A recent article in ET mentions that the challengers in the Rs 7000 crore toothpaste market like Anchor,Ajanta Babool and Vicco were wiped out by the major brands like Colgate, HUL etc. A few years ago the major toothpaste brands like Colgate and Pepsodent were shocked by the huge challenge from brands like Anchor ,Babool etc . The challenger brand used price as the major USP and gained more than 15% share in the market.
Its interesting to understand how the majors fought these challengers. The following are the strategies used by the major brands to fight the price competition -
- React aggressively : The assault from the challenger brand was faced by the major brands aggressively. Brands like Colgate, Pepsodent etc reacted sharply to the competitor first by reducing the price to arrest the severe market share loss.
- Flanker brands : The major part of the success of market leader was the use of flanker brands to ward off price competition. Colgate effectively used Cibaca as the flanker brand to fight the price competition thus preserving the price premium of the market leading brands.
- Use smart SKUs : The toothpaste market leaders also used less prices SKUs to neutralize the price competition. The availability of big brands in affordable packs in a way prevented the consumers from switching to a less priced local brand.
- Advantage in differentiation : The age old concept of Positioning and Differentiation helped the leading brands to effectively fight the price competition. The low priced brands failed to counter the brand-equity with price alone.
- Deep pockets : The deep pockets of the likes of Colgate and HUL enabled a large aggressive and sustained offensive against the challengers. Regional brands didn't had a chance fighting the deep pockets.
The lesson for the challenger brand is not to fight the big players without credible differentiation.