Branding in FMCG Goods in Changing Economic Conditions
Disclaimer: This dissertation has been submitted by a student. This is not an example of the work written by our professional dissertation writers. You can view samples of our professional work here.
Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UK Essays.
An energetic person in field of marketing with knowledge base of B.E mechanical & Post graduate Diploma in Business management played a very important role for my thesis. He has an experience of more than tow years in Sales and Marketing, at Excell elevators and currently working at IIPM Ahmedabad, as a Senior Research Associate. Perfection and proper direction are his two keys to achievement for any work. Without his best guidance for this thesis, it would have been possible to complete this thesis.
Sir, also helped me out in solving my queries related to the thesis. His immense knowledge in marketing field has helped me to a great extent to complete my thesis. His humble approach towards every students, gives a great encouragement to work with him. As a thesis guide he helped me out in every possible way he could. I specially thank him for taking out his precious time for helping me out in completing my thesis.
Research always start with a question or a problem. Its purpose is to question through the application of the scientific method. It's a systematic and intensive study directed towards a more completed knowledge of the subject studied.
· Primary Research:
1. Interaction with customers by filling up questionnaires
2. Interview with Marketing manager
3. Total sample size which is taken into consideration for research is 100 respondents
· Secondary Research:
3. Articles and Magazines
4. Project Reports and News paper
Branding strategy :
Every organization has a brand, whether they have consciously developed or not. A brand is an expectation or a promise of experience. Whether that expectation is trusting, authoritative, innovative, brands are the short hand for describing the way a business, organization, product, services, or a person relates to its stake holders.
The way to build a strong to put their customers and their needs at the center of the every decision the organization makes. Overtime the customer centric action creates the differentiation in the marketplace and build an emotional connection with the customers. The process of managing brand as assets begins with the understanding the brand from the customers point of view. What image, reputation, perception does each customer and stake holder maintain that can be capitalized or corrected.
Managing brand as assets also requires a considerable effort to measure and quantify the impact of the brand on customer, their decision, and the companies financial performance.
Brand strategy is the plan for the company how it is going to create the value for the customers by building its brands strength and addressing its weakness. Brand strategies manifest product innovation, graphic design, store layout, customer service and many other components of the brand experience. The strategy provides the foundation for development of brand building program and typically includes brand objective, consistent brand name and identity systems, target audience and positioning, key communication messages and prioritization of brand touch points.
The recent global slow down as sent everyone in a tizzy. From financial institution to manufacturing industries, everyone has faced the heat of the slowdown. In this scenario I have taken up the matter of the Branding Strategy which is being applied in the FMCG sector. What kind of changes were applied or not and what were the strategies brought in to tackle the slowdown is the matter of study.
Different companies have tried to tackle the situation by bringing in new changes in their branding strategy. Some organization may not have required to change their strategies in the market. It may be because of their strong market presence, brand loyalty or strong financial performance.
Here some cases of the companies and their brand will be studied thoroughly. It will be seen that what kind of changes were made or no changes were made in the marketing strategy
A Brand is not a by-product, an ad-campaign, a logo, a spokesperson or a slogan. It is the differentiating identity and the most important reason for customers, employees, stake holders to do the business with you. In a real sense it's a firms most important asset.
The new era has come, where innovation is the only way to stay in the market. Whether be it a product, an ad-campaign or marketing strategy innovation is the tool to survive.
But the recent recession gives us a thought, should the Branding strategy that is being applied remain the same?
The answer can be found looking at different cases. It may be necessary to look after the branding strategy to be applied in a different manner even if the current branding strategy is alright and doing good to fetch the business in the market. Because sticking to the old branding strategy may not always be a big hit. As earlier said innovation is very much important.
Recession Marketing Success Requires Boldness
Over the years hundreds of studies have been conducted to prove companies should maintain advertising during a recession. In the 1920's advertising executive Roland S. Vaile tracked 200 companies through the recession of 1923. He reported in the April 1927 issue of the Harvard Business Review that the biggest sales increases throughout the period were rung up by companies that advertised the most. After World War II, Buchen Advertising, Inc. decided to plot the sales of a large number of advertisers through successive recessions. In 1947, it began measuring the annual advertising expenditures of each company. When they correlated the s with sales and profit trends before, during and after the recessions of 1949, 1954, 1958 and 1961, they found that almost without exception sales and profits dropped off at companies that cut back on advertising
The conclusion of six more recession studies by the group present formidable evidence that cutting advertising in times of economic downturns can result in both immediate and long-term negative effects on sales and profit levels. Meldrum & Fewsmith's former Senior VP, J. Welsey Rosberg reports “ I have yet to see any study that proves apprehension is the route to success. Studies consistently have proven that companies that have the intelligence and guts to maintain or enlarge their overall marketing and advertising efforts in times of business downturns will get the edge on their hesitant competitors.
Their studies also discovered that after the recessions ended, those companies continued to insulate behind the ones that had maintained their advertising budgets. In 1979 another study by ABP/Meldrum & Fewsmith, covering the recession of 1974-75 and post-recession years, showed similar findings. They found that “companies which did not slash advertising expenditures during the recession years (1974-1975), experienced higher sales and net income during those two years and the two years following than companies which cut ad budgets in either or both recession years.”
In an economic downturn, there may be a inclination to give up on new thoughts and thinking, and just hunker down, until the worst is over. But, what if this is really our chance to observe new possibilities? If freaking out doesn't make your numbers improve (and - at this point - you can lead a consumer to your product, but you can't make her buy), what might happen when you use that brainwave space to identify and integrate consumer trends you never actually noticed before? Possibly amazing things.
Take Reena Jana's quick hit Businessweek article and video with David Rockwell, architect/branding expert/set designer, as an example. He commented on hotel design, which has been on my mind a bit lately too. One of Rockwell's thoughts: what about holding cooking classes in hotel kitchens? Such design thinking is worth a little hotelier attention these days, given the convergence of trends in staying home, cooking more, and being with family. What else, physical space or otherwise, is primed for such “transformability,” as Rockwell called it?
Cooking classes in a hotel kitchen could serve consumers and add value on so many levels - but without this “what now” sense of doom we feel, such ideas might never surface. Given extreme limitations, creative thinking is forced to be that much more bold, even as the solutions become more streamlined.
Here's another example of transformability, in my mind: Consider how Subaru is handling the current “discount” season, with their “Share The Love” philanthropic campaign. Rather than promoting money-back at loan signing or one of the other classic year-end strategies for a car dealer, they kept within the tight parameters, learned more about their consumers and thought quite in a different way. What their research found was that a generous donation would very much resound with the types of people who'd be considering a Subaru buy right about now.
Inspiring customers into a car purchase during a downturn, and doing good at the same time? Wow. A tried and true, established auto industry tradition turned on its ear - transformed! Without an extreme impetus to fill a void of ideas in a difficult consumer environment, such a concept might never have surfaced.
If design thinking and transformability emerges only when long-established industries with entrenched business practices and ethnicity get hit this hard - maybe we have something to be thankful for after all? This overwhelming bad may have opened a few more of us up to a very clever, possibly unusual - and thereby all the more noticeable - leveraging of consumer development.
There's a great deal of pluck and drag about the loss of fizz at Pepsi - and questionably at Coke, as well. Both companies face declining sales of their flagship brands and have used to greater or lesser success predictable ways to mask the elementary issue: Fewer people are buying less and less of these iconic brands.
conservative wisdom says do two things at once: Buy up more trendy beverages, like waters, sports and energy drinks; and work really, really hard to strengthen the base brands.
So, Pepsi hires Peter Arnell (of Tropicana Disaster fame), fires its long-time ad agency and creates a proposal that calls for marketing its wares at "the real me." According to BusinessWeek, the challenge was to make Pepsi as culturally relevant as the iPod. Good luck with that, Peter.
The temptation of course is honest: Wouldn't it be great if brown, sugary water could be as cool as the latest touch screen gadget? Gosh, it would be great. However, it's not going to happen. So rather than sending marketing execs on "cool hunts" for design inspiration, here's a more daunting trek: Take a look at what other brands have done, what Coke and Pepsi have to do - to each other. Grow share in a declining market.
It would be so great to imagine that there's something to be done with either of these brands that could forge an entirely new category of experience - and therefore consumer behaviors - the way the iPod has. But the truth is they'd learn much more by taking a commuter flight to Winston-Salem, N.C. It's so very transgressive to even suggest it, but the only people who have spent time trying to wrestle for share in declining markets are the tobacco brands.
(a) FMCG SECTOR
(i) Global Perspective:
The FMCG industry, or alternatively named CPG, abbreviation for Consumer Packaged Goods, deals mainly with the production, distribution as well as marketing of packaged goods for all consumers.
The Fast Moving Consumer Goods (FMCG) has to do with those consumables which are regularly being consumed. Among the first activities of the FMCG industry there is selling, marketing, financing, purchasing, and so on. Recently this industry has also launched in operations, supply chain, production, general management, etc.
The wide range of consumable goods provided by the FMCG industry turns over a large amount of money, while competition among FMCG manufacturing is become more and more fierce. Investors are putting more and more into the FMCG industry, especially in India, where the FMCG industry is the fourth largest sector, having a total market size of more than US$13.1 billion, and still estimated to double by 2010. In New Zealand as well, the FMCG industry accounts for 5% of Gross Domestic Product (GDP).
Some common FMCG product include food and dairy products, glassware, paper products, pharmaceuticals, electronics, plastic goods, printing goods, household products, photography, drinks etc, so here coffee, tea, greeting cards, gifts, detergents, soaps etc are all included.
The factors that made the FMCG industry a highly competitive one are low operational cost, solid distribution networks, and emergence of new FMCG companies. In addition, the growth of the world's population is another responsible factor for the huge success of this particular industry. Some of the leading FMCG companies all over the world are Sara Lee, Nestlé, Unilever, Procter & Gamble, Coca-Cola, Carlsberg, Kleenex, General Mills, Mars etc.
Not only does it provide the necessary goods for day to day life, but the FMCG industry has also created tremendous job opportunities and careers. It is a stable, varied, and highly profitable industry, and the jobs it provide range from sales, supply chain, finance, marketing, operations, human resources, development, general management, and so on.
Recruitment has also grown together with the growth in the FMCG sector:
* The working force within FMCG manufacturing in the UK accounts for 14% of the total workforce in UK;
* Sales in the FMCG industry accounted for £14.5 billion in 2000, spent on non-food UK products alone, in grocery retail sectors in UK;
* In 2000 the non-food FMCG market in UK, raised to £110 billon.
Including sectors such as Food, Drink and Pharmaceutical the output registered by FMCG accounts for 19% of the UK's GDP
i. Indian Perspective: The Indian FMCG sector is the fourth largest sector in the economy with a total market size in excess of dollar 13.1 billion. It has a strong MNC, presence and is characterized by a well established distribution network, intense competition between the organized and unorganized asegments and low operational cost. Availability of key raw materials, cheaper labor costs and presence across the entire value chain gives India a competitive advantage. The FMCG market is set to treble from $11.6 billion in 2003 to $ 33.4 billion in 2015. Penetration level as per capita consumption in most product categories like jams, toothpaste, skin care, hair wash etc in India is low indicating the untapped market potential. Burgeoning Indian population, particularly the middle class and the rural segments, presents an opportunity to makers of branded products to converts consumers to branded products. Growth is also likely to come from consumer upgrading in the matured product categories. With 200 million people expected to shift to processed and packaged food by 2010, India needs around $28 billion of investment in the food processing industry
India has enacted policies aimed at attaining international competitiveness through lifting of the quantitative restrictions, reduced excise duties, automatic foreign investment and food laws resulting in an environment that fosters growth. Cent per cent export oriented units can be set up by government approval and use of foreign brand names is now freely permitted.
Automatic investment approval including foreign technology agreements within specified norms, up to 100 per cent foreign equity or 100 per cent for NRI and overseas corporate bodies investment, is allowed for most the food processing sector except malted food, alcoholic beverages and those reserved for small scale industries. 24% foreign equity is permitted in the small scale sector. Temprorary approvals for imports for test marketing can also be obtained from the Director General of foreign Trade. The evolution of a more liberal FDI policy environment in India is clearly supported by the successful operation of some of the global majors like PepsiCo in India.
The Indian government has abolished licensing for almost all food and agro-processing industries except for some items like alcohol, cane sugar, hydrogenated animal fats and oils etc. and items reserved for the exclusive manufacture in the SSI sector Quantitative restrictions were removed in 2001 and Union Budget 2004-05 further identified 85 items that would be taken out of the reserved list. This has resulted in a boom in the FMCG market through market expansion and greater product opportunities.
TRENDS AND PLAYERS
The Indian FMCG sector is the fourth largest sector in the economy and creates employment for three million people in downstream activities. Within the FMCG sector, the Indian food processing industry represented 6.3% of GDP and accounted for 13 per cent of the country's exports in 2003-04. A distinct feature of the FMCG industry is the presence of most global players through their subsidiaries (HLL, P&G, NESTLE) which ensures new product launches in the Indian market from the parents portfolio.
Demand for FMCG products is set to boom by almost 60 per cent by 2010 and more than 100 per cent by 2015. This will be driven by the rise in share of middle class from 67% in 2003 to 88 percent in 2015
The boom in various consumer categories, further, indicates a latent demand for various product segments. For example, the upper end of very rich and a part of the consuming class indicate a small but rapidly growing segment for branded products.
The middle segment, on the other hand, indicates a large market for the mass end products. The BRICs report indicates that India's per capita disposable income, currently at $556 per annum will rise to $1150 by 2015-another FMCG demand driver. Spurt in the industrial and services sector growth is also likely to boos the urban consumption demand.
The size of the fabric wash market is estimated to be $ 1 billion, household cleaners to be $ 239 million and the production of synthetic detergents at 2.6 million tones. The demand for detergents has been growing at an annual growth rate of 10 to 11 per cent during the past five years. The urban market prefers washing powder and detergents to bars. The regional and small un-organized players account for a major share of the total volume of the detergent market.
The size of the personal wash products is estimated at $989 million: hair care products at $831 million and oral care products at $537 million. While the overall personal wash market is growing at one per cent, the premium and middle end soaps are growing at 10 per cent. The leading players in this market are HUL, NIRMA, Godrej and Reckitt & Colman. The oral care market, especially toothpastes, remains under penetrated in with penetration below 45 per cent. The industry is very competitive both for organized and smaller regional players
The Indian skin care and cosmetics market is valued at $274 million dominated by HUL, Colgate Palmolive, Gillete India and Godrej Soaps. The coconut oil market accounts for 7 per cent share in the hair oil market. In the branded coconut hair oil market, Marico and Dabur are the leading players. The market for branded coconut oil is valued at approximately $174 million
FOOD AND BEVERAGES
The size of the Indian food processing industry is around $65.6 billion, including $ 20.6 billion of value added products. Of this, the health beverage industry is valued at $ 230 million: bread and biscuits at $1.7 billion: chocolates at $73 million and ice creams at $188 million
The size of the semi processed ready to eat food segment is over $1.1 billion. Large biscuits and confectionery units, soya processing units and starch glucose sorbitol producing units have also come up, cater to domestic and international markets.
The three larges consumed categories of packaged foods are packd tea, biscuits and soft drinks.
The Indian beverage industry faces over supply in segments like coffee and tea. However, more than half of this is available in unpacked or loose for. Indian hot beverage market is a tea dominant market. Consumer s in different parts of the coutry have erogenous taste. Dust tea is popular in southern India, while loose tea is preferred in western India. The urban rural split of the tea market was 51:49 in 2000. Coffee is largely consumed in southern states. The size of the toatla packaged coffee market is 19600 tonnes or $87 million. The total soft drink market is estimated at 284 million crates a year or $1 billion. The market is highly seasonal in nature with consumption varying from 25 million crates per month during peak season to 15 million during offseason. The market is predominantly urban with 25 per cent contribution from rural areas. Coca cola and Pepsi dominate the Indian soft drinks market.
Mineral water market in India is a 65 million crates ($50 million) industry. On an average, the monthly consumption is estimated at 4.9 million crates, which increases to 5.2 million during peak season.
RURAL MARKETS : SMALL IS BEAUTIFUL
By the early nineties FMCG MARKETERS HAD D OUT TWO THINGS
1) Rural markets are vital for survival since the urban markets were getting saturated.
2) Rural markets are extremely price sensitive
Thus, a number of companies followed the strategy of launching a wide range of package sized and prices to suit the purchasing preferences of India's varied consumer segments. Hindustan Unilever a subsidiary of Unilever, coined the term nano marketing in the early nineties, when it introduced its products n small sachets. Small sachets were introduced in almost all the FMCG segments from oil, shampoo, and detergents to beverages
Cola major, coke brought down the average price of its products from around twenty cents to ten cents bridging the gap between soft drinks and other local options like tea, butter milk or lemon juice. It also doubled the number of outlets in rural areas from 80,000 during 2005 to 160000 the next year almost doubling its market penetration from 13 per cent to 25 percent. This along with greater marketing, led to the rural market accounting for 80 per cent of new coke drinkers and 30 per cent of its total volumes.
In this day and age, consumers automatically recount a product to the name of a particular brand. More specially, the status of the said brand tends to trigger signals of whether a product is cost-effective, superior in quality, or even connect to a particular social status. Numerous studies have maintained that brands have become powerful tools in modern marketing. It has become one of the major factors that consumers consider in their purchasing decisions. Any commercial organization knows this as a fact. That is why they are inclined to place their attention to brands and the demands of the consumers. It has become an requisite component of the marketing operations of the modern organization. For existing multinational companies, having a global brand name has been massively helpful in expanding their operations the world over. Presenting their products and services as the top alternative in the market nowadays is not enough to ensure the success. In this era where the consumer is independent, every company needs to build a brand that will be universally familiar in any market. Companies seek to establish a global brand with the ends of acquiring a bigger market share and a better position in the market. Though it is a common belief that having a global brand name equate to success in terms of business, there are still existing issues that comes with it. This paper will be considering the minutiae of establishing a global brand name. Similarly, the key reasons why this is being considered by most, if not all, companies will be taken into account along with the other alternatives that these companies have in marketing a global product.
II. Marketing Under a Global Brand Name
The term “global brand” is often interchanged with the term “global product.” However, there are studies that pointed out that the two are completely different terms. Basically, a global product connotes merchandise sold all over the world that share standardized attributes. This means that these products have a propensity to have a uniform set of characteristics and normally take on common brand names. On the other hand, a global brand tends to characterize the identity and image close to a specific product. More importantly, it is the blend of both tangible and intangible attributes that constitute a global brand.
Recent studies of global branding designate that the said concept is subject to the view of the individual consumer. More specifically, the more recent views of international branding strategy tend to reflect the demands of the consumers. As puts it, these global brands are subjected to the global culture. In its simplest terms, global culture pertains to a set of consumer tastes and values. These tastes and values do not necessarily share the same standards and often show conflict with one another. Thus, global brands have to take on a certain level of flexibility in their operations.
In its face value, this seems quite a daunting task for any company. However, this does not stop them from seeking to establish a global brand name and take on in global branding strategies. Why? The reason is that despite these complex concerns of the consumers, these brands have become embedded in their consciousness. The bottom-line is that, despite their best efforts, consumers cannot ignore global brands. The following parts will discuss the other advantages that companies enjoy in operating a global brand.
A. Creation of Demand on Other Countries
One of the advantages of having a global brand is the possibility of demand spillovers. This means that the marketing efforts held in a particular country could essentially multiply out to markets of other countries. Basically, the image of the global brands encapsulates this advantage. The concept of brand popularity and the country of starting point often establish this type of demand spillover. Share this suggestion of demand of global brands. Mainly, they call this element of global brands as the “global myth.” Simply put, demand of global brands tends to provide the consumers a feeling of having a “global identity” or having a feeling of being a “citizen of the world.”
Studies on the effect of brand popularity on the company maintained that it has major implications on its market share. In the study of they pointed out that the company acquires benefits from brand popularity. One benefit is that having brand popularity provides the consumers more confidence in their purchasing decisions with particular reference to giving the implied assurance that a popular brand is better than the alternative. Another benefit of brand popularity is the association of assessment to the product. Coined this dimension of global brands as “quality signals.” Thus, issues of price of the product with a global brand are often regarded as “reasonable” because of its perceived high value among consumers.
B. Strategic Appeal
Another perceived reason why organizations seek to establish a global brand is because of its strategic appeal. Indicated in their study that global brands tend to have more opportunities than their equivalent in the local markets. This is supported by the earlier studies on the markets in the US, Japan, and EU.Noted that global brands offers companies an efficient way of exhausting its resources. More specifically, maintaining global brands tend to offer the possibility of lower costs and having the highest quality product.
Aside from the earlier fact pointed out on the demand spillover, a consequent outcome of that phenomenon would be the demand for standardized products. This means that modifications to meet the local demands are significantly lessened as the demand replicate greater value with the unaltered global brands. In this regard, time and resources in the amendment processes is taken away which equates to cost reductions and further profit for the company. On the whole, the creation of global brands creates a much greater economies of scale and scope for companies.
III. Brand Management in the Global Setting
Recent marketing initiatives in the global setting have acknowledged the importance of bands in dealing with the dynamic business environment. Recent studies maintained that it is important for companies to treat their brand management initiatives as they treat their strategic management processes. ( 2001, 75) This means that the battle of brands in both their local and domestic counterparts have intensified throughout the years. This increase in the demands on the part of the organizations has given them the responsibility of making their brand management more systematic, scientific and a continuous process. The study of (2001, 75) basically maintained that companies should bake sure that their brand will be remembered constantly. Be it through logos or taste, the consumer has to readily recognize the brand right away. This is where brand management comes in to the picture.
There are studies that maintain initially what their brand intends to represent. In doing so, the company is able to find a way to position its brand with reference to the other players in the market. ( 2001, 75) This is seen in the case of global brands like Nike and Coca-Cola. In the case of Nike, they have decided to package themselves as a brand associated with winning. On the other hand, the Coca-Cola brand tends to place value on their universal taste. ( 2003, 198)
A case study of Procter & Gamble maintained that a use of a brand portfolio would be able to help a company in managing its brand in the global setting. (2003) With such a tool at their disposal, P&G is able to make sound decisions with regards to their brand management initiatives. In doing so, P&G are able to position their products properly with reference to the other players like Unilever, Kimberly-Clark and Colgate-Palmolive. Studies pertaining to branding strategies and theories point out two important components organizations should consider in their brand management initiatives. These are brand equity and brand value.
A. Value Creation in Branding
Brand value is the perceived worth of the consumers on the brand. The most notable form of value creation in brands is through advertising. (2003, 53) There are three known approaches in the creation of value in brands: decoration, gluing, and mascot approach. The decoration approach basically shows a branding strategy displaying differentiation by connecting the brand to completely different cues presented by the other players in the market. ( 1999, 51) The gluing strategy of value creation associates their product to certain emotional cues of the consumer. These are seen in advertisements that attempt to stir the emotion of the possible buyers. (1992, 10) The mascot approach on the other hand indicates the use of a human-like entity that is believed to be able to establish a connection to the potential buyers. The use of charismatic non-human characters (Pillsbury Dough Boy) tends to reflect this type of value creation approach in branding. ( 2004, 188) Basically, these approaches of value creation tend to be influential for the buying decisions of the consumers. In the same regard, the use of brands could also be a way towards building this value to the company.
B. Using Brand Equity
The term brand equity denotes the net revenue of the brand which it is expected to amass eventually. There have been instances that local brands have changed its name to build up its brand equity. In the Netherlands, the potato chip brand, Smiths, has acquired the brand name of Lay's despite being one of the top brands in the market. ( 2003, 53) They pointed out that the shift of brand names is an attempt to capture “affinity” with the global brands and establish more value in their products. This is also seen in the case of Vodafone which operated local brands with different names. (2003, 53) mentioned that these local brands are now employing the brand name Vodafone to establish brand stature and brand validity at par with the other global and local brands operating in the same market. In the international retail industry, P&G started to eliminate the redundant brands in the local markets and started acquiring brands with an existing consumer base. This is seen in their recent acquisition of Gillette which resulted to the expansion of the scope of their market. In essence, the development of brand equity tends to cling on the intangible aspects of the brand. Factors like the consumer awareness and differentiation of established by these brands contribute to the overall equity of the company's particular brand.
C. Consumer-Centered Brand Management
Looking at the discussions above, it is implied that branding is in the business of giving consumers what they want. Instances of local brands acquiring the brand name of the global brand seem to be the trend so as to ensure greater brand equity and brand value. However, Coca-cola took on a different path. In its acquisition of Parle, a beverage company in India, Coca-Cola kept the local brand name, Thums Up, in operation. In looking at this scenario, Coca-Cola appears to center its attention to the consumers in the market. Before the acquisition, Parle was the leading distributor of carbonated drinks, even surpassing the monoliths Pepsi and Coke. Their product, Thums Up, has become a part of the Indian society. Advertisements of the product emulated the Coca-cola formula of “can't beat the feeling” campaigns. Though the soft drink consumption is somewhat considered a magnificence in India, these advertisements created value for Thums up and prompted the market to take the product as their stable companion in meals and other past times. Thus, instead of the convention of homogenizing the products after acquisition, the decision to keep the Thums Up brand essentially ended up as a great marketing stride for the overtops of Coca-cola in the Indian market.
IV. Issues to Consider
Based on the claims above regarding the dynamic nature of the market, it appears that there are certain issues that companies have to take on in their global brand management initiatives. The following discussions will be covering these issues and how existing companies dealt with it.
A. Buying Behavior of the Consumers
A key element in for every profit-seeking organization is the recognition of the behavior of the consuming public. Consumer behavior is essentially a product of the culture of a particular market. The seminal study of points the importance of culture for multinational organisation. In his theory, Hofstede intimated that societies could have either “individualism-collectivism, masculinity-femininity, high-low power distance, and high-low uncertainty avoidance.” The theory basically reinforces the claim that consumers tend to base their buying decisions on the existing social conventions. This theory also claims that for every state, there is a distinct buying behavior which could also entail distinctive branding strategies and marketing initiatives. Recent studies like that of points out that the national culture contributes to the future performance of an organisation. Other distinctive features of the state like language tend to trigger changes in the packaging of the brand and changing characters that the buying public could understand. This basically manifest that every market has a distinctive way of reacting to certain products or services. The best way to provide some sort of positive reaction is to make the company relate to the consumers. Some companies went as far as changing the menu like that made by Pizza Hut in Hong Kong. ( 1995)
B. Possibility of Replacing of Global Brand Names
As indicated in the previous discussions, the awareness of the market should be among the top priorities of the operations of global brands. In terms of using the global brand name or using a local one, the Coca-cola model in India should be very helpful. Good companies like Coca-Cola should realize when and how to use their brand names. For instance, the European operations of Budweiser tend to emphasize the name of their global brand as the “King of Beers.” Prominence on the symbols and letterings are also ensured because there is a similar alcoholic brand that has a slight similarity to the global brand. The said brand is called Budvar. This prompted the Budweiser brand to refrain using the “Bud” label in their beers in their European distribution. In the same regard, they reinforced their brand management initiatives by their “this Bud is right for you” campaign.
In the area of mobile phones, the situation of Nokia takes a whole different approach. Being the leading provider of mobile technologies, Nokia is able to acquire local brands and manufacturers all over the world. In this scenario, they tend to change the name of the acquired companies and place their global brand names in all the products that they sell. This makes perfect sense given that Nokia's brand name has been equated with innovation and top of the line products since the mobile phone surge in the later part of the 90s.
Another global brand name is Electrolux. It was the company who are among the early ones who built value on their brand through door-to-door sales. Thus the name is often associated with top house appliance sold all over the world. However, the company holds other brand names aside from Electrolux as they have acquired numerous local companies (like Zanussi) in their years of operation. In the same regard, they have decided to keep the names of the local brands to show diversity in their products.
The concept of globalization has been the most influential and possibly of furthermost significance in the realm of business and commerce. With the apparent elimination of geographical boundaries, the market has given organizations the opportunity to trade regardless of the size of their company. The emergence of globalization has triggered inclinations towards global products and establishing global brand names. It is this phenomenon that maintained the need for standardization of their products and indispensable condition of brand management strategies. Building up a global brand name is as complex as sustaining the potential of the products in the global scale. As indicated in the discussions above, issues on competitiveness, close consideration in changing of local brand names and the recognition of the consumer behavior in the market could spell the difference between the success and failure of the company in their ventures. Recognition of the demands of the market allows them to make informed decisions and take actions that would essentially place them in a favorable business situation. Elements like consumer behavior, personality, product characteristics and even the culture of the market tend to dictate the direction on which a global product's life cycle. In the end, the awareness of the company of these elements along with the intangibles of the brand (vitality and stature) will ensure an impressive performance of a global product in the respective markets that it operates. Essentially, as manifested in companies cited above, a fit between the right marketing strategies, brand management, and knowledge of the respective market not only ensures the success of the company but also guarantee its sustainability for years to come.
CASE STUDY : NESTLE
What is a brand name
Branding is the collection of attributes that the consumer has come to expect from a product, which will strongly influence their buying patterns. Branding can be achieved using a company name - it can be applied generically or, as in the case of Kit Kat, on an individual basis. The brand name promises the consumer particular benefits, such as quality and value for money, with these expectations being built up over many years. A brand name is often considered by a company to be its most important intangible asset. In a market where repeat purchases are the key to profitability, a brand name becomes paramount to a product's success.
A catchy name and distinctive packaging are vital ingredients in any brand image, but the true essence of a brand identity lies in the consumer's mind i.e. the perceptions of the product. A company must be constantly aware of these perceptions and try to preserve and build on them through advertising and other promotions. Branding enables marketers to build extra value into products and to differentiate them from their competitors.
The history of Kit Kat emphasises the importance of successfully managed brand names to the company that owns them. Nestlé was prepared to pay a record price to acquire Rowntree in 1988 because of the prestigious brands in Rowntree's product portfolio. Kit Kat was an important part of the portfolio. This acquisition prompted the City to look into the possibilities of including a financial valuation of a brand as an asset on a company's balance sheet.
Kit Kat was launched in 1937. Since then, it has consistently been one of the best selling chocolate bars on the market and has acquired an instantly recognisable brand name and identity. In 1997, British sales of Kit Kat amounted to some £227 million, which made it easily the most popular confectionery product on the market. Forty four Kit Kats are consumed every second in the UK!
The UK confectionery market is worth over £5 billion per annum and is highly competitive. It continues to be dominated by large, well-established names - highlighting the importance to firms of creating brand identities for their products. Once created, however, a brand name needs constant maintenance. Kit Kat's ability to remain a brand leader over sixty years is no accident. The long term maintenance of a brand name requires continuous monitoring and investment. Brand image must be seen as a dynamic, not a static factor; the same consumer perceptions that create brand loyalty can also turn against a product that fails to adjust and adapt to changing attitudes.
This case study focuses on Nestlé's Kit Kat and the long term brand name maintenance strategies which have sustained Kit Kat's position as a market leader for over sixty years.
Business theory suggests that products follow a life cycle, going through phases of development as follows:
* the conception of an idea/product
* research and development
* introduction to the market.
A period of growth then follows as consumers become increasingly aware of the product and, if successful, it becomes profitable. Eventually, the growth of sales will level off - this is the mature phase and is usually the result of increased competition. The theory predicts that sales will gradually decline as the market becomes saturated and consumer tastes change. However, it would be wrong to assume that after the uphill struggles of the development and growth phases, life becomes easier on the level. It is a considerable challenge to the marketers to prolong the profitable mature phase for as long as possible, using a range of extension strategies.
A major drawback with the product life cycle theory is that it cannot be used as a predictor. Firms may be able to identify some of the stages of development from historical sales data, but they cannot know their exact position on the cycle, nor in which direction they might be heading. In addition, some products seem to enjoy very long maturity, if not immortality, with no signs of decline. Extending the product life span is the goal of many firms, but achieving this requires careful co-ordination of corporate and marketing objectives and strategies.
Nestlé's corporate objectives
It is vital to any firm that its marketing objectives are compatible with the overall corporate objectives. In selecting corporate objectives and strategy, a firm might wish to refer to the Boston Matrix, Ansoff's Matrix or use a simple SWOT analysis to establish where the company is and in which direction it wishes to head. For example, a company planning to consolidate its position within a national market might set very different objectives for the marketing of its products to a company wishing to expand into international markets. This in turn would affect the marketing tactics each company might employ.
Confusion can often arise when attempting to reconcile marketing and corporate objectives. It could be argued that the success of any firm depends on its ability to satisfy a consumer need at a profit. This is, itself, the essence of marketing - so it could also be said that marketing and corporate objectives are the same thing. However, this would imply that marketing is more important than the other functional areas, when clearly they are all inter-dependent. Ultimately, any corporate strategy must both reflect and dictate to each of the different functional areas of the firm. Nevertheless, the information provided by the marketing department will be central to any corporate strategy formulation. This will include sales and market share, analysis of the competition, sales and profit forecasts for the future and analysis of changing consumer attitudes.
Nestlé's corporate objective is to be the world's largest and best branded food manufacturer, whilst ensuring that the Nestlé name is synonymous with products of the highest quality. In recent years, the company has pursued a policy of expansion and diversification through acquisition and divestment to achieve a more balanced structure to the business.
Global brand names can achieve substantial production and purchasing economies of scale and, as world travel increases, so does the importance of instantly recognisable products. With a product portfolio which includes eight of the thirty top selling confectionery brands, such as Quality Street, Aero, Smarties, Polo and Rowntree's Fruit Pastilles, Milky Bar and After Eight, it is extremely important that the marketing objectives for each product line are fully compatible with the overall objectives of the company as a whole. Like any group of individuals, each product has its own character, strengths and weaknesses and consequently, the marketing objectives of each product need to be specifically tailored.
What is the company trying to achieve?
In which direction are we headed?
How can we get there?
What specific actions need to be taken, by whom and when?
How can we judge whether we are being successful in achieving our objectives?
How do we measure our success or failure?
Marketing objectives and strategy
Having decided its corporate objectives and strategy, Nestlé can set marketing objectives for each of its product lines and profit centres. The primary objective for Kit Kat is to maintain its position as the UK's number one selling confectionery brand. In order to achieve this, Nestlé has to develop a marketing strategy that will take into account all the elements of the marketing mix. This will involve individual strategies for pricing, product development, promotion and distribution. For an established brand name, these strategies must be flexible and relevant to each new generation of consumers, but at the same time, great care must be taken not to damage the perceptions of the product built up over decades of marketing.
Kit Kat has a particularly broad consumer profile and is popular with all age groups. The Kit Kat marketing strategy can be summarised by the line 'Broad in appeal, young in feel and big in stature.'
Marketing tactics - the marketing mix
No matter how effective the promotion and packaging, a firm will find it very difficult to market a product which fails to satisfy a consumer need. Kit Kat owes much of its success to a unique dual appeal - as a four-finger chocolate bar, (known in the confectionery trade as a countline), sold at corner shops and newsagents, but also as a two-finger biscuit sold in supermarkets. It is a product that has endured because of its wide appeal across the age ranges and to both sexes.
Altering the actual product is potentially a very hazardous act for an established brand name as it risks altering the consumer perceptions of quality built up over decades. Tampering with the recognised core qualities could well damage the integrity of the brand. For Kit Kat, these intrinsic elements of the brand, or unique selling points include the:
* chocolate fingers
* foil and band wrapping, unique in the countlines market and seen as an important feature which encourages involvement and sharing by consumers
* well-known strapline - Have a Break, Have a Kit Kat.
In spite of the risks of altering the product, the two finger bar and multipacks were introduced in the 1960s to meet the increased needs of supermarket shopping and more recently, Orange, Mint and Dark Chocolate Kit Kats have been available for limited periods. In the third week that Kit Kat Mint was available, it more than doubled total Kit Kat Sales. The Orange Kit Kat proved particularly popular with sales of 38 million bars in just three weeks. It provided very positive market research results. While they are seen as novelties, they can also be used to provide reassurance and reinforcement of the core attributes of the original established brand name.
Special editions are used primarily as promotional tools. Market research has shown that consumers prefer special editions to be available for limited periods only and that consumers are likely to purchase the original Kit Kat at the same time or shortly after. (They are, therefore, a good way of injecting new life into the Kit Kat product life cyclce). Depending on their popularity, some special editions are introduced more than once. The Orange Kit Kat has proved so popular that the two-finger multipacks are now permanently available.
Apart from these variants, the intrinsic characteristics of the Kit Kat product and packaging have changed very little during the last sixty years. Although some minor, subtle changes have been made in packaging, merchandising and sales promotions, a Kit Kat from the 1930s would be instantly recognisable to modern consumers today.
A key advantage of maintaining a strong brand image in a competitive market is a degree of flexibility in the pricing strategy. It is a common characteristic of imperfectly competitive markets for producers to concentrate on non price competition.When looking at the pricing strategy for Kit Kat, it can be seen from the s that the real price has remained remarkably stable over the last sixty years.
Nestlé has used a wide range of promotional tactics with Kit Kat. Promotion offers have included free bars in the multi-bar family packs and an instant win deal with Burger King in 1996. This promotion, where over 75 million free burgers were on offer, increased sales of Kit Kat by an estimated 30 In 1998, an on-pack promotion featuring 'The Simpsons,' with the chance to win £20,000 cash and hundreds of other prizes, increased sales of Kit Kat by a staggering 41
Advertising plays an extremely important part in the confectionery industry, with spend approaching £114 million in 1996. The Have a Break, Have a Kit Kat theme appeared briefly in 1939, but has been the on-going Kit Kat slogan, or strapline, since the mid 1950s. Kit Kat's advertising is concentrated in two media
* television commercials - which follow the well-known Have a Break tradition
* posters - where the powerful colours of the pack and product are used to dramatise the message.
A particular challenge for the advertisers is to appeal to both the consumers and the purchasers. Women account for two thirds of all confectionery sales, but a large proportion of these purchases are subsequently consumed by children. Men eat as much as they purchase suggesting they are less generous!
Nestlé has develop distribution channel which ensure the availability of Kit Kat to buy wherever and whenever the consumer wishes to purchase it. Sales of confectionery depend heavily on its availability, with market research showing that well over 60of all purchases are made on impulse. Consequently, Nestlé tries to supply as many outlets as possible - both wholesaler and retailer channels.
Point of sale merchandising is also important when consumers are making instant, snap decisions from a wide range of products on view. Instantly recognizable packaging also helps to tempt customers. Shoe shops, for example, have recently been identified as having potential for confectionery sales owing to the large number of families that visit them. It is also predicted that confectionery, along with all foodstuffs, will become available through cable and interactive television, videophones and the Internet.
Internationally, Kit Kat is now also manufactured in Canada, Germany, India, Malaysia, China, Japan, Australia, South Africa and the United States. It is available in more than 100 countries throughout the World.
The importance of evaluating the success of Nestlé's brand strategy
An important ingredient in the pursuit of any objective is control. It would be irresponsible of a firm to commit itself to objectives and strategies without also setting in place the means to monitor and evaluate its success. In the short run, Kit Kat's sales s are a key indicator of success, enabling Nestlé to assess growth and market share performance and compare its progress with that of its competitors. However, in the longer term, it is also necessary to gain market research information on consumer perceptions. Consumer attitudes constantly change over time. If Kit Kat is going to maintain its brand leadership, it must be aware of and adapt to these changes. The market never forgives complacency.
Kit Kat's success can be attributed to consistency in its marketing, whilst allowing for minor changes to maintain a modern image. Above all, the brand has enjoyed continuous backing with investment in marketing to both the trade and consumer sectors, enabling it to compete successfully with both established and new products. Continuous reinforcement of the brand message through advertising and promotions has enabled Kit Kat to sustain its popularity over a long period of time in the face of rapidly changing consumer attitudes and tastes and consumption patterns.
CASE STUDY: NIVEA
Beiersdorf is the international skin care company behind the leading brands NIVEA, ELASTOPLAST, ATRIXO and EUCERIN. Over the past 10 years the company has grown rapidly in the UK by developing a balanced and well managed portfolio of brands. A brand portfolio should consist of a range of products which support each other, irrespective of which categories they operate in.
The NIVEA range includes product types ranging from female face and body products to men's shaving gels, through to deodorants and sun care products.
The NIVEA product range
NIVEA identifies market segments that meet individual consumer needs. Segmentation occurs when a market is split into sub-markets (segments) which can respond in similar ways to different marketing activities.
* contains consumers with similar needs or tastes
* is best satisfied by products targeted to meet their specific needs.
This can be at a macro level (e.g. total health and beauty market) and at a micro level (i.e. within a specific category).
NIVEA Sun is a major international sun care brand, recognised worldwide as a leader in sun care research and development. The UK market is worth £173.6m with an overall category purchase penetration of 33% (usage penetration is higher). Sun care is a serious issue for all and the protection message is key to the NIVEA Sun brand proposition. NIVEA Sun appeals to, and is used by men, women and children with quality products to meet all needs. The brand also aims to bring fun to the market through recognising situations when sun care products are applied.
The UK sun care market
Pages in this study:
The three main product segements
2006 NIVEA Sun Range
The diagram above shows the three main product segments that make up the NIVEA Sun range. As you will see, there are a variety of products in each, which can also be segmented as shown.
It is vital that skin is adequately protected against the sun's harmful effects (although no sunscreen can provide total protection). NIVEA Sun provides products that enable people to be as safe as possible. NIVEA Sun also encourages the use of other forms of protection (e.g. wearing a sun hat and avoiding midday sun). Protection is the largest segment in the sun care market with a purchase penetration of 28%. NIVEA Sun is the protection segment market leader by value (i.e. more money is spent on NIVEA Sun protection products than any other sun care brand in the UK).
When choosing sunscreens there are two important factors to consider:
i. skin type
The chart below shows segmentation by skin type. The level of protection required for each segment will vary according to generalised skin types (as seen below):
Segments according to skin types
Skin type applies to children, as well as adults. Children's skin is thinner and its repair mechanism is not yet fully developed. As a result they require extra protection and sun screens that are specifically developed for their skin.
NIVEA Sun provides a range of lotions and sprays targeted at different climates and to users with different skin types. Someone with fair skin may be well protected with a SPF 20 product when in England, but if they were in Barbados they would need SPF 40.
Segments according to SPF
2. After Sun
NIVEA Sun is the market leader within this segment in the UK, which has been growing rapidly.
In contrast to protection and after sun, the self-tan category is concerned mostly with cosmetic appeal. Many adults use self-tan to have an all year round sun kissed glow.
A vision paints a picture of what you are trying to achieve with your brand in a simple sentence.
NIVEA Sun's vision is:
"To be the Number 1 brand in the UK sun care market in penetration, sales and likeability."
Penetration relates to the percentage of potential customers that purchase a product. Sales relate either to value (the money spent on the product) or volume (the quantities sold). Likeability is all about enjoyment. If people like a brand/product they will continue to buy it.
One key way to achieve the vision is to provide innovative solutions to market needs. This has been a key success factor for NIVEA Sun. As a brand it has achieved this through continually segmenting its consumers in order to:
* effectively meet consumers' needs
* identify new market opportunities.
Segmentation has been vital to the success of NIVEA Sun and allowed the brand portfolio to grow to over 40 products, all meeting clear consumer needs.
The following factors are used to develop and define the sun care segments:
* Demographics - different groups of consumers behave differently (factors relate to age, gender, etc). Demographic differences relevant to NIVEA Sun include different buying behaviours between men/women and adults with children. There is a stark contrast between awareness and usage of sun care products between men (who prefer convenience) and women (who enjoy more luxurious sun care products). Similarly, adults with children are another broad segment with differing needs. Demographic segments are broad. As research shows, the level of awareness of sun care transcends income and social class.
* Attitudinal - this is the most important segmentation variable. Consumers' attitudes towards sun care influences their purchases. NIVEA Sun conducts market research to understand user attitudes. This involves questionnaires using a nationally representative sample, and more intensive research with small groups, to discuss individual skin protection habits and preferences.
This has identified 5 distinct groups for protection and after sun:
* Concerned Consumers - 'a good tan is not important'. These consumers are conscious of the harmful effects of the sun and purchase sun protection products that are most likely to offer high sun protection factors.
* Sun Avoiders - avoid sunbathing and using sun protection when in the sun - it is seen as a chore. These are unlikely to purchase a sun care product. Through education, this segment may be convinced to protect using more easy-to-apply products such as sprays.
* Conscientious Sun Lovers - adore sunshine and like to use a trustworthy brand with suitable protection factors. They know about sun care and use this knowledge to purchase suitable products for their skin.
* Careless Tanners - adore the sun but don't protect against harmful dangers. Tanning is important to this group, not protection. They don't worry about the long-term damage to their skin and may purchase a low SPF product, if any at all.
* Naive Beauty Conscious - like to have a good sun tan. They recognise that sun protection is important but fail to understand about Sun Protection Factors (SPFs). These consumers may still be interested in the core features of a sun protection product (e.g. SPF) and be more inclined to purchase an added-value offering such as a mousse.
Consumer segments were identified by analysing answers to questions about attitudes.
The two main aspects of attitudes relate to:
Usage occasion (when) - e.g. holiday, outdoor sports, gardening, working etc. This relates to the Sun Protection Factor (SPF) required, e.g. the SPF required for a holiday in Egypt differs greatly to outdoor work in the UK. This is one of the reasons why NIVEA Sun produce a wide range of sun protection from SPF 4 to 50 . Research has shown that consumers often purchase a variety of SPF's for differing needs and occasions. This factor alone however is not an accurate means of segmenting markets.
Benefit sought - protection is the primary benefit but the preference by which this is delivered will vary by segment, e.g. convenience is important to men (so they choose spray applicators). Parents want to provide maximum protection for children (high SPFs and coloured products are therefore important).
The benefit sought differs across the attitudinal segments. Whilst 'Concerned Consumers' want a very functional product providing 'adequate protection' (e.g. SPF 30), 'Naive Beauty Conscious' may want a more luxurious sun protection product (e.g. mousse).
This also applies to consumers with special skin types, who require a more specialised product. Recognising that this is a separate segment, NIVEA Sun has formulated sensitive skin products.
The segmentation variables will differ considerably for the self-tan range of products. This
Cite This Dissertation
To export a reference to this article please select a referencing stye below: