Business—Drypers Case Study Paper
Introduction
Diapers in the past couple of decades have slowly but surely become a necessity. Thanks to the considerable increase in population of infants and toddlers, which comprise more than 3 quarters of the entire diaper manufacturing and retailing industry, this has become a reality. Because of all of these factors, there has been a continuously growing need to focus other interventions that would convert to better brand and product awareness, which, if things go as planned, would lead to a significant increase in product mobilization and therefore, sales and profits.
Fortunately, there are many ways that the diaper industry key players have figured out to achieve that. Research shows that the two biggest premium brand diaper manufacturers in the U.S. and probably internationally, relied on TV marketing and advertising campaigns to sharpen their edges and obtain a larger share of the market.
Evidently, their values increased a few months after their brand and product awareness campaigns were carried out. This is the reason why other diaper manufacturers like Drypers Corporation, be they be a value or private label diaper manufacturer, should also consider investing a portion of their budget in TV marketing and advertising. This paper will focus on the different key players, particularly the diaper manufacturer and private labelers in the United States diaper industry. Comparisons between the major key players, the largest diaper manufacturers and advertisers—Kimberly Clark and Procter & Gamble, against Drypers Corporation will be made.
Executive Summary
There is a large market for diapers, training pants, and other related products in the U.S. This is due to the fact that the population of infants, toddlers and basically all other people who could benefit from such products have slowly but continuously increased in the continent. A statistical value suggesting that the entire U.S. disposable diaper market was worth approximately 4 billion USD—this is assuming a baby uses a total of 4,500 disposable diapers until 4 years of age which is equivalent to a whopping $1,100 worth of disposable diaper retail sales for every baby in the U.S. . Drypers diapers, manufactured by Drypers Corporation, are a value-priced branded product. For the sake of comparison, the type of disposable diapers being manufactured by Procter & Gamble and Kimberly Clark are premium priced branded diapers.
Drypers Corporation is one of the most prominent companies in the market sector for diapers in the United States. It has been competing with other major key players in the industry, especially Procter & Gamble and Kimberly Clark Corporations which hold the first and second places as top diaper manufacturers in terms of market and even dollar share. Also, these two big companies, a few years before the start of the 21st century, seemed to have dominated smaller diaper manufacturers such as Drypers Corporation in terms of the two criteria we have mentioned. This was thanks to their overly large budget for marketing and advertising, especially for TV advertising, which at that time was like the most premium and grandest medium of advertising. As a result, brand awareness and the mobilization of products manufactured by these two large-scale diaper corporations rose quickly to the point that other manufacturers were left out with only a small portion of the entire diaper market share. This is so far the main problem that Drypers Corporation had to face.
Unfortunately, this problem leads to another problem. The management would have to walk in a practically undiscovered terrain because Drypers Corporation is a value priced branded disposable diaper manufacturer and manufacturers of this type do not usually manufacture their products via television broadcasts but rather via various direct means of advertisement such as prints and coupons. Procter & Gamble and Kimberly Clark, premium-priced disposable diaper manufacturers and significantly larger and have considerably deeper pockets than Drypers Corporation, are already experienced in TV advertising. They actually do not have the need to advertise in TV because of their already strong product and brand awareness. The second problem is the risk that Drypers Corporation faces. It has been announced that they are to invest 10 million USD for television advertising.
After reviewing Drypers Corporation’s situation, we have decided to recommend the cutting of the planned budget for TV advertising because of the following reasons: firstly, they do not have the necessary experience in dealing with TV networks for advertisement purposes; secondly, because it would be too risky for the company to shed out such an amount of funds to fuel a maiden advertising campaign. We also recommend that the management do a small scale pilot testing first and then based on the results of the test, create a TV advertising strategy that they could use in the future to ensure that they can significantly improve their brand awareness even without having to expend some 10 million USD in funds.
There are a lot of major and minor key players in the disposable diapers and training pants’ market in the United States. This paper will however focus on Drypers Corporation’s dilemma regarding the feasibility and the possible risks involved in their decision to invest a significant amount of resources for TV advertising. Drypers Corporation is a large diaper manufacturer. To be more specific, it manufactures mostly value-priced branded disposable diapers. It is one of the largest diaper manufacturers yes, but there are other two bigger players in the U.S. disposable diaper and training pants market: Procter & Gamble and Kimberly Clark Corporation. These two are so far the top two best performing disposable diaper manufacturers in terms of market and dollar shares. Now that is already a set of two criteria. Procter & Gamble and Kimberly Clark Corporation, at that time, do not manufacture value-priced branded diapers but rather premium priced branded ones. This can be an edge for the company. At the same time, this can also be a weakness that Drypers Corporation can take advantage of.
One of the main issues in the case is the initial size of the proposed investment fund for TV advertising. While one of the company’s senior officials presented to us an optimistic view of the things that may happen sometime after the campaign, we cannot help but think whether it would really be wise to invest 10 million USD for TV advertising. The main concern here is the risks involved. This proposed amount already comprises 33 percent of Drypers Corporation’s entire budget for marketing and promotions. Meaning, should this plan push through, other departments would be left with only 67 percent of the total departmental budget.
This becomes a problem because normally, a value priced branded disposable diaper manufacturer, even the size of Drypers Corporation, does not invest that much for TV advertising. In fact, these companies are usually not into TV advertising. They mostly publicize their products using more direct means of advertisement. Drypers Corporation for example “typically markets their products through grocery stores due to their general lack of national brand name recognition and less extensive national production and distribution capabilities necessary to supply large mass merchant and drugstore chains”. Companies like Procter & Gamble are usually the ones who heavily rely on TV advertising in optimizing brand awareness. What is more disturbing is the fact that it would be Drypers Corporation’s first time to invest in TV advertising. Although we still do not know the outcome of such decision, we perceive it to be an unusually risky one.
Analysis and Evaluation
Segmentation and Target Market
There are many groups of people in the entire disposable diaper and training pants market who will continuously consume these commodities in order to satisfy their needs buy buying them from their trusted merchandisers and brands. In economics, this is called utility. It is basically “a representation of preferences and choices over some set of goods and services—preferences that have a continuous utility presentation provided that they are complete, continuous, and transitive”. The target market in this case would be infants under 30 months of age & toddlers under 4 years of age and their mothers for disposable diapers (this applies to all type of disposable diaper manufacturers), and individuals between the ages 18 and 49 for the training pants segment. These are so far the target market characteristics that are common among all three forms of disposable diaper and training pants manufacturer: premium priced branded manufacturers; value priced branded manufacturers, and private label manufacturers. At this point it would be important to take note that Drypers Corporation is a value priced branded manufacturer. Meaning, their main target is the economy class segment of the disposable diaper consumers. Cheap and value priced products would most likely be patronized by the middle and lower class segments of the market. Thirdly, Drypers Corporation also aims to penetrate deeply in the premium quality disposable diaper market segment. This can be supported by the development of their products such as the improvements in the comfort and leakage prevention capabilities of their products. It is highly important for a medium to large sized corporation like Drypers to know their target market because there are many things that would depend on this—future marketing strategies as well as the company’s profit figures.
Product Strategy
The physical product or products in this case would be the disposable diapers and the training pants manufactured by Drypers Corporation. As stated in the case, Drypers wanted to increase the consumer’s awareness of their product and brand as a disposable diaper manufacturer. The management is planning to do that by TV advertising. Even though the company sells their products for a significantly lesser price compared to their competitors, their line of diapers and training pants are among the best in terms of innovation and build quality. In fact, Drypers make up for their marketing-related handicaps by focusing their attention to product innovation. In 1996 and 1997 for example, the company became the first U.S. disposable diaper manufacturer to introduce a diaper that is designed for the best skin care, fit, absorbency and leakage control. A few years after this one, the management had again, rolled out another wave of innovation. They incorporated anti-bacterial and at the same time, moisturizing properties to their products. This way, there is no doubt that Drypers Corporation indeed made a difference. Its competitors on the other hand, Procter & Gamble and Kimberly Clark, relied on sheer advertising. Although their line of products is also of premium quality, Drypers’ still takes the lead in terms of product development and innovation.
Branding Items
The reputation of Drypers’ products is actually good and very comparable with that of its larger competitors. The quality and build of every unit is good. In fact, at some point, one could say that Drypers diapers, though sold at a significantly lower price compared to other brands is of higher quality compared to Procter & Gamble and Kimberly Clark’s products. Drypers Corporation manufactures diapers and training shorts that are of export quality. In fact, they already have numerous plants based in North and South America, in Europe, and also in Asia.
Promotion Strategy
Since the only real problem why Drypers is not selling as many units of diapers and training shorts as they were expecting is their overreliance to direct forms of advertising, it would really make sense to try out something new. Apparently, they found a promising answer in TV advertising. While it is quite obvious that TV advertising would really be a great boost to the consumers’ awareness of their products, the real issue lies on the amount of funds they are going to invest for their debut partnership with TV advertisers. They have two options here. They can either start full blast just like what they are planning to do now or they can start out small and slow until they finally have a complete grasp of how advertising in TV works.
Pricing Strategy
There is actually no pricing issue present if we talk from a pro-Drypers Corporation point of view. In fact, their current pricing strategy is one of their key advantages over their competitors. They develop high quality products and sell them for significantly lower prices—qualities that economy class and even some middle class customers love the most. One of the options they actually have is to slightly increase the prices of their products up to a reasonable level. They can do this because after their latest product innovations, customers may still find a price hike to be fairly reasonable. The management can also keep the prices low so that more consumers would be lured in. Either way, the pricing advantage belongs to Drypers Corporation.
Place and Channel Strategy
If the management wants the outcome of the campaign to be good, they should conduct a comprehensive research about the most reputable channels that they can be advertising partners with. Teaming up with a not so reputable advertising partner may be easily misinterpreted by consumers and in worse cases, defeat the entire purpose of launching a marketing campaign. Since it is Drypers’ first time to engage in this kind of venture, it may be a good idea to partner with a value-priced TV advertiser initially and then after a while, progress by teaming up with a high-end TV advertising company. They can also start out strong by immediately going for the top TV channels. However, their main dilemma in that case would be their shallow pockets. Perhaps if Drypers’ pockets are as deep as Procter & Gamble and Kimberly Clark’s, that would not be a problem and the second option would be easily selectable. Advertising involves a lot of money and so financial and possible gains after the campaign must be carefully considered.
SWOT Analysis Table
Recommendations
It is never a bad idea to try to invest in something new especially if that particular investment would later on be converted to higher sales and profit figures which would surely cause the further growth and progress of the company. In Drypers Corporation’s case, we can say that the management’s intentions are good. However, there are risks involved in making decisions, especially if it is like sailing in undiscovered waters—they are basically trying to TV advertise even though they have not experienced doing so before. Risks should be carefully calculated because risking 10 million USD worth of TV advertising budget could be devastating for any company the size of Drypers Corporation. Our recommendation is for the management to cut their initial TV advertising budget to 2.5 million USD and as the first TV advertising campaign becomes successful, increase it by 2 folds until it reaches a certain limit which they should decide on their own. This way, risks would be greatly minimized and they will be able to ensure a slow but sure and safe progress in their consumer product and brand awareness.
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