Business Lessons from Hindustan Unilever Limited (Better known as "The CEO Factory" of India)

Yesterday I completed "The CEO Factory" by Sudhir Sitapati & my mind is still musing about all the practical things taught by this book. It has been the most wholesome read I ever had on subjects of Marketing, and Business in general.

William lever started selling Sunlight & Lifebuoy in India in1888 and Hindustan Unilever formed in 1956. Today Hindustan Unilever is India's biggest FMCG brand in Value.

What an Incredible journey of 125 years in India!

This article is divided into 5 broad chapters & 8 lessons, covering everything from making a product to delivering it to the end-users.

Chapter 1: Advertising Lessons from HUL

Advertising the sexiest part of marketing. It is the only part of the business where both right-brain & left-brain, feeling & thought, magic & logic, are equally used.

HUL spends 3,500 Crore or 20% of all TV ads in India (Numero Uno spender)

Lesson No. 01: Brand image is your brand’s personality & you shouldn’t be changing it too often

Zakir Hussain’s tabla made Taj Mahal Tea famous. It imprints the classical music ambiance with the famous phrase "Wah Taj" while sipping the original Indian Tea.

Overtime Taj tried contemporary celebrities like Madhuri Dixit & Saif Ali khan.

This move proved ineffective & Taj’s Market share in the premium segment took a hit because people still connect "Taj Mahal" tea with Tablas.

Classic music is the real identity of Taj Mahal Tea

After conducting consumer research, it was confirmed that Taj is Classical music & it shouldn't be tempared with celebrities.

HUL quickly took Taj Mahal back to its classical music structure where musicians play mesmerizing music to the refrain of “Wah Taj”

HUL got Niladri Kumar, Rahul Sharma & Nirali Kartik in the new ad campaign.

Taj Mahal’s advertising has suddenly become recognizable again & the brand has started gaining Market share after a Decade.

Remember Flipkart introduced "kid-adults" in their famous ad which they dropped but has to again use them for the same reason.

Expecting a return of "Chaukpur Cheetahs" for amazon in IPL season?

Lesson No. 02: “Daag Achhe Hey”, blockbuster ad of Surf Excel

From 2005 to 2010 Surf Excel tried every trick in the advertising book but none was growing the brand. They did every possible targeted campaign specific to chocolate stains, remove ink stains, remove every stain, remove stains without fading colors & even remove stains in half the time. All have failed.

Mr. Sudhir Sitapati, then brand manager of Surf Excel found a Brazilian concept on Modern Parenting which told parents that stains were the part of learning & children should be encouraged to get dirty.

Upon meeting mothers, two things were concluded, One, they put value (only value no other thing except value) over learning. Moms cherish values such as empathy, expressing love, and generosity over learning.

Second, being a fact that Stains are accidental & not something related to fun activities.

Mr. Gopal Vittal (Current CEO of Bharti Airtel), then head of the laundry division created a brief for Lowe Lintas for the ad from the above learnings. ( See the image below)

Three scripts that were suggested by Lintas & Gopal went with one were a boy & his sister walking back home, when his sister fall in a puddle.

The Puddle ad get in the top ten ads of the decade 2000-2010 by Economic Times

Most importantly, Surf Excel which was the 5th largest brand in 2005, is today HUL's largest brand.

Chapter 2: Marketing Lessons from HUL

Marketing = What the Consumer Wants

The marketing department frames business problems in consumer terms, understand unmet consumer needs, and then mobilize the rest of the company in fulfilling it.

Lesson No. 03: NEEDSCOPE = HUL’s positioning technique based on the premise that Human beings remember & identify best with personalities.

Needscope was coined by professor Heylens, so also named as Heylens Map.

Concept: On the X-axis you have “I” Vs. “We” (Individualistic Vs. Affiliatives) & on Y-axis you have “Extrovert Vs. “Introvert”

To understand it easily, consider 4 characters of “Kabhi Khushi Kabhi Gham” movie,

1.Kajol who is warm, talkative & bubbly

2.Jaya who is loving, kind & repressed

3.Amitabh who is stern, disciplined & self-centered

4. Kareena who is daring, flamboyant & vibrant

Positioning a brand in this way makes it easy for the marketing team, to communicate it among consumers.

E.g.

Kwality walls, Apple & McDonalds are 2 o’clock brands (Extrovert + We)

Dove & Brookbond are 4 o'clock brands (Introvert + We)

Samsung & Domex are 7 o'clock brands (Introvert + I)

Lux & Thums Up are 10 o'clock brands (Extrovert + I)

Do you know, HUL has 4 tea brands for each quadrant. Can you name them?

Lesson No. 04: Slippery slope of brand extension (Failures of extension)

Brand image is a set of associations that consumers have for your brand & reason why brand extension doesn’t work is “there is just not enough mind space for a new association”

Why Lux International didn’t succeed?

For a simple reason, Lux consumers felt that their good old Lux is no longer the best beauty soap on earth. At the same time, Lux international consumers felt that they were paying a premium for ultimately what was just Lux.

Such contradictions could hurt both brands, so HUL replaced Lux international with Dove

The famous words of Sudhir Sitapati on product extension goes like this:

“ If you are lucky your brand extension will fail but if you are unlucky it may succeed and destroy the mother ship”

An example of one such brand extension is Rin Supreme Bar which failed miserably & has to rebrand into Surf Excel Brand. This move was also risky but somehow consumers accepted it.

Three brands that succeeded in the brand extension are Dove Shampoo, Surf Excel Matic, and Red Label Natural care.

They succeed because of the three reasons:

1) Their performance is not interfering with their parent product. E.g. If you wash in a bucket, use Surf Excel, but if you have a washing machine, use the Matic version

2) They solved the Need-Gap. E.g. Red label natural solves the problem for consumers who want spiced tea. As Red Label Natural priced higher than Red Label, so consumers migrating from the former are actually increasing the revenue.

3) They are all built from the fundamental association of the brand. Hence no issue with mind space congestion. Dove soap was about care & so was Dove Shampoo

Chapter 3: Product Lessons from HUL

Get the product right, pricing, publicity, the cover & availability will follow.

Lesson No. 05: Fair & Lovely (Now Glow & Lovely) = Blockbuster innovation from R&D

While working on Vitamin B3 deficiency among children, Niacinamide, a form of Vitamin B3, leads to pellagra which causes dark patches on the skin.

It was found that Pellegra could be treated by directly applying it on the skin which temporarily reverts the skin color to birth color.

And the most famous (recently notorious) product from HUL born

Good companies invest in R&D; in the best companies everyone is involved in R&D

Lesson No. 06: Majority of Consumers want benefits & are not interested in ingredient

Here is the photo of Essence of Tea classified by Benefit, Attribute & ingredients

The Vast Majority of consumers want Benefits & are not interested in Ingredients.

So when designing a product, make sure you remain output (benefit) focused & not ingredient (input) focused. This will help to optimize your costs.

Product Example:

When consumers say they want buttery cookies they mean they want cookies that taste buttery, and a product may add a few % points of butter just to substantiate the claim.

Side Note: Amul Butter Cookies recently took a potshot on Brittania "Good-day" biscuits which has only 0.3-3% butter while Amul Butter cookies have 25% butter goodness. Later Brittania replied with a very clever angle of Health. It was Audi Vs. BMW moment for us.

But you have to careful in product designing, for example, Indulekha which helps retaining falling hairs uses ancient Ayurvedic ingredients. Try not the mess with them unless you are sure that the benefits remain the same with different ingredients

Chapter 4: Pricing & Packaging Lessons from HUL

Let us start with a bizarre story: In February the price of FMCG products such as Lifebuoy & Lux get heavily discounted.

The reason being the ITC cigarettes, which every year after the budget gets costlier due to an increase in Tax.

So, distributors sell the FMCG products for which they get credit period of a month & use that money to stock cigarettes. The profit they make from cigarettes is much more than the loss they incur from Lux & Lifebuoy.

Let us see the simplest formula of a price.

Price = All the Costs incurred by Company + Margin of the Company

It is said that a Brand is born with a gross margin & dies with it. Because the moment you increase the price, consumers will reject your product.

The current Startup mantra of "Price at a discount, recruit consumers & then take up the price" works for the business model where exit cost is high such as Telecom but fails for easily available products like Soap.

There is only 1 fact in consumer loyalty & that is "Consumer Loyalty is a myth"

Lesson No. 07: Access is more important than Affordability

Consumers in MP West bought large packs of everything (Lifebuoy 600 gm, Surf excel 4kg) while consumers in MP East bought everything in small packs (Lifebuoy 30 gm, Surf Excel 200 gm).

A simple reason can be deduced from this behavior, is the difference in income for the west & east where the west is supposed to be a richer region.

But an old lesson in business is never to believe in anecdotes. and when they checked the Income stats, it turns out to be similar.

Real Reason:

If we see MP East where Rice is the staple food & it requires more labor than wheat. Daily laborers are employed in the fields & salaries are paid daily.

While MP West sow wheat & soya which requires less labor & done by small farmers.

Hence the discrepancies.

But does that mean a company should not make various packs (SKUs), & how to price them?

Rule of Pricing: Discount very large packs & small packs but not more than 20%

The reason for differential pricing lies with the difference in consumers who buy those packs.

Users of Large packs & small packs are different. We want a poor person to try our product hence we will price it low. But we also want a person who buys in bulk to get some discount hence we will price it low too.

If you are tight on budget, then stop discounting very large packs, because someone using a 500 ml shampoo bottle won't be downgrading to a sachet.

Chapter 5: Sales Management Lesson from Hindustan Unilever

HUL is a legendary organization in Sales & Distribution Management, delivering goods to 1.5 Million outlets every week.

Let's start with a quintessential question "Why would a retailer sell your product?"

They recommend your product either because of the profitability of your product (margin) or because they have so much of it in their store that they want to reduce their stock.

Lesson No. 08: Sales Management function exist for building availability, not for building revenue

Former sales director Srinandan Sundaram says that the sales department are cost centers & not revenue centers. Their job is to fulfill demand at the lowest possible cost.

It means "Pipes don't quench thirst, water does" or "Roads don't take you to the destination, your desire to go does"

At Dmart, India's most valuable retailer (Pre Reliance-Future group acquisition period), store managers don't have a sales target; instead, they have a target for on-shelf availability & pilferage.

Input metrics such as "Unique Billed Outlets", "Range Selling Index", "Product Placement", "Frequency of service", etc. matter more than revenue numbers. It builds a strong & self-driven system.

But be precautious on measuring of the input metrics as they are easy to fudge. Build a robust governance mechanism to measure the metrics.

Let us summarize for each lesson & call it a day!

Lesson No. 01: Brand image is your brand’s personality & you shouldn’t be changing it too often. Don’t experiment with altering the brand image. It will dissociate the consumers from your brand.

Lesson No. 02: “Daag Achhe Hey”, blockbuster ad of Surf Excel. User insights are very important. Build your communication on things they value most.

Lesson No. 03: NEEDSCOPE = HUL’s positioning technique based on the premise that Human beings remember & identify best with personalities. Frameworks are the best way to keep your brand positioning intact. Don’t mix up positioning if you have

multiple brands for the same product.

Lesson No. 04: Slippery slope of brand extension (Failures of extension). Whenever you move into brand extension, take care of the consumer’s mind space. You don’t want to create a counter-intuitive brand association for your product. If you are selling a premium, stay premium.

E.g. BBK group keep OnePlus in premium & Oppo/Vivo mass. Don’t launch a light version as it may eat your flagship. I am curious how Oneplus Nord (cheaper version of Oneplus) will affect Oneplus 8.

Lesson No. 05: Fair & Lovely (Now Glow & Lovely) = Blockbuster innovation from R&D

R&D is the ultimate growth engine for product invention, don’t reduce the R&D budget.

Lesson No. 06: The majority of Consumers want benefits & are not interested in the ingredient. Design product on output, not on input. This will help reduce cost & boost your margin.

Lesson No. 07: Access is more important than Affordability. Make sure you create an ample volume variant (Packs/SKUs) for each segment to buy your product.

Lesson No. 08: Sales Management function exist for building availability, not for building revenue. Sales are for creating the infrastructure of your distribution & not on revenue. Make sure you have a solid system to track the input metrics otherwise people will fudge the metrics.

That’s all Folks!

Do comment your view & hit the heart button!

Article by: Gunjan Solanki

The author is the founder of Marketing Weekly. He is an Alumnus of IIFT, Kolkata.

He is currently working in Sales & Distribution for Pidilite Industries. He has prior experience in Sales, Marketing, B2B in Vodafone & Trident Group.