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Evaluation of Nutella Marketing Strategy

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Introduction This report was request by Peter McPherson. The aim of this report is to evaluate marketing strategies used by Ferrero for the product Nutella in 2012 and few possible ways to improve it. Ferrero is a successful international company with over 21 913 employees and 7 218 million Euro turnover in year 2011.

One of the best-selling products of this company is Nutella and my report will concentrate on this product and marketing techniques used by Ferrero to promote Nutella, as well as how they manage to achieve such a big success.

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In the end of report reader can find some solutions for problems faced by this company in terms of successful marketing strategies. This report was requested by my lecturer Peter McPherson and is going to be submitted by 7th of December 2012. Procedure During preparation of this report different sources of information’s had been used.

All information’s included are secondary, as none of the surveys were conduct. List of sources: * Nutella official website (http://www. wakeuptonutella. co. uk/), * Leckie and Leckie, Business Management ( course book), * Tutor2u website (http://www. tutor2u. net/default. asp), * Business Dictionary website (http://www. businessdictionary. com/), * Notes prepared during classes. Findings History In 1940 in Italy Piera and Pietro Ferrero, decide to transform their small pastry shop in Alba in to a factory.

With the desire to make and create new products with state-of-the-art ideas, they son Michelle Ferrero continued development of company and revolutionised food habits of millions of consumers. Thanks to efficient partnership with his wife Maria Franca, he was one of the first manufacturers which have opened production sides and offices abroad. Now company history reached to the third generation, sons of Michelle and Maria Franca worked together at the top of the Group as Managing Directors for more than 10 years.

Unfortunately, one of the sons, Pietro Ferrero, tragically died in Africa during humanitarian mission, inspired and driven by him, that aimed to prelaunch the Ferrero Social Enterprises. And now, Giovanni Ferrero continue to run company by himself. Nutella spread was invented at 1940 by Mr. Pietro Ferrero. At this time there was very less chocolate because of the II World War and small supply of cocoa, thus idea to use hazelnuts, which were highly available at Pedimont where company was operating. At first Nutella was called “pasta gianduja” and sold in loaves.

After time producer realized that, he need to invent something which will be easier to spread on the bread and this is how “supercrema gianduja” was invented. From the first day “gianduja” was introduced, it was a great success, as chocolate was almost six times more expensive then hazelnut mixture. Some of the Italian groceries started service called “The Smearing”, that mean that kids could go to the store which a piece of bread for a “smear” of “supercrema gianduja”. At 20th April 1964 “gianduja” was renamed as “Nutella” and the first jar of new spread left a factory.

Nutella was first imported from Italy to U. S. 30 years ago. And from that time, it got popular not only in America but all over the world. Marketing Concept History Marketing was changing over the years; it has been always connected with the economic and social situation. In the mid-18th century when the Industrial Revolution started, mass production was possible for the first time. The main focus of inventors and producers at that time was the way to improve the output of the workers in factories. That was because the demand for the products was greater than a supply.

Companies could concentrate only on production as competition at that time was limited, and customers didn’t have a big choice in between the products. Very popular at this time was buying in bulks and using mechanised process of production what helped to keep labour cost down, this process is called economies of scale. That period is called production-orientated; company was focusing on producing and the lowest possible costs. Economic situation have changed around 1930s. Development in mass production meant that bigger range of product could be produced at low cost.

This leaded to increasing number of competitors. At that time production level was higher than demand. Companies needed to change they strategies and convert from a large-scale production into large-scale consumption, and become sales orientated, what meant that the main concern of company is to convince customer to buy a product. It could be done in many ways, for example by keeping price low. The company could afford to keep price low only if production and sales remained high. To do that company needed to find the way to attract the customers, for example by employing salespeople.

Very popular at that time become Hard Selling, it included discounting, ’money off’ offers and aggressive sales techniques. At this period we can see that marketing functions like, advertising, promotion and selling were developing for the first time. In 1960 for the first time companies started to think about customers’ needs not only production and sales. Better living standards, higher income and customer wanted more luxury goods, leaded to producers realizing that they can achieve higher sales if they will produce products for which there is a demand.

They have stopped to waste time on trying to persuade consumers to buy unwanted products and recognised that price is not as much important as they thought. This stage is called Marketing orientated. The marketing concept is all about matching a company’s capabilities with customer wants. This matching process takes place in what is called the marketing environment. Definition Marketing have many definitions, for example: Marketing is a management process which identifies, anticipates and satisfies consumer wants at a maximum profit. Marketing is delivering of standard of living of society.

Nevertheless, they all have something in common. Namely, they all say that the main purpose of marketing is to find what customers wants are and fulfil them. Analysis of Business environment Macro environment The macro environment deals with the worldwide economic situation. It includes external factors which have an effect on the company but cannot be controlled by it. Factors are specific for each industry, but affect all of them. External factors are resented by shortcut PESTEC. Micro Environment The micro environment include stakeholders with which company has regular contact.

Micro environment factors are all those factors which are close to business and have direct impact on its well-being. Few other factors which can have big impact on the business are: * Media – media can earthier help or ‘break’ an organisation. If media speak positively about company, it can help to promote it, sell more products and gain new customers. If media present company in a bad light, company image can be ruin and the customers may stop buying it’s products. * Competitors – competitors can have very big impact on business.

It’ is important for the company to offer to the customer something different or better than the product offered by competitors. Ferrero decide to offer different product then all competitors did at the time it was first introduced, at this time Nutella was first hazelnut spread on the market. Marketing Mix Description Nutella is a bread spread, based on hazelnuts, sold in jars, with size variety. * Marketing mix – represent seven P’s rule, which are the controllable variables which marketing department can manipulate to achieve the target of selling the product/services produced by the organisation.

Seven P’s include: People, Process, Physical Evidence, Price, Place, Promotion and Product. Price – represent actual amount paid for the product or service by the customer. Place – represent where customer purchases the product/service. Product – represent the goods/service that customer purchases. Promotion – represent the way in which a customer is made aware of product/service and convince to buy it. The Marketing Mix for Nutella Price – 750g – ? 3. 60 400g – ? 1. 99 100g – ? 1. 19 Place – grocery stores Product – Nutella, chocolate beard spread.

Promotion – Ferrero promotes nutella in TV, newspaper, billboard. Advertisements are directed to kids and parents. Tangible / Intangible Tangible goods and services are those which we can physically touch, for instance: toys or cosmetics. Shopping which we are doing online also can be tangible good as long as it’s going to be ship to us. Conversely to that, Intangible goods and services are those which we can’t touch, like music which we buy online or computer programmes. Nutella is considered as being tangible good, as customer can touch it. Product Mix

Product mix (called also product portfolio or product assortment) refers to range of the product that company produce. Sometimes product lines are very similar like Kinder surprise and Kinder bueno. Nevertheless, some of the product lines are very different like diapers or razors. Ferrero, produce many product but all of them are very similar to each other’s, like Raffaello, Ferrero Rocher or mentioned above kinder bueno and kinder surprise. Product range Product range represent variations of the same product produced by the company. For example car company can sell car and vans.

Good example for Nutella, can be that it’s sold in different sizes. CAE Each product needs to satisfy needs of customer if company wants it to be sold. Core product is any item which satisfies needs of customer. For example, Nutella is product directed to kids so to satisfy the need of targeted customer it has to be quite cheap and have taste which kids will like. Nevertheless, customers needs are more complicated, company need to satisfy whole range of them. For example, Nutella have to be not only tasty and cheap, but also healthy, it also have to alert people about its ingredients so some allergic people won’t get ill.

This is what we call product concept. Augmented product is a product with additional futures. That mean that for example, as Ferrero have many competitors, it have to add some new futures or packaging to product in order to make Nutella more attractive to consumers. Product life cycle (PLC) The product life cycle show the different stages a new product passes through over time and the sales that can be expected at each stage. 1. Development – that is the stage during which technological and scientific research is concluded, in order to produce new product which will meet demand of customers.

Nutella was passing this stage in year 1940, inventor Mr. Pietro Ferrero conducted Market research, during which he discovered that chocolate, was in shortage at this time and he can start selling hazelnut spread, as hazelnut was relatively cheaper. 2. Introduction – time when product is lunched on the market. The costs of advertising, stock holding and promoting the product can be high at this stage. If the product is innovative, there is no many competitors at the market. In 1940 when Nutella was introduced to the market, it was the first hazelnut spread and it didn’t have any competitors.

Nevertheless, price wasn’t to high as the target market was average customer. 3. Growth – during this stage sales are increasing significantly as customer knowledge about the product is getting bigger. Nutella passed this stage 30 years ago, while company start selling it’s product internationally. 4. Maturity – product have its common place in the market. Growth begins to slow down, price falls and the there is more competitors. Nutella is at this stage right now, there are competitors but Nutella have strong position on the Market. 5. Saturation – at this stage consumer tastes may begin to

change, more and more product are going out of sell. Competition becomes really fierce. 6. Decline – changes in customers tastes and technologies, as well as other more advanced product introduced to market led to drop of sales and eventually withdrawn from the market. 7. Further growth in sales – life of the product can be extended by initiation of some extension strategies. There is many different strategies which can be used by company. Promotion Promotion Mix – combination of specific promotional methods used for family of product or just one product.

Elements of promotion mix are: advertising, direct marketing, personal selling or merchandising. Advertising Advertising is a form of communication used in marketing to persuade customer to buy the product. As Nutella is branded product it is much easier to promote this product. Branded names help to create identity for a product, customers relate to brands and from images of them. In case of heavy branding it is really important to remember about defensive role of advertising, as very often all effort can be easily cancelled by competitors, that is why manufacturers try to preserve status quo.

Successful advertising can help in creating positive image of the company, which may be useful tool in public relations. It is very important for Ferrero that image of the company is going to be good, as it need customers trust because Nutella is product direct to families and kids. Public Relation Is defined as the deliberate, planned and sustained effort to establish and maintain mutual understanding between an organisation and its public. Public relation is concerned with the behaviour of the organization, its products, services and individuals which gave raise to publicity.

Conversely to publicity, which is a result of information being made known, the results of public relations are controllable. Company can communicate with various public in order of achieving specific objectives. Public relations activities are as follows: * The community: organisation need to act as if it were a member (like a private citizen). Involvement in community activities and the development of a community relations programme can help to achieve the goals. Nutella organise different competitions (like drawing or writing) for kids, where they can win different prizes.

* Employees: It’s internal aspect of public relations and it may bring many benefits in involving workforce in organizational goal and establishing mutual understanding. Ferrero tries to support its employees during they career by giving them special triaging and opportunities to develop. * Government: Both local and national politicians are important sources for and organisation, for example, proposed legislative changes affecting the business. Ferrero need to make sure that all health regulations are being followed by them, and all changes in law are going to be seek.

* The financial community: Commercial and merchant banks, investors and share analysts and city journalists provide a ‘public’ with whom an organisation should communicate if it is to be seen as financially creditable Ferrero need to keep in good relations with banks, as it may need some financial help at time of big investments. * Distributors: all types of middle men in a company’s channel of distribution – wholesalers, retailers, brokers, agents and dealership – need information about products and services it hey are to have the knowledge and confidence necessary to become effective re-sellers.

Ferrero need to make sure that communication between company and retailers is good, and they have good knowledge about product. Promotion Promotion is one of four P’s marketing mix. Represent actions taken by business to promote and advertise product. Term promotion is made from few things: * Advertising – non-personal communication transmitted through mass media, * Publicity – free promotion made by new stories in media, * Sales promotion – price/money related communication, like coupons or discounts. Promotion has three main objectives, namely:

* To present information’s to customer as well as others, * To increase demand, * To differentiate a product. Product can be promoted in many places like, internet, media and newspaper. What is more, there is many ways of promoting a product, for example free items or discounts. Direct Marketing Direct marketing is all about making contact with existing customers to promote products and services. It allows sending personalized message, can be cost effective and extremely powerful in generating sales, especially for small businesses. There is many methods used by businesses.

Leafleting Leafleting Mailshots Mailshots Direct Mail Direct Mail Email Email Mobile marketing Mobile marketing Telephone Marketing Telephone Marketing Direct Marketing Direct Marketing Ferrero is a big international company and don’t use direct marketing, as a part of promotion, it prefer to use mass sources, like media. Personal Selling Personal selling is based on door-to-door or tele-sales strategies. For instance, some of the pharmaceutical companies employ sales representatives to visit doctors’ surgeries and try to convince them to prescribe certain medicines.

Types of Market Industrial market – There is many business which sell the product between each other’s. Before item is going to be sold to customer it has to go through a long way. Trading between companies is called industrial market. Retail Market (commercial market) – represent relation between retailer and consumer. That’s mean sells made between both sides. Price What determines price Price factors have impact on decision making process in which price of the product is set up. There is many factors which determinate how high price is going to be.

Some of them are: * Cost of production, * Profit Company wants to make, * Market demand for a product, * Industry standards, * Service provided by the company, * Experience company have, * Customer which product is directed to, * Competition in this segment of market, * Location of the company, * Image of the company, * Branded product. Price strategies Competitive pricing – On the market there is high competition which can eliminate some companies from it. To avoid that some of competitors decide to set similar prices for a product (for example petrol companies).

Instead of that firms use non-ricing methods (advertising, promotions, packaging) to convince customers to buy they products. Destroyer pricing – That strategy is used by companies which can afford to set low prices. Company set low prices and in this way force competitors to do the same. Some of them are unable to survive and may be pushed to close business. When competitors are eliminated from the market, prices return to the same or higher level. Premium pricing – Some of the companies set high prices for the product to create an exclusive image of the products, for example Ferrari, Gucci,

Timberland. When the Nutella was first introduced it was innovative product and there was no competition on the market. Nowadays, there is many companies which offer similar product. Ferrero use competitive pricing strategy to avoid price war with its competitors, for example with Cadbury (Jar of Nutella and jar of Cadbury in size of 400g cost same price ? 1. 99 each). Place Determinants of Place Place where the product is sold is very important for a business success, as this can determinate the amount of sales company will reach.

The factors which can have impact on place where products are sold are: * Climate, * Cost of renting place, * Clientele, * Image of the company, * Type of business, * Competition. Channels of Distribution Channel of distribution is a route that product take to reach the customer from the manufacturer. The route chosen depends on different factors, including: * Product – some of the products are highly technical and expert knowledge is required to sell them. These kinds of goods very often are being sold directly from the manufacturer to customer.

In contrast to that foodstuff, like Nutella, are distributed through a wholesaler and retailer before reaching the customer. * Finance available to the organisation. * The reliability if companies in the chain – if some parts of distribution chain is unreliable then manufacturer may decide to supply directly to customer. * The desire image for the product – if the product is designed as luxury it may be sold only in chosen places. * Government restriction – some of the product can be bought only in specially designed places, like medicines in pharmacy.

* The product’s life-cycle – if product is in the beginning of it’s life cycle, it may be sold only in outlet where higher price can be charge. The fallowing routes are possible: People, Process, Physical Evidence People This sector of Marekting Mix represent all people which are working for the company. They are very important for a business. Essential is proper training of staff, as not only product but the service provided by them builds the image of the company. How the staff look, talk, dress and behave is an integral part of success of company.

Nutella, carefully choose the employess and make sure that the qualification and skills present by them match with those needed for position. Process This factor is linked with customer service and involve number of processes which are making marketing effective in an organisation e. g. processes for handling customer complaints, processes for identifying customer needs and requirements, processes for handling order etc. Ferrero Company knows that satisfy customer is a key for success of company. That is why they conduct many researches to find out what consumers needs are.

Physical Evidence Physical Evidence refers to experience customer have from using product or service. Before product or service approach to customer it is important to help him/her to see what he/she is buying. For instance, by providing brochures, pamphlets. Ferrero use mostly TV advertisement to show customers what is the range of product sold by them. Market Research Quantitative, Qualitative Quantitative – information is that which can be measured and which is normally expressed in numerical form. This kind of information helps company to analyse information and make accurate forecasts.

Ferrero Balace Sheet prepared every year present all financial information about its company. Qualitative – this kind of information is expressed in words and is descriptive , sometimes involve judgements or opinions. Primary Research If secondary data do not provide all sufficient information to satisfy research objections, primary data have to be collected. There are four methods: 1. Survey research – this is the most common method. This is concerned with the administration of major issues have to be considered: * Selection of communication method ( mail, telephone ),

* Maximizing response to a survey, * Questionnaire design, * Phrasing of questions. 2. Depth interviews – usually involve one face-to-face ( individual depth interview ) responder or a group of 5-25 respondents ( group discussions ) Individual depth interviews are particularly useful in the fallowing situations: * If the subject matter is of a confidential or potentially embarrassing nature, * Where a highly detailed understanding of complicated behaviour on decision-making patterns is required ( e. g. planning the family holidays ), Group discussions are often used for:

* Generating ideas for new products and services, * Exploring consumer response to promotional and packaging ideas. 3. Observational research – includes viewing and listening to situations. It also includes recording human behaviour with monitoring instruments. It is in use when obtaining data by survey is to expensive. Examples of it use are: * Monitoring traffic flow, * Studding a retail outlet ( display methods, prices & customer flow ), * Viewing competitors’ products at an exhibition, * Viewing product usage. 4.

Experimentation – involves the manipulation of one or more variables by the experiment in such a way that its effect on another variable can be determinate e. g. manipulating price in order that its effect on sales can be determinate. Types of errors effecting experimental results: * Motivation – respondents may alter their responses to a specific simulant over a period of time, irrespective of external events. * Exogenous occurrences – events not controlled by the experimenter e. g. competitive actions. * Selection – when the groups made for experiment aren’t equal.

* Instrument variability – changes in the measuring instrument over time. * Last respondents – sometimes responses in an experiments may refuse to continue. Advantages of primary research are: * Information’s gained are always accurate and up-to date, * All sources of information are known. Disadvantages of primary research: * It may be expensive to conduct, * It may take long time to prepare Secondary research Is carried out by researcher, using secondary information in the form of published sources. Sources of secondary data: 1.

Internal sources – generated by organisation itself. Examples: Accounting records, sale force reports, customer complains record. 2. External sources – these data are generated by sources outside the organisation. Examples: newspapers, periodicals and research reports. Advantages : * Inexpensive, * Easy to access. Disadvantages: * It may be out of date, * May be not relevant. Sampling Random Sampling – to conduct this kind of sampling, individuals are pre-selected from a list, most likely from telephone directory or electoral register.

Interviewer choose random people from the list and call them. This sampling is expensive to conduct as all selected people must be interviewed. Stratified Random Sampling – this sampling makes interviewed group more representative of the population as a whole. The sample is divided up into segments based on how the population is divided up. Quota Sampling – researcher is provided with instructions about the number of people which have to be interned and about their characteristic. It is a job interviewer to find people which fit to criteria. What ‘change’ factors affect the business

Product/Service There are many factors which can affect product or service sold by business. For example: * There is no demand for item, * Product doesn’t have all futures which customers want, * Product include costly features, which consumer doesn’t need, * Packaging don’t look attractive, * Competition is present. Ferrero product may be affected by competitors or smaller demand for Nutella. Nevertheless, as the product is in sale long time, it have achieve quite high status and as I’s image is good there is not much danger from side of competitors.

Place Place where the product is sold can be affected by below factors: * The product being sold. ( some of the products require technical knowledge, and are sold straight away from manufacturer), * If the company is not using right distribution channels, * Can be affected by government restrictions, * The product life-cycle ( some product in introductory stage are sold only in outlets) * Finance available to organisation. Nutella is a grocery product which doesn’t require special distribution line or technical knowledge to use.

That is why place which is sold is more flexible, the only thing which is important to Ferrero, is that Nutella is directed mostly to kids and families so it have to be placed in stores where this kind of customer does they shopping. Price Price can be affected by few factors: * Company’s objectives, * Competitors’ prices * Position of the product in its life-cycle, * Cost of manufacturing the product, * Level of advertising or promotion, * Profit level expected, * Suppliers’ Prices. Nutella’s target market are families with kids, that is why, in this particular case high prices are not recommended, because the sales may drop.

What is more, cost of producing and transporting Nutella isn’t to high, so even setting low price will bring profits for the company. Promotion * Promotion can be affected by: * Stage of the product in life-cycle, * Product type, * Budget, * Target customer. Ferrero promote Nutella in may ways, for instance, by TV advertisement or newspapers. As this product is directed to younger consumers, it have to be planned and made in way which is easy to understand. Nutella is a well know brand and make big profits every year that is why budget is not a big concern. Segmentation

Definition Segmentation – is when an existing target market, is further broken down in to clearly identifiable, but different sub-market. Types of Segmentation Geographic – this type of segmentation segregate people to the part of the world where they are coming from and where product can have the best sales. What is more, very important factor in this segregation is if the region is urban or rural. Demographic – this segmentation separate customers to few group accordingly to: sex, age, family size or income, occupation, education and religion, race, nationality.

Psychographic – This type of segmentation is all about personality, social class and life style of the group. For example, sports fan, cooking enthusiast or traveller. Behavioural – behavioural segmentation is more about the frequency of use of the product or brand loyalty of the group. Good example is Apple which have many customers loyal to them. Socio-economic – Type of Segmentation use by Nutella Nutella target customers are families and kids, so the type of segmentation use by this company is Demographical. Need and wants of consumers change at different age stages.

That is why Ferrero needs to consider wants of the youngest members of society. The importance of segmentation Segmentation helps to better understand customer needs. It will help company in getting more benefits from consistency of their marketing strategy and become more competitive with their target audience. Conclusion After many years of development and hard work of all employees, Ferrero develop in to big successful international company, recognised around the world. One of the most popular products in this company is Nutella.

This branded product gain its fame because of great taste and well planned marketing strategy. By well-developed marketing mix and conducting many marketing researches, product has been develop to satisfy target customer taste. Recommendations Pricing strategy As Nutella was first hazelnut bread spread on the market it gain its fame and place at the market. After some time competitors started lunching its products and Ferrero had to share market with them. Destroyer pricing is a good solution for this situation. Ferrero can easily effort lower prices and eliminate its competitors. Channels of distribution

If Ferrero will try to skip wholesalers in its distribution channel, lower prices could be set (to support suggested pricing strategy) and time in which product can reach customer could be shorter. Place Ferrero may want to consider selling Nutella in new places, good idea may be opening small stores or cafes which will sell only Nutella and product containing it (like cakes). Promotion Ferrero can start new promotions to attract customers. For example: when customer buy one jar of Nutella is getting chance to win another one. Information about prize can be placed on the bottom of the cap.a

Cite this Evaluation of Nutella Marketing Strategy

Evaluation of Nutella Marketing Strategy. (2016, Sep 03). Retrieved from https://graduateway.com/evaluation-of-nutella-marketing-strategy/

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