How did Nirma become a Market leader?
Nirma was founded by Karshanbhai Patel, who worked at the Gujarat Government’s Department of Mining and Geology as a chemist.
In 1969, Karshanbhai Patel started producing detergents in the 100sq feet backyard of his home mixing Soda Ash and a few ingredients to make a detergent and he found the solution. He started selling his detergent by cycling in his local area. This shows the clear determination of Karshanbhai Patel. He was selling the detergent at INR 3.5 per KG (almost one-third price) whereas its competitor Surf a product of HUL was selling at INR 15.
To remind you of that, at that time middle-class people’s salaries used to be around INR 100–200 per month. Here Karshanbhai Patel understood the market needs perfectly. He understood that people don’t care about the packaging, they only care about the price and the quality of the product. Spending 10% to 15% of your income on just detergent powder was not worth it. And that’s why the Nirma product became a hit as people found value in the product.
Understanding the market and the audience in the market is very much necessary for any business. It gives you clarity for your process.
After 3 years he left his Government job and decided to give his full time to this business and expand the business beyond Gujarat. So he decided to supply his products to retailers on credit. But it was a great risk and that risk turned into reality. This resulted in the non-payment of dues by retailers to Karshanbhai Patel.
But being an intelligent businessman, he pulled out 90% of the stock from the retailers. Can you believe it? A person who wants to expand his business on a large scale, how can he just pull out the stock? But he had something in his mind, he invested money in Television Ads that were aired on Door Darshan Channel and we know that ad “Sabki Pasand Nirma”. This created havoc in the market. The demand was increasing day by day. For a month Karshan Bhai Patel didn’t supply the product and on the other side, this advertisement was getting broadcasted on television.
At last, the retailers have to request Karshanbhai Patel to make the supply of the products. This strategy helped Nirma beat Surf and become the highest-grossing detergent powder in the country. Not only for a year but a decade, Nirma was the highest-grossing detergent powder in the country.
When retailers requested the supply of the products, Karshanbhai Patel made some T&C, he not only asked for the previous payments but also kept a condition that there will be no credit given to retailers. They have to pay the money as soon as they get the product.
But remember what goes on top has to come down! Why does Nirma have to see their downfall?
Businesses should follow the trends. Because it shows the mindset of the audience. And Nirma somehow failed here.
Nirma continued with the same campaign and did not try to innovate, whereas the competitors focused on creating different content through which trust was created among the customers.
To make their products cost-effective, competitors placed their products at different price levels, whereas Nirma was available at one price.
What Nirma Did Wrong?
- Lack of Innovation in the product
2. Consumer perception changed, they started thinking of Nirma as an inferior product due to its low price.
3. Lack of content to communicate with the Audience.
4. Failed to understand the changing behavior of their customer/audiences.
5. Due to entering into various segments, Nirma Forgot about its core product.
What we Learn:
Every business should focus on its core product without even thinking of diversification. Because Diversification needs specialization
Always be aware of the market and its audience, and try to know your audience’s taste every time.
Change is inevitable. So be ready for change and accept the change.
You will not always be on top; to remain on top, you have to fight for it.
Do market, competitor, and audience research to be up to date and act accordingly.
