Addendum to International Sales – Understanding and Tackling New Markets

On the basis of specific feedback from a reputed professional, C.P. Mohan, with whom I share Institute of Rural Management Anand, or IRMA, as alma mater, an addendum has been made to the Pyramid Model for Market Understanding, or PMMU, which was explained on the blog: International Sales – Understanding and Tackling New Markets –https://nowhereperspectives.com/2020/07/10/international-sales-understanding-and-tackling-new-markets/?fbclid=IwAR0rKgUce8Thmmaa2L4clcBlUrFBiB-Mr_tjUj0Z-UoXUeAQQNvLCzS-Qkk. This addendum deals with three points: demand estimation, steps in understanding trade and positioning challenges.

Demand Estimation in the PMMU followed a guesstimate-approach because it was based on on-the-job experience, not on any particular Market Research method, for, as a marketing professional who used to go on short visits to a country, it was not possible for me to have the wherewithal to conduct any systematic market research. Hence, the PMMU in general and the demand estimation method in particular are more of directional guidance than conclusive milestones for an international marketer. Nonetheless, there are a few essential elements that need to be part of demand estimation. Gender demographics is one such factor. It is common knowledge in the perfume trade that there are more perfume users among women than men. A rough ratio of this gender metric is 60:40 in favor of women. Hold your breath for a moment! There are many perfume manufactures, including Nabeel Perfumes Group of Companies, Dubai, which employs me, that sell more Pour Homme than Pour Femme. 

Why is this incongruity? Well, I learnt from counter sales staff and merchandisers across the continents – I am fortunate to visit 86 countries – a ubiquitous consumer behavior that many women use men perfumes but not vice versa. Furthermore, my interactions with consumers at retail shops, bulk-buyers at wholesale points corroborated this cross-gender consumer preference. What is the psychology behind this? Men perfumes generally are of stronger scents while women perfumes are lighter fragrance. Marketers say they do not sell products but emotions! Many women want to project a strong personality, hence, prefer the stronger fragrances in men collections. ‘Brut’ brand of perfume is a good example of the woman-power of a men perfume. ‘Dolby’ under “Chris Adams,” the brand I sell, also has this crossover effect. My experience shows that around 10-15% of women perfume users ALSO use men perfumes. The word: ALSO is very important because it means that such women consumers use both men and women perfumes – their dressing tables have both Pour Femme and Pour Homme collections, and which one to use depends on their mood, occasion, time of the day, etc. 

Another metric that is of vital importance in demand estimation is the percentage of working population. Ghana’s working population in 2019 had the following data: Employment to population ratio was 38.33% — modeled I.L.O. estimate — for males in the standard age group of 15-24 while it was 33.51% – modeled I.L.O. estimate – for females for the same age group. The source of the data is the International Labor Organization: ILOSTAT database – retrieved in December 2019 – and the I.L.O. says, “Employment to population ratio is the proportion of a country’s population that is employed. Employment is defined as persons of working age who, during a short reference period, were engaged in any activity to produce goods or provide services for pay or profit, whether at work during the reference period (i.e. who worked in a job for at least one hour) or not at work due to temporary absence from a job, or to working-time arrangements. Ages 15-24 are generally considered the youth population.” 

The male to female ratio of Ghana’s 31 million population is 102.62 to 100 which gives 15.70 million males and 15.30 million females. So the working population of Ghana comes around 11.15 million – 38.33% of 15.70 million males + 33.51% of 15.30 million females. This 11.15 million working population in the age group of 15-24 has a significant share in my rough estimate of 60% perfume users of 18.60 million in Ghana. 

Average per capita income, another determining factor in demand estimation, may be misleading in communities with significant income disparity. So the per capita income of US$1800, which I mentioned for Ghana, is more of macroeconomic relevance than an essential element in the demand estimation. Nonetheless, prevailing habit of perfume usage — fitting into the suiting prices — as a part of lifestyle across the income groups, however, can offset this shortcoming to a great extent.

Understanding Trade: From a trade point of view, perfume can be classified as Oriental and Occidental perfumes. Occidental perfumes are French-line perfumes, and Orientals are of Arabic type, with Oudh being the most renowned from this stable. Genetic classification gives eight families of perfumes: Fresh, Floral, Florential, Oriental, Fougere, Woody, Chypre and Gourmand. Based on concentration of fragrance, classification of perfumes goes this way: Eau de Cologne, concentration 2 to 4 %; Eau de Toilette, or EDT, has 5 to 15% level; Eau de Perfume, or EDP, 15 to 20%; and Perfume Oil; 20 to 30% concentration.

Distribution Channel Penetration: By and large, we can say that urban and suburban dwellers are the consumers of Designer perfumers. Hence, these two types of perfumes are mostly sold through modern trade channels like high-end stores located at shopping malls, pharmacies and other perfumery and cosmetic stores located at affluent areas. Mass-market perfumes are sold through supermarkets, low-end perfumery and cosmetic chains, textile shops, fancy stores, pharmacies, etc. Significance of distribution channels varies from country to country. For example, pharmacies are the main channel in Argentina. In Peru and Chile, Modern Trade, or M.T., channels of malls, perfumery chains are the main outlets. In Zambia, pharmacies are an important channel in the cities while fancy stores in the country side. In sub-Saharan Africa, perfumes and cosmetic shops — doing both wholesaling and retailing — fancy stores, roadside makeshift-shops, hawking, etc. are the channels. In South East Asian counties like Hong Kong, Singapore, Malaysia, M.T channels contribute bigger share. In general, in advanced and more-developed developing countries, Mass-market perfumes are sold mainly through M.T channels while less-developed developed countries, the channels are mainly of traditional outlets.

What are the existing relationships and how to identify the soft spot for penetration and entry? Single-brand retailing hardly exists in Occidental perfumes though Oriental perfume companies do so because of the range of products within the same brand. Such retailing is done at manufacturers’ home turfs or in the areas where they have control. However, this is not a recommended model for a global scale of operation. For Mass-market type, distribution needs to look at stores and shops where middle-income people shop at. People buy a new brand of perfume after smelling it – this is the soft spot in penetration. When you launch a perfume in a new country, support your distributor with enough testers of the new perfume. Use testers to generously spray on paper blotters and make potential walk-in consumers feel it. 

Positioning Challenges: When you buy cooking oil, you buy it for the use by your family, but when you buy perfume, you buy it for yourself. It means that lots of personal likes and dislikes like type of scents, color of perfume boxes, shape of bottles, etc. will come into play. There are a few characteristics that are unique to perfume trade. All types of perfumes have the core product attribute: durability of scent – how long it lasts on your body after spraying. The commonality ends here as each type – Mass-market, Celebrity and Designer – of perfumes has its own characteristic product attributes. In other words, perfume is a luxury product, but a zooming in of the trade will show that many attributes, barring the core product attribute, of luxury have different meanings for different types of perfumes.

In Designer type perfume, attributes like shape of bottles and their exquisite elegance and packaging; color, shape and nature of material used in the box play significant role in buying decisions. Price is not a very significant factor as Designer perfumes are more brand than products. Retail price of Hugo Boss or Christian Dior going up from US$100 to US$110 will not likely deter a brand-loyal consumer from buying it. Designer type perfumes have very high brand loyalty, hence, can withstand price shocks – aesthetic value overpowering price value.

Mass-market perfumes has an underlying positioning assumption: making luxury affordable. In other words, Mass-market perfumes target those who cannot afford a US$100 perfume but want to wear same scents at a lower price. The business model of Mass-market perfumes imbibes this consumer fundamental by bottling scents of the most popular Designer perfumes, with differentiating packages. So Mass-market perfumes are like this or that: like Boss Orange or GUCCI Guilty or Dior Joy, etc.  In Mass-market perfumes, price plays domineering role in influencing buying decision though aesthetics has inherent strengths in influencing consumer behavior in varying degrees. Price completely overpowers aesthetics in Mass-mass perfumes – diametrically opposite of Designer perfumes. If a manufacturer, however, can take up the challenging task of producing a mass-mass brand with good aesthetics in terms of attractive packaging by leveraging size-cost equilibrium  – nothing significant can be done on fragrance concentration due to the limiting factor of price –  then the brand can still be differentiated in the same segment.

In Mid-mass segment, price still plays domineering role, but aesthetics claims its due space in consumer choice. A perfume consumer who wants to buy a good brand that will last longer and has aesthetics derived from an exquisite bottle and attractive packaging and at the same time at an affordable price suiting his purse, then he/she is looking for a Mid-mass type perfume. This is a delicate balance between luxury and price – a consumer needs luxury and want that luxury within his/her affordability. This type of perfume is the most challenging for a marketer to drive volumes. 

Masstige type perfumes have an equilibrium between price and aesthetes – I will put it as 50:50. Both price and aesthetics are equally important in influencing buying decisions. I am willing to pay extra but give me better-looking bottles and more attractive  packaging — the buying attitude in this type. Pricing of masstige type of perfumes allow enough room to maneuver on aesthetics. However, a manufacturer here cannot pay too much attention on aesthetics and cross the masstige price barrier because then he/she shall be foraying  into the turf of Celebrity perfumes  whose dynamics are different. If a marketer cannot price-differentiate masstige brand from Celebrity brand, his masstige brand might fail. Suppose that you have retail- priced your masstige brand at US$25 in market where Antonio Banderas or Shakira — both are Celebrity brands — is sold at US$27, then many consumers are likely to go with Antonio or Shakira. Hence, positioning of masstige should be below Celebrity with reasonable price difference.

The PMMU model can be used to understand the market for any product. Let us look at the Beauty Soap Market. Brands like Claus Porto, L’ Octane Cravtree and Evelyn and Dior Joy come under Luxury/Premium type; Tom Ford and Victoria Secrets brand under Celebrity type; Dove being Masstige; Lux, Vivel and Pears in Mid-mass range; and Nirma, Hamam amd Lifebouy are Mass-mass type.