Segmentation Targeting and Positioning of the Food Company - Report Example

Food Company Marketing Contents Contents 2 Introduction 3 PESTLE 3 Strategic Issues 5 Segmentation Targeting and Positioning 6 Long-term Strategic Direction 8 Strategy Choice and Rational 9 Recommendations 10 Marketing Mix 10 Reference List 13 Introduction This is a marketing report for a hypothetical food company, where the researcher works. The senior manager of the researcher has asked him to develop a new market offering for the company in its established market of U.K. The context of the report will encompass details of the brand or product line extension programme of the company as well as implicitly analyze the rational for making this choice (Spich, 1995). PESTLE Political The company needs to abide by customized political norms established by public governing authorities in U.K. The government of U.K. imposes strict controls on food companies in forms of minimum wage laws, tax rates, health rules and hygiene regulations (Hill and Jones, 2009). In general, the government constantly pressurizes firms to encourage healthy eating habits in the market. In some circumstances, companies are instructed to provide calorie information on their edible items. In addition to this, land use and planning patterns of all retailing firms in U.K. are determined under the guidance of its local governments. Under the campaign of “rip of Britain”, political authorities of the country have forced Competition Commission to monitor prices and profits of these retailing firms (Dewett, Whittier and Williams, 2007). The companies also face a lot of problem in realizing the precise Value Added Tax rates in their business. The political authorities of U.K. have instructed its restaurant industry to lower carbon footprint (EVD, 2009). Economical Over time, per person income level of U.K. has increased. With rise in discretionary spending powers and living standards, consumers demand more edible products from the market. However, since 2008, money income levels of consumers have fallen due to the recession caused by market exuberances of the global financial crisis (Weber, 2007). Low productivity of the economy has lowered employment levels and disposable incomes of consumers (Trading Economics, 2014). At this juncture, consumers in U.K. prefer less pricy fast food products. Since consumption in the food and restaurant industry is a type of luxury, negative future expectations during recession have lowered its aggregate demand. Even so, harmful impacts of recession are now fading away in U.K.; and in 2014, the country has experienced a growth of 2.4% (IBIS World, 2014). The hospitality and food service industry in the nation is expected to grow to an extent of 90 billion in the coming five years, as economy of U.K. is reviving at present. Social Individuals in U.K. prefer to eat good and high quality food. In the recent era, almost 19 million individuals in the country are found to generate demand for healthy food products in restaurants. Spending over food in restaurants is a mark of sophistication in the country. However, pattern of demand in the restaurant and food industry has changed as consumers reflect the need for nutritious food products with lower calories. Fast food is highly criticized in the country and their advertisements to children are only supported legally (Ibrahim, 2012). The demand for restaurant industry has heightened with time as consumers’ overall living standards have bettered. Moreover, individuals in U.K. are greatly occupied in their professional life and hence, prefer eating outside, instead of preparing food at home. Almost 88% of households in the country desire to consume organic food products (Doward, 2014). Technological With time, state of technology in U.K. has substantially improved and consumers in the market are more familiar to advanced technologies. Many food companies and restaurants in the country try to promote their products over social media websites like, Facebook and Twitter. Also, outlets of the companies often use modern digital display systems, where product offerings can be regularly changed. Self-billing systems and electronic price tags are also used in the retailing outlets of several firms. Such factors help firms to lower their cost as well as attract more customers. Legal The government of the country promotes production of organic food products; however, certifications of authenticity of healthy food items are provided by the Department for Environment, Food and Rural Affairs in U.K. Even so, in order to promote higher degree of commercialization, the government imposes less legal regulations on these firms. Yet, firms need to abide by the norms of UK CAP codes. Environmental The level of carbon footprints from the food and restaurant industry in U.K. is very high. This is the reason why firms within this industry are actively trying to frame ways whereby they would be able to reduce the extent of pollution generated in their logistics process. Strategic Issues Considering the political environment of U.K., where this food company operates, it can be stated that the company’s cost of operations becomes very high due to imposition of extensive state regulations. The tax rate of the government often lowers profit margins or increases the prices of food products of the company (Stolzea and Lampkin, 2009). The company has faced low demands in U.K. market since 2008 due to recession. The company can face issues in business if the new offering is a high calorie fast food product. Superior technologies are used by giant firms in the industry to lower costs and enhance sales. It can be challenging for the company to introduce such modern technologies as this require large amount of finances. The company cannot forge intrinsic health benefits of any of its new or existing products in the market. This is because; legal authorities of the country are very strict on such grounds. The value and worth of a product must be scientifically proved by the company. The company needs to maintain ecological footprint standards in the market for being a sustainable organization. However, such issues faced by the company can be strategically lowered if its new offering in the market is a healthy low calorie wrap consisting of organic food ingredients. This is because: The government of the country encourages healthy food habits and trading of the same. Since the economy is recovering since 2013 and per capita income levels are also improving, it will be beneficial for the firm to introduce new product line extension in the market (Sagitter One, 2013). The company can enhance utilities of consumers if it launches a new low calorie nutritious product in the market, as preference pattern of U.K. customers seeks such products. Segmentation Targeting and Positioning The new product cannot be launched by the company without the help of proper segmentation, targeting and positioning strategy. A market segment is basically a group of customers sharing similar characteristic features, measured in terms of tastes and preferences. If the company cannot segregate the need and preference patterns of consumers, then it would not be feasible to formulate apt marketing strategies. There are various attributions on account of which segmentation can be adopted. The primary variables of segmentation are: Demographic Psychographic Geographic Behavioural The potential customers for the company’s new offering can be targeted through demographic and psychographic mode of market segmentation. Under this regime, the company will centre on its most potential clientele in terms of factors like, income, education, age and lifestyle. Income: The new product would target the upper middle and high income group of customers in U.K., who earn £30000 and above annually. Since product of the company would comprise organic ingredients, its cost and selling price in the market would be high. Hence, lower income group of customers would lack adequate purchasing power to avail such expensive food items. Age: Individuals belonging to different age groups can be target clientele for the product. This age limit can be from 6 to 60 years. The new product launched by the company would contain high health benefits. So, on consuming such items, individuals of all ages would benefit from high nutrition. Education: It should be noted that the product would be offered to those middle and upper middle income adult consumers, who have completed their secondary education. This is because; only educated consumers can comprehend the worth of an expensive wrap made from healthy organic ingredients. Lifestyle: Considering the psychological perspective, it should be observed that the product would be offered to health conscious customers who prefer healthy products over high calorie food items. This is because if consumers are not health conscious, then they would not be ready to offer high prices for such wraps sold by the company. The company would implement a social responsible targeting strategy. This is apt for launching a new product in the market, which offers higher health benefits to customers. Considering organic ingredients of the new offering, the company can target its potential customers by elaborating on health hazards emerging from consumption of fast food and non-organic food items. In addition to that, through various means of promotion, the company can make customers realize the goodness of organic food (Kuratko, 2013). The positioning strategy of the company would help to properly position its product in the market. The perceptions of consumers regarding nature of the new product would substantially depend on market positioning. Figure 1: Position Map High Quality Low Price High Price Low Quality (Source: Author’s Creation) The above positioning strategy shows that the company should position its product in the market by reasoning the high price with superior quality. This would make consumers aware of intrinsic worth of the product (Stutely, 2002). Long-term Strategic Direction The competition faced by the food company in the market of U.K. is very high with presence of several indirect and direct competitors. The direct competitors of the company are organic food suppliers like, Whole Foods Market, Inc and Rachel’s (Kitchen, 1999). On the other hand, indirect competitors of the company are firms selling non-organic food items like, McDonalds and Domino’s. Nonetheless, if the company correctly implements the above segmentation, targeting and positioning strategies, then it would be able to achieve high returns after launching the new product line in the market. All aforementioned strategies are set after considering long-term trends of the market (Burt and Sparks, 2003). It is obvious that over time, consumers would become more conscious about their health and hence, demand for food items with organic ingredients would rise. It is noted that currently, buyer’s willingness to pay premium prices for organic fruits, vegetables and milk products is increasing in the market of U.K. The individuals nowadays prefer to consume food items that are produced with the help of higher agricultural standards. It was claimed by Bob Sexton (the chief executive of Soil Association) that, “Early indications show positive growth in the organic market in 2013, after around four years of decline – showing strong appetite among consumers for the environmental, animal welfare and health benefits of organic produce” (Doward, 2014). Thus, in the long run, the company should aim to launch more diversified food products in the market with increased use of organic raw materials (Timmins, 2010). Even so, only with effective marketing mix strategies, such products can become successful in the industry. Since new offering of the company will meet the needs of U.K. consumers, it is likely that the entire programme would be highly successful in the market (Diabetes, 2010). Strategy Choice and Rational The choice of launching a new food wrap with organic ingredients indicates differentiation strategy adopted by the company. The food company does not desire to operate in the complicated market of U.K. on the basis of standardization. It seeks a wide base of customers in U.K. by modifying its services and products according to taste and preference patterns of native individuals here (Kotler, 2008). Perhaps, this is the reason for the researcher to undertake the decision of launching the new product after analysing the external business environment of the company in U.K. From the above analysis, it is can be stated that health conscious eating habits are preferred by most consumers in U.K at present. This is because public authorities as well as the individuals in the country have realized possible health hazards from excessive consumption of high calorie food products. Researchers have found that aggregate proportion of diabetic patients have significantly increased in U.K. Almost 5.6 million individuals in U.K. were found to suffer from diabetes and other degenerative diseases in 2009 (Diabetes UK, 2010). Such results were primary caused due to unhealthy eating habits of individuals in the country. Overtime, the nation has realized that only with the help of healthy food consumption, incidence of such chronic diseases can be lowered. Organic food products are highly rich with nutrients and contain fewer chemicals. Almost 87% of individuals in the country prefer to consuming organic food items. Hence, after considering such factors and implementation of differentiation strategy in business, it is likely that company’s new product offering would contain high traces of organic items (Zeng, Huang and Dou, 2009). Health conscious consumers in the country would surely be attracted towards this new healthy product (Kapferer, 2012). As the U.K. economy has started to recover from the recession in 2009, demand for organic food products, like, organic cakes and sandwiches have significantly increased here. Also, since the government encourages trading of healthy nutritious food, the company would get several benefits or supports while implementing its product line extension program in U.K. (Stryker, 1998). In general, it is highly rational for multinational companies to operate on the basis of adaptation. In the modern world, business firms should operate on the basis of cooperative intelligence; under this regime the companies should frame policies in ways that would be able to maximize utilities of customers. Only by following this process, the food company will be to win over its rivals in the market. By offering a healthy wrap in the market (made with organic ingredients), the company would cater to the local taste and preference pattern of U.K. Hence, this would be its adaptive strategy in business. Recommendations In order to implement the adaptive strategy and launch a new offering in U.K. accordingly, the company needs to thoroughly analyze marketing strategies related to the programme. This can be done with the help of 7Ps marketing mix model. Marketing Mix Product The company should claim to provide high value to customers through its new product. This is because the product will meet all customer requirements. Since the wrap will be prepared with organic food materials, it would be nutritious and contain low calorie. In addition to that, the company’s warp will be prepared on customized basis. For instance; the fillings will offer pork, beef, chicken, egg or only vegetables. The sauces that will be added in fillings would be made according to choices of consumers. It can be tomato, white, mustard, lemon cause or a mixture of two or more (Jeffes, 2008). Price The cost prices of procuring food products through organic means are very high. This is because such products are prepared by maintaining high agricultural standards. Since cost price of raw materials used in this particular wrap would be high, overall average cost borne by the company to produce per unit of its new food item would also be high. Hence, it will be highly rational on behalf of the company to charge premium price for this product. Moreover, organic food products are types of luxury edible items, which are highly priced. According to theoretical concept of Veblen Effect, rich customers would judge quality of product offered by the company according to its price value in the market (Kotler and Keller, 2006). Place The new food item that the company would offer should be well-distributed in all busy locations of the country so that it can be recommended to a wide base of customers. The supply should be more in outlets of the company, which are located in big departmental stores or marketplaces. This is because; these places are regularly visited by a large number of individuals. Furthermore, the proportion of youngsters visiting in such places is also high and they are highly responsive to new offerings made by any company. Promotion The company can make customers aware about its new product offering and its intrinsic worth through efficient promotional means. It can promote the new product in forms of commercials given in television, radio and internet sites. Overtime, proportion of internet users has increased in U.K. and hence, advertisements of the company over social networking sites can cover a large number of individuals. Special discounts can also be offered to consumers, who would repeat their wrap purchases. Process The company will set varying recipes for filings of its new wrap, after taking consent of most talented and knowledgeable cooks. In addition, baking and heating cookwares used by the company should also be modernized. The packaging process should use paper, but not plastic. This would enhance social image and eco-friendly concern of the firm in the market (Kotler, 2008). People Since the company would offer a luxury food product in the market at premium prices, it is most likely that its target potential clientele would be individuals from upper middle income group in U.K. Moreover, the product would be offered to consumers of all age groups within that income range. In addition to that, most of them would be highly educated and health conscious in nature (Evans, 2013). Physical Evidence The company requires improving physical appearance of its outlets. Since potential clientele of the new product would be rich sophisticated individuals, it is likely that interior decoration and store features of the company would be explicitly modern and superior. The purchase intensions of these customers would highly depend on ambiance of the company outlets (Peng, 2008). By following the above marketing mix strategies, it can be assumed that new offering of the company would prove to be successful in the market. Reference List Burt, S. and Sparks, L., 2003. Department of trade and industry: competitive analysis of the retail sector in the UK. [pdf] University of Stirling. Available at: [Accessed 10 April 2014]. Dewett, T., Whittier, N. C. and Williams, S. D., 2007. Internal Diffusion: The Conceptualizing Innovation Implementation. Competitiveness Review, 17(1), pp.8 – 25. Diabetes UK, 2010. Diabetes in the UK 2010: Key statistics on diabetes. [pdf] Diabetes UK. Available at: < http://www.diabetes.org.uk/Documents/Reports/Diabetes_in_the_UK_2010.pdf> [Accessed 10 April 2014]. Doward, J., 2014. Organic food back in vogue as sales increase. [online] Available at: > [Accessed 10 April 2014]. Evans, N., 2013. London’s 10 best diet-friendly restaurants. [online] Available at: [> [Accessed 10 April 2014]. EVD, 2009. Market survey UK - Health Foods. 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New Jersey: John Wiley & Sons, Inc. Zeng, F., Huang, L. and Dou, W., 2009. Social Factors in User Perceptions and Responses to Advertising in Online Social Networking Communities. Journal of Interactive Advertising, 10(1), pp. 1-13. Read More