Nyassa enterprises

9B16A004

MARKETING AT NYASSA

Neeraj Pandey, Gaganpreet Singh, and Sandeep Puri wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com. Copyright © 2016, Richard Ivey School of Business Foundation Version: 2016-02-12

Nyassa is all about unique fragrance with healthy ingredients that do wonders to your body and soul. –Ishween Anand

On March 18, 2015, Ishween Anand, chief executive officer (CEO) of Nyassa Retail Private Limited (Nyassa), was still in her Santacruz office in Mumbai, finalizing the agenda for the Monday meeting scheduled with her marketing, finance, and operations teams. This meeting was important because the decisions made would have a great impact on the company’s future. Nyassa had been in the business of manufacturing luxury bath and body products since 2006. Thanks to high-quality and limited industry competition, product acceptance since the launch of the brand had been phenomenal, allowing the company to build up a reasonable market share, with healthy profit margins, within a short time. Nyassa’s main competition was from Indian players such as Forest Essentials, Kama, and other mass producers, and from foreign brands such as Lush, The Body Shop, and Crabtree & Evelyn. Anand’s focus was on new product development for upcoming innovative bath and body products so as to win market leadership in selected categories. She was aiming high but needed to decide on certain issues before taking the next step towards growth. Also, the forecasted industry potential in the natural/premium space worldwide was making investing in new product lines lucrative. Anand faced a dilemma — should Nyassa penetrate deeper in India, skim the markets that showed high potential, and/or launch the brand in overseas markets?

COMPANY BACKGROUND

Anand set up Nyassa in 2006 with a vision to create natural products that were beneficial to the skin and had delightfully lingering fragrances. The enterprise, which grew out of her personal passion, was well- received in most markets; within the first month of operations, its products were being sold in 12 Reliance Wellness outlets. Anand was a banker who had previously worked for a multinational company in the United States. She learned how to make soap while she was living overseas and was now the lead member of Nyassa’s research and development team as well as its CEO.

In the premium soap industry, Nyassa had often been at the forefront of introducing new fragrances and ingredients to its products and had been, from the beginning, a pioneer in the use of argan oil, barley and quinoa proteins, wheat germ, avocado, and sweet almond oil. The high quality and uniqueness of its products were acknowledged by the market, as reflected by the sales and the number of enquiries the

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company received. Indeed, within the first week of its commercial launch in June 2014, in a shopping mall in Mumbai, it had received orders from renowned retailers such as The Bombay Store and Reliance Wellness. Nyassa sold approximately 42,000 units in the fiscal year (FY) 2014/15, with soaps alone contributing 38 per cent of the revenue, followed by creams/lotions/moisturizers (21 per cent), oils (18 per cent), and room fragrances (15 per cent). The company was planning to create a line of ultra-premium or super-exclusive products, which it claimed would be unique in the premium natural bath and body product industry.

MARKETING MIX

Product Lines

Nyassa manufactured eight product lines (see Exhibit 1), all pure, natural, and handmade and with exotic fragrances from scent blends that were made in-house. The premium quality of its ingredients made its products ideal for buyers wanting healthy skin. In 2012, Nyassa captured a first-mover advantage by introducing argan oil as a differentiating attribute in its product range. The company was also a trendsetter in the premium natural soap space by offering loofah, butter, and sugar soaps, which were the first of their kind. Anand was aware that the law in the soap industry was quite stringent, requiring manufacturers to disclose ingredients on the product packaging. Therefore, product innovation and differentiation could not be protected from competitors over the longer term, given the similarity in the economic and human capital of competing firms.

Price

Growing competition in the market gave impetus to Nyassa’s research and development team to consistently work towards innovation. Of the three levels of price management — industry, product/market, and transaction1 — Anand was more concerned about strengthening pricing at the product/market level because industry-level price management dealt with demand and supply issues (Nyassa did not operate on a particularly large scale), and price management at the transaction level was more appropriately applicable in the business-to-business (B2B) scenario. Anand compared Nyassa and its nearest competitors on the value equivalence line (VEL),2 a measure used by managers to achieve price excellence at the product/market level. Exhibit 2 positions each of the competitors on the price- value trade-off graph and highlights every probable competing move that might help organizations take strategic decisions. The price range of each of the competing firms was higher than Nyassa’s. Crabtree & Evelyn products were the most expensive brands. Owing to market forces, including increased competition in recent years, the positioning gap in the VEL had narrowed, thus curtailing the market share and limiting the growth opportunities for Nyassa and others. To bring sustainability into the business structure, the need to proactively reform the VEL had become critical for Nyassa.

Anand knew that Nyassa was on par with leading brands in the natural luxury premium space on value dimensions; however, she felt that price positioning needed to be revisited. The total economic value estimation (EVE)3 was the sum of reference and differentiating values. The reference value may be defined as the price of the next best competing alternative (NBCA). The existing price metrics in the industry appeared to highlight the undervalued scenario in which the value of competing products was

1 M. V. Marn, E. V. Roegner, and C. C. Zawada, The Price Advantage, 2nd ed., John Wiley & Sons, New Jersey, 2005, p. 14. 2 VEL is a tool used to position competitors on a perceived price-value graph. 3 T. T. Nagle and J. E. Hogan, The Strategy and Tactics of Pricing, 4th ed., Pearson Education, New Jersey, 2005, p. 21.

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less than the reference value of Nyassa products. Nyassa had higher differentiating values. To reposition Nyassa might require proactive business changes among various operating dimensions to alter economic and psychological perceptions. Anand was debating which business strategies she should adopt to achieve a price-value trade-off for her unique and varied product portfolio and to accomplish the desired price positioning.

Distribution

Nyassa was headquartered in Mumbai, India, with its production units located in nearby territories. The company’s first exclusive store opened in Khar, Mumbai, in January 2014, and by March 2015 it had exclusive retail stores, kiosks, and “shops in shops” in other Indian cities such as Pune, Hyderabad, Nasik, and Bangalore. Initially, Nyassa made forays into more cities through the franchise model; however, the deals were mutually called off after a short time. Anand learned that the backend operation system needed to be quite robust for a successful franchise. Although franchising was a quick way to gain a foothold in and cater to new target markets, the odds of losing control over the process due to a lack of infrastructure were high, which might result in dissatisfaction and poor service. Anand stated, “While building a brand, it is imperative to have control over the customer experience, and the look, feel, and acknowledgement of our products can be best appreciated in our own store.”

Reflecting on her experience in retailing, Anand understood that products generally got lost if they were not positioned effectively in the market. Getting appropriate shelf space, especially at multi-brand outlets or retail stores, was always a concern. To circumvent this issue, she preferred to set up an exclusive chain of stores for Nyassa products. However, profits had begun to dwindle because of the higher operating expenses involved, especially in the Indian metropolises. Nyassa, being an Indian SME4 (small or medium-sized enterprise), was highly susceptible to fluctuating revenues. Instability was further increased by various fixed operating expenses. Nyassa was also distributing its products on popular e-commerce portals such as Flipkart, Pepperfry, Purple, and Jabong, which enabled its products to be sold in other cities where a physical presence was not possible because of resource constraints.

There was high sales growth potential in the premium beauty and personal care category (see Exhibit 3). Nyassa’s products had been highly appreciated at exhibitions. The management was in talks with various venture capitalists in order to increase production capacity and expand further into national and international markets, and the response had been quite encouraging. Accordingly, Anand had directed the marketing, operations, and other associated teams to proactively draw up a blueprint for expansion. However, the prospect of international expansion had not convinced some employees, who had suggested instead penetrating further into the domestic market. Anand had countered by pointing out the challenges in cost-benefit terms of penetrating deeper in Tier 2 and smaller Indian cities.5 As the products were in the premium category, she felt that people in those cities might not be willing to pay the high prices they commanded. Considering these operating and business constraints, Anand pondered her next moves.

4 As per the Micro, Small and Medium Enterprises Development Act of 2006, the government of India had defined SMEs as entities that have an investment of above �10 million and below �100 million in plant and machinery. See SMERA, “Emerging SMEs of India: Methodology,” www.dnb.co.in/smes/methodology.asp, accessed March 14, 2015. 5 The Reserve Bank of India had classified Indian cities in six tiers based on population. See “Details of Tier-Wise Classification of Centres Based on Population,” http://rbidocs.rbi.org.in/rdocs/content/pdfs/100MCA0711_5.pdf, accessed March 15, 2015.

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Promotion: “From Heaven and Earth”

Nyassa did not invest much cash in electronic media advertisements. Anand and her team participated in most of the high-end consumer shows in Mumbai, besides putting trade-show stalls in target cities such as Hyderabad, Chennai, Kolkata, and Pune. The company also had arrangements with various expatriate clubs and restaurants. It had opened kiosks in malls (see Exhibit 4), engaged actively in public relations, participated in corporate events, and started social media campaigning. Nyassa also used SMS campaigns to bring brand awareness.

Nyassa had undergone a repositioning and rebranding of its products in 2013 with a new value communication strategy that highlighted its products as “from heaven and earth,” signifying that the ingredients originated from heavenly sources and were further developed into their purest form as provided by Mother Nature (see Exhibits 5 and 6). The repositioning had increased sales revenue many times over. The company focused on giving walk-in customers a positive in-store experience. In line with the new philosophy, the stores/kiosks featured a clean, white decor. To give potential consumers the opportunity to try the products before buying, a dedicated space was set aside in each exclusive retail space, and diffusers were installed at the entrance to attract customers. The sales associates were well trained to understand the needs of consumers and to match products to their needs. Sales associates spent an average of 15 to 20 minutes with each potential buyer.