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This
columnist feels it’s time to defy the famous dictum of the
fitness fanatics: “No Pain, No Gain.” Offer your customers
“gain without pain”—value pricing without demanding undue
sacrifice. And then sweeten the deal with unexpected
extras.
One of
this columnist’s profiled winners, Lamoiyan, makers of
Hapee toothpaste, is a prime example. They don’t try to
compete on price alone. Instead, their plan has been to
create a position that’s sufficiently attractive to
justify a reasonable price. They do this by adding
value—through convenience, reputation, promotions, and
last but not the least, image. Many have heard about the
whole fascinating story of how Lamoiyan uses formula to
turn double-digit profits.
For years
the business taught Cecilio K. Pedro one simple truth. All
it took to produce a toothpaste was a simple process that
required no sophisticated technology, for its basic
formula has not changed in over 60 years. “It is just
mixing a lot of chemicals in a mixing tank and sealing
it,” he says.
More and
more, he came to realize he had to do things his own way.
What he did next left many to question his sanity, and a
few others to admire his courage and vision. For he set up
his own toothpaste-making company and, in what seemed like
a quixotic fight to many, entered the market with an
unknown brand, to compete for his niche against the
multinational brands.
If he had
serious doubts about the success of his venture, he was
unfazed by them nor did he waver. By any reckoning, the
odds against him were multiplied a hundred times by the
leading brand’s remarkably dominant presence in a country
where, when people buy toothpaste in the neighborhood
store, they still invariably mumble the leading brand by
force of habit.
With
aggressive advertising and a competitively priced product,
his brand’s presence is now a big threat to the
multinational companies to which he used to supply raw
materials. Proof of this was when the leading brand
dropped its prices in 1986. Hapee toothpaste is touted to
be the only local brand that has gained a respectable
position in the Philippine toothpaste industry to date.
In the
past, toothpaste was largely profit-driven because of the
virtual monopoly of a dominant leader. With more demanding
consumers, they started asking if the 40-percent price
difference between the leading brand and Hapee (at that
time) justifies the benefit of continuing their
relationship with the market leader. No wonder the leading
brand finally got their “wake-up call” and dropped their
prices in late 1996 while Lamoiyan launched another brand,
Kutitap, priced 20-percent lower than Hapee’s prices not
only to protect their shares from the leading brand’s
assault but from the sudden interest of other competition.
There are
many reasons prices have been dropping. Price promotes
consumer trial or retrial, so new competitors without much
advantage would resort to pricing strategy to address a
market weakness associated with new brands. That’s what
relatively new brands are doing, or at least trying to do.
This strategy, in effect, lowers the risk of a wrong
purchase by the consumers.
Furthermore, as consumers become more knowledgeable and
demanding, manufacturers are forced to produce products
that are acceptable and of comparable quality to the
market. Consumers then start evaluating the value for
money factor and become willing to pay a premium only when
they see solid justification. Multiply the price premium
difference to the frequency and quantity purchased and you
get a better picture of how consumers look at price
savings. The quality of Hapee toothpaste, after all, is
acceptable.
Price
sensitivity is actually not because of the consumer
personality, but is a function of their discretionary
income and the importance of the product purchase.
Consumers have high price sensitivity when both factors
are low, while they will have low price sensitivity when
both factors are high. Different time periods would then
give different price sensitivities, and marketers in the
know can maximize their revenues and profitability by
monitoring consumer price sensitivities.
For
price-driven products where a particular segment of
consumers looks at price as the sole determinant of a
purchase, it must be noted that some of these consumers
may be expressing unsatisfied needs from existing products
so they are not willing to pay more for a particular
product category. It is important for marketers,
therefore, to open their eyes wide on new products or new
features opportunities on feedback like this.
All these
marketers are scattered along the price spectrum, from
selling at the lowest prices in their category to near the
highest. But they share the same key to success: offer
gain without pain. They have made an important discovery,
with an application for all marketers struggling to
survive in today’s cutthroat pricing climate.
Aside from
the regular variants, Hapee develops specialty products
which, in time, will provide the company the most complete
line that one oral-care brand can offer. These are Gumtech
Advance Toothpaste, Hapee Complete Plus Whitening Toothgel,
Hapee Night Mint Toothgel, Hapee Extreme Clean Toothgel
and Hapee 2-in-1 Toothpaste and Mouthwash.
The
Philippine Dental Association (PDA), through its seal of
approval, acknowledges Hapee’s world-class quality. The
entire Hapee community is honored to be chosen as PDA’s
partner for its centennial year celebration with the theme
“Isang Siglong Nangangalaga sa Ngiting Pilipino, Kaisa ng
Buong Mundo.” For this year’s celebration, Hapee will
provide full support for PDA’s activities and programs,
and assist PDA in upgrading the practice of oral care in
the country.
The
spectacular success of Lamoiyan is never the result of a
single factor. There is far too much happening at any
given moment in today’s complex business
environment—productivity gains, employee morale,
refinancing of debt, new product developments and
management reorganization—to assign full credit to any one
business activity. This columnist can be certain of one
thing: Lamoiyan’s marketing innovation played a leading
role in the company’s remarkable achievements. | 
