Unilever’s New Pricing Strategy
1. Introduction
Unilever Thai Holdings Ltd, a large consumer products maker, have taken up a new pricing strategy and setting the phase for ferocious competition in this sector. This is seen as a bid to ward off new entrants to the market and to consolidate their grip over the customers. The new strategy comes in the wake of dropping prices of many commodities, which has led to a need for the company to find new revenue sources.
2. Company Background
Unilever is one of the world’s oldest and largest multinational corporations. It was formed in 1930 by the merger of two British companies, Lever Brothers and Unilever. The company has over 400 brands in over 190 countries and employs 168,000 people (Unilever, 2016).
3. Products and Distribution
The Unilever Group owns many well-known brands such as Lipton, Knorr, Dove, Rexona and Omo. In Thailand, its products are distributed through supermarkets, hypermarkets, convenience stores and its own network of over 4,000 direct sales outlets. It also has an e-commerce website and a home delivery service (Unilever Direct).
In terms of product mix, Unilever offers food, beverages, home care and personal care products. Its product range is vast and caters to all segments of the population.
4. Communication Strategy
In terms of communication strategy, Unilever uses various channels to reach out to its target audiences. These include television, radio, print media, outdoor advertising and digital media. It also organises promotional events and sponsorships to create brand awareness and recall.
The company relies heavily on television advertising to promote its products. In 2015, it spent US$566 million on TV advertising, which was more than any other advertiser in Thailand (Nielsen, 2015). This was followed by personal care products maker P&G Thailand with US$556 million (Nielsen, 2015).
Radio is another key channel for Unilever as it reaches out to rural consumers who may not have access to television. The company has its own radio station – Radio Mango 96.5 FM – which airs programmes that focus on music, entertainment and lifestyle topics. It also uses this channel to promote its products through branded content and adverts.
In addition to traditional media, Unilever is also active on digital platforms such as social media, search engine marketing (SEM) and display advertising. It has a strong presence on Facebook with over 2 million fans (as of December 2016) and uses this platform to engage with consumers and promote its products. For example, it ran a campaign on Facebook called ‘Search for OMO’s ambassador’ where users had to find an image of OMO detergent powder hidden in a picture (Omo Thailand Facebook page).
Unilever also uses SEM to generate leads for its home delivery service – Unilever Direct. When users search for ‘home delivery’ on Google, they are shown an ad for this service along with a contact form. Once the form is submitted, a sales representative from Unilever contacts the customer to discuss the delivery options available.
Finally, Unilever also uses display advertising on websites such as Bangkok Post and Khao Sod to promote its products.
5. Pricing Strategy
Unilever’s pricing strategy is based on a mix of price skimming and penetration pricing. For new products, the company uses price skimming to maximise profits in the early stages of the product life cycle. As the product becomes more established in the market, it starts to compete on price and this is when penetration pricing is used.
The company also offers discounts and promotions on its products to attract buyers. For example, it ran a promotion in 2016 where customers could get a free bottle of shampoo when they purchased two conditioners (Unilever Thailand website).
6. Product Strategy
In terms of product strategy, Unilever follows a portfolio approach. This means that it offers a wide range of products across different categories in order to appeal to a broad range of consumers. The company’s portfolio includes food, beverages, home care and personal care products.
Its food brands include Knorr, Lipton and Knorr Cup Noodle. Its beverage brands include Lipton Ice Tea, Pukka Herbal Tea and Pureit Water Purifiers. Its home care brands include Surf Excel, Comfort Fabric Softener and Domex Toilet Cleaner. Finally, its personal care brands include Dove,Rexona and Sunsilk Shampoo.
The company regularly launches new products in order to sustain growth. For example, it launched Knorr One Skillet Meals in 2016 and Rexona motionsense deodorant in 2015 (Unilever Thailand website). It also relaunched its Lipton Ice Tea range in 2016 with new flavours and packaging (Lipton Thailand website).
7. Preferred Consumers
Unilever’s preferred consumers are families with young children. This is because these families are more likely to purchase multiple product categories from the company such as food, beverages, home care and personal care items.
The company also targets working mothers as they are time-pressed and often have less time to cook meals from scratch. For these consumers, Unilever’s range of ready-to-eat meals offer a convenient solution.
In addition, Unilever also targets rural consumers as they are an important growth market for the company. It has invested heavily in marketing and distribution in these areas in order to build up its brand equity among these consumers.
8. Conclusion
Unilever is a large multinational corporation with a vast product portfolio that caters to all segments of the population. It has taken up a new pricing strategy in order to consolidate its position in the market and ward off new entrants. The company has also invested heavily in marketing and distribution in order to reach out to its target audiences.