Strategic Marketing of Renova Company - Business Plan Example

STRATEGIC MARKETING Contents Part A 3 Evaluation of strategic directions 3 Increased price competition 4 Private label manufacturing 5 Continued technological innovations 6 Launch of the black toilet paper as a PR coup 7 Launch of the black toilet paper as a line extension 8 Implications of the chosen option for Renova’s existing product portfolio 9 Part B 10 Marketing plan for strategic option 10 References 17 Part A Evaluation of strategic directions Renova is a company which produces and markets paper consumption products. It is one of the most well-known Portuguese brands in the paper products industry. The main products of Renova include tissues for domestic and sanitary use. The company manufactures a number of paper products including kitchen rolls, toilet paper, wet wipes, female hygienic products, writing paper, printing paper, make up removing tissues, paper handkerchiefs, facial tissues, napkins are other types of tissue products which find multiple uses in domestic and sanitary functions. The products of Renova are popular not only in the home country but also in a number of markets across the globe including United Kingdom, the United States of America, Spain, Belgium, Japan and France. Presently, the company has launched a new range of toilet papers known as the black toilet paper. The black toilet paper is an innovation in the tissue industry which is an industry experiencing sluggish growth and very less innovation. Paulo Pereira da Silva, the CEO of Renova has launched the black toilet paper as an innovative product of the company with the expectation that the black toilet paper will emerge as a mainstream product for the company, especially because the toilet paper products account for 50% of the product portfolio of Renova (Figure 1). Presently, there are five main strategic directions that are currently being considered by Paulo Pereira da Silva for launching the product. The company has to opt for the most suitable strategic direction for marketing and positioning the product among the consumers. Each of the directions are evaluated and analyzed in the following section, to choose one strategic direction for the marketing of the black toilet paper product. Figure 1: Product Portfolio of Renova Increased price competition The black toilet paper belongs to the category of expensive toilet papers. The product is an innovative product which uses expensive raw material and manufacturing technology. Since the competition in this market is very high, Renova will face much difficulty if it tries to opt for a premium pricing while launching the black toilet paper. The market share of Renova in the western European tissue industry was low in 2005 at around 1% and the company also faces huge competition from well established companies like Procter & Gamble, Kimberley-Clark, Georgia Pacific, and Svenska Cellulosa Aktiebolgat (SCA) etc. (Seabra de Sousa, 2009). Also, the main customers of Renova are the indirect competitors of Renova as well. These include major retail companies like Carrefour, Tesco and Lidl. In this situation, Renova has should ideally use a penetrative pricing scheme rather than a premium pricing scheme. However, it would not be possible for the company to set very low prices for the product because of the high costs of production of the black toilet paper. Therefore, Renova should market the black toilet paper at a medium range price. Lowering the prices to a high extent may affect the profitability of Renova because the cost of manufacturing this differentiated product will always remain high. Also, it is very difficult to set the prices lower than that offered by other private labels because the competiveness in this industry is very high and the competitors of Renova are million dollar companies with more control over the pricing aspects. Therefore a low pricing strategy would not be a suitable choice for marketing the black toilet paper. Private label manufacturing The second option that the CEO of Renova has is to enter into partnerships with the existing retail companies and produce the private label brands for selling the black toilet paper. While there may be few advantages associated with partnering with the retail companies, there are many disadvantages associated with this strategic option. The main advantage of the partnerships with retail companies to market this product is that the visibility of the product would be high in the shelves of the retail stores because the product would be marketed as a private label or in-house product of the retail companies. Product awareness and product visibility can be easily propagated in this scheme. But there can be multiple drawbacks of the implementation of this strategic option. Firstly, the partnership with the retail companies would incur high expenses. Secondly, the control of the business over this particular product would be diluted to a high extent because the main medium of sale would be the retail stores (Freeman, 2010). This would mean that the profits would have to be shared with the retail companies while there would be almost no scope to share the manufacturing cost of the black toilet paper. The retail stores are influential entities in the customer commodity market. So, marketing the product in partnership with the retail companies would mean placing more control regarding the marketing decisions on the hands of the retailers. The partnership with the retailers may mean shadowing the brand name of Renova related to the black toilet paper product and may also reduce the profitability of the company for this product in the long term. As such, the strategic direction of partnering with retail companies and selling the product as a private label product does not seem feasible from the control and profitability points of view for Renova. Continued technological innovations The third strategic option available for Renova is to differentiate the black toilet paper with the help of continued innovations either by improving the existing features and functionalities or by introducing additional features and functionalities. To go in this strategic direction, Renova has to invest highly in functional innovations and technology. But, the scopes of differentiation seem to be very les in this industry. Already the tissue paper industry is a low growth industry in which people buy the product as a necessary commodity rather than as a luxury item. Some differentiated products have been launched by competing companies based on factors like feel, quality, odor, design etc. But, it can be identified that the innovation of the black toilet paper is a major shift in itself from the regular toilet paper products. Therefore, adding more features to this product would require much more investments in the research and development domain and may not create results at the end because of the limited scopes of differentiation. The significant factors that affect the buying decisions of consumers for toilet papers are quality, hygiene and health concerns while factors like luxury feel, decorations and price are much less influential factors in the purchase decision making process. Moreover, many significant functional innovations in the tissue industry have failed within a short period of time from their introduction in the market. For example, The Corronelle Fresh Roll Wipes launched by Kimberley-Clark was a product driven by exceptional functional innovation. The product contained a combo of dry toilet paper and wet wipes and was launched with the perception that consumers will prefer to have both types of products in one single package. However, in reality the product was a failure due to a number of causes like poor communication and delayed shipments. Thus, the strategic option of differentiation through innovation is identified to be an unsuitable strategic choice for the positioning of this product because of two main reasons. The first reason is that there are limited scopes of differentiation and functional innovation in this industry. The second reason is that functional innovation and differentiation alone cannot guarantee the success of a product in the tissue industry. Launch of the black toilet paper as a PR coup Another strategic direction that can be followed by Renova to market the black toilet paper product is to launch this product as a limited public relations coup. Using a public relation coup would mean that the company would promote the new product through effective market communications designed to make a niche segment of customers aware of the new product and make them attracted to it. The use of public relations as a medium for creating product awareness among customers may be successful to a certain extent in case the target costumer segment of the company is small. But, if the target customer group for the black toilet paper is small, it would mean low profitability for the company from the sale of this product. Since, the black toilet paper is a differentiated product in an industry which is driven more by need than by luxury, therefore, engaging in public relations activities as the main medium to create brand awareness would limit the salability of the product. The public relations coup is more useful when the company aims to target a limited number of potential customers. In case of Renova, marketing the black toilet papers to a small number of customers may lead to loss from the sale of this product because already the production cost of the product is high and the price is to be kept at medium range to ensure competitiveness. In this situation, if the sale volumes are also low due to a smaller number of buyers, then this would have serious implications for the revenue generation and sales turnover of the company which may affect the profitability and continuity of the product in the long term. Launch of the black toilet paper as a line extension Another strategic direction that can be considered by Renova is to launch the black toilet paper products as a new full-fledged product line extension. Line extension is significantly different from brand extension. In line extension the category of products remain same while in brand extension, the company diversifies into a number of new product categories as a part of its expansion and growth activity. Line extension is a strategic option for consideration by Renova in launching the new differentiated product in the market. An emerging need for a differentiated product in the tissue industry can be noticed in recent years which Renova can capture by introducing the black toilet paper in the industry at a suitable time and with appropriate product deliverables. There may be many advantages associated with this strategic choice. Firstly, the launch of the product as a line extension product would be an expansionary move on the part of the company. It would help to increase the visibility of the product and sale the product to a broader group of customers. Also, when the company would introduce the product as a new line extension, it would be ready to embark on suitable promotional and marketing strategies which would enhance the awareness of the consumers regarding the product and also place the product in a profitable position within the market (Kim and Mauborgne, 2004). Line extension is a significant strategy, particularly in case of consumer commodities. Since, the black toilet paper is a consumer commodity good; therefore, it would be advisable for Renova to follow this strategic direction in promoting and positioning the new product in the market. Implications of the chosen option for Renova’s existing product portfolio The strategic option of introducing the black toilet paper product as a full-fledged line extension of the brand would have several implications for the existing profit portfolio of the company. The toilet paper products of Renova are the most significant components of the whole product portfolio of Renova. The introduction of the new product in the toilet paper product category is likely to shift the focus of the company towards the toilet paper product category. The black toilet paper would be launched as an innovative and differentiated product in the market. Also, it is a new concept in the tissue industry which has not been launched by any of the competitors of Renova. Therefore, the company would ideally focus on positioning the black toilet paper as a high revenue and profit generating product of the company. Another dimension of the launch of the black toilet paper as a full-fledged product line extension is that the introduction of a new product for category extension would mean that the company has to invest a high level of resources for promoting the new product which will also promote the brand as a whole (Ireland, Hoskisson and Hitt, 2010). The popularity of the black toilet paper would automatically add to the popularity of the brand. The customers would be more aware of the brand name and would be willing to try out products from other product lines of the company as well. Therefore, the chosen strategy is likely to add value to the market position of the new product as well as the existing products of Renova. Part B Marketing plan for strategic option Renova brand was incorporated in the year 1818 and since then this brand has been focused towards becoming a well being brand rather than being identified as a disposable paper brand. In the highly competitive market with strong players such as Proctor & Gamble, Kimberly-Clark, Johnson-Johnson and many other private labels located across Portugal, Spain, France and many other European countries it is essential for Renova to reposition its brand identity. This can be achieved through various strategies but the most appropriate strategy which can be chosen by the company is to launch black toilet paper as fully fledged product line. Product line of the company needs to be modified as to achieve differentiation in the market place. It can also be stated that this new strategy would help the company to attract lost market share. Apart from setting up a new strategy it is important that well structured marketing plan is designed which would enable Renova to achieve the set target. Marketing plan would be initiated through formulating STP or segmentation, targeting and positioning. This will be done on the new product to be launched by the company. Black toilet paper was initially launched by many companies but most of them failed because of improper positioning of the product. However, for this company the best suitable method would be to analyze the trend of consumer market demand towards their existing product line. This would help the company to target those consumers who are brand loyal. The selection of specific market segment is essential when a new product is launched under the same brand name. For Renova maximum percentage of their revenue are contributed by sales of toilet paper. In this context it is important for the company to sustain its existing market share and uphold the new product in such a fashion that it proves to be appealing for the target market. As per segmentation, the market segment for the black toilet paper of Renova would be large group of consumer market belonging to middle and upper class segment. This would comprise of customers belonging to any region where the brand is already operating. Targeting as per STP framework is basically done on the market segment chosen by a company. The target market for Renova would be young aged and middle aged customers who are belonging to middle class as well as upper class income group. This target market would encompass both males and females and would specifically focus on those customers who are not price conscious and more inclined towards quality and hygiene. The other most important factor in framing a marketing plan is positioning of the product to be launched. In case of Renova, black toilet paper would be positioned as an environmentally friendly tissue paper that enhances hygiene in the lives of customers (Cheverton, 2005). This positioning statement would discard the fear from the minds of customers that colored tissue causes harm to environment as well as on human skin. Price would not be encompassed in the product positioning as the major factors to be highlighted are high quality and hygiene. Value proposition can be considered to be a promise that is made by a firm in relation to delivering high value to all its customers. It can even be stated as a belief that emerges in an individual regarding product or brand in terms of experiencing value added services. Value proposition is often regarded as a business strategy that is framed by an organization in order to position newly launched products or services or to expand on its market share. Renova needs to consider this factor while adopting the new strategy. This is simply because this factor would enable the firm to compete effectively in the market place and achieve competitive advantage. In an industry that possesses tough competition and low entry barriers for new entrants it becomes essential for an existing company to incorporate differentiation in its system of operations. This in turn helps to acquire more market share and even to create an image which cannot easily be imitated by other players in the industry. In order to create value Renova needs to enhance the level of customer satisfaction as this would facilitate sustainable value creation. Customers need to be given value added features through their new product line. Black toilet paper in itself is an innovative concept but value can be created by adding fragrances and even by making the paper much softer. This would increase the demand in terms of those customers who give quality the first preference. On the other hand in the initial stage the company can even conduct pilot testing of their new product by offering sample to customers so that their reactions can be recorded and efficiently implemented. Value proposition can also be developed for end users by eliminating all the health concerns that are related to colored tissue papers. However quality would be the major tool to create as well as sustain value proposition in relation to customers for long term (Onkvisit and Shaw, 2009). This factor needs to be created even for the retailers who would be keeping stock of the new product being launched by Renova. Retailers have a high bargaining power in this industry this is because there are large numbers of players who have significant market share. They even keep their own labeled products in the retail stores with some top most players in the industry along with few private labels. In such context it is essential to provide value addition to retailers so that the new product of Renova can acquire preferable shelf spaces. This can be achieved through giving retailers considerable profit margins and involving them actively in promotion of black tissue paper. High margins would attract most retailers in the initial phase of product launch which can be later be adjusted by the company as the new product gains significant market presence. Value proposition would even be created in terms of building a strong customer base. As customer satisfaction level is increased towards the new product its demand would increase which would in turn increase value for retailers. On the other hand forming healthy relationship with retailers is also a method of developing value proposition by an organization. In a marketing plan the centre of focus is formulation of 4P’s for a product or service. The 4P’s indicate product, price, place and promotion. All of these four elements are directly related to branding and marketing of an existing product or for a completely new product. These are often termed as marketing mix for product or services. Marketing mix depends on the nature of the product and also on the ultimate goal of a company. Like for instance at times a company designs this marketing mix in such a fashion that it triggers sale while for some this serves as a tool to communicate with end customers. Renova would implement the strategy of launching black toilet paper and its target market would be customers belonging to upper and middle class segment as well as for customers from hospitality industry. This means that the new product would not only be utilized in the form of a household item but would even be a part of toiletries provided in hotels, restaurants, hospitals, etc. Hence the marketing mix needs to be designed in a manner that it serves dual purpose. Product – The main product contents of Renova black toilet paper would be the same as its existing product portfolio. However there needs to be certain modifications so that it seems to be appealing for consumer market. The color of the paper would be changed with some added fragrances. In order to create a unique brand identity, logo of Renova can be engraved in the toilet paper. Apart from this softness should be major area of concern while manufacturing this innovative toilet paper. The length of the tissue paper would remain the same with a slight increase in its breadth. No added colors would be present in the paper as a means of maintaining high quality. The product would be modified in the form of incorporating certain designs in the paper in order to differentiate the new product from the rest available in the market. Packaging is another important component and for this product packaging would be different as per buying behavior of customers. For hotels, and other big customers product packaging would be large comprising of rolled sheets then singular ones. The thickness of package would increase so that these customers can get value for money. On the other hand for household purpose packaging would range from medium to small (Doole and Lowe, 2008). There would also be rolled as well as single pieces of Renova toilet paper. However the package size would decrease as bulk purchases of tissue paper is not observed in consumer market. This form of product features is beneficial in meeting long term as well as short term objectives. In context of short term goal this would enable the company to expand on its market share by providing value for money to its customers. On the contrary in long term perspective this would help to form a strong loyal base of customers and provide required strength to enter into new markets. Price – This factor needs to be set in a manner that is well aligned with the selected target market. Cost plus pricing strategy would be the most appropriate for this new product simply because the target market chosen is not so much price conscious. On the other hand the company even needs to give desirable margins to retailers which can only be done on the basis of high revenue margins (Smith, 2011). Moderate prices would be set for the black toilet paper of Renova. However the company would offer discounts on bulk purchases which is majorly done by the industrial clients. It would even differentiate its prices in terms of product packaging. Like for smaller product package prices would be low in comparison to medium packages. This pricing strategy adopted by Renova would enable the company to meet its short term goals in terms of earning high profit margins and competing in the market place. Oh the other hand it would even facilitate long term goals by maintaining market share and gaining competitive advantage. Promotion- This is a tool for communicating with the customers and conveying message behind the new product to be launched in the market. Promotion constitutes the maximum cost while launching a new product as it is essential to make customers aware about the innovative features present in the product in order to generate sales. The message that would be communicated across the consumer market would be related to hygiene of customers. Its promotional message would comprise of toilet paper being associated with quality and hygiene in lives of people. There would be not much focus given on the prices of the product but its different unique packaging will be highlighted throughout the promotional campaign. The major objective of this campaign would be to spread awareness as well as outline the product differentiation which Renova had tried to create in the intense competitive market. Marketing communication mix that would be used is a combination of print media, digital media and traditional media such as TVs and radio. Extensive promotion needs to be conducted so that awareness is spread strongly to facilitate brand positioning even before the product is launched in the market. Communicating message would remain the same but advertisement campaign would differ in terms of selected media. Social media would highlight the product features and prices, TV commercial would encompass models showing the quality and softness of the toilet paper, campaign on radio and print media would be same as that in social media. However this campaign can be further expanded through sponsoring events, advertising in retail stores, organizing trade shows, etc. Distribution- The product needs to reach conveniently to the consumer market and in order to do so well proved distribution channel is required. Renova would manufacture the product in its own factory outlets which would then be transported using third party logistics to various distributors. These distributors would be divided on regional wise and they in turn would distribute stock to retailers. The retailers would display the product on their outlets and can be easily accessed by customers. The marketing plan which is designed for the black toilet paper of Renova shall enable the firm to capture maximum market share and retain its brand position for long term. References Cheverton, P., 2005. Key Marketing Skills: Strategies, Tools and Techniques for Marketing Success. Great Britain: Kogan Page Publishers. Doole, I., and Lowe, R., 2008. International Marketing Strategy: Analysis, Development and Implementation. Canada: Cengage Learning EMEA. Freeman, R. E., 2010. Strategic Management. London: Cambridge University Press. Ireland, D. R., Hoskisson, R. E. & Hitt, M. A., 2010. Understanding Business Strategy Concepts Plus, 3rd ed. Mason: Cengage Learning. Kim, W. C., & Mauborgne, R., 2004. Blue Ocean Strategy. Harvard Business Review, 1(1), p.81. Onkvisit, S., and Shaw, J., 2009. International Marketing: Strategy and Theory. New York: Routledge. Seabra de Sousa, R., 2009. Renova toilet paper: Avant-garde marketing in a commodized product category. New York: INSEAD. Smith, T., 2011. Pricing Strategy: Setting Price Levels, Managing Price Discounts and Establishing Price Structures. Canada: Cengage Learning. Read More