Distribution Channels Case Study
You are asked to help formulate the IMC approach for the entrepreneur starting Chic Soap. The concept behind Chic Soap is simple; it sets out to incorporate fashionable perfumes such as Obsession, Raffinee and Opium into a high quality white soap base. The product would then be packaged using the logo of the perfume plus a Chic Soap common background. The advantages for the perfume supplier are: a guaranteed outlet for its perfumes at full retail prices; and a low cost trial route for potential customers. The advantages for Chic Soap are: the use of already established perfume concepts to promote the soap; and access to the distribution ...view middle of the document...
Very high prices were charged for soaps that were part of ranges such as Rive Gauche; around £3.00 for the 150 gram equivalent. As the companies sold very little soap in these ranges they were not particularly worried about the effects of other products cannibalising brand sales. They were prepared to see Chic Soaps take on the sales of perfumed soap to a wider market.
3. The size of the total toilet soap market was around £190 million at retail. The top quality premium soap market was estimated to be 7 per cent of the total; it was growing slowly as the deodorant market came under pressure because of the environmental problems associated with aerosol sprays; other growth factors included the expansion in showers, and the expansion in the number of single homes.
4. Retail outlets made about 20 per cent gross on premium soaps. They tended to hold only limited stocks, and did not therefore want the product in as large a quantity as mass market products which were available in cartons containing 50 or 100 bars.
5. Many of the independent chemists were serviced through wholesalers. Such wholesalers accounted for about 70 per cent of the market. Wholesalers expected to make around 8 per cent. There were about 100 wholesalers that serviced the independent chemist; of these around 20 national chains accounted for 80 per cent of the total business. The national department stores (around 350) bought product direct.
6. Research suggested that the main consumer of premium soaps was female 35+, socio-economic group A, concentrated in the South East of England and in large cities elsewhere. The average purchase of the 150 gramme soap was once every 3 weeks. An increasing proportion of the soap was bought as gifts, especially at Christmas. In the previous year, around 25 per cent of the total premium soap sector was purchased during the period early November to late December.
7. Most advertising in the sector was in women's magazines. It was estimated that it would cost around £100 to reach every 2000 consumers in the appropriate socio-economic group. The competition advertised heavily; average expenditure for the leading companies was around £400,000 per annum.
8. A sales representative would cost around £12,000 per annum; a company car would be £3,000 per annum. Such a sales representative could visit either 500 outlets direct or deal with 15 chains of wholesalers.
9. The costs of packaging would be high. High quality packaging with the appropriate perfume design on the label would cost £0.14 per unit; with a minimum print run of 40,000 units. It was anticipated that gift packs of the five perfumed soaps for the Christmas season would be an additional £0.45 to produce with a minimum production...