Marketing Strategies – Breakfast Cereals in Australia

Healthy Co. Pty Ltd is a food processing organisation located in Queensland, Australia. ‘Nutri Mix’ breakfast cereal is the product developed by the company for this market and it’s focused on nutrition and healthy life choices. The initial research was focused on six local macro-environment factors that could potentially impact the product.

The factors in favour of marketing such a product on the Australian market reside in an aging population as proportion of total population, forcing the government to focus on nutrition as a means to slow down health care expenses (IGR, 2004); the local market being a stable and developed one; the country’s technological development enabling advanced marketing and logistics techniques; and an increased concern for 21st century nutrition trends, pointing to an alarming growth rate of child obesity. Between 1985 and 1995 the child obesity grey almost 50% in both genders (Parliament of Australia, 2006)

Target market. Demographic segmentation refers to the process of dividing the market into groups based on variables such as age, gender, income, occupation, education, religion, race, nationality, family size, etc. Age is an important demographic variable for ‘Nutri Mix’ as the product will target certain segments that are more likely to consume healthy food products. The logic behind using age as a segmentation variable is the fact the consumer needs and wants change as they grow older and marketers need to design products, packages and promotions to meet these needs and wants.

The healthy breakfast cereal product will focus more on children – 3 to 12 years old and senior adults – above 65 years old. The children segment is chosen due to the parents’ increased concern regarding child obesity in Australia, whereas the senior segment is chosen due the government’s increased concern for growing health care expenses generated by an aging population and a shrinking taxation base generated by a slow down in natality rates. Gender is another relevant variable for ‘Nutri Mix’ market segmentation.

This variable is widely used in consumer marketing, mostly in clothing, cosmetics or toiletries. However, given that one of the main age segments targeted by the breakfast cereal refers to children, the product’s specifications, package and promotional activity should focus on the female segment as they hold the buying decision. Behavioural segmentation consists of dividing customers into groups based on the way they respond to, use or posses knowledge regarding a product. Occasions can be used to group consumers into different segments.

For instance, Kelloggs, one of the largest breakfast cereal producer worldwide, encouraged its consumers to eat its products on the occasion of getting up. One other behavioural variable refers to the product’s benefits. In this case, the benefits are related to the health and well being of the consumer. ‘Nutri Mix’ is recommended for people with weight problems, as well as people with healthy eating habits. Psychographic segmentation refers to the process of dividing the market into groups based on variables such as social class, lifestyle or personality type. Nutri Mix’ is a product designed for the middle class in Australia and with a healthy life style (individuals that practice outdoor activities, individuals that spend a lot of energy and individuals looking to improve the state of their health). Personality type segmentation can be useful at a later point in time for designing targeted promotional activities. However, in the beginning this variable will not be considered relevant for the market segmentation. Geographic segmentation consists of dividing customers into groups based on variables such as region of the country to or rural/urban area in which they are located.

The breakfast cereal product will be launched in Western Australia, more specifically Queensland, third state in the country as size of the population with 4,35 million inhabitants (Queensland Government, 2009). Marketing objectives The marketing objectives for ‘Nutri Mix’ refer to product awareness, target market and market share. The company is aiming to increase product awareness through intensive targeted promotional campaigns over a period of 6 months. The target market refers to the senior consumers and children.

Thus, the promotional campaigns will target female adults fitting the mother profile, seniors and nutrition consultants. The product awareness will be increased via multiple channels, both with above the line and below the line sales promotions. The company also wishes to reach a market share of 5% from the breakfast cereal segment within the first 6 months of launching the product on the Australian market. This segment is dominated by Kellogg’s, which is also one of the largest breakfast cereal marketers worldwide. However, most of the products in this category are not very healthy.

A study made by CHOICE on 152 breakfast cereals suggested that “Most breakfast cereals contain far too much sugar, salt or both to be healthy choices for everyday eating, while cereals aimed at kids can be among the worst for nutrition” (CHOICE, 2009). The marketing mix Product This strategy pays respect to the characteristics of the final product, namely the extent to which it matches the customer requirements, the quality, the brand name, functionality, styling, safety, packaging, warranty, reparations & support and accessories & services (NetMba. com (a)).

The same CHOICE study mentioned previously identified 4 dimensions that Healthy Co. Pty Ltd should consider for ‘Nutri Mix’: dietary fibre, saturated fat, sugars and salt. ‘Nutri Mix’ will have a high content of fibre, low saturated fat content even when the recipe contains nuts, relatively low sugar and low salt. The content of sugars and salt will be carefully control, as these represent the main concern in children nutrition. Thus, sugar can contribute to tooth decay and has a major contribution in gaining weight. Salt has been linked to high blood pressure, which can lead to heart diseases and stroke. Nutri Mix’ will be developed as a range of healthy products, including: (a) simple muesli cereals, dried fruit muesli cereals, nuts muesli cereals (such as Brookfarm Natural Macadamia Muesli – nuts content); (b) simple muesli bars, dried fruit muesli bars, nuts muesli bars (such as the Carman’s range of breakfast cereal bars range); (c) wheat biscuits (such as Weet-Bix and Weet-Bix for kids); (d) puffed rice cereals (such as Abundant Earth Organic Puffed Rice); (e) puffed corn cereals (such as Abundant Earth Organic Puffed Corn); and (f) instant oat meals with various flavours.

The package will be designed to look appealing on one hand to children and mothers and on the other side to senior consumers. Also, the company will consider the environmental implications and design a package that is easily recyclable, but in the same time it properly preserves the content, the feature of environmentally-friendly being almost a mandatory requisite in a country in which 62% of adults (8. 9 million people) stating to be concerned about environmental problems (Australian Bureau of Statistics, 2004). Thus, the uffed rice and corn cereals, which are mostly for children will have a package displaying a licensed character or a movie theme and containing either a cartoon drawing (e. g. Tony the tiger) and/or an activity or promotion directed to children (e. g. collect stickers). All the bars will have the packaging in lively colours as they stand for energy, which is associated with these colours. However, the designing will consider matching these lively colours with the usual colour set displayed on the rest of the products. The rest of the products will adopt packages matching with the children and cereal bar styles, but in weaker shades.

The material used for packaging will be mostly paper as it might be an optimal solution from the environment point of view for both the package per se and information about nutritional content. The package for all consumers will display the nutritional content according to the latest food regulations. Packages will be coded for food-related claims, including here the food authorities and other contributors, such as the national heart associations. Product differentiation will be considered a strategic competitive advantage for Healthy Co. Pty Ltd as the Australian market if a mature one in terms of general breakfast cereals, but not on the healthy products niche. Price This strategy refers to the approach that the management will have vis-a-vis prices, discounts or financing. The pricing strategy has to be planned carefully because it is the one that supports the cost structure.

Example of pricing decisions include: pricing strategy (e. g. skimming), bundling, price discrimination, price flexibility, cash discounts, early payment discounts, suggested retail price, seasonal pricing, volume discounts and wholesales pricing (NetMba. om (a)). According to NetMba. com (b), pricing objectives can be categorized as: ? Current profit maximization. This objective seeks to maximize current profit taking into account revenues and costs. However, this objective might not be ideal if it results in lower long-term profits. ? Current revenue maximization. This objective seeks to maximize current revenues, regardless of the profit margins. In the long-term this objective aims to maximize profits by reducing costs and increasing market share. ? Maximize profit margin.

The objective seeks to maximize the unit profit margin at the expense of quantity, which is lower than usual. ? Partial cost recovery. This is an objective that might have interest for an organization that has other revenue sources. ? Maximize quantity. The objective seeks to maximize the quantity of products/services sold or the number of customers in order to reduce costs in the long-term as predicted by the learning curve, also known as the experience curve. ? Quality leadership. Use price as a tool to designate high quality and position the product as a quality leader. Survival. Whenever the market situation is in decline or at overcapacity, a company may choose a pricing level that covers the costs and allows it to remain in the market even though the profits may be affected. This is usually a short-term strategy. ? Status quo. A company may choose price stabilization, thus avoiding price wars and maintaining a moderate profit level. ‘Nutri Mix’ will be positioned as a medium priced product, just like other healthy breakfast cereal products on the market, such as Weet-Bix from Sanitarium Health Food Company.

The product won’t have a line of cereals for specific medical problems (e. g. gluten free), so there won’t be any highly priced product in the initial phase. Some of the most common price strategies refer to predatory, penetration and skimming pricing. The first refers to selling the products at a very low price meant to drive competitors out of the market or create barriers to enter the market, while the second refers to setting lower prices for the products in order to attain a larger, if not dominant market share.

Generally, penetration pricing is used when entering a new market or attempting to increase a relatively small market share. The strategy requires high demand elasticity, so that the demanded quantity for the product using the strategy changes easily when its price changes. Skimming prices strategy involves adopting a relatively high price for a product at first and a lowering of the same price over time, thus allowing the company to recover its sunk costs faster (Wikipedia, 2009).

Considering that healthy products are prices slightly higher than normal food products in most existing markets, ‘Nutri Mix’ will also fall in this category and be prices above the normal breakfast cereal in supermarkets, but at the same level with competing products on the health food niche. Therefore, skimming prices is the strategy that will be adopted initially by the company. Place This strategy refers to the establishment’s location, the logistics, market coverage and infrastructure endowments (e. g. internet).

Distribution-related decisions include: distribution channels, warehousing, transportation, inventory management, market coverage, reverse logistics, order processing and distribution centres (NetMba. com (a)). Some of the most common distribution channels available to companies can be defined as below: ? Direct selling. It implies selling the products/services by dealing directly with the customers, rather than use intermediaries. Traditional methods include telephone selling, mail order or door-to-door selling.

Recently more methods have been developed including telemarketing, online shopping or radio selling. In the 1990s, direct selling was increasing a lot in Australia as was all over the world. The results of a consumer survey study indicated that consumers had a negative perception towards network marketing, while holding a low positive view of direct selling (Kustin & Jones, 1995). Despite relatively positive results regarding direct selling, this is not seen as an appropriate distribution type for food products, ‘Nutri Mix’ being included here. Advertisement. Advertisements are strongly related to advertising. Advertising is a form of marketing communication through which customers are persuaded to purchase and buy more of a brand or products/services. Advertisements are the adds that support the advertising activity and they are created to increase consumption of the a given product/service or reinforce brand image or brand loyalty. For distribution purposes, advertisements are usually used for consumption goods, ‘Nutri Mix’ falling in this category.

However, this will be discussed further in the promotions section of the 4Ps. ? Distributor. A distributor is a company that markets or sells merchandise, especially a wholesaler. It is also the company that sells to the retailers. ? Retailer. Retailers are companies that sell directly to the consumers and can range from large businesses such as Wal-Mart to small businesses such as non-chain locations managed independently, like a family bookstore. ? Agent. Agents usually sell on behalf of the producer and work on commission.

Given that Healthy Co. Pty Ltd is just entering the market with a brand new product, the company won’t have the capacity to handle a distribution channel with a few links (e. g. distributor for a large retailer). Therefore, the distribution will be done via at least one distributor and one retailer. The products will get to the consumer through a large retailer, although later on the company will consider distributing its healthy products through small healthy food shops. Promotion This strategy refers to the advertisement, the promotions used to attract customers, the direct sales, the overall sales activity, the public relations and media.

Promotion-related decisions refer to: promotional strategy (e. g. push or pull), advertising, sales promotions, sales force & personal selling, PR & publicity and marketing communications budget (NetMba. com (a)). According to About. com (2009), integrated marketing communication (IMC) is a “management concept that is designed to make all aspects of marketing communication such as advertising, sales promotion, public relations, and direct marketing work together as a unified force, rather than permitting each to work in isolation”.

The integration of all promotional tools is meant to maximize impact on consumer mind and minimize costs. IMC is important because it allows companies to design campaigns that are both effective and consistent across multiple media platforms and/or types. It can be distinguished between audio/visual media and published media. Audio/visual media includes television (terrestrial and digital), radio, cinema, billboards, transport, direct mailing, while the published media includes newspapers (national, local, regional), magazines (specialist, consumer), internet and trade & professional press.

Each media type has its advantages and disadvantages and marketers should be aware of those when designing their marketing campaigns. It can also be distinguished between advertising, sales promotion, public relations, personal selling and direct marketing in terms of integrated marketing communications or better said the marketing communications mix. Advertising is “a non-personal form of promotion that is delivered through selected media outlets that, under most circumstances, require the marketer to pay for message placement” (KnowThis. om, 2009). Sales promotion refers to short-term incentives to boost the sales of a given product/service. Public relations (PR) refer to the building of good relations and company image with the company’s “public”. Personal selling includes presentations made by the company’s sales force in order to build relationships and increase sales. Finally, direct marketing handles direct communications with targeted individuals with the purposes of obtaining a direct response and building strong relationships.

Healthy Co. Pty Ltd will adopt an IMC budget to cover advertising, sales promotions and some PR in the initial phase. The advertisements will be placed in supermarkets and the advertising campaigns will be done in the internet and health-related print media. The sales promotions will cover each product line at the time to give customers a change of trying each product line with a buying incentive before becoming used to them. The PR will focus on the health benefits of consuming ‘Nutri Mix’ and the environment aspects. Conclusion Nutri Mix’ is a breakfast cereal mix of products focused on healthy eating habits for mainly children and senior consumers. Product awareness is an important goal for the company is ‘Nutri Mix’ is its market entering product in Australia. Targeting a specific market gives the company the ability to compete better on a very mature market (that of breakfast cereals), while setting the market share goals to 5% within the first 6 months, should tell the manufacturer if the products are viable or not for this type of market.

The product will be split in more categories, some more directed to children, others to the entire market, while the promotional activity will be focused on target sub-segments depending on the product content. The pricing strategy will be a skimming one to enable the company to recover partially or totally its sunk costs. The distribution will be done via at least one distributor and one large retailer in the beginning with the possibility to extend to small shops in a future stage. The promotional activity will focus on advertising, sales promotions and some PR in the initial phase.