The U.S. Automatic-Dishwasher and Hand-Dishwashing Detergent Markets: A Competitive Profile

Abstract

This is a study of two markets: the U.S. Automatic-Dishwasher Detergent market (the “Automatic” market), and the Hand-Dishwashing Detergent market (the “Hand” market). It follows the footsteps of seventeen 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, Alkaline AA Battery, Facial Tissue, Toilet Paper, Paper Towel, Disposable Diapers, and Sanitary Pads.

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.

The middle class is the socio-economic segment that represents about 40% of households in America.

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.

soaps are made from natural ingredients, such as plant oils or acids derived from animal fat. Detergents, on the other hand, are synthetic, man-made derivatives.

A detergent for hand-washing dishes is meant to produce suds. So, one should not use it in a dishwasher as it is intended specifically to clean dishes without the use of suds or bubbles.

Pods, the single-dose detergents for automatic dishwashers are variously called pacs, packets, pods, tabs, and tablets.

Consumer Reports found that the best-performing detergent pods cleaned dishes better than the best gels. That’s because they contain a broader mixture of ingredients that can bolster cleaning. Pods are also quite convenient. All you have to do is to put them in the dishwasher without worrying about the correct amount of detergent.

Certified dishwashers use less than four gallons per cycle. In contrast, the sink uses four gallons of water every two minutes.

The “Automatic” market had 2008 retail sales of $491 million. It had two segments: (a) Liquids and Powders, and (b) Pods--with sales, respectively, of $329 million and $162 million. However, we have conducted our analysis on the Liquid/Powder segment, which had 67% of the total sales of that market. We have concentrated our analysis on the 65-85 Oz size because it was the most popular, and accounted for 63% of total sales of that segment.

The “Hand” market had 2008 retail sales of $599 million. We have focused our attention on the 22-34 Oz size because it was the most popular constituting 55% sales of that market.

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 the “Automatic” market, the data supported Hypothesis I for both 2008 and 2007 because the market leader, Cascade (75 ounces), was a member of the mid-price segment.

Cascade is a megabrand, and its three brands had a 2008-share of 63.3% of this market.

For 2008, the data also supported Hypothesis II, because, the unit price of the runner-up, Finish (75 ounces), was lower than that of the market leader Cascade, although Finish was a member of the economy rather than the mid-price segment.

However, the data did not support Hypothesis II for 2007, because the runner-up, Cascade Complete (75 ounces), was a member of the super-premium segment.

For the “Hand” market, the results supported Hypothesis I for 2008 because the market leader Palmolive (25 ounces) was a member of the mid-price segment.

We have also determined that, for all practical purposes, the data has supported Hypothesis I for 2007, too.

For 2008, the data did not support Hypothesis II, because the runner-up, Dawn (28 ounces), had a price tag higher than that of the market leader, Palmolive (25 ounces).

However, for 2007, the data did support Hypothesis II because the runner-up, Ajax (34 ounces), had a unit price lower than that of the market leader, Palmolive (25 ounces).

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

A pattern is emerging in price-quality segmentation analysis. In twelve studies—that exclude Men’s and Women’s Razor-Blades, Coffee, Toilet Paper, Paper Towels, Disposable Diapers, and Sanitary Pads—the market leader was found to be a member of the mid-price segment, as we have hypothesized.

Also, results in eight markets supported Hypothesis II.

We also discovered three strategic groups both in the “Automatic” and the “Hand” market.