We get on better when we are thinking together rather than when we are talking together

Urban Market Entry Strategy

A Market Research Insight 2013-14

we get on better when we are thinking together rather than when we are talking together

Overview

Netsurf Network Last 5 Years

Year 2012-13 Year 2011-12 Year 2010-11 Year 2009-10

733,908,012
683,560,112 530,888,043 428,382,196 277,110,087

Year 2012-13 could be marked as year of transition Challenge of Growth To address this challenge, we have taken some positive steps for upcoming year(s)

Year 2008-09 0

200,000,000 400,000,000 600,000,000 800,000,000

Questions

1. Is our present market enough to achieve exponential business growth?

The greatest business successes in history from Standard Oil to Facebook have stemmed from the companys ability to capture new markets. Tapping into fresh types of consumptionnew products, customers, or occasionscan create vibrant, long-term growth for companies in old and new industries alike. These markets can generate additional sources of profit, bolster the position of firms related businesses, and keep competitors always on the defensive.
- Stephen Wunker, Ivey Business Journal, 2011

Questions

2. Are there any new unidentified potential segments in the urban geographies where we are already present?

3. Can we explore entirely new geographies with potential target segments identified?

Questions

4.

Are we currently optimizing the sales of all of our products?

Sales Performance (Apr 2012- Mar 2013)

Herbs and More 4%

Naturamore 40%

Biofit 56%

Considering the 56% sales that we derive from Biofit range, emphasize that our presence is strong enough in the Rural areas. Are we exploiting the potential of the other two product ranges? Which could be the areas that are lucrative for Herbs & More and Naturamore?

5.

Are we currently optimizing the sales of all of our products?

Naturamore (40%)
Top 5 Districts & blocks Ahmedabad Mumbai Thane Mandal, Bavla, Dhandhuka, Sanand, Barwala Dahisar, Malad, Borivali, Kandivali, Goregaon, Thane, Kalyan, Vasai, Bhiwandi, Shahapur Surat, Choryasi, Olpad, Bardoli, Mandvi Daund, Bhor, Indapur, Baramati, Haveli Thane

Herbs and More (4%)

Top 5 Districts & blocks Thane, Kalyan, Vasai, Bhiwandi, Shahapur Dahisar, Malad, Borivali, Kandivali, Goregaon, Daund, Bhor, Indapur, Baramati, Haveli Babhulgaon. Ralegaon, Ghatanji, Kalapur, Wani Mandal, Dascrol, Muli, Bavla, Barwala

Mumbai Pune Yavatmal

Surat

Pune

Ahmedabad

Presence in city suburbs about 80% Are we actively seeking the right people who- consume, advise or retail these products?

Market Potential Overview

Potential Market for Naturamore
o The Indian Nutraceutical market was valued at $ 1480 Millions in 2011. Dietary supplements were the largest category accounting for 64% of the Nutraceutical market. Typical consumers of dietary productsSuffers from some diet related health problems With no scope or time for grandmother remedies Inclined to take scientifically proven healthcare products Believes in preventive healthcare Is increasingly aware of health related issues arising out of hectic lifestyle and food habits Increasingly demands Nature derived products The Indian arm of Amway corporation gets over 50 per cent of revenues from Nutrilite brand currently. In 2012, Amway had a turnover of Rs 2,288 crore. o

Potential Market for Herbs and More

Urban India leads consumption (of personal care products), with about two-thirds of all personal care products by volume, and more than four-fifths of the cosmetics segment consumption. Meanwhile, urban consumption is evolving, moving from basic functional to more advanced and specialized products, and greater expenditure levels. Interestingly, the new formats which are emerging as important purchase points are the local chemist shops/pharmacies, beauty salons, petrol junctions, nearby paanwala for sachets and smaller packs etc.

o 1. 2. 3. 4. 5. 6. o

Contribution to overall Consumption growth: Urban Consumer: 68% Rural Consumer: 32%

Business models are changing and little understood or conveniently stereotyped by some stakeholders. Direct selling is increasingly becoming multi channel.
-John Holloway, Executive Director, Direct Selling Association of Australia

Direct Selling Organisation

Direct Seller

Door-to-Door

CONSUMER

Direct Selling Organisation

Direct Seller

Distance Selling

Door-to-Door

Store Selling

CONSUMER

So may be it is time for us toIdentify our potential market segments again

Identify and tap multiple channels to make our business

Identify the activities of our business that can engage the target markets

Project- Urban Market Entry Strategy Identification

Aim: To understand the urban market and suggest some of the strategies that will help Netsurf to get entry into urban markets. Objectives: Identify the target group(s) Identify multiple channels in the urban market Identify the current competition Captivate the identified target groups through activities suitable for them

We need to target those areas/groups where

o Either product advise is given OR o Business advise is given

Target Influencers= New Segments

Target Groups Identification

Beauticians Yoga Centers HR Consultants Dieticians Sport coach/trainers Housewives

Geographical Areas Covered

Delhi

Pune

Mumbai

Selected urban cities

Potential- H&M, Naturamore retailing Retail mindset Influencer for skin/hair related products Consults & recommends Decent footfall

Potential- Naturamore retailing Influencers May recommend health products Re-purchase assurance

Beauty Parlours

Potential- Naturamore, H&M retailing Act as Health gurus Influencers Decent footfall Retail mindset (optional)

Sports Coaches Selected TGs

Yoga Centers

Potential- Networking Connect with unemployed people Searching for second income options

Dieticians
Potential- Naturamore retailing Influencers Recommend health products Decent footfall

HR consultants

A Category: where basic facial charges start from Rs. 1000/B Category: where basic facial charges start from Rs. 600/C Category: where basic facial charges start from Rs. 300/- or less. Non-branded, commercial/home based parlours. Daily footfall 5 to 25

Beauty Parlours
Coaches for any outdoor sports Associated with sports clubs Train children & adults

Category A: home based & conservative Category B: commercial set up Daily footfall 10 to 100

Sports Coaches Selected TGs

Yoga Centers

Dieticians
Independent practice / association with a health club Provide counseling at other commercial set ups Dietetics course completed

HR consultants

Medium to small scale HR consultants Commercial set up Connects with mid-level employers Around 20-50 people enrolled for job

A Category: where basic facial charges start from Rs. 1000/B Category: where basic facial charges start from Rs. 600/C Category: where basic facial charges start from Rs. 300/- or less. Non-branded, commercial/home based parlours. Daily footfall 5 to 25

Beauty Parlours
Phase II

Category A: home based & conservative Category B: commercial set up Daily footfall 10 to 100

Housewives

Yoga Centers

Selected TGs
Challenges identified

Sports Coaches

HR consultants

Challenges identified

Dieticians
Challenges identified

Something we should know about

Beauty Parlours:
Beauty Parlours are the places where customers (male/female) pay for personal grooming services. Beauty Parlours typically offer services like hair cut, facial massages, body massages, pedicure & manicure, threading, waxing, etc. along with bridal make-up and grooming. A Spa, as oppose to a beauty parlour, offers specialized services related to relaxation (massages) and various health treatments. They may also be using aroma therapy for the same. A regular beauty parlour may not offer these services.

Yoga Centers: The conservative yoga consultants, mainly home based, are more conscious about their personal relationships with their customers. The commercial consultants usually give trainings in their own commercial set ups, and also visit other health clubs, sports complexes and corporate clients.

Market Potential Overview

The Indian beauty Parlour Segment o o o o o India currently comprises 25 percent of organized salon market, which will increase its share to 30 percent by 2015. The Indian salon franchise ecosystem has a support of over 5,000 salon franchisees. Close to 61 percent of men and 54 percent of women visit salons on a monthly basis. More than 60 percent of the respondents say they spend between Rs 500-2,500 on beauty services Today every lane in the city (Gurgaon) has a beauty parlour and while it is difficult to put a number to them, it can be said that there would be over 500 of them in the city at present. As per the report, industry estimates peg the beauty salon market at Rs 6,900 crore in the country, which includes both services and the value of professional care products retailed through salons. Eight per cent of the total salon market (Rs 552 crore) is contributed by the Delhi-NCR region. -Beauty business glowing in Gurgaon, TOI, Apr 15 2012 Unorganized sector

Indian Yoga Industry

The Indian Yoga Industry is unorganized sector

Database Generation Free search engines like justdial.com, grotal.com, yellow pages etc.

Cold Calling Brief but clear information about direct selling company, products and business shared.

Fix Appointments Asked for their feedback about product and business plan. Hence, it called for a meet.

Visit 1: Product Sampling Products given Leaflets & visiting cards shared Business brief fixed next appointment

Process
Sales Conversion They are informed about the procedure to join the business or acquire products and the sale is closed. Lead Generation Those who are found positive about products/& business, their contact details to be forwarded to sales team. Visit 2: Feedback collection Meet again and collect detailed feedback about products and business understand their inclination to join Follow up call Called before the next appointment to ensure that they have used all the products and they are ready to share their feedback

Cold calling script

I am calling from Netsurf Communications Pvt. Ltd. company, which is basically a

direct selling company. My name is _______ & I work here as a ___________. We

have FMCG products range & one of them is into personal care. We need to talk to you regarding this range, which is called as Herbs & more. We have plans to launch this range across the metro cities like Pune, Mumbai, Ahmedabad, Bangalore and Delhi etc. We would like to know your feedback as beauticians over herbs & more as well as our business plan associated with that (we being a direct selling company.). If you are interested we would like to come and meet you and also give you the samples of our products for you to test them. We would like to know how do you find the products & our business opportunity.

Visit 1: Business introduction script

You can become a Netsurf franchisee by making an initial products purchase of Rs.

6,000/-. In return you get products of your choice worth (MRP) Rs. 8,000/-. I.e. 25%
discount initially and post that every repurchase of the products can be made at 30% flat discount on MRP for lifetime. If you make additional products repurchase of products of Rs. 5,000 in the first month of becoming a franchisee, you get 40% discount on products MRP for a year & you would be called a premium franchisee. This business plan gives you the liberty to engage yourself in multiple ways. If you are interested you can also become a master franchisee by doing networking and earn networking commission. However, it is not mandatory for you to do networking to remain in this business and to earn the product discounts.

Sampling

Sampling
Place Cold Calls Appointments Product Sampling Target group: Beauty Parlours Pune Mumbai Delhi 70 50 40 15 10 15 13 10 12 Aundh, Baner, Camp, Hadapsar, D.Gymkhana, Kothrud, Market Yard, Swargate, Wakad Borivali, Colaba, Dadar, Fort, Matunga, Thane Anand Niketan, Chandani Chowk, Dwarka, Lajpat Nagar, Munirka, Pitampura, Rajori Garden, Tilak Nagar, Safdarjang enclave. Areas Covered

Target group: Yoga Centers Pune Delhi 30 40 9 8 6 7 Koregaon Park, Chinchwad, Ambegaon, Balewadi, Dhakawadi Dwarka, Chandni Chowk, Lajpat Nagar, Pitampura, rajori & Vasant Vihar

Respondents Gender distribution: Beauty Parlours 77% females of which 75% falling in the age group of 30-40 years; Yoga Centers 31% females & 69% males falling in age group of 35-50 years. Out of 34 beauty parlours visited, 3 were home based while rest of them had a commercial set up. While the products were being distributed, the beauticians were told clearly that the H&M products are for Home care purpose only.

Findings & Observations

Findings & Observations

Beauty Parlour: Most (29/32, Pune-8, Mumbai-8, Delhi 13) of the commercial beauty parlours display and retail some personal care & make up products to earn discounts. These products may not be only the direct selling products. The beauty parlours (11, Pune-2, Mumbai-5, Delhi-4) are/were already involved in one or more direct selling business at the same time. All the beauty parlour holding beauticians are qualified through some beauty institute.

Yoga Centers: Very few (2 from Delhi) of the commercial yoga centers display and/or retail any health care & personal care products to earn discounts. These products may not be only the direct selling products. The yoga centers (Delhi-3, Pune-1) are/were already involved in some direct selling business.

Findings & Observations

Initial investment of Rs. 6000/- was found to be reasonable

City

Total samples

Consideration for Retailing

Consideration for Networking

Target Group: Beauty Parlours Pune Mumbai 13 10 7 6 7 7 1 1

Delhi

12

8
Target Group: Yoga Centers

Pune Delhi

6 7

1 4

1 5

1 2

Initial investment of Rs. 6000/- was found to be reasonable by 48% respondents. Consideration to use products by self- 19% respondents (only for H&M products) Consideration for Retailing by 48% respondents. Consideration for Networking by 17% respondents.

Products observed at the retail display of Beauty Parlours

Direct Selling Brands Brand Name Nutrilite Category Vitamins & supplements Weight Management & Targeted Nutrition for women Skin and Body care Skin Care Other Brands Biotique VLCC Natures Body & Skin Care Facial Kits, Body Care, foot care Facial Kits Sunscreens, Body lotions Hand and foot Lotions and body scrubs Toner, Sunscreen, Lotions, Scrubs Specific Products observed, if any Protein powder & calcium tablets Apart from the above mentioned common products, we also observed some region specific products as belowMumbai: Direct Selling brands like Forever living, Modicare (personal & home care) & other brands like Richfeel (hair care), Forest Essentials, Cheryls (hair care), Blossom Kocher, Brillaire (hair care), Himalaya, O3+, Argan Dulux, R K Aroma & Garnier. Delhi: Direct Selling brands like Forever living, Modicare (personal & home care) & Glister, Sarah Wilson, Tamarind, Lemon Tree, Blossom Kocher, Ayurveda Tannend, Rain Again, O3+, Jawed Habibs, Akeya Seth, Yuvalin & Herbia. Pune: Direct Selling brands like Glister, Cheryls, Rahul Phates, Lotus Herbals & Richfeel.

Herbalife

Formula 1, XtraCal
Day Creams, Toners, cleansers, night creams, Body Lotion & creams, body wash, etc.

Oriflame Avon

Shehnaz Hussain
Wellas Loreal

Ayurvedic Facial products

Professional Hair Care range Professional Hair Care range Professional Hair Care range

Gold , silver facial Crme, Scrubs, and sunscreens

Smoothen shampoo & conditioner Smoothen shampoo & conditioner

Matrix

Hair care products

Responses Received
We received following positive responses through this activity across the cities25% of the respondents (from all the 34 TG respondents) showed positive feedback to be engaged with Netsurf either as a products retailer or a product user. Name of the Respondent Target Group Beauty Parlour Area Name of Business Business Set up Two room, commercial set up & another set up near Goregaon film city, Mumbai Single room, home based set up A beauty, hair & spa services and advanced treatment at a commercial set up Comments Showed interest in Anti pimple cream and wanted to buy more of the same after a month after we approached her. The sampled H&M products were displayed and tested on her clients. She showed interest in face cleanser as her clients demanded more.

Josphine

Kothrud, Pune

vogue beauty parlour

Pushpa Bhosle

Beauty Parlour

Aundh, Pune

Kimaya Beauty Parlour

Ajita Surve

Beauty Parlour

Market Yard, Pune

Sejal Beauty Hair & Spa

She has liked all the products.

Responses Received (cont.)

We received following positive responses through this activity across the cities25% of the respondents (from all the 34 TG respondents) showed positive feedback to be engaged with Netsurf either as a products retailer or a product user. Name of the Respondent Target Group Area Name of Business Business Set up Taking Personal classes all over the city and have around 100 trainers below him Have a commercial setup and taking personal classes Comercial Set Up , Is currently doing Amway, Avon and Modicare into direct selling past 10 years Commercial set up , Currently doing Avon , Oriflame also not just the owner but the other beauty helpers ae engaged into proactive selling. Comments He wants someone senior to address him before giving initial amount of Rs 6000 He wants someone senior to address him before giving initial amount of Rs 6000 After the trial she might start retailing and networking as well because of the margin level.

Mr Shukla

Yoga Trainer

Vasant Vihar

Shree Yoga Academy

Mr Avinash

Yoga Trainer

PitamPura

Avinash Yoga Academy

Mrs. Praveen

Beauty Parlour

Tilak Nagar

Dreamz Beauty parlour

Mrs. Sheetal

Beauty parlour

Tilak Nagar

Paul Beauty PARLOUR

After the trial she might start retailing and networking as well because of the margin level

Discussion

Our approach
1. Our entry to the target groups was made with the approach of sampling the products and knowing their valuable feedback over products & business plan. However, we made sure that they know that we are a direct selling company. a. The first entry was smooth as everyone likes to try free samples. b. Any respondent having negative opinion about retailing or getting into direct selling was eliminated at the cold calling stage only.

2. Feedback mechanism was implemented completely. They were given enough time to test the products and were not followed up rigorously until then.

a. This strategy made them comfortable and positive in cooperating with us. b. They felt important because we asked for their expert feedback/opinions about the products being launched in their city.

Target Groups Approach

Pune & Mumbai: product oriented, skeptical & conservative about new brands, result conscious Delhi: Business oriented, emphasize more on margins/profits, competitor comparison is important

Regarding Products
1. Beauty Parlors a. At present, Hair care cream received maximum (5) likes from Pune & Mumbai region. b. Anti pimple cream was sought by many parlors. c. Face Scrub and Face Cleanser also has potential as these services are commonly sought by many parlor going customers. d. A very common problem of hair loss can be addressed by hair care cream and nourishing shampoo. e. Anti-septic cream and dental paste have little room.

2. Yoga Centers

a. Naturamore contains soy protein isolate that contains an important female hormone called estrogen that is essential in womens menopausal symptoms. b. Along with Naturamore, Dental Paste and other H&M products were sought by more that 50% of the respondents. c. Naturamore Jr. has little room through this Target groups.

*Note: more feedback is awaited

Suggested approach with respect to products

1. Beauty Parlors

a. Understand the skin/hair types and their requirement

b. Understand the ingredients, their effects and expected result

c. Understand difference between herbal and Ayurvedic d. Having idea about competitor products and their positioning before visiting will help in meaningful conversation e. Should be able to show product demos appropriately (taking sample on the back-side of the hand) f. One should recommend using the products for multiple times to test the results (they being Ayurvedic products) g. One can portray aloe turmeric cream as a multipurpose product that can be used as a sun screen (SPF15), night repair cream, day cream, moisturizer, etc h. Get an idea about services provided by them & their client base i. Products should be recommended for home care/home use/home treatment.

2. Yoga Centers

a. Indian origin of product and the company b. Vegetarian c. Not for muscle building d. Complete internal nourishment e. Herbs and more is also equally potential as Naturamore for this target group.

Suggested approach with respect to business

1. Beauty Parlors

a. All the commercial beauty parlors had a display shelf to retail products. b. They are used to suggesting home treatment for hair and skin to their clients. c. Well aware about the direct selling business and directly can discuss on retail margin earnings. d. Brands like LOreal or Matrix giving less retail margins- about 16-20%. e. Not very open for networking

2. Yoga Centers

a. Response differed category-wise b. Conservatives (20%)- not open to business at all. c. Respondents with commercial set-up are business minded i. ii. Recommend products- Patanjali, Nutrilite, Vaidyanath etc 40% had already tried other direct selling like Amway and Modicare

*Note: more feedback is awaited

Suggested approach with respect to business

1. Beauty Parlors

Talk about retail margins, networking being optional & easy/ hassle free dispatch process Payback policy Dont hurry to make them franchisee Initially they may go for just buying the products at MRP to testing them on their customers. One can always look at them as a consumer to our products

2. Yoga Centers

Trainers which are kind of conservative in nature may not be willing to recommend products to their clients as they are more conscious about personal relationship they share. However one can look at them as a consumer for Naturamore and H&M. Try and conduct a session/product display at the place where they are conducting their regular yoga classes.

FAQs

Which H&M products can be used & how at the beauty parlours? How to chose H&M products as per the skin / hair types?

How can Netsurf offer exclusivity of H&M products franchisee to any beauty parlour?
Do you have any professional range products for H&M/ is it a professional range of H&M? Are the products available on consignment basis to beauty parlours? What results should be expected from H&M or Naturamore products? What is the USP of Naturamore & H&M? Does Naturamore help in weight management? How is Naturamore better than Nutrilite by Amway? Companys background & manufacturing facility Where to avail these products? Ingredients quality & purity? What is the support provided by company? This company & products are not known, what promotional support would the company offer? Is it a chain marketing or a MLM company? Can I sell your products through my retail outlet?

Respondents said
As such I wanted to promote some product. I had taken Jafra's distributorship but then I didnt do any business. Why not promote our (Indian made) product then?" "Today most of the customers ask for herbal products and I also try to use them whenever possible."

In my opinion you should think about exclusivity i.e. they should be available in very select parlors so that product value remains intact. See now Amway products are available everywhere. People ask me which product to use but they do not take it from me as I always sell them on MRP. So they go to somebody else and get it on discount. But because of this, products has gone in wrong hands. they don't know which product should be given to whom and when people don't get result they blame that product is not good"

If your products are good & worth for daily usage, then probably I can start retailing it.

40% Discount will leverage my savings more, as currently I retail a lot of products like L'Oreal, Wella's, Lotus & Shehnaz Hussain but the margin is too less. Like 16-17%.

Currently I am using Amway Nutrilite, which cost around Rs. 2000, along with that they are also offering Calcium capsules for joint pains etc. if your product has the same ingredient and benefits then apart from retailing I will start using it for my own use and start recommending it to my friends and family.

Thank you