Should Unilever divert money from its premium brands to invest in a lower-margin segment of the market?

Answer:

Yes, Unilever has to diversify from its premium brands and start investing in the lower-margin segment to meet the needs of the people in the growing detergent market. In the detergent market, the company has three major brands such as Omo, Minerva and Campeiro, that it offers to consumers in different markets. One reason Unilever should venture into the lower-margin segment is that most detergent users in the markets are low-income consumers and have poor living conditions. The consumers are living to fulfil the most basic needs. Therefore, they prefer most products that offer value for their money in the market. Therefore, diverting from premium brands to lower margin segments would increase the company's sales revenue in the existing markets.

Secondly, the company should diversify its products to the lower margin segment because when the company's lower needs are satisfied, the higher needs through the premium brands can be achieved. According to Maslow, most companies that gratify the lower needs find it easy to set an appropriate order of meeting the needs of the customers with higher needs. The most appropriate detergent to expand its operations in the market will be Minerva. Minerva has positioned itself in most markets, especially in Brazil, to create an emotional appeal to the people. The product will be perfect because it is positioned and priced appropriately in the market, giving it an opportunity to the consumers in the market. The lower margin segment will be satisfied because it will satisfy the washing traits of the targeted segment who prefer quality products priced lowly in the market.

Third, The company should also diversify in the lower segment because there is higher profit potential in the lower-margin segment. There are many consumers of the lower margin segment products in the market. Unilever can diversify its products in the segment, a fact that would increase its revenues from selling the products to the lower segment. The company can gain more profits when it makes quality products satisfying the value of money to the lower margin segment.

References

Jones, G. (2005). Renewing Unilever: Transformation and tradition: Transformation and Tradition. Oxford University Press, UK.

Murphy, P. E., & Murphy, C. E. (2018). Sustainable Living: Unilever. In Progressive Business Models (pp. 263-286). Palgrave Macmillan, Cham.