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Case-1: The
use of the marketing mix in product launch
Introduction
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
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.
Product :
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.
Price :
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
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
Promotion
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.
Conclusion
NIVEA VISAGE Young is a
skincare range in the UK
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:
1. Describe
what is meant by a business being ‘consumer led’.
2. What are
the key parts of the marketing mix? Explain how each works with the others.
3. Explain
why the balance of the marketing mix is as important as any single element.
4. 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
Introduction
In 1895 in Czechoslovakia 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
To improve its performance
in the competitive car market, Škoda UK UK
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
Strengths
To identify its strengths,
Škoda UK
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.
Weaknesses
A SWOT analysis identifies
areas of weakness inside the business. Škoda UK
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
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
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
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 UK
Škoda needed a strong
product range to compete in the UK UK
• 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
• Škoda car owners were
happy about owning a Škoda
• the brand was no longer
seen as a poorer version of competitors’ cars.
However,
• 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
• 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 UK
Conclusion
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
The case study shows how Škoda
UK UK
Answer the
1. What was
the key weakness that Škoda was able to identify?
2. What
strength did Škoda use to turn its brand weakness into an opportunity?
3. How has
Škoda strategically addressed external threats?
4. What in
your view are the important benefits of using a SWOT analysis?
Case-3 : Marketing strategy for growth
Introduction
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 England
and in 2004, a new distribution centre opened in Wales
Wilkinson’s growth places it
in the top 30 retailers in the UK
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
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
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.
Outcomes/evaluation
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.
Conclusion
Wilkinson’s marketing
strategy began with its corporate aim to grow and increase stores across the UK
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
1. What is
the difference between primary and secondary research? Identify one example of primary
and secondary research carried out by Wilkinson.
2. Explain
why Wilkinson needed a marketing strategy to help them to grow.
3. Evaluate the benefits of the
marketing campaign to Wilkinson.
4. Analyse
how effective the marketing campaign was in helping Wilkinson respond to competitive
pressures.
Case-4: Extending the product life cycle
Introduction
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
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.
1. 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.
2. 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.
3. 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.
4. 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%.
5. 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:
1. 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.
2. Some of the other Kellogg
products (e.g. Minis) had taken the focus away from the core business.
3. 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.
4. 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.
1. 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’.
2. 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.
3. 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.
4. New packaging was
introduced to unify the brand image.
5. 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.
Conclusion
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:
1. Using
current products familiar to you draw and label a product life cycle diagram, showing
which stage each product is at.
2. Suggest
appropriate aims and objectives for a small, medium and large business.
3. Consider
the decision taken by Kellogg to opt for product development. Suggest a way in which
it could have diversified instead. Justify your answer.
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