Executive Summary:
This report is based upon the chocolate confectionary market in particular it is dealing with Kit Kat that is a product of Nestle. Further more the report will include; the situation facing Kit Kat within the chocolate confectionary market, the marketing strategies Kit Kat adopt to obtain maximum customer satisfaction and profitability, the effects European integration will have on the brand and also future recommendations that will help Kit Kat to stay ahead of the competition with threats coming from Cadbury’s, a rival chocolate confectionary company, who have just launched a new product called ‘Time Out’ that is similar in ways, mainly it’s wafer thin base, to Kit Kat.
The results of these findings were as follows:
* Kit Kat markets it’s product in two different formats (two finger format and a four finger format) that are promoted and marketed differently. This is to cover more than one market segment, but the consumer does not seem to be able to tell the difference.
* The chocolate confectionary market is very competitive so Kit Kat will have to keep inventing new ideas and strategies to stay leader in the market.
* Kit Kat’s organisational structure is Functionally organised: where functional specialists head different marketing activities and it also has a Product Management Structure: using this approach a manager develops and implements a complete strategy and marketing programme for a specific product or brand. (Kotler pg116)
After assessing Kit Kat’s strengths, weakness’, opportunities and threats recommendations can be made on how to defend the company against Cadbury’s introduction of a new product and other elements:
* Kit Kat could introduce new brand flavours like the Limited Edition bars: Orange flavour and Mint flavour. Due to the fact that these were well received while on limited edition it is predicted that they will be well received by the consumer if they were realised as a full product and also promoted well.
* The introduction of a larger more hunger satisfying chocolate bar that could compete with Mars Bar and also wear off the threat from the Cadbury’s Time Out bar.
* When going further into the European market Kit Kat should adopt a Geographic marketing organisation where sales and marketing people are in charge of different countries and regions. This will allow the sales and marketing people to get to know their customers and also work with a minimum of travel time and cost.(Kotler pg. 116)
* To fit in with today’s more healthy consumer it is proposed that Kit Kat develop a new healthy Kit Kat brand that could be for people on the move that do not have time to eat a proper meal but want to keep healthy and fit and this could open up a new target segment for Kit Kat.
Introduction:
Snacking is a common occurrence in today’s society. With a large range of products being offered with different marketing strategies behind each one, competition is fierce in a continually rising market. Nestle Kit Kat that has been around since 1935 and has been Nestle Rowntree’s biggest brand since the 1950’s with other Rowntree brands being Polo, Rowntree’s Fruit Pastilles and many others. With the chocolate biscuit market having grown by 20% in the past five years company’s are now more than ever having to be continually in touch with customer needs and wants and with Kit Kat’s main brand strategy believing in offering consumers value for money this puts them in good stead for the future. But the pressure will continue to be on Kit Kat being market leader as the chocolate confectionary countline market has seen new products being introduced like the entrance of Fox’s Rocky bar that has already claimed 4.1% of the market and the release of Cadbury’s Time Out bar in Ireland. With the increase in the amount of competition in the market Kit Kat are going to have to be more innovative and will have to step up their quest to give consumers ultimate value for money and their objectives for the future are as follows:
* Increase sales across all of the European markets
* To become obvious leader in the UK confectionary market
* Generate genuine growth in the profitability and productivity of it’s confectionary business
* Increase efficiency of it’s supply chains so therefore improving customer service
The later of these bullet points is a primary example of the drive that today’s companies should be aiming for. Customer satisfaction is the main aspect of a profitable company and a non-profitable company. They are attracted by promise and held by satisfaction (Kotler pg104.) So in today’s world if a companies only goal is to sell a product and make a profit relentless to the need of the customer then the company is bound to falter. This is why Kit Kat has been Nestle Rowntree’s biggest brand since the 1950’s due to them putting the customer at the centre of the company and satisfying them so that they come back for more.
Methodology: The information about the company and the product came from chapter 3 of ‘Principles of Marketing’, Kotler, Armstrong, Saunders, Wong (1999). The book was published in 1999 so the information in it will be out of date and will therefore not give an accurate reflection of the state of the product and market today.
Contents:
Page Title Page Number
Executive Summary 1
Contents Page 3
Introduction 4
Analysis of Report 6
Conclusion 11
Recommendations 12
References 13
Appendices 15
Analysis of Case Study:
Market Situation
The market situation that Kit Kat face is one of both promise and concern. With Kit Kat being market leader in the CBCL (Chocolate Biscuit Countline) and with their drive to be number one in the market this puts them in a good position for the future but with heavy competition coming from old and new sectors of the market it will be a tough mission to keep Kit Kat market leader.
Kit Kat has a number of strategies to help make maximum profit and to also keep consumer satisfaction high one of which is the marketing and promotion of their brand. The Kit Kat brand is available in two formats:
* Two-finger format that is sold in multipacks at large grocery stores and is marketed at parents for their children’s consumption. It advertises it’s product by putting adverts on morning television that will appeal to people aged 35-44 years old with children. The two finger format is part of the CBCL (Chocolate Biscuit Countline) and is market leader in it’s field, so therefore is able to dictate the price of the market that the competition will follow, with the two finger formats main competition coming from United Biscuits and Jacobs. The promotions are grocery orientated giving promotions like one bar free with every purchase.
* Four-finger format which is sold separately in CTN’s (confectioner/tobacconist/newsagent) with 80% of the four-finger format being sold this way. The target market is for people aged 16-24 years old and to coincide with it’s target market it advertises it’s product through independent radio and trendy magazines trying to keep it’s image up-to-date and trendy with the younger generation. It is part of the General chocolate countline sector which implies personal consumption. Due to the four-finger format being third in the market behind Snickers and Mars Bar, that are two Mars product, this means that they cannot set the price for the market to follow and have to reduce it’s price to go along with Mars Bar that is market leader. Promotions for the four finger are along the lines of 1p off every bar due to the different target segments.
Kit Kat sells it’s product in these two formats to cover two market segments also the increasing power of the multiple grocers that are becoming a lot more sophisticated and powerful. Kit Kat produce different packs for the multiple grocers to avoid price comparison by the consumer and also restricts the power of the multiple retailers in their negotiations to increase their profitability. (Kotler pg134) Due to the two finger format being number on in the market this gives it an advantage in that it can dictate the price of the market where as the four finger is third in the market so it therefore has to reduce it’s price behind the market leader, Mars Bar, if it wants to compete for the number one spot.
As Kit Kat has tried to create two different format of it’s brand to cover two different market segments the consumer does not see any difference in the total brand which could put the promoting and advertising of the two products in jeopardy due to the fact that the consumer can’t tell the difference. Sale figures may fall for the four finger in years to come due to the fact that the population of 15-24 year olds declines (Kotler pg136) but as this could result in a depressing finding for the four finger market the fact that ‘the influences of the seniors as a market segment will grow over the next several decades. By the year 2000 people aged 50 or more made up 38 percent of the population and accounted for 75 percent of the country’s wealth.’ (Mill & Morrison pg361) This could open up a new target market for Kit Kat in that they could advertise and market it’s product to seniors due to the increasing number of them and the decreasing number of people aged 15-24 years old.
Competition and European integration
The chocolate confectionary market is extremely competitive and very stable. With the main competition coming from Cadbury’s that has launched a new product called Time Out that is aimed at the CBCL market. Time Out is a mixture of both chocolate bar snacks, like Twix and wafer based snacks, like Kit Kat. This could be very dangerous for Kit Kat as Time Out’s sales in the countline market steadily increase from 18 million in 1992 to 39 million in 1994 (Kotler pg137). To combat this Kit Kat will have to look at introducing new flavours and brands into the market to try and take the attention off Time Out. This factor has proven very popular in recent years with big companies like Coca Cola and Tango introducing lots of new flavours in their products to try and compete in their competitive markets.
Kit Kat is wanting to become a globally renowned brand so it will therefore have to integrate it’s brand into Europe this however does pose some problems:
* Some Kit Kat’s that are produced in Europe will have to have different chocolate than others to fit in with some regulations across Europe
* Kit Kat cannot advertise itself the same way in other countries as it does in the UK because of factors like lifestyles, cultures and language differences.
* The packaging of the brand is different in the UK than elsewhere in Europe
* The product lifecycles will be different in other countries than in the UK
For Kit Kat to integrate into Europe it cannot standardise it self due all of the differences mentioned above but there are some opportunities that Kit Kat could take advantage of in these problems. The packaging of Kit Kat is a lot cheaper in other counties than it is in the UK so this will give more money to the company. Unfortunately the cheap wrapping cannot be done in the UK due to the fact that the consumer in the UK like the wrapping that is produced for the UK so to change this may result in a fall in sales. Although some of the chocolate produced in Europe is different from the UK consumers do not seem to be able to notice the difference which could lead to easier distribution of the chocolate in Europe.
At the moment due to the large size of the company the organisational structure of the company is as such:
* Functional organisation: where functional specialists head different marketing activities, this is the most common form of marketing activity.
* Product management organisation: when a manager develops and implements a complete strategy and marketing programme for a specific brand.
The advantage of these types of marketing are that managers have close relationships with their target markets and are able to make rapid decisions. The disadvantages are that there are lots of different management levels so the employee’s are receiving lots of orders from many different types of management. Another disadvantage is that these methods of marketing are very costly with brand managers requiring assistants and assistants are required whenever a new brand is to be launched.
Other possible marketing strategies that Kit Kat could use are:
* Geographic organisation: where sales and marketing people run specific countries and regions.
* Market management organisation: where products are assigned to different product managers who work with functional specialists to develop and achieve their plans.
The Geographical organisational marketing technique I think will be the best suited to Kit Kat for their integration into Europe and wanting to become a global brand name because this technique will allow the salespeople to get used to their surroundings and to get to know the kind of customers that they are dealing with and to understand their needs and wants better. The marketing management organisation would be best suited to a company that sells only one product to many different markets but this does not apply to Kit Kat.
Conclusion:
To conclude Kit Kat’s current position in the market is at the moment relatively stable. With the sales of it brand doing well in both of it’s target markets. With the company determined to fight for it’s place in the market and with it’s drive to advance the quality of product being produced and constantly trying to improve customer satisfaction Kit Kat is going the right way about leading the market. The move to expand into Europe should increase the companies suppliers and distributors links and also globalise the brands name. However, there are threats and weakness’ within and around Kit Kat at the moment.
With the main threat coming from the launch of Time Out that is trying to combine two popular snacks: Kit Kat and Twix to produce a new exciting product that gives the consumer the best of both worlds. This could take a lot of sales away from Kit Kat so they will need to act fast to take away the threat. The balance between strengths and weakness’ is marginally equal but because of Kit Kat’s number of opportunities that it has the strengths should soon out way the weakness.’ The brands marketing strategies are suited for the type of marketing that they are doing at the moment but with the change in the brands objectives then the objectives will have to change aswell. For example at the moment a functional and product management organisation is put in place but when the brand integrates into Europe it will have to change it’s strategies to accommodate the type of market that they are wanting to satisfy.
Recommendations:
It is after analysing the details on Chapter 3 of ‘Principles of Marketing’ that I can provide suitable recommendations for Kit Kat’s future:
* When integrating more into the European market a Geographic marketing strategy should be deployed to fit in with the different types of cultures and consumers that will be encountered. This type of marketing will give the salespeople a better view of their consumers so will therefore be able to understand and interpret their needs and wants more suitably.
* The introduction of a new kind of Kit Kat that is more hunger satisfying to challenge Mars Bar and also compete with the launch of Time Out. This new product should be priced relatively the same as Mars Bar to try and compete with at seeing as it is market leader.
* The introduction of a variety of new brand flavours should be implemented. This type of marketing has been implemented with big companies like Coca Cola and Tango and has proved to be a hit. Kit Kat should start with releasing the two Limited Edition bars that were previously released and were received very well. It these prove a great success it should conduct test to see what the consumers want as their next flavour.
Appendices:
SWOT Analysis of Case Study:
Strengths
* Kit Kat has a good image in the UK
* The two finger format is market leader
* Kit Kat spends an average of 10% of it’s total sales value on advertising which is the largest expenditure in the market
* Two Limited Edition Kit Kat’s that were brought were a success
* Sells it’s product in two different formats to cover two different target markets
Weakness’
* Kit Kat has tried to distinguish between the two formats that it sells but the consumers don’t seem to notice
* Four-finger format is not the market leader so cannot dictate the price in the market
* The number of people from the age of 15-24 years old is decreasing this will have a negative effect on the four finger format as this age group is the one that the four-finger market targets
* Has to develop new strategies for integrating into the European market so that ultimate customer satisfaction is achieved
Opportunities
* Outside the UK more people buy the four-finger format than the two-finger format
* Consumers can’t tell the difference between the chocolate that is different in other countries
* Release the Limited Edition Kit Kat brands that were so well received when they came out
* There is a 20% growth in the chocolate confectionary market in the last five years
Threats
* New product development from competitors like the Time Out bar from Cadbury’s
* The cost of establishing new brands has increased
* Competition coming from small brands and grocery retailers’ own labels
