Chester Allan, Gillette’s country manager of Indonesia, needs to decide whether increasing spending in marketing beyond 12% of sales will cause a 20-25% increase in blade sales in 1996. Despite the high market share of 48% and 97% brand awareness (See Exhibit 1) of Gillette-brand blades, the company needs to target several factors that hinder its growth by switching rural population to lower priced Gillette blades; targeting 48% of the urban male population that uses knives to start using blades; and increasing the productivity by improving the warehouses with new equipment and selecting better, more reliable distributors in order to eventually reduce expenses for the company.
Gillette needs to capitalize on increased population and economic growth of Indonesia, which has resulted in improved income levels and demand for higher-end products. However, the populations in rural areas are still not able to afford grooming products, which are regarded as luxury products. In addition, government regulation prohibiting direct import or distribution of products and different cultural practices hindering partner relationships are presenting challenges in increasing profits for Gillette.
Allan should focus on targeting segments that are not yet captured by the market share, including urban men who shave with knives and the rural population that cannot afford the expensive Gillette blades. Urban men who shave with knives account for 80% (total urban men who shave) X 60% (men who use knives) = 48% (See Exhibit 2) of the total urban men population. Since these men live in a growing market where there is an increase in per-capita income, there is a high possibility that this group will be able to afford the Gillette blades. In addition, Allan should divert the marketing strategy towards lower-end blades to target the 65% rural market that uses the competitors’ brands. Even though there is a trend towards rising incomes, it would...