Marketing-Driven Strategy to Make Extraordinary Money

This chapter is from the book

Marketing That Works: How Entrepreneurial Marketing Can Add Sustainable Value to Any Sized Company, 2nd Edition

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This chapter is from the book

This chapter is from the book 

Marketing That Works: How Entrepreneurial Marketing Can Add Sustainable Value to Any Sized Company, 2nd Edition

Learn More Buy

Positioning, Names, and Slogans

Many entrepreneurs miss positioning opportunities when they name their products, services, and companies. As we discuss in-depth later, entrepreneurs have limited marketing funds to educate their target markets about the positioning of their products and services. If the names chosen do not themselves connote the appropriate positioning, then entrepreneurs have to spend more funds to educate the market in two ways instead of one. They not only have to get potential customers to recognize and remember their product name, but they must also educate them about the differentiating attributes and benefits of the product that goes with the name. The Please Touch Museum in Philadelphia is a perfect example. Its name tells parents and their children exactly what they can expect. Many new technology and Internet-based ventures have also been very intelligent and creative in their names to connote the appropriate positioning. Companies such as diapers.com (“the best deal on diapers”), Netflix (movie rentals and streaming via the Internet), Salesforce.com (the #1 customer relationship management [CRM] company), and SnapChat (visual conversations) made it easy for potential customers to remember what they do and at least part of their positioning. Although diapers.com may limit customer perception of offerings and allows for minimal expansion beyond diapers, the Netflix name allowed the company to expand from ordering DVDs online and receiving them via the U.S. Postal Service to streaming rental movies and even original content. All of these services clearly connect to the name of the company. On the other hand, all you know just from the Amazon.com name is that it is an Internet company. The fact that it sells a multitude of products via online retail, develops and sells its own consumer electronics, and even offers Internet infrastructure services is not evident from its name. The education of the market needs to be done with other marketing activities.

Some fortunate companies have gone even further by making their names not only support their positioning, but also simultaneously let their potential customers know how to get in touch with them. Examples would be 1-800-FLOWERS, 1-800-DIAPERS, and 1-800-MATTRESS as well as diapers.com and Amazon.com.

Other companies gain leverage by having their product names and company names be the same. Do you know which Fortune 1000 company was named Relational Software? Relational Software’s product was named Oracle. To improve market awareness, the company changed their name to Oracle, the name of their popular product. Oracle has become one of the top database software companies in the world. However, the gain in awareness has been a hindrance in diversifying. Oracle is known for its database but, despite large investments and marketing activities, Oracle has been relatively unsuccessful in selling their own application software. Oracle is not perceived as a strong applications software company. Oracle = database.

If the name of the company or product is not enough to position it in the customer’s mind, then the next need is for a slogan or byline that succinctly (and hopefully memorably) hammers home the positioning. If the positioning has been done well, then a slogan or byline can in many cases fairly completely communicate the appropriate attributes. One good example is FedEx: “When it absolutely, positively has to get there overnight.” The positioning inherent in this byline is a good example of concentrating on only the few, most important attributes to stress in order to position the company. Visa has been using “It’s everywhere you want to be” for many years to differentiate itself as a ubiquitous charge card, accepted around the world. On the other hand, Michelin uses “Because so much is riding on your tires” to try to differentiate itself as better on the safety attribute for tire buyers.

Just as brevity and simplicity are valuable in positioning, they are also as valuable in slogans and bylines. The slogan that goes with a company or product name should be one that can be retained for quite a long time, as long as the positioning will be in force. Robert Keidel proposed other ground rules for effective slogans:⁸ Avoid clichés, such as “genuine” Chevrolet, Miller, and so on; be consistent; use numbers, but have them backed up; be brief; take a stand; and make it distinctively your own. All of these rules are consistent with our effective positioning paradigm and make good sense.

Hindustan Unilever Limited (formerly Hindustan Lever Limited—HLL) represents an interesting example that illustrates many of the points discussed in this chapter.

Hindustan Unilever Limited: Positioning and Targeting to the Bottom of the Global Pyramid

The positioning should be made like any effective management decision. Develop criteria, generate many decision options (including creative, “out of the box” options), and then evaluate the options on those criteria. The implicit criteria for evaluating positioning decisions are typically related to the long-term and short-term impact on the entity’s shareholder value. However, there are also many constraints that may limit the options, such as ethical issues, environmental issues, legal issues, corporate values and culture, and so on. The Hindustan Unilever Limited (HUL) example also illustrates how the positioning decision is deeply intertwined with decisions on how to promote, distribute, and sell the products. C.K. Prahalad in his valuable book, The Fortune at the Bottom of the Pyramid, documents the need for the new positioning and how HUL responded to that need with innovative product positioning and marketing mix strategy.

HUL is the largest detergent manufacturer in India, with $2.4 billion in sales in 2001, 40% from soaps and detergents.⁹ One constraint that exists on their positioning options is their corporate mission:

• Our purpose at HUL is to meet the everyday needs of people everywhere—to anticipate the aspirations of our consumers and customers and to respond creatively and competitively with branded products and services, which raise the quality of life.
• Our deep roots in local cultures and markets around the world are our unparalleled inheritance and the foundation for our future growth. We will bring our wealth of knowledge and international expertise to the service of local customers.

In their history from 1990 to 2000, HUL had targeted the mass market in India. They developed some distinct competencies that should provide sustainable competitive advantage versus their competition. Products are manufactured in about 100 locations around India and distributed via depots to almost 7,500 distribution centers. HUL reaches all villages with at least 2,000 people. It has a number of innovative programs to involve the rural women in selling and servicing their products.¹⁰ It is difficult for their competition to reach the rural population because of the costs of building the infrastructure and developing products that are appropriate for the rural market.

One of their competencies that they continue to leverage is their ability to introduce and profitably market products that the poorer parts of the society are willing to pay for. Instead of looking at costs first, they look at what the people are willing to pay. This willingness to pay is determined by the perceived value of the product by the potential customers. According to HUL Chairman Manvinder Singh Banga:

• Lifebuoy is priced to be affordable to the masses... Very often in business you find that people do cost-plus pricing. They figure out what their cost is and then they add a margin and figure that’s their selling price. What we have learned is that when you deal with mass markets, you can’t work like that. You have to start by saying I’m going to offer this benefit, let’s say it’s germ kill. Let’s say it’s Lifebuoy. You have to work out what people are going to pay. That’s my price. Now what’s my target margin? And that gives you your target cost—or a challenge cost. Then you have to deliver a business model that delivers that challenge cost.¹¹

Why did HUL decide to use the “germ kill” positioning? They saw a way to fulfill an important unfulfilled need of many consumers. However, they had a number of interacting issues and stakeholders to deal with in order to make the positioning and associated targeting work.

The Unmet Need

Globally, in terms of infectious diseases, only acute respiratory infections and AIDS kill more people than diarrhea, which kills 2.2 million people annually. In India, 19.2% of the children suffer from diarrhea, and India accounts for 30% of all the diarrhea deaths in the world.¹² The solution for this problem is very simple and well known. Washing hands with soap reduced the incidence of diarrhea by 42% to 48% in a number of well-documented research studies.¹³ In 2000, the solution was not being used by the masses in India. Only 14% of the mass rural population was using soap and water after defecating and before and after every meal. Sixty-two percent used water plus ash or mud, and 14% used water alone.¹⁴

There have been a number of attempts to solve this problem globally, but without a lot of success. In India and other developing countries, the problem was seen as too large and costly for a big public health initiative. Additionally, the solution needed to be coordinated among three different government departments—Public Health, Water, and Environment—a daunting task. Because other diseases such as AIDS got most popular attention, there wasn’t a champion for diarrhea. Lastly, behavioral change in the diarrhea area is difficult to design and implement. In 2000, HUL was a participant in a public-private partnership for encouraging hand washing. It was a consortium of communities, government, academia, and the private sector and was targeting a pilot in the Indian state of Kerala. However, controversy around the consortium’s mission from various community groups hampered its implementation in 2002.

HUL had a long history of marketing 107-year-old Lifebuoy, with a bright red color and a crisp carbolic smell, as “healthy clean.” Since the 1960s, they marketed the product using a sports idiom to illustrate healthy clean. Their target market was the Indian male, 18 to 45 years old, with a median income of approximately $47 per month, a semiliterate farmer or construction worker living in a town of 100,000 or less.¹⁵ However, by the late 1980s, competition had also copied the positioning so that health became perceived as the base level of cleaning, and Lifebuoy was not as differentiated. By 2000, in the developed, higher income areas of India (and the world, for that matter), the soap market was saturated and very competitive. Proctor & Gamble and Colgate were world-class competitors for the relatively affluent consumer all over the globe.

Because of this phenomenon, Unilever, the two-thirds majority owner of HUL, as a whole was expecting developing markets to account for approximately 50% of their sales over the next ten years.¹⁶

If HUL did not have the sales and distribution channels available to deliver the newly positioned Lifebuoy profitably at the price the market dictated, it would not be a good or even feasible strategy. The sales and distribution channel is a unique public/private mix of microcredit lending and rural entrepreneurship that began in 1999. HUL noticed that dozens of agencies were lending microcredit funds to poor women all over India. HUL approached the Andra Pradesh state government in 2000 and asked for clients of a state-run microlending program. The government agreed to a small pilot program that quickly grew. The initiative, now called Project Shakti (strength), has expanded to 12 states, and CARE India, which oversees one of the subcontinent’s biggest microcredit programs, has joined with HUL.¹⁷

The Wall Street Journal illustrates the power of this channel by describing the activities and attitudes of one independent microcredit entrepreneur associated with HUL—Mrs. Nandyala:

• When one of Mrs. Nandyala’s neighbors, who used a knock-off soap called Lifebuoy that comes in the same red packaging as Unilever’s Lifebuoy brand, balked at paying an extra rupee (about two U.S. cents) for the real thing, Mrs. Nandyala gave her a free bar to try. A skin rash caused by the fake soap cleared up after a few days, and the neighbor converted to Lifebuoy.
• When another neighbor asked why she should pay more for Unilever’s Wheel detergent than a locally made bar of laundry soap, Mrs. Nandyala asked her to bring a bucket and water and some dirty clothes. “I washed the clothes right in front of her to show her how it worked,” she says.
• Project Shakti women aren’t Hindustan Lever employees. But the company helps train them and provides local marketing support. In Chervaunnaram, a Hindustan Unilever employee who visits every few months demonstrates before a gathering of 100 people how soap cleans hands better than water alone. Dressed in a hospital-style smock, she rubs two volunteers’ hands with white powder, then asks one to wash it off with water alone and the other to use soap. She shines a purple ultraviolet light on their hands, highlighting the specks of white that remained on the woman who skipped the soap. As the crowd chatters, the Hindustan Unilever worker pulls Mrs. Nandyala to the front of the hall, and tells the crowd she has got plenty of soap to sell.
• Mrs. Nandyala wasn’t always comfortable with her new, public role. She first applied for a microloan from a government-run agency to buy fertilizer and new tools for her family’s small lentil farm four years ago. In 2003, the agency introduced her to a Hindustan Lever sales director from a nearby town. She took out another $200 loan to buy sachets of soap, toothpaste, and shampoo—but was too shy to peddle them door to door. So a regional Hindustan Lever sales director accompanied Mrs. Nandyala and demonstrated how to pitch the products.
• Mrs. Nandyala has repaid her start-up microloan and hasn’t needed to take another one. Today, she sells regularly to about 50 homes, and even serves as a mini-wholesaler, stocking tiny shops in outlying villages a short bus ride from her own. She sells about $230 of goods each month, earning about $15 in profit. The rest is used to restock products.¹⁸

In 2005, 13,000 entrepreneurs like Mrs. Nandyala were selling Unilever’s products in 50,000 villages in India’s 12 states.¹⁹

An important reason for the success of this integrated marketing strategy for rural India is the consistency of goals between the private entity (HUL), the government entities, and the NGOs (for example, CARE). Because the Lifebuoy product is positioned and targeted for the socially desirable improved health goal, the other entities are happy to cooperate with HUL. This targeting and positioning is strategically very valuable for HUL. As C.K. Prahalad states:

• Differentiating soap products on the platform of health takes advantage of an opening in the competitive landscape for soap. Providing affordable health soap to the poor achieves product differentiation for a mass-market soap and taps into an opportunity for growth through increased usage. In India, soap is perceived as a beauty product, rather than a preventative health measure. Also, many consumers believe a visual clean is a safe clean, and either don’t use soap to wash their hands, use soap infrequently, or use cheaper substitution products that they believe deliver the same benefits. HUL, through its innovative communication campaigns, has been able to link the use of soap to a promise of health as a means of creating behavioral change, and thus has increased sales of its low-cost, mass-market soap. Health is a valuable commodity for the poor and to HUL. By associating Lifebuoy’s increased usage with health, HUL can build new habits involving its brand and build loyalty from a group of customers new to the category. A health benefit also creates a higher perceived value for money, increasing a customer’s willingness to pay. By raising consumers’ level of understanding about illness prevention, HUL is participating in a program that will have a meaningful impact on the Indian population’s well-being and fulfill its corporate purpose to “raise the quality of life.²⁰

It is clear that this integrated positioning, targeting, and marketing sales and distribution strategy delivered sustainable competitive advantage for HUL. However, there is one area in which we feel that HUL could have improved the productivity of the whole process—with their newly developed communication channels.

HUL worked with Ogilvy and Mather to develop teams that would visit the villages—targeting the 10,000 villages in nine states where HUL stood to gain the most market share, as well as educate the most needy communities. They spent a lot of effort in designing low-cost ways of communicating with their rural target. HUL grew to 127 two-person teams in 2003 and estimates that the program is reaching 30% to 40% of the rural population in targeted states.²¹ Each team went through a four-stage communications plan. Stage 1 is a school and village presentation using an interactive flip chart. At the end of the day, they assign school teachers to work with the students to develop skits and presentations for their next visit in two to three months. Stage 2 is a Lifebuoy village health day, which includes the skits and a health camp in which the village doctor measures height and weight to give “healthy child” awards to those who fall within healthy norms. Stage 3 is a diarrhea management workshop geared toward pregnant women and young mothers who might not be reached by the first two stages. Stage 4 is the formation of the Lifebuoy health club that includes activities on hygiene and keeping the village clean. The two-person team will return four to six more times to run health club activities.

As discussed in more detail in Chapter 6, “Advertising to Build Awareness and Reinforce Messaging,” there is a big opportunity for improving productivity of advertising and, in this case, other communications methods, by applying adaptive experimentation. In the HUL case, they assumed that the Ogilvy and Mather-generated communication plan was the best that could be generated, and they rolled it out. However, given that each village or state could be an experimental unit, and given that some other way of efficiently communicating with the targeted rural villagers could have been more effective, there was an opportunity cost of not developing and trying and measuring the impact of other communications methods in different villages as they rolled out the program. Chapter 6 goes into more detail on how this might have been done.