Marketing Management

02 Jul

CASE: 1

VIRGIN MOBILE INTRODUCTION

Virgin Mobile, a leading branded venture capital organization, is one of the world’s most recognized and respected brands. Conceived in 1970 by Sir Richard Branson, the Virgin Mobile Group has gone on to grow very successful businesses in sectors ranging from mobile telephony, to transportation, travel, financial services, leisure, music, holidays, publishing and retailing. Virgin Mobile has created more than 200 branded companies worldwide, employing approximately 50,000 people, in 29 countries. Its revenues around the world in 2006 exceeded £10 billion (approx. US$20 billion). In Indian mobile market, Virgin mobile is a unique player based on its business model and strategy. It is the only service provider which does not hold any bandwidth and mobile setup infrastructure but uses Tata Teleservices spectrum and is penetrating market totally on its branding and marketing strategy. Creating a niche brand and promoting it to specific customer segment with proper marketing has been the key success factor for virgin mobile across the globe. So, from marketing and customer understanding point of view, this is a very unique company to study.

UNDERSTANDING VIRGIN’S BUSINESS MODEL:

Virgin has promoted itself as the brand for young India, keeping the Indian youth as its target customer segment. The idea behind targeting this segment can be found inherited in virgin’s business model. The salient features of Virgin’s business model from customer perspective are:

1) With intensive competition and reducing voice tariffs, the profit margins for voice service are decreasing day by day. So, the future profit strategy is maximizing profit margins through data services and it is youth segment which provides maximum data service revenues.

2) Future projection of increasing young and working population of India as 65% of overall population by 2020.

3) Increased use of data services in future due to technological advancements. So , in mobile sector where all other players are trying to provide similar service to different customer segments, virgin is targeting specific segment with tailor made plans keeping its long term goals in mind.

CUSTOMER ACQUISITION AND RETENTION STRATEGIES

The company knows that they are trying to position themselves into a very established and competitive market. They understand the fact that they cannot start making profit from day one neither they have plans for it; they anticipate to achieve a subscriber base of 5 million in next three years and will make profit afterwards they will be able to break even in three year or so. Sir Richard once said, “We want to deliver a more tailored and relevant offering for a single segment.” Company targets only 10% of the above mentioned segment and have plans to acquire and retain them by various innovative propositions, some of them are-

1 Providing services which were not offered so far

a) Get paid for incoming calls.

b) 50 paisa calls across the country.

c) A brand truly meant for the young India which is reflected at each & every touch point.

d) Extensive data service offers in the form of Vbytes.

e) Excellent value added plans.

f) Go online facility for enquiry, purchasing phone, recharging and everything.

g) One-touch VAS access from every virgin mobile.

2 Providing services which others are not providing meticulously

a) Easy to change the handset from a wide range of handset providing at very reasonable prices

b) Boring customer care services telling you are in queue.

c) One customer care officer dedicated for all queries of one customer leading to transparency.

d) No jammed or bad network coverage.

e) Tailor made customized plans without any hidden charges.

f) No monthly bills.

VALUE CREATION THROUGH PRODUCT DESIGN:

Various steps that Virgin is taking to add value to the customer are on price, quality, technology and social front. Company is providing the best prices in whichever plan you go, quality of signals is not only comparable but better than most of the service providers, on technology front it is the first in India to go for one-touch VAS access from every Virgin Mobile.

Questions

1) Who was the Target Market for Virgin Mobile?

2) What do you understand by Value Creation in context to this case study?

3) Does the customer acquisition and retention strategy really help Virgin Mobiles?

4.) Study and elaborate the business model of Virgin mobile?

 

CASE: 2

SOTC: An Overview                                                                                               

Established in 1949 with just five employees at an office in Cawasji Hormusji Street, Mumbai, SOTC has grown to become one of India’s largest travel companies. By the year 1968, the Company had a turnover touching Rs 25 million. A major turning point came in 1976 when SOTC handled its first group tour to the US during the bicentennial celebrations. Within three years, SOTC had taken about 500 passengers to Europe, the US, Singapore and Japan. In 1981, came another breakthrough when SOTC Package Tours began active advertising, with the first ad hitting the newspapers Between the years 1983 and 1995, SOTC grew by leaps and bounds. It moved to new premises at Church gate, Mumbai, installed the first computer for sales and operations, and went through a management metamorphosis with a complete restructuring of the business into autonomous Strategic Business Units (Subs) with a state-of-the-art call centre. SOTC has been fulfilling the travel needs of Indians for over five decades now. It continues to seek out new and exciting destinations to offer to outbound travelers. SOTCs outbound business operations broadly encompass Packaged Group Tours for Indians and Individual Holidays. SOTC World Famous Tours caters to those who seek comfort in group travel. It is widely acknowledged to be the most successful package tour brand in India. Recognizing the importance of language markets, SOTC also pioneered tours conducted in Marathi and Gujarati under the SOTC brand extensions:

MARKETING MIX OF SOTC PRODUCT

Product is the combination of tangible and intangible elements. The Tourism(SOTC) product, which is mainly the destination, can only be experienced. The views of the location travel to the destination, the accommodation and facility as well as the entertainment at the destination all form the tourism product. Thus, it is a composite product combination of attraction, facilities and transportation . Each of these components has its own significance in the product mix and in the absence of even single components, the product mix is incomplete.

Services Offered by SOTC

  • Escorted tours
  • Customized holidays
  • Trade fairs
  • SOTC sports
  • Corporate tours

PRICE

Pricing in tourism is a complex process. Pricing includes the prices of other services like Air travel, Bus, Railways, Hotels, etc. All are included in tourism package. Pricing also depends on the Geographic Location of the destination. Pricing also depends on the competitors price. Pricing also depends on Seasonality. Seasonality is the most important factor in pricing. To match demand and supply tourist managers try to get either discount .E.g. Taj is the tourist attraction in India. Pricing is also based on competitors pricing. Pricing is also subject to government regulations .E.g. Air price changes tourism package also changes, if Hotel charges change then also tourism package changes. Pricing of the tourist product is a complex matter because of its composite nature. Geographical location of the destination affects the pricing decision. At the same time, seasonality factor and varying demand cannot be overruled. The objective of pricing in any other firms is to fetch a target market share, to prevent competition, and to take care of the price elasticity of demand. A very important way, in which SOTC responded to their highly complex pricing circumstances, is to operate at two levels.

  1. The first level is corresponds with the marketing strategy, which concerns with the product positioning, value for the money, long run return on investments etc.
  2. The second level corresponds to the marketing operations or tactics where the prices are manipulated to match the current demand and competition

PLACE

Different distribution strategies can be selected for Tourism marketing. Tourism as a product is distributed as a travel. Internet is also used widely. There is an also small agent spread all over the town who plays a role of place. Large travel companies like Thomas Cook, Cox & Kings, SOTC, etc they act as a wholesalers and these wholesalers also act as a retailer. The two major functions performed by the distribution system in tourism marketing are

  1. To extend the number of points of sales or access, away form the location at which services are performed or delivered
  2. To facilitate the purchase of service in advance

Different distribution strategies are selected for Tours marketing by SOTC. There are also small agents (who have taken franchise of SOTC) spread all over the town/country who also play a role of place. SOTC act as wholesalers and also act as a retailer. The latest mode of reaching customers is through Internet that is SOTC has its own website from where information on the tours can be procured, direct booking can be done for which the payment can be made through the credit card. SOTC also has its own offices from where booking can be done.

1) Franchises: Offices in all major cities of India,347 offices in India

2) Tie Ups: Flightraja.com

3) Travel boutique online

4) Internet Booking of Packages and Tickets

PROMOTION

Advertising and sales promotion in Tourism can be very effective when supplemented by publicity and personal selling. They use electronic, print all sorts of media they use; and it is highly promoted industry. Public or PR (Public Relation) plays an important role in tourism. It is also through recommendation of friends and relatives this is a biggest promotion. Creation of awareness is an important factor in the formulation of marketing mix for the tourism industry. The promotion task simplifies the activities of informing, persuading and influencing the decisions of potential tourists. The promotion mix plays a vital role as the users of service feel high degree of involvement and uncertainty about the product and their role in buying process In the tourism industry the travel agents and the travel guides are the two most important people who speak a lot about the industry. Hence it is imperative that they have to be at their best at all times. Travel guides especially, are expected to have a lot of patience, good sense of humor, tact to transform the occasional tourists into habitual ones, thorough knowledge of the places, linguistic skills etc

SOTC`S PEOPLE MIX-

  1. Includes travel agents, tour operators, tour guides.
  2. Locals are employed

3 Exhaustive training is provided

4 2900 employees through its 347 offices and caters to 3 million customers.

PROCESS OF SOTC

The operation process of the tourism firm will depend on the size of the tourism firm. The sequential steps involved in the delivery of the SOTC products are:

  1. Provision of travel information — The information regarding the travel is provided at a convenient location where the potential tourist seeks clarification about his proposed tour.
  2. Preparation of itinerates—— SOTC prepares its composition of series of operations that are required to plan a tour.
  3. Liaison with providers of services— Before any form of travel is sold over the counter to a customer; SOTC enters into the contracts with the providers of various services including transportation companies, hotel accommodation, coaches for local sightseeing etc.
  4. Planning and costing tours—— Once the contracts and arrangements are entered into, then the task of planning and costing the tour, this will depend on the tour selected as well as physical evidence.
  5. Ticketing—– The computerized reservation system has in recent years revolutionized the reservation system for both rail and air travel. SOTC also provides the online ticket booking facilities to its customers, which further leads to time saving process for it`s customers.
  6. Provision of foreign currency and insurance— SOTC in case of foreign travel also provide foreign currency as well as insurance to its customers.

PHYSICAL EVIDENCE

The Physical evidence of a tourism product refers to a range of more tangible attributes of the operations. Tangibalising the product is a good way of giving positive and attractive hints or cues to potential customers with regard to the quality of the product., For SOTC , Elements Such as quality and attractiveness of décor, effective layout of establishment, surroundings and quality of promotional materials are all important.

MARKET SEGMENTATION

Indian travel market can be classified into two broad categories International Travelers- Those crossing International borders Domestic Travelers – Those travelling within India. International Travelers can be classified as Inbound Travelers (those who travel into India from Overseas) and Outbound of India (who travel internationally.)

Inbound market is further segmented into six broad categories

  1. Holiday and sight seeing.
  2. Business travelers
  3. Conference attendees.
  4. Students
  5. Visiting friends
  6. Relatives etc.

TARGETING

Such segmentation is required when targeting the offerings to a particular segment. For Example

  1. The mass market consists of vacationists that travel in large groups and prefer all-inclusive tours. They are generally conservative. The popular market consists of smaller groups going on inclusive or semi-inclusive tours. This group includes pensioners and retired people.
  2. The individual market consists of chairmen, senior executives, etc.
  3. As the lifestyle changes, consumption of services might change. For example, a newly married couple might prefer romantic holidays, but once they have children they would prefer family vacations where there are plenty of activities to entertain kids. Teens and youth might prefer adventure holidays whereas senior citizens would probably prefer more relaxing vacations

KEY TO SUCCESS FOR SOTC

The key to success for SOTC will undoubtedly be effective market segmentation through identification of several niche markets and implementation strategies. Along these lines the company intends to implement advertising, personal selling and direct marketing strategies to the target markets. Their personal selling marketing strategies will rotate around keeping in touch with hotels and travel agencies for major customers, and advertising customers. Hence their key success factors will include the following:

1) Excellence in fulfilling the promise: intend to offer completely enjoyable, comfortable and informative travel excursions that will ensure that travelers are thoroughly satisfied and appreciative at the end of their trip.

2) Timely response to customers’ requests: SOTC cannot afford to delay their clients for whatever reason, as this will have negative bearing on our image and reputation, including future business. Hence they need to be continually communicating with the client, including hotels and lodges so as to ensure that are constantly available to the client meeting their expectations.

3) Solid and fruitful strategic alliances: Considering the nature of their services and our relative infancy on the market, SOTC should realize the importance of establishing and maintaining fruitful strategic alliances with various stakeholders, including hotels, lodges, and travel agencies, so as be assured of constant flow of customers, fulfilling their needs at every opportunity.

4) Marketing know-how: There will be a need to aggressively market SOTC business and the services they provide so as to be continuously at the top of prospective client minds. This will also act as a temporary deterrent for companies contemplating entering our market. Advertising shall be undertaken on a regular basis.

Questions

1. What P’s are involved in marketing mix of services?

2. Explain the People mix with reference to SOTC?

3. State the key to success for SOTC?

4. Give an short marketing mix of services of Banking?

 

CASE: 3

ICICI: Hum Hai Naa                                                                                   

Making impact with the experiences on post decision processes

Banking in Indian post nationalization in 1969 projected a picture of a laid back approach, where the basic focus was driven towards savings and deposits. Most retail customers with banks operated with in the dictate laid down by banking regulations. Aspects like, banking between 10- 2pm, Saturday half-day, Sunday off day, lag time get drafts made and numerous other facets which were like bottlenecks with which the retail customer at the bank was conditioned too. After liberalization in 1991 and with banking sector also opening, the industrial credit arm of the government expanded into retail banking in 1994 with ICICI bank.

After Mr K V Kamath took over as MD and CEO of the bank in 1996, ICICI went through a series of takeovers and new product launches between 1996 & 1999. with 364 branches, over 46 extension counters, a network of over 1050 ATMs, multiple call centers and well-developed internet banking, the Mumbai HQ of ICICI bank can provide financial services all over India. Its customers often use multiple channels, and they are increasingly turning to electronic banking options. Business from ATMs, internet, and other electronic channels now comprises of almost 50% of all transactions, up from just 5% in last couple of years. In the process of growing its business to this level, ICICI bank has distinguished itself from other banks through its customer relationship. ICICI bank executive director Chanda Kochar says, “In an increasingly competitive environment where customers are becoming more demanding and financial services are getting commoditized, ICICI realized the key differentiator would be customer focus”.

ICICI today has not just expanded into numerous divisions like insurance, mutual funds, securities, and commodity trading, but even their core banking business has extended into a multitude of activities, providing benefits to the customers. The ICICI ATM today is not just a point for cash withdrawal, but it can also be used for mobile prepaid card recharge, buying internet packs (ATNAny Time Net), payment of donations (Anytime blessings), Mutual funds transactions, bill payments, flexi top ups and calling cards. ICICI’s aggressive and customer driven approach on the flip side has also been able to open the market. Nationalized banks like SBI, Corporation Bank etc., have had to realign themselves and a host of other private banks have followed the suit. HDFC bank, UTI bank, IDBI bank to name a few have always been known as the follower in the segment after ICICI’s aggressive opening. ICICI has redefined the Indian banking industry on how customer driven banking is done.

The case of ICICI bank illustrates and highlights the importance of customer satisfaction as the foundation of a successful business. Also, it shows how customer satisfaction depends on good performance creating positive feelings and perceptions of equity. In addition to this, it shows how customers can learn about the offerings by experiencing them directly. Finally, ICICI shows how by offering innovative and new range of services make the customers stay loyal. All this phenomena occurs after the consumer has made a decision. Hence, once a customer comes to you after making a decision on your product, as a marketer you should be ready to provide them with a detailed experience of your offerings so as to make them stay with you. You should be careful enough to provide them with the experience which should have a favorable impact of you and your products on your customers.

Questions

1. According to u what driven the success of ICICI in presence of so many nationalized banks?

2. What do you understand by customer satisfaction? How did ICICI gain it?

3. How the ICICI did changed the Indian Banking approaches?

4. What you understand by Post Decision Process?

 

CASE: 4

Why Grow Up” Frooti                                                                                

“Why Grow Up” was a campaign started by Parle Agro to give Frooti new look and new positioning. The campaign was started in 2009 and now when we look back, it seems that creative agency has done a wonderful job in creating this campaign.

Advocacy is the most powerful means of creating goodwill and thus creating stronger brand. In all these advertisements, company has used common people and they are seen playing around with large, non-symmetrical, funny mango.

This is a great strategy in which brand has given preference to common people over celebrities and stars. The new campaign gives a new, young, happy and funny look to brand. “Why Grow Up” campaign is conceptualized by creativeland .

This is a part of long term strategy of company, as per the news they want to take brand to new heights and associate it with young and aspirations of audience. The company has even incorporated the new designs in the packaging with a small change in logo and brighter color of tetra packs.

The company has gone aggressive with smaller packs of frooti and gave a heads on collision to other fruit juices and aerated drinks. People have spent their lives growing with frooti and now when they are part of their new brand strategy.

The creator of ad has used candid cameras and captured the surprise impact of the participants who are playing a game and which in turn is made an ad. This is a very unique concept and highly appreciated by the audience. All people not only children but adults who still long for happiness in their lives love the advertisement.

Frooti is considered to be a cult brand and in some sense a category name also. Mango is considered to be king of fruits and brand company has done a great job in understanding the strengths of the company and revamping the identity of brand thus keeping its heritage intact

Questions

1. What is main objective of the “why grow up “campaign?

2. According to you what impact did the “why grow up campaign on consumer’s mind?

3. What role do the packaging plays create an image of brand like frooti?

4. How successful the “why grow up” campaign?

Marketing Management

02 Jul

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 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.

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. 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

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 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:

  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, 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.

Strengths

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.

Weaknesses

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

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

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.

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 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.

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’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.

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’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

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.

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. 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

  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’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.

  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. MaturitySuccessful 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’.
  1. 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.
  2. 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.
  3. New packaging was introduced to unify the brand image.
  4. 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.

Marketing Management

02 Jul

CASE STUDY -I

“Waiting in New Delhi

“Richard was a 30 year-old American manager sent by his Chicago-based company to set up a representative office in India. This new office’s main mission was to source consumer products such as cotton piece goods, garments, accessories and shoes as well as certain industrial goods, e.g. tent fabrics and cast iron components.

“India’s Ministry of Foreign Trade had invited his company to pen this office because they knew it would promote exports, brig in badly-needed foreign exchange and provide manufacturing knowhow to Indian factories. This was in fact the first international sourcing office to be located anywhere in South Asia, and the MFT very much wanted it to succeed so that other Western and Japanese companies could be persuaded to establish similar procurement offices.

“Richard decided to set up the office in New Delhi because he knew that he would have to meet very frequently with senior government officials. Since the Indian government closely regulates all trade and industry, Richard often found it necessary to help his suppliers obtain import licenses for the semi-manufactures and components they required to produce finished goods for his company.

“Richard found the government meetings very frustrating. Although he always phoned to make appointments, the bureaucrats almost always kept him waiting for half an hour or more. Not only that, his meetings would be continuously interrupted by phone calls, unannounced visitors and assistants bringing in stacks of letters and documents to be signed. Because of he waiting and the constant interruptions, it regularly took half a day or more to accomplish something that could have been done back home in 20 minutes or less.

“Three months into this assignment, Richard began to think about requesting a transfer to a more congenial part of the world—‘somewhere where things work.’ He just could not understand why the officials here were being so rude. Why did they keep him waiting? Why didn’t they hold incoming calls and sign papers after the meeting so as to avoid the constant interruptions?
“After all, the government of India had actually invited his company to open this office. So didn’t he have the right to expect reasonably courteous treatment from the bureaucrats in the various ministries and agencies he had to deal with (Richard R. Gesteland)?”
What Richard does not realize, Mr. Gesteland explained, is that the Indian way of doing business is vastly different from the American way of doing business. What is acceptable in some cultures, may not be considered acceptable or the standard in others. In India, being a half hour or more late is not unusual and is not considered rude. India has what Mr. Gesteland calls fluid time, in which no times are firmly set. Additionally, it is acceptable to take telephone calls during meetings. It is also considered acceptable to sign papers and have unexpected visitors. Although this may seem to an American to be backwards, a waste of time, and impolite, it is considered the standard and a perfectly acceptable manner of doing business in India.

QUESTION

1) Why did Richard not able to jell with local conditions?

2) If you were Richard, What would you do

 

CASE: II    The Sudkurier
The Sudkurier is a regional daily newspaper in south-western Germany. On average 310,000 people in the area read the newspaper regularly. The great majority of those readers subscribe to its home delivery service, which puts the paper on their doorsteps early in the morning. On the market for the last 35 years, the Sudkurier contains editorial sections on politics, the economy, sports, local news, entertainment and features, as well as advertising. The newspaper is financially independent and its staff is free of any political affiliation. Management at the Sudkurier would like to bring the paper into line with the current needs of its readers. For this purpose, the management team is considering the use of market research.
Management would like to have information about the following.

  1. What newspaper or other media are the Sudkurier’s main competitors?
  2. Do most readers read the Sudkurier for the local news, sports and classified ads, and should these sections therefore be expanded at the expense of the sections on politics and the economy?
  3. Should the Sudkurier’s layout be modernized?
  4. Do mostly lower levels of society read the Sudkurier?
  5. Into what political category do readers and non-readers the Sudkurier?
  6. Which suppliers of products and services consider the Sudkurier especially appropriate for their advertising?

Source: Regional Press Study, Gfk-Medienforschung Contest-Census  

Questions:

1. Explain how you will methodically go about compiling the requested information covered in the seven questions for management. Include in your explanation an estimate of the expense involved in obtaining the information.

2. Develop a 10-question questionnaire for the purpose of making a survey.

 

CASE: III    Unilever in Brazil: marketing strategies for low-income customers

After three successful years in the Personal Care division of Unilever in Pakistan, Laercio Cardoso was contemplating attractive leadership positioning China when he received a phone call from Robert Davidson, head of Unilever’s Home Care division in Brazil, his home country. Robert was looking for someone to explore growth opportunities in the marketing of detergents to low-income consumers living in the north-east of Brazil and felt that Laercio had the seniority and skills necessary for the project. Though he had not been involved in the traditional Unilever approach to marketing detergents, his experience in Pakistan had made him acutely aware of the threat posed by local detergent brands targeted at low-income consumers.
At the start of the project—dubbed ‘Everyman’—Laercio assembled an interdisciplinary team and began by conducting extensive field studies to understand the lifestyle, aspirations and shopping habits of low-income consumers. Increasing detergent use by these consumers was crucial for Unilever given that the company already had 81 per cent of the detergent powder market. But some …. esalers had national coverage and economies of scale but did not directly serve the small stores where low-income consumers shopped, necessitating another layer of smaller wholesalers, which increased their cost to US$0.10 per kg. Alternatively, Unilever could contract with dozens of specialize distributors who would get exclusive rights to sell the new Unilever detergent. These specialized distributors would have a better ability to implement point of purchase marketing and would cost less ($0.05 per kg).
Question:

1. Describe the consumer behaviour differences among laundry products’ customers in Brazil. What market segments exists?

2. Should Unilever bring out a new brand or use one of its existing brands to target the north-eastern Brazilian market?

3. How should the brand be positioned in the marketplace and within the Unilever family of brands?
Case 4   Ryanair: the low fares airlines

The year 2004 did not begin well for Ryanair. On 28 January, the airline issued its first profits warning and ended a run of 26 quarters of rising profits. On that day, when the markets opened, the company was worth €5 billion. By close of business, its value had shrunk to worth €3.6 billion, as its share price plunged from worth €6.75 to €4.86. Investors were dismayed by the airline’s admission …..

  • In April 2005, Ryanair abandoned an experiment in paid-for in flight entertainment, after passengers were reluctant to rent the consoles at the £5 required to receive the service. Apparently, market research discovered passengers are unwilling to invest on such short flights, with the ideal being six-hour flights to longer-haul holiday destinations. When the experiment was launched in November 2004, Michael O’Leary hailed the move as ‘the next revolution of the low-fares industry…we expect to make enormous sums of money’.

Questions:

1. How does Ryanair’s pricing strategy account for its successful performance to date? Would you suggest any changes to Ryanair’ pricing approach? Why/why not?

2. Is the ‘no-fares’ strategy a useful approach for Ryanair in the short term? In the long term?

3. Do the issues facing Ryanair threaten its low-fares model?

 

Case V   LEGO:   the toy industry changes

How times have changed for LEGO. The iconic Danish toy maker, best known for its LEGO brick, was once the must-have toy for every child. However, LEGO has been facing a number of difficulties since the late 1990: falling sales, falling market share, job losses and management reshuffles. Once vote ‘Toy of the Century’ and with a history of uninterrupted sales growth, it appears LEGO has fallen victim to changing market trends. Today’s young clued-up consume is far more likely to be seen surfing the web, texting on their mobile phone, listening to their MP3 player or playing on their Game Boy than enjoying a LEGO set. With intensifying competition in the toy market, the challenge for LEGO is to create aspirational, sophisticated, innovative toys that are relevant to today’s tweens.

History

In 1932 Ole Kirk Christiansen, a Danish carpenter, established a business making wooden toys. He named the company ‘LEGO’ in 1934, which comes from Danish words ‘leg godt’, meaning ‘play well’. Later, coincidentally, it was discovered that in Latin it means, ……
still remaining true to its wholesome ‘play well’ brand values? Will LEGO succeed in its attempts to target young girls and its desire to target a more adult audience? Will it succeed in its attempts to reduce costs and improve efficiencies? Will CEO Jorgen Vig Knudstorp succeed where his predecessors have failed? Only in the fullness of time will these questions be answered but one thing is for sure: no brand, no matter how powerful, can afford to become complacent in an increasingly competitive business environment.
Questions:

1. Why did LEGO encounter serious economic difficulties in the late 1990s?

2. Conduct a SWOT analysis of LEGO and identify the company’s main sources of advantage.

3. Critically evaluate the LEGO turnaround strategy.

Marketing Management

02 Jul

CASE: 1    Absolut Vodka: creating advertising history

The Absolut advertising campaign was often regarded by advertising experts as one of the most brilliant, innovative, successful and long-running campaigns ever. The several prestigious awards that the campaign has won since its first ad was launched stand as testimony to this fact (See Table) for details of some of the awards).

Table:    A brief list of awards won by Absolut advertisements

Year Award(s)
1989 The Kelly Grand Prize for the ad ‘Absolutla’
1990 Grand EFFIE Award for Absolut advertising campaign
1991 The Kelly Grand Prize for the ad ‘Absolut Glasnost’
1992 Award of Excellence’ for animation on the Internet by the communication Arts magazine
1993 Absolut Advertising Campaign introduced in the ‘Hall of Fame’ by the American Marketing Association
2000 Four Cresta Awards for international Advertising for the ads ‘Absolut Accessory’, ‘Absolut Auckland’, ‘Absolut Voyeur’ and ‘Absolut Space’ from Creative Standards International and the International Advertising Association
2002 Insight Award for Best online advertising
2003 EFFIE Gold Award for sustained success of the Absolut advertising campaig


‘Absolut adventure’: the making of a legend

In early 1979, Absolut vodka launched in the USA at the liquor trade convention held at Fairmont Hotel in New Orleans. Initially, the company concentrated its marketing efforts in and around New York, Los Angeles, San Francisco and Boston because these were the places where new trends were created, media attention was intense and the bar culture prevailed.

V&S had sold around 25,000 cases of Absolut vodka when advertising agency TBWA took over its ad account in late 1979. Two at TBWA, Graham Turner and Geoff Hayes, were assigned the job of creating the ads for the ‘still not so popular Swedish vodka’. The duo began by getting familiar with the product’s  taste and conducting extensive research on different liquor ads of the previous 10 years. They found that most ads were pretentious and pompous, featuring people dressed in expensive attire and living lavish lifestyles with a small liquor bottle tucked in some corner. Moreover, none of the ads was targeted at people below 40.

After extensive research and effort, the admen came up with three different advertisement samples. The first featured a Russian soldier looking through a pair of binoculars with each lens reflecting the Absolut vodka bottle, accompanied by a slogan that read ‘Here’s something that Russians would really love to put behind bars.’ This ad was aimed at challenging the Russian vodka brand Stolichnaya. The second ad featured some of the favourite pastimes of Swedes, with a picture of the bottle; the slogan read ‘There’s nothing the Swedes enjoy more when it’s cold.’ The third ad featured only the Absolut vodka bottle with a halo over it, with a two-word slogan: ‘Absolut Perfection’ (a modified version of one of the ads created at NW Ayer). This ad was designed with the intention of humorously portraying as pure and natural.

The admen had come up with a dozen designs, which depicted the bottle in different ways accompanied by a two-word slogan. It was one of the simplest themes anyone associated with Absolut had created up until then. The ads featured the Absolut bottle, a description of the product and the two-word slogan with one word describing the theme and the other the brand name itself. In early 1980, V&S launched the first advertisement, ‘Absolut Perfection’, along these lines. Since then, the bottle has been retained as the centerpiece for every advertisement of Absolut vodka accompanied by a two-word slogan.

All Absolut ads were published in popular American newspapers and magazines like Newsweek, Time, New York, Los Angeles, New Yorker, New York Times, Interview and GQ. Carillon decided to continue using the same ad concept with a variety of themes. Experts felt that by using the same concept to depict various events, people or things, Absolut ads always gave people something to think about. Soon the ads had become a topic of interest among liquor consumers.

People began drinking Absolut not only because it was a new premium brand available on the market, but also to experience the image that its advertisement had created—that of simplicity and purity. Analysts credited the popularity of Absolut to its advertisements as they involved viewers in a creative process. Within three years, v Absolut vodka was being exported to 16 different markets worldwide as well as its home country, Sweden. In 1984, V&S exported six million litres of Absolut vodka. In the USA, sales were doubling every year (see the table).

Table    V&S: Income statements, 1997-2002 (SEK million)

Particulars/year 1997 1998 1999 2000 2001 2002
Net Sales 3223.6 3,446.9 4028.6 5711.5 6725.1 9092.8
Other operating revenues (10.3) 32.3 43.2 104.3 175.3 149.6
Operating Expenses (2449.8) (2626.8) (2924.9) (4177.4) (4741.2) (6686.6)
Depreciation, amortization and write-downs (105.7) (130.7) (85.6) (235.0) (394.9) (519.2)
Non-recurring items (17.0) 287.3 (143.3) 46.1
Operating Profit 640.8 1009.0 918.0 1449.5 1764.3 2036.6
Financial items, net 31.5 50.6 46.0 (16.2) (292.6) (167.6)
Profit before taxes 672.3 1059.6 964.0 1433.3 1471.7 1869.0
Taxes (175.0) (197.3) (273.5) (437.2) (462.0) (598.5)
Minority share (0.4) (0.8) (0.3) (61.9) (0.5) (5.7)
Net profit for the period 496.9 861.5 690.2 934.2 1009.2 1264.8

In 1985, Michel Roux, President of Carillon and in charge of US distribution, came up with the idea of getting Absolut bottle painted and using it as an ad. Initially, there was opposition to this idea as it was a departure from the central idea of having the bottle photographed. However, Roux went ahead and commissioned celebrated artist Andy Warhol to paint the bottle, marking the beginning of Absolut’s association with art. The painting attracted a lot of accolades and the celebrity association gave the brand a great deal of mileage.

Thereafter, several artists painted their own interpretations of the Absolut bottle. Analysts observed that painting an Absolut bottle had apparently become an issue of pride for many leading artists. Big names such as Keith Haring, Kenny Scharf, Stephen Sprouse, Edward Ruscha, Arman and Britto made their own interpretation of the Absolut bottle (see Table given below for details). The above exercise was not only in the form of painting, but also in sculpture, glasswork, photography, folk art, wood work, computer/digital art and many other media. As Absolut’s association with the world of art gave the brand a lot of media attention and publicity, the company began regularly publishing these art ads along with the regular ads. Analysts noted that what began as an advertising campaign to promote an unknown Swedish vodka brand had become a part of American culture.

Table        Absolut’s association with art and fashion

Year  Name Description
ABSOLUT ART
1990 Absolut Glasnost This art collection featured paintings by 26 Russian artists including Alexander Kosolapov, Evgeny Mitta and Leonid Lamm.
 1993 Absolut Latino This collection featured artwork contributed by 16 artists from South and Central America. This collection showcased the artist’s interpretations of the Absolut bottle in traditional and contemporary Latino themes depicting the relationship between reality and illusion. Some of the artist who contributed to this collection were: Alberto Icaza, Vik Muniz and Monica Castillo.
 1997 Absolut Expressions This collection featured art work contributed by 14 African and America artists. The artists (including Anita Philyaw, Maliaka Favorite and Frank Bowling among others) presented their interpretations of the bottle in traditional African art, early American folk art and in abstract imagery through mediums like canvas, quilts, and sculptures.
 1998-99 Absolut Originals This included paintings contributed by 16 European artists including Damien Hirst, Maurizio Cattelan and Francesco Clemente.
 2000 Absolut Ego (Paris) Absolut Exhibition (New York) Absolut Art  Collections featured paintings contributed by famous artists like Damien Hirst and Nam June Paik.
 Absolut FASHION
 1995 Absolut Newton This campaign featured designer wear created by famous fashion designers John Galliano, Helmut Lang, Anna Molinari and Martine Sitbon. It was first featured as an eight-page insert in Vogue, a popular fashion magazine.
 1997 Absolut Versace This eight-page insert in Vogue featured designer wear created by Gianni Versace, the famous Italian designer. Gianni’s creations were modeled by famous models like Naomi Campbell, Kate Moss, Mark Findley and Marcus Schenkenberg, and photographed by famous fashion photographer Herb Ritts.
 1999 Absolut Tom Ford/ Absolut Gucci This campaign included designer collections created by Tom Ford (of Gucci) a famous American fashion designer. The campaign was shot at a discotheque in Paris and was included as an eight-page insert in Vogue.
 2000 Absolut Gaultier This campaign featured designs by Jean Paul Gaultier, inspired by Absolut and other Swedish legends. It was included as an eight-page insert in Vogue and other popular European fashion magazines.

Roux now began toying with the idea of making ads that were ‘stylish, hip and audacious’. With this began Absolut’s association with the world of fashion. In 1988, Roux commissioned the famous American fashion designer David Cameron to design an advertisement for the bottle. Instead of featuring the Absolut bottle, Cameron designed a dress (with the Absolut Vodka name and the text printed on it) that was modelled by a famous model of the day, Rachel Williams (she ‘represented’ the bottle). This print ad, named ‘Absolut Cameron’, was launched in February 1988 and gained tremendous publicity. On the day of its publication, 5000 women reportedly called TBWA wanting to buy the dress shown in the ad.

This led to the next phase of Absolut’s advertising strategy, wherein the bottle began to be represented in new, innovative ways. By the mid-1990s TBWA ran several ads linked to fashion, like Absolut Fashion (eight pages of coverage in Vogue), Absolut Style and Absolut Menswear, in popular fashion magazines like Vogue, Elle and GQ (see Table for details).

As the themes for the advertisements became more complicated, the cost of producing them went up substantially. For instance, some of the Absolut Christmas ads cost more than US$1 million to produce. Thus, over the years, V&S continually increased its advertising budget. TBWA spent approximately US$25 million on Absolut ads in 1990, an increase from US$750,000 in 1981. In 1997, Absolut also became associated with The Ice Hotel (an entire hotel made from ice) in Jukkasjarvi, Sweden. An ‘Absolut Ice Bar’ was added to the Ice Hotel, where different kinds of drinks made from various Absolut brands were served in glasses also made of ice.

By the end of the 1990s, Absolut ads began targeting not only the sophisticated, upper-class consumers but also sports fans, professionals, artists, intellectuals and even those who could not comprehend subjects like art and literature. Clearly, V&S was now aiming at a broader set of customers as the ads were featured in almost all kinds of magazines: sports, entertainment, art and fashion, business, and so on. By now the company had launched more than 1000 Absolut ads all over the world.

‘Absolut continuity’: the brand marches strongly ahead

By 2ooo, Absolut advertisements were recognized the world over for their stylish, humorous and innovative attributes. As people began collecting the ads, analyst observed that the brand had become an advertising phenomenon. More importantly, sales of Absolut were increasing over the years. Apart from the USA, Absolut was now exported to Russia and many Asian and Latin America countries. The brand generated most of its sales in the USA, Canada, Sweden, Greece, Spain, Germany and Mexico. In 2002, total sales stood at 7.5 million cases, making it the world’s largest premium spirit brands.

In 2002, Absolut was presented with the international advertising industry’s most prestigious awards for its online advertising on its website, www. absolut.com, and the Absolut fashion campaign. Advertising experts regarded the website as ‘a premier online brand and lifestyle destination’.

Commenting on the creativity that Absolut ads stood for, Richard W. Lewis, author of Absolut book: The Absolut Vodka Advertising Story, says, ‘Readers enjoy a relationship with this advertising that they have with few other advertising campaigns, especially in the print media. They are challenged, entertained, tickled, inspired and maybe even befuddled as they try to figure out what is happening inside an Absolut ad.’

In January 2003, the company launched Absolut Vanilia. Unlike the previous variants, Absolut Vanilia was launched in a white bottle. The launch of the new flavour was not only supported by print advertisements, but also with radio and outdoor ad campaigns. These ads were launched in a phased manner, beginning with teaser ads in different magazines in April 2003 followed by interactive online ads. The online ads were featured on websites like Maxim.com, EntertainmentWeekly.com, style.com, and Wired.com. These ads were created specifically to suit the product tag-line ‘a different kind of vanilla’.

In October 2003, in line with its penchant for creativity/innovation, Absolut ventured into the world of music with the launch of the Absolut Three Tracks project. This campaign featured music created by different artists according to their interpretations of the Absolut bottle. Analysts felt that the Absolut Three Tracks project, had opened am entirely new chapter in brand communications, as it enabled users to ‘listen to the Absolut brand.’ Commenting on this, Michael Persson, Director, Market Communications, ASC, said, ‘For years, our consumers have seen interpretations of the brand by some of the world’s most prominent artists and designers. With this new project they will also be able to listen to the brand: this is the voice of Absolut’.

Advertising experts felt that even 25 years after its launch, the Absolut advertising campaign was still going strong, innovatively, without changing the central theme. Even while creating music for Absolut Three Tracks, the bottle was used as the central theme. Aril Brikha, one of the artists who created a music track for Absolut Three Track said, ‘I had scanned the shape into a computer program that turns a picture into a tone—a futuristic way of including a picture without letting the listener know. I find it quite similar to previous Absolut projects where the bottle has been hidden in a picture.’ Industry observers as well as customers agreed on one issue: whatever the mode of expression—be it art, photography, technology, fashion or music—Absolut had until now stood for ‘brilliance in advertising’. Said an analyst, ‘We are surprised each year by the creativity and innovation of the brand. It is successful because it is contemporary. There is no end to the campaign.’

Questions:

1. Discuss the role advertising plays in increasing brand awareness and brand loyalty among consumers, especially for products that have very subtle differentiable attributes. In the above context, examine the impact Absolut advertisements had on its target audience. Do you think the advertisements fulfilled their purpose?

2. ‘The Absolut advertising campaign is successful because it is contemporary.’ How did TBWA maintain the ‘freshness’ of the Absolut campaign? Discuss with respect to the brand’s association with different media: art, fashion, technology and music.

3. Even though Absolut ads have been depicted in different media, the central theme of the campaign has remained unchanged (the bottle and the two-word slogan) over the years. In light of the above statement, do you think that the campaign will manage to hold sway or lose in impact in the near future? Give reasons to support your arguments.

 

CASE: 2       Tesco: the customer relationship management champion

Every three months, millions of people in the UK receive a magazine from the country’s number one retailing company, Tesco. Nothing exceptional about the concept—almost all leading retailing companies across the world send out mailers/magazines to their customers. these initiatives promote the store’s products, introduce promotional schemes and contain discount coupons. However, what sets Tesco apart from such run-of-the-mill initiatives is the fact that it has mass-customized these magazines.

Every magazine has a unique combination of articles, advertisements related to Tesco’s offerings and third-party advertisements. Tesco ensured that all its customers received magazines that contained material suited to their lifestyles. The company had worked out a mechanism for determining the advertisements and promotional coupons that would go in each of the over 150,000 variants of the magazine. This has been made possible by its would-renowned customer relationship management (CRM) strategy framework.

According to Tesco sources, the company’s CRM initiative was not limited to the loyalty card scheme; it was more of a company-wide philosophy. Industry observers felt that Tesco’s CRM initiatives enabled it to develop highly focused marketing strategies. Thanks to its CRM initiatives, the company became UK’s number one retailer in 1995, having struggled at number two behind rival Sainsbury’s for decades. In 2003, the company’s market share was 26.7 per cent, while Sainsbury’s market share was just 16.8 per cent.

CRM the Tesco way

Tesco’s efforts towards offering better services to its customers and meeting their needs can be traced back to the days when it positioned itself as a company that offered good-quality products at extremely competitive prices. Even its decision to offer premium-end merchandise and services in the 1970s was prompted by growing customer demand for the same (see Table 2.A for the company’s ‘core purpose’ and ‘values’, which highlight the importance placed on customer service).

The biggest customer service initiative (and the first focused CRM drive) came in the form of the loyalty card scheme that was launched in 1995. This initiative was partly inspired by the growing popularity of such schemes in other parts of the world and partly by Tesco’s belief that it would be able to serve its customers in a much better (and more profitable) manner

Table 2 A  Tesco: core purpose and values

CORE PURPOSE

Creating value for customers, to earn their lifetime loyalty

Values

1. No one tries harder for customers:

Understand customer better than anyone, be energetic, be innovative and be first for customers, use our strengths to deliver unbeatable value to our customers  look after our people so they can look after our customers

2. Treat people how we like to be treated:

all retailers, there’s one team—the Tesco Team trust and respect each other strive to do our very best give support to each other and praise more than criticize ask more than tell and share knowledge so that it can be used enjoy work, celebrate success and learn from experience by using such as scheme. Tesco knew that, at any of its outlets, the top 100 customers were worth as much as the bottom 4000 (in terms of sales). While the top 5 per cent of customers accounted for 20 per cent of sales, the bottom 25 per cent accounted for only 2 per cent. The company realized that by giving extra attention to the top customers (measured by the frequency of purchases and the amount spent) it stood to gain a great deal.

To ensure the programme’s success, it was essential that all Tesco employees understood the rationale for it as well as its importance. So, the company distributed over 140,000 educational videos about the programme to its staff at various stores. These videos explained why the initiative was being undertaken, what the company expected to gain from it, and why it was important for employees to participate whole-heartedly in it.

Table 2B:  Tesco: classifying customers

EXPENDITURE SHOPPING FREQUENCY
Daily Twice weekly Weekly Stop start Now and then Hardly ever
High Spend PREMIUM STANDARD POTENTIAL
Medium Spend STANDARD POTENTIAL UNCOMMITTED
Low Spend POTENTIAL UNCOMMITTED
FREQUENT INFREQUENT RARE

Impressed with the programme’s results over six months, the company had introduced the scheme in all its stores by February 1995. The stores captured every one of the over 8 million transactions made per week at Tesco stores in a database. All the transactions were linked to individual customer profiles and generated over 50 gigabytes of data every week. Dunnhumby used state-of-the-art data-mining techniques to manage and analyse the database. Initially, it took over a few weeks to analyse the vast amount  of data generated. To overcome this problem, Dunnhumby put in place new software that reduced this time to just a few days. As a result, it became possible to come up with useful and timely insights into customer behaviour  in a much faster way.

Table 2C:  How Tesco used the information generated by its Clubcards

Pricing Discounts were offered on goods that were bought by highly price-conscious customers. While the company kept prices low on often-bought goods/staples, for less familiar lines it adopted a premium pricing policy.
Merchandising The product portfolio was devised based on customer profiles and purchasing behaviour  records. Depending on the loyalty shown by customers towards a particular product, the substitute available for the same, and the seasonality, the product ranges were modified.
Promotion Promotions were aimed at giving special (and more) rewards to loyal customers. Few promotions were targeted at the other customers.
Customer service Extra attention was given to stocking those products that were bought by loyal customers.
Media effectiveness The effectiveness of media campaigns could be evaluated easily by noticing changes in the buying patterns of those customers whom the said campaign was targeted at.
Customer acquisition The launch of new ventures (such as TPF and Tesco.com) went smoothly since Tesco targeted the ‘right’ kinds of customers.
Market research While conducting marketing research, Tesco was able to tap those customers that fitted accurately into the overall research plan.
Customer communication It was possible to mass customize communication campaigns based on individual customer preferences and characteristics. Tesco began holding ‘customer evenings’ for interacting with customers, gathering more information, and gaining new customers through referrals

The analysis of the data collected enabled Tesco to accurately pinpoint the time when purchases were made, the amount the customer spent, and the kinds of products purchased. Based on the amount spent and the frequency of shopping, customers were classified into four broad categories: Premium, Standard, Potential and Uncommitted (see Table 2B). Further, profiles were created for all the customers on the basis of the types of products they purchased. Customers were categorized along dimensions such as Value, Convenience , Frozen, Healthy Eating, Fresh and Kids.

Tesco also identified over 5000 need segments based on the purchasing habits and behaviour patterns of its customers. Each of these segments could be targeted specifically with tailor-made campaigns and advertisements. The company also identified eight ‘primary life stage’ need segments based on the profiles of its customers. These segments included ‘single adults’, ‘pensioners’ and ‘urban professionals’, among others.

Using the information regarding customer classification, Tesco’s marketing department devised customized strategies for each category, Pricing, promotion and product-related decisions were taken after considering the preferences of customers. Also, customers received communication s that were tailored to their buying patterns. The data collected through its Clubcard loyalty card scheme allowed Tesco to modify its strategies on various fronts such as pricing, inventory management, shopping analysis, customer acquisition, new product launches, store management, online customer behaviour and media effectiveness (see Table 2C).

Tesco began giving many special privileges, such as valet parking and personal attention from the store manager, to its high-value customers. special cards were created for students and mothers, discounts were offered on select merchandise, and the financial service venture was included in the card scheme. The data generated were used innovatively (e.g. special attention given to expectant mothers in the form of personal shopping assistants, priority parking and various other facilities). The company also tied up with airline companies and began offering Frequent Flyer Miles to customers in return for the points on their Clubcards.

Reaping the benefits

Commenting on the way the data generated were used, sources at Dunnhumby said that the data allowed Tesco to target individual customers (the rifle-shot approach) instead of targeting them as a group (the carpet-bombing approach). Since the customers received coupons that matched their buying patterns, over 20 per cent of Tesco’s coupons were redeemed—as against the industry average of 0.5 per cent. The number of loyal customers has increased manifold since the loyalty card scheme was launched (see Figure 2A).

The quarterly magazine Tesco sent to its customers was customized based on the segments identified. Customers falling into different categories received magazines that were compiled specifically for them—the articles covered issues that interested them, and the advertisements and discount coupons were about those products/services that they were mostly likely to purchase. This customization attracted third-party advertisers, since it assured them that their products/services would be noticed by those very customers they planned to target. Naturally, Tesco recovered a large part of

Figure 2A:      Tesco increasing number of loyal customers its investment in this exercise through revenues generated by outside advertisements.

The data collected through the cards helped the company enter the financial services business as well. The company carried out targeted research on the demographic data and zeroed in on those customers who were the most likely to opt for financial services. Due to the captive customer base and the cross-selling opportunity, the cost of acquiring customers for its financial services was 50 per cent less than it would be for a bank or financial services company.

Reportedly, the data generated by the Clubcard initiative played a major role in the way the online grocery retailing business was run. The data helped the company identify the areas in which customers were positively inclined towards online shopping. Accordingly, the areas in which online shopping was to be introduced were decided upon. Since the prospective customers were already favourably disposed, Tesco.com took off to a good start and soon emerged as one of the few profitable dotcom ventures worldwide. By 2003, the website was accessible to 95 per cent of the UK population and generated business of £ 15 million per week.

By sharing the data generated with manufacturers, Tesco was able to offer better services to its customers. It gave purchasing pattern information to manufacturers, but withheld the personal information provided by customers (such as names and addresses). The manufacturers used this information to modify their own product mixes and promotional strategies. In return for this information, they gave Tesco customers subsidies and incentives in the form of discount coupons.

The Clubcards also helped Tesco compete with other retailers. When Tesco found out that around 25 per cent of its customers who belonged to the high-income bracket were defecting to rival Marks & Spencer, it developed a totally new product range, ‘Tesco Finest’, to lure them back. This range was then promoted to affluent customers through personalized promotions. As planned, the defection of customers from this segment slowed down considerably.

In February 2003, Tesco launched a new initiative targeted at its female customers. Named ‘Me Time’, the new loyalty scheme offered ladies free sessions at leading health spas, luxury gyms and beauty saloons, and discounts  on designer clothes, perfumes, and cosmetics. This scheme was rather innovative since it allowed Tesco customers to redeem the points accumulated through their Clubcards at a large number of third-party outlets. Company official Crawford Davidson remarked, ‘Up until now, our customers have used Tesco Clubcard vouchers primarily to buy more shopping for the home. However, from now on, “Me Time” will give customers the options of spending the rewards on themselves.’

As a result of the above strategies, Tesco was able to increase returns even as it reduced promotions. Dunnhumby prepared a profit and loss statement for the activities of the marketing department to help assess the performance of the Clubcards initiative. Dunnhumby claimed that Tesco saved around £300 million every year through reduction in expenditure on promotions. The money saved thus was ploughed back into the business to offer more discounts to customers.

By the end  of the 1990s, over 10 million households in the UK owned around 14 million Tesco Clubcards. This explained why as high as 80 per cent of the company’s in-store transactions and 85 per cent of its revenues were accounted for by the cards. Thanks largely to this initiative, Tesco’s turnover went up by 52 per cent between 1995 and 2000, while floor space during the same period increased by only 15 per cent.

An invincible company? Not exactly…

Tesco’s customer base and the frequency with which each customer visited its stores had increased significantly over the years. However, according to reports, the average purchase per visit had not gone up as much as Tesco would have liked. Analysts said that this was not a very positive sign. They also said that, while it was true that Tesco was the market leader by a wide margin, it was also true Asda and Morrisons were growing rapidly.

Tesco’s growth was based largely on its loyalty card scheme. But in recent years, the very concept of loyalty cards has been criticized on various grounds. Some analysts claimed that the popularity of loyalty cards would decline in the future as all retailing companies would begin offering more or less similar schemes. Critics also commented that the name ‘loyalty card’ as a misnomer since customers were primarily interested in getting the best price for the goods and services they wanted to buy.

Research conducted by Black Sun, a company specializing in loyalty solutions, revealed that though over 50 per cent of UK’s adult population used loyalty cards, over 80 per cent of them said that they were bothered only about making cheaper purchases. Given the fact that many companies in the UK, such as HSBC, Egg and Barclaycard had withdrawn their loyalty cards, industry observers were skeptical of Tesco’s ability to continue reaping the benefits of its Clubcards scheme. Black Sun’s Director (Business Development) David Christopherson, said, ‘Most loyalty companies have a direct marketing background, which is results-driven, and focuses on the short term. This has led to a “points for prizes” loyalty model, which does not necessarily build the long-term foundations for a beneficial relationship with customers.’

Commenting on the philosophy behind Tesco’s CRM efforts, Edwina Dunn said, ‘Companies should be loyal to their customers—not the other way round.’ Taking into consideration the company’s strong performance since these efforts were undertaken, there would perhaps not be many who  would disagree with Edwina.

Questions:

1. Analyse Tesco’s Clubcards scheme in depth and comment on the various customer segmentation models the company developed after studying the data gathered.

2. How did Tesco use the information collected to modify its marketing strategies? What sort of benefits was the company able to derive as a result of such modifications?

3. What measures did Tesco adopt to support the CRM initiatives on the operational and strategic front? Is it enough for a company to implement loyalty card schemes (and CRM tools in general) in isolation? Why?

 

CASE: III   Pret a Manger: passionate about food

Introduction

Pret a Manger (French for ‘ready to eat’) is a chain of coffee shops that sells a range of upmarket, healthy sandwiches and desserts as well as a variety o coffees to an increasingly discerning set of lunchtime customers. Started in London, England, in 1986 by two university graduates, Pret a Manger has more than 120 stores across the UK. In 2002 it sold 25 million sandwiches and 14 million cups of coffee, and had a turnover of over £100 million. Buckingham Palace reportedly orders more than £1000 worth of sandwiches a week and British Prime Minister Tony Blair has had Pret sandwiches delivered  to number 10 Downing Street for working lunches. The company also has ambitious plans to expand further—it already has stores in New York, Hong Kong  and Tokyo, and has set its sights on further international growth.

Background and company history

In 1986, Pret a Manger was founded with one shop, in central London, and a £17,000 loan, by two property law graduates, Julian Metcalf and Sinclair Beecham, who had been students together at the University of Westminster in the early 1980s. At that time the choice of lunchtime eating in London and other British cities was more limited than it is today. Traditionally, some ate in restaurants while many favoured that well-known British institution, the pub, as a choice for lunchtime eating and drinking. There was, however, a growing awareness among many people of the benefits of healthy eating and a healthy lifestyle, and lunchtime habits were changing. There was a general trend towards taking shorter lunch brakes and, among office workers, to take lunch at their desks. For those who wanted food to take away, the choice in fast food was dominated by the large chains such as McDonald’s, Burger King and Kentucky Fried Chicken (now KFC) while other types of carry-out food, such as pizzas, were also available.

Sandwiches also played an important part in British lunchtime eating. Named after its eighteenth-century inventor, the Earl of Sandwich, the humble sandwich had long been a popular British lunch choice, especially for those with little time to spare. Prior to Pret’s arrival on the scene, sandwiches were sold mainly either pre-packed in supermarkets and high-street variety chain stores such as Marks and Spencer and Boots, or in the many small sandwich bars that were to be found in the business districts of large cities like London, Sandwich bars were usually small, independently owned or family run shops that made sandwiches to order for customers who waited in a queue, often out on to the pavement outside.

Dissatisfied with the quality of both the food and service from traditional sandwich bars, Metcalf and Beecham decided that Pret a Manger should offer something different. They wanted Pret’s food to be high quality and healthy, and preservative and additive free. In the beginning, they shopped for the food themselves at local markets and returned to the store where they made the sandwiches each morning. Pret’s offering was based around premium-quality sandwiches and other health-orientated lunches including salads, sushi and a range of desserts, priced higher than at traditional sandwich bars, and sold pre-packed in attractive and convenient packaging ready to go. There was also a choice of different coffees, as well as some healthy alternatives. Service aimed to be fast and friendly go give customers a minimum of queuing time.

Pret a Manger: ‘Passionate about What We do’

Pret a Manger strongly emphasizes the quality of its products. Its promotional material and website claims that it is:

‘passionate about food, rejecting the use of obscure chemicals, additives and preservatives common in so much of the prepared and fast food on the market today…it there’s a secret to our success so far we like to think its determination to focus continually on quality—not just our food, but in every aspect of what we do’.

Great importance is also placed on freshness. Unlike those sold in high-street shops or supermarkets, Pret’s sandwiches are all hand-made by staff in each shop starting at 6.30 every morning, rather than being prepared and delivered by a supplier or from a central location. Metcalf and Beecham believe this gives their sandwiches a freshness and distinctiveness. All food that hasn’t been sold in the shops by the end of the day is given away free to local charities.

Careful sourcing of supplies for quality has also always been important. Genetically modified ingredients are banned and the tuna Pret buys, for example, must be ‘dolphin friendly’. There is also a drive for constant product improvement and innovation—the company claims that its chocolate brownie dessert has been improved 33 times over the last few years—and, on average, a new product is tried out in the stores every four days. Aware that some of its customers are increasingly health conscious, Pret’s website menu carefully lists not only what is available, but also the ingredients and nutritional values in terms of energy, protein, fats and dietary fibre for each item.

The level and quality of service from staff in the shop is a critical factor. The stores are self-service, with customers helping themselves to sandwiches and other products form the supermarket-style refrigerated cabinets. Staff at the counter at the back of the store then serve customers coffee and take payment. Service is friendly, smiling and efficient, in contrast to many retail and restaurant outlets in Britain where, historically, service quality has not always been high. Prêt puts an emphasis on human resource management issues such as effective recruitment and training so as to have frontline staff who can show the necessary enthusiasm and also remain fast and courteous under the pressure of a busy lunchtime sales period. These staff are usually young and enthusiastic, some are students, many are international. The pay they receive is above the fast-food industry average and staff turnover is 98 per cent a year, which sounds high—however, this is against an industry norm of around 150 per cent. In 2001, Pret had 55,000 applications for 1500 advertised vacancies.

Recently, Fortune magazine voted Pret one of the top 10 companies to work for in Europe. According to its own promotional recruitment material, Pret is an attractive and fun place to work: ‘We don’t work nights, we wear jeans, we party!’ Service quality is checked regularly by the use of mystery shoppers: if a shop receives a good report, then the staff there receive a 75p an hour bonus in the week of the visit. Head office managers also visit stores on a regular basis and every three or four months every one of these managers works as a ‘buddy’, where they spend a day making sandwiches and working on the floor in one of the shops to help them keep in touch with what is going on. Store employees work in teams and are briefed daily, often on the basis of customer responses that come in from in-store reply cards, telephone calls and the company website. The website, which, lists the names and phone numbers of its senior executives, actively invites customers to comment or complain about their experience with Pret, and encourages them to contact the company. Great importance is placed on this customer feed-back, both positive and negative, which is discussed at weekly management meetings.

The design of the stores is also distinctive. Prominently featuring the company logo, they are fitted out in a high-tech with metal cladding and interiors in Pret’s own corporate dark red colour. Each store plays music, helping to create a stylish and lively atmosphere. Although the shops mainly sell carry out food and coffee in the morning and through the lunchtime period, many also have tables and seating where customers can drink coffee and eat inside the store or, weather permitting, on the pavement outside.

Growth and competition

Three years after the first Pret shop was launched another was opened and, after that, the chain began to grow so that, by 1998, there were 65 throughout London. In the late 1990s stores were also opened in other British cities such as Bristol, Cambridge and Manchester. Although growth in the UK has been rapid—between 2000 and 2002 the company opened 40 new outlets and there are over 120 throughout Britain—Pret’s policy has always been to own and manage all its own stores and not to franchise to other operators. In 2002, £1 million was spent in launching an Internet service that enables customers to order sandwiches online.

Plans for international growth have been more cautious. In 2000 the company made its first move overseas when it opened a shop near Wall Street in New York. However, there were problems on several fronts in moving into the USA. Metcalf is quoted saying, ‘As a private company its very difficult to set up abroad. We didn’t know where to begin in New York—we ended up having all the equipment for the shop made here and shipped over.’ There were also staffing and service quality difficulties—Pret reportedly found it difficult to recruit people in New York who had the required friendliness to serve in the stores and had to import British staff. Despite these problems, several other shops in New York have followed and, in 2001, Pret opened its first outlet in Hong Kong.

During the 1990s, coffee shops boomed as the British developed a growing taste for drinking coffee in pavement cafes, and competition for Pret grew as other chains entered the fray. Rivals like Coffee Republic, Caffè Nero, Costa Coffee (now owned by leisure group Whitbread) Aroma (owned by McDonald’s) and American worldwide operator Starbucks all came into the market, as well as a number of smaller independents. All these chains offer a wide range of coffees but with varying product offerings in terms of food, pricing and style (Starbucks, for example, offers comfortable arm-chairs around tables, which encourage people to linger or work in a laptop in the store). In a London shopping street it is not uncommon to see three or four rival outlets next door to or within a few yards of each other. However, it quickly became clear that the sector was overcrowded and, apart from Starbucks, some of the other chains reportedly struggled to make a profit. In 2002 Coffee Republic was taken over by Caffè Nero, which also eventually acquired the ailing Aroma chain from McDonald’s. Costa Coffee was the largest chain overall with over 300 shops throughout Britain, while Starbucks was expanding aggressively and aimed to have an eventual 4000 stores worldwide.

The future

As work and lifestyles get busier, the demand for convenience and fast foods continues to grow. In 2000, some estimates put the total value of the fast-food market in Britain, excluding sandwiches, at over £6 billion and growing about £200-£300 million a year. While the growth in sales of some types of fast food, like burgers, was showing signs of slowing down, sandwiches continued to increase in popularity so that by 2002 sales wee an estimated £3 billion. Customers are also getting more health conscious and choosy about what they eat and, increasingly, want nutritional information about food from labelling and packaging.

In January 2001, in a surprise move, Pret’s two founders sold a 33 per cent stake in the company to fast-food giant McDonald’s for an estimated £25 million. They claim that McDonald’s will not have any influence over what Pret does or the products it sells, but that the investment by McDonald’s will help their plan for future development. According to Metcalf:

‘We’ll still be in charge—we’ll have the majority of shares. Pret will continue as it does… The deal wasn’t about money—we could have sold the shares for much more to other buyers but they wouldn’t have provided the support we need.’

After a long run of success, Pret has ambitious plans for the future. It hopes to open at least 20 new stores a year in the UK. In late 2002 it opened its first store in Tokyo, Japan, in partnership with McDonald’s. The menu there is described as being 75 per cent ‘classic Pret’ with the remaining 25 per cent designed more to please local tastes. In other international markets, the plan is to move cautiously—Pret’s first move will be to open more stores in New York and Hong Kong, where it has already been successful.

Questions

1. How has Pret a Manger positioned its brand?

2. Explain how the different elements of the services marketing mix support and contribute to the positioning of Pret a Manger.

 

CASE: IV    The Sudkurier

The Sudkurier is a regional daily newspaper in south-western Germany. On average 310,000 people in the area read the newspaper regularly. The great majority of those readers subscribe to its home delivery service, which puts the paper on their doorsteps early in the morning. On the market for the last 35 years, the Sudkurier contains editorial sections on politics, the economy, sports, local news, entertainment and features, as well as advertising. The newspaper is financially independent and its staff is free of any political affiliation. Management at the Sudkurier would like to bring the paper into line with the current needs of its readers. For this purpose, the management team is considering the use of market research.

Management would like to have information about the following.

  • What newspaper or other media are the Sudkurier’s main competitors?
  • Do most readers read the Sudkurier for the local news, sports and classified ads, and should these sections therefore be expanded at the expense of the sections on politics and the economy?
  • Should the Sudkurier’s layout be modernized?
  • Do mostly lower levels of society read the Sudkurier?
  • Into what political category do readers and non-readers the Sudkurier?
  • Which suppliers of products and services consider the Sudkurier especially appropriate for their advertising?
  • What advertising or information dot the readers think is missing from the Sudkurier?

You are an employee of the Sudkurier who has been instructed to obtain the requested information and to prepare your findings for the decision-makers. You are in the fortunate position of receiving regular reports about the people’s media use from the Arbeitsgemeinschaft Media-Analyse e.V. Relevant excerpts from the most recent survey are shown here as Tables 3 and Table 4

Table 3   Media analysis of readership structure

Range in Circulation Area (1) Readers per edition of SUDKURIER National

average

in %

RANGE Total in %
in % Absolute
Total 53.5 310,000 100.0 100.0
Gender Men 55.5 150,000 49.0 47.2
Women 51.6 160,000 51.0 52.8
Age Groups 14-19 years 51.8 20,000 8.0 7.2
20-29  years 41.0 50,000 15.0 19.1
30-39  years 52.1 50,000 16.0 16.4
40-49  years 61.8 50,000 16.0 15.2
50-59  years 61.1 60,000 19.0 16.5
60-69  years 53.6 40,000 13.0 13.5
70  years and older 57.4 40,000 13.0 12.2
Educational

Level

Secondary school without apprenticeship 49.4 60,000 18.0 17.6
Secondary school with apprenticeship 50.8 100,000 31.0 39.6
Continuing education without Abitur 60.8 110,000 36.0 27.0
Abitur, university preparation, university/college 49.7 50,000 15.0 15.8
Occupation Trainee, pupil, student 44.7 40,000 11.0 11.0
Full-time employee 54.6 160,000 50.0 51.7
Retire, pensioner 57.3 70,000 23.0 21.8
Unemployed 52.4 50,000 16.0 15.5
Occupation of main wage earner Self-employed, mid- to large business/Freelancer 63.8 20,000 5.0 3.1
Self-employed, small business,/Farmer 59.9 30,000 10.0 7.1
Managers and civil servants 58.6 30,000 9.0 8.7
Other employees and civil servants 49.3 120,000 40.0 42.9
Skilled staff 57.6 100,000 32.0 32.5
Unskilled staff 38.7 10,000 4.0 5.6
Net Household Income/month 4500 and more 62.7 100,000 31.0 23.9
3500-4500 52.7 60,000 19.0 20.8
2500-3500 54.9 80,000 26.0 25.9
to 2500 44.1 70,000 23.0 29.3
Number of wage earners 1 earner 45.4 100,000 33.0 40.4
2  earner 56.5 130,000 41.0 42.6
3  earner 62.7 80,000 25.0 16.9
Household Size 1 Person 41.8 50,000 14.0 17.9
2 Persons 55.5 90,000 29.0 31.8
3 Persons 59.5 70,000 22.0 22.4
4 Persons and more 54.8 110,000 35.0 27.9
Children in Household Children less than 2 years of age 52.7 10,000 4.0 3.8
2 to less than 4 years 38.4 10,000 4.0 5.4
4 to less than 6 years 45.8 10,000 5.0 5.2
6 to less than 10 years 43.8 20,000 8.0 8.5
10 to less than 14 years 54.1 30,000 10.0 9.2
14 to less than 18 years 57.7 50,000 16.0 13.7
No children under 14 54.9 250,000 79.0 77.4
No children under 18 53.6 210,000 67.0 68.1
Driving Licence Yes 55.2 250,000 80.0 73.0
No 47.3 60,000 20.0 27.0
Private Automobile 55.5 270,000 86.0 80.0
Garden own garden 60.4 240,000 76.0 57.0
without garden 39.8 70,000 23.0 43.0
Housing own house 62.1 180,000 58.0 46.0
own apartment 45.9 10,000 3.0 3.0
rent house or apartment 44.7 120,000 38.0 49.0
Electrical Appliances Freezer/Deep freeze 59.6 200,000 62.0 51.0
Last Holiday Journey Within the last 12 months 55.1 190,000 62.0 n.a.
1-2 years ago 51.0 40 ,000 14.0 n.a.
More than two years ago 48.6 50 ,000 16.0 n.a.
Never 55.4 30 ,000 9.0 n.a.
Last Holiday Destination Germany 57.4 70 ,000 23.0 n.a.
Austria, Switzerland, South Tyrol 48.7 60 ,000 20.0 n.a.
Elsewhere in Europe 53.4 130,000 42.0 n.a.
Country outside Europe 51.4 20 ,000 5.0 n.a.
Did not travel 56.4 30 ,000 9.0 n.a.
1) Entire circulation area 310 ,000 readers per edition

Example:

53.5% of people older than 14 years in the circulation of the Sudkurier daily

55.5% of all men older than 14 years and 51.6% of women older than 14 read the  Sudkurier daily; that is 150 ,000 men and 160 ,000 women.

Table 4  Reader behaviour

What purchasing information is used?

Media purchasing information

for medium and long-term acquisition

(11 product areas; Basis: total population)

 

Daily newspaper                    61%

Posters on the street               9 %

Leaflets                                  36 %

Television                              24%

Radio                                     13%

Magazines                             27 %

Free newspapers                    49%

Credibility of advertising in the media

Advertising in… is generally believable and reliable

(Basis: broadest user group in each case)

 

Regional newspaper                  49%

Television                                  30%

Public radio                                20%

Privately-owned radio                14 %

Magazines                                  15%

Free newspaper                          23%

 

Advertising in… is most informative

(Basis: broadest reading group)

 

Regional newspapers (subscription)    62 %

Television                                            47%

Public Radio                                        29%

Privately-owned radio                         26%

Magazines                                           27 %

Free newspapers                                 36 %

Time spent reading daily newspaper

(Basis: broadest user group)

 

less than 15 minutes                       7 %

15-24 minutes                              21 %

25-34 minutes                              28 %

35-65 minutes                               34 %

more than 65 minutes                   10 %

I often consult/depend on advertising in…

(Basis: broadest user group in each case)

 

Regional newspapers (subscription)         27 %

Television                                                 11%

Public Radio                                             89%

Privately-owned radio                                6%

Magazines                                                   7 %

Free newspapers                                       18 %

Source: Regional Press Study, Gfk-Medienforschung Contest-Census

Questions:

1. Explain how you will methodically go about compiling the requested information covered in the seven questions for management. Include in your explanation an estimate of the expense involved in obtaining the information.

2. Develop a 10-question questionnaire for the purpose of making a survey.

 

CASE: V    Marketing Spotlight – Disney

The Walt Disney Company, a $27 billion-a-year global entertainment giant, recognizes what its customer’s value in the Disney brand: a fun experience and homespun entertainment based on old-fashioned family values. Disney responds to these consumer markets. Say a family goes to see a Disney movie together. They have a great time. They want to continue the experience. Disney Consumer Products, a division of the Walt Disney Company, lets them do just that through product lines aimed at specific age groups.

Take the 2004 Home on the Range movie. In addition to the movie, Disney created an accompanying soundtrack album, a line of toys and kid’s clothing featuring the heroine, a theme park attraction, and a series of books. Similarly, Disney’s 2003 Pirates of the Caribbean had a theme park ride, merchandising program, video game, TV series, and comic books. Disney’s strategy is to build consumer segment around each of its characters, from classics like Mickey Mouse and Snow White to new hits like Kim Possible. Each brand is created for a special age group and distribution channel. Baby Mickey & Co. and Disney Babies both target infants, but the former is sold through department stores and specialty gift stores whereas the latter is a lower-priced option sold through mass-market channels. Disney’s Mickey’s Stuff for Kids targets boys and girls, while Mickey Unlimited targets teens and adults.

On TV, the Disney Channel is the top primetime destination for kids age 6 to 14, and Playhouse Disney is Disney’s preschool programming targeting kids age 2 to 6. Other products, like Disney’s co-branded Visa card, target adults. Cardholders earn one Disney “dollar’’ for every $ 100 charged to the card, up to the card, up to $75,000 annually, then redeem the earnings for Disney merchandise or services, including Disney’s theme parks and resorts, Disney Stores, Walt Disney Studios, and Disney stage productions. Disney is even in Home Depot, with a line of licensed kid’s room paint colors with paint swatches in the signature mouse-and-ears shape.

Disney also has licensed food products with character brand tie-ins. For example, Disney Yo-Pals Yogurt features Winnie the Pooh and Friends. The four-ounce yogurt cups are aimed at preschoolers and have an illustrated short story under each lid that encourages reading and discovery. Keebler Disney Holiday Magic Middles are vanilla sandwich cookies that have an individual image of Mickey, Donald Duck, and Goofy imprinted in each cookie.

The integration of all the consumer product lines can be seen with Disney’s “Kim Possible’’ TV program. The series follows the action-adventures of a typical high school girl who, in her spare time, saves the world from evil villains. The number-one-rated cable program in its time slot has spawned a variety of merchandise offered by the seven Disney Consumer Product divisions. The merchandise includes:

  • Disney Hardlines – stationery, lunchboxes, food products, room décor.
  • Disney Softlines – sportswear, sleepwear, daywear, accessories.
  • Disney Toys – action figures, wigglers, beanbags, plush, fashion dolls, poseables.
  • Disney Publishing – diaries, junior novels, comic books.
  • Walt Disney Records – Kim Possible soundtrack.
  • Buena Vista Home Entertainment – DVD/video.
  • Buena Vista Games – Game Boy Advance.

“The success of Kim Possible is driven by action – packed storylines which translate well into merchandise in many categories,’’ said Andy Mooney, chairman, Disney Consumer Products Worldwide. Rich Ross, president of entertainment, Disney Channel, added: “Today’s kids want a deeper experience with their favorite television characters, like Kim Possible. This line of products extends our viewer’s experience with Kim, Rufus, Ron and other show characters, allowing (kids) to touch, see and live the Kim Possible experience.

Walt Disney created Mickey Mouse in 1928 (Walt wanted to call his creation Mortimer until his wife convinced him Mickey Mouse was better). Disney’s first feature-length musical animation, Snow White and the Seven Dwarfs, debuted in 1973. Today, the pervasiveness of Disney product offerings is staggering – all in all, there are over 3 billion entertainment-based impressions of Mickey Mouse received by children every year. But as Walt Disney said. “I only hope that we don’t lose sight of one thing – that it was all started by a mouse.’’

Questions:

1. What have been the key success factors for Disney?

2. Where is Disney vulnerable? What should it watch out for?

3. What recommendations would you make to their senior marketing executives going forward? What should it be sure to do with its marketing?

Marketing Management

02 Jul

Answer the following question.

Q1. What are Current trends in packaging?

Q2. Explain Channel conflicts.

Q3. What is Inventory Management?

Q4. Explain Promotion to the Dealer: Its demerits.

Q5. Explain the terms Product Item and Product Line in the context of Product Mix. Why and how product mix is changed?

Q6. “Ware – housing decision are growingly becoming more critical”. Discuss quoting examples.

Q7. Present the major issues affecting “costs’ in the context of Inventory, management. Explain your views citing examples.

Q8. What do you mean by the term Physical Distribution? Explain briefly the nature & importation in the sphere of physical distribution.

Marketing Management

28 Jun

A) Discuss Various Marketing Research Instruments. Give suitable examples (one example/instrument)?

B) Describe following in context of new product development (NPD)?

  1. The new product development decision process
  2. Risk factors hindering new product development

C) Illustrate the marketing mix for any two of the following?

  1. Cafe Coffee Day
  2. Dr. Batra’s clinic
  3. Lux Soap
  4. HP( Hewlett Packard)

D) Illustrate with examples, the differences between Product marketing & Services marketing?

E) Illustrate with examples, the methods/ways of evaluating advertising effectiveness?

F) Discuss the factors which contribute in deciding the “price” of the product? Discuss various pricing methods?

G) “Laco Industries “has planned to introduce new baby shampoo in the kids market. The company conducted a research in selected tier II cities in India to know the demand & successfully launched its product. In this context, discuss the characteristics of the good research?

Marketing Management

28 Jun

Q.1) Define term “Marketing Management” discuss the elements of Market Environment?                       

Q.2) Define the term Product Management? Explain how New Product Decisions are made?                   

Q.3) What is Customer relationship Management Explain its feature and nature?   

Q.4) Explain the nature and feature of Marketing research and Information Systems?                   

Q.5) What is Market Measurement and Forecasting?           

Q6) What is Segmenting and Targeting the Market?

Q7) What is Advertising Management? Explain the concept of Sales Promotion and Personal Selling?

Q8)  Write a short note          

a) Brand Equity

b) Global Marketing

c) Direct Marketing

d) Pricing decisions

Marketing Management

27 Jun

Answer the following question.

Q1. What are the various types of Brand Extensions. Explain with necessary examples wherever required.

Q2. Bring out the utility & quality aspects of packaging. Quote examples as appropriate.

Q3. A New brand of a ‘Tyre-that-Never-punctures’ is to be launched in India by a multinational company with your advice about concept – testing and test marketing Justify your contention.

Q4. R.K.Industries Ltd., intends to launch a new folding exercise cycle in Indian market. As a marketing manager which steps would you like to take while launching this product? How will you conduct the test marketing for this product. Make necessary Assumptions and justify your answer.

Q5. Explain Warehousing and Inventory Decisions.

Q6. What is Branding?

Q7. What is Inventory Management?

Q8. Explain e-marketing.

Marketing Management

27 Jun

1. Give the Classification of Products and state Product Line Decisions?

2. What are various ways to classify the service market?

3. Define marketing channel. And explain various types of marketing channels?

4. What are problems and constraints in Rural Marketing?

5. What is market segmentation and Basis of Market Segmentation?

6. How marketing Research and Distribution Management is done in Rural Markets?

7. State the Market Segmentation process and criteria for effective market Segmentation?

8. What is Matrix Organization and what are advantages and disadvantages?