Product Positioning in the Target Market - Term Paper Example

 «Product Positioning in the Target Market» Mission Statement Our mission is to continually provide our customers with quality small treat chocolates at lowest possible prices. In order to achieve our mission goal, we will conduct our business with the following basic keys, provide quality chocolate products along with quality services, take care of our customers, take care of our employees, respect our customers and reward our share holders. The mission is to provide great tasting chocolates as well as to offer efficient and friendly services throughout our retail and confectionary market outlets because customer satisfaction is imperative. The priority of our chocolate products is given to customer satisfaction by providing right service along with right information at right time and right place. The main target audience of Freshener will be women and school children. Women play a vital role in chocolate market as they are the largest purchasers of chocolates either for home consumption or for giving gifts. The most remarkable fact about UK chocolate market is that people over 55years of age consume chocolate worth 700 pounds every year, which accounts to be 21% of the total chocolate consumption. Consumer’s eating habits and lifestyles are constantly changing as general public due to busy life schedule depend mostly on chocolates and short snacks to make up for missed meals. Even though few have concerns and awareness about sugar and fat in chocolate, they regard it to be an affordable daily treat. Market Research In recent years, chewing small treat chocolate has been one of more dynamic sectors with in the confectionary market, especially in United Kingdom. The latest reports show that people in the UK consume larger number of chocolates than in any other European country and their love of chocolates and sweets continue to flourish day by day. It was accounted that UK consumed 30% or more of the total chocolate consumption in Europe, that comes around 660 900 tonnes per year. Chocolate confectionary accounted for 70% of the total sales value in the UK market and the per capita chocolate consumption was valued as 11.25kg per person. The main target audience of Freshener will be women and school children. Women play a vital role in chocolate market as they are the largest purchasers of chocolates either for home consumption or for giving gifts. The most remarkable fact about UK chocolate market is that people over 55years of age consume chocolate worth 700 pounds every year, which accounts to be 21% of the total chocolate consumption. Consumer’s eating habits and lifestyles are constantly changing as general public due to busy life schedule depend mostly on chocolates and short snacks to make up for missed meals. Even though few have concerns and awareness about sugar and fat in chocolate, they regard it to be an affordable daily treat. Market Overview For a new chocolate brand Freshener from Exel Pvt Ltd, it would be a tough time to get a market where the competition is fierce and is dominated by multinational companies like Cadbury, Mars and Nestle who fight each other to keep hold of their profitable portions of this £5.3bn market. For the last five years, Cadbury had been very strong and sharing more than 30% of the chocolate market. Around one third of all the chocolate the UK people eat is made by Cadbury. It concentrated mostly on consumer awareness and understanding which in turn led to the lunching of many successful new product developments. Mars and Nestle are the other leaders in the market who had been sharing the market up to more than 25% and 20% respectively for the last five years. Nestle, the world’s biggest food and drink group, had been focusing more on UK chocolate market and it resulted to 16% hike in their annual earnings. Demand for dark chocolate has been increasing rapidly up to an incredible growth of 45% since 2004 and is still expected to continue to rise mainly because of that the consumers are influenced by its high levels of antioxidants. Even though Black Magic, the most recognized dark chocolate from Nestle, uniquely dominated UK market and helped retailers largely to take the benefits of fast growing consumer demand, there is an opportunity for a new dark chocolate with more innovative product development and targeted marketing activity that it can produce a successful market. Exel Pvt Ltd also plans for dark chocolates and considers it to be imperative in this competitive market. Product Target Market Opportunity for a new chocolate can be developed and brought to the market only by understanding the consumers’ needs and wants and evaluating the levels that they are satisfied with. For a dynamic and complicated market like UK confectionary market, a new product must be developed by assessing different segments and identifying the consumer behaviors and buying motives. According to the UK social class segmentation put forward by the Institute of Practitioners in Advertising (IPA), first three levels of population namely A, B and C1, which itself is about two third of the total population, play vital role in chocolate consumption (Dave Hall and Rob Jones- 2001) C1 and C2 classes also purchase chocolate for own consumption that accounts to be about 25% of the total chocolate consumption. Eating habits of high and middle level professional and managers constantly change as they, with busy life schedule, are becoming ‘time-poor’ and they take chocolates or snacks to make up their meals. Exel Pvt Ltd needs to establish chocolate snacks targeting these classes, as consumers buy chocolate products for physical hunger satisfaction. The chocolate buyers mainly include four categories. 1. Those who buy for immediate eat. 2. Those who buy for home stock. 3. Those who buy for gift purpose. 4. Those who buy during festivals and seasons. Immediate eaters, particularly children, buy chocolate to satisfy hunger, or as a snack, or for freshening the mouth. This group is one of the largest segments that is mainly driven up by impulse purchase. The second group, especially mothers buying for children or for family, continue to increase in the UK market. Many people nowadays buy chocolates for sharing with friends or celebrate and reward for a different occasions that share 20%of the chocolate market. There are great sales during Easter and new-year seasons. ‘Freshener’ needs to be developed based on the tastes and satisfactions of customers of all these different segments. Product Positioning The basic positioning strategy of Freshener is that, when ever there is a product developed according to customers changing attitude and life style, they will rank it in their mind. Freshener is not going to be a big size treat for customers as many other brands, but as a small indulge that they will be satisfied with all their needs and at all occasions. The recent trends in UK market show that chocolate eaters always prefer small treats. According to the market research, sale of small chocolate cakes have grown by 28% between 2003 and 2007. Same time, sales of large chocolate boxes have remained at the same level. This tendency of small treat doesn’t mean necessarily a step down to wish to eat less chocolates and fatty treats for any health reason, but consumers with busy schedule and having less time to take lunch or afternoon tea with family members go for small treats. This is the main reason they prefer smaller chocolate packages that they can have it any time and on the go. Product Strategies Exel’s products, by taste, size, contents, softness and packages, would achieve a success in satisfying the needs of these small treat customers. Mouth Fresh small treat products are most appropriate for the immediate eaters; meanwhile it will be developed in a proper way for home stock, gift and season purposes. For immediate eat segment, size and taste are some factors that decide on the impulse buying. Because of that the immediate eat group consists of children, teenagers, men women, and old aged people a new product should provide varieties of small treat chocolate products in such a way that it would be able to rank in their mind as a better small treat. While consumers make their selection based on an immediate personal need, often as an impulse buying, or quite an unplanned selection, ‘Freshener’ can possibly change the consumer’s buying motive in to ‘small treat’ motive and make a successful change in UK chocolate market. Price Consumer and Customer pricing Approximately more than 80% of all the new products launched into the confectionary trade sector fail to hold a reasonable share in the market in their first years itself may be because of their pricing strategy or poor brand development. As a new product, market oriented pricing based upon the analysis of the current situations of the market would be much beneficial than any other strategy to Freshener products. The proposed prices will be in between ₤ .5 to ₤ 2.5. This is comparatively the best lowest chocolate prices available in the market. The middle men in the channels of distribution are playing major role in our marketing system and hence we will set a reasonable margins of 20% to 30% which varies accordingly. Pricing Strategies Being highly competitive market the new product has to get an access into, Freshener would penetrate the market so as to persuade the consumers to develop the habit of preferring the new product and to encourage the wholesalers and retailers to purchase large quantities of the product and as a result to gain a significant slice of market. In the present UK market, being inflation is up, household bills and fuel prices are up, unemployment is also up; and same time financial crisis is becoming a great threat, a major population would concern the price hike in what ever they buy. All segments of functional buyers of chocolate, except gift segment more or less would concern small treat for less prices. Though it would be a tough task to Freshener to penetrate in the market where prices of cocoa have risen nearly up to 70% recently due to bad weather and political instability in major countries producing it, still it only can bring a success, especially when competitive brands like Cadbury chocolate bar prices have been increased this year. Place Extensive Channel It can be seen in UK market that busy people tend to increase their leisure time and they want to enjoy convenient shopping. Small retailers and supermarkets have a major role to play in the distribution of confectionary and able to reach huge number of consumers. Freshener aims mainly at immediate eat segment who need small treat chocolates available at both small and large scale retail outlets, near to railway stations, high traffic-flow locations, busy towns, children’s park, school and college areas etc. The success of chocolate sales through convenient shopping lies in the way that chocolates are displayed and in the impulsive nature of the product, being capable of meeting a number of needs such as immediate eat and small indulgence. The UK convenient shopping is more than 20 billion worth and it increases, out of which 60% is shared by immediate eat segment. Freshener products can take full advantages from convenient shops of impulse buying driven by small treat and immediate need. Other intermediaries Supermarkets in UK share the confectionary market more than 120 billion. Home stock, gift and seasonal segments of chocolate market feel their shopping better from supermarkets and groceries, hence, Freshener would give importance to supermarkets, and concentrate to make products available at the convenient and point of sale areas. Same time, cash and carry wholesalers are vital part of the supply chain for small retailers and for potential consumers, so the availability of Freshener stocks in these wholesale business must be reckoned. Promotion Advertising Recent research made by Fair trade Foundation argues that UK public, especially confectionary consumers are ever more aware of fair-trade chocolate, and public awareness rose from 24% in 2007 to 32% in 2008. Now the consumers think of ethical products. Consumers all over the world, more or less, think about whether the farmers and laborers are paid fair price for cocoa products and concern about 15000 or more child slaves working on cacao in Africa. There is a big majority who concern about health and wellness, and how it is being affected by different products available in the market. Freshener primarily focuses on passing information through TV and web about its ethical value and antioxidants that can be provided by Freshener so as to increase the demand and to build a brand loyalty. It also plans to put advertising billboards at busy areas like traffic lines. Digital billboards will be considered to be an effective media because it can provide much information with effects of both sound and videos and hence it can show the ethical values regarding Freshener’s fair trade movements. Advertising Strategy Being new product to a cut throat competitive market, Freshener needs to persuade the consumers by providing samples from supermarkets and other groceries for the first few weeks. During that time, it can be available for ‘point of sale advertisement’ so as to attract more large scale retailers and eventually hold a share of the market after the promotion. Mouth Fresh would be advertised as a source of ecstatic pleasure for wedding parties as there is an increased demand for small and readymade chocolates for wedding parties in UK, especially if it can add bride’s and groom’s name along with. Promoting sales Though sales promotion activities like issuing free samples are not main part of our marketing strategies, it some time will considered because a highly competitive market should need it so as to get more customers. When it so required, free samples will be given when ever we put forward new chocolate brands. We also plan to consider free small gifts along with our chocolate products in order to be more popular in the market. Budgets Financial Analysis Financial success is most important to us and hence the management believes that this financial success can be achieved through high quality chocolate products and customer oriented activities. The market and financial analyses show that Freshener will increase sales by more than £ 200m over three years while maintaining a gross profit margin of 75%. . The financial management aims at gross revenues of £ 80m by fourth month and to attain total sales of £ 140 m in the first year. The management aims at increasing sales by 67% in the first year and by 40% in the second year. The expectation and estimation of the management is that costs of chocolate products should not exceed 4% of the total operation. Financial Statement Exel Pvt Ltd is well aware that ‘money makes the world go round and hence we give much importance to the financial status of the business. We will be able to turning back a profit by the end of the month and be profitable in the next year. We plan to commence with a total of £ 800,000 in capital and £ 15, 00,000 as a loan to start up the business. 2009 Financial Statement Start up expenses Legal Expenses £ 15,000 Stationary expenses £ 15,000 Other Expenses £ 20,000 TOTAL START UP EXPENSES £ 50,000 Start up assets required Cash Balance on the date of starting £ 13,00,000 Other current assets £ 10,00,000 TOTAL CURRENT ASSETS £ 23,00,000 Long Term assets TOTAL ASSETS £23,00,000 Total Requirements £ 23,50,000 Funding Pip Academy £ 600,000 Investor 1 £ 100,000 Investor 2 £ 100,000 TOTAL INVESTMENT £ 800,000 Current Liabilities accounts payable £ 20,000 Long term liabilities Loan £ 15,00,000 TOTAL LIABILITIES £ 15,20,000 Loss at starting up (£ 20000) TOTAL CAPITAL £ 780,000 TOTAL CAPITAL AND LIABILITIES £ 23,00,000 References Dave Hall, Rob Jones and Carlo RAFFO (2001) Business Studies, Second Edition, Cause Way Press Ltd, Ormskirk, Lancs Bruce R Jewell (2000), An Integrated Approach to Business Studies, 4th edition, Pearson Educational Limited, Edinburg gate, England. Philip Kotler (1994), Marketing Management, Analysis, Planning and Control, 8th Edition, Prentice Hall of India. Read More