Adina Crossley Alejandra Jimenez

Lily Yang Navid Farzinnia Stephen Yeung

Marketing Planning K. Gerlach August 2008

  Method Overview   Recommended Strategy   STEEP Analysis   Target Markets and Customers   Competitors   Core Competencies and SWOT   Current Objectives   Market Growth Analysis   Risks   Recommended Actions

  Introduction ◦  Produces broad range of home cleaning and

personal care products ◦  Founded in 2000 by two partners: Eric Ryan a

designer and Adam Lowry a chemical engineer

◦  Key positioning: non-toxic, biodegradable, inexpensive, not tested on animals, with attractive packaging made from recycled plastic ◦  Tagline: People Against Dirty ◦  SMP Focus: largest part of business: home cleaning

products

◦  In seven years Method becomes a 100-person international enterprise (source: Marin Magazine)

◦  Inc. magazine recently named Method "the seventh-fastest growing private company in America.“

◦  The Method's 2006 revenue reached $55 million, up about 80 % over the previous year. In industry 4 % considered good growth.  (source: Information Resources Inc.)

◦  The Method's annual turnover is $100m  (source: Adam Lowry, co-founder of Method)

◦  In 2007 Method launched in the UK.

EXISTING PRODUCT NEW PRODUCTS EXISTING MARKETS (CUSTOMERS)

Launch Innovative retail: pop-up stores, website sales, online postings

Expand product line to include more personal care products

NEW MARKETS (CUSTOMERS)

Expand distribution of all products nationwide to mass market

Limit revolutionary products to one to two a year

OPPORTUNITY: Eco-friendly market is hot! Competitors still fragmented RISKS: Rapid expansion of advertising and promotion may increase costs, drive out profits, Some new products may not be winners!

  SOCIAL MOVEMENTS: Green Consumer

  Purchase behavior closely aligned with personal values regarding outside environment.

Eco-Friendly   Increasing interest in non-toxic home products that do not

harm the environment – term is eco-friendly Mass Luxury

  Offers better quality at prices that are still low Customer Education

  consumers looking for more information in return for brand loyalty

Youth demographic   emerging huge youth demographic entering 20s in next five

years

  TECHNICAL: Cleaners can now be made using oxygenated processes, natural bacteria and enzymes

  EVIRONMENTAL Outdoor environment:   Cleaning product additives in soil and water   USGS found metabolites in 69% of streams and disinfectants in 66% of

streams Indoor environment:   EPA study: concentration of pollutants inside 2 to 5 times higher than

outside   Mt. Sinai studies indicate high levels of dioxin and chemicals in all human

bodies in US.

  ECONOMIC:   Natural biobased products now produced on large scale to

support green movement – reduces cost of ingredients and are renewable

  Rising cost of raw materials - especially petrochemical products

  POLITICAL:   Emphasis is on decreasing use of petroleum both as energy

and in products

  Public demand for 3rd party certification of Green products: Green Seal, Scientific Certification System (SCS), USGBC (LEED for buildings)

  Increasing likelihood of tax benefits for use or production of green products

  European Union restrictions on common cleaning chemicals: parabens.

  Hazardous Products Act: requires labeling of hazard or toxic products w/ first aid information

Customer Segment One Customer Segment Two

  Customers with green preference lifestyle

  Is concerned primarily with indoor pollution and personal/family health

  Concern for the outdoor environment: recycled packaging and organics ingredients are relevant but not more important than price

  Responds to design in packaging and home environment

  Prefers natural aroma to that of chemical smell in the home

  Is not looking for the absolute lowest price

  Is likely female   Is likely between ages of 25 and 50

  Considers himself/herself to be a green consumer

  Very concerned with the environment in general

Customer Type Motivation and Needs  Trial Willing to try, but tend to stick to

natural foods. Open to the idea of doing more but it’s not a priority

 Occasional Have integrated a few Green products into their lives, usually consumables

 Regular Take action to make Green a part of their lives, yet remain primarily in the food/beverage categories 

Committed Dedicated to a Green lifestyle, for the good of themselves as well as the world around them. Using Green products from all categories, including household cleaners and laundry.

 Customer Segment One = Trial, Occasional, Regular Target segment for Method! Customer Segment Two = Committed

Ranked in Order of Threat Level 1. Clorox Green Works 2.  Seventh Generation

Experienced 40% growth annually since Method launch. Now at $100 million (source: Mintel Research 06)

3. Simple Green 4. Earth-Friendly 5. Consumer trend to make non-toxic cleaners

in the home

STRENGTHS WEAKNESSES  Brand known for high quality, effective product  Breadth of product line  Lower price  Large Advertising/promo budget  Large distribution channel of 24,000 stores*  Education

 Ordinary package design and odor  Packaging not made of all recycled material  Low innovation in formula  Low trust as a green brand

OPPORTUNITIES THREATS  20% increase in Eco-friendly/green market  Home consumer product industry focused on green products  Brand already known by large Emerging Millennium generation

 Multiple competitors entering  Low barrier to entry  Established green brands moving into cleaning product category  Downturn in economy  Difficult to promote Green brand without damaging existing “chemical” brand image *source: Mintel Research

  Design:   Innovative recyclable packaging with attractive curvy colored

package   Technology:

  Produce fruity smell products with regular natural materials   Mass Market Distribution Channel:

  Achievement of economies of scale distribution while keeping advantages of small-scale manufacturing operation

  New Product Must Adhere to Core Competencies  Be visible in the home = value: design  Be used frequently = value: non-toxic  Be low to mid priced = value: available to mass market

STRENGTHS WEAKNESSES Fast growth Very popular herbal aroma Innovative package design Recycled plastic packaging Non-toxic for use on and around people and pets Highly effective natural surfactants Broad product line Strong distribution channel in areas w/large target market segments Low price for value Strong brand loyalty

Not all products viewed as equally effective Some products contain petroleum-based ingredients Lack of bulk sizes for product refills Still not widely recognized in mass consumer market Low level of advertisement and promotion Inexperienced mgmt team

OPPORTUNITIES THREATS High demand for products in current distribution channels Only 2-5% of cleaning products available are green Cleaning product market huge: 17.5 billion Products are popular and recognized by large emerging youth market

Growing number of competing products: low barrier to entry Global detergent co. moving into market Clorox GreenWorks popularity and large distribution channel Price pressure by competitors Retailers closing due to soft economy

Source: Mintel, Natural Products Marketplace Review

Method Products attractive to Trial, Occasional And Regular

consumers

These groups together make

Up 77% of the consumer population

As interest in natural products increases so will Method’s target market

•  Green cleaners consumers are rising exponentially during last 3 years

•  Consumers are price sensitive and normally they showed to shift to non green products when there was more than 20% price difference.

•  Sales of natural cleaning products rose by 23% between ‘06 and ’07.

Source: SPINS Market Research

  Key Strength for Effective Growth Strategy ◦  Early deal with Target ◦  Have not focused on traditional Green product

channels: Specialty stores, Whole Foods, Catalogs ◦  Focus has been on where trial, regular, and

occasional consumers shop. ◦  Now expanded to Costco, Safeway and other

“mainstream” retailers   Consumers are eco-friendly, looking for value but still

have relatively high income ◦  Still primarily on the West Coast

  External:   Green Products Market lacks uniform or trusted

certification or endorsement   Lack of label uniformity drive consumers to decide on

price   Still lack of access to green and/or eco-friendly

products for most consumers (especially in the mid-west)

  Consumer excitement over eco-friendly may dissolves in the face of high prices (note 20% price increase study SPINS research)

  Internal   To date company has no experience with product

failure – could bet too much on a flop.

 Aggressively expand distribution of core successful cleaning product line to East Coast and Mid-West •  Create tailored bundle (not bulk) packaging for Warehouse stores

like Costco  Evaluate and drop any laggard products  Expand line of complementary personal care products  Limit introduction of revolutionary product

introductions to one a year  Step-up Creative Promotion

  Colleges, mid-luxury green focus hotels, airlines   Pop-up store events   Website community: blogs, education and FAQ

 Obtain 3rd party green certification  Don’t stop core competencies: product aesthetics,

design, distribution and value