Case-1: The use of the marketing mix in product launch
NIVEA® is an established name in high quality skin and beauty care products. It is part of a range of brands produced and sold by Beiersdorf. Beiersdorf, founded in 1882, has grown to be a global company specialising in skin and beauty care.
In the UK, Beiersdorf’s continuing goal is to have its products as close as possible to its consumers, regardless of where they live. Its aims are to understand its consumers in its many different markets and delight them with innovative products for their skin and beauty care needs. This strengthens the trust and appeal of Beiersdorf brands. The business prides itself on being consumer-led and this focus has helped it to grow NIVEA into one of the largest skin care brands in the world.
Beiersdorf’s continuing programme of market research showed a gap in the market. This led to the launch of NIVEA VISAGE® Young in 2005 as part of the NIVEA VISAGE range offering a comprehensive selection of products aimed at young women. It carries the strength of the NIVEA brand image to the target market of girls aged 13-19. NIVEA VISAGE Young helps girls to develop a proper skin care routine to help keep their skin looking healthy and beautiful.
The market can be developed by creating a good product/range and introducing it to the market (product-orientated approach) or by finding a gap in the market and developing a product to fill it (market-orientated approach). Having identified a gap in the market, Beiersdorf launched NIVEA VISAGE Young using an effective balance of the right product, price, promotion and place. This is known as the marketing mix or ‘four Ps’. It is vital that a company gets the balance of these four elements correct so that a product will achieve its critical success factors. Beiersdorf needed to develop a mix that suited the product and the target market as well as meeting its own business objectives.
The company re-launched the NIVEA VISAGE Young range in June 2007 further optimising its position in the market. Optimised means the product had a new formula, new design, new packaging and a new name. This case study shows how a carefully balanced marketing mix provides the platform for launching and re-launching a brand onto the market.
The first stage in building an effective mix is to understand the market. NIVEA uses market research to target key market segments which identifies groups of people with the same characteristics such as age/gender/attitude/lifestyle. The knowledge and understanding from the research helps in the development of new products. NIVEA carries out its market research with consumers in a number of different ways. These include:
- using focus groups to listen to consumers directly
- gathering data from consumers through a variety of different research techniques
- product testing with consumers in different markets.
Beiersdorf’s market research identified that younger consumers wanted more specialised face care aimed at their own age group that offered a ‘beautifying’ benefit, rather than a solution to skin problems. NIVEA VISAGE Young is a skin care range targeted at girls who do not want medicated products but want a regime for their normal skin.
Competitor products tend to be problem focussed and offer medicated solutions. This gives NIVEA competitive advantage. NIVEA VISAGE Young provides a unique bridge between the teenage market and the adult market.
The company improved the product to make it more effective and more consumer-friendly. Beiersdorf tested the improved products on a sample group from its target audience before finalising the range for re-launch. This testing resulted in a number of changes to existing products. Improvements included:
- Changing the formula of some products. For example, it removed alcohol from one product and used natural sea salts and minerals in others.
- Introducing two completely new products.
- A new modern pack design with a flower pattern and softer colours to appeal to younger women.
- Changing product descriptions and introducing larger pack sizes.
Each of these changes helped to strengthen the product range, to better meet the needs of the market.
Some of these changes reflect NIVEA’s commitment to the environment. Its corporate responsibility approach aims to:
- reduce packaging and waste – by using larger pack sizes
- use more natural products – by including minerals and sea salts in the formula
- increase opportunities for recycling – by using recyclable plastic in its containers.
Lots of factors affect the end price of a product, for example, the costs of production or the business need to maximise profits or sales. A product’s price also needs to provide value for money in the market and attract consumers to buy.
There are several pricing strategies that a business can use:
- Cost based pricing – this can either simply cover costs or include an element of profit. It focuses on the product and does not take account of consumers.
- Penetration price – an initial low price to ensure that there is a high volume of purchases and market share is quickly won. This strategy encourages consumers to develop a habit of buying.
- Price skimming – an initial high price for a unique product encouraging those who want to be ‘first to buy’ to pay a premium price. This strategy helps a business to gain maximum revenue before a competitor’s product reaches the market.
On re-launch the price for NIVEA VISAGE Young was slightly higher than previously. This reflected its new formulations, packaging and extended product range. However, the company also had to take into account that the target market was both teenage girls and mums buying the product for their daughters. This meant that the price had to offer value for money or it would be out of reach of its target market.
As NIVEA VISAGE Young is one of the leading skin care ranges meeting the beautifying needs of this market segment, it is effectively the price leader. This means that it sets the price level that competitors will follow or undercut. NIVEA needs to regularly review prices should a competitor enter the market at the ‘market growth’ point of the product life cycle to ensure that its pricing remains competitive.
The pricing strategy for NIVEA is not the same as that of the retailers. It sells products to retailers at one price. However, retailers have the freedom to use other strategies for sales promotion. These take account of the competitive nature of the high street. They may use:
- loss leader: the retailer sells for less than it cost to attract large volume of sales, for example by supermarkets
- discounting – alongside other special offers, such as ‘Buy one, get one free’ (BOGOF) or ‘two for one’.
NIVEA VISAGE Young’s pricing strategy now generates around 7% of NIVEA VISAGE sales.
Place refers to:
- How the product arrives at the point of sale. This means a business must think about what distribution strategies it will use.
- Where a product is sold. This includes retail outlets like supermarkets or high street shops. It also includes other ways in which businesses make products directly available to their target market, for example, through direct mail or the Internet.
NIVEA VISAGE Young aims to use as many relevant distribution channels as possible to ensure the widest reach of its products to its target market. The main channels for the product are retail outlets where consumers expect to find skin care ranges. Around 65% of NIVEA VISAGE.
Young sales are through large high street shops such as Boots and Superdrug. Superdrug is particularly important for the ‘young-end’ market. The other 35% of sales mainly comes from large grocery chains that stock beauty products, such as ASDA, Tesco and Sainsbury’s. Market research shows that around 20% of this younger target market buys products for themselves in the high street stores when shopping with friends. Research also shows that the majority of purchasers are actually made by mums, buying for teenagers. Mums are more likely to buy the product from supermarkets whilst doing their grocery shopping.
NIVEA distributes through a range of outlets that are cost effective but that also reach the highest number of consumers. Its distribution strategies also consider the environmental impact of transport. It uses a central distribution point in the UK. Products arrive from European production plants using contract vehicles for efficiency for onward delivery to retail stores. Beiersdorf does not sell direct to smaller retailers as the volume of products sold would not be cost effective to deliver but it uses wholesalers for these smaller accounts. It does not sell directly through its website as the costs of producing small orders would be too high. However, the retailers, like Tesco, feature and sell the NIVEA products in their online stores.
Promotion is how the business tells customers that products are available and persuades them to buy. Promotion is either above-the-line or below-the-line. Above-the-line promotion is directly paid for, for example TV or newspaper advertising.
Below-the-line is where the business uses other promotional methods to get the product message across:
- Events or trade fairs help to launch a product to a wide audience. Events may be business to consumer (B2C) whereas trade fairs are business to business (B2B).
- Direct mail can reach a large number of people but is not easy to target specific consumers cost-effectively.
- Public relations (PR) includes the different ways a business can communicate with its stakeholders, through, for example, newspaper press releases. Other PR activities include sponsorship of high profile events like Formula 1 or the World Cup, as well as donations to or participation in charity events.
Branding – a strong and consistent brand identity differentiates the product and helps consumers to understand and trust the product. This aims to keep consumers buying the product long-term.
- Sales promotions, for example competitions or sampling, encourage consumers to buy products in the short-term.
NIVEA chooses promotional strategies that reflect the lifestyle of its audience and the range of media available. It realises that a ‘one way’ message, using TV or the press, is not as effective as talking directly to its target group of consumers. Therefore NIVEA does not plan to use any above-the-line promotion for NIVEA VISAGE Young.
The promotion of NIVEA VISAGE Young is consumer-led. Using various below-the-line routes, NIVEA identifies ways of talking to teenagers (and their mums) directly.
- A key part of the strategy is the use of product samples. These allow customers to touch, feel, smell and try the products. Over a million samples of NIVEA VISAGE Young products will be given away during 2008. These samples will be available through the website, samples in stores or in ‘goody bags’ given out at VISAGE roadshows up and down the country.
- NIVEA VISAGE Young launched an interactive online magazine called FYI (Fun, Young & Independent) to raise awareness of the brand. The concept behind the magazine is to give teenage girls the confidence to become young women and to enjoy their new-found independence. Communication channels are original and engaging to enable teenagers to identify with NIVEA VISAGE Young. The magazine focuses on ‘first time’ experiences relating to NIVEA VISAGE Young being their first skincare routine. It is promoted using the Hit40UK chart show and the TMF digital TV channel.
- In connection with FYI, NIVEA VISAGE Young has recognised the power of social network sites for this young audience and also has pages on MySpace, Facebook and Bebo. The company is using the power of new media as part of the mix to grow awareness amongst the target audience.
NIVEA VISAGE Young is a skincare range in the UK market designed to enhance the skin and beauty of the teenage consumer rather than being medicated to treat skin problems. As such, it has created a clear position in the market. This shows that NIVEA understands its consumers and has produced this differentiated product range in order to meet their needs.
To bring the range to market, the business has put together a marketing mix. This mix balances the four elements of product, price, place and promotion. The mix uses traditional methods of place, such as distribution through the high street, alongside more modern methods of promotion, such as through social networking sites. It makes sure that the message of NIVEA VISAGE Young reaches the right people in the right way.
Answer the following questions:
- Describe what is meant by a business being ‘consumer led’.
- What are the key parts of the marketing mix? Explain how each works with the others.
- Explain why the balance of the marketing mix is as important as any single element.
- Analyse the marketing mix for NIVEA VISAGE Young. What are its strongest points? Explain why you think this is so.
Case-2 : SWOT analysis in action at Škoda
In 1895 in Czechoslovakia, two keen cyclists, Vaclav Laurin and Vaclav Klement, designed and produced their own bicycle. Their business became Škoda in 1925. Škoda went on to manufacture cycles, cars, farm ploughs and airplanes in Eastern Europe. Škoda overcame hard times over the next 65 years. These included war, economic depression and political change. By 1990 the Czech management of Škoda was looking for a strong foreign partner. Volkswagen AG (VAG) was chosen because of its reputation for strength, quality and reliability. It is the largest car manufacturer in Europe providing an average of more than 5 million cars a year – giving it a 12% share of the world car market. Volkswagen AG comprises the Volkswagen, Audi, Škoda, SEAT, Volkswagen Commercial Vehicles, Lamborghini, Bentley and Bugatti brands. Each brand has its own specific character and is independent in the market. Škoda UK sells Škoda cars through its network of independent franchised dealers.
To improve its performance in the competitive car market, Škoda UK’s management needed to assess its brand positioning. Brand positioning means establishing a distinctive image for the brand compared to competing brands. Only then could it grow from being a small player. To aid its decision-making, Škoda UK obtained market research data from internal and external strategic audits. This enabled it to take advantage of new opportunities and respond to threats.
The audit provided a summary of the business’s overall strategic position by using a SWOT analysis. SWOT is an acronym which stands for:
- Strengths – the internal elements of the business that contribute to improvement and growth
- Weaknesses – the attributes that will hinder a business or make it vulnerable to failure
- Opportunities – the external conditions that could enable future growth
- Threats – the external factors which could negatively affect the business.
This case study focuses on how Škoda UK’s management built on all the areas of the strategic audit. The outcome of the SWOT analysis was a strategy for effective competition in the car industry.
To identify its strengths, Škoda UK carried out research. It asked customers directly for their opinions about its cars. It also used reliable independent surveys that tested customers’ feelings. For example, the annual JD Power customer satisfaction survey asks owners what they feel about cars they have owned for at least six months. JD Power surveys almost 20,000 car owners using detailed questionnaires. Škoda has been in the top five manufacturers in this survey for the past 13 years. In Top Gear’s 2007 customer satisfaction survey, 56,000 viewers gave their opinions on 152 models and voted Škoda the ‘number 1 car maker’. Škoda’s Octavia model has also won the 2008 Auto Express Driver Power ‘Best Car’.
Škoda attributes these results to the business concentrating on owner experience rather than on sales. It has considered ‘the human touch’ from design through to sale. Škoda knows that 98% of its drivers would recommend Škoda to a friend. This is a clearly identifiable and quantifiable strength. Škoda uses this to guide its future strategic development and marketing of its brand image.
Strategic management guides a business so that it can compete and grow in its market. Škoda adopted a strategy focused on building cars that their owners would enjoy. This is different from simply maximising sales of a product. As a result, Škoda’s biggest strength was the satisfaction of its customers. This means the brand is associated with a quality product and happy customers.
A SWOT analysis identifies areas of weakness inside the business. Škoda UK’s analysis showed that in order to grow it needed to address key questions about the brand position. Škoda has only 1.7% market share. This made it a very small player in the market for cars. The main issue it needed to address was: how did Škoda fit into this highly competitive, fragmented market?
This weakness was partly due to out-dated perceptions of the brand. These related to Škoda’s eastern European origins. In the past the cars had an image of poor vehicle quality, design, assembly, and materials. Crucially, this poor perception also affected Škoda owners. For many people, car ownership is all about image. If you are a Škoda driver, what do other people think?
From 1999 onwards, under Volkswagen AG ownership, Škoda changed this negative image. Škoda cars were no longer seen as low-budget or low quality. However, a brand ‘health check’ in 2006 showed that Škoda still had a weak and neutral image in the mid-market range it occupies, compared to other players in this area, for example, Ford, Peugeot and Renault. This meant that whilst the brand no longer had a poor image, it did not have a strong appeal either. This understanding showed Škoda in which direction it needed to go. It needed to stop being defensive in promotional campaigns. The company had sought to correct old perceptions and demonstrate what Škoda cars were not. It realised it was now time to say what the brand does stand for. The marketing message for the change was simple. Škoda owners were known to be happy and contented with their cars. The car-buying public and the car industry as a whole needed convincing that Škoda cars were great to own and drive.
Opportunities and Threats
Opportunities occur in the external environment of a business. These include for example, gaps in the market for new products or services. In analysing the external market, Škoda noted that its competitors’ marketing approaches focused on the product itself.
Audi emphasises the technology through its strapline, ‘Vorsprung Durch Technik’ (‘advantage through technology’). BMW promotes ‘the ultimate driving machine’. Many brands place emphasis on the machine and the driving experience. Škoda UK discovered that its customers loved their cars more than owners of competitor brands, such as Renault or Ford.
Information from the SWOT analysis helped Škoda to differentiate its product range. Having a complete understanding of the brand’s weaknesses allowed it to develop a strategy to strengthen the brand and take advantage of the opportunities in the market. It focused on its existing strengths and provided cars focused on the customer experience. The focus on ‘happy Škoda customers’ is an opportunity. It enables Škoda to differentiate the Škoda brand to make it stand out from the competition. This is Škoda’s unique selling proposition (USP) in the motor industry.
Threats come from outside of a business. These involve, for example, a competitor launching cheaper products. A careful analysis of the nature, source and likelihood of these threats is a key part of the SWOT process.
The UK car market includes 50 different car makers selling 200 models. Within these there are over 2,000 model derivatives. Škoda UK needed to ensure that its messages were powerful enough for customers to hear within such a crowded and competitive environment. If not, potential buyers would overlook Škoda. This posed the threat of a further loss of market share.
Škoda needed a strong product range to compete in the UK and globally. In the UK the Škoda brand is represented by seven different cars. Each one is designed to appeal to different market segments. For example:
- The Škoda Fabia is sold as a basic but quality ‘city car’
- The Škoda Superb offers a more luxurious, ‘up-market’ appeal
- The Škoda Octavia Estate provides a family with a fun drive but also a great big boot.
Pricing reflects the competitive nature of Škoda’s market. Each model range is priced to appeal to different groups within the mainstream car market. The combination of a clear range with competitive pricing has overcome the threat of the crowded market.
The following example illustrates how Škoda responded to another of its threats, namely, the need to respond to EU legal and environmental regulations. Škoda responded by designing products that are environmentally friendly at every stage of their life cycle. This was done by for example:-
- Recycling as much as possible. Škoda parts are marked for quick and easy identification when the car is taken apart.
- Using the latest, most environmentally-friendly manufacturing technologies and facilities available. For instance, areas painted to protect against corrosion use lead-free, water based colours.
- Designing processes to cut fuel consumption and emissions in petrol and diesel engines. These use lighter parts making vehicles as aerodynamic as possible to use less energy.
- Using technology to design cars with lower noise levels and improved sound quality. Outcomes and benefits of SWOT analysis.
Škoda UK’s SWOT analysis answered some key questions. It discovered that:
- Škoda car owners were happy about owning a Škoda
- the brand was no longer seen as a poorer version of competitors’ cars.
- the brand was still very much within a niche market
- a change in public perception was vital for Škoda to compete and increase its market share of the mainstream car market.
The challenge was how to build on this and develop the brand so that it was viewed positively. It required a whole new marketing strategy.
Škoda UK has responded with a new marketing strategy based on the confident slogan, ‘the manufacturer of happy drivers.’ The campaign’s promotional activities support the new brand position. The key messages for the campaign focus on the ‘happy’ customer experience and appeal at an emotional rather than a practical level. The campaign includes:
- he ‘Fabia Cake’ TV advert. This showed that the car was ‘full of lovely stuff’ with the happy music (‘Favourite things’) in the background.
- An improved and redesigned website which is easy and fun to use. This is to appeal to a young audience. It embodies the message ‘experience the happiness of Škoda online’.
Customers are able to book test drives and order brochures online. The result is that potential customers will feel a Škoda is not only a reliable and sensible car to own, it is also ‘lovely’ to own.
Analysing the external opportunities and threats allows Škoda UK to pinpoint precisely how it should target its marketing messages. No other market player has ‘driver happiness’ as its USP. By building on the understanding derived from the SWOT, Škoda UK has given new impetus to its campaign. At the same time, the campaign has addressed the threat of external competition by setting Škoda apart from its rivals.
Škoda is a global brand offering a range of products in a highly competitive and fragmented market. The company must respond positively to internal and external issues to avoid losing sales and market share.
A SWOT analysis brings order and structure to otherwise random information. The SWOT model helps managers to look internally as well as externally. The information derived from the analysis gives direction to the strategy. It highlights the key internal weaknesses in a business, it focuses on strengths and it alerts managers to opportunities and threats. Škoda was able to identify where it had strengths to compete. The structured review of internal and external factors helped transform Škoda UK’s strategic direction.
The case study shows how Škoda UK transformed its brand image in the eyes of potential customers and build its competitive edge over rivals. By developing a marketing strategy playing on clearly identified strengths of customer happiness, Škoda was able to overcome weaknesses. It turned its previously defensive position of the brand to a positive customer-focused experience. The various awards Škoda has won demonstrate how its communications are reaching customers. Improved sales show that Škoda UK’s new strategy has delivered benefits.
- What was the key weakness that Škoda was able to identify?
- What strength did Škoda use to turn its brand weakness into an opportunity?
- How has Škoda strategically addressed external threats?
- What in your view are the important benefits of using a SWOT analysis?
Case-3 : Marketing strategy for growth
Businesses must respond to change in order to remain competitive. Developing appropriate strategies which allow them to move forward is essential. Wilkinson is a prime example of a business that has responded to changing customer needs throughout its history. It is one of the UK’s long-established retailers of a wide range of food, home, garden, office, health and beauty products. James Kemsey (JK) Wilkinson opened his first Wilkinson Store in Charnwood Street, Leicester in 1930. After the Second World War, the 1950s saw a rise in the use of labour-saving devices and DIY. Wilkinson responded by making this type of product the focus of its sales. In the 1960s customers wanted more convenience shopping. Wilkinson started selling groceries and supermarket goods and created the Wilko brand. In the 1980s Wilkinson extended its range of low-cost products to include quality clothing, toys, toiletries and perfumes. In 1995 it opened a central distribution centre in Workshop, serving stores in the north of England and in 2004, a new distribution centre opened in Wales. In 2005 Wilkinson launched its Internet shopping service, offering over 800,000 product lines for sale online. Wilkinson currently has over 300 stores, which carry an average of 25,000 product lines. 40% of these are Wilko ‘own-brand’ products. The company’s target is to see this element grow and to have over 500 stores by 2012.
Wilkinson’s growth places it in the top 30 retailers in the UK. Recently it has faced increasing challenges from competitors, such as the supermarket sector. Wilkinson needed to combat this and identify new areas for growth. Over two years it conducted extensive market research. This has helped it create a marketing strategy designed to continue growing by targeting a new market segment – the student population. This case study focuses on how Wilkinson created and implemented this strategy, using the findings of its market research to drive the strategy forward.
Marketing strategy aims to communicate to customers the added-value of products and services. This considers the right mix of design, function, image or service to improve customer awareness of the business’ products and ultimately to encourage them to buy. An important tool for helping develop an appropriate marketing strategy is Ansoff’s Matrix. This model looks at the options for developing a marketing strategy and helps to assess the levels of risk involved with each option. Marketing strategies may focus on the development of products or markets. Doing more of what a business already does carries least risk; developing a completely new product for a new audience carries the highest risk both in terms of time and costs.
Based on its research, Wilkinson committed to a market development strategy to sell its products to a new audience of students. This is a medium risk strategy as it requires the business to find and develop new customers. It also carries costs of the marketing campaigns to reach this new group. The main focus of the strategy was to increase awareness of the brand among students and encourage them to shop regularly at Wilkinson stores.
Market research is vital for collecting data on which to base the strategy. Market research takes one of two main forms – primary research and secondary research. Primary research (also called field research) involves collecting data first hand. This can take many forms, the main ones being interview, questionnaires, panels and observation. Secondary research (also called desk research) involves collecting data which already exists. This includes using information from reports, publications, Internet research and company files.
Both methods have advantages and disadvantages. The advantages of primary research are that it is recent, relevant and designed specifically for the company’s intended strategy. The main disadvantage is that it is more expensive than secondary research and can be biased if not planned well. Secondary research is relatively cheap, can be undertaken quickly and so enables decision-making sooner. However, secondary research can go out-of-date and may not be entirely relevant to the business’ needs.
Wilkinson undertook primary market research using questionnaires from students across the UK and secondary research using government and university admissions data. The statistics revealed that there were three million potential student customers.
They had a combined annual spend of around £9 billion per year. This research confirmed that the choice of focusing on the student market as a means of growth was valid. Wilkinson undertook further research to identify how to reach students and persuade them to start shopping at Wilkinson stores. This information was used to formulate a focus strategy. This was aimed specifically at the needs of the student ‘market segment’.
Marketing to students
Wilkinson involved 60 universities in research, using questionnaires distributed to students initially in Years 2 and 3 of a range of universities and then to ‘freshers’ (new students) through the University and Colleges Admission Service. This ensured the widest range of students was included to eliminate bias. It also gave a wide range of responses. From this initial group, students were asked a second set of questions. Participants were rewarded with Amazon vouchers to encourage a good take-up. The research focused on two areas:
1. student awareness of the Wilkinson brand and
2. reasons why students were currently not using the stores regularly.
The market research enabled Wilkinson to put together its marketing strategy. The aim was to ensure the student population began shopping at Wilkinson stores early in their student experience. This would help to maintain their customer loyalty to Wilkinson throughout their student years and also to develop them as future customers after university. Repeat business is key to sustained growth. Wilkinson wanted to create satisfied customers with their needs met by the Wilkinson range of products. A marketing campaign was launched which focused on a range of promotional tactics, specifically designed to appeal to university students:
- Wilkinson being present at freshers’ fairs – and giving free goody bags with sample
products directly to students
- direct mail flyers to homes and student halls, prior to students arriving
- advertisements with fun theme, for example, showing frying pans as tennis racquets
- web banners
- offering discounts of 15% with first purchase using the online store
- gift vouchers
- free wallplanners.
The challenge was to get students into Wilkinson stores. The opportunity was to capture a new customer group at an early stage and provide essential items all year round. This would lead to a committed customer group and secure repeat business.
Wilkinson wanted to know what would inspire students to shop at Wilkinson more and what factors would help to attract non-customers. The research provided significant primary information to analyse the effects of the campaign. Wilkinson used questionnaires collected from the first year undergraduates to gather qualitative data. In addition, Wilkinson obtained quantitative data from various other sources, including:
- redemption rates – how many people used the discount vouchers when buying
- sales analysis – how much extra business did the stores handle
- footfall in stores analysis – how many extra people went into stores.
This information helped Wilkinson to develop its plans for future marketing campaigns. It identified Motivation factors for the student audience which would help to encourage future purchase. Key factors included products being cheaper than competitors and easy access to stores. 23% of students questioned gave ‘distance from university’ as a reason for not regularly visiting the store. The layout of the store was another major problem affecting repeat visits. These findings have been taken on board by Wilkinson in its future planning of store locations and layouts.
Researching students’ opinions after the campaign showed that:
- Awareness of Wilkinson brand had significantly risen from 77% to 95% of those interviewed. This brought it in line with Morrison supermarkets, a key competitor.
Wilkinson’s marketing strategy began with its corporate aim to grow and increase stores across the UK. It was facing increased competition from supermarkets and needed to identify an area to focus on. To pursue a growth strategy, Wilkinson used market research to identify new target customers. This enabled it to prepare marketing strategies to fit the audience.
Primary and secondary research was used to find out customer views regarding its brand. Data indicated the student market segment was a significant area to focus on to achieve market development. A marketing campaign using data from a follow-up survey was put in place. The campaign showed significant increase in students’ levels of awareness about Wilkinson and its products. It encouraged them either to shop more or to try Wilkinson for the first time. The campaign helped to achieve many of the business’ aims, creating increased brand awareness and repeat visits. It also helped to inform the company’s future strategies for growth. Market research gathered will help to formulate future plans for new stores. These will be in line with Wilkinson commitment to providing communities with affordable products across the country.
Answer the following questions
- What is the difference between primary and secondary research? Identify one example of primary and secondary research carried out by Wilkinson.
- Explain why Wilkinson needed a marketing strategy to help them to grow.
- Evaluate the benefits of the marketing campaign to Wilkinson.
- Analyse how effective the marketing campaign was in helping Wilkinson respond to competitive pressures.
Case-4: Extending the product life cycle
Businesses need to set themselves clear aims and objectives if they are going to succeed. The Kellogg Company is the world’s leading producer of breakfast cereals and convenience foods, such as cereal bars, and aims to maintain that position. In 2006, Kellogg had total worldwide sales of almost $11 billion (£5.5 billion). In 2007, it was Britain’s biggest selling grocery brand, with sales of more than £550 million. Product lines include ready-to-eat cereals (i.e. not hot cereals like porridge) and nutritious snacks, such as cereal bars. Kellogg’s brands are household names around the world and include Rice Krispies, Special K and Nutri-Grain, whilst some of its brand characters, like Snap, Crackle and Pop, are amongst the most wellknown in the world.
Kellogg has achieved this position, not only through great brands and great brand value, but through a strong commitment to corporate social responsibility. This means that all of Kellogg’s business aims are set within a particular context or set of ideals. Central to this is Kellogg’s passion for the business, the brands and the food, demonstrated through the promotion of healthy living.
The company divides its market into six key segments. Kellogg’s Corn Flakes has been on breakfast tables for over 100 years and represents the ‘Tasty Start’ cereals that people eat to start their day. Other segments include ‘Simply Wholesome’ products that are good for you, such as Kashi Muesli, ‘Shape Management’ products, such as Special K and ‘Inner Health’ lines, such as All-Bran. Children will be most familiar with the ‘Kid Preferred’ brands, such as Frosties, whilst ‘Mum Approved’ brands like Raisin Wheats are recognised by parents as being good for their children.
Each brand has to hold its own in a competitive market. Brand managers monitor the success of brands in terms of market share, growth and performance against the competition. Key decisions have to be made about the future of any brand that is not succeeding. This case study is about Nutri-Grain. It shows how Kellogg recognised there was a problem with the brand and used business tools to reach a solution. The overall aim was to re-launch the brand and return it to growth in its market.
The product life cycle
Each product has its own life cycle. It will be ‘born’, it will ‘develop’, it will ‘grow old’ and, eventually, it will ‘die’. Some products, like Kellogg’s Corn Flakes, have retained their market position for a long time. Others may have their success undermined by falling market share or by competitors. The product life cycle shows how sales of a product change over time. The five typical stages of the life cycle are shown on a graph. However, perhaps the most important stage of a product life cycle happens before this graph starts, namely the
Research and Development (R&D) stage. Here the company designs a product to meet a need in the market. The costs of market research – to identify a gap in the market and of product development to ensure that the product meets the needs of that gap – are called ‘sunk’ or start-up costs. Nutri-Grain was originally designed to meet the needs of busy people who had missed breakfast. It aimed to provide a healthy cereal breakfast in a portable and convenient format.
- Launch – Many products do well when they are first brought out and Nutri-Grain was no exception. From launch (the first stage on the diagram) in 1997 it was immediately successful, gaining almost 50% share of the growing cereal bar market in just two years.
- Growth – Nutri-Grain’s sales steadily increased as the product was promoted and became well known. It maintained growth in sales until 2002 through expanding the original product with new developments of flavour and format. This is good for the business, as it does not have to spend money on new machines or equipment for production. The market position of Nutri-Grain also subtly changed from a ‘missed breakfast’ product to an ‘all-day’ healthy snack.
- Maturity – Successful products attract other competitor businesses to start selling similar products. This indicates the third stage of the life cycle – maturity. This is the time of maximum profitability, when profits can be used to continue to build the brand. However, competitor brands from both Kellogg itself (e.g. All Bran bars) and other manufacturers (e.g. Alpen bars) offered the same benefits and this slowed down sales and chipped away at Nutri-Grain’s market position. Kellogg continued to support the development of the brand but some products (such as Minis and Twists), struggled in a crowded market. Although Elevenses continued to succeed, this was not enough to offset the overall sales decline. Not all products follow these stages precisely and time periods for each stage will vary widely. Growth, for example, may take place over a few months or, as in the case of Nutri-Grain, over several years.
- Saturation – This is the fourth stage of the life cycle and the point when the market is ‘full’. Most people have the product and there are other, better or cheaper competitor products. This is called market saturation and is when sales start to fall. By mid-2004 Nutri-Grain found its sales declining whilst the market continued to grow at a rate of 15%.
- Decline – Clearly, at this point, Kellogg had to make a key business decision. Sales were falling, the product was in decline and losing its position. Should Kellogg let the product ‘die’, i.e. withdraw it from the market, or should it try to extend its life?
Strategic use of the product life cycle
When a company recognises that a product has gone into decline or is not performing as well as it should, it has to decide what to do. The decision needs to be made within the context of the overall aims of the business. Kellogg’s aims included the development of great brands, great brand value and the promotion of healthy living. Strategically, Kellogg had a strong position in the market for both healthy foods and convenience foods. Nutri-Grain fitted well with its main aims and objectives and therefore was a product and a brand worth rescuing.
Kellogg decided to try to extend the life of the product rather than withdraw it from the market. This meant developing an extension strategy for the product. Ansoff’s matrix is a tool that helps analyse which strategy is appropriate. It shows both market-orientated and product-orientated possibilities.
Extending the Nutri-Grain cycle – identifying the problem
Kellogg had to decide whether the problem with Nutri-Grain was the market, the product or both. The market had grown by over 15% and competitors’ market share had increased whilst Nutri-Grain sales in 2003 had declined. The market in terms of customer tastes had also changed – more people missed breakfast and therefore there was an increased need for such a snack product.
The choice of extension strategy indicated by the matrix was either product development or diversification. Diversification carries much higher costs and risks. Kellogg decided that it needed to focus on changing the product to meet the changing market needs.
Research showed that there were several issues to address:
- The brand message was not strong enough in the face of competition. Consumers were not impressed enough by the product to choose it over competitors.
- Some of the other Kellogg products (e.g. Minis) had taken the focus away from the core business.
- The core products of Nutri-Grain Soft Bake and Elevenses between them represented over 80% of sales but received a small proportion of advertising and promotion budgets.
- Those sales that were taking place were being driven by promotional pricing (i.e discounted pricing) rather than the underlying strength of the brand.
Implementing the extension strategy for Nutri-Grain having recognised the problems, Kellogg then developed solutions to re-brand and re-launch the product in 2005.
- Fundamental to the re-launch was the renewal of the brand image. Kellogg looked at the core features that made the brand different and modelled the new brand image on these. Nutri-Grain is unique as it is the only product of this kind that is baked. This provided two benefits:
- the healthy grains were soft rather than gritty
- the eating experience is closer to the more indulgent foods that people could be eating (cakes and biscuits, for example). The unique selling point, hence the focus of the brand, needed to be the ‘soft bake’.
- Researchers also found that a key part of the market was a group termed ‘realistic snackers’. These are people who want to snack on healthy foods, but still crave a great tasting snack. The re-launched Nutri-Grain product needed to help this key group fulfil both of these desires.
- Kellogg decided to re-focus investment on the core products of Soft Bake Bars and Elevenses as these had maintained their growth (accounting for 61% of Soft Bake Bar sales). Three existing Soft Bake Bar products were improved, three new ranges introduced and poorly performing ranges (such as Minis) were withdrawn.
- New packaging was introduced to unify the brand image.
- An improved pricing structure for stores and supermarkets was developed.
Using this information, the re-launch focused on the four parts of the marketing mix:
- Product – improvements to the recipe and a wider range of flavours, repositioning the brand as ‘healthy and tasty’, not a substitute for a missed breakfast
- Promotion – a new and clearer brand image to cover all the products in the range along with advertising and point-of-sale materials
- Place – better offers and materials to stores that sold the product
- Price – new price levels were agreed that did not rely on promotional pricing. This improved revenue for both Kellogg and the stores.
As a result Soft Bake Bar year-on-year sales went from a decline to substantial growth, with Elevenses sales increasing by almost 50%. The Nutri-Grain brand achieved a retail sales growth rate of almost three times that of the market and most importantly, growth was maintained after the initial re-launch.
Successful businesses use all the tools at their disposal to stay at theSuccessful businesses use all the tools at their disposal to stay at the top of their chosen market. Kellogg was able to use a number of business tools in order to successfully re-launch the Nutri-Grain brand. These tools included the product life cycle, Ansoff’s matrix and the marketing mix. Such tools are useful when used properly.
Kellogg was able to see that although Nutri-Grain fitted its strategic profile – a healthy, convenient cereal product – it was underperforming in the market. This information was used, along with the aims and objectives of the business, to develop a strategy for continuing success. Finally, when Kellogg checked the growth of the re-launched product against its own objectives, it had met all its aims to:
- re-position the brand through the use of the marketing mix
- return the brand to growth
- improve the frequency of purchase
- introduce new customers to the brand.
Nutri-Grain remains a growing brand and product within the Kellogg product family.
Answer the following questions:
- Using current products familiar to you draw and label a product life cycle diagram, showing which stage each product is at.
- Suggest appropriate aims and objectives for a small, medium and large business.
- Consider the decision taken by Kellogg to opt for product development. Suggest a way in which it could have diversified instead. Justify your answer.