Distribution Channels Case Study
You are asked to help formulate the marketing plan 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+, socioeconomic 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...