THE ALFA Co.

CASE

Alessandro Arbore
Cristian Chizzoli

Copyright © 2007 SDA Bocconi, Milano

SDA Bocconi School of Management The Alfa Co. Case – Part I

Alessandro Arbore & Cristian Chizzoli

The Alfa Co. Case

PART I

At the beginning of January, the marketing director of the French division of Alfa
Co. was arranging a series of meetings with his staff to discuss the sales results achieved in
the various business activities in the year that had just finished.
The first meeting on the list was about household cleaning products. In the biggest
detergent sector, from which Alfa Co. derived about 30% of its overall turnover, household
cleaning products came second after detergents for clothes (Figure 1). Products in that
market were made up of a variety of brands with different characteristics and purposes, but
the most significant share was represented by liquid detergents, used mainly for cleaning
large surfaces, which generated more than half of overall sales (Figure 2). In terms of
competition, three large groups (Alfa Co., EpsilonBeta Co. and DeltaGamma Co.) con-
trolled three-quarters of this market (Figure 3). With specific reference to the liquid deter-
gents market, competition was fairly close and the three leaders co-existed with different
brands and prices (Table 1).

Figure. 1 – The detergents market in France (expressed in thousand of euros)

Gentle Cleaners 206

Fabric Conditioner 251

Bleaches 253

Dishwashing 365

Household cleaning 719

Detergents for clothes

1125

0 200 400 600 800 1.000 1.200

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SDA Bocconi School of Management The Alfa Co. Case – Part I

Figure 2 – Market composition for household cleaning products (sales by type of product)

Glasses
11,3%
Limescale
removers
5,8%

Powders
8,0%

Creamy 8,1%

Bath &
kitchen Liquid 55,5%
15,1%

Figure 3 – Recent development of the market share of household liquid detergents

(main competitors)

30

25 Alfa Co.
EpsilonBeta Co.
DeltaGamma Co.
20

15

10
2000 2005 2010 2014

Table 1 - Key competitors in the liquid detergent sector

Brand Price (euros per litre)

Alfa Co. Alfa € 2.05

Delta € 2.00
DeltaGamma Co.
Gamma € 1.70
Epsilon € 1.90
EpsilonBeta Co.
Beta € 1.80
Kappa € 1.90
Others
Zeta € 1.85

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SDA Bocconi School of Management The Alfa Co. Case – Part I

During the meeting discussing the development of Alfa – i.e. the company brand in
the liquid detergents market – the marketing director of Alfa Co. expressed his concern:
although the market share had remained virtually unchanged in the previous five years, the
two main competitors, EpsilonBeta Co. (with the Epsilon and Beta brands) and
DeltaGamma Co.(with the Delta and Gamma brands) had in fact considerably reinforced
their respective positions in the market, to the point that they threatened Alfa’s ten year
long leadership (cf. Figure 3).
Something had to be done.
The first thing they decided was to engage a specialised company to carry out a re-
search on a representative sample of consumers. The research asked the consumers to rate
the degree of importance of a series of attributes that determined their buying choice of a
liquid detergent. These opinions was then be compared with the results of a similar re-
search carried out in the past (in 2010 and 2008). The survey also asked the interviewees to
express their opinion about the performance of Alfa and its main competitors on the basis
of these attributes. The results of the research are shown in Tables 2 & 3.

Table. 2 – Household liquid detergents: development of importance of the attributes

(average figures)

Ranking
Relevant attributes
2014 2010 2008

Degreaser 1° 1° 3°

Disinfectant 2° 4° 4°

Suitable for all surfa-

3° 6° 10°
ces

Scented 4° 8° 12°

No rinsing required 5° 7° 11°

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SDA Bocconi School of Management The Alfa Co. Case – Part I

Table. 3 – Household liquid detergents:

importance of the attributes and opinions on performance
(average figures, 2014)

Opinions (scale 1-5)

Relevant attribu- Importance
tes (scale 1-5)
Alfa Beta Gamma Delta Epsilon

Degreaser 3,66 4,48 4,00 3,05 4,49 3,27

Disinfectant 3,30 3,92 4,59 2,50 3,60 2,39

Suitable for all
3,15 3,48 2,18 3,68 3,33 3,23
surfaces
Scented 2,64 1,96 1,51 2,03 1,89 2,49
No rinsing requi-
2,41 1,81 2,65 4,49 1,98 3,48
red

After having carefully analysed the data from the previous research, the marketing
director and his staff discussed possible changes to be made to the present market policies.
The management team, however, could not agree on the choices to be adopted.
Some people felt it necessary to reinforce Alfa’s positioning on the two attributes
judged to be the most relevant for consumers (degreasing and disinfecting power) in terms
of which the company brand was seen as very similar, if not worse, than the competitors’
(especially Beta and Delta). Those who supported this idea stressed the fact that the loss of
market share seen over the previous few years was a direct consequence of the
reinforcement of the competitors’ brands on the two most relevant attributes. It was
therefore necessary to make amends by means of a high impact advertising campaign
which highlighted the degreasing and disinfecting power of the Alfa products.
Some managers, however, expressed their doubts about the feasibility and the
actual effectiveness of such a strategy. On the one hand, the difficulty of further
reinforcing Alfa’s positioning in terms of the “degreasing power” was underlined, since the
brand’s performance in this respect was already rated highly by consumers. On the other
hand, in terms of the “disinfecting” attribute, Alfa was considerably behind Beta, and the
attempt to bridge this gap would have required substantial investment whose return, as well
as being uncertain, would only have been mid-term. Alternatively, a campaign could be set
up which played on other attributes, such as not needing to rinse. In these cases, Alfa had
received the worst feedback, but the point was to work on attributes which were considered
less relevant in the purchasing choices in the market.
The marketing director was unsure about which strategy to adopt. At the same time,
the data processed by the market research company did not provide enough guidance to
make a choice. For this reason, the company which carried out the research was asked to
study the analysis in greater depth, and to separate the data concerning opinions about the
importance of the products’ various attributes. The aim was to identify homogenous groups
of consumers by analysing their answers about relevant attributes: from this point of view,
any identified group had to have minimum variance of opinions (EX-POST BENEFIT
SEGMENTATION). The data processing, carried out through a cluster analysis, brought
the following 4 consumer groups to light:

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SDA Bocconi School of Management The Alfa Co. Case – Part I

• Cluster 1 (23% of the market): considers cleaning the house a sanitising and
disinfecting activity for the home, and therefore appreciates the disinfecting
quality of the detergents. This group prefers a specific product for each of the
various surfaces to be cleaned, and does not appreciate the ‘scent’ aspect, as it
associates it with a poor ability to disinfect.
• Cluster 2 (28% of the market): has little time to spend on housework and
therefore appreciates the fact that a product does not need to be rinsed and the
availability of ‘versatile’ products for all types of surfaces. This group does not
appreciate detergents with strong disinfecting properties or scents since it does
not consider them suitable for use on different surfaces (kitchen, sanitary-ware,
glass etc.).
• Cluster 3 (22% of the market): it appreciates the ‘hedonic’ aspect of the
product, placing great importance on the detergent’s ability to leave a pleasant
smell. This group on the other hand does not like products which are sold as
‘disinfectants’, because of the ‘hospital’ smell they leave behind;
• Cluster 4 (27% of the market): as this group is very interested in cleaning the
house, it looks for products which are able to clean thoroughly (degreasers) and
suitable for all surfaces. On the other hand, this group does not appreciate
heavily scented products because it does not consider them capable of
completely removing dirt.

Tables 7 & 8 show in detail, according to each cluster, the levels of importance of
the various attributes and the average opinion on performance of the main competitors. As
soon as these deeper analyses were made, the marketing director organised another
meeting with his staff for the following morning.

Table 4 – Household liquid detergents: importance of the attributes, by cluster

Cluster 1 Cluster 2 Cluster 3 Cluster 4

(23%) (28%) (22%) (27%)

Degreaser 3,9 3,1 2,7 4,8

Disinfectant 4,8 2,7 1,9 3,8

Suitable for all surfaces 1,1 4,3 2,3 4,4

Scented 1,9 2,1 4,9 2,0

No rinsing required 1,7 4,8 2,1 0,8

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SDA Bocconi School of Management The Alfa Co. Case – Part I

Table 5 – Household liquid detergents: opinions on performance, by cluster

Cluster 1 (23%) Cluster 2 (28%)

Alfa Beta Gamma Delta Epsilon Alfa Beta Gamma Delta Epsilon

Degreaser 4,4 4,6 3,2 4,6 3,8 4,4 4,1 3,3 4,6 3,1

Disinfectant 3,6 4,8 2,8 3,7 2,6 4,2 4,7 2,5 3,5 2,3

Suitable for all surfaces 3,5 2 4 3,5 2,3 3,1 2,2 4,3 3,2 3,5

Scented 2,1 1,7 2 1,8 2,2 2 1,6 2,1 1,9 2,7

No rinsing required 1,8 2,9 4,6 2 3,1 1,2 2,7 4,7 1,8 3,5

Table 5 - (continued)

Cluster 3 (22%) Cluster 4 (27%)

Alfa Beta Gamma Delta Epsilon Alfa Beta Gamma Delta Epsilon

Degreaser 4,5 4,1 3 4,6 3,4 4,6 3,3 2,7 4,2 2,9

Disinfectant 3,8 4,2 2,3 3,7 1,9 4 4,6 2,2 3,5 2,7

Suitable for all surfaces 3,2 2,3 3,1 3,1 3,3 4,1 2,2 2,8 3,5 3,7

Scented 1,6 1,2 1,5 1,8 1,9 2,1 1,5 2,5 2,1 3

No rinsing required 2 3 4,2 2,1 3,1 2,3 2,1 4,3 2,1 4,1

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SDA Bocconi School of Management The Alfa Co. Case – Part I

Questions

− Estimate the expected value for each competitors, with reference to

the whole market and within each cluster of consumers;
− Develop a “quadrant analysis” (i.e. matrix of im-
portance/performance and of importance/relative performance)
with reference to the main competitor (both in the whole market
and within each cluster);
− Given the objective to increase the market share, what kind of stra-
tegic decision would you suggest to Alfa Co. now?

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