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You are here: Home > Current Topics > Mind your Business > 12 September 2005 |
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There are some products that are an unfortunate necessity in life and for the companies that manufacture these products the marketing and sales of them bring specific problems and issues as well as opportunities. The world's population is currently around 6.5 billion. Of that figure around 3.2 billion are women. Every woman in the world has to endure the biological process of menstruation - it is a fact that is inescapable. The very nature of this process however does make it a delicate subject for many people. Because of this, there is a dearth of information about how women handled their period in the times before the regular use of some form of sanitary towel or tampon. For the most part it seems that nothing was used apart from normal underwear (see Museum of Menstruation and Women's Health(http://www.mum.org/whatwore.htm)) so the development of products such as sanitary towels and tampons is relatively recent. Despite the revolution in feminine hygiene that has occurred since the early part of the 20th century, the subject is still one that many people would rather not think about. But, if we look at it from the perspectives of economic and business analysis it raises some interesting points. 
Image: The changing role of women has meant that the attitude towards feminine hygiene products and how they are marketed has changed. In addition the market has expanded as related products are developed to cater for different needs. Copyright: Ulrik De Wachter First some basic 'facts' about this issue and the product: Menstruation occurs between the ages of around 12 to 55. The average woman will have 500 periods during that time (Source of information: NetDoctor.co.uk(http://www.netdoctor.co.uk/health_advice/facts/menstruation_cycle.htm)). The period of menstruation lasts for anything from 3 - 7 days (let's assume an average of 5 days) and it is recommended that tampons should be changed every 4 - 8 hours (see Tampax FAQs(http://www.tampax.com/questionsanswers2.php?topic=3)) (let's assume an average of 6 hours). Therefore, the average woman is likely to use 20 tampons during each period. A box of 30 of the leading brand, Tampax, retails at £2.58 at Tesco (as of 26th August 2005). In the lifetime of a woman therefore the number of tampons used will be 10,000, which in turn would mean buying around 333 boxes of Tampons. Given the retail price quoted (and bearing in mind that inflation and wage increases would make some difference to the overall figures) the total amount spent by the average woman over their lifetime on this product is £860. If we relate this back to the number of women in the world it is easy to see that the potential market is very big indeed - around £2,752,000,000,000,000! There are two main types of product available in this market - tampons and towels. Tampons were developed by a Denver, Colorado physician, Dr Earle Cleveland Haas in 1929. The other is a sanitary towel, which had been in use from the 19th century. The number of manufacturers in the market is limited - there are basically five major names, Proctor and Gamble who own the major brands Tampax and Always, Kotex, owned by Kimberley-Clark, Playtex, owned by Playtex Products Inc, Lil-lets owned by Accantia and Bodyform owned by SCA Hygiene. Branding is an important aspect of the market; there are a number of brands in the market and for the manufacturers, the importance of brand loyalty is very high. For many women the importance of using a product that they feel both confident about and comfortable with is of vital importance. The manufacturers therefore are very keen to ensure that they market the products effectively and this means getting their message across to women at the earliest opportunity - often the first product used is the one that a woman will stick with for the rest of their lives. Both Tampax and Lil-lets have dedicated Web sites with information and advice for women about the products. In addition, they both have representatives on the ground visiting schools to give advice to young women about the whole issue and of course this also represents a useful time to get products to potential users. Over the years, the products have also undergone some changes. It might seem difficult to imagine how new product development could be important in such a market but it is, because of the necessity of refining the design and making the products more efficient as well as responding to changing market conditions and needs. Tampon manufacturers have also had to cope with the effects on sales as a result of health scares notably something called toxic shock syndrome. This has led to a switch to the use of sanitary towels and the design of these has improved considerably over the years to incorporate more comfort and efficiency. 
Image: Always, owned by Proctor and Gamble, one of the major brands in the towels market. This type of product has undergone a number of design changes in recent years and has regained popularity after rumours of health scares in the use of tampons. In addition, the changes to the social structure of society and the increasing independence of women has meant that companies are able to advertise the product in ways that would not have been possible even 20 years ago. The first ever advert for a sanitary towel on television in the UK was on 10th March 1986 - the advert was for the Dr White's brand. In addition to TV adverts, adverts in magazines have had to tread a fine line between humour and information to make this sensitive subject more appropriate. There are also other aspects to the market. Are they luxuries or necessities? Many products that are classed as 'luxuries' become subject to indirect taxes like VAT. Feminine hygiene products are subject to VAT but should they be? Prior to the 2000 Budget, the full rate of 17.5% VAT was levied on sanitary products but other products such as razor blades, for example, were zero rated. This means that women are penalised and may end up paying proportionately more in tax because indirect taxes are generally regarded as levied on products where consumers have a choice; most women would argue that they do not have a choice in this case. |
There are lots of aspects of both business studies and economics that are relevant in this case study. The main areas are market structure, market entry, market segments, new product development, promotion and advertising and policy on developing countries.
The market is dominated by a relatively small number of large manufacturers. Before Tampax was bought by Proctor and Gamble, the market in the UK consisted of two manufacturers, Southalls and Tambrands. Indeed, the Competition Commission investigated the structure of the market in 1980 but concluded that there was no activity that was detrimental to the public interest.
One of the issues that the Commission would have considered was the extent to which barriers to entry existed in the market. In the report they found little evidence of any serious barrier that prevented other manufacturers from entering but the fact that the market is still very concentrated may suggest that there are other reasons why new entrants are not coming into this market.
Total sales of Tampax are around $660 million worldwide. Tampax and Always account for 46% of the total US tampon market and around 60% of the UK market. Accantia, the owners of the brand Lil-lets, accounts for 27% of the UK tampon market.
For Proctor and Gamble, total sales in beauty care products of which sanitary items form a part were $17.12 billion in 2004 (P&G annual report(http://www.pg.com/investors/annualreports.jhtml)). The global market is dominated by Proctor and Gamble, Kimberley-Clark and Accantia Health and Beauty ltd but there are a number of own brand products in the UK market, and in addition the brand Bodyform owned by SCA Hygiene.
It is reasonable to assume therefore that the market is very much an oligopoly. Within the market there are a number of different products aimed at different market segments. The obvious divide is between the market in towels and that of tampons. However even within these two areas there are then sub-markets.
Within the tampon market there will be products that have applicators, those that do not and those that have different absorbency rates. In the towels market, there will again be different lengths and absorbency rates but there might also be those that have 'wings' that help the product stay in place and there will be related products like panty liners that help provide a greater degree of security and confidence. Manufacturers will also recognise that there will be a need for other personal hygiene products like douches that could be regarded as a complementary good.
These latter products of course have to be capable of undergoing change along with fashions. The move towards G-string type underwear that has been fashionable for the last few years means that normal shaped panty-liners are no good. Never fear, the product developers rise to the challenge by producing designs that will cater for this type of undergarment. Proctor and Gamble have the Alldays Tanga range that is designed to fit with G-string underwear.
It is clear from the way the market has developed since the introduction of Dr Haas' invention that it is now a mature market. The fact that such items are going to continue to be needed however does mean that it is unlikely to decline significantly in the coming years. It does mean that the opportunities for market growth are now more limited. Proctor and Gamble suggest that the market is growing at around 5% per year by value and 2% in volume. Where market growth might be stronger is in the less developed countries.
Image: The market for these products tends to be focused on the West but emerging economies like China and India as well as the African nations represent a massive potential market for the manufacturers. Should governments provide help to enable women in less developed countries who may not have access to such products? Should they be taxed less than other products to make them more affordable? Copyright: Fokko Veenstra
One of the issues here, however, is the cultural barriers to using such items and also the extent to which they are affordable in countries where the income per capita is very low. The market in China is one area where there is a huge potential for growth. The rural areas of China still have a high proportion of very poor people and again the affordability of such products will remain an issue. For governments of these countries there are decisions to be made in relation to the taxes levied on sanitary protection. Should taxes be reduced to make the products more affordable? Even if they were, would the income levels still prohibit their use?
In the West and in less developed countries, the issue of how to promote these products is still an issue. After the initial development of the product by Dr Haas, there was a problem in generating sales because of the problems facing him in advertising the existence of the product. The fact that it was 1986 when there was first an advert for such a product in the UK highlights the continued sensitive nature of the product.
Today, there seems to be a great deal more flexibility in the way in which these products are advertised. The emphasis however is on giving women greater freedom to be able to live their lives as normally as possible. Part of the reason for this has been the change in the role of women which has really gathered pace since the 1960s. Women now take a far greater active role in all aspects of society and few want to be inhibited by a natural monthly biological function. It used to be the case that many women would hide themselves away during their periods because of embarassment and stigma.
Changing social trends and attitudes therefore enable manufacturers to not only develop new products to keep up with these trends but also to promote their products in new ways.
One of the key strategies now being adopted is aggressive price competition and promotion to try to convince customers to change brands. This is against a backdrop of relatively stable total market growth. In essence, the number of people in the market not using these products is very small if not zero in developed countries. The number of new entrants (i.e. those around the ages of 11 - 14) will be counterbalanced to some degree by the number leaving the market (i.e. those around the age of 50 - 55).
The potential for growing the total market therefore is limited so the emphasis will be on poaching customers from rival brands and that means breaking the ties of brand loyalty that may have been developed over a number of years. In addition, the entry into the market of own label products has made profit margins and the competition in the market even tighter.
If you are doing economics:
If you are doing business studies:
A combined question:
What are the major issues facing manufacturers in seeking to grow their markets in less developed countries?
What are the major issues facing manufacturers in seeking to grow their markets in less developed countries?
This builds to a certain extent on the issues discussed in the business section above but now incorporates the special problems that exist in less developed countries. The obvious factors to consider are things like cultural differences, affordability, education, promotion and access.
