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Student ID: 0706335 Individual Assessment, IB209 Marketing Analysis 09/10 Erecting a global brand word count 2963 Student ID: 0706335 Contents:

1. Introduction

  • Overview
  • Why Durex?
  1. 1Financial performance
  2. Market share
  3. Brand strength
  4. Speed of international expansion

2. The Marketing Environment

  • The Micronenvironment
  1.  Threat of substitute products
  2. Threat of competitive rivalry
  3. Threat of consumer bargaining power
  4. Threat of supplier power
  5. Threat of new entrants
  • The Macroenvironment
  1. Political factors
  2. Economic factors
  3. Social forces (culture)
  4. Technological forces

3.The Marketing Mix

  1. Product
  2. Place
  3. Price
  4. Promotion

4. Forecast & Conclusion

5. Appendix

Introduction

Overview

Ask a random person on the street to name a major British company or brand and chances are that Durex won? t be their first choice. Despite this, Durex (whose name is a combination of its core brand traits – durability, reliability and excellence) is one of the oldest and among the top selling brands in the world. The Durex brand dates its origins back to 1929 when it was first registered as a brand name by the London Rubber Company Ltd (LRC). Durex? legacy of constant development and innovation of its products (the brand is responsible for the development of the first lubricated condom, the first anatomically shaped condom and recently), its dedication to improving the production process (first fully automated production line in 1959 and the use of the first electronic testing facilities in 1953) and the increasing awareness of the dangers of sexually transmitted diseases has helped Durex become a global name with an undisputed share of the market and factories world-wide. As a result of a merger in 1999, Durex became part of SSL International Group

1. Why Durex? Financial Performance Over the past 5 years Durex has managed to maintain continuing impressive results with year on year growth in sales. Sales rose from ? 131. 1 million in 2003 to over ?

2. 66million in 2009 (with a rise of +9. 4% in 2007/08 and +7. 3% in 2008/092). Overall the SSL group fared very well with increases of 31% in operating profit growth and a 6. 4% overall growth

3. The company which owns Durex – SSL is currently valued at 720 pence in London trading, its sharpest climb since May 19 and its highest value since November 2000, valuing the company at 1. 53 billion pounds

4. The firm said it was “well on target” to hit its goal of boosting earnings per share by 50% in the three years to 2012

5. Market Share Despite being around for only ~80 years Durex has managed to establish an undisputed leading position amongst its competitors when it comes to market share. Its current global (branded) condom share (value) increased from 32. 5% to 34. 2% 6 with it accounting for over a billion condoms being manufactured in the world. Durex is currently the number one condom brand in 16 (European) countries with its strongest hold being on countries such as: Croatia (86. -88,8), Belgium (83%85%)and England (85%)

7 . Brand Strength Due to the nature of its products, Durex is forced to operate in an environment where conventional marketing methods (such as mass TV advertising, celebrity endorsements etc) are restricted. This, combined with the social stigma attached with sex related products would usually result in big barriers for growth. However the recent rebranding of its product design and image has resulted not only in the creation of a ? 40million sub-brand (Durex Play) but also in the mass availability of Durex products in nation-wide supermarkets such as Boots, Tesco, Sainsbury? s etc8.

By producing a new aesthetically package design and changing its focus from “safer sex” to “better sex” Durex has been able to raise its sales and strengthen its global position without using an intensive advertisement campaign but rather the gradual and slow introduction of new product and packaging line. Speed of International expansion Founded in 1929, Durex now has factories in over 17 countries and is sold in over 130 countries worldwide with plans to establish themselves in more countries including China, where Durex has set up a plant which would be able to produce over 800million condoms a year

9.In markets where Durex isn? t the dominant brand, aggressive plans are made by the management to capture them

10. Four months of trading from its recent Russian acquisition, BLBV resulted in ? 10. 5 million in operating profits on a ? 45 million in turnover. Had the deal taken place last financial year, then this figure would have risen to ? 16mill operating profit.

11 This acquisition seriously strengthens Durex? s position not only in Russia but also several other Eastern European countries where BLBV was the main distributor of condoms including such large markets as – the Baltic? , Romania and Kazakhstan

12. The favorable market conditions have also allowed the targeting of companies in Australia, Greece, Italy and Spain to help the company get a stronger hold there

13. The Marketing Environment Marketing environment is the term used to describe the external forces that directly or indirectly influence an organization? acquisitions of inputs and generation of outputs. Companies usually have very little direct control but which none the less affect the way in which the organization can do business and how well it will perform.

Companies have to make sure that information about the trading environment is well communicated amongst the members of the organization so as to be able to conduct an effective marketing strategy and build a successful maintainable relationship with the customers. The Durex management has effectively realized that its continuing success relies on keeping right up to date with its consumers latest trends and desires and as such has initiated the „Sexual Wellbeing Survey? (started in 1995).

In 2006/7 Durex interviewed over 26,000 people across 26 different countries where they asked about the openness and acceptability of sex, how the consumers sexual wellbeing shaped their lives and what they desired to obtain a better sexual experience. The microenvironment. The microenvironment refers to the aspects of the marketing environment which impact the company/organization rather than impacting the market as a whole. Usually, the degree to which companies have control over is small and the best the company can do is react to the situation.

The forces involved in the microenvironment are usually referred to as Porters Five Forces. This model was developed by Michael Porter of Harvard Business School and used the concepts of Industrial Organization to determine what drove the competitive industry and hence the potential profitability of the industry

14. Porter designed this framework with it targeting companies at an industry group level. Porter believed that each company should break down their operations into separate industries each of whom should develop their own industry specific five forces approach. The threat of substitute products. Condom? s are manufactured with the intention of preventing unwanted pregnancies and the spread of disease. What this means is that the market share of people who would not use condoms would consist of: those in a long term trusting relationship, those who have been married for a long time and either want a baby or due to age they can no longer conceive, and finally those who have turned to the alternative methods of contraception. These consist of mainly of morning after pills and vasectomies.

Durex is fortunate in the sense that the substitute goods in its market aren? t an aggressively marketed form of an alternative. Due to the possible side effects of persistent use of the pill15 and the genuinely small number of people who get a vasectomy – 50 million16, of which half are in the USA – where Durex doesn? t have a strong footing yet, the only market that the company might be missing out on would be the old aged couples. Durex however has managed to solve this problem by introducing its sub brand Durex Play which focuses on providing couples with a „better? exual experience (vibrators, „wands? , „rings? etc) rather than the precautionary „safe? sex experience. Durex Play has seen remarkable growth and has now grown into a ? 40million + turn over sub-brand in a period of 2 years with sales increasing 290% over 2 years

17. The threat of competitive rivalry. In terms of rival condom brands, Durex usually has a much bigger share than any brand in Europe (Mates is the second brand of choice in UK with 12% and Trojan comes 3rd with 2%-3%)

18. In other markets, where Durex doesn? t have such a strong hold, such as USA, Durex finishes 2 nd in the rankings after the brand Trojan which accounts for roughly 75% of condoms purchased in America

19. There is little difference between the types of condoms offered by the various brands, with both Torjan and Durex having double digit number of different types of condoms, with the only main difference being that Durex focuses more on visual stimulation and having a more varied range of flavoured condoms

20. In terms of price, there is again little variation between the two brands 21. By spending large amounts on research ($20million was spent researching the new Avanti condom type), and by having a very strong position with its Durex Play brand, which is growing at rates faster than the market, Durex is able to be in a very strong position when it comes to its rivals and has plenty of exit opportunities. Threat of consumer bargaining power. In terms of consumer bargaining power, Durex has a weaker position.

Due to the nature of the product, condoms are rarely purchased in bulk and there is 0 cost to the consumer to switch goods (apart from the possibility of not liking the other product). The number of customers is the same for all companies – mainly the 16-35 age group and then a different focus on the people older than that (those who aren? t as frequent users of condoms). Where Durex does have the advantage is that its brand strength and association with high quality puts it in a favourable position to compete for both new buyers and existing customers.

Cliff Stubbs, who is the marketing director of SSL, believes that Durex? s aim to be a “a brand associated with a person’s overall sexual wellbeing” and with a number of consumer focused initiatives to reflect this , along with its considerable investment in marketing the products to the 16-25 age group, gives it the ability to promote itself through campaigns with MTV, Radio 1 and with celebrities such as DJ Westwood.

22 Despite this, independent analysts such as Michael Tully believe that due to Durex? somewhat generic image, brands such as Mates can win back the market share by targeting better, through use of partnerships with magazines such as Nuts, Zoo i. e. spending it on sponsorship – to be seen in the right environment, rather than on marketing

23. Threat of supplier power Due to Durex? s ownership of a large number of power plants, strategically placed all over the world, it is in a good position in terms of being protected from potential threats from suppliers. Its new factory in China is being opened with the intention of pushing through the growth of Durex for the next 10 years.

As such Durex are able to maintain a long lasting relationship Threat of new entrants It is currently hard to imagine a new entrant to be able to successfully enter the current market. Durex already has an established supply base as well as major distribution channels with huge high street supermarkets, its parent companies success means that it gets substantial funding to conduct research to be able to constantly develop innovative new products like the Durex Avanti range, which took 10 years and $20million to develop, but is made from a material twice as strong as latex meaning that the condom can be produced twice as thin

24. Whilst there are no cost to buyers if they switch product, the strong hold that Durex has on the market means that it is very unlikely that new entrants would be able to make a successful entrance. In 1994 the Monopolies and Mergers Commission concluded that there are significant barriers to entry for new companies which include: the cost of obtaining the relavant quality certification, the cost of establishing a brand image, the difficulty of getting listed with wholesalers and distributors and finally the possible reaction of from incumbents once entry has occurred.

The macroenvironment The macroenvironment consists of the large social forces that affect the microenvironment and that can affect the decisions of managers of an organization. The macroenvironment consist of the following: Political factors Political factors refer to the degree of intervention of the government in the economy. The main component of government intervention into the market is the provision of free condoms through the NHS. These accounted for roughly 20% of the condoms supplied in the UK in 200525 however apart from that the government has not initiated any policies or campaigns which would somehow restrict ord count 2963 Student ID: 0706335 Durex? s operation because even though it has a monopolistic share of the market, its providing a public good. Economic Factors General economic conditions such as market boom or recessions usually heavily influence the demand and consumption of goods. In the case of Durex, the recent global recession has not resulted in any financial hardships. Infact, if anything, analysts believe that the recession is actually helping improve the sales of Durex goods due to people spending more time with family rather than at work26

27.Social Factors Changes in social and cultural trends can have a heavy impact on the demand for a firm’s products. Even as recently as a few years ago the idea of selling vibrators and „cock rings? was unimaginable and companies like Boots were forced to recall stock after negative consumer reaction. However, Durex? s successful rebranding campaign and changing trends in societies attitude to sex (becoming more open about it) now means that its products are available in nearly every shop. Because the UK is an aging country, the % share of the main sexually active target market for Durex (i. . 16-24 year olds) will slowly decrease. However, Durex has managed to successfully address this with its Durex Play brand which focuses on providing couples with „better sex? rather than „safer sex? and as such it still has a product line which it can sell. Technological factors Durex? s commitment to new technology and innovation has been clear throughout its MYHISTORYS!!! with it leading the way in many areas of condom manufacture and design. The Avanti condom is the latest testament to this having taken 10 years to develop and cost $20million in the process. Despite this, as Garry

Watts points out, brand strategy should be open to the possibility of innovation, but innovation should never drive brand strategy and that if there? s conflict between the brand and innovation then it is better to launch a new brand altogether

28. The Marketing Mix The term ‘marketing mix? refers to the basic, tactical components of a marketing strategy. Price The pricing of Durex condoms is very competitive and has stayed at the same levels as other condom manufacturers or at a lower level which has allowed consumers to continue buying its products despite the recession.

Place This refers to the channels of distribution of the product. For Durex this includes its chain of supermarket suppliers like Tesco, Boots and various drugstores. As such Durex is able to get its products into shops where everyone goes and where everyone is able to see their products. Durex condoms are also available to buy online and in vending machines meaning that Durex is also able to reach out to the consumers who might be otherwise embarrassed to buy condoms in public. Product In the UK there are over 10 different condoms in the Durex range.

These range to accommodate the various combinations that consumers might be looking for – size, strength, design (ribbed or not etc) and as well as coming in various different flavours29. There is a wide variation ranging from the „Extra Safe? range to the more „fun/adventurous? „Fetherlite? brand and the first non latex condom – the Avanti (made from polyurethane). The product differentiation can easily be seen through the different designs and colours of the condoms and as such makes it easy for consumers to identify what suits their needs best. The „easy-on? esign and the simple wrapping of the product increase its functionality. Promotion Promotion is split into 4 main groups – Individual communication, mass communication, brand management and corporate identity. It is perhaps in this area that Durex particularly excels.

With its Global SexualWellbeing survey it shows its dedication to what the consumer thinks as shown by their yearly global surveys. Its brand management strategy – launched 4 years ago had a return on investment after only 5 days

30. The campaign refocused Durex? s image (better sex), allowing it to access a larger market, softened Durex? masculine image (including a complete redesign of the logo and the style of writing), improved the product range without inferring any extra additional cost and finally expanded the highly successful Play brand. Durex? s other campaigns have ventured into producing a series of funny and intentionally sexual adverts which hint at the product without ever going into graphic detail. Research shows that brand awareness rose from 44% to 75% after these ad campaigns31 Forecast and Conclusion In conclusion, Durex is a company with very strong performance.

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