The U.S. Deodorant Market: A Competitive Profile

Abstract

This is the twenty-first paper—and the 22^nd study--that follows the footsteps of twenty one 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, Sanitary Pads, Automatic-Dishwasher Detergent, Hand-Dishwashing Detergent, Household Liquid Non-Disinfectant Cleaner, and Heavy-Duty Liquid Laundry Detergent.

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.

The U.S. Deodorant Market had retail sales of $1,324million in 2008. It had five segments: Aerosol, Cologne Type, Rollon, Stick/Solid, and Remaining Deodorants. We have chosen the Stick/Solid segment because it was by far the largest with 2008 U.S. retail sales of $911 million, constituting 69% sales of this market.

We have focused our attention on the 2.5-2.8 Oz size because it was the most popular.

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 data did not support Hypothesis I because Secret, the market leader, was a member of the premium segment.

For 2008, the data supported Hypothesis II, because Dove (2.6 Oz), the runner-up, had a price lower than that of Secret, the market leader.

For 2007, technically, the data did not support Hypothesis II, because the unit price of Dove (2.6 Oz) with a unit price of $3.36, was just a little higher than the $3.29 unit price of the market leader, Secret (2.6 Oz).

So, we have determined, that for all practical purposes, the data did not negate Hypothesis II.

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

We also discovered three strategic groups in this market.

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

Also, results in eleven markets supported Hypothesis II.