Foundations of Marketing - 4000 words

Interviewee(s)[1]	1	2	3	4	5	6
/Question(s)	Female, 21 years old	Female, 46 yrs old	Male, 66 yrs old	Female, 66yrs old	Female, 46 yrs old	Male,48 yrs old
1 – Do you drink HB[2]?	Chocolate	Coffee (work and home)	Tea	Tea & chocolate (mornings and evenings)	Tea	Tea & Chocolate
2 – Why do you drink HB?	Self indulgence	Stimulant	Taste, habitual	Tea – refreshing, Chocolate – relaxing	Habit – changing type to herbal	Habitual, Milky flavour – before bed, indulgence.
3 – Where do you stop for your HB?	Supermarket/weekly	Secondary buyer- Jill, coffee shop	Secondary buyer – Gillian at the Co-op	Corner shop	Local Health Food Store	Supermarket, secondary buyer – Wife, Ros
4 – What influences your choice of HB?	Thick, rich flavour, smooth texture, unsweetened, diet versions	Coffee aroma	Strong taste, brand loyal (red-label) and Gillian	Brand – twinning’s and Cadbury; add-milk type of chocolate	Taste, non-caffeine variety	Price – anything on offer, try anything new
5 – Would you consider buying a HB called “silk”?	yes	no	no	No- tea, yes – chocolate	Yes – chocolate, No – tea	Yes

INTERVIEWEE AUDIT

Table 1: Spread-sheet showing the interviewees responses to the Silk marketing research

Table 2: Drinkers and non-drinkers of hot chocolate beverages

	H-C drinkers	Non – H-C drinkers
1 – Why do you drink such beverages?	Self indulgence, relaxant, Milky flavour	Stimulant, taste, habitual
2 – Where do you stop for your beverages?	Supermarket, corner shop, secondary buyer	secondary buyer, coffee shop, health shop, co-op
3 – What influences your choice of beverages?	Flavour, texture, diet version, price, taste	Aroma, Strong taste, brand,
4 – Would you consider buying a hot beverage called “silk”?	yes	no

Table 3: Demographics of H-C drinkers: Gender

	Female	Male
1 – Why do you drink such beverages?	Self indulgence, relaxant,	Milky flavour, taste
2 – Where do you stop for your beverages?	Supermarket, corner shop, secondary buyer	supermarket, secondary buyer,
3 – What influences your choice of beverages?	Flavour, texture, diet version, price, taste	Taste, price brand,
4 – Would you consider buying a hot beverage called “silk”?	yes	yes

Table 4: Demographics of HC drinkers – Age distribution

	Young (15-24)	Middle-aged (45-54)	Old (65+)
2 – Why do you drink such beverages?	Self indulgence	Milky flavour	Relaxing
3 – Where do you stop for your beverages?	Supermarket	Supermarket, secondary buyer	Corner shop
4 – What influences your choice of beverages?	Flavour, texture, diet version	Price, promotions	Brand
5 – Would you consider buying a hot beverage called “silk”?	yes	yes	yes

Table 5: Behavioural segmentation

Hot Chocolate drinkers/non-drinkers	Interviewee F1[3]	Interviewee F4[4]	Interviewee M6[5]
Benefits sought	Self indulgence, smooth texture, rich flavour, diet version	Relaxing, convenience, quality, brand, milky flavour	Milky flavour, price promotions
Purchase occasion	Self buy, weekly at the supermarket	Self buy, corner shop	Secondary buy – Ros, wife, supermarket
Purchase behaviour	No information given	Solus buyer	Innovator – buy anything new
Usage	Light drinker	Heavy drinker	Light drinker

Table 6: MARKETING MIX

	Gender		Age			Behaviour
	Female	Male	Young (15-24)	Middle-aged (45-54)	Old (65+)	Benefits sought	Purchase Occasion/Behaviour	Usage
Product	This segment F1 and F4 sought features like smooth texture, rich flavour, milky and diet variety of HC that did not differ in taste and quality with the non-dietary HC. And sought HC to help relax. Silk is a good brand name and is acceptable by all female segments.	The male segment are seek for a drink that makes them relax and also sought a milky flavour variety	A smooth texture, rich in flavour, diet versions of HC that did not differ in taste with the other versions of HC	A milky flavour	Is driven by brands and liked an add-milk version of HC	rich in flavour, relaxing, smooth texture, diet versions, indulgence	Solus buyers and innovators	The segment F1 and M6 are light users and F4 are heavy users
Price	No information was given	This segment would be more favoured to price discounts	No information was given	Price discounts will favour this segment	No information was given	Price discounts will favour this segment	No information was given	No information was given
Place	Half of this segment shopped at supermarkets and the other corner shops. Extending distribution channels to other outlets like corner shops to gain a wider coverage of consumers and increase market share.	The house hold purchases are made supermarkets	Made purchase along with weekly groceries at supermarkets	Purchases are made at supermarkets along with other drinks	This segment makes purchases at corner shops for convenience	The main benefit sought is for convenience	self and secondary buys
Promotion	No information was given	Sales promotion	No information was given	Sales promotion	No information was given	Promotions	No information was given	No information provided

Q2 – a) POTENTIAL CUSTOMER AUDIT:

Table 7

i) Who is important?	In purchasing Silk, the buying decision may be individualistic or could be based on collective decisions made by for example, the family and it can be described in 5 ways as the i) Initiator ii) Influencer iii) Decider iv) Buyer v) User. The F1& F4 group in Q1a seems to possess all the attributes and therefore their buying decisions are individualistic. In the case of the M6 group, the wife is the main influencer and buyer and the middle aged man could be the initiator and decider and the couple are the users of the product.
ii) How do they buy?	This is known as the decision making process starting from Identifying the problem to information search evaluation then purchase and post-purchase evaluation which has been illustrated in the appendix. The consumers were more influenced by the flavour and self indulgence. Segment M6 is more interested in what was on offer but all the segments are interested in the flavour and texture since hot chocolate is a low involvement commodity and purchase can easily be influenced by emotions. Quality is essential.
iii) What is their choice criteria?	The consumers choice criteria can be classified into the 4 types: – Technical, economic, social and personal. Technical – Taste – e.g. F1 who loved HC for the smooth texture and rich flavour. • Reliability • Performance Social – Price – e.g. M6 who would buy when there are promotion and affordability • Value for money Economic – Status – e.g F4 who was brand-oriented • Social belonging Technical – Self image • Ethics • Emotions
iv) When do they buy?	As it was stated earlier, Silk is a tangible staple product and is consumed regularly. The purchases are mostly made on a weekly basis or when the consumable has been consumed.
v) Where do they buy?	The consumers make their purchases at supermarkets, corner shops etc. as it can be observed in the table above We have a good relationships with major retailers and locating Silk will be easy and convenient for the consumer.

a) INTERNAL AUDIT

Table 8: The 4 M’s Model

Men	RLL is known to possess a strong resources area notably in people. The human resources include the Managing Director, Sales Director, Group Finance Director, Production Director and Marketing Director.
Money	The Finance Director stated that RLL is financially strong. The company’s major revenue is generated from its tea variety and reflects in the sales of tea in the industry as a market leader with an average sales figure of 170M pounds. And has been confirmed by the director to be financially capable of producing the new product, Silk.
Machine	The production director affirmed the unit’s ability to incorporate an additional line for Silk and the cost amounts to approximately 1M pounds which will cover the cost of production, packaging and design.
Marketing – 4p’s	Product – RLL’s current main focus is on the Tea sector with product variety such as instant tea and flavoured tea that has a high quality brand. Price – In the hot drinks industry, we tend to be price leaders. Our products are of high quality and hence prices must fit the brand image. Promotion – RLL spends heavily on marketing, trade promotion and selling and push and pull a narrow range of high quality products. Place – The company has good relationship with retailers and are supermarkets are the sole distributors. There are only about a dozen of them but have many outlets to cover different regions in getting across to the consumers.

b) COMPETITOR AUDIT: Porter’s 5 Forces model

Figure 1: Porter’s 5 Forces Model (Jobber, 2007)

i) Rivalry within industry: There is a high level of rivalry within the industry from Nestle, KJS and other smaller companies like Wander, S.K.B. and Premier Brands that have a larger part of the food beverage market share than the bigger companies.
ii) Entry Barriers: Entry barriers clearly exist for hot beverage companies, as big competitors can switch into the food beverage market because they have the resources to do so. But for the new entrants into the industry, competition is very high and a lot of resources will be required to set-up costs, in advertising to create a name in the industry and a likely hood of retailiation from big companies

iii) Supplier power: No information was given on the suppliers of RLL in the case study.

iv) Buyer power: Our major buyers are Asda, Sainsbury, Morrison’s etc who are not up to a dozen even though they may seem to have a high buyer power, the power of our brand makes it a-must for these retailers to have our products on their shelves and also due to the limited number of food beverages producers, we would have more advantage over them.
v) Substitutes: Even though the there is a weakening demand for tea and coffee, there are major contenders in respect to their high potential sales. And consumers can be lured to purchase them if Silk does not meet their demand requirements. And its producers are potential entrants.

c) MACRO AUDIT: Political Ecological Socio-economic Technology (PEST)

Table 9: Political factors

Tax policy

In the pre-budget review, it was proposed that taxes will be cut and will allow consumers have more income to spend. The review showed that multinationals will not have to pay taxes on dividends from foreign investment; this is a good incentive for RLL when the need to expand or invest arises.

Environmental regulations

One of the major environmental issues is the carbon emission and ways to reduce it. And consumers agreed that buying decisions are based on the green factor. In the UK, the prices for organic foods have surged. It also has a positive impact on companies as the less energy consumed the less money to be paid. New pest management legislation in Europe could result in crop production shifting to other countries and prices for commodities shooting up. This may affect the cost of production of beverages in RLL.

Table 10: Economic Forces

Economic growth	The economy’s growth has slowed down during this year and GDP is likely to decrease from 2.5% to 1% and decrease further by next year. This may affect our production and consumers from buying. Urgent measures are being taken by the government to reduce this negative impact.
Interest rate	Due to the “credit binge” the Bank of England has cut down interest rate to 2% to encourage lending which will then lead to spending. Although Banks have been quite reluctant to pass down this cut, pressures have been put on them to do so and HSBC has made available 1b pounds credit available. This in turn will encourage consumers to buy and will enhance RLL’s new product launch.
Exchange rate
Unemployment and recession	HRM guide reported that unemployment rate rose to 5.8% (1.8M) as at the 3^rd quarter of this year as a result of the recession. And as a means of getting out of the recession, the government is creating incentives for the citizens to spend out of recession. And will enable consumers to still buy our products.

Table 11: Socio-economic forces:

Health consciousness	There is an increase in the health awareness of the society as a lot of people seem to currently fight obesity and to stay healthy and fit. It is also a fashion fad to be slim e.g. F1 in the table would indulge in drinking more Hot chocolate if there were diet versions of HC. RLL can leverage on this opportunity and create a healthier HC that will appeal to the market.
Population growth rate and age distribution	The current population growth rate is 0.275% (2007 Est.) with a current population of 60M. The age distribution is concentrated towards the age band of 25- 54. And our target market 15-24 – 12%, 45- 54 – 13% and 65+ – 4.4% totalling about 29.4% of UK population. Focusing on these target markets will help grow out market share.

Table 12: Technological forces

Research & development

RLL should needs to keep researching on new technologies and products and any new innovation discovered can lead to having a competitive edge over rivals and vice versa

3 Using a Marketing Planning Structure recommend a suitable strategy for RLL

Business Mission

“RLL is a multinational food company aimed at continually providing improved premium products to its esteemed customers globally.”

MARKETING AUDIT

RLL is currently a major player in the tea sector in Hot drinks Industry and has achieved it through high marketing orientation, high quality brand etc. Marketiing Audit is segmented into two parts an Internal and External Marketing audit leading proWhere are we now? How did we get here? Where are we heading?

INTERNAL MARKETING AUDIT

Refer to section 2b

EXTERNAL MARKETING AUDIT

This comprises of the macroenvironment and microenvironment.

MACROENVIRONMENT: This entails broad environmental issues that may affect the performance of business. It includes the following Political, Economic, Socio-economic, Technological factors. Refer to section 2d for the full details.

MICROENVIRONMENT

Table 13

MARKET

Size

As at 2007, RLL occupies 28% of the hot drinks market share, dominantly so in the tea industry with a market size of 26%. The food beverage industry is currently 8-10% of the hot drinks industry with a steady growth.

Growth rate

Growth rate: there has a steady increase in the food beverage industry as observed in the case study where sales has grown at an average of 5% yearly from 96M in 2001 to 125M in comparison to the tea and coffee industry which can be observed to experience rise and falls in the sales figures.

Market trends:

Report documenting recent social trends

CUSTOMERS

Refer to section 1b and 2a

COMPETITORS

Figure 3: Showing competitor’s profile

DISTRIBUTORS

Table 14: Showing the strengths and weaknesses through their distributors

Strengths

We have very good relationships with our distributors and the power of the RLL brand makes retailers to put our products on the self.

Weakness

We are heavily reliant on the distributors

SUPPLIERS

No information was given.

SITUATIONAL ANALYSIS – SWOT Analysis

Table 15: SWOT Analysis for RLL

Strengths

Well established brand name
High quality brand of products
Price leaders
Strong relationship with retailers
Financially strong
Highly marketing oriented

Weaknesses

Heavily reliant on the retailers
Weakest link in the competitor analysis is in the area of New Product Development

Opportunities

Untapped emerging market
Increasing sales growth in the food beverage industry
Weakening demand for substitutes

4. Undeveloped products and brands.

Low level of competition in this sector
Lower interest rates

Threats

Strong competitors e.g. Nestle, KJS
The current economic recession
The health consciousness

STRENGTHS

1. Well established brand name

2. High quality brand of products

3. Price leaders

4. Strong relationship with retailers

5. Financially strong

6. Highly marketing oriented

Converted Weaknesses

1. Distributor chain expansion to gain wider coverage

2. The urgent need to improve the operations unit by better supervision and control

CONVERTING WEAKNESSES TO STRENGTHS

1. Heavily reliant on the retailers – expanding the distributor chain to other retailers other than the big stores will not only reduce reliance but also expand the market share and customer reach e.g. the interviewee F4 who goes to the corner shop for convenience.

The operations unit is the least efficient amongst its peers.

MATCHING STRENGTHS TO OPPORTUNITIES

1. Untapped emerging market/ high quality brand of products

2. Increasing sales growth in the food beverage industry/strong relationship with retailers

3. Weakening demand for substitutes/ highly marketing oriented

4. Undeveloped products and brands/ well established brand name

5. Low level of competition & advertising spend in this sector/Financially capable to establish itself in the industry

6. Lower interest rates / price leaders

Converted Threats

7. Strong competitors/ highly marketing oriented

8. Current economic recession/strong relationship with retailers

9. Health consciousness/ high quality brand of products

CONVERTING THREATS TO OPPORTUNITIES

1. Strong competitors e.g. Nestle, KJS, Premier etc. Possess a competitive advantage over them to gain market share and for the smaller competitors like SKB and Wander attack heavily using our financial resources and advertising.

2. Current economic recession – Current economic recession – the government strategy of getting out of the recession is by spending and this is an advantage for RLL as consumers will tend to buy more and hence buy our products.

3. Health consciousness – Producing healthier versions of Hot beverages (Diet version) will lure more consumers to Silk especially the young females

Table 16: showing the conversion of weaknesses to strengths and matching the objectives

OBJECTIVES

Specific – we are targeting females within the age range of 15—24 and 65+.

Measurable – the people who drink hot chocolate beverages

Achievable – grow our sales from 0% to 8% of the brand share

Realistic – 60% of the brand consumers should be within the age range of 15-24 and 40% within the age 65 years and above.

Time bound – 3-5 years

Objectives: “To launch our hot chocolate drink, Silk amongst the young and old females with a brand share of 60% within the ages 15-24 and 40% within 65+ and above and growing our brand share from 0% – 8% in 3 – 5 years.”

–

Strategic thrust – Strategic objectives

Table 17: Ansoff Model

Existing Markets

New Markets

Existing Products

Market Penetration

O3 – Utilising our high marketing orientation to refocus consumers to our brand of tea products hence strengthening demand Weakened demand for substitutes

O8 – The current economic recession resulting in a spend-spend way out of recession, our strong ties with retailers will be helpful in ensuring consumers have access to our tea range of products.

Market development

O7 – The hot drinks industry in UK is highly competitive, moving into a new market outside the UK that is less competitive and coupled with our high marketing capabilities will enable us gain advantage over UK competitors and expand our market share.

New Products

Product Development–

O1 – RLL’s products are well established national brands with a new product, Silk; it will gain accelerated brand recognition in the food beverage industry where the products and brands are still undeveloped.

O2 – Increasing sales growth in the food industry is a means of opportunity to penetrate into the market and gain competitor advantage before other strong competitors move into the market. RLL’s strong relationship will prove resourceful as it will make available our products to consumers.

O5 – In contrast to the tea and coffee sector that are highly competitive. Low level of competition and advertising spend in this sector coupled with the company’s financial capability will enable RLL secure a position in the market through advertising and

O3 – As a result of the weakening demand for substitutes, RLL can take advantage of this opportunity using its high level of marketing orientation to draw consumers towards the new product, Silk.

O9 – Produce product variants: Have a diet version of Hot chocolate with a smooth and rich flavour i.e. retaining the same high quality.

Diversification

O1 – Creating a malted drink and exploring other markets outside the UK with RLL’s known positioning as a high quality brand

– Trying out new products in a new market

– Introducing silk other parts of Europe, target the children

10. Untapped emerging market/ high quality brand of products

11. Increasing sales growth in the food beverage industry/strong relationship with retailers

12. Weakening demand for substitutes/ highly marketing oriented

13. Undeveloped products and brands/ well established brand name

Health consciousness/ high quality brand of products

Tactics – 4Ps

Table 18: The Marketing Mix: 4 P’s

Product	The product “Silk” can be categorised into 3according to the target market: the core benefit – a hot drink to relax or to indulge in. The expected product –
	Product variety	The healthier version of Hot Chocolate beverage has been selected to fit the target market and subsequently other versions like the milky or malted can be introduced.
	Quality	The quality is an expected part of the product should be a key factor of the product to promote a re-inforcement. Target market (the females) stressed on it.
	Design	The design and packaging is essential to lure our target market especially the young females.
	Features	The healthy aspect of Silk is an augmented feature that can stimulate consumers to buy and give leverage over competitors.
	Brand name	The brand name “silk” appealed to all the hot chocolate drinkers and will be a good a good brand name for our chocolate beverage

Price	RLL’s high quality of products and lack of competition shown in the food industry as shown in the SWOT analysis. High price will most likely be an option but price discounts can be used initially to gain market share.
Place	Channels – A selection distribution strategy using our target market the distribution channels would be through the retailers as they have a large number of outlets. Coverage – The , assortment, locations, inventory and transport.
Promotion	Sales promotion, advertising, sales forces, public relations, direct marketing

Product: It can be categorised into 3 major Hot Chocolate Beverage- is a tangible and convenience staple good as it is consumed quickly and purchased frequently. The appropriate strategy is to make Silk available in several locations, low mark-ups and advertise heavily to induce trial and build preference. Brand – attributes, benefits, values, culture, personality, user profile

Price:

Promotion:

Place: Advertising is key

Cost control

Quality and size of the sales work force

Distribution network/decisions is essential.

Action – GANTT

Control – GANTT

Marketing Objectives – strategic thrusts and strategic objectives

Core Strategy – target market and competitor analysis. Note: 4Cs

Competitive Advantage:

Marketing Mix

Organization and Implementation

REFERENCES:

http://features.us.reuters.com/entrepreneur/news/5D1970E8-E3BE-11DC-87A3-7D218A14.html
http://www.indiahowto.com/business-objectives.html
http://www.youtube.com/watch?v=HQwE0Xv1lAA
http://www.foodnavigator.com/On-your-radar/Food-prices
http://www.quickmba.com/strategy/pest/
http://esa.un.org/unpp/index.asp?panel=2
http://answers.google.com/answers/threadview/id/187650.html
http://www.knowthis.com/tutorials/principles-of-marketing/product-decisions.htm
www.netmba.com/marketing/mix/
http://www.hrmguide.co.uk/jobmarket/unemployment.htm
Kotler, P., Marketing Management; 9^th International Edition; Prentice Hall International, Inc., Upper Saddle River, New Jersey 07458
Jobber, D. 2007. Principles of Marketing. 5^th Ed.

APPENDIX:

Figure i: Marketing Mix

How do the buy?

Figure ii: The decision making process

Table i: Competitor Analysis

Factor	Nestle	KJS	RLL	Prem Brands	SKB	Wander	Supermarkets	Paulig
Finance	4	3	4	2	3	2	3	2
Operations	5	5	4	3	4	1	5	3
Brands	4	3	4	3	2	2	4	3
Selling	4	4	4	3	3	3	0	4
Marketing	5	4	5	3	2	2	3	3
Retail links	4	4	4	3	3	3	0	4
NPD	3	3	3	2	1	2	0	3
Production	4	3	4	2	2	2	0	3
Costs	4	4	4	3	3	2	0	3

Table ii: Internal audit: showing the finance position of companies in the Hot Beverage Industry

[1] Keywords: F1: 21 year old female; F2: 46 year old female, M3: 66 year old male; F4: 66 year old female; F5: 46 year old female; M6: 48 year old male, HC[1]

[2] HB – hot beverages

[3] F1 – young female

[4] F4 – old female

[5] M6 – middle aged male