KELLOGG is the world’s leading producer of cereal products with total sales volume of nearly $13 billion during 2008. Kellogg products are manufactured in 19 countries and marketed in more than 180 countries around the world. Major Kellogg’s products include crackers, Toaster pastries, cereal bars, fruit-flavored snacks, frozen waffles and vegetarian foods (http://www.kelloggs.co.uk/ Accessed on March 03, 2011). The company famous brands include all- bran, corn flakes, keebler, pop-tarts, eggo, cheez-it, nutri-grain, rice krispies, bearnaked, morningstar farms, famous amos, special K, and frosted mini-wheats.
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Mission statement: “Kellogg is a global company committed to building long-term growth in volume and profit and to enhancing its worldwide leadership position by providing nutritious food products of superior value” http://www.kelloggs.co.uk/ Accessed on March 03, 2011)
In a rapidly changing and competitive business environment, it is not easy to predict:
future trends in consumer tastes and preferences
Creating new products or making changes to existing brands involves making investment decisions, in the hope of making a return. Weighing up future returns against an investment is crucial and involves an element of risk, because the future is never certain. Previous experience, together with market research information helps to predict future events and outcomes. However, all business activities involve some element of risk. There is often a link between risk and return. More the risk, the higher the likely returns (or profits); however, a balance needs to be struck.
In making a decision to develop a new brand, it needs to decide how much investment to make and to forecast the likelihood of a successful outcome. Decision makers aim to develop a long-term strategy to meet a range of objectives such as:
growing market share
developing a unique market position
creating consumer or brand loyalty
generating a targeted level of profit.
This case study describes a major investment in Kellogg’s ‘All-Bran’. It illustrates business case for the new product and identifies how the company’s investment in new product development serves to strengthen a global brand. Later part of the essay will reflect an outline plan which identifies resources required for the project that is materials, equipment, labour, and training and development of staff
2. LAUNCHING OF KELLOGG’s ALL-BRAN
2.1) NEED IDENTIFICATION AND ANALYSIS:
In an uncertain world where the organisation’s strategy is to focus on products and brands that are either the market leader or in a strong position the company believes that this focus upon core and successful products enables it to provide consistent and reliable returns and rewards for its stakeholders.
Before proceeding with the change, Kellogg carried out some detailed market research with consumers to discover their thoughts and feelings. There are two main approaches to market research i.e.: qualitative and quantitative.
Qualitative research involves working in detail with a relatively small number of consumers e.g. observing and listening to them talking in small groups in which they discuss the brand, products, packaging, advertising ideas, etc. The qualitative research helped Kellogg to develop the concept of a family of fibre brands. The advertising and promotional materials with which the consumer groups worked were very similar to the end promotions that Kellogg wished to communicate.
Quantitative research involved using questionnaire and survey approaches with a much larger sample of targeted consumers to estimate the impact on sales if these changes were put into market. Kellogg’s undertook market research by answering the questions as per questionaire-1 in Appendix.
In September 2004, Kellogg planned to introduce a new product i.e. ‘All-Bran’ to make the benefits more relevant to consumers. Promotion of ‘feel great’ message was featured on 8 million packs and on the ‘All-Bran’ website. It focused on the fact that high-fibre diets may help people to feel lighter and more energetic as well as aiding the digestive system. Bran which is high in fiber is needed in a human’s diet. It is best to be used in moderation to gain the positive health it promotes. The high bran, high fibre cereal has been designed to aid a healthy digestive system and to help people control their morning eating habits; without compromising on taste! Research showed that consumers see cereals as a ‘natural product’. This is a strong selling point. It makes it vital to feature the ingredients on the packaging. This is because All-Bran range can be seen as part of a daily healthy diet (http://www.thetimes100.co.uk/case-study–building-brand-order-to-sustain-its-life-cycle Accessed on March 03, 2011).
By setting up SMART (specific, measurable, achievable or agreed, realistic and time-related) objectives Kellogg would know whether each objective for launching ‘All-Bran’ had been achieved. The objectives were clear and were communicated to all staff. This made sure that all staff agreed to follow certain actions to achieve the stated aims. By setting these objectives Kellogg set a direction that would take the business to where it wanted to be three years into the future.
Major objectives include;
encourage and support physical activity among all sections of the population
use resources to sponsor activities and run physical activity focused community programmes for its consumers and the public in general
increase the association between Kellogg and physical activity
use the cereal packs to communicate the ‘balance’ message to consumers
introduce food labeling that would enable consumers to make decisions about the right balance of food
2.3) TARGET MARKET:
It is the process of evaluating each market segment and select one or more segments to enter. Premiums and gifts are outstanding tools for call to mind initial trial, brand switching, and repeat purchase. Now and then company is able to target because they are financially strong and they can arrange a vast product line. People aged 55 and over are the target markets of Kellogg’s ALL BRAN .Kellogg’s ALL BRAN are easily available in urban and rural areas all over the country. It has been targeted every segment and we can say that Kellogg has a ‘fragmented market’.
Market attractiveness factors for “All-bran” include market, size, differentiation possibilities, bargaining power of customers, seasonality, distribution, product growth and stage in product life cycle
Main factors influencing marketing of a product are;
a) Economic and technological factors i.e. Investment intensity, Industry capacity, Technology, Barriers to entry and exit and Access to supplies
b) Competitive i.e. competitive structure, competitive groupings, substitute products, price, and Individual competitor analysis
3. PRODUCT LIFE CYCLE
The product life cycle is the period over which it appeals to customers and can be illustrated in a series of stages showing how consumer interest, and hence sales, has altered over time. Kellogg’s All-Bran has a long and distinguished history. Like many other famous products, however, it is important from time to time to re-energize its life cycle. To prolong the life cycle of a brand or product an organisation needs to use skilful marketing techniques to inject new life into the product.
The traditional product life-cycle shows how a product goes through 4 stages during its life in the market place. At each stage in the product life-cycle, there is a close relationship between sales and profit so when a product goes into decline, profit decreases. When a product is introduced to the market, growth is slow due to limited awareness. As the product is establishing itself, sales will start to increase during the period of growth. As the product reaches maturity, the company needs to inject new life into the product; either by creating brand extensions or variants otherwise the product will reach maturity and start to decline. All-Bran is standing on the maturity stage with 65% of total market share. To stay spirited in the market it needs to introduce time to time new offers and flavors and different promotional schemes. Manufacturing capability is another key issue. If launches of new products are successful in global markets, Kellogg’s must have the manufacturing capacity to meet consumer demand as well as the supply chain necessary to reach those consumers.
When a company like Kellogg’s is investigating a change in its marketing it can consider four elements (http://www.thetimes100.co.uk/case-study–using-new-product-development-to-grow-a-brand Accessed on May 03, 2011) of marketing mix or 4Ps:
This is about meeting changing needs and wants of customers through offers. The growth in healthier lifestyles creates opportunities for Kellogg’s to increase the number of products for this segment. In case of ALL BRAN, the product is the cereal production by the company. Core Product is cereal, for breakfast and as a snack. Actual product is high quality level; different tastes, flavors, packaging and the symbol K. Augmented product provides tastes and energy as well as nutritional ingredients.
Pricing decision is very important because the survival of a company in the market depends upon pricing decision. Pricing strategy depends on pricing objectives. The amount a company charges for its product is important in determining sales. Super brands like Kellogg’s can charge a premium because of the strength of the brand and product quality.
Where customers can purchase the product is also an important factor in determining sales. If a brand like All-Bran is not stocked in supermarkets where most purchases are made, sales will be lost.
The marketing mix activities of a product planning, pricing, and distribution are performed mainly within the organization or between the organization and its marketing “partners”. However, with promotional activities, the firm communicates directly with potential customers. Kellogg’s uses above the line promotion like TV advertising as well as below the line promotion like on-pack promotions and sampling. The market research revealed several matters that Kellogg needed to address when alerting the public to changes in the brand family.
1. Some consumers might find the act of placing a range of separate products under the All-Bran brand confusing. The solution was to ensure that packs clearly display both the power brand name (All-Bran) and also the product name (e.g. Bran Flakes).
2. Research showed that consumers see cereals as a ‘natural product’. This is a strong selling point. It makes it vital to feature the ingredients on the packaging.
3. To give the campaign maximum impact, Kellogg carefully co-ordinated television and radio advertising, PR and in-store promotions. These encouraged consumers to try out and reappraise the revamped products.
A product’s life cycle may last only a few months (e.g. with a fad, or craze) or, as with Special K, for many years. Although it was a successful product, Kellogg’s recognised the opportunity to stretch the brand by investments that would:
extend and further develop its growth phase and
Help to delay the onset of the maturity phase.
4. CHARACTERISTICS OF THE MARKET
4.1) MARKETING ENVIRONMENT:
This can be divided into two broad categories;
a) Micro Environment:
The Micro Environment of the Kellog consists off;
The Company: has to take other groups or departments of company into account. Such as finance, research and development, purchasing, operation, accounting department.
Suppliers: Kellogg’s obtains its raw materials of wheat, corn, cocoa, rice and sugar from primary suppliers around the world. It is a large-scale manufacturer and stores sufficient stocks to meet customer orders.
Marketing Intermediaries Kellogg’s does not sell its breakfast cereals directly to consumers. It uses intermediaries like wholesalers, supermarkets, high street stores and hotels. Kellogg’s has major relationships in the tertiary sector. These include the major retail supermarkets such as Tesco and ASDA and some of the wholesale sector such as Makro.
Customers: The Kellogg’s Company mainly focuses on customer market that consists of people aged 55 and over and weight conscious people.
Competitors: Nestle is the only competitor of Kellogg.
b. Macro Environment:
The external factors which affect a company’s planning and performance, and are beyond its control: for example, socio-economic, legal and technological change
There are many environmental issues which should be looked at to get the broader picture of Kellogg’s Company. These issues can be grouped into six categories: political, economical, social-demographic, technological, legal and ethical. The acronym for this is a Pestle analysis.
Political /Legal Environment: UK has a stable political environment hence, private enterprise is encouraged, which gives Kellogg an opportunity to introduce new products and improve the existing ones.
Economic Environment: Economic factors are those that affect consumer buying behavior. As this is an era of great depression, there is a change in the income of the consumer so the sales of Kellogg are affected by this.
Natural Environment: The natural environment of Kellogg’s involves all the natural resources that are needed as inputs by the company and are affected by market activities. They’ve set themselves a number of targets to meet by 2015, and are constantly checking their progress along the way so they can see how they’re doing. By 2015 they aim to have reduced all of the following by 15-20% per metric tonne of food produced since 2005.
Greenhouse gas emissions
Waste sent to landfill (For waste to landfill, they achieved a 41.5% reduction by 2009 and have set themselves a new target of a further 20% reduction by 2015 against a 2009 baseline.)
Socio-cultural Environment: UK has a tradition of eating cereal as a breakfast so Kellogg has got high market.
Technological Environment:: UK has good infrastructure and distribution channel which again is highly favorable for Kellogg to grow further.
Responding to the Marketing Environment:
“Kellogg’s has utilized integrated business units and compensation incentive systems to increase the accountability of the cash expenditure and improve the functionality of the organization. Products sales have been increasing in the UK as well as in other countries. The pricing and availability of the product determines the profitability of a product. Streamlining many of the operations in recent times has helped the Kellogg increase the profit margin. More resources could therefore be spent on the marketing and advertisement of products. In addition, Kellogg’s also increased the number and frequency of promotional offers more toys and DVD’s in cereal boxes, tie-ins with movies and charitable donations to local schools and charities. In 2002, a new strategy of “Volume to Value” was introduced throughout the company.”
4.2) MARKET SEGMENTATION PROCESS
The process of defining and subdividing a large homogenous market into clearly identifiable segments having similar needs, wants, or demand characteristics. Its objective is to design a marketing mix that precisely matches the expectations of customers in the targeted segment.
Today Kellogg’s is doing its business in United states, China, India, Indonesia, Jordan, Lebanon, Malaysia, Maldives, United Kingdom, Qatar, Saudi Arabia, Singapore, Sri Lanka, Thailand, United Arab Emirates and Vietnam. In this project we are only discussing its market segmentation in United Kingdom. They are segmenting the market in the form of geographic, demographic, psychographic, and behavioral.
All-Bran Original is available in Australia, Somalia, USA, Canada, Colombia, UK, Italy, Mexico, France, Japan, Latin America, and South Africa
4.3) MARKET TARGETTING PROCESS
After dividing the market into various segments, the Kellogg Company has to decide which segment it can serve better. So first they evaluated each segments. They want the sets of buyers who share common needs and characteristics to serve. Kellogg mainly used undifferentiated (mass) marketing strategy because cereal will always be mass marketed. They have to do business on large scale so Kellogg Company is using mass marketing.
4.4) PRODUCT DEVELOPMENT PROCESS
New product development process of product starts with idea generation.
Marketing Strategy Development
Concept Development &Testing
5. USE OF INTERNAL AND EXTERNAL RESOURCES
Use of internal and external resources is crucial in the launch of a new product.
5.1) INTERNAL RESOURCES:
Idea of Kellogg’s came from;
Product development teams
Formal research and development (asked consumers through questionnaires )
Brains of its executives, scientists, engineers, manufacturing staff and salespeople
Companies successful entrepreneurial programs (encourages employee to think about new cereal product )
Value innovation program
5.2) EXTERNAL RESOURCES:
Customers (through questionnaires)
Competitors (Kellogg’s get clue about their new product by watching competitor’s ads, analyze the sales, and then decide).
Suppliers (tell company about new concepts, techniques and materials that can be used to develop new products).
6. SWOT ANALYSIS
a) Kellogg ‘All Bran’ is the only large, very high fibre brand in the market place. Private label provides the main competition.
b) The general public remains highly aware of ALL BRAN
c) The ALL BRAN brand is strong; consumers associate it with healthy activity.
a) Awareness of the brand had been declining because of little promotional (e.g. advertising) activity in recent years.
b) Compared with leading brands such as Kellogg corn flakes, the individual fibre products have limited scale, making it hard to make advertising investment economic.
c) The preposition that a fibre cereal keeps you regular is less motivating to consumers than in the past. Consumers now more interested in products inner health
a) People are looking to eat more healthily
b) The rapid growth of non cereal products that meet inner health need (pro biotic drinks and yogurts)
c) In the UK the number of people over 55(the products main consumers) continues to increase.
a) The sales of private labels fibre cereal is growing.
b) There is a consumer’s trend towards the tastier cereal
By creating the power brand ‘All-Bran’ and providing the right sort of well researched promotional support, Kellogg has been able to inject renewed vigor into a family of related products. Through appropriate promotional activities and more relevant messages, Kellogg has re-awakened consumers’ interest in products that can play an important part in developing a healthy diet in a health-conscious world. Regular campaigns of promotional activity are helpful in enabling all organizations to sustain their own life cycle and those of their brands and products. It is early days in evaluating the success of the marketing activity supporting All-Bran but the signs are good.
Appendix: Primary Research:
What changes taking place in society are likely to affect the product?
How might new technologies affect our business?
What are likely to be the future market trends?
Where are the opportunities within the market place?
What new categories would appeal to the target market?
How far do consumers think the brand could stretch into the market for different product categories?
1. What is age bracket do you belong to?
39 yrs or above
2. Which income bracket do you belong to?
GBP 1000 & above
3. What is your marital status?
4. What is the brand of the cereal that you usually purchase?
5. Is ALL BRAN your favorite cereal?
6. How often do you purchase cereal?
Once a week
Once a month
7. Please rank accordingly to the characteristics of ALL BRANS:
a) Taste b)Price c) Flavor d) Packaging
1=least preferred 5=most preferred
1 2 3 4 5
8. Do you like the ads of ALL BRAN?
9. What flavors of Kellogg do you like the most?
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