NIRMA'S DOWNTURN IN THE DETERGENT MARKET
Blame it on Competition

<<Previous

What according to you are the strategies Nirma should adopt to retain its customers' loyalty and regain its No.2 position in the market?

Conventional wisdom could say that Nirma can embark on a series of short-term measures to tinker with its strategy and manage to keep afloat. However, that is the worst thing that can happen, though I feel it might also be the most likely thing to happen since that seems to be the obvious solution. In my opinion, ideally what is required is a fundamental shift in its thinking, whereby it revises its assumptions that makes it rethink its implicit and explicit theories about its business.

Going back to the heady days of 1990s when Nirma was making rapid forays into the markets and challenging HLL, one can recall the euphoria that Nirma generated not only in the markets and industry, but also in the academic circles

Take for instance the case of customer loyalty. Just like employee loyalty, customer loyalty is a chimera. I think any company trying to gain or regain customer loyalty is living in a fool's paradise. The Indian market-as is the case with Indian society - is fast becoming a transactional market. Customers do not buy a product because it is from company X or Y. They buy it, since it satisfies their needs and wants. So who is Nirma's customer? Is she/he the same person who was the customer earlier in the 1990s? Or is she/he a different person? If yes, then how should the realignment in the strategy take place to make her continue buying Nirma's product? That is the route to rethinking about the assumptions that govern business. That is the type of rethinking that I am proposing for Nirma.

Any other thoughts/views you would like to share with our readers?

Corporate affairs are too complex to capture by means of a single or a few strategies, or some programs and plans. I will just take up a few issues and write out my thoughts about Nirma.

First issue that I would like to write on is the size of the company. Nirma has undoubtedly grown into a big corporation, and has ventured into so many different areas by means of a variety of strategies like integration and diversification. With size, arise the challenges of organization and control. Nirma needs to focus on these challenges and see how it can retain some of its nimbleness and yet reap the advantages of size, such as the scale economies.

Secondly, Nirma has reached a stage in its evolution, where it seriously needs to rethink its vision and mission. Here, I do not mean that it should rewrite its mission statement in more beautiful words. I mean that it should think seriously, what has made it reach the stage where it is. Nirma focused on the customer whose basic requirement was an acceptable quality product available at an affordable price. This customer still demands that. But, a slow change has been taking place all these years especially in post-1991 period in India. The indices capture much of that change, yet some escape attention. The customer, in the segments that Nirma served, no longer wants just a cheap product. She/he demands quality too, and is willing to pay a bit higher for that. That means there is a requirement for the best value product: A product that offers quality that would be an 'aha' experience at that price.

Nirma needs to resolve this dilemma: Does it want to serve its original customer segment that still wants a cheap product and may be even ready to compromise on quality; or does it want to move up serving the value-conscious customer (that was its customer in the 1990s)? If I were asked which direction Nirma should go in resolving its dilemma, I would unreservedly say it should remain in the direction of its original customer segment. Why? Because, the value-conscious customer-that Nirma struggles to serve, and that it can't do as well as its rivals can do-has a choice. Leaving Nirma aside, she/he can move to Hindustan Lever or Proctor & Gamble or Wipro. That is what has been happening. In the segments that Nirma has moved up, owing to the initial momentum of following its customer, it has too much competition to handle and is clearly not up to the task.

By bowing down to serve its original customer, Nirma would be creating a space for itself, where many will not be willing to come. This customer is the poor customer who needs to eke out a living and buy the necessities at a low price to make both ends meet. She/he lives in the vast expanses of India where life is a daily experience of struggle to somehow keep body and soul together. She/he is a part of a 600+ million customers market. To do this means that a company like Nirma needs to leverage on two things: Scale economies and low-cost operations. Nirma has accumulated enough learning to undertake low-cost operations. What it needs is to build scale economies with a sharp focus on a limited range of complementary products.

If I would frame a vision for Nirma, it would go something like this: "A big company dedicated to serving continually the daily needs of the small woman and man."

What I am proposing in not an original idea. C K Prahalad has been recently writing about the fortune that lies at the bottom of the pyramid. The pyramid is the distribution of income among the people of the world. Very few people are at the top echelons of the pyramid, while a disproportionately large number lie at the bottom layers. Prahalad's prescriptions to focus on the poor as a potential market are mainly directed at the MNCs. What I propose is that a local Indian company can do that as well, maybe even better.

2010, ICMR (IBS Center for Management Research).All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means - electronic or mechanical, without permission.