The U.S. Facial Tissue Market: A Competitive Profile

Abstract

This is the thirteenth project that follows the footsteps of twelve studies that have tried to analyze the competitive profiles of U.S. consumer markets: Men’s Shaving Cream, Beer, Shampoo, Shredded/Grated Cheese, Refrigerated Orange Juice, Men’s Razor-Blades, Women’s Razor-Blades, Toothpaste, Canned Soup, Coffee, Potato Chips, and Alkaline AA Batteries.

Michael Porter associates high market share with cost leadership strategy, which is based on the idea of competing on a price that is lower than that of the competition.

However, customer-perceived quality—not low cost—should be the underpinning of competitive strategy, because it is far more vital to long-term competitive position and profitability than any other factor. So, a superior alternative is to offer better quality vs. the competition.

In most consumer markets, a business seeking market share leadership should try to serve the middle class by competing in the mid-price segment; and offering quality better than that of the competition: at a price somewhat higher to signify an image of quality, and to ensure that the strategy is both profitable and sustainable in the long run.

Quality, however, is a complex concept, consumers generally find difficult to understand. So, they often use relative price, and a brand’s reputation, as a symbol of quality.

For 2008 the U.S. Facial Tissue market had sales of $1035 million.

Using Hierarchical Cluster Analysis, we tested two hypotheses: (I) That the market leader is likely to compete in the mid-price segment, and that (II) Its unit price is likely to be higher than that of the nearest competition.

For both 2008 and 2007 the results supported Hypothesis I. The market leader Kleenex was a member of the mid-price segment, as hypothesized.

However, the results did not support Hypothesis II for both 2008 and 2007, because the runner-up, Puffs was a member of the premium segment with a higher price tag to match.

We found that relative price was a strategic variable, as hypothesized.

A pattern is emerging in price-quality segmentation analysis. In ten of the thirteen studies—that exclude Men’s and Women’s Razor-Blades, and Ground Coffee—the market leader was found to be a member of the mid-price segment, as we have hypothesized.

Moreover, results in seven markets supported Hypothesis II.

We also discovered three strategic groups in the industry.