Consumer behavior case study 7

 ASSIGNMENT

Week 7 Case

Please Follow the example case and complete the following case study.  Please note that all sections must be complete.  The key issues section is critical.  Look for the terms and concepts that we have learned and apply them to the case.  Do not define the key issues.  What in the case makes them the key issue? 

Grading Rubric:

  1. Case Summary 2 points
  2. Key issues 10 points
  3. Personal Analysis 3 points
  4. Case Questions 9 points
  5. Conclusion 2 points

CASE STUDY

SUCCESS AT THE BOTTOM OF THE PYRAMID? P&G’S GILLETTE GUARD SHOWS IT’S POSSIBLE

Consumer behavior is influenced by internal and external factors. One of the external factors that sets real boundaries for consumers is their level of income. Some marketers refer to strategies directed at different income tiers as targeting certain levels of a pyramid. Marketing to the “bottom of the pyramid,” focusing on consumers with very limited financial means, ­became well-known in 2004 when C. K. Prahalad wrote The Fortune at the Bottom of the Pyramid. He envisioned companies marketing affordable products to the millions of consumers around the world with limited income and unmet needs. He believed that companies could help consumers and be profitable at the same time.

A number of companies have attempted to make this model work. Puriet, an in-home water purification system manufactured by Hindustan Unilever Limited, was developed for low-income consumers and has found success by offering a 6-month installment plan to make the $25 price more manageable. The Nokia 105, introduced by Microsoft, is a $25 basic cell phone with an alarm clock, flashlight, and FM radio. It was priced specifically for low-income consumers and has sold millions of phones since its introduction in 2013.

However bottom of the pyramid strategies are not always as workable as companies would have imagined. The Nokia 5 has struggled to be financially sustainable and has faced challenges as low-income consumers gravitate toward smart phones that are decreasing in cost. Other companies missed the mark because of a lack of research, discovering in the end that consumers could not afford their product or could opt for a cheaper, more local offering. Some companies have been pushed by investors to show profitability in the short-term with their low-income market initiatives, which has been difficult to accomplish. In some instances the only way to make their business model work over the long term is to partner with a nongovernmental organization (NGO) which could help them to gain access to consumers through their established connections within countries.

Let’s consider the possibilities in India, a country with considerable bottom of the pyramid potential. World Bank 2013 data show India’s population at 1.24 billion people and per ­capita income at $125 a month. The McKinsey Global Institute estimates that 78 percent of the that population fall into the bottom of the pyramid category, with the majority living in ­rural India. They predict that this market may be worth $1.5 trillion by 2020. The sheer numbers of consumers and the overall ­potential make this market appealing to marketers, but still the low level of income poses considerable challenges.

For years Procter & Gamble (P&G) has worked to find ways to capture market share of the men’s razor market in India. They felt that there was a significant opportunity to meet the shaving needs of Indian men at the bottom of the pyramid. Unfortunately, early efforts, like their Vector razor, were undermined by a misunderstanding of the shaving process for men in India, many of whom did not have access to running water. More recently, P&G introduced the Gillette Guard. This razor was developed based on 3,000 hours of research over 18 months, some of it conducted in the homes of low-income Indian men. They asked the men about their shaving rituals and observed them in the process of shaving. What P&G found is that they typically shave on the floors of their huts with no electricity, using a bowl of water and no mirror. Their primary objective is to avoid cutting themselves. This research proved to be invaluable in the development of the new razor.

The Gillette Guard was the result of what Alberto Carvalho, vice president, global Gillette, described as a focus on not only producing a razor that would meet the needs of these consumers, but doing it at “ruthless cost.” This meant paying attention to the smallest details, designing a stripped down single blade razor with only four components versus the 25 found in more sophisticated razors. Jim Keighley, associate director for product engineering, says “I can remember talking about changes to this product that were worth a thousandth, or two thousandths of a cent.” In the end they were able to produce a razor that cost one third of the previously introduced Vector. Selling price for the Gillette Guard ended up at 15 rupees (34 cents) and razor blades at 5 rupees (12 cents).

DISCUSSION QUESTIONS

  1. CS 12-1Using the “4A’s” framework in Figure 12.1, analyze the considerations that went into the development of the Gillette Guard razor for the Indian market.
  2. CS 12-2Are companies targeting the bottom of the pyramid taking advantage of vulnerable consumers with limited resources?
  3. CS 12-3More than half of U.S. workers earn less than $30,000 a year, barely above the poverty line for a family of five. What would you recommend to a company looking to target the bottom of the pyramid consumers in the United States?

Please follow this guideline:

 

WEEKLY CASE INSTRUCTIONS

This assignment is due by midnight on Sunday, at the end of each week. No late assignments will be accepted without advance permission from the instructor.

On every case assignment you must meet the minimum standards for depth and organization. Any case analysis that is under 500 words (not counting title and references) will receive a zero. Each case also must have a minimum of 3 outside references, not counting the textbook.

Below is a Sample Case Analysis.  This sample gives you a clear example of how the required case analysis format should be delivered. Follow this format in your analysis.

Do not use the Key Marketing Issues used in the sample case. Each case will have its own set of Key Marketing Issues which you will choose based on the details of the case content and the class reading. Follow this format on all 8 case analyzes.

Sample Case Assignment Analysis Format

MRKT 5000 Online Course

(Instructional notes in red)

(Your name here)

Can Pepsi make Pepsi One the One? (This is a case from a previous edition of the Marketing text – not currently in your text book. This is only a sample analysis to demonstrate analysis format only)

CASE SUMMARY:

Pepsi One is an innovative product launched in the market by PepsiCo to keep the image of innovation, fast movement, and competitiveness.  The case includes the steps of a new-product development process.  Emphasizing the launch of the product and the ways that Pepsi One is getting more familiar to the target market.   Pepsi One is becoming a successful product by getting more market share from the main competitor Coca-Cola.

(Each case to be analyzed will be read from the text, with specific questions assigned)

KEY MARKETING ISSUES

  • Line extension – Development of a product that is closely related to existing products in the line but meets different customer needs.  Pepsi One is a product that tries to differentiate itself from the normal diet products, to reach different target markets.

.

  • Product modification – Change in one or more characteristics of a product. Pepsi changed the sweetener to acesulfane potassium (ace K) to create the Pepsi One.
  • Aesthetic modification – Changes to the sensory appeal of a product.   Pepsi tried to appeal as a not a new diet drink but a new way of tasting a soda.
  • New-product development process – A seven-phase process for introducing products: Idea generation, Screening, Concept testing, Business analysis, Product development, Test marketing, Commercialization.  The PepsiCo performed all phases of new-product development in order to ensure the product would succeed in the market.
  • Product differentiation – Creating and designing products so that customers perceive them as different from competing products.  Pepsi One tries to differentiate itself being the only low calorie drinks that taste exactly as a regular drink (Pepsi).
  • Product design – How a product is conceived, planned, and produced. 
  • Styling – The physical appearance of a product.   Pepsi One omits the word “diet” and even the word Pepsi, is secondary to the thick, black lettering of the word “One”.
  • Product positioning – Creating and maintaining a certain concept of a product in customers’ minds.  Through advertising the company tried to keep the idea of the product in customer’s minds.

(These are the issues in this particular case – each case will have a different set of Key Issues)

Personal Case Analysis

I learned that Pepsi One was a product created by a modification of an existent product “Pepsi Diet”.  The product modification was the sweetener used.   A new taste of cola was added to the appeal for a low calorie soft drink.  By trying to differentiate Pepsi One from a classic Diet product, PepsiCo shows its innovative style and gain market share from Coca-Cola.

CASE QUESTIONS

1-    Is Pepsi One a new product, a modified product, or a line extension?  Explain your answer.

Pepsi One is a new product, line extension and a modified product.  Pepsi changed the sweetener to acesulfane potassium (ace K) to create the Pepsi One and tried to be unique by being a low calorie soft drink, which tastes a regular soft drink.

2-    In what way is Pepsi One positioned?

Pepsi One was positioned by including characteristics that target market most desires.  Understanding the diet aspect of Pepsi One helped attract an unusual market segment for a diet drink:  cola-loving males in their 20s and 30s. The product is not made to compete head to head with Diet Pepsi.

3-    Over the years, PepsiCo has had a number of product failures.  Evaluate PepsiCo management’s decision to introduce Pepsi One?

PepsiCo was launched just after test indicated consumers liked its taste as much as its creators did.  In extensive home-use tests, almost 70 percent of Pepsi One tasters reported they would purchase the product again.  To differentiate Pepsi One from the horde of diet soft drinks, PepsiCo focused on the product’s taste, which is almost indistinguishable from the taste of sugared soft drinks.

CONCLUSIONS

The company that wants to be competitive needs to be innovative and always introduce new products in the market.  PepsiCo used line extension of its Diet products to create Pepsi One.  Pepsi One is a product modification as well, which was consisted of in changing the sweetener to acesulfane potassium (ace K).  This aesthetic modification provided the product differentiation that appealed to customers as product with low calorie that tastes as a regular soft drink.  The different product design that included change on the styling never seen before, helped to position the product among the cola-loving males in there 20s and 30s.  By being innovative Pepsi One is guaranteeing its position on the soft drinks market, taking some market share from its big rival “Coca-cola.”

Works Cited

(Each analysis must include a minimum of three outside references, not counting the text or references from the case subject directly)

Bramhall, Joe, “Pepsi Inc”, Hoovers, http://www.hoovers.com/xm-holdings/–ID_60656–/free-co-factsheet.xhtml

“Choosing a soft drink”, Soda pop.com Click & Learn:  http://www.pepsicity.com/rpsm/edOid/105548/rpem/ccd/lookLearn.do

Deitz, Corey, “Learn the Difference to Make the Best Choice For Yourself”, Your Guide to softdrinks, December 29, 2005, Pepsi and Coke Comparison Chart 

http://pop.about.com/od/satelliteradio/a/blsatcomparecht.htm

Company Profile, “Pepsi, Inc”, February 10, 2006, NAMC Newswire, http://www.newswire.com/companyprofiles/xmsr.html

Insight from Standard & Poor’s, S&P Boosts Pepsi to Strong Buy, BusinessWeek online, February 9, 2006, http://www.businessweek.com/investor/content/feb2006/pi20060209_35961.htm?chan=tc

(Make sure your name is at the top of the paper)

(Remember that any paper with less the 500 words of content – not counting the words from the questions and references – will receive a zero)

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