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 companys 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. Nyassas 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. Anands 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 Nyassas 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 ompany 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 Nyassas 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 Nyassas. 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. 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 companys 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).

Nyassas 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 maller 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

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.

Packaging

Nyassa employed all three variants of packaging, namely primary, secondary, and tertiary. The
primary packaging for all solid soaps and related products was kept transparent (see Exhibit 6).
Anand mentioned that during the past few years, distinctive packaging had been a priority focus of
the company. The packaging served the higher role of brand communicator or silent salesperson,
unlike in the inception days when it was used just for storage and preservation. The packaging
material was made from recycled paper, thus promoting the cause of a sustainable environment.
These initiatives and this focus had increased the total costs of production, thus impacting net
profits. However, since the target market was invariably niche and premium, a slight price markup
due to premium packaging might not discourage customers. But, given the competitive market,
Anand decided not to charge any price premium for this sustainable packaging. The liquid variants of
the soaps were packed using transparent bottles with attractive labels.

SALES AND DISTRIBUTION BETWEEN RETAIL AND CORPORATE CUSTOMERS

Nyassa had a sales ratio of 65:35 between its retail and corporate customers. Its corporate customer
profile included renowned business houses, hotels, and spas across India, such as The Taj-Colaba,
Reliance Group, and Marriott Group. Anand mentioned that Nyassa was a customer-oriented
organization with the capacity to provide customized service in terms of packaging, fragrances,
colours, and budgets for its B2B clients.

Anand was happy with the progress that the business development team had achieved in the past
few years in strengthening the corporate customer base. Though the order frequency in this sales
format was not that high, the volume of business acquired over the festive (corporate gifts) and
holiday (hotels) seasons was impressive. Anand mentioned that although the share of retail sales was
high, the net margin from products sold in retail was less because of the high operating overheads of
the companys exclusive stores. The decreased net margins led her to consider how to reverse the
business situation, i.e., swapping the business ratio so more revenue would come from corporate
customers.
BEAUTY AND PERSONAL CARE (COSMETIC) INDUSTRY IN INDIA

In 2013, the premium beauty and personal care market in India attained sales of 22.76 billion,6 a
rise of 210 per cent from 2008 (see Exhibit 7). The expansion of the industry was the result of greater
acceptance among urban consumers of luxury and high-priced products. Companies that had been
targeting bottom-of-the-pyramid customers had started to target top-of-the-pyramid customers
to exploit this growing market. Nitin Paranjpe, CEO and managing director (MD) of Hindustan
Unilever (HUL), had put premium products at the centre of his companys growth strategy. Of its 15-
odd new products, 13 were targeted at top-of-the-pyramid consumers. All cosmetic companies had
been working on new product sizes to cater to new markets, as well as focusing on novel packaging
in order to attract potential buyers.

Anand observed that there was a rush to go premium in the industry, as premium categories had
margins of 50 to 60 per cent and upwards. The greatest margin was in the premium category of
soaps, and as a result this space had become crowded. As every player in the segment tries to chase
premium products, competition will intensify and make it very difficult for companies, commented
A. Mahendran, MD of Godrej Consumer Products (Godrej).7

The industry had transformed over the years and was increasingly becoming more gender-specific.
For instance, industry leaders had introduced a premium range of bath and shower products
specifically for men in addition to existing product lines. From 2008 to 2014, here had been
consistent growth in each of the product lines in the premium segment of the bath and personal care
industry, the highest growth being 528 per cent for premium deodorants in terms of value. Forecasts
by industry analysts predicted high growth in other domains of the industry as well (see Exhibit 8).

Major Competitors

The major players in the overall beauty and personal care industry were HUL, Proctor and Gamble
(P&G), ITC, and Godrej. However, Nyassa faced stiff direct competition from manufacturers of
handmade natural and luxurious bath and body products, namely Forest Essentials, The Body Shop,
and Crabtree & Evelyn.

Forest Essentials
 Forest Essentials, founded in 2000, manufactured hair and skin care products made from natural
ingredients sourced from plants, trees, and herbs naturally grown in company-owned forests. The
water used in manufacturing the products, also sourced from natural forest springs, was rich in
mineral deposits and had been certified by a French laboratory as possessing unique therapeutic and
regenerative 6 All currency amounts are in Indian rupees (INR = ) unless otherwise specified. On
March 2015, the exchange rate between the U.S. dollar and the Indian rupee was US$1 = 65

qualities.8 The quality of the water had been endorsed by world-renowned brands such as Este
Lauder and LOral.9

The Body Shop

The Body Shop, founded in 1976, sold more than 900 natural beauty and cosmetic products in over
2,500

stores across 60 countries. It became part of the LOral S. A. in July 2006 but retained its unique
identity and values and continued to operate independently, led by its own management team that
reported directly to the CEO of LOral, Jean-Paul Agon.10

Crabtree & Evelyn

Crabtree & Evelyn had humble beginnings in 1972 but had become a leading brand in the premium
soap category, with a presence in 65 countries. The company provided a large range of bath and
body products such as premium soaps, spa, bath and shower gels, lotions, creams, and fragrances.11

THE NEXT STAGE OF GROWTH

Nyassa had successfully accomplished the initial phase of creating value for its customers through its
highly recognized products. It was all set to embark on its journey of further creating,
communicating, delivering, and capturing value through new products and services so as to become
the market leader at least in selected categories. The company had already rapidly acquired high
brand equity among its existing customers and had many new products in the pipeline for launch in
the next three years 2015, 2016, and 2017. Anand wanted to leverage her experience, networks,
and knowledge about the target market requirements, as well as the role of promotional channels, in
creating differentiation, especially in terms of psychological benefits to consumers. She was thinking
of offering the opportunity for customers to return products if they were not satisfied. Unique,
reusable packaging for selected corporate gift products was another possibility to consider: this was
an idea she got while on an Indigo flight from Hyderabad to Mumbai, where she was served nuts in
reusable packaging, which customers were taking away with them for their own later use. It occurred
to her that this might be a way to win more corporate customers for Nyassa. However, she was a bit
doubtful how helpful reusable packaging would be in gaining a price premium for Nyassa products

The first set of revolutionary products was likely to hit the market by mid-2015. Should Nyassa skim
the market or go for a penetrative pricing strategy? Both strategies had their pros and cons. Anand
was also considering whether product changes were necessary for the global market, especially the
countries of the Middle East, from where a lot of inquiries had come, both for franchises and relating
to products. She was also contemplating focusing more on corporate gifting in the B2B market rather
than in the retail business-to-consumer (B2C) market, as this offered greater margins and higher
profits. The cross-selling of slow-moving stock-keeping units (SKUs) with fast-moving SKUs by bundle
offers was another marketing strategy actively being considered . Top management recognized that
few companies chose to go slow on growth. In its initial days, Nyassa had been approached by
venture capitalists (VCs) who were willing to pour funds into the company to encourage exponential
growth, especially in terms of a retail network across India. However, Nyassa had chosen to grow
selectively and be an exclusive brand and had not given in to the temptation of easy funding. Now
that the brand was well established, Anand was considering whether it would be a good idea to
explore the VC option for the next big leap.

Anand had to make decisions on all these options quickly, particularly with regard to value creation
in terms of return policy, packaging, and cross-selling for the new products scheduled to be launched
for 2015. The right choices now would help her company make the next leap of growth and achieve
its objective of market leadership in selected categories of products