Marketing Principles - Essay Example

Introduction FMCG (Fast moving concumer goods) companies are behind the biggest brands in the world. FMCG is all about s, the products which everyone recognises from trips to the supermarket or on television. The brands that make up this sector are the high profile ones, the ones everybody knows and loves. Coca-Cola, Dettol, Dove. These fast moving consumer goods are the essential items we purchase when we go shopping and use in our everyday lives. Theyre the household items you pick up when youre buying groceries or visit your local chemist or pharmacy. FMCG goods are referred to as fast moving, quite simply, because theyre the quickest items to leave the supermarket shelves. They also tend to be the high volume, low cost items. The top FMCG companies are characterised by their ability to produce the items that are in highest demand by consumers and, at the same time, develop loyalty and trust towards their brands. Danone is an FMCG company with over 90,000 employees and operates in 125 countries World-wide. Danone’s brands include Evian ,Actimel, Volvic and Activia. Officialy created in 1990 as a branch of Danone Belgium, and hit UK with the yogurt drink Actimel in 1999. Worldwide Group Danone has two subsidiaries in the UK - Danone UK Ltd and Danone Waters UK & Ireland. Danone UK Ltd is the fresh dairy business behind Britain’s fastest growing yogurt brands, Activia and Shape, as well as Britain’s best-loved yogurt drink, Actimel and new luxury Greek-style yoghurt, Oykos and one more new range of super thick, super tasty strained yogurt with a hidden layer of fruit compote, Danio. Danone Waters UK & Ireland represents Evian, the worlds most popular mineral water. Its portfolio of bottled waters also include Volvic, Volvic Touch of Fruit and Badoit. Danone mission is “to bring health through food and beverages, to as many people in the UK as possible”. Danone funds nearly £180 million in research and development each year. This essay about Danone UK Ltd., has been divided into four parts. The first part deals with explaining marketing process and marketing orientation to the newly developed product in organization. The second – is analysing the macro and micro environmental factors, examining the concept of segmentation and identifying the factors that will influence buyer behaviour and propose a new positioning strategy on newly developed product. The third, explaining how the new product was developed, evaluating a range of distribution methods, discussing and critically evaluating pricing methods, explaining the concept of integrated marketing communication. Finally discuss how different segment of the consumer market would be for business-to-business services (B2B) and the differences between domestic marketing and international marketing. Task 1a There are can be found many various interpretations of definition of marketing. One of the popular definitions given by CIM (2001, n.p.) defines marketing as the management process responsible for indentifying, anticipating and satisfying customers’ requirements profitably. It is clear here that marketing is viewed as process of enriching businesses through researching and satisfying customer’s needs. Even more exhaustive definition is provided by the American Marketing Association (1985, 2), according to which marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create, exchange and satisfy individual and organisational objectives. The definition of marketing gives a logical continuation to the marketing process, which calls for management decisions on situational analysis, marketing strategy, marketing mix (including such elements as product, pricing, distribution, promotion and personal selling (CIM 2001)), implementation and control. Marketing process of Danone UK Ltd also is comprised of the above mentioned elements starting from situational analysis and ending with promotion of the products, and control over the implementation of the marketing strategy. One of the key elements of the marketing process is marketing mix, which is comprised of four basic elements (4Ps: product, price, place, promotion). Below is provided brief overview of Danone’s marketing mix: Product: 4 business lines: Waters, Fresh Dairy Products, Baby Nutrition, Medical Nutrition 100% health-driven products Adapted to local health issues: tastes and needs Pleasurable and tasty with a variety of flavours Continuous product innovation Price: Positioning “ product available for everyone” Products are in line with the income of the populations Place: Sold in supermarkets, retail stores, and local shops; Global presence; part of the strategy: to be available everywhere Promotion: A “health” positioning that is unique in the food industry worldwide; Active promotion of the products and brands through different marketing channels; Campaigns providing information and increasing awareness about healthy lifestyle (Danone.com,n.d.). task1b. Marketing orientation is an approach used by management professionals to identify the channels of meeting the requirements and desires of the people through its product mix. This approach is in contrast to earlier marketing principles where the focus was to identify the benefits of the product and match them with the customer base. So market orientation works in reverse psychology (Kohli et al 1993). This approach has evolved in the wake of increasing market stiffness and more choices for consumers that the companies require market orientation techniques to stay competitive. There are different aspects of the marketing orientation, where the focus is made on: customer (being customer focus), competitors (being competitor focus), product (product orientated), sales (sales orientated), or production orientated (Marketing Mentor, n.d). For a newly developed product of Danone it is recommended to focus on the product. Product orientated business is a business where focus is made on the quality of its own product (Marketing Mentor, n.d.). Taking into consideration the company’s mission and focus on health it is critical to ensure the highest quality and greatest taste of the product and to consider subtle changes in consumer needs. Task2a Evaluation of the micro and macro environment is a crucial part of any strategic planning process as this practice enables management to evaluate the market, its size, competition and the overall favorability of the external environment for doing particular business. For assessing the external factors there is often used PESTEL analysis, which provides a critical overview of the political, economic, social, technological, environmental, and legal framework for doing business in a particular country. Another tool used for assessing the threats and opportunities on the market that are further interrelated with the company’s internal factors including both strengths and weaknesses is known as SWOT analysis. Below is provided analysis of the eternal and internal environment of Danone UK Ltd with an application of both tools: SWOT and PESTEL. SWOT Strengths Market leader in different categories strengthened by the strong brand image of the group: global leader in fresh dairy products market – 27% share; the second largest player in the global packaged waters market – 24% share as of 2012; Focus on innovation as a key driver of business; strong R&D activities Diversified streams of revenue in terms of both geographical presence and product portfolio; Growing focus on business expansion in the emerging economies (especially Mexico, Russia, China, Indonesia, India, and Brazil) and strong local expertise on these markets; Weaknesses Smaller scale of operations in comparison with Danone’s close competitors. Danone’s closest competitors such as Nestle, PepsiCo, etc have much larger favorable scale of operations and therefore much larger size in terms of revenues. Lack of scale of operations reduces the bargaining power of the company in relation to marketing channels and distribution network; Opportunities Rising demand for flavored waters Ageing population as a great opportunity for launching business new business line with a focus medical nutrition (growing demand for dietary and nutritional needs for elderly population); Growth of global probiotic market (expected to grow up to $45 bln in 2018); Growth of baby and infant nutrition demand on the Indian market Threats Changes in regulatory environment for producers of consumer foods and beverages aligned with extensive regulations by national and international authorities might be a significant threat to Danone’s business. Lower-priced private label food products as a threat for decrease of the Danone’s market share in future Environmental issue of water scarcity might have significant impact on capacity and production costs (MarketLine Advantage 2014, 21-27). PESTEL Economic factors In result of tightening economic conditions and recent economic downturn consumers of dairy products (especially consumers in the West) can change their preferences towards home-cooked meals and/or lower-cost food products (MarketLine Advantage 2014). As the newly developed product of the Danone refers to the Yoghurt category it is important to say that yoghurt sales is expected to be 49.8% of dairy products industry in UK in 2014 (Bulford 2014). Social factors Health consciousness in the society is showing a positive trend. Thus, for example, yoghurt consumption among the UK consumers has increased by more than 25% over the past 10 years. Consumers change their eating habits towards more healthy options preferring yoghurts and other low-fat dairy products to ice-cream and heavy breakfasts (Bulford 2014). Cultural shift towards health consciousness and awareness is a great opportunity for Danone’s business development. Another cultural shift that is increasing greatly especially in mature markets is tendency to eat on the way as people become more and more busy and don’t have time enough to have their meal at the restaurant of cook at home (MarketLine Advantage 2014). Demand for portable pots among time-poor but health focused consumers are look for alternative breakfasts that can be eaten on the go (Bulford 2014). Legal factors As the company operates in the foods and beverages industry, it is subject to various extensive regulations on behalf of local authorities and international organizations. Moreover, the company can face with different types of sanctions or barriers imposed by the governments of foreign countries. Legal environment is very tough for such business activities as Danone’s mainly because it concerns human health and safety. Especially these regulations relate to the marketing efforts of the company referring to the health benefits of its products (MarketLine Advantage 2014). Technological factors Technological factors play an important role in the dairy products industry in which Danone Group operates. New technological advancements in delivering the highest quality of the product through keeping the maximum of nutritional elements and benefits is the major task. Therefore, technology is a major challenge for Danone, to use the best available technology for increasing the quality of their health products. Task2b Segmentation is a marketing principle that divides buyers into a segment based on the set of different criteria varying from consumer’s needs, demographics, geography, behaviour or lifestyle, psychographics, etc. (Marketing Mentor, n.d.). Yolado is a perfect substitution of the ice-cream but on the meantime it offers unique healthy and nutritional benefits. For Danone and its newly developed product (Yolado) it is recommended to apply segmentation criteria based on the consumer’s needs and behaviour/lifestyle. The first segment includes both adult males and females who are concerned about their health and health of their families. Due to the product unique characteristics (frozen and tasteful as ice-cream, healthy as yoghurt) the product will perfectly fit the tastes of gourmands who keep control over their weight. Another segment is children, who love ice-cream but their parents tend to restrict this passion due to additional calories and fats. Task2c Consumer or buyer behavior is the way of consumer is making decision to choose and buy a specific product or service. Consumer behaviour can vary among individuals or groups depending on the experience they receive or get from a service or a product. In relation to the Danone’s newly developed product the major factors that will influence buyer behaviour should be (based on the external factors analysis): price, brand recognition/loyalty, and focus on healthy ingredients/features of the product. The target audience of the Danone’s newly developed product should be people whose buying behavior is defined as “Variety seeking”. This category of consumers monitors and buys a new brand or product not because it is necessarily cheaper or better but rather because they seek for a change to what they are used to buy (Marketing Mentor, n.d.). Variety seeking consumer’s behavior is common with routine response purchases such as dairy products and drinks (Marketing Mentor, n.d.). Based on the factors influencing buyer behavior and specific nature of the product, Danone should emphasize its healthy and nutritional features of the product. The new posting strategy should focus on health benefits the customer gets by choosing the newly developed product and the unique taste of ice-cream. Task 3a One of the new products offered by Danone to the market is its innovation – Yolado, a yogurt-based dairy product. This product has an exclusive formula as it is made with fresh ingredients, does not contain colours and preservatives, and should be eaten frozen (Danone.com, 2014). Despite the low-calorie the yogurt (less than 100 calories per pot) Yolado has a smooth taste of ice cream. Thus, combining healthy and tasty features of the product, Danone gains sustainably competitive advantage as the innovative frozen yoghurt becomes very attractive for consumers, whose healthy eating awareness and consciousness is a globally growing tendency. Task3b A new business or an established business will find changing the distribution strategy fairly difficult once it has been setup. There are many distribution channels varying from retail outlets, wholesale outlets, sales force to direct mail, telemarketing, and digital marketing. However, the choice of distribution channel should be based on the specific features of the product, accessibility and delivery factors, frequency of consumption, market size, location, etc. Danone’s product itself requires mass market coverage; it is a product which consumers expect to buy every day in the local or neighbourhood store or supermarket. Based on the consumer’s behavior, there are identified two major types of distribution methods for Danone’s fresh dairy products that are perceived as the most appropriate in the industry and are aligned with the company’s strategy. The first distribution channel for Danone’s newly developed product is wholesale distribution. Wholesale distribution implies that the company-middlemen buys in bulk the product and then sells in smaller volumes to retailers or resellers (Marketing Mentor, n.d.). The second distribution channel for Danone’s newly developed product is the retail distribution, whereas supermarkets/hypermarkets act as the major link between dairy product manufacturers and final consumers (Bulford 2014, 12). Both distribution methods will enable the company to reach its target audience in a most effective way. Task3c Pricing is a method of describing what a company will receive in return for the services rendered. There are many different types of pricing methods, including: anchor pricing; bundling; cost leadership; cost plus; differential pricing; discounting; penetration pricing; prestige (premium) pricing; promotional pricing; psychological pricing; subsidizing pricing; skimming; value based pricing (Marketing Mentor, n.d.). One of the most appropriate pricing strategies for introducing newly developed product is viewed to be promotional strategy – temporarily pricing a product below list price or below cost in order to attract customers (Marketing Mentor, n.d.). This will encourage people to try the product and to get “acquainted” with it. Frozen yoghurt will be presented on the shelves of supermarkets and other retail stores with the other yoghurts and Danone might use promotional pricing to introduce the product to the market and encourage people to learn the new product offered by attractive price. After promotional activity, the company can adopt product-line pricing strategy which implies adjusting a product’s price to the product line of the company, whereas impact of the price on the other products the company sells is taken into consideration (Marketing Mentor, n.d.). Task3d Integrated marketing communication is a relatively new concept in the marketing industry which aims to integrate all channels of marketing. IMC requires that organisations coordinate their various strategies, resources and messages in order that they enable meaningful engagement with audiences (Fill 2013). By adopting IMC the company is able to develop a clear positioning and clear and encourage stakeholder relationships that are of mutual value (Fill 2013). The marketing mix is a set of controllable tools that the organisation blends in order to produce the response it wants in the target market (Marketing Mentor, n.d., n.p.). Usually the marketing mix includes 4 basic elements: product, place, promotion, and price; the extended marketing mix is comprised of 9 elements, including: product development; pricing strategy; promotion/publicity, place (distribution channel strategy); people; processes; physical factors; positioning; and packaging (Marketing Mentor, n.d.). After applying the basic 4p’s to the Danone’s product the marketing strategy should be extended to 3p’s that include: physical factors, positioning and packaging. All these three elements are relevant to the Danone’s newly developed product as it will help the customers to distinguish the frozen yoghurt from other ordinary yoghurts and ice-cream. Physical factors help the company to ensure that its logos, premises, and other corporate identity elements are consistent to establish positive association and recognition (Marketing Mentor.com, n.d.). There are two critical physical factors for Danone: use of logo and other distinguishing corporate elements on the package of yoghurt Yolado and physical layout of the yoghurt in the supermarket (placement in yoghurt’s section, not ice-cream). Positioning strategy of Danone is focused on health nutrition. The newly developed yoghurt Yolado offers the new way of eating yoghurt to the customers. The company is positioning a product as an exclusive yoghurt-based dairy product, made with fresh ingredients, without colours and preservatives and which is eaten frozen (Danone.com, 2014). In other words, company is promoting “the smoothness of ice cream with the goodness of yogurt” (Danone.com 2014, n.p.) and is positioning the product as “fresh and different yogurt consumption experience” (Astley 2012, n.p.). Packaging is a crucial element to the Danone’s business as it enables the company to fulfil its marketing communication needs and impact on the purchase decision process (Marketing Mentor 2014). In addition to promoting the unique features and nutritional benefits of the yoghurt, Danone has to ensure that its packaging is suitable for ice-cream mixture, and is capable to store the product with refrigerated yogurts and enable freezing in refrigerator before consumption (Astley 2012). There are two sizes of packaging: individual and family size. While the color, shape and text have common characteristics it is necessary to consider it while adjusting to the local markets. Task 4a This section will explain the marketing mix strategy and its application to two market segments for our product Yolado by Danone. In the first marketing mix strategy which is the 4p’s model, we will base the pricing on demographic segmentation. The combined demographic data based on initial consumer feedback can help to create a pricing model for that geographic segment. Since our product is a healthy yogurt, we will concentrate on the urban markets of that country. Being a large organization we can push the product deeper in a geographic location but the investment will not yield profitable results as the need for the product will not be created and thus the product will not become sustainable. The second classification for Yolado can be divided based on consumer behavior. As this product is yoghurt with a texture of ice-cream, the product can be targeted to both adults and parents who care about their health and health of their children and families. The attitude can be focused towards creating awareness of the healthy and taste features of the product and market the segment of adult consumers. This segment can be provided with promotional strategies to increase sales, usage rate and response of a product. The strategy can be more intense when applied to business-to-business services as pricing will be competitive and generating useful feedback and market numbers will be a challenge (Ferrell, Lukas &Schembri, 2012). Due to the nutritional characteristics of the yoghurt, it can be sold to businesses as well, for example to kindergartens, schools and especially summer camps (due to seasonality and increased demand for refreshing cold product). Below is provided brief comparative table of the marketing mix for two groups: B2C and B2B. Business to Customer Business to Business Product Yolado Yolado (the same product) Price High Lower than B2C Place Supermarkets shelves Schools, kindergartens, summer camps Promotion Marketing and advertisement Tailored proposition Task4b In the event of a successful product launch the next step towards product and business growth will be to craft a marketing strategy for domestic business and for international growth. To achieve domestic business success, our product will face a single set of marketing and competitive issues. The target will be a single set of customer base although there can be many further segments in the same market but the policy will remain the same. There are many challenges that need to be addressed to refrain from creating a negative impact in the international markets (for example, Spain). Consideration needs to be taken for another cultures beliefs, traditions, symbols, religion and language. As people are influenced by culture, their needs and choices will be affluent to those things that promote their culture. As it has been mentioned in the PESTEL analysis Danone should carefully develop its promotion strategy revealing the health benefits of the Yolado yogurt. For entering into emerging markets, a stiff competition is from the local authorities that lay down tough policies for international competitors to enter their markets. Typical examples are import tariffs, quotas, subsidies and tax cuts for local business in the same niche. This is a crucial form of ongoing debate as protectionism hampers free trade and globalization. References: American Marketing Association 1985. “The definition of marketing”, Marketing News, March 1, 1985, 2. Astley, M. (2012). Danone launches ‘new category’ of yogurt for Spanish market. [online] DairyReporter.com. Available at: http://www.dairyreporter.com/Markets/Danone-launches-new-category-of-yogurt-for-Spanish-market [Accessed 29 Jun. 2014]. Bulford, D. 2014, Yoghurt & Other Dairy Product Processing in the UK. 1st ed. IBISWorld Industry report C10.513. CIM, 2014, An Overview of Marketing. [online] Cim.co.uk. Available at: http://www.cim.co.uk/marketingplanningtool/intro.asp [Accessed 26 Jun. 2014]. Danone.com, 2014. [online] Available at: http://www.danone.com/en/for-all/our-4-business-lines/fresh-dairy-products/stakes-innovations/ [Accessed 26 Jun. 2014]. Danone.com, (2014). Products available for everyone, everywhere. [online] Available at: http://www.danone.com/en/for-all/mission-strategy/our-strategy/products-available-for-everyone-everywhere/ [Accessed 29 Jun. 2014]. Fill, C. 2009, Marketing Communications: interactivity, communities and content, 5e, Harlow: FT/Prentice Hall Kotler, P. et al (2010) Principles of Marketing 5th Edition, Financial Time? Prentice Hall Kohli, A. K., Jaworski, B. J., & Kumar, A. (1993). MARKOR: a measure of marketorientation. Journal of Marketing research, 467-477. MarketLine Advantage, 2014. Company Profile: Danone SA. MarketLine, pp.21-27. Marketing Mentor, n.d. [online] Marketingmentor.net. Available at: http://www.marketingmentor.net [Accessed 20 Jun. 2014]. Read More