SACHET MARKETING; AFFORDABILITY FOR POOR CONSUMERS OR ACQUISITION STRATEGY FOR WISE ENTREPRENEURS
The Lagos Startup Week concluded on Saturday. It was a very impactful three-day physical session, but then the discussion is not about the LSW 23 but about an experience I had on my journey back home. I saw a JIK 1000 ml in the shopping bag of someone, and I kept asking if JIK was still even in the market.
Let us cast our memories back to 2011, when the Tolaram group launched what would become one of the biggest new cats, shutting down the old cats. Yes! This is because Hypo would go on to become the brand name for bleach and whitening products on the market. Well, the millennials would always taunt the Gen Zs for not getting to experience JIK at the climax of their products and how amazingly good they were as products.
While I do not agree with such a philosophy, it is not the core of our discussion. How about we discuss what brought about the Renaissance in this industry?
Was it product quality? Was it better marketing and advertising, or was it a pricing issue?
It was simply a SACHETIZATION strategy that Hypo utilized to become a brand name in this industry. What, then, is sachetization?
Ultimately, we aim to delve into the concept of sachetization as a means to increase market penetration and cater to varying purchasing powers.
Defining Sachetization:
Sachetization, as defined by Sy-Changco of Ateneo de Manila University in The Philippines, refers to the endeavor of enhancing market penetration by offering products in smaller, more affordable packs. Contrary to popular belief, sachetization does not necessarily entail reducing prices; instead, it involves tailoring products to align with consumers’ financial capabilities.
A Response to Economic Constraints:
Sachetization can be viewed as a response by entrepreneurs and organizations to a decline in aggregate demand resulting from reduced purchasing power and increased economic hardship. It involves rebranding products into smaller packages, maintaining the same quality while offering them at reduced prices. Numerous examples can be found in brands such as Dettol, Baileys, Fresh Yo, and Chivita.
Case Study: Wonder Foods (Promasidor):
My first encounter with sachet marketing was through Wonder Foods, now known as Promasidor. Initially, their flagship product, Cowbell milk, was priced similarly to the market leader, Peak milk. However, sales of the 400g powdered milk product were lackluster. To compete with other milk brands, the company began purchasing larger milk packages, which were then divided into smaller polythene bags by wholesalers for resale. This innovative marketing and distribution strategy yielded some success. Subsequently, Cowbell imported milk in smaller sachets to cater to middle- and low-income consumers, resulting in increased revenue. Over time, the company expanded its product range to include chocolate drinks, tea, and seasonings, achieving an annual turnover of over $300 million in 2010.
Profitability of Sachetization:
Contrary to popular perception, sachetization is not inherently profitable for companies. Taking Hypo as a case study, a 1000ml bottle is priced at N800, while a 75ml sachet costs approximately N80. Simple economic calculations reveal that purchasing 10 sachets of 750ml Hypo (equivalent to 1000ml) would cost N800, providing 250ml less product compared to buying the bottle. As a manufacturer, selling in sachets becomes even more profitable due to cost savings.
Expanding to Services:
Sachetization extends beyond products and finds application in the service industry as well. This strategy is notably prevalent in the telecommunications sector, where service providers offer smaller, more affordable packages to cater to diverse consumer segments.
The Sachet Water Paradox:
Contemplating the prevalence of sachetization, one cannot help but wonder if it played a significant role in the popularity of sachet water. While further analysis is required, it is evident that the concept of sachetization has permeated various industries, bringing products and services within reach of a broader consumer base.
Conclusion:
Sachetization has emerged as a strategy to enhance market accessibility and cater to consumers with limited purchasing power. By offering products and services in smaller, more affordable packages, businesses have sought to increase market penetration and address economic constraints. Though often misunderstood as a profit-maximizing technique, sachetization can yield financial advantages for manufacturers. As this trend continues to shape industries, it remains vital to explore its implications for both businesses and consumers.
But then…
Entrepreneurship is quite a dynamic and interesting game. Every strategy has its pros and cons. No strategy lasts forever, leaving one to keep testing the waters and massively implementing what works. In the end, it is not to him who has the best business idea, nor to him who is better branded. It is rather to him who is able to keep his head up in the game long enough to play his card well and check up with a pick 2
