Kellogg’s – Product Range Filling

Last week I made a post about Domino’s Pizza and brand stretching; this week, however I want to discuss the complete opposite: product range filling.  One of the world’s most recognisable cereal producers, Kellogg’s, have just announced a new brand of cereal to join their product range.  ‘Mini Max’ is a cereal positioned as a healthy breakfast that is particularly appealing to young children – it is low in saturated fat, salt and sugar, while also high in fibre.

Unlike Domino’s Pizza’s plans to extend into gourmet pizzas, Kellogg’s have decided to launch a whole new brand (the alternative approach would be to modify an existing cereal, Frosties for example, and make a healthier version, possibly ‘Frosties-light’ or ‘Frosties-fibre’).  Moreover, they are targeting the same market.  This is not lowering their product range to a budget-consumer nor is it a premium product – the new brand, Mini Max, will have similar pricing to Kellogg’s’ other cereal brands.

The benefit of creating a whole new brand identity to market the healthy cereal is that it is much easier to convince the target market of the product’s benefits.  While Domino’s Pizza will have difficulty in trying to get customers to change their perception of the firm as high-quality, by creating the new brand – ‘Mini Max’ – a separate identity has been created from Kellogg’s’ other products.  Hence, no matter how much junk is packed into their other products, parents are unlikely to be deterred from purchasing Mini Max; consumers have no pre-conceived perceptions.

However, there is a drawback to product range filling.  Namely cannibalization; this is where a new product does not increase total sales but instead steals sales from the other items in a firm’s product range.  This could easily happen with Kellogg’s.  Not only does the firm plan on the Mini Max brand becoming worth more than Frosties, the new healthy cereal may prompt parents to re-consider purchasing their normal cereal over health concerns.  It is this habitual buying behaviour that is vitally important for Kellogg’s to create cash-cows, like Frosties.

Although Domino’s Pizza also risks cannibalisation, this is far less of a problem with upward brand stretching.  Albeit cannibalisation may mean few new consumers are attracted, if existing customers suddenly start purchasing the pricier gourmet pizzas, overall sales will still increase.  The worst damage cannibalisation does is during a downward brand stretch; consumers start paying less than before for similar products.

Ultimately, these past two weeks show two different examples firms can use when introducing new products.  Although they both have their drawbacks, I personally think that product range filling, undertaken by Kellogg’s, is a far less riskier strategy that is more likely to work.

© Joshua Blatchford, author of Manifested Marketing, 24/08/2011

Domino’s Pizza – Brand Stretching

Domino’s Pizza is the U.K’s largest pizza delivery chain with almost one thousand franchises across the country.  Hitherto, the company has benefited from cash-strapped consumers staying in and ordering a take-away meal, rather than eat out at an expensive restaurant.  This, and the growth of online ordering through their website and smartphone apps, has helped boost sales by 9% this year.  However to keep this momentum rolling, Simon Wallis – marketing director – has decided to introduce gourmet pizzas aimed at the up-market consumer.  This is an example of an upward brand stretch: expanding a brand into more expensive, higher quality product ranges.

But will middle class consumers be prepared to pay for a premium take-away?  Will they even want to purchase from Domino’s Pizza?

The benefits are pretty straight-forward.  By focusing on a more upmarket consumer, the company can charge higher prices and increase their profit margins.  Moreover, the new product range will be great for the company’s reputation; a new product is far more effective than any advertisement, PR or branding at convincing consumers that the firm produces high-quality products.

This is particularly important for Domino’s Pizza, who are infamous for selling greasy pizzas to students and teenagers.  Hence, by launching a new range pizzas – which are easily distinguishable from their old menu, made from healthy ingredients and use thin crusts – they may find their brand image improves as the more affluent market become regular users.

However, brand stretching is a very risky business strategy – just how far can a brand stretch?  That is a question marketers at Domino’s Pizza must have thought long and hard about.  The problem with focusing up-market is that any company still has its old brand image associated with any new product ranges; this is bad news for Domino’s Pizza.  The firm’s brand image has never been good; consider the YouTube scandal a couple of years ago.  Can the firm convince this new market segment that the firm produces luxury pizzas?

The main problem is I am not sure that the new product range of gourmet pizzas is enough to convince the premium market that the firm can produce high-quality pizzas, even if it can.  The mistake I feel Domino’s Pizza have made is that they have focused too heavily on the product.  Although the actual product is the single most important factor in creating a brand image and is often over-looked, I feel that in this case other branding issues have been forgotten about.

For instance, the ‘People’ aspect of a service.  The company has given no thought to the delivery of these new gourmet pizzas.  Hence, when you pay a premium price for your luxury pizza, you will still receive it in a cardboard box from a man who arrived on his scooter, wearing an awful looking company cap.  It is hardly a service that boasts ‘luxury’.  Thus, although the pizzas may be amazing, this is irrelevant if everything else from the brand image to point-of-sale reminds the consumer of standard take-away food.

Ultimately, Domino’s Pizza have been very successful up to now at focusing on the budget range of the market.  They do particularly well at selling to students!  This makes me wonder why this brand stretching is necessary.  All good marketers know that true marketing is about building relationships with customers; these are highly profitable.  Hence, the company would be better off trying to retain their current customers, rather than trying to attract new up-market consumers.

Do you feel Domino’s Pizza have a good brand image?  If so, do you feel this is good enough to move up-market?

© Joshua Blatchford, author of Manifested Marketing, 19/08/2011

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