1. Vision Statement of Nestlé
The strategic priorities of Nestlé are focused on delivering shareholder value through the achievement of sustainable, capital efficient and profitable long term growth. Improvements in profitability will be achieved while respecting quality and safety standards at all times.
In line with this objective, Nestlé envisions to grow in the shortest possible time into the number one food company in Pakistan with the unique ability to meet the needs of consumers of every age group – from infancy to old age, for nutrition and pleasure, through development of a large variety of food categories of the highest quality.
Nestlé envisions the company to develop an extremely motivated and professionally trained work force, which would drive growth through innovation and renovation.
It aspires, as a respected corporate citizen, to continue playing a significant role in the social and environmental sectors of the country.
2. Brief Introduction of Nestlé
In the 1860s Henri Nestlé, a pharmacist, developed a food for babies who were unable to breastfeed. His first success was a premature infant who could not tolerate his mother’s milk or any of the usual substitutes. People quickly recognized the value of the new product, after Nestlé’s new formula saved the child’s life, and soon, Farine Lactée Henri Nestlé was being sold in much of Europe.
By the early 1900s, the company was operating factories in the United States, Britain, Germany and Spain. World War I created new demand for dairy products in the form of government contracts. By the end of the war, Nestlé’s production had more than doubled. The 1920s saw Nestlé’s first expansion into new products, with chocolate the Company’s second most important activity Nestlé felt the effects of World War II immediately. Profits dropped from $20 million in 1938 to $6 million in 1939. Ironically, the war helped with the introduction of the Company’s newest product, Nescafé, which was a staple drink of the US military. Nestlé’s production and sales rose in the wartime economy. Nestlé with headquarters in Vevey, Switzerland was founded in 1866 by Henri Nestlé and is today the world’s biggest food and beverage company. They employ around 250,000 people and have factories or operations in almost every country in the world.
Nestlé Pakistan currently has 1958 employees and has a market capitalization of 41,268,136,000.
3. Introduction to Nestlé Fruit Yogurt
Nestlé is committed to offering consumers high-quality food products that are safe, tasty and affordable. The Nestlé Seal of Guarantee is a symbol of this commitment. Keeping this in mind, Nestlé developed a unique healthy product which is a substitute to sugary junk food like carbonated drinks, ice-creams and desserts.
Nestlé Fruit Yogurt, a value added product, is categorized as a chilled dairy product which has all the goodness of milk, yogurt and fruit. Such products need to be refrigerated between temperatures of 0 – 4 degrees from manufacturing till it reaches the consumers because they contain live bacteria. Nestlé Fruit Yogurt has a shelf life of 28 days.
Marketing Ethics and Social Responsibilities
Keeping in mind Pakistan’s social responsibilities and marketing ethics, Nestlé adopts the following practices in its production of Nestlé Fruit Yogurt.
Quality of the product is maintained by foreign quality control supervisors on a random weekly basis.
The product is produced using all Halal foods.
Product wastes are properly treated.
Workers, especially those involved in the production process, are provided with specially designed clothing/suits.
The price of the product is kept low.
4. Nestlé Fruit Yogurt’s Current Marketing Mix
The marketing mix comprises of the 4 Ps namely: Product, Place, Price and Promotion. Following is a detailed study of the contents of Nestlé Fruit Yogurt’s marketing mix.
1. Product
Products are need-satisfying products of an organization. The idea of a product as potential customer satisfaction or benefit is very important. Nestlé Fruit Yogurt is a new product in Nestlé’s product line in Pakistan.
Branding
Branding is the use of a name, term, symbol or design or a combination of these to identify a product. The fruit Yogurt has well known brand name Nestlé which has gain popularity over years and is known for offering healthy nutritious food items.
Advantages of Branding
a) Identification
Branding has helped Nestlé Fruit Yogurt gain a distinctive identification and has presented an ease of gaining customers. Most people prefer trying fruit yogurt of familiar trusted brand rather than of the brands they haven’t heard of before. It has also helped reduce the costs for designing and implementing programs for promoting the product.
b) Brand Familiarity
Brand familiarity refers to how well customers recognize and accept a company’s brand. Nestlé has earned brand acceptance with high quality products and their regular promotion and its high degree of brand familiarity affects the planning of the remainder of the marketing mix. Therefore Nestlé Fruit Yogurt is placed in all super markets and general stores of Pakistani market and doesn’t require extensive promotion because of its already built brand familiarity.
c) Brand equity
Since brand equity refers to the value of brand’s overall position in market we can safely say that Nestlé has higher brand equity on the basis of its satisfied customers and eagerness of customers to have it in stock.
Manufacturer Brand
Nestlé is a manufacturer brand (national brand) i-e it is created by producers and is promoted throughout the Pakistani market in addition to markets of other countries.
Packaging
Packaging concerns with designing and producing the container or wrapper for a product. Nestlé Fruit Yogurt comes in an attractive and convenient to use
package and serves the following purposes of packaging:
Protects the contents on their way to consumer: Its package id well designed so as to protect it during shipment and prevents tampering with it in the warehouse or retail stores. Protects the product after purchase: Nestlé Fruit Yogurt is convenient to use, cleaner and less susceptible to losses from spilling and spoilage because of its good quality packaging. Packaging acceptable to middlemen: Packaging is acceptable to middlemen because it is suitable for displaying and stacking in stores. Helps persuade the consumers to buy the product: Packaging is attractive and colorful with the illustrations of fruits and creamy delicious yogurt which persuades the customers to taste it.
Labeling
A label is a part of a product which carries information about the product and the seller. A label may be a part of the package or a separate tag attached to the product. Types of labels include:
A brand label
A descriptive label
A grade label
Nestlé Fruit Yogurt employs descriptive labeling which is a part of its package. It carries information about ingredients, nutritional contents, products weight, and the fruit flavor.
Product quality and customer needs
Quality is the ability of a product to satisfy a customer’s needs or requirements. Since consumers mainly require satisfaction, marketing managers must be constantly concerned with product quality.
Therefore, Nestlé is committed to offering consumers high-quality food products that are safe, tasty and affordable to cater to the customer satisfaction aspect. The Nestlé Seal of Guarantee is a symbol of this commitment. Keeping this in mind, Nestlé developed a unique healthy product
which is a substitute to sugary junk food like carbonated drinks, ice-creams and desserts.
Product mix
The vast product mix of Nestlé among the dairy products consists of Nestlé Milkpak UHT milk
Milkpak Butter
Nestlé Plain Yogurt
Nestlé Fruit Yogurt
Milkpak UHT Cream
Milkpak Desi Ghee
Nestlé Everyday
Nestlé Nido
Nestlé Nesvita
Product Line
A group of products, intended essentially for similar uses and having similar physical characteristics, constitute a product line. Product line under consideration mainly consists of Nestlé Plain Yogurt and Nestlé Fruit Yogurt.
Product Mix Structure
The structure of product mix has both breadth and depth. Product breadth is measured by the no. of product lines carried. Product depth is measured by the variety of sizes, colors, and models offered with each product line.
Depth (assortment within a line)
Breadth(different lines)
Fruit Yogurt
Plain Yogurt
Strawberry flavored
Peach flavored
Without fruit chunks
With real fruit chunks
Initially Nestlé Fruit Yogurt came without fruit chunks; however, now it comes with real fruit chunks and is worth same piece i-2 Rs.12.Therefore, it is a value added product.
Nestlé Fruit Yogurt is a consumer product categorized as convenience product. Since people are not willing to spend much money and time on such products, it is a low priced product and is clearly stated as a chilled dairy product with all the goodness of milk, yogurt and fruit.
Nutritional information
Energy 118kcal-499kg
Protein 5.4g
Carbohydrates 19.6g
of which sugars 19.0g
Fats 2.0g
of which saturates 1.3g
Fiber 0.1g
Sodium 0.1g
Calcium 208mg
(%rda) (26.0g%)
Ingredients
Standardized fresh milk (Fat 1.7%, SNF: 8.3 %), Fruit chunks (Strawberry, Peach or Mango), Sucrose, stabilizer, preservatives, artificial flavor, permitted food color.
Product Life Cycle
A product life cycle has four categories
Introduction
Growth
Maturity
Decline
Management must be able recognize what stage of life cycle is the product in at any given time. The competitive environment and marketing strategies that should be used ordinarily depend on the particular life-cycle stage. Nestlé Fruit Yogurt is in the introductory stage
.
Nestlé Fruit Yogurt: Introductory stage
During the introduction stage a product is launched in a full-scale screening program. The product may be entirely new or may come out with a novel feature in an already available product.
When Nestlé Fruit Yogurt was launched in market it was not entirely new but it was well-known (plain fruit yogurt) with a novel feature (i-e fruit flavored) which in effect created a new product category.
Like all other products at this stage, a lot of money is spent not only for the development of this product but also to seek consumer acceptance of the offering. Nestlé Fruit Yogurt enjoys the benefit of brand familiarity and its well-known product line of plain fruit yogurt and is readily accepted by a sufficient number of customers.
2. Promotion
Promotion is one of the major tools used in marketing and an essential part of the marketing mix of an organization. Marketers usually use promotion to inform the public of their product and communicate with customers with respect to product offerings. Promotion is also however used to influence the marketers target market usually via:
Advertisements and commercials through interpellation
Streamers
Outdoor billboards
Magazines newspapers and posters
Personal selling
Sales promotion
Public relations etc
Promoting their product as better then any other similar products or by changing views, awareness, beliefs, and feelings of perspective customers.
Promotional roles
Three essential promotional roles are given below:
Informing
Persuading
And reminding target audiences
Nestlé Fruit Yogurt is a new product in Nestlé’s product line in Pakistan. The product’s present market constitutes all the citizens that consume yogurt. Nestlé Fruit Yogurt’s production began in the second quarter of 2005 but due to very limited budget and the product being an entirely new concept to the existing market, a discrete analysis of all the entities that would affect the new product were taken into consideration. As the product was new, marketers immediately felt the need of informing the people about it. Providing Information is the first and the foremost task of promotion because people need to know about the existence of a product, its benefits, usage and working. The most useful product will be a failure if no one knows it exists. For the promotion of Nestlé Fruit Yogurt analysis of the scenario was conducted. It revealed that in 2004 there ware 250 brands being advertised on TV; by the start of 2005 the number had doubled and before the launch of Nestlé Fruit Yogurt it reached to about 500 brands. Because of the flooding of television with advertisements, company decided to promote the product distinctively and differently using: streamers, posters, magazines, and outdoor billboards as the marketing mediums. The common observation is that the more the people get to see various advertisements on T.V the less they pay heed to them. Its human nature to get fed up or become indifferent to things that go beyond limit I-e the flood of advertisements coming up
everyday. To promote fruit yogurt through means other than mass media was a very wise decision on the part of the management of Nestlé. If Nestlé’s fruit yogurt had been advertised on T.V, it would have been forgotten or lost its charm very soon.
Another purpose of promotion is persuading. Intense competition among firms in market provides people with many alternative products for satisfying even basic physiological needs. As a result, persuasive promotion becomes essential. Nestlé, keeping this into mind, have made billboards, streamers, advertisement and magazines captivating and attractive enough to play upon the weaknesses of fruit, dessert lovers and diet conscious people who were since long looking for some healthy and hygienic alternative to junk food.
Last but not the least is reminding the market of the product’s availability and its potential to satisfy. This is done by bombarding the target market with messages, symbols etc which have the ability not only to retain but also to attract new customers. Previously Nestlé’s message regarding their fruit yogurt was “fruit yogurt with real fruit chunks” which later on changed to “imagine the taste”. So we conclude that Nestlé’s current message of “imagines the taste” and delicious cup of fruit yogurt serves both persuasive and reminding roles of promotion.
The message of Nestlé’s fruit yogurt
(This message helps reminding the target market of fruit yogurt)
The captivating fruit yogurt of Nestlé
(Persuades the market to buy this product)
3. Place
Raw yogurt, which is one of the competitors of fruit yogurt, has been into market since long. It is not only cheap but also available in quantities of one’s choice (more or less). Management of Nestlé Fruit Yogurt correctly figured out that the perception of raw yogurt of one particular class of Pakistan is hard to change. They knew that introduction of fruit yogurt, which is of RS.12, delicious, hygienic and nutritious, among low-income
group and low socio-economic status will not be a wise decision, as they won’t readily accept it. They also correctly judged that less knowledgeable and illiterate people will resist switching from raw to fruit yogurt because they are either less aware or indifferent to the hygienic factor and nutritive values of food. They willingly compromise on quality for price and some among them, without striving to get information, perceive the Nestlé’s fruit yogurt to be of high price and do not buy it ultimately. Keeping these attitudes and behaviors of different classes in mind, Nestlé decided to start off from the safe side I-e they introduced their fruit yogurt in Islamabad, Lahore, Karachi and Peshawar. These cities of Pakistan are thickly populated and have relatively high awareness and literacy rate. We can safely say that this product is targeting “A” class of our country and became popular among them because of the following characteristics of this class:
“A” class people are mostly literate, knowledgeable, have awareness and the resources to try out every new food item that comes into the market. They are much aware of the nutritive values of food and know the advantage or edge of fruit yogurt over the raw one. They don’t usually compromise on quality, hygiene and delicacy for price. This amalgamation of flavored yogurt with fruit chunks came as good news for fruit lovers. It became popular among teenagers of this class because it is a healthy alternative junk food etc
4. Price
The ultimate aim of any organization is to set a price that satisfies both the consumers and the manufacturers. Nestlé Fruit Yogurt comes in a small sized pack of 12 Rupees which is affordable to every socioeconomic status. The competitors of Nestlé Fruit Yogurt include:
Olpers
Prime yogurt
& Raw yogurt mainly
In order to outweigh the competition of raw yogurt which is very cheap and a
preference of price-conscious people, Nestlé Fruit Yogurt comes in a small pack which is reasonably priced keeping in consideration its fruit-contents which make it nutritious and tasty. This has been achieved by working on price strategy which starts by reducing the production costs so as to reduce the sales costs. Low price feature of the product targets the lower and middle classes too. It is now commonly used as a substitute to mashed foods for kids and also to junk sugary foods and as a dessert, all because it combines the benefits of taste, quality and low price and is gaining popularity due to these multiple features.
Price Level Policies over Product Life Cycle
Price level policies vary according to the life cycle stage product is in at any given time. Therefore pricing policies are different in introductory, growth, maturity and decline stage. Since Nestlé Fruit Yogurt is in introductory stage we discuss the pricing policies of introductory stage as under:
Introductory stage
Pricing strategies used at introductory stage or market entering price strategies are:
Skimming
Penetration
In preparing to enter the market with a new product, management decides whether to adopt a skimming or a penetration price strategy.
Market-Skimming Pricing
Skimming defines the pricing strategy of entering market at a high price with high quality products. This strategy is applied in case of less elastic or inelastic demand of products.
Market-Penetration Pricing
This strategy involves introduction of products at low prices. This strategy is applied in case of products with more elastic demand and particularly for
consumer goods.
Nestlé Fruit Yogurt: Market-Penetration Pricing
The pricing strategy adopted by Nestlé Fruit Yogurt is market-penetration pricing since it is a consumer product and has entered market with price as low as Rs. 12 and also because it fulfills following conditions of market-penetration pricing.
A large market exists for the product.
Demand is highly elastic.
Economies of scale are possible i-e substantial reductions in the unit cost of the product can be achieved through large-scale operations. Competition for this product already exists in market i-e Raw yogurt which presents a fierce competition.
Price Objective
Every marketing activity including pricing should be directed towards a goal. Thus management should decide on its pricing objective before determining the price itself. Nestlé like a few other firms has consciously established a pricing objective for fruit yogurt. Following are the common pricing objectives:
Profit-oriented:
To achieve a target return
To maximize profit
Sales-oriented:
To increase sales volume
To maintain or increase market share
Status quo-oriented:
To stabilize prices
To meet competition
Nestlé price objective: Status-quo oriented
The pricing objective taken up by Nestlé Fruit Yogurt is status quo which is intended simply to maintain the firm’s current situation that is the status quo. With either of the goals of this objective a firm seeks to avoid price competition. Price stabilization is often the goal in industries where one large firm such as Nestlé acts as a leader in setting prices. Smaller industries tend to “follow the leader” when setting their prices or simply price the products to meet the prevailing market price. This pricing policy gives management an easy means of avoiding difficult pricing decisions.
Nestlé also adopts this strategy to avoid price competition. It focuses more on using other marketing mix elements such as product distribution and product rather than price.
Nestlé Fruit Yogurt is concentrating more on innovation that is introducing new flavors and previously introduction of real fruit chunks rather than changing prices.
5. Nestlé Fruit Yogurt’s Macroenvironment
Nestlé’ Fruit Yogurt’s External Macroenvironment includes: 1. Demographics
a) Age
Briefly, we can say that fruit yogurt is popular among every age group. This is because it’s delicious, nutritious, hygienic and the best alternative junk food. People for a long time were looking for one such yogurt that is energizing, creamy, thick, and full of fruits. Once this product came, it took the Pakistani market by storm. Because of its low fat contents it came as good news for the diet conscious people. Mothers and wives, who have always been the most considerate for their kids and families, preferred to buy fruit yogurt as it is of high quality and distinct taste. It has loads of flavors suited to the taste of almost every member of the society. Previously it was taken with meals only but now it has become an all time favorite dessert as well.
b) Sex/gender
It has been a common observation that men have never been much into eating
yogurts but with the launch of this product scenario changed. Men who used to be most reluctant to eat yogurt, enjoy this product as much as they can. So we can safely say that fruit yogurt is popular among men and women alike.
c) Location of residence
Nestlé Fruit Yogurt is not available everywhere right now. It has been first introduced in Karachi, Lahore, Islamabad and Peshawar where education and awareness level is relatively high and people willingly go for the hygienic, nutritious and high quality products irrespective of their prices.
d) Socioeconomic status
Previously, people used to prefer khula yogurt. The reason was that it used to be cheap, available in large quantities and worth a compromise on quality for price. To target such people, Nestlé came up with a 12 rupees economical fruit yogurt which is within the affordability of every income group of Pakistan. With this introduction low income people switched to fruit yogurt as it provided them with high quality, nutrition, and delicacy at a very reasonable price.
e) Religion
With religion comes the concept of Halal, Haram products primarily. If you take a look at the above-mentioned ingredients of fruit yogurt .you’d know that they are all Halal according to our religion ‘Islam’. This is because one of the foremost strategies of Nestlé Fruit Yogurt is to take well into consideration the country’s legislatures and religious constraints of the country before the introduction of a product. In addition to this, fruit yogurts of Nestlé are of high quality, they are nutritious and hygienic as well.
f) Education
Education and knowledge bestow a person with awareness which actually effects the buying decisions of individuals. Only the educated people know the importance of nutritious and hygienic foods and such people never compromise on quality for price. They prefer to buy expensive products but in return expect the highest possible quality n wide variety. Keeping this aspect into
consideration, Nestlé launched its fruit yogurt initially in Karachi, Islamabad, Lahore and Peshawar where the literacy rate is relatively high and people have the urge to know more and beware of their surroundings.
2. Economics Conditions
The economic conditions prevalent in the country did affect the investment in the Nestlé Fruit Yogurt industry.
Some common restrictions and barriers that prevented the investment of capital in this project included:
a) Operations Restrictions
Restrictions on procurement, hiring foreign personnel, or locating business activities, as well as the efficiency and honesty of officials with whom business executives must deal and the effectiveness and integrity of the judicial system. To deal with problems like these Nestlé Fruit Yogurt’s board of directors lessened the use of the middle-man and did most of the sale by their own department.
b) Labor Policies
Government policies, trade union activity, and productivity of the labor force that create either high or low costs for businesses. Apart from this Nestlé Fruit Yogurt team discourages the use of child labor in its plants. This comes at a cost. The labor expenses for the company raised more than forecasted.
c) Domestic Economic Problems
A country’s ranking according to its most recent five-year performance record in per capita GDP, GDP growth, inflation, unemployment, capital investment, and budget balance. During the year 2005-06 the country did experience inflation, a low GDP and unemployment all these factors contributed in a low investment by the investors into this fruit yogurt project Nestlé Fruit Yogurt used the process of strategic planning. Strategic planning involves identifying future trends and analyzing how the corporation can take advantage of those trends. Such analysis traditionally concentrated heavily
on economic trends, but since political decisions and events substantially influence these trends, planners now incorporate political risk analysis. Current planning activities made by Nestlé involve an attempt to assess the impact of political and economic trends, but strategic planners can find it difficult to incorporate political analysis into their traditional economic and business research. Political analysis, by its nature, is qualitative, dealing with more abrupt and sweeping factors. Many planners have found systematic risk ratings particularly useful because they allow for the cross country comparisons that are an integral part of their analytical approach. Most firms use risk information for many reasons and in several different offices.
Another important reason for the low investment of capital in the Nestlé Fruit Yogurt project was the increased interest rates. Fewer investments were made which created a need for capital. This affected the company’s marketing strategy and the number of advertisements made was decreased.
3. Competition
Nestlé Fruit Yogurt has three main competitors namely:
1. Olpers
2. Prime Yogurt
3. Raw Yogurt
Competitive strategies of Nestlé
In order to counter the present competition, Nestlé’ Fruit Yogurt’s marketing team adopts the following measures:
Innovations in their products (yogurts) so that the market never gets fed up. Fruit yogurt of high quality and a distinct taste.
Low fat contents to target the diet-conscious section of the market. Low price of 12 rupees that is affordable to every socioeconomic status. Nutritious, hygienic and the best alternative to junk food.
Attractive packaging and use of imported seals.
High budget, advertisement of this new product (fruit yogurt) on mass media.
Advertisement through streamers, posters, magazines and outdoor billboards. Different fruit flavors in the yogurt that specifically attract kids and fruit lovers.
4. Social and Cultural Forces
First of all, we have to define what society is. Society is all about people in general, living in communities. Then we have to know what culture is. Culture is basically the customs, beliefs, way of life, and social organization of a particular country or group.
Now we have to see how and in what ways the cultural and social forces affect the marketing of our chosen organization, “Nestlé” in Pakistan. The first aspect that will be brought under consideration is:
a) Family
In a country like Pakistan, family plays a pivotal role in the everyday life of an individual. Where there is a family, there is food, and where there is food there are accessories e.g. raita, pickles, salad, packed or raw yogurt. This is a part of our culture. Nestlé provides the families with the dairy products like packed simple yogurt, raita, and fruit yogurt. Besides having it as an accessory of food, simple yogurt is also used as a raw material for cooking, which is again a part of our tradition, our culture. Nestlé provides the Pakistani families with all that they require purity, taste, hygiene everything.
b) Customs and Behaviors
The normal custom is that this particular product is usually consumed in the summers. As previously mentioned, the country runs on traditions and culture, and it tells us that it gives the body a cool effect; therefore, people prefer having yogurt in the summers.
Here in Pakistan, the majority of the people are either illiterate or live below the line of poverty, so how this “edible” product is packaged does not really matter as it has to be consumed anyway.
The behavior of the customers changes at certain points in a year where the demand of this particular product increases e.g. Moharram, Ramadan, Eid etc.
5. Political and Legal Forces
Political and legal forces also influence every company’s conduct. Political and legal forces on marketing would be categorized into:
a) Trade policy
Taxes (state and local taxes) – delivery services result in higher taxes due to increase in number of vans since Nestlé mostly relies on its self service for transportation so that the chilling capacity and other such requirements can be observed. Increase in vans for transportation is thus an uncontrollable factor and demands tax payments.
Quotas and tariffs – when importing seals Nestlé also faces import barriers in the form of quotas and tariffs which also limit the imports.
b) Quality Control
Since Nestlé is an ever increasing food company quality control also presents a problem which has to be observed. Nestlé Milk related products have established an Extension Service, staffed by qualified veterinary doctors, who assist farmers in vaccination and treatment of livestock, improved breeding, good animal husbandry practices, provision of high yield fodder seed etc so as to come up with highest quality food products.
c) Open/close economy:
It’s an open economy facilitating foreign investments and allowing free trade.
6. Technology
Nestlé, the world’s biggest food Group is also the global leader in the industry with regard to Research and Development (R&D), No other food company dedicates so many human and financial resources to R&D: an international staff of 3500 engaged in the search for innovative new products and the renovation of existing ones. Year after year, Nestlé invests some 800 million Swiss francs into R&D as a major driving force of
its double strategy: to strengthen the Company’s brands worldwide and to continue to support future long- term growth and competitiveness through innovation and renovation. At the threshold of this new millennium, Nestlé Fruit Yogurt’s objective is to consolidate and strengthen its leading position at the cutting edge of innovation in the food area, in order to meet the needs and desires of consumers around the world, for pleasure, convenience, health and well being.
Nestlé Fruit Yogurt-processing industry has special concerns about the health and safety of the consumers. This is the reason why abundant and productive agricultural sources, conducive climate conditions, and modern technologies are all important factors for providing Nestlé Fruit Yogurt-processing industry with ample and high quality raw materials. For the most part, Nestlé food-processing facilities are located close to their agricultural source.
Nestlé uses the term “clean technologies” to describe its working environment. This term is defined as “manufacturing processes or product technologies that reduce pollution or waste, energy use, or material use in comparison to the technologies that they replace.”
Nestlé Fruit Yogurt is Mass-processed by heating concentrated milk, or milk fortified by skim milk powder, to about 90¡ C (194¡ F) for a few minutes, then cooling it to about 44¡ C (111¡ F), at which point a controlled culture of Lactobacillus bulgaricus and Streptococcus thermophilus is added. These two lactic organisms produce the required acidity and the delicate yogurt flavor. Souring and thickening take place in about 3 hours at 44¡ C (111¡ F), and stop when the mixture is cooled to 5¡ C (40¡ F).At this stage chunks of fruit are added to give the yogurt the desired taste. Because the milk has been heated and soured, and due of its high acidity, pathogens cannot grow in yogurt, and it is probably the safest of all perishable foods. Well-made yogurt made by Nestlé industries of any type should last for 14 days if kept at 5¡ C (41¡ F).
Improved Packaging
Nestlé’s fruit yogurt’s main aim is the use of less excessive and more environmentally friendly packaging products. It uses special packaging techniques that minimizes and eliminates loss by leakage or evaporation and reduces spoilage and contamination by dirt, insects, bacteria, mold, moisture or oxygen.
Another important technique used in the packaging of Nestlé Fruit Yogurt is that of Aseptic packaging. Aseptic packaging sterilizes the fruit yogurt and then packages it in a sterilized container. The typical aseptic containers include foil-lined cartons, plastic cups, and plastic bags. These containers cost and weigh less than the metal cans or glass bottles traditionally used in packaging. Another advantage of aseptic packaging is better flavor. Cans or bottles require much longer heating time for sterilization. The longer foods are heated, the more the flavor changes. In the aseptic process, foods can be heated rapidly outside of the container. Therefore, aseptically packaged foods have a more natural flavor as well as more nutrients.
Above everything to keep up with the quality standards Nestlé used imported seals specially designed for packaging dairy products. All this makes Nestlé Fruit Yogurt a flavored product with only a few calories per serving and is popular for low calories diets.
6. Nestlé Fruit Yogurt’s Microenvironment
1. Market
In marketing, the term market refers to the group of consumers or organizations that is interested in the product, has the resources to purchase the product, and is permitted by the law and other regulations to acquire the product.
In marketing any given good or service, three specific factors need to be considered:
People or organizations with needs,
Their purchasing power, and
Their buying behavior
Nestlé Fruit Yogurt is an indulger for all males, females and adults who are health conscious people and who want healthy alternative to junk food but with good taste.
This product is unvaryingly for all fruit-lovers and fans of desserts. However the main target market of this product is not only kids, who are appealed to a variety of fruit flavored yogurts with real fruit chunks i.e. Peach, Strawberry, Pineapple etc because of their delicious tastes, but are also a choice of mothers because they are safe and because of their nutritive values. Briefly Nestlé Fruit Yogurt has a wide range market including all age groups and income groups with price Rs.12 per yogurt.
2. Suppliers
The people or firms that supply the goods or services required by a producer to make what it sells and also the firms that provide the merchandise, a wholesaler or retailer resells are the suppliers and are a vital part of a firm’s marketing success.
The core raw materials of Nestlé Fruit Yogurts are milk and fruits. Driven by its commitment to quality and having realized that only self collection could eliminate its dependence on poor quality milk from outside sources, the company successfully established its own collection system and expanded its operations over a very large milk shed area in Punjab. Milk is collected through a vast network of village milk centers (VMCs), sub-centers and centers. At these centers chillers have been installed to lower milk temperature to 4 degree centigrade for preventing bacteria development during long hauls to factories, which are undertaken by a fleet of specially insulated tanks.
Initially Nestlé Milkpak ltd. Acquired services of Kabirwala Dairy ltd. But now with the merger of this factory with Nestlé Milkpak in April 1997, Kabirwala factory is a fully owned unit of Nestlé Milkpak ltd.
3. Marketing Intermediaries
Marketing intermediaries are independent business organizations that directly aid in the flow of goods and services between a marketing organization and its markets.
There are two types of intermediaries:
a) Middlemen, wholesalers and retailers
As for Nestlé Fruit Yogurt wholesalers are given license (i.e. those with best chillers).However middlemen are less involved because it mostly done by their self owned departments.
b) Channels of distribution
They operate between a company and its markets and between a company and its suppliers. These are the facilitating organizations that provide services such as transportation, warehousing, and financing that are needed to complete exchanges between buyers and sellers.
Milk collected by Nestlé is low on Sodium high on fat and solid-non-fats and has reduced bacteria count. This was achieved through a comprehensive strategy and sustained efforts to overhaul the milk collection process, intensive education program for the farmers and the milk collection staff, up gradation of milk loading and transportation system, increase in the chilling capacity and above all, adherence to the highest acceptance standards at all milk collection points, including the factories.
7. Segmentation
Market segmentation is one of the steps that go into defining and targeting specific markets. It is the process of dividing a market into a distinct group of buyers that require different products or marketing mixes.
A key factor to success in today’s market place is finding subtle differences to give a business the marketing edge. Businesses that target specialty markets will promote its products and services more effectively than a business aiming at the “average” customer.
Opportunities in marketing increase when segmented groups of clients and customers with varying needs and wants are recognized. Markets can be segmented or targeted using a variety of factor. The bases for segmenting consumer markets include:
Demographical bases (age, family size, life cycle, occupation) Geographical bases (states, regions, countries)
Behavior bases (product knowledge, usage, attitudes, responses) Psychographic bases (lifestyle, values, personality)
A business must analyze the needs and wants of different market segments before determining their own niche. To be effective in market segmentation keep the following things in mind:
Segments or target markets should be accessible to the business Each segmented group must be large enough to provide a solid customer base. Each segmented group requires a separate marketing plan.
Large companies such as Nestlé segment their markets by conducting extensive market research projects. This research is often too expensive for small businesses to invest in, but there are alternative ways for to a small business to segment their markets.
There are many reasons for dividing a marketing into smaller segments. Any time one suspect there are significant, measurable differences in the market he/she should consider market segmentation.
Market segmentation is the process in marketing of dividing a market into distinct subsets (segments) that behave in the same way or have similar needs. Because each segment is fairly homogeneous in their needs and attitudes, they are likely to respond similarly to a given marketing strategy. That is, they are likely to have similar feeling and ideas about a marketing mix comprised of a given product or service, sold at a given price, distributed in a certain way, and promoted in a certain way. Small segments are often termed niche markets or specialty markets. The process of
segmentation is distinct from targeting (chosing which segments to address) and positioning (designing an appropriate marketing mix for each segment). The overall intent is to identify groups of similar customers and potential customers; to prioritise the groups to address; to understand their behaviour; and to respond with appropriate marketing strategies that satisfy the different preferences of each chosen segment.
The requirements for successful segmentation are:
Homogeneity within the segment
Heterogeneity between segments
Segments are measurable and identifiable
Segments are accessible and actionable
Segment is large enough to be profitable
These criteria can be summarized by the word SADAM:
S – Substantial: the segment has to be large and profitable enough A – Accessible: it must be possible to reach it efficiently
D – Differential: it must respond differently to a different marketing mix A – Actionable: you must have a product for this segment
M – Measurable: size and purchasing power can be measured
Currently a college student studying the marketing mix is now introduced to the Four Ps of the Marketing Mix; Product, Place, Promotion, Price. Product (service) is whatever it may be that is being sold/marketed. Price refers to not only the actual price but also price elasticity. Place has evidently replaced distribution simply by where or what area the marketing campaign is going to cover. Today the idea of place is not limited to geographic profiling but also demographics and other categorizing variables. This has only occurred over the last ten years with the expansion of internet use and its ability to target specific types of people and not just people in a geographic area. Promotion simply refers to what medium will deliver the message and what the overall marketing strategy is offering as a benefit.
The variables used for segmentation include:
Geographic variables
region of the world or country
country size
climate
Demographic variables
age
gender
sexual orientation
family size
family life cycle
income
occupation
education
socioeconomic status
religion
nationality/race
Psychographic variables
personality
life style
value
attitude
Behavioral variables
benefit sought
product usage rate
brand loyalty
product end use
readiness-to-buy stage
decision making unit
When numerous variables are combined to give an in-depth understanding of a segment, this is referred to as depth segmentation. When enough information is combined to create a clear picture of a typical member of a segment, this is referred to as a buyer profile. When the profile is limited to
demographic variables it is called a demographic profile (typically shortened to “a demographic”). A statistical technique commonly used in determining a profile is cluster analysis.
The most successful small businesses understand that only a limited number of people will buy their product or service. The task then becomes determining, as closely as possible, exactly who those people are, and ‘targeting’ the business’s marketing efforts and dollars toward them.
As a manufacturer of dairy products, Nestlé knew that there were plenty of other companies operating in the local market with their own product lines. So they decided to offer something different something unique to their customers, they came up with the Nestlé Fruit Yogurt. In doing this they eliminated a percentage of the market- but it also gave them a ‘niche’ that they could capitalize on, and expanded their market in a way that other manufacturers could not take advantage of.
One needs to understand that people purchase products or services for three basic reasons:
To satisfy basic needs.
To solve problems.
To make themselves feel good.
You’ll need to determine which of those categories your product or service is the solution to, and be prepared to market it accordingly. Your product or service may fit more than one category
The next step in creating an effective marketing strategy is to zero in on the target market. Zeroing in on the target market is done by using Market Segmentation. The primary market of Nestlé is local or regional. The first thing they did was to research the ‘demographics’ of the community, and divide it into market segments:
Age: children, teens, young, middle, elderly
Gender: male, female
Education: high school, college, university
Income: low, medium, high
Marital status: single, married, divorced
Ethnic and/or religious background
Family life cycle: newly married, married for 10 – 20 years, with or without children.
This information was available to them through the local town, hall, library, or Chamber of Commerce. Next, they needed to segment the market as much as possible using ‘psychographics’ as their guide:
Lifestyle: conservative, exciting, trendy, economical
Social class: lower, middle, upper
Opinion: easily led or opinionated
Activities and interests: sports, physical fitness, shopping, books Attitudes and beliefs: environmentalist, security conscious.
In addition, they wanted to find out how they purchased: seasonally, locally, only in volume, who makes the decisions? It is important to note that businesses, unlike individuals, buy products or services for three reasons only: to increase revenue, to maintain the status quo, or to decrease expenses. If Nestlé filled one or more of these corporate needs, then they might have had found a target market.
By now they had a picture emerging of who they thought their ‘ideal’ customer was … or who they wanted him to be. Depending on the nature of their business, Nestlé might even be able to write a description of their customer.
“My target customer is a middle-class woman in her 30s or 40s who is married and has children, and is environmentally conscious and physically fit.”
Based on the numbers Nestlé uncovered in their research, above, they may even know, for example, that there are approximately 9000 of those potential customers in their area! It may well be that 3000 of them are already loyal to a competitor, but that still leaves 6000 who are not, or who have not yet
purchased the product from anyone.
Lots of times prospective customers don’t know about the company Nestlé or their product “the fruit yogurt”, or can’t tell the difference between Nestlé and others. It is the job of people at Nestlé, once to know who their best customers are, to ‘target’ the group that they’ve identified – even if they have competition. In addition, they may decide, using the example above, that Nestlé would like to extend their target market to include women from 50 – 60 years of age. If they go back to the basic reasons why people purchase goods or services, and can find ways to target their efforts to that age group, they may be successful in capturing a bigger share of the market!
On the other hand, what if Nestlé ‘specialized’ the product or service and then researched the target market, only to discover that there are probably less than 75 people who will buy from them?
First of all, if those 75 are corporate customers who will spend hundreds on your product or service annually, then Nestlé has nothing to fear. But if those 75 are only going to spend Rs.600 every decade on your product or service – then Nestlé needs to go ‘back to the drawing board’ of planning the business and perhaps determining a wider target market – but at least they would be armed with all the information they need to start again, or go in a different direction.
Let’s face it – there’s a market, and a target market, for everything.
8. Target Market and Strategies
After a company has defined market segments, it can enter one or many segments of a given market. Target marketing involves evaluating each market segment’s attractiveness and selecting one or more segments to enter, these selected segments are called target markets. A company should target segments in which it can profitably generate the greatest customer value and sustain it over time.
Target Marketing involves concentrating your marketing efforts on one or a few key segments. Target marketing can be the key to a business’s success. The beauty of target marketing is that it makes the promotion, pricing and distribution of your products and/or services easier and more cost-effective.
A company with limited resources might decide to serve only one or a few special segments or “market niches.” Such “niches” specialize in serving market segments that major competitors overlook or ignore. Alternatively, a company might choose to serve several related segments – perhaps those with different kinds of customers but with the same basic wants. Nestlé Fruit Yogurt’s marketing team could choose from either of the following strategies:
1. Cost Leadership (Undifferentiated or Mass) Strategy
This strategy emphasizes efficiency. By producing high volumes of standardized products, the firm hopes to take advantage of economies of scale and experience curve effects. The product is often a basic no-frills product that is produced at a relatively low cost and made available to a very large customer base. Maintaining this strategy requires a continuous search for cost reductions in all aspects of the business. The associated distribution strategy is to obtain the most extensive distribution possible. Promotional strategy often involves trying to make a virtue out of low cost product features.
To be successful, this strategy usually requires a considerable market share advantage or preferential access to raw materials, components, labour, or some other important input. Without one or more of these advantages, the strategy can easily be mimicked by competitors. Successful implementation also benefits from:
process engineering skills
products designed for ease of manufacture
sustained access to inexpensive capital
close supervision of labour
tight cost control
incentives based on quantitative targets.
Examples include low-cost airlines such as EasyJet and Southwest Airlines, and supermarkets such as KwikSave.
2. Differentiation Strategy
Differentiation involves creating a product that is perceived as unique. The unique features or benefits should provide superior value for the customer if this strategy is to be successful. Because customers see the product as unrivaled and unequaled, the price elasticity of demand tends to be reduced and customers tend to be more brand loyal. This can provide considerable insulation from competition. However there are usually additional costs associated with the differentiating product features and this could require a premium pricing strategy.
To maintain this strategy the firm should have:
strong research and development skills
strong product engineering skills
strong creativity skills
good cooperation with distribution channels
strong marketing skills
incentives based largely on subjective measures
be able to communicate the importance of the differentiating product characteristics stress continuous improvement and innovation
attract highly skilled, creative people
3. Segmentation Strategy
In this strategy the firm concentrates on a select few target markets. It is also called a focus strategy or niche strategy. It is hoped that by focusing your marketing efforts on one or two narrow market segments and tailoring your marketing mix to these specialized markets, you can better meet the needs of that target market. The firm typically looks to gain a competitive advantage through effectiveness rather than efficiency. It is most suitable
for relatively small firms but can be used by any company.As a focus strategy it may be used to select targets that are less vulnerable to substitutes or where a competition is weakest to earn above-average return on investments.
The following diagram illustrates the use of each target marketing strategy accroding to its market scope and compentency.
Due to the nature of the product ( uniquely traditional yet contemprary ) and the available market segments, Nestlé Fruit Yogurt’s marketing team chose to combine multiple strategies. The team combined market segmentation strategy with product differentiation strategy which was an effective way of matching Nestlé Fruit Yogurt’s product strategy (supply side) to the characteristics of its target market segments (demand side). But before any further decision was made, the marketing team evaluated the market segments.
In evaluating segments to target, Nestlé’s marketing team observed three factors:
Segment size and growth
Segment structural attractiveness
Company objectives and resources
The team collected and analyzed data on current segment sales, growth rates, and expected profitability for various segments. It was observed that due to Pakistan’s uneven income distribution and education level, it would be difficult for consumers to accept a product of price Rs.12 (although low) and realize the health benefits and nourishment the product provides. Only developed cities such as Karachi, Lahore and Islamabad had an even income distribution level and literacy rate that was adequate. For this reason, only ‘A’ class citizens of the major developed cities of Pakistan including: Islamabad, Lahore and Karachi were chosen as first target segment.
A survey also underlined that the changing consumer patterns of young males and females mainly due to diet awareness, health consciousness and eating
out habits has increased the rate of consumption of ready to go (fast food) food products. Hence a product, such as Nestlé Fruit Yogurt itself, that offers combined benefits of a healthy diet in addition to being ready to go, would definitely catch the eye of the youth population. This led the marketing team to choose all health conscious males, females and adults to be put up as the second target segment of Nestlé Fruit Yogurt.
On the basis of this information, Nestlé Fruit Yogurt’s marketing team identified Nestlé Fruit Yogurt’s target market to constitute class ‘A’ citizens of Karachi, Islamabad and Lahore – all males, females and adults who are health conscious people and who want healthy alternative to junk food but with good taste.
9. Positioning
Positioning can be defined as how your target market defines you in relation to your competitors. A good position makes the product unique and is considered a benefit by the target market. Now we will talk about how our chosen organization “Nestlé” is positioned in Pakistan. There are many factors that we will be taking into consideration. The first and foremost factor that we will be considering is the number of competitors. According to what the studies show there are three main competitors of Nestlé i.e. Olpers, Prime yogurt, and raw yogurt. As stated above, the first requirement of good positioning is that the product should be unique. When we relate this factor to the Nestlé Fruit Yogurt we see that the product indeed is unique, as no competitor before introduced yogurt that was flavored. But being unique is not enough. The product has to be beneficial for the target market and we see that Nestlé Fruit Yogurt is very much liked by kids and the fruit lovers.
When we are comparing one thing with another we have to look at all the “competitive” factors that make the product conspicuous and prominent among the others. The next factor is flavor. Nestlé Fruit Yogurt is available in different flavors with a tinge of originality which boosts up the level of quality. And as mentioned previously this product is not subjected to high
amounts of heat therefore it retains the original taste. This high quality product is available at a very affordable price or PKR 12. A price that is affordable to almost anyone. In a country like Pakistan, price does play a pivotal role in helping the target market to decide which product to buy. Besides this, according to our culture, accessories of food include lots of things. One of them is raita. Nestlé has been innovative enough to introduce the Nestlé raita in order to stand out in the row of competitors.
The next factor that we’re going to discuss is quality packaging. Packaging is another factor by which Nestlé Fruit Yogurt stands out in the row of competitors. According to the studies, it has been seen that most of the sales are in the major urban areas of Pakistan. Rural areas and minor urban areas still use the conventional raw yogurt. So its basically the people of the urban areas who are more literate, knowledgeable, and hygiene conscious, whereas the people in the rural areas neither know this stuff nor care about this. The packaging is composed of imported seals and a sterilized plastic container.
The next factor is the high budget advertising activities. Nestlé spends huge amounts in the ATL and BTL activities in order to become the prominent members among the competitors and to have a good image in the eyes of the target market.
All these positioning factors are then subjected to the perceptual map. The perceptual map is a two dimensional map used by marketers in order to perceive the comparative importance of each point of every brand available.
10. Strategic Direction of Nestlé Fruit Yogurt
Setting strategic direction involves answering two questions: Where are we now? And, where do we want to go?
Where are we now
A detailed approach of assessing where we are now includes SWOT analysis and environmental scanning. Each is explained in detail below:
SWOT Analysis
STRENGTHS
Their brand recognition.
The employees want to achieve higher volumes by renovating existing products and innovating new products. Nestlé is a low cost operator which allows them to beat the competition by producing low cost products and also edging ahead with low operating costs. They have a great research and development team.
WEAKNESSES
They have not entered into many local cities.
Packaging is not that attractive.
OPPORTUNITIES
Health-based products are becoming more popular in the world including Pakistan. Because they are a market leader (42.9%), they can introduce more health-based products without any doubts. Sponsorship can be gained through different means, such as sporting events. THREATS
There is a potential intense competition amongst the top players in the competition. Competitors can use aggressive marketing strategies like cutting prices. Along with this comes increased competition to gain market share.
Where do we want to go
Knowing where the organization is at the present time enables managers to set a direction for the firm and start to allocate resources to move towards that direction. Two techniques to aid in these decisions are: Portfolio and Market Product analysis.
The Portfolio of Business: BCG Matrix
Market Product Analysis
Firms can also view growth opportunities in terms of four combinations of current and new markets and current and new products. As Nestlé attempts to increase the sales of its fruit yogurts’ business, it must consider all four
of the alternative market-product strategies.
11. Proposed Marketing Mix
On the basis of current sales and consumer response to Nestlé Fruit Yogurt, we feel that the current product line needs change. Nestlé Fruit Yogurt is a product that was essentially made to target adult males and females but consumer behaviors show that the product is being consumed more by children. An addition to that is the fact that the targeted literate and health conscious segments of the market aren’t consuming this product as forecasted due to the fact that with the product’s high nutrition value it has relatively high fat content.
To face these issues, we propose that a new product should be introduced in the existing product line. The new product will overcome the limitations of the current Fruit Yogurts and allow further penetration into the market and increase market share.
The components of each marketing mix element are combined to provide a cohesive marketing program which is explained as follows:
1. Product Strategy
Nestlé Fruit Yogurt is a new product of Nestlé’s product line in Pakistan. Nestlé is rightly reputed to offering high-quality, tasty and healthy food items. Keeping that in consideration proposed Nestlé Fruit Yogurt has been made on same lines and is a substitute to sugary junk food items. This product has all the goodness of milk, fruit and yogurt and to add to it, the product has extremely low fat content (99% Fat Free).
The product is expected to gain popularity and momentum in market due to the distinctive features of taste and health combined together along with following features:
Size and Package: After the popularity of fruit yogurt with kids, the proposed product now comes in a family size package so as to be utilized
equally by family as a whole. Therefore three different sizes will be introduced, ranging from small, medium and large. Following is a hand made large package sample of the proposed product.
Nestlé Pineapple Fruit Yogurt Prototype
Fat content: The fat content of the product has been reduced to 99 percent which makes it .2 g on fats as opposed to 2.00 g of the existing product in small size.
Flavor: Fruit yogurt currently comes in flavors as Strawberry, Peach and Apricot in Pakistani market. However, to give vastness to the flavors it offers to fruit lovers the new product introduced is Pineapple flavored. This gives novelty to current flavors being offered and more choice to consumers.
Target Market: Due to the above mentioned new features Nestlé Fruit Yogurt now targets adults who are health conscious on the same basis as the existing product targets kids as well as adults. Due to its reduced fat-content it is now a best choice for health-conscious people. People can now use it readily as a dessert without worrying about its fat content affecting their dietary plans.
Where the existing fruit yogurt targets only individuals with its small sized pack, it now targets the whole family with its new packaging and attracts a whole lot of new pineapple-lover consumers.
2. Price Strategy
Setting price of a product is one of the most challenging decisions. As this product is relatively new in the market, due to the fact that there are fruit yogurts in the market but none with low-fat content; Nestlé could choose from either of the following pricing strategies:
1. Creaming or skimming
Selling a product at a high price, sacrificing high sales to gain a high
profit, therefore ‘skimming’ the market. This strategy is employed only for a limited duration to recover most of investment made to build the product. To gain further market share, a seller must use other pricing tactics such as economy or penetration.
2. Limit pricing
This is a strategy of pricing adopted by firms in a contestable market in order to ‘limit’ the ability of new entrants to take advantage of economies of scale where by costs are low enough for them to become competitive.
3. Market oriented pricing
Setting a price based upon analysis and research compiled from the targeted market.
4. Penetration pricing
Setting an initial low price at the stage of deployment of the product to attract initial customers. The price is likely to rise later as the product gains a market share.
5. Contribution Margin-based Pricing
Contribution Margin-based Pricing maximizes the profit derived from an individual product, based on the difference between the product’s price and variable costs (the product’s Contribution Margin per Unit)
6. Psychological pricing
Pricing designed to have a positive psychological impact. For example, selling a product at £4.95 rather than £5.
But before we decide on the pricing strategies, a pricing objective needs to be established to achieve required goals. For this to be useful, the pricing objective management selects must be compatible with the overall goals set by the firm and the goals for this marketing program. Nestlé could adopt the following pricing objectives:
Profit Orientation
Sales Orientation
Status quo Orientation
For Nestlé Pineapple Fruit Yogurt to be successful the company first needs to capture a large market share and to do so the sales volumes need to be increased; thus, the objective is sales orientation. In order to achieve these objectives Nestlé needs to commit time and money to this marketing program in the form of a budget. The budgeting process starts with a sales forecast based on estimates of units expected to be sold-by month, quarter and year. Estimated expenses for the marketing mix activities comprising the marketing program are estimated and balanced against expected revenues to estimate the programs’ profitability. This budget is really the “sales” document presented to top management to gain approval for the budgeted resources to implement the marketing program.
Now that the pricing objectives are set, the pricing strategy needs to be decided on the following grounds:
Nestlé Pineapple Fruit Yogurt has low fat content which is a strong desired feature by target customers. As the product is unique in its characteristics, its demand is fairly inelastic. A large market exists for the product.
Substantial reductions in unit costs can be achieved through large scale production (economies of scale). The product is protected from competition through patents and high plant and equipment costs.
Given the conditions neither a complete market-skimming pricing strategy nor a strict market-penetrating pricing strategy would best suit the pricing objectives of Nestlé Pineapple Fruit Yogurt. Instead, a carefully selected price – neither too low nor too high – would allow us to harness all of the product’s market potentials. The price would be higher than the market-penetrating price level but would still accomplish in penetrating the mass market immediately and, in doing so, generate substantial sales volume and a large market share. The price will not be too high either so as to
only generate lump sums of profit, but will serve its purpose of profit generation. But for this ‘Mesh’ pricing strategy to achieve its goal Nestlé needs to reduce its selling costs by minimizing its production costs which can be achieved through economies of scale (limit pricing). We recommend the price to be:
Rs.39 for Large size
Rs.25 for Medium size
Rs.10 for Small size
3. Promotion Strategy
It would be safe to say that most companies engage in some form of promotional activity every day of the year. Promotion is one of the four Ps of marketing—price, product, place, and promotion. Promotion is generally thought of as a sequence of activities designed to inform and convince individuals to purchase a product, subscribe to a belief, or support a cause. All of the various tools available to marketing managers for promotional activities constitute what is known as the promotional mix. Launch of a new product into the market is usually accompanied by an aggressive promotional campaign. The objective is to make people aware of the new product, its distinctive features and want satisfying capability. It also aims at outshining the competition and forcing the customers of the existing brands to switch to this new product. After designing our new pineapple yogurt, we set out with the task of promoting its distinctive features. It is an addition to the Nestlé’s fruit yogurt series but is better then the earlier introductions in the following ways:
Pineapple flavor (a new one)
99% fat free.
Available in the packs of varying sizes (small Rs.10, medium Rs.25, and large Rs.39). An attractive and convenient packaging.
Reasonable prices of all yogurt packs.
Promotional mix of pineapple yogurt
Marketing managers use different components of the promotional mix as tools
for achieving company objectives—advertising, personal selling, public relations, and sales promotion. Each of these elements can be further divided into additional subcomponents or strategies. The majority of a company’s promotional resources are usually spent on these four elements for a simple reason: Companies perceive these methods as the most effective means to promote their products. In the introductory stage of the life cycle of a product, the promotional campaign should serve the following purposes:
Informative
Aggressive
To accomplish these goals, we have planned to utilize every possible and available media of promotion because this will help ensure the success of our innovation.
Advertising
An identified sponsor often thinks of advertising as the paid, non-personal communication used in the promotion of a cause, idea, product, or service. The various advertising delivery methods include banners at sporting events, billboards, Internet, web sites, logos on clothing, magazines, newspapers, radio spots, and television commercials. Among the common forms of advertising are advocacy, comparative, cooperative, informational, institutional, persuasive, product reminder, point-of-purchase, and specialty. For the selection of an appropriate advertising media for our new product, we will carry out a “media analysis” which is defined as: “An investigation into the relative effectiveness and the relative costs of using the various advertising media in an advertising campaign” We believe that before committing an advertising budget it is necessary to carry out marketing research on:
Potential customers.
Their reading habits, television-watching habits.
How many times do we wish the potential customers to see an advertisement? How great a percentage of the market we wish to reach, etc.
These elements all need to be considered and balanced to plan a campaign that
will effectively reach its target audience at a reasonable cost. After the analysis, we will resort to the following two media.
Published media
Following are the forms of published media we suggest to be used for advertising the new product.
National daily newspapers
Sunday newspapers
Local and regional newspapers
Consumer magazines
Specialist magazines
Catalogs
Trade and professional press
Internet
We will make sure that our posters and advertisements have their place in every ordinary or famous magazine and catalog as we are targeting every age group and people belonging to every income-level and socio-economic status. Also, there is no active website of Nestlé Pakistan, we recommend that a website of Nestlé Pakistan should be launched which includes the all product lines of Nestlé available in Pakistan. Following is a poster designed by us for the promotion of our new product – Nestlé Pineapple Fruit Yogurt.
Visual and aural media
Visual and aural media promotion will include:
Television (terrestrial and digital)
Radio
Cinema
Billboards
Transport
Direct mailing
Our message regarding the pineapple yogurt
Our logo
Sales promotion
Sales promotions are marketing practices designed to facilitate the purchase of a product that do not include advertising, personal selling, or public relations. Companies use sales promotion for a variety of reasons; (1) to attract new product users who will hopefully turn into loyal consumers who keep buying the product; (2) to reward existing consumers with a price reduction, thereby maintaining their loyalty; and (3) to encourage repeat sales from occasional consumers. Companies use a variety of sales promotion tactics to increase sales, including advertising specialties, cash refund offers/rebates, contests and sweepstakes, coupons, patronage rewards, point-of-purchase displays, premiums, price packs/cents-off deals, samples, and trade shows. Trade shows
Most industries hold conventions and trade shows each year to show off new technology, assess consumer trends, and review other issues important to the industry. Trade shows provide firms that sell to a particular industry an excellent opportunity to promote new products, make new contacts, renew existing business relationships, maintain or build a reputation, and distribute promotional materials. Considering this means an effective way of promotion, we set out to become a part of an extravaganza organized by Bahria University. On this occasion renowned fast food chains, national and international airlines, consumer goods and service companies will be promoting and selling their products and services. We have already bought a stall and now are busy making captivating posters and charts for the presentation of our innovation. We are hopeful that this mega event will turn out to be an effective promotional platform for us. People in scores will come because of the big names (sponsors) associated with this trade show and will actually get to experience the taste of our pineapple yogurt.
Samples
We have decided to distribute free samples of our innovation to the visitors of the extravaganza. We will also use delivery methods, which include
mailing the product, passing the product out in stores, or door-to-door delivery. The largest drawback of free samples is their high cost. However, we expect that the associated sales will offset the initial cost of the free samples.
Advertising specialties
We will frequently create and give away everyday items with our printed name and logo such as caps and coffee mugs on the extravaganza and elsewhere.
Premiums
A premium is a good offered free or at a low cost to encourage consumers to buy a particular product. In order to stimulate the demand of our product on special occasions such as ramzan, extreme summers, eid-ul-fitr and azha, we will offer products for free with it e-g if we consider the smallest pack of rupees 10 then the offers accordingly will be:
In Ramzan – Pineapple Fruit Yogurt with the pack of pakora mixes – R.20 only (5 Rupee discount). On Eid-ul-Fitr – Pineapple Yogurt with the pack of Sawayan – Rs.25 only (7 Rupee discount). On Eid-ul-Azha – Pineapple Fruit Yogurt with the pack of Tikka Masala – Rs.17 only (4 Rupee Discount).
Personal selling
We consider personal selling one of the most effective promotional techniques because it facilitates interaction between consumer and seller. With personal selling, a salesperson can listen to and determine a consumer’s needs by asking questions and receiving feedback from the consumer. Furthermore, personal selling activities can generate long-lasting friendships between consumers and sellers that typically generate many repeat purchases. Our sales manager has entrusted the sales representatives with the task of selling pineapple yogurt door-to-door, telling people about its distinct features such as new flavor, low fat contents, nutritive value, hygienic factor and varying sizes of rupees 10, 25 and 39 respectively. Apart from this, we are also training the sales representatives of the retail stores where we are displaying our product. We are briefing them about our messages, logos, 99% fat free feature and ingredients of our
yogurt so that they convey this information to customers and interact and cater to their needs in the best possible way.
Public relations
Public relations has been described as building goodwill with a company’s various publics, including consumers, employees, government officials, stockholders, and suppliers. The overall goal of any public relations effort is to project a positive company image when dealing with such issues as community and government relations, employment practices, and environmental issues. Keeping this fact into consideration, we are striving to have good relations with all of the following.
Consumers
We believe that public relations efforts are extremely important for maintaining a company’s consumer base. We make sure that our consumers believe that they are buying from a caring, honest, and trustworthy company. We strive to avoid negative media stories about, for example, exploiting workers or producing substandard products which can do enormous damage to our company in the eyes of consumers and erosion of a company’s client base is likely to result in both lost sales and lost market share.
Employees
The most valuable asset of our company is an employee. Therefore, it is essential that they believe in us. Public relations communications are extremely important in ensuring that employees receive information about the company before outside media receive and report the information. A good example of providing superior public relations would be to inform company employees that a small reduction in the work force is required but that a full severance package will be provided for laid-off employees. Although this news is not positive, the employees are hearing about it first from the company and are also aware that they will be receiving assistance from the company. If employees read or see negative reports about the employer without credible public relations explanations, they may find other work or reduce their productivity because of low morale.
Government officials
Maintaining a positive public image is also important because government agencies and offices (e.g., Federal Trade Commission, Federal Communication Commission) monitor the media and have regulatory oversight over company activities. Positive stories in the media obviously help promote a positive image to government regulators, which reduces the chance of being investigated and possibly fined. The opposite is also true: Stories about client complaints or other dishonest practices or potentially illegal actions will draw the government’s attention and probably some sort of investigation—something that no company wants. An investigation can drag on for months, even years, providing even more negative publicity. Even if the government regulators find no wrongdoing, the public is still likely to be skeptical because the company was investigated. Therefore, we make our best effort to answer any questions that regulators have regarding negative media stories or consumer complaints. Our well-organized public relations department wards off potential trouble by being honest, friendly, positive, and helpful to government regulators and members of the news media.
Suppliers
Positive public relations are essential for a company’s relation with its suppliers. Suppliers are most concerned about being paid for the product they are selling to a company. Since our suppliers are generally not paid until ten to twenty days after delivery of the raw material or product, they don’t make a fuss because of their faith in our ability to pay the bills. But any negative news regarding our financial position in the absence of a full and complete explanation from our public relations department may result in a damaged reputation with suppliers. Suppliers could stop shipping their products or demand that payment is made at the time of delivery. Neither option is appealing to us, and both could cause critical delays in getting our products to market. In order to avoid such trouble, we do our best to maintain our positive position and goodwill in the eyes of public. 4. Place (Distribution) Strategy
Distribution channels can be viewed as a ‘pipeline’ to the market. Like a physical pipeline, your channels can be too narrow to provide the flow of
revenue you need – they can be clogged with conflicting product lines or agendas – they can be piped to the wrong customer set – or they can be filled with impurities, resulting in a poor quality product or service to your customer. The net result is lower revenue and higher sales and marketing cost. Sometimes, new products fail because the channel could not do the job. Each of these pipeline blockages is a dimension of your channel capacity which is a function of coverage, competency, connection and commitment.
Presently, the distribution seems just fine and no proposal needs to be made to alter the distribution channel in any way. But there is a problem with the retailers shelving ability. Like its previous contemporary Fruit Yogurts, this product also has to be kept at a temperature between 0-4 degrees and hence requires good chillers (refrigerators) for storage at retail stores. Nestlé must provide retailers with appropriate sized chillers having effective temperature maintenance.
Nestlé needs to make sure that no one leaves the factory without a sample whether its delivery persons, meter readers etc. We need to be free with samples, give them to people walking past restaurants or inside the departmental store because it is proven by an expert that whatever you give away comes back to you manifold.
Our choices of marketing outlets have come about largely by trial and error. In the process of trying out various avenues we have settled at this point that grocery stores works well for us. The easier it is for our customers to get our product the more they will be able to buy. We have tried to add stability to our operation by selling our products through several different outlets. It feels better not to have all our eggs in one basket, as things can always change unexpectedly, and each outlet supports the others by increasing our visibility and hence customer familiarity. The big advantage of selling through stores is the relatively steady income and the volume of sales possible with comparatively little time expended on our part. Each week we stock the shelves ourselves, buy back any product that didn’t sell by its due date (called a buy back guarantee).
12. Teachers Comments
