innovation and entreprenuership

Course: ENTR 8000 Section

Date: February 18, 2019

Assignment #3B Market Assessment

14

Business Summary:

Shampoo Company is an innovative organic bar shampoo that is sustainable and has zero waste throughout its supply chain. It uses cornstarch packaging which will dissolve once submerged in water. The goal is to help conserve the present and future generations by eliminating the use of plastic containers.

Section 1: Industry Description & Analysis

The main objective of shampoos is to eliminate dirt and oil without making the hair out of control or frizzy (Zion Market Research, 2019). According to the Zion Market Research, “the market is categorized by anti-bacterial shampoo, anti-dandruff shampoo, herbal shampoo, and care shampoos (Zion Market Research, 2019). Asia is the leading user of shampoo and this development is predicted to be consistent in the incoming years (Zion Market Research, 2019). North America and Europe is also considered the largest purchasers in the market due to the increase in purchasing power and the development in products (Zion Market Research, 2019).

The green industry bases its financial gain with accordance and concern in the environment (FranchiseHelp.com, 2018). In order to reduce waste and use of chemicals in the supply chain, as this industry acknowledges the significance of the natural capital (FranchiseHelp.com, 2018). A report from the year 2014 states that, 55% of customers agrees to pay more for products that are sustainably approved, and a research in 2013 says that 71% of consumers recognizes green products (FranchiseHelp.com, 2018).

Industry Size

The industry size of the shampoo market is growing, as it is concluded that the trends through product improvisation and problems regarding hair is predicted to support in this term as the Compound Annual Growth Rate (CAGR) is expanding at an average degree (PersistenceMarketResearch.com, 2017). A forecast formulated by the Persistence Market Research reports that, the shampoo market is estimated to be USD $13 Million in 2022 – this shows that fifty percent of the profit share of the sector is lost in 2017 (PersistenceMarketResearch.com, 2017).

Asia-Pacific has the largest share of consumers in the international shampoo segment – with 2,194 units of the products was consumed in 2017, with the CAGR amounting to 6.2% while South America accelerates quickly with its CAGR of 9.2% (MordorIntelligence.com, 2018). The global market is rising as the problems regarding hair like dandruff, irritation, falling hair, etc., and as the raise in the income per household, improved lifestyles, and the harmful environment are the common reasons for the boost in the market (Zion Market Research, 2019). Additionally, the growth rate is explained due to the currency rate during a 3.8% increase in the unit sales (MordorIntelligence.com, 2018).

Financial Averages

Average marketing expenditure

Shampoo Company is a business to Consumer Company, due to this 5 to 10% will be shed for the marketing, as the brand commits to provide in its marketing channels to gain and reach a variety of consumer sectors (BDC.com, 2019).

The different marketing channels include: the Website, wherein the company has to update the information daily with analytics, to record where the visitors of the websites are viewing from, and this will help understand the consumers (BDC.com, 2019); Social Media platforms, that shares content daily (BDC.com, 2019); Online advertising, it is estimated to be $1000 per month for the ads (BDC.com, 2019); and Informational Videos, the budget comprises of a videographer and an editor (BDC.com, 2019).

Cost of Goods Sold

The cost of goods sold for the Shampoo Company is low because it is organic, and the natural resources of the product and labor are outsourced from different countries that have a lower income per capita.

Pestel/Pestle Analysis

Political

· General decrease in terms of trade barrier because nowadays consumers lean towards organic products.

· Products that are tested with animals are being banned by the government.

· Slight increase in salaries in Canada that will result in more buying powers of the Canadians

Economic

· Increase in purchasing powers of Canadian citizens.

· Due to increase in inflation. The expenses of raw materials will increase as well.

· Counterfeit products will greatly impact the sales of the business.

Social/ Socio Cultural

· Increase in demand due to people are affected by videos in the internet showing the negative effects of using synthetic chemicals

· Increasing numbers of married or unmarried couples that do not have children will have more time and money to spend on products.

Technology

· Digitalizing marketing tools, communications and promotion will greatly impact the brand awareness of the company.

· Beauty community emerges on online platforms

· Increase in numbers of smartphones and technology will mean that there is a lot of possibilities for them to be reached by the advertisement

Environmental

· Increase in a law that protects the environment from harmful chemicals.

· Emerging movement that will force company to be transparent regarding their water and waste

· Taxes on industrial and chemical waste

Legal

· Increase in rules regarding on recycling

· Prohibiting companies to test or experiment their products with animals.

Porters 5 Forces

Threat of New Entry

· High capital requirements.

· Having a strong brand name is important.

· Barriers to entry are high.

· Loyalty to brands is important.

Bargaining Power of Consumers

· The product is important to consumers, low bargaining power for consumers.

· Large number of consumers. High leverage for the company.

· Products are highly customized making consumers to be less likely to switch to different brands.

Threats of substitute

· Substitutes will have lesser quality.

· Having inferior substitute will not affect consumers buying decision.

· Product is highly differentiated that will give the company a leverage.

Bargaining power of supplier

· High switching cost for suppliers

· Amount and volume is critical to supplier

· Huge and diverse distribution channel of the company weakens the bargaining power of suppliers

Competitive rivalry

· Relatively high amount of competition lush, bath & body works, etc.

· Large industry size will allow companies to grow and prosper.

· Industry growth rate is high

Section Two: Market Description & Analysis

The market

Shampoo Company will be targeting green consumer millennials aged 23-38 years old who are not only environmental aware but also environmental responsible –these consumers prioritize to purchase sustainable products for themselves and for its household members.

Market size

The millennials are said to be the most sustainable among all generations (Saussier, 2017). According to the survey conducted by Nelsen and Deloitte, millennials are willing to spend more for services or products that are eco-friendly (Saussier, 2017).

The table below shows that consumers are willing to pay more for sustainable products, 51 percent of the participants of this survey are millennials (Saussier, 2017).

According to the 2018 report of 10,455 millennials across 36 countries, 33 percent millennials believe that businesses should improve and protect the environment (Deloitte, 2018). Which is why millennials today, are very picky when it comes to choosing the product that they purchase.

Shampoo Company will target green consumer millennials since according to research, 66 percent of the global buyers are willing to pay more for sustainable products and with that 66 percent, 73 percent are the millennials (Curtin,n.d). In addition to that, about 84 percent of Green Consumers think that the products that they purchase should have a recyclable packaging (Hitwise, 2017). This benefits Shampoo Company since it offers a zero-waste product.

In addition to that Forbes also concluded that 73 percent of millennials are willing spend for eco-friendly products (Forbes, 2018). Also, the survey conducted by Nielsen below also shows how Millennials sustainability level is greater than the Gen x and Baby Boomers (insight, 2018).

Source: The Conference Board® Global Consumer Confidence Survey conducted in collaboration with Nielsen Q2 2017

Forces and Trends impacting the market

According to the Consumer View study, after brand and its price, sustainability is the third most common factor in the buying behaviour (Cyberclick, 2018). Today there are many trends that affects the purchasing behaviour of the consumers. One of the major trends in 2018 is the Plastic Pollution. According to the leading market intelligence agency Mintel, the problem with plastic pollution caught the attention of the consumers (Conway, 2018). That’s why it also became a trend in social media.

The #plasticfree hashtag campaign became one of the most popular hashtag trends people who are sustainable using in social media (Heathman, 2018). Indeed, Social Media has become the influential voices of this generation (Brown, 2018). And with the help of Social media influencers who promotes sustainability, they create a positive impact in the society (Brown, 2018). Consumers today are becoming more aware in the environment and beginning to put extra effort in making the world better.

The eco-friendly influencer or what we call the green-living influencer help bring awareness to a sustainable life (Brown, 2018). Hence, buyers these days are becoming more educated about the environment which affect their purchasing behaviour (Franchise, 2018).

Today, even consumers are becoming wiser and wiser in regards with their daily expenses, they are still willing to spend more for sustainable products/ services (Forbes, 2018). Which they think is must and not just a trend to follow. Since according to the Nielsen’s 2015 Global Corporate Sustainability Report, 66 percent of consumer would spend more for sustainable products (Forbes, 2018). And to the prediction of Consumer lifestyle trends which is over the next 3-5 years “Consumers wants to have a positive contribution to the environment and to take pride in a sustainable way of living “(Kantar Consulting,2018). Thus, will be a good sign for Shampoo Company to enter the market and make a movement in making the world a better place to live for the benefit of the present and the future generations.

Section Three: Competitive Description & Analysis

Direct Competitors

Shampoo Company’s direct competitor are Lush and Rocky Mountain Soap. The direct competitors are both organic shampoo soap which is free from animal testing and they are both made by hand (Lush Fresh Handmade Cosmetics, Rocky Mountain Soap Co., N.D.)

Indirect Competitors

Information Chart

One of the strengths of the Shampoo Company is first and foremost it is environment friendly. We all know that plastic containers, plastic wrappers are one of the causes of global warming. Because of the wastes that is not segregated properly it causes harmful effects on the environment (VOA News, 2019). The Shampoo Soap comes in a cornstarch packaging wherein it dissolves easily in water (Murray, 2019). Secondly, the shampoo is made with organic compounds wherein it does not contain any harmful chemicals that may cause skin and scalp problems in the long run. Third, the product is very affordable since all consumers should be aware of the evident problem of our environment not just the rich people. Lastly, the product will be carried out by all retail outlets and online stores so that consumers may easily access the products whenever and wherever they are. In addition to that, we also support organization such as Plastic Oceans Foundation Canada, which goal is to give awareness about the Plastic pollution in the world and inspire people to make a movement to end plastic pollution (Plastic Oceans, 2017). We opt to support this organization by giving our 10 % sale for each bar purchased.

Brand awareness is the main problem of Shampoo Company. Products such as our indirect competitors have already established their brand for several years now. Thus, there is a possibility that consumers might not switch to Shampoo Company since they are already in their comfort zone and does not want to try another brand that is new to the market.

Threats

One of the eminent threats the product may have is our competitors. Once we share our product to the market and they noticed that we are capturing a large chunk of the market share, they will surely make their own product which is probably much the same in order to get a piece of the market share.

Consumers Purchase Decision Criteria

When consumer makes a purchase decision, budget always comes first to mind. Consumers always wants to get more by paying less (Stringfellow, 2018).

Another benchmark is the usage of chemicals. Most of the known brands in the world have scientists that works on a lab to study the chemicals added to it to ensure safety of their customers and other brands avoid the use of chemicals to ensure that they are leading towards a healthier and sustainable product (Stringfellow, 2018).

Consumers buying behavior depends on the packaging of the product and the branding. They consider the color, and size of the product. It must be appealing to consumers for them to consider the particular item. Marketing the products is also an advantage, it helps increase the brand awareness of people. Big brands do commercials to reach the millions of consumers by using celebrities to represent their brand. (Essays, 2018).

Conclusion

Shampoo Company acknowledges the significance of natural resources, and acquires capital from following guidelines and with the help and concern of preserving the environment. Millennials are primarily the target market since according to a research in 2017 made by Nelsen and Deloitte, they are inclined to patronize sustainable products and services. Since eco-friendly products and services is the third in the consumers’ purchasing behavior, plastic pollution awareness got the consumers’ attention and people want to do something about it. As individuals have been educated on this matter, they focus on bettering the planet, which helps them decide in buying eco-friendly products.

The product’s toughest competitor would be its competitor inside the market which is Lush shampoo bar. As this also offers sustainability and has already established its brand awareness. Hence, we strongly believe that Shampoo Company is better than other competitors in the market for the following reasons: First, our product is not only made from organic ingredients but also offers quality product which helps hair become healthier. Moreover, the shampoo has a variety of scents to choose from which are all hypoallergenic.

Second, we are the first shampoo bar that uses dissolvable corn starch packaging which produce zero waste. And lastly, we support organizations such as Plastic Oceans Foundation Canada, which is the goal is to inform the topic of plastic pollution in the world and inspire people make a movement to end plastic pollution (Plastic Oceans, 2017 ) by giving 10 % of our sale for each bar purchased.

References:

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