Being Under Estimated is a Competitive Advantage

When Karsanbhai Patel introduced Nirma in 1970 (Indian Company) , Hindustan Level ( Now Hindustan Unilever) Management reacted in a typical MNC manner “ This is not our segment , its way below our level”, we need not concern. .”  But in very short span of time, Nirma’s success made them take a closer look at the low-income market and take an underdog seriously. This was only after when they faced huge losses in market share at the hands of Nirma.

It started as a single product one man outfit in 1969, Nirma almost touched close to Rs. 17 billion in close to three decades. Nirma’s mission to provide, “Better Products, Better Value, Better Living” contributed a great deal to its success. It was highly successful in keeping companies like HUL out of this segment and could carved a niche for itself in the lower-end of the detergents and toilet soap market.

Nirma Became top player in not only Detergents but also toilet soaps , By the year  1999-2000, Nirma had touched 38% share of India’s 2.4 million tonnes detergents market. HLL’s share was 31% for the same period!

So what was the reason for Nirma’s success, it did not have any competitive advantage over established players, yet it could beat them.

Some key things that Nirma did to differentiate from others, simple but effective:

• Distribution (Reach): 400+ distributors and more than 2 million retail outlets across the country. This was a huge Game Changer as it enabled Nirma to make its products available to the remotest village.
• Cost : Nirma Changed the rules of the Game, they had very high focus on keeping the costs low, kept their operations so lean that they were able to provide high value products at very low prices. The staff strength at their plant was very low (500). In contrast, Tata’s Chemical’s plant, about twice the capacity employed 10 times the number of people.
• Short Distribution Chain: The material was shipped directly from plant to Distributors (except few places in South), rather than depots. Other companies had depots and this added to their cost as the chain became longer. Nirma had its own printing press to further reduce its cost for printing and packaging.
• Brand Wars : Nirma maintained a very robust speed of upgrading it’s product basket. They also mastered the game of managing the geographical diversity of consumer preferences, e.g. North Preferred Pink coloured soaps whereas South preferred Green coloured Soaps. Initially, the advertising spend of the company was very low, as compared to other FMCG companies. Nirma spent only 1.25-2% of its turnover on advertising as compared to the normal 6-10%. They followed a simple process to place the product on the shelves first, receive feedback, and then create an enduring ad campaign

Nirma’s Success story is an example that at times Being Under estimated can be a Big Competitive Advantage …