The Principles of Marketing

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Principle Of Marketing



Contents

Introduction - Concept

Product decision

Research summary and strategy

Pricing decision

Promotion and media respond

Launching schedule

Marketing budget and profitability

Conclusion

References

Introduction - Concept

Seeing a rising trend of health conscious food, especially in nutrition food category, we decided to develop a new sport nutrition product that suitable and convenience for everyone, which could be an alternative choice for people who are busy and could not spend much time for a meal.

According to Euromonitor International - Pass Port Sport Nutrition In The United King Dom (2013a, 2013b), there was an increases by 16 percent in current value terms in 2012, archived GBP260 million. Energy and nutrition bars sees increased 18 percent of volume with a current value increased of 12 percent in 2012. Protein product has been seen a growing non-stop since 2012. The increased of sport nutrition substitute grows steadily. There is also a forecast of raising a steady value of 13 percent, to reach GBP478 million in 2017 of sport nutrition. As can be seen, energy and nutrition food industry rises steadily in recent year.

We chose Nestle as our existing company because Nestle is a national wide company famous for producing health and nutrition food. Our product is a new kind of energy bar, based on the innovative and reputation that Nestle has, we can make it easier to launch our product.

Product decision

After conducting a research about energy and nutrition bar's flavour, one common bar has sweet and fruity flavour, it is very rare for a customer to find and to buy a salty bar. Hence, to differentiate our product, we decided to develop a new flavour for our energy and nutrition product, which will be a salty energy and nutrition bar, which has cheese flavour.

The main ingredients of our product is fat-free cottage cheese, which contains important protein-base nutrition. This ingredient helps people to build and enhance muscle, plus, it has very nice taste. The other ingredients of our product are: peanut, peanut butter, flour, sugar, Lo Han Guo powder, sea salt. Because this product contains peanut, therefore a word of advice for people who are allergic to peanut should not consume this product will be printed outside the package. We use aluminium foil to pack our product in order to keep it clean and fresh.

We segmented our target customer in demographic, psychographic and behavioural. In demographic, our customer are both female and male, but we may focuses more on male, age from 18 to 36, working people and students. In psychographic, our customers are people who like to go to the gym, like to build muscle or have a busy life, do not have much time for a proper meal. In behavioural, our customers are people who seek benefit of convenience food and purchase and consume at least one energy bar a week.

We name our product C-bar, C stands for "cheese". The up selling point of our product is it is unique, it is the first cheese flavour nutrition bar with low-calorie. C-Bar does not only help build and enhance muscle, but it is also a suitable alternative for a meal in rush hour, people can eat a C-Bar whenever they feel hungry and they do not have enough time to go home and cook a proper meal.

Research summary and strategy

We conducted a research on energy and nutrition food industry. The result showed that energy and nutrition food industry grows rapidly from 2007 and 2012, and to be seen as continue in future.

Table 1Sales of Snack Bars by Category: Value 2007-2012

2007

2008

2009

2010

2011

2012

Breakfast Bars

244.8

257.2

262.4

269

272.9

275.9

Energy and Nutrition Bars

18.3

24

30.9

38.2

45.7

55

Fruit Bars

16.1

15.5

15.1

14.7

14.4

14.2

Granola/Muesli Bars

56.7

62.5

69.7

82.8

95.4

107.1

Other Snack Bars

33.9

43.6

54

58.7

64.1

71.4

Snack Bars

369.9

402.8

432.1

463.3

492.4

523.5

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

The table below is the market share of nutrition and energy food category from 2009 to 2012.

Table 2 Energy and nutrition food marketshare

Brand

Company

2009

2010

2011

2012

Maximuscle

Maxinutrition Ltd

36.7

36.0

36.2

36.3

Precision Engineered

Holland & Barrett Retail Ltd

13.6

12.9

14.8

14.6

Myprotein

Hut Group Ltd,The

5.1

6.4

8.7

10.8

Reflex

Reflex Nutrition Ltd

3.2

3.2

4.2

4.2

USN

USN UK Ltd

4.5

4.4

4.3

4.1

Sci-Mx Nutrition

Sci-Mx Nutrition LLP

3.8

3.9

3.9

3.9

CNP Professional

CNP Professional Ltd

4.2

4.1

4.0

3.9

Phd

PhD Nutrition Ltd

3.6

3.6

3.5

3.4

Prolab

Natrol UK Ltd

2.3

2.3

2.3

2.3

EAS

EAS UK Ltd

4.3

4.4

2.9

1.9

Others

16.8

15.8

15.3

14.7

Total

100.0

100.0

100.0

100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

As can be seen, Maxinutrition Ltd is the leader of this market, its market share is 2.5 times the second largest Holland & Barrett Retail Ltd.

We conducted an online survey which asked customers about their favourite flavour, frequency of purchase and price range they would like to spend for an energy bar. The result shows that only 25 percent of people purchase energy bar 2 to 3 times a week while 52 percent said that they rarely buy one. The most favourite flavour is chocolate with 60 percent of people agreed. People are more willing to pay for an energy bar with price range from GBP1.00 to GBP1.99, and only 20 percent willing to buy an energy bar at GBP2.00 to 2.99 or less than GBP0.99.

According to Trott's (2011) evaluation criteria of long term strategy fit, in 3 year, we planned on:

  • Make strategic partnership Gyms and fitness centre
  • Research and develop new flavours
  • Television commercials
  • Member cards

And in 5 years, we would like to:

  • Introduce in student halls, canteens, pharmacy
  • Make commercials using celebrities
  • Research and develop new product targeting children and elderly

And our channel fit would be retailers, fitness centre and gym, supermarket, general food store and vending machine.

Pricing decision

Since our competitors are existing companies with wide range of different products, they use Product Line Pricing, pricing different products within the same product range at different price points.

Table below show the competitors' lowest retail price on a nutrition energy bar product.

Table 3 Lowest retail price of competitors

Competitors

Price from

Quality

Phd

1.45

High

Powerbar

1.49

High

USN

1.64

Low

Quest bar

2.44

Low

Myprotein

2.99

Low

Maximuscle

3.79

High

Seeing a gap in middle high price and middle high quality, we decided our product will be at that position.

Diagram 2 Position map of energy and nutrition food industry (with C-Bar)

Based on the participants' response on how much they are willing to pay for an energy bar and our aim to produce a product with medium high quality and medium high price, we used competitor-based pricing, consider how our competitor do and how they set price (Kotler and Amstrong, 2013). Our cost per unit is GBP0.59, it is reasonable to set the price at GBP2.49. We set our price a little bit high though all of our respondent would willing to buy the product at GBP1.99. Therefore, we also use psychological pricing, to make the customer believe the product is cheaper than it really is and our product quality is worth to buy, so that customer who seeks value and quality may be attracted to it.

Promotion and media respond

Due to very high advertisement fee on TV, advertising on social network sites such as YouTube and Facebook seems more cost-effective. Facebook and YouTube are rated the most popular and paid for online advertising on social networks. According to the US Marketers/ Agencies (2011), 69 percent of 230 respondents asked thought advertising on Facebook is good and excellent, while 46 percent agreed that YouTube is another good idea for paid advertising online. And people who thought Twitter is good for advertising only account for 36 percent of 230 respondents.

Our product aims to customer both male and female, age from 18 and above, who have a busy life and do not have enough time for a proper meal or like to build muscle. Most people may have television at their home, but there is still a number of people who cannot afford to have a television or a television license at home, especially student who lives far from home. Thanks to the development of high technology and internet, everyone owns mobile phone, laptop and tablets. And as a matter of fact, they watch YouTube and log in Facebook or Twitter almost every single day.

First of all, people cannot deny that Facebook is one of the most popular social networks in the world, which have the largest number of users. Facebook can help business approach any kind of target customers and increase brand awareness, enhance the firm's reputation. With the feature "Like" on Facebook, whenever a Facebook user click "Like" on something, as a consequence, it create a story on people's new feed and that person's story timeline. This feature also makes Facebook users become free advertisers for businesses. Plus, Facebook is cost-effective promotion, it charge by cost-per-click and cost-per-thousand impression bid (Facebook.com). Businesses only have to pay for the impressions or clicks they receive, and can manage this via their ads manager.

Twitter has opened up advertising to small commerce lately (The Guardian, 2013). Advertising on Twitter will also be charged by cost-per-click and cost-per-thousand impressions and "tweets" (Twitter.com). Advertising on Twitter just as advertising on Facebook, the more people subscribe to your business Facebook fan page or Twitter account, the more popular that business gets.

Advertising on YouTube is a huge opportunity to get more customers. People watch clips and movies on YouTube every day, and there is always a small advertising launches before the movie clips starts, people can choose either to watch it or to skip it after 5 seconds. Hence, chances are people can still get some information of the product advertised, and if they think it is interesting, they will click on the link leads to the full advertisement and may be, subscribe to it. The more views hit on an YouTube clips, the more popular it gets. YouTube, just like other social networking site, they charge by cost-per-click and cost-per-thousand impressions. Plus, it is available in every platform: computer, laptop, mobile phone, tablets and any computer operation systems such as Mac and Microsoft.

We also thought of advertising on mobile phone via games. A small advertisement will pop up when user start a game, this helps us to attract more customers as well as using social networking site because mobile phone games are getting more and more popular nowadays.

The best feature of it is the "share" feature, if a person thinks our advertisement is interesting, he or she will share it to other people, and the number of people watching our advertisement keep increase as long as people keep sharing it. This is a very cost-effective way of advertising and an excellent way of attracting consumers.

Launching schedule

Description

Responsible department

Date

Category plans available

Research and Development

01.02.2014

Brief National Account Management

NAM

01.04.2014

Discussions with retailers

Customer Director

01.06.2014

Inventory available

Logistic

01.12.2014

Launch to media, trade and sales

Sales

01.02.2014

Product in store

Logistic

01.03.2014

Advertising and promotions starts

Marketing

01.03.2014

The above table is our schedule of launching our product. The category plan which is in charged by Research and Development department would be available on the 1st of February 2014, then 2 months later will be the brief National Account Management by our National Account Management team. Discussion with retailers would be planned to occur on the 1st of June 2014 by Customer Director department. In the last month of 2014, the inventory would be available, Logistic department would be responsible for it. Media launch, trade and sales are in charged by Sales department will be started on the 1st of February 2015. On the 1st March 2015, Logistic department will make sure that our products are available in store and Marketing department will start advertising and promotion campaigns.

Marketing budget and profitability

We forecast that our sales in the first year may bring a loss of profit of GBP0.34 million.

Our customers are 17.6 million women and men age from 18 to 36, our penetration is 5 percent of 5 million target market, that equals 250,000. We expected them to purchases once bar per week, the number of pack sold is 13 million, charged price GBP1.11. Our net sale as forecasted is GBP 14.43 million. The table below is our sales forecast.

Table 4 Sales forecast

Men + Women (18-36)

17.6 million

Target market

5 million

Penetration

250,000 (5%)

Purchase frequency

1 / week

No. of packs

13 million

Pricing (average to customers)

£1.11

Net sales

£14.43 million

We will spend GBP7.1 million on advertising as table below details

Table 5 Advertising spend

Advertising

£ 4.5 million

Promotion, including DM

£1.8 million

Market research

£800k

Though our first and second year will see a loss in profitability, we hope to rise our profit to GBP0.18 million in the third year. The table below is our brand profitability in 3 years.

Table 6 3 years sales forcast (in million)

Description

Year 1

Year 2

Year 3

Net sales

£14.43

£15.87

£17.46

Gross margin

£6.76

£7.44

£8.18

Marketing spend

£7.10

£7.50

£8.00

Brand profitability

(£0.34)

(£0.06)

£0.18

Conclusion

C-bar is a new product that has never been launched before. It has the flavour and quality that we are confident to be its uniqueness. Although it will be difficult to launch a new kind of energy and nutrition bar with saltiness and cheese flavour, we hope that it will be developed in the future with careful plan.

References

Facebook, n. d. Facebook for business. [Facebook] Available at: <https://www.facebook.com/business> [viewed 19.01.2014]

Hern, A., 2013. Twitter opens up advertising to small businesses in the UK. The Guardian [online]. Available at:<http://www.theguardian.com/technology/2013/nov/14/twitter-opens-up-advertising-to-small-businesses-in-the-uk> [viewed 19.01.2014]

Kotler, P. and Armstrong, G., 2013 Principles of Marketing. 15th ed. Harlow: Pearson Education. Chapters 10 and 11.

YouTube, n. d. Advertising on YouTube [YouTube] Available on: <https://www.youtube.com/yt/advertise/> [viewed 19.01.2014]

Trott, P., 2011 Innovation Management and New Product Development. 5th ed. Harlow: Pearson Education. P 446-448, P528-529.

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