Product and Pricing - Energy Drink - Assignment Example

Product and Pricing - Energy Drink Table of Contents Background 2 Target market 3 Positioning statement and competitive advantage 5 Product description 6 Pricing strategy 8 Reference 10 Purpose The purpose of this report is to develop a new product development plan. The main aim is to gather practical experience in conducting research, analysing market situation, customer behaviour and developing products that fulfils customer’s requirement in a better manner. This was a life time learning experience for me as I realised the wide chasm that exits between marketing theories learned at college and their real life application. There are many hidden factors that one come across while developing a plan for a new product. Therefore, just theories are not enough. One should possess a sound understanding of the theoretical aspect of marketing related issues and then only he or she can take an appropriate decision in real like situation. Thus, in reality, it is the theoretical knowledge, the analytical skill and ones visionary power that helps in developing new product that succeeds in fulfilling the requirements of the target customer base in a better way. While developing the report for new product development, I analysed the theoretical knowledge regarding the subject, my ability to analyse market situation and my innovativeness and creativity in converting an idea into a new product. I also came across some loopholes that I needed to work on. Background Before developing the plan, a market research was conducted with an aim of analysing the market dynamics for energy drinks in the international market. This research was done to find out the types of energy drinks available in market, the companies engaged in its production and also the performance or growth prospect of such products. While conducting the research it was found, that there are several companies engaged in producing energy drink. Majorities of these companies supply the products in cans of several sizes. From 1997 till 2000, the health drink or energy drink, as they are commonly called, were available in cans of approximately 8.4 ounce. From 2000 onwards, cans of 16 ounce and above were introduced. With time, popularity of large cans increased and people started purchasing large cans instead of small ones. The data shows that in 2008, 8.4 ounce cans captured 42.8 percent of the market whereas cans of 16 ounce and above covered rest of 57.2 percent. This data assist in interpreting changing customer behaviour of the target group. After analysing the demand of energy drinks in different international market, it has been found that western countries have the largest market for such drinks. This can be attributed to the living standard, the social life style and the weather condition. With time, the concept of energy drink is gaining ground in many developing nations. Therefore, it can be concluded that in near future these developing countries will emerge as potential market for energy drinks. Energy drink had originally been introduced in UK as a medium to replenish the lost energy in patients. Soon this concept gained popularity among the athletes of UK as well as US market. At present, companies like Coca-Cola, PepsiCo and few more are among the popular energy drink provides. Among several energy drinks available in the market, Red Bull is the one most dominating in developed western countries. In recent past, the media has disclosed many interesting information about these energy drinks. As for example, many energy drinks contains high caffeine, sugar and sodium that adversely affects the health of athletes. The concept of mixing energy drink with alcohol is also gaining popularity (Fact Expert, “Energy Drink Report and Discussion”). Target market After considering the information derived from the market research, it was inferred that apart from athletes, youth are also getting attracted to energy drink. Today, there are several products available in the market meant specifically for the athletes but some of them are targeted to attract the youth. Therefore, the company will consider young generation (14 to 28) years) as the target customer and product will be introduced in the growing markets of China and India. There were several reasons for selecting these nations as the target markets. After the recession phase of 2008-2009, China merged as the fastest growing economy, followed by India. This has affected the living standards of people as now they possess higher purchasing capability. This economic condition is one of the factors that influenced the choice of the target market. Apart from economic situation, the social factor also influences the choice of target market. Both China and India are densely populated countries with comparatively high population growth. In the next few years, a large part of the population will be in the age group of 14 to 24 years and thus demand for energy drink will increase. Other social factors like changing live style will make life in these countries faster and people will be left with little time to prepare health drinks themselves. Hence, they will prefer to have readymade drinks as a supplement of protein, vitamins and other vital minerals. At present the markets in developed nations are almost saturated and the growth prospect is quite low, whereas in developing nations there is a vast unexplored potential market. As compared to western nations, the degree of competition is also low. Therefore, several multinational companies are targeting to capture these overseas markets. However, with time competition will grow in these nations and then it will be quite difficult on enter in these markets. Thus, it is better to enter at this point of time when barriers for new entrants is comparatively low. In India and China, the cost of resources like land, labour and material is not too high. The government in these nations are taking initiative to develop infrastructure in order to attract foreign investment. They have also introduced changes in legal policies to make them more flexible and at par with legal framework followed by majority of developed nation. As compared to the developed nations, the legal policies and environmental norms are not that stringent in these developing countries. After considering all these factors, it has been decided to select China and India as the target market for the health drink. Positioning statement and competitive advantage It has been planned to make this energy drink a little different from other energy drinks available in the market. This drink is not just for the athletes who need high energy but it can also be consumed by the general youngsters to derive energy as well as other essential vitamins, protein and minerals. Since, today’s young generation have more junk food, they have poor nutritional contents. If these young people incorporate this health drink in their daily diet, it will fulfil the basic requirement of nutrition and will assist them to have a healthy and active body. The company plans to position this energy drink as a unique product in the target market. The company explains the product as “to the young generation who lead a highly active life and rely more on fast food, our energy drink is a reliable and easy source of required nutrition in a balanced form as compared to its competitive products that are targeted mainly to the athletes as energy boosters”. The main motto of positioning this product among the youngster is to capture the large market segment that possess a unique demand for a healthy substitute of carbonated soft drinks, alcoholic drinks and drinks containing high caffeine. The youngsters are considered as future asset of a nation but in the contemporary society, youngsters hardly pay attention to their food habits. They are more accustomed with fast food that fails to provide essential nutrition in a balanced proportion. After considering all these factors, the company has decided to develop a product that fulfils the basic requirement of nutrition in a unique manner. The main aim is to make this drink a part of day to day life of the youngsters. It will not just be another substitute of an energy drink; rather the plan is to introduce this as a popular drink among the target customers. This will serve a dual function. It will fulfil the requirement of a drink as well as be a good source of nutrition. This energy drink will fulfil the need of target customers in a more innovative and creative manner. Product description This health drink will be a bit different from the ones prevailing in the market. Therefore it is quite essential to provide a unique and distinguishable name of the product. Brand name of this product should imply that it is not a usual energy provider but also fulfils basic nutritional requirement among the youngsters. Therefore, it has been planned to name the energy drink as “Nutriano”. This brand name will reflect the added nutritional values possessed by this energy drink. To make a brand popular, its brand logo plays a vital role. A logo should convey the basic massage to the target customer group in a clear and comprehensible manner. The logo should provide a unique identity which is easily noticeable by other prevailing competitive products. The basic colours used in the logo are red, yellow and black. In general, these colours reflect high energy level and the name explains the nutritional values existing in the product. The company has used a trendy style while developing the logo to make it popular among the young ones. The logo as a whole seems too charged up and attractive. This is to attract attention of the target customer group that comprises of people in the age group of 14 to 24 years. While purchasing a product, the customer takes into account all the three levels of that product; that is the core product, the actual product and the augmented product. The core product is the benefit associated with the product. Nutriano will provide high energy level and will also fulfil nutritional requirement among the target market segment. After the core product, one should pay attention to the actual product that will be delivered to the customers. This reflects the tangible component of the product. Thereafter, the actual product describes the physical components. It will be available in some common flavours like chocolate, vanilla, orange, mango, strawberry, honey and coffee flavour. Depending on the responses of the customers during market testing, required changes will be introduced in the existing flavours. Considering the customer response, few more flavours will be added. The company has decided to sell the product in tetra packs instead of using plastic bottles or aluminium cans. The tetra packs will be of biodegradable material. This will reduce the risk of environment pollution and degradation of natural resources. Initially the product will be available in packs of 50 ml, 375 ml, 750 ml, 1 Lt and 1.75 Lit sizes. These different sizes will fulfil the requirement of the customers in a more convenient manner. The augmented product reflects the extra sales added value associated with the product. Nutriano will have no artificial colour and flavour. Even no artificial preservative will be used. While developing the product, special attention has been given to develop a balance between quality and efficiency of this health drink. The company kept sugar level quite moderate to minimise the risk of obesity. All these qualities make the product a safe one to be used even by adults and elderly people to fulfil deficiency of nutrition and energy in their daily life. However, while branding the product, the company will pay exclusive attention to the target customer that is the youngster in country like China and India. To popularise the brand in the target market, the company has decided to use innovative and creative promotional strategies. The company has planned to prepare advertisements that will reflect different aspects of a youngster’s life. This will assist the target customer base to correlate with the product. Again, more emphasis will be on electronic media as compared to print media. The company will sponsor sports events and will conduct seminars to enhance awareness regarding health among the young generation. There is also a plan to use marketing promotional policies such as distribution of free samples of energy drinks in schools and colleges or providing high discount when product is purchased in bulk. The company will develop collaboration with some restaurants and eating places which are popular among youngsters. The company firmly believes that all these will lead to the development of a strong market image in the target market. Pricing strategy Developing countries are highly sensitive to the price of goods and services. Hence, companies pay special attention to the pricing strategy while entering these markets. Before finalising the price of the energy drink, certain specific factors regarding the target customer base were taken into account. The most influential factor is the purchasing capability of the target customers. It is quite understandable that youngsters belonging to the age groups of 14 to 24 will not be willing to pay a high price for such energy drinks because at this stage of life majority of them are dependent on the family income or they are engaged in some part time jobs at low salary. Hence, the company should keep the price comparatively low so that it can attract the target customers. It has been calculated that if the company attains economies of scales, production cost will gradually decline and thus the company will succeed in making good profit. Therefore, the pricing strategy is to gain cost leadership in energy drink sector. The company has already collected information regarding the prevailing market price in China and India to study the market dynamics. Now the plan is to offer the product at a price which is little lower than the price charged by other branded international companies. At present the competition from the domestic competitors is almost negligible; hence attention will be given to the international rival companies. Companies like Coca-Cola and PepsiCo already have a well developed market in these countries and they use their brand name to sell their energy drinks. However, these companies are mainly considered as soft drink manufacturers and this image is so strong that it overshadows other products existing in the product portfolio of these companies. This is a positive sign for a company who is in the process of entering the market of energy drink. Undoubtedly, cost leadership pricing strategy will assist the company to enter and then penetrate the target market but Nutriano should not be priced too low as this puts to question the quality of the product. Thus, the company should strive to strike a balance between the market image as well as the competitiveness in the industry. This is only possible if the company can keep a check on its operating cost. Reference Fact Expert. Energy Drink Report and Discussion. 2010. Energy Facts: Report on the Drink. October 28, 2010 . Read More