Henkel is a multinational company founded in Germany in 1876. Henkel is a leading firm with international recognition and is ranked among the Fortune Global 500. The organization produces many leading products and brands such as Persil, Schwarzkopf, Loctite, Pritt, Sellotape and Right Guard. It operates in three business areas: Laundry & Home Care, Cosmetics/Toiletries and Adhesive Technologies. As shown in Figure 1. (see Appendix), Adhesive Technologies represent 48% of total sales, followed by Laundry & Home Care with 29% and Cosmetics/Toiletries at 22%.
In 2010, Henkel achieved annual sales of €15,092 million and a net income of €1,143 million. (Henkel 2011)
The company operates in over 125 countries, in five continents. Henkel employs over 48,000 staff, 80% based outside of Germany. Figure 2. (see Appendix) shows that most sales are to Growth regions (41%) followed by Western Europe (36%) and then Northern America (18%) (Henkel 2011). Henkel targets both industries and households, aiming some campaigns at organizations such as laundries, hospitals and parlours and others towards households.
Henkel states that “For a large proportion of our cosmetic products, our laundry and home care products and our consumer adhesives, women count among the direct or indirect target user group” (Henkel 2011).
Henkel’s strategy consists of three priorities: achieve full business potential, focus more on customers and strengthen the global team. The ultimate purpose of Henkel’s strategy is the further improvement of the company’s competitiveness and to permanently establish a winning culture. (Henkel 2011)
Persil is one of Henkel’s leading brands. First introduced in 1907, Persil is renowned as being the first commercially available “self-activated” laundry detergent. Persil had huge success and captured the majority in the German market share. Nowadays, Henkel sells Persil products in numerous countries; mainly Germany, France, Spain, Mexico, China. Persil has also adopted local names such as LeChat in France, Dixan in Greece, Italy and Cyprus and Wipp in Spain and China.
The success of Persil was due to two main factors. Firstly, for being the pioneer in changing the whole detergent market, making itself discernible from the competition. The second, was Persil’s product presentation and packaging, making the European people feel identified. These competitive advantages have brought a large following of loyal customers throughout the different countries Persil is sold in. In this paper we will analyze Henkel’s strategy for the Persil brand and make recommendations.
2. BRANDING STRATEGIES
Brand strategies are a very important part of the marketing strategy process. There are three aspects within the idea of brand strategy: brand reach, brand positioning, and brand architecture (Homburg, Kuester, and Krohmer 2009, p.141). Brand reach is about the geographical and vertical reach of the company. Brand positioning is the act of designing the company’s brand to a distinctive place in the minds of the customers. Brand architecture looks at the structure of the brands in the company and the relationships between those different brands.
Brand reach has two different aspects, geographical reach and vertical reach. The geographical reach refers to the scope the brand reaches over an area. Henkel’s redesign of the brand will reach all of the different countries they are selling in. The vertical reach explains the use of the brand throughout the value chain. There are two options regarding the vertical reach of a brand; ingredient branding and processing branding.
Ingredient branding explains the use of brand materials throughout the entire value chain. For example, the use of Intel processors in several different computer brands. The opposite is explained by processing brand, where the brand is not seen throughout or even at the end of the production process. An example of this can be seen when purchasing a car. Buyers are aware of the car brand but do not know who produced the airbags. (Homburg, Kuester, and Krohmer 2009, p.142)
Brand positioning is the next aspect of brand strategy, which has three parts to analyze. The brand core is the identity of the company, which is also known as the mission statement. Persil’s brand core is the pioneer of first active-agents in detergents market. The next part in the brand-positioning model is brand benefits. This illustrates what the product brand offers its customers. Persil’s laundry detergents offer the public an easy way to wash clothes and a large range of different products, in turn leading to an improved quality of life.
Both of these aspects are integrated within the overall brand personality, which means the traits associated with the brand. Trustworthiness, authenticity, reliability and resilience are examples of traits that fit Persil’s brand personality. Brand image is the impression of a brand’s total personality in the customers mind. The closer the brand image and brand personality are to each other, the more successful a brand is likely to be. This is shown in Figure 3. (see Appendix). (Homburg, Kuester, and Krohmer 2009, p.143)
The relationship to competitors’ brands is also a useful way to analyze brand positioning. There are two different types of positioning in branding, differentiation and similarly positioning. Differentiation is positioning your brand in a remarkably different area than any other brand on the market. Similarity positioning is positioning your brand in a similar area to those already on the market. A product map is used to illustrate similarities are differences. As Persil was the pioneer for active-agent detergents in the laundry detergent market, it used the differentiation approach.
Brand architecture is the third and last aspect of the brand strategy. Brand architecture is the structure of all the brands in a company and their inter-relationships within the company. Brand architecture does not look at decisions made for individual brands but more, the structural decisions for the entire brand collection of a company. There are three types of branding strategy when considering brand architecture; single branding strategy, single umbrella branding strategy, and multiple umbrella branding strategy. (Homburg, Kuester, and Krohmer 2009, p.145)
The single branding strategy illustrates a company where each product has its own brand, and is sold under its own brand name rather than under the company brand name. Henkel markets its products, such as Persil, under individual brand names rather than under the Henkel company brand. Single umbrella branding is the opposite of single branding strategy. This is where all products or services are marked under the same brand. Multiple umbrella branding is the mix between both types.
Keeping different brand names separate can be challenging for most companies. However, Henkel has so many years of experience in this area that managing this would not be a problem. Persil, for example, is marketed as a separate brand by Henkel and has been a leader in the laundry detergent market for over 100 years. Changing the name of Persil or other Henkel brands should not be an alternative, as it may bring a negative effect to the company. Since Henkel’s customers, are familiar with separate brand names, they may not appreciate a change to new unfamiliar names.
3. PRODUCT MIX
In today’s dynamic market environment, organizations constantly need to adapt their products due to rising competitive situations and changing customer needs. The product mix is a helpful term when it comes to maximizing the organization’s potential. This can be defined as the entire range of products supplied by an organization at a given point in time (Homburg, Kuester, and Krohmer 2009, p.133). There are three main options for expanding an organization’s product mix in order to get the optimal product portfolio. These are product variation, product differentiation and diversification (Homburg, Kuester, and Krohmer 2009, p.134).
Product variations are modifications of the features and characteristics of an already existing product on the market, without changing the core functions of the product (Homburg, Kuester, and Krohmer 2009, p.134). The variation can be made in many ways but the most common variations are changing the products’ aesthetic properties (e.g. shape, color), physical-functional properties (e.g. quality, material) or symbolic properties (e.g. brand image, brand name). An important point is that product variation is just a matter of changing an already existing product, not creating a new product. Examples of product variations are a new ”face lift” design of a car or a new packaging design of a product.
Product differentiation is an organization’s process of adding new product variants to an already established product (Homburg, Kuester, and Krohmer 2009, p.135). This is an opportunity for an organization to create competitive advantages, by distinguishing its product from competitors.
An organization can do this by basing the product differentiation on either offering superior products or creating better customer relationships (Homburg, Kuester, and Krohmer 2009, p.72). In product differentiation the original product still exists, in comparison with product variations when the modified products are no longer available on the market. MasterCard is an example of a product differentiation, due to its various range of payment solutions.
Diversification is when an organization integrates products into its product mix that do not have direct connections to already available products in the organization’s product portfolio (Homburg, Kuester, and Krohmer 2009, p.136). By diversifying, the organization is seeking to increase profitability through greater sales volume acquired from introducing new products in new markets (Homburg, Kuester, and Krohmer 2009, p.76). A diversification strategy can be very risky for organizations but can also create opportunities with great potential. McDonalds’ introduction of its “McCafe” concept is an example of a diversification move, which proved very successful.
In 1907, when Henkel was in its roots, the organization used a product differentiation approach. It was able to introduce a new unique laundry detergent formula of a self-activating detergent that resulted in being the pioneers of this type of product. Henkel was able to create competitive advantages by implementing its new superior formula on the market and therefore distinguishing its brand from competitors.
Another aspect of Henkel’s product differentiation is its great product range. Henkel differentiates itself by being the leading supplier of laundry detergent, offering detergent to a wide customer group. These diverse products target different categories of washing such as: low temperature washing, premium market washing, detergents for allergenic people and environmentally friendly washing.
1962 saw the introduction of a completely new Henkel product in the market called Somet. This product did not focus on washing clothes, but instead on washing dishes. The introduction of this product was very successful and is an example of diversification by the company. Henkel integrated a detergent for washing dishes in its product mix hence, operating in a new market. By doing so, Henkel was able to increase profits through greater sales volume of its products.
In recent years, Henkel has changed its product mix approach with an increased focus on product variation techniques. Henkel recognizes the need to modify already existing products in order to survive in today’s dynamic market. This is shown in Henkel’s ability to change their laundry detergent products’ aesthetic packaging properties, which is an example of product variation. Through the years Henkel has changed the design of the detergent packages several times which all proved successful. Henkel realizes the importance of presentation for potential buyers and hence places a lot of emphasis on this area.
4. ALTERNATIVE STRATEGIES
Henkel’s goal is to reassure customers that Persil is still as effective as any other laundry detergent on the market. Henkel embarked upon this strategy by changing its product decisions through product variation, as discussed earlier. The organization developed new ideas for its already established products by redesigning and improving formulations, as well as developing a clearer distinction between their different product groups to attract new customers. Henkel undertook pre-tests to analyze customer responses, redesigned its website and engaged in promotional activities such as the Persil Future Ship which toured 18 German cities, showcasing the new campaign. Henkel also contributed €1,000,000 to the Project Futurino initiative.
There are many other options that Henkel could have pursued to enforce its new strategy. Under the heading of product decisions, Henkel could have used product differentiation or diversification, as explained above, to expand the product mix to enforce its new strategy. Henkel has used these methods before and could implement these methods again. Henkel could have also established synergies, reduced the product range or considered areas such as brand management activities.
When examining the area of establishing synergies, there are two options that Henkel could have considered; product bundling and product platforms. “Bundling is when a company sells two or more separate products in combination and sells the bundle at a single price” (Homburg, Keuster and Krohmer, 2009, p.137). This can encourage cross selling and also reduce costs. This may have been a good idea for Persil as many customers may buy more than one of their products. However, as each customer has different needs and preferences, a lot of research would have to be done to discover optimal bundles that suit many consumers. Consumers may also not use the products in equal measures so may still need to buy products individually.
Henkel could also have considered establishing product platforms. This is when individual products can be produced using common standardized product components (Homburg, Keuster and Krohmer, 2009, p.137).
Although this would save costs for Henkel and may make the Persil products more recognizable, it may make it harder for customers to differentiate between the Persil products themselves. Persil would have to ensure that their products are still clearly distinguishable from each other for this to be successful. As Persil is aiming to develop an even clearer distinction between their different product groups, this may not be a wise strategy for them to take.
Product elimination is another area that Henkel could have considered. This would involve removing one of its products from the market. By removing a less popular product it could show customers that Henkel is concerned about standards and only wants to keep its best and most effective products on the market. On the downside, Henkel may lose the customer base that used to use the now eliminated products.
Another alternative for Henkel could have been to engage in brand activities. This involves moving into other product groups but under the same brand name. If brand loyalty already exists, which it does in the case of Persil, this can prove to be very successful. “Brands signal a certain level of quality so that satisfied buyers can easily choose the product or service again” (Kotler et al. 2009, p.428).
As Persil has been voted the most trusted brand in its category nine years running by Readers Digest, it is clear Henkel already has brand loyalty and a strong customer relationship. If Henkel had moved into an entirely new market area, different to laundry detergents and home care, it could have captured new market segment. This could have lead to an expansion of the company and potentially increased overall profits. Persil also has many years of experience in the market so would already have a lot of consumer information. This could prove highly successful, as they would have a competitive advantage over new entrants.
Henkel could have also looked at areas such as pricing decisions, communication decisions and sales decisions. Another option was to lower prices, redevelop communication methods or come up with new sales decisions such as: new distribution channels or a new advertising campaign to reassure customers of the effectiveness of the Persil brand.
Although all these options have advantages and benefit Henkel in different ways, we believe that Henkel’s choice to focus on product variation was the most suitable for its strategy to assure customers that Persil is still as effective as any other laundry detergent on the market.
5. PRODUCT INNOVATION
Many products are subject to a life cycle, which is becoming increasingly shorter for a number of product categories. Given this, the development of new and successful products is essential for companies’ long-term survival. First of all, companies need to generate innovative ideas. In general, these ideas come from company-internal sources or external sources.
Company-internal sources are information from the R&D department employees, field sales force employees, customer service/service hotline employees, complaint information or suggestions from employees (Homburg, Kuester, and Krohmer 2009, p.115). Using this source of information, the organization can benefit from more directly available information that takes into account more knowledge of the existing products and resources.
On the other hand, sources of information from outside the company could be through customers, competitors, market innovation in other markets, technological developments, findings from trends, market research institutes, business consultants and advertising agencies (Homburg, Kuester, and Krohmer 2009, p.115). Gathering these information sources, the company can benefit from an “outside the box” thinking resulting in more creative ideas (company-external information sources tend to be more innovative). In particularly, customers can be a very useful source of information for product innovation.
Using creativity methods can also generate new product ideas. These methods can promote and encourage creative thinking by creating synergies, for example in cross-functional project team. Creativity methods can be: brainstorming, brainwriting, or the morphological box (Homburg, Kuester, and Krohmer 2009, p.116).
Our recommendation would be to use company-internal sources of information. By doing so, the company can benefit from its large number of employees, that are at the same time are customers. Henkel could also benefit from more direct and cheaper information. Although, to avoid a biased view the company should also hire an expert in this particular field, to get an outside opinion.
6. PERSIL PEN
Innovation has always been a main focus for Henkel. In 2007, Persil Megapearls with Anti-Gray formula was named as the “most successful innovation” in its category and voted among the top 10 most successful innovations of all food categories by Lebensmittel Praxis (Henkel 2011). Henkel works hard to innovate new products to satisfy constantly changing consumer needs. Henkel wants to focus more on the new “Green movement” that has been present in society for the past decade. According to Henkel’s mission, its aim for each product is to contribute to the sustainable development and combine top performance with human and environment responsibility.
To extend on this idea our group has thought of a new innovative product for Henkel. The “Persil Pen” is a small pen, with concentrated detergent in it that can be used on-the-go to remove stains and spills from fabrics. The Persil Pen will be small enough to fit in someone’s briefcase or purse, for a convenient and quick way to deal with life’s on-the-go accidents.
The Persil Pen in the beginning will be targeted mainly to professionals in the work force. The product can be used discreetly in the office to take care of small accidents at lunch or on the way to work in rush hour. The new product for Henkel’s detergent market will bring convenience and reliability to the busy, unpredictable workday. After the Persil Pen has gained market recognition, we plan to expand to different target groups such as students. Another possibility could be to team up with restaurants and have the pen available for use for diners, free of charge. This way they can try out the product and hopefully later purchase it themselves.
Our marketing strategy will consist of two ideas. First, we plan to target large companies and hand out the Persil Pen at meetings, offices, trade fairs and conventions. This will get the new product directly into the hands of our target market. Another promotion to get the product out in the market would be to attach a free pen with the new brand labeled detergent in the stores. This will open up the new product to the already existing group of customers that buy Persil detergent.
The Persil Pen can be advertised and communicated to the public with a focus on the redesign of the Persil Brand. This new brand strategy of changing all the packaging for their detergent to a new and more modern look, will be the perfect time to introduce Persil Pens. This will spark interest in the current customer base and attract interest in the entire Persil brand, in turn raising market shares.
As Henkel originates from Germany, we have chosen Germany as the first market for Persil Pen to be launched in. If the launch is successful we will launch in other countries using the Persil brand name. In the development of this product we think a low price would captivate a larger number of new customers, and make them aware of its existence. The price should not be too low, so that customers do not think that we are selling a low quality product. By the time that a reasonable number or percentage of the target customers are using the new product, the price should be gradually adjusted to a mid-range price, comparable to Persil’s price range.
Once the product is launched and sold, variations on the product concept can be made. This will be a unique way to stand out from competitors in the market. “Tide”, a very well known detergent company, has developed and is producing a product like this in North America. Persil can work to concur the European market for this product. Persil is already a well-established brand in Europe so brand loyalty will already be established.
This product illustrates Persil’s goal of facilitating washing for their customers and improving their quality of life. The Persil Pen will eliminate having to wash an entire work shirt with just one stain on it. Not only is this extremely facilitating for users but will also add to Persil’s environmentally friendly campaign. People will not have to waste as much water washing a garment with only a small stain. This new product will increase customer loyalty and in turn increase sales volume for Persil and
Henkel is a leading company in three core business areas: Laundry & Home Care, Cosmetics/Toiletries and Adhesive Technologies. Henkel is successfully marketing its products under individual brand names, for example Persil. Persil has a clear view of their brand reach, positioning and architecture. Henkel is constantly expanding its product mix through methods of product variation, product differentiation and diversification. Henkel gathers vital information from both external and internal expertise (Henkel 2011).
We believe that Henkel could explore alternative strategies such as brand activities, but that product variation is still the most suitable option for its current strategy. Henkel has always thrived in the area of innovation, for example Persil’s pioneer formula in 1907. We think that the Persil Pen could prove to be a new successful product with great potential. Henkel is performing well despite the downturn in economic conditions worldwide in recent times (Henkel 2011). We are confident of Henkel’s ability to create a strong foundation for the future success of the company.
LIST OF REFERENCES
Henkel 2011 (accessed October 1, 2011), [available at http://www.henkel.com]. Homburg C., Kuester S. & Krohmer H. (2009), Marketing Management; A Contemporary Perspective. Berkshire: McGraw-Hill Education. Kavaratzis M. & Ashworth G.J. (2005), City branding: An effective Assertion of Identity or a Transitory marketing trick? 96 (5), pp. 506-514. Kotler P., Keller K.L., Brady M., Goodman M. & Hansen T. (2009), Marketing Management. Essex: Pearson Education Limited.