All posts tagged Range

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

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by Josh on August 24, 2011  •  Permalink
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Posted by Josh on August 24, 2011

https://manifestedmarketing.wordpress.com/2011/08/24/kelloggs-product-range-filling/

Rockstar Energy Drinks – Product Line Filling

AG Barr – the parent company behind drinks such as Irn Bru, Tizer and Rockstar energy drinks – has recently announced the launch of ‘Rockstar Pink’.  This is supposed to be the first energy drink on the market that specifically targets female consumers.  They have segmented this market as the health-conscious  female who requires an energy kick; hence, the product contains only 10 calories, zero sugar and  smaller can size.  It also comes with a straw, according to the firm’s website, that means girls’ lipstick will not get smudged.  This form of market penetration is known as ‘product line filling’, where the depth of their product portfolio is increased by offering consumers greater variety.  Although AG Barr plans to use extreme sports sponsor ship and sampling at sports events, I am pessimistic that the drink will be a success.

Albeit they have identified an untapped niche in the market,  I believe they are still being too broad in their targeting.  They are attempting to target the product for sports and for nightlife usage – occasional segmentation should focus on one occasion and one occasion only, such as Coca-Cola’s recent repositioning.  The risk is that by attempting to appeal as both a sports product and for leisure use, Rockstar Pink becomes positioned by consumers as unsuitable for neither occasion.  If you look at the width of Lucozade’s product range, which has had a far greater market dominance, you can see the  differentiation between Lucozade ‘Original’ and ‘Sport’.  I feel a much more appropriate strategy would be to focus purely on recreational usage and compete with mixed-drinks in nightclubs by positioning the product as a healthier alternative to vodka and Red Bull/Coke.

Another potential pit-fall, I believe, could be the packaging of the product.  While this is seemingly straight-forward: take an ordinary can, make it smaller and then make it pink, it is integral to competing with other products at the point-of-purchase and portraying the benefits of the product.  On the one hand, the pink colouring makes the product stand-out.  But does it really reflect the core purpose of the drink?  It does not look healthy at all – the intense colour is synonymous ‘artificial colouring’.  In contrast, the sugar-free version of  ‘Rockstar Original’, below, looks much more healthier and cleaner.  All the pink colouring does is show who the company intends to sell to – this eliminates any male consumers, who may also be health-conscious.

However, I guess the included straw does have at least one benefit to females wearing lipstick.  The problem?  Avoiding lipstick smudges is the wrong benefit!  Females taking part in sports or clubbing – the firm’s targeted occasions – are not going to care about their lipstick.

The last issue with ‘Rockstar Pink’ is common to all product line filling decisions:  cannibalisation.  This is when the launch of a new product simply replaces the sales of existing products with the new products.  If you take a look at the Rockstar product line, there are at least three products that could witness a decline in sales as females shift to ‘Rockstar Pink’: ‘Sugar Free’, ‘Zero Carb and ‘Roasted Light Vanilla’.  And we are assuming here that the product is successful, which I am highly sceptical of.  Moreover, their already extensive product range makes failure even more likely.  This is because they essentially already have products that offer the same benefits that the new drink offers; they even come in smaller sizes than ‘Pink’s’ standard 12oz can.

It seems to me as if AG Barr have broken a fundamental rule of branding.  Namely, they being too broad in defining who their core customer is.  This results in a product that appeals to no one for using during no particular occasion.  In such a mature and competitive market, there is a right time and reason for each product; by trying to be the right product for several occasions and reasons you always end up being second-best.

© Joshua Blatchford, author of Manifested Marketing 30/05/2011

 

I also want to mention that the official domain for the blog is now http://www.manifestedmarketing.com

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by Josh on May 30, 2011  •  Permalink
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Posted by Josh on May 30, 2011

https://manifestedmarketing.wordpress.com/2011/05/30/rockstar-energy-drinks-product-line-filling/

Molson Coors – Market Development

It is a basic rule of marketing that a company must constantly monitor and react the external environment that affects a business. As such, ‘Molson Coors’, the brewers behind the beer ‘Carling’ are well-aware that beer’s market share of the U.K alcholoic drinks market has been reduced by 40% over the last four decades. After reviewing their product portfolio, Molson Coors have decided upon a marketing strategy to implement: that is market development. As a response to cultural change, the firm intends to offer their existing Carling drink to female drinkers, a market hitherto un-tapped by their marketing resources. But is it really this simple?

As part of Molson Coors’s multi-brand strategy, Carling has been targeted the male market through football sponsorship, such as ‘The Carling Cup’ and has achieved high levels of brand-equity among its current target market. However, the female consumer has very different set of values that should be satisfied – thus, the brand needs modification – to deliver value to their customers. To appeal to the female drinker, Molson Coors are undertaking product-line filling, where more items are added to a product range. Namely, ‘Kasteel Cru’ and ‘Kasteel Cru Rosé’ drinks are going to be introduced into the product line. This enables clear differentiation from the male-orientated products that dominate the line; the new champagne yeast-based drinks offer new ideas and values. Thus, by creating a new brand, females should feel more confident about ordering beer on a night out.

Moreover, this new branding strategy is an effective front for an extension strategy – offsetting the decline in sales by extending the maturity stage of a product’s life-cycle. This may mean that Moloson and Coors’s competitors begin to drop out of the market, enabling them to increase their market share due to a competitive advantage. They would hope that the increase in market share, however, is faster than the decrease in market size; this would be the litmus-test to determine the effectiveness of their marketing strategy in the review stage of the marketing cycle.

Despite carrying out a year and half’s worth of research and speaking individually to thousands of women across the U.K, there is an inevitable degree of risk-taking needed with a market development strategy. Not only are Molson Coors targeting a new market, they also creating new brands. Hence, it may be more appropriate to define their strategy as diversification; targeting new customers with new brands. As a result of this, albeit distinct move, the brewers risk spreading their resources too thinly – for instance, can the same marketing team satisfy the needs of two customers? It may be that their marketing efforts conflict one anothers.

Furthermore, supermarkets – a key intermediary in the distribution channel, who have huge negotiating power – are likely to adversely affected by this strategy. Introducing new brands simply increases competition for shelf-space. This could lead to some retailers refusing to stock the new drinks, which would ruin the marketing team’s efforts.

Ultimately, although I stress the importance of responding to external change, I am not impressed by this strategy. I believe Molson Coors have responded incorrectly to the decline in beer sales. This is because consumers’ perceptions of brands is not down to marketing gimmicks, like prentious branding and the like, but their own personal experiences with the brands. And it is the male consumer that has this experience through sports events that has created brand equity in the past. Therefore, they should capitalise on this strength and focus on male drinkers by adapting their products and not their target market. Hence, a market development strategy is needed – not market development.

© Joshua Blatchford author of Manifested Marketing 08/11/2010

 

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by Josh on November 8, 2010  •  Permalink
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Posted by Josh on November 8, 2010

https://manifestedmarketing.wordpress.com/2010/11/08/molson-coors-market-development/

Waitrose – Price Elasticity of Demand

Waitrose – part of the John Lewis partnership – has branded itself among the high-end food shoppers, who expect to pay more for better quality, which is a good indication of a strong relationship between a firm and their customers. Despite this, Waitrose launched an Essentials Range that comprised of value food products – for example, they offer over 1,400 everyday food items at a discounted price. However, in order for revenue to be increased – as this is a product development revision of their existing marketing mix  – while prices are decreased, sales volume needs to grow by a greater proportion: this is Price Elasticity of Demand (PED)

A positive PED was needed; Waitrose hoped that the decrease in price would be more than compensated by an increase in sales volume so that overall revenue would increase. Perhaps some what luckily, the marketing effort was implemented swiftly, despite a slow organisational structure, to be ready before the impact of the recession. Clearly, therefore, responsiveness can be essential in marketing – moreover, considering the high number of substitutes and strength of customers’ buying power in the supermarket industry. As a result of perfect economic timing, sales value was over £100 million thanks to the rebranding; this meant that the volume increase required to break-even on the £25 million cost of the price reduction of 5% was exceeded by a huge 17%. A clearly successful strategy, that has given Waitrose a new-found financial strength and compounded its marketing competitive advantages: their market share has risen to 4.1%.

However, if this strategy is so successful, why do not all firms reduce prices to increase sales? Well, if the PED is negative then overall sales revenue will decline if a price is lowered (and increase if the price rises): the price drop has got to make people want to buy the product more. Although, reducing the price of milk is highly unlikely to encourage greater consumption – a tactic to implement a market penetration strategy – it can detract customers from competitors, as is the case with Waitrose. But there remains one more risk with this launching a budget/essential product range: damage to reputation. Given their strong customer relations, Waitrose to some extent relied on customers purchasing from them just for their image, which was emphasised by expensive products. However, by stressing that the premium taste has not been lost from their food – British farmers, animal care standards and quality assurance – middle-class Mums still feel classy doing their weekly shop. This highlights the importance of communicating a firm’s values and ethos, even if it is for marketing purposes and not for ethical reasons.

© Joshua Blatchford author of Manifested Marketing 06/09/2010

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by Josh on September 6, 2010  •  Permalink
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Posted by Josh on September 6, 2010

https://manifestedmarketing.wordpress.com/2010/09/06/waitrose-price-elasticity-of-demand/

Moleskine – Branding

Branding is important for any business or product; the same can be said for Moleskine notebooks. Their notebooks, which carry a premium price tag, have emphasised the historical and cultural connotations of the company – as well as boasting high-quality acid-free paper – to justify the price and differentiate themselves from budget competition.

History and culture is the life and blood behind Moleskine’s branding. Before the company’s revival in the 1990s, similar leather books, which the current product portfolio is modeled after, were used by the likes of Ernest Hemingway, Vincent Van Goth and Oscar Wilde – those that symbolise heritage. And it’s because of this literary connection that its main distribution channels are bookstores. As a result of this, the company used to be unable to keep up with the huge demand that has generated among writers and has furthermore snowballed into communities devoted to sharing their beloved notebooks with one another; no other brand of notebook has seen a following quite like this. Although the brand may stifle risk-taking and innovation, the company has made good progress in extending its product range too – address books, special editions, ‘passion journals’ – all create a solid extension strategy. Not that this is needed. Due to strong consumer-relationship marketing, a vast proportion of revenue is generate from repeat custom.

However, albeit still going strong during the recession, modern-day business does pose several threats to Moleskine. The product is manufactured in China, which, despite a high-quality paper industry, does not immediately lead customers to infer that they are getting a high-quality product. Moreover, the cheap supply of labour makes their products pricing strategy look even more like profiteering. Having said that, these are operational issues that, in fact emphasise just how good their marketing is to over-come such issues; the various functional departments simply need to become more homogeneous.

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by Josh on July 9, 2010  •  Permalink
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Posted by Josh on July 9, 2010

https://manifestedmarketing.wordpress.com/2010/07/09/moleskine-branding/

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