The Nirma Story

THE ROAD TO SUCCESS Contd...

Unlike detergents, soaps were a personal-care product. Many customers had deep psychological bonds with their soap brands. Moreover, the market was segmented by HLL by price, by scent appeal, and by brand personality. So, Nirma positioned Nirma Bath against Lifebuoy^[5] , Nirma Beauty Soap against Lux^[6] , Nima Rose against Breeze^[7] , and Nima Lime against Jai Lime^[8] . Explaining how Nirma hoped to win this game, playing by HLL's rules, Hiren said, “World-wide, there are only four or five platforms – floral, beauty, health, freshness – which account for most of the soaps sold.” Nirma produced high-fatty-matter^[9] soaps with the right scents, and priced them much lower than other brands. This created the ‘sub-premium'segment. Nirma also mastered the game of managing the geographical diversity of consumer preferences. For instance, the North preferred pinks soaps and while the South preferred green ones. Sandal soaps were more popular in the South.

While introducing toilet soaps and detergents in the premium segment, Nirma relied on its time-tested weapon – Price. The company planned to concentrate on volumes in these segments as well. But there was a change in the margins given to retailers. Unlike the economy products, where the cost benefits were passed on to the consumers, Nirma passed on this benefit to the retailers. It gave them huge margins. For instance, for Nirma premium soap, it offered 52% and for Nirma shampoo, it offered an unbelievable margin of 140%.

Analysts were skeptical about Nirma's chances of success in the premium segment of the soaps market. Unlike detergents, the soaps and shampoo market was highly fragmented. There were about 15-20 brands, and it was difficult for any soap to get a sizable market share. Moreover, this market was less price sensitive. So, it was difficult for any company to sustain itself on price alone. Analysts felt that it would take years to change Nirma's brand image. According to a survey conducted by Samsika Marketing Consultants, Nirma's marketing firm, Nirma was considered to be a cheap brand. Many people were almost ashamed to admit that they were using it. To shed this image, in the late nineties, Nirma released corporate advertisements worth Rs 10 bn throughout India.

Analysts felt that the fast growing shampoo market was a better bet than the premium soaps market. In India, only 30% of the population used shampoos and more than 70% of this group was in the urban areas. However, according to some analysts, though the perceived potential of the rural market was very high, in actual practice, it was difficult to persuade rural folk to use shampoos. Another problem Nirma faced was that of inadequate infrastructure. Though it had a strong presence in the smaller towns and villages, it lacked the network necessary for penetrating urban areas. Thus, Nirma's entry into premium soaps and shampoos seemed to have failed.

^[5] Popular brand of carbolic soap from HLL.

^[6] Popular brand of beauty soap from HLL.

^[7] HLL's brand in the floral soaps category.

^[8] HLL's lime brand. The premium product in this category was Liril, which was countered by Nirma Lime Fresh.

^[9] High-fatty-matter soaps are high in lather quality.

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