level products, which provide the dandruff protection, fragrance, and extra smooth function, all in one product.

Vidal Sassoon

 

Core MarketingTarget:

The core marketing target are the female, between 20-40 years old, who might frequently change their hair style and wish to maintain the hair healthy. 

Key Features & Benefits

Efficiently repair the hair to restore its quality.

Lift the hair, help maintain the current hair style

Variants  

VS Super repair, This variant is high conditioner level, suitable for the customers damaged the hair badly, repair the hair, to restore its health.#p#分頁標題#e#

VS styling for curve. This is high conditioner level product, focus on maintain the curve style hair.

VS for all style. This is medium conditioner level products, which suit for all general style hair, offer the general nutrition, and nourish the hair, to make it healthier.

Clairol

Core MarketingTarget:

The core marketing target are the female, over 30 years old, who might against the chemical material in hair care product. 

Key Features & Benefits

Plant-based material, essence derived from plant, low chemical contains

Variants  

Clairol anti-alopecia, This variant is medium conditioner level, suitable for the customers who have hair fall problem, to keep the hair strong and stop the hair fall.

Clairol black& straight. This is medium conditioner level product, derived essences from black sesame, to make the hair straight and black.

Clairol Mint. This is medium conditioner level products, derived essence from spearmint, focus on offering the clean, dry and fresh feeling of hair. 

'our current aim is to build up the product mix which would meet all kind of requirement across customers, and through the different brands, our ranged product mix could offer a clear awareness to customer, which one is the most suitable product for him/her. We segment the market mainly on by the product functional level, and each brand emphasis a specific function as the main function. Although there are some overlap in some sub-segment of product in the additional function, but concern about the main function, that would be small different as well. For example, the Pantene and Head&Shoulders both have product for cleaning, however, the Pantene would conditioner the hair besides the cleaning function, and the Head & Shoulder will be better on the cleaning function, it would provide the super dry, clean, and fresh feeling to customer, as it do not efficiently conditioner the hair as Pantene. So there is still difference between the different brands in same sub-segmentation.' Said Z. Zhou. (2010)  

Those five brand marketed into the China, have build up each own's brand awareness among customers, and created own loyalty customers based on its different culture, function and marketing position. The evaluation of the performance of the segmentation is going to be undertaken in the questionnaire.

 The P&G product communication strategy 

The main communication method applied by P&G is advertisement, the P&G spend 'over 50 million CNY each years on advertisement activities in the hair care products, and Pantene occupied over 40% of the input solely.' Said D. Xu,(2010) the marketing assistant of P&G China,  during the interview, 'We advertise each product separately, to avoid the potential confusion caused by our huge product and brands mix.'#p#分頁標題#e#
根據廣告她說，“這些廣告的主要是通過電視，雜志，互聯網及戶外廣告進行傳播。當有新產品推出，海報將被連接到零售商的產品 ，他們可以在店內發布并通知客戶。然而，電視廣告仍然是主要的傳播通道。在廣告活動的開支中，有超過60％的涉及到的電視廣告，生產和銷售的財政預算。

According to the channels of advertising, she said, 'The main channel to put those advertisement are through TV, magazine, internet and outdoor advertisement. And when there are new products introduced, the poster will be attached with the product to retailer, they could post it in the shop to notify the customers as well. However the TV advertisement is still the main channel. Among the expenditures into the advertisement activities, over 60% budget involved into the TV advertisement producing and distribution. We have contract with over 30 TV sets, and play our advertisement totally over 120 minutes per day in all time period. And we have put advertisement on all fashion category magazines and 14 other general well sold magazines. The input on internet is relatively smaller, we only put our advertisement in several mainstream websites, such as sina, sohu, 163 and Tencent. The efficiency of the internet ad is still smaller than other methods, especially comparing to the TV. Our marketing target should be active to the TV, magazines rather than internet, the mainstream websites could ensure our product information was successfully delivered to our major customers.'

Refer to the function of so large amount expenditure on advertiseing, she explained that the advertisement is aim to delivery the information of new products to customers, to build up the brand awareness among customers. And if the frequency of the advertisement reduced, the customer might doubt about the company's operating ability. And each brand of P&G has developed its particular culture along with the development, the fashion idol in the advertisement is a must, that would cost a lot on the endorsement, but comparing to the effect of the idol, the expenditure should be worth, in the purpose of delivery the product information and culture to customers.

The second method of marketing communication is the sale promotion, yet the D.Xu declined the importance of this method comparing to advertising. Due to the unique function and product differentiation, all the P&G product have generate more cost than its competitor, and during the 2004 to 2006, the price of P&G product reduced from 10%-30%, the profitability of the product is quite limited, the sale promotion activity mostly used the further discount approach, that would further reduce the profit of the company and its retailers. However, the sale promotion is one of the most efficient method to stimulate the demand across customers in a short period, therefore, the P&G still insist to apply the sale promotion sometimes, but the sales promotion normally are specific to one or several chosen brands or products, and the promotion normally would refer to all products mix of P&G. The sales promotion would be held especially when the new products are introduced, or the sales of a particular product have been fall for a period.#p#分頁標題#e#

The public relationship activities that P&G involved are mainly in the charity field. The company have established a constant relationship with several charity organisation in China, including the Red Cross, Hope Project etc. And whenever there is natural crisis happened, the company would immediately donate to the disaster area. In the Sichuan Earthquake 2006, the company donate 10 million totally to the local government and charity. (D.Xu, 2011)

The company have not applied the direct marketing and personal selling methods to the customers, this is due to the characteristic of the FMCG products, they are too small and too less profitability to launch such methods which would consume time and cost.

questionnaire data analysis 

To exam the efficiency of P&G marketing segmentation in hair care industry in China, a questionnaire was designed and undertaken in this research. The form of the questionnaire is listed as appendix. 

This questionnaire was undertaken by a group of staff working in Beijing Xidan Shopping Mall, at a promotion station of P&G, the participants mostly are the P&G customers and those who interested in the P&G products.

The original sample plan was 50, and considering the return rate of questionnaire, 100 printed questionnaire were prepared and handed out . Actually 75 questionnaires were collected.

The questionnaire results are sorted and presented with the MS Excel, and listed as following:

Question 1. The sex of the customers

 

Figure 10. The sex of participants (Author, 2011)

There are 21 male customers out of 75 participants, and 54 female totally. The P&G products are highly attractive to female customers, which occupied as 72%.

Questions 2. The age structure of participants

 

Figure 11. The age structure of participants (Author, 2011)

As the figure shown, there are 2 male under 20 years old, 15 male between the 20-30 years old, 3 male between 30-40 years old, 1 male between 40-50 years old; 7 female under 20 years old, 29 female between 20-30 years old, 14 female between 30-40 years old, 2 female between 40-50 years old, 2 female older than 50. The age structure of participants shown that, the P&G products are highly attractive to female from teenage to mid-life, and it only attract male customer at teenage, comparing to the age structure of female customers. This results shown that the P&G main marketing target for female customers between 18-35 years old is efficient.

Question 3. The frequency of change hair care products

 

Figure 12. Frequency of change hair care products (Author, 2011)

This question is designed to check the loyalty of customers. 45% customers almost do not change their hair care products, 38% customers would change somethings, but not frequently, only 17% customers frequently change their products. This results proved that the hair care market in China is a highly loyalty market, once the customers build up the trust against one product, they will hardly try other products.#p#分頁標題#e#

Question 4. Reason for not change products

 

Figure 13. Reason for not change products. (Author, 2011)

This question designed to check that by what reason, the customers do not change the hair care products, and show their loyalty. 19% participants care about the product quality, 45% of them care about the product function, 12% of them do not trust other brands, and 17% of them think the current product is fit for their hair condition. This results shown that in today's hair care market, the product function have become a great metre for customers to choose a trusted brand.

Question 5. Reason for change products

 

Figure 14. Reason for change products (Author, 2011)

This question is going to test that by what factors, the customer might change the hair care products. 21% of participants would change products when the quality is bad, 20% of them would change if the function is not good, 17% might try those products recommended by their friends, and 36% of them would change the product just cause they are interested in other/new products. This results have some conflict with the previous question, that most customer would show loyalty when the function is good, however, only 20% customer would change if the function is not good, the function of hair care products is not as obviously and instantly as products in other industry, that means customers are tolerant to the product function. The on the other hand, although customers have many reason to show their loyalty to one particular product, however, they may still change for other products if either recommended by friends or just interested in the new/other products, that means the efficient marketing communication activities of any product would have a great chance to stimulate the customer demand. This also proved that the hair care market in China is a highly competitive market 

Question 6. What is the most important function you need from hair care product

 

Figure 15. Major factor considered while purchasing (Author, 2011)

This question checked the major functor that would affect customer decision when their choosing the hair care products, 28% customers care about the conditioner function, 17% participants care about the flake remove function, the rate of factors on keep hair clean, remove oil, color seal, style seal and smooth & straight are almost same around 8%-13%, only 3% participant care about the anti-alopecia factors. This results indicated that the customer care about the nutrition contains in the products and the feeling after use, these are the major factors that would attract customer from product level. 

Question 7. What is the most important factor that would stimulate your demand?

 

Figure 16. Factor stimulate demand (Author, 2011)

This question checks which is the most efficient method to stimulate customer demand, 41% participants care about the product function, 17% would interest in the promotion activities, 16% concern about the price, 13% care about the healthy factor, only 8% are attracted by the advertisement, and only 5% choose product due to the brand. This figure indicates that in this market, customers choose product rationally, firstly the product should have the good function which would meet the customers' requirement, then it must be at a acceptable price, better there are some promotion activities. The brand itself is not important, however the culture behind the brand is effective.  #p#分頁標題#e#

Question 8. Which is your favourite P&G brand

 

Figure 17. Favourite P&G brand (Author, 2011)

This question is to check which is the most popular P&G brand, Pantene is the most popular brand at the share of 33%, followed by Head & Shoulders as 24%, VS just 1% ahead Rejoice at 16%, and the Clairol is the worst but still got 12% share. This figure out that the Pantene and Head & Shoulders are the most successful P&G brands in China hair care market, however the performance of VS, Rejoice and Clairol are not bad, they all have gained some loyal customers, and maintained a certain amount of profitability. . 

Question 9. What other brands you have used or interested in using 

 

Figure 18. Favourite non P&G brands (Author, 2011)

This question shows the main competitor for P&G in the market. The three brands owned by Unliever have obtains over 50% market except the P&G products, they are the main competitor of P&G, and the Slek, old native brand still have 19% share, the Aoni and Bawang are both herb essence anti-alopecia products, they have 12% share together, although its function is aimed to customer with elder age, but its potential market is still huge.

Question 10. Where do you purchase hair care products

 

Figure 19. Place for purchasing (Author, 2011)

This question check the behaviour of customer purchasing place, 68% participants purchase the products in supermarkets, 16% purchase in shopping mall, 13% purchase from retailers or wholesales, only 3% purchase from barbershop, and none purchase from internet. This indicate that the supermarket, shopping mall, and retailer/wholesales are still main channel to distribute products in hair care industry, although the e-business has raised in recent years, the P&G has not participant into the e-business, there is no sale from internet.

Question 11. Which volume package you normally choose

 

Figure 20. Volume package preference (Author, 2011)

P&G sell its product in 4 different volume in China, 200ml, 400ml, 600ml and 1L, this question checks which package are preferred by customers. The best sale package is 400ml as 40%, the second is the 600ml package at 29%, 22% customer choose 1L package, and only 9% participant interested in 200ml package. The product with more volume normally will get a discount, therefore the product with larger volume is more popular than those with small volume. The 400ml is the regular package for hair care products, and most people get used to this volume. Those ones choose 1L package are absolutely loyal customer of P&G, and rate of the loyal customer is acceptable. 

Question 12. What is the most acceptable price range of one bottle of hair care product (400ml)?

 

Figure 21. Price preference (Author, 2011)#p#分頁標題#e#

This question shown how much people would like to pay for a bottle of hair care product. 16% people thinks the price should be kept below ￥10CNY, 31% participants accept the price between ￥10-￥20CNY, 41% participant could afford the price from ￥20-￥50CNY, only 12% customer think the price over ￥50CNY is ok. This question indicated that, the most customer could afford the P&G products at a middle or higher price, however, this could not be the excuse for price raise, maintain the price below the acceptable price of customer could stimulate the customers demand a lot. 

Question 13. How do you know about the P&G products?

 

Figure 22. Channel to know about P&G products.

This question is going to check the marketing communication efficiency of P&G. 28% participant know about P&G through TV, 17% through newspaper and magazine, 16% through internet, the amount of participants know about P&G through outdoor advertisement and supermarket poster are same as 11%,  9% are told by their friends, and only 4% get information from shopping guide. This result indicated that the advertisement is the main channel of P&G to communicate with its customers, the advertisement through TV, newspaper/magazine, or out door advertisement, have efficiently achieved its objective, to let the customers know about the products.

Question 14. How do you think about the P&G advertisements?

 

Figure 23. Opinions about the P&G advertisement.

This question is going to check the efficiency of P&G advertisement, from 5 criterion factors, image, theme, diction, speakman/speakwomen, advertisement length. Most participant give the positive valuation from those factors, however 32% participant think the advertisement is too long, and 19% think the theme sometimes is not clear enough. Generally the advertisement are accepted by most participants, and as the result the advertisement expressed and delivered the right information to customers to increase the product awareness among customers.  

Question 15. Rate P&G product you used most, 1 is the lowest score, 5 is the highest score.

 

Figure 24. Rating the P&G products (Author, 2011)

This question check the customer satisfaction to their preferred products. The 1 is the lowest score, and 5 is the highest score. The score 4 and 5 are considered as the customer satisfied with the product. The Pantene is the brand with highest rate of customer satisfaction, while VS have the lowest customer satisfaction. The customer satisfaction to Rejoice, Head & Shoulders, and Clairol are at average level. This figure further proved that the Pantene is the top brand among P&G brand mix, although the Clairol is the last member into the P&G brand mix, it has already satisfied customers as the old brand Rejoice and Head & Shoulders, the VS is the brand that need to improve it quality and function urgently to satisfy the customers.#p#分頁標題#e#

 Two hypotheses analysis

1.If Retailers and buyer feel sensitive to the new differentiated product in new segment.

If customers use every day with the same kind of hair product, so long down, they will become disgusted with this product, so the manufacturers to produce new products come out if it can meet the customer's curiosity, so that they feel freshness and manufacturers to customers seriously. Therefore, in today's constantly introducing new products is essential.

 

2.The market if fully shared by the current players. 

If a market is completely shared by current manufacturers, each manufacturer's profits will be low, so a manufacturer wants to get huge profits in this market, it is necessary to conduct this market segment, then focus each small segment market to produce the corresponding products, gain market share and get a competitive advantage.

 Risks and threat of current marketing segment and product differentiation strategy

The P&G efficiently segmented the market into many small and specific segments, and it introduced the particular differentiated products to each segments, this brought a variable product and brand mix to the company. However, the FMCG industry is a low profitable industry, the profit only can be achieved by the scale economy, therefore the P&G need to build up variety of production facilities to ensure the quality of each differentiated product are in the best condition. This would require a large amount of investment on the machines and land,and more human resource to undertaken the production activities, and further generate more overhead cost, which might reduce the efficiency of the scale economy, and lower the profitability of the company.

The current marketing communication strategy of P&G is to emphasis the culture and function of each particular product, therefore the involvement in advertising those variety of products is huge. Although it could delivery the information more precisely to customers, the cost is still an unforgettable measurement refer to the efficiency. 

How to integrate the massive market segments and product mix to save the overhead cost and investment in marketing communication is the top problem of P&G currently.

Conclusion 

The competitive environment in China hair care market

The China hair market along with the development of China economy, has become an important market in the global hair care market, on the market volumes and the market value both. The China hair care market have already well developed, the relationship among customers, retailers and the players are maintained in a balance. Customers rely on the favourite brands, retailers rely on the profitable products, the players segmented the market in all category, and fully covered each market segment, from function, and price level. The power of new entrants and substitutes are small, this ensured the profit for current players in the market. The buyer power, supplier power, and the rivalry power are at average level, that are balance among the buyer, supplier,and the competitors. This industry is already fully shared by the current players, and their market share represented their investment in to the industry. The development of this industry will continue keep in steady in the next following years, unless a revolution on this industry would break the current balance in the market.#p#分頁標題#e#

How P&G segment the market to supply specific target with differentiated products

P&G introduced five different brand in the market, Pantene, Head& Shoulders, Rejoice, VS and Clairol, each brand contain sub segmented product to meet all different need among customers. Each brand and product have its particular culture and function beside the high quality factors. This enabled the profitability of P&G and become the main reason of P&G to be success. All customer with different need, and special requirement, should be able to get the product which could fully meet their need. The particular culture contained in the products make them different with other competitors and other brands, customers without particular need could also choose the products with a particular culture which fit their taste.

How P&G do the marketing commuincation

P&G have a good product differentiation strategy and its marketing communication is also very important. It helps them a lot. The main method of communication with customers is advertisement, sales promotion. The huge investment in advertising ensured the frequency of P&G product been referred, and delivered the information about the culture and function of the product accurately to customers on time. Although the sales promotion is not frequently applied by P&G ,it still stimulated the demand of customer to the target products in short period. Because there is such a powerful marketing communications, in order for the majority of P & G people to discover and understand a variety of new products.

What is the performance of P&G current marketing segment

The current marketing segmentation of P&G performed well. From the questionnaire, we found that most customer would choose the product which fit their need best. The current variety product and brand mix fully covered the target market for male and female customer between 20-40 years old. Some customers out of the targeted market are also choose their products. More than 50% people will choose the P&G. It means brand loyal. From the Question 1 we can find female are more than male like choose the hair care product, so the P&G develop the many woman products, it is a right decision. And from the Question 10, we can find most of the people like go to the supermarket to buy the hair care product, and we can find, in there everywhere we can find the P&G’s advertisement. So this is a good marketing strategy, and we also can find it is a perfect sales channel. The micro segment with differentiation product build up a strong relationship between the product and customers, most of the P&G customers are loyal. 

What is the potential risk and weakness for current segment

The segment is too specific, and a little overlapped. This required a large amount of capital to support the operation, and the separate advertising strategy would cost more to deliver the information of each particular product to the targeted customers. The health  and environment protection factors are other threat to this variety segment strategy. This industry make profit based on the scale economy, with variety segment and differentiated product, that require more material used in package and manufacturing, as the characteristic of chemical industry, the massive of usage of material certainly would harm the environment, and contain the harmful elements. #p#分頁標題#e#