Strategy for Introducing a New Product - Tetley Tea - Research Paper Example

Strategy for Introducing a New Product Tetley tea is a company that has persisted in the market for a long time. Its history reveals that it has existed for more than hundred and seventy years. Tetley’s presence in the market for long has seen it expand to over 70 countries selling its products. The company has recorded growth over the years in both sales and the variety of products. The company is currently under the ownership of the Tata Group of companies. The company has been changing strategies over the years as market trends change. In addition, consumer needs have affected most of the decisions taken by the company over the time. The company has loyal customers in the market because of its persistence. Today, it is still a dominant player in the tea industry in most of its countries. Tetley is just about to introduce a new product into the market. However, before the launch, the company needs to establish whether the market will accept the new product. In addition, the company needs to identify the specific target in the market. This paper will examine the market trends in order to provide the answers to these issues. Tetley has had immense impact in the market. It is through their marketing strategies that they have managed to win a large market share. Through this therefore, the company owns the credit for innovating tea bags in the early 1900s although the venture came after accidental realization that tea bags were a possibility in packaging. The company has its roots in the United Kingdom where its founders started out venture. The company has posted growth in several other countries. Despite the competition that has grown over time as new entries in the tea industry, Tetley tea still dominates the United Kingdom market. Tetley group has several sister companies operating separately. The entire sister companies offer unique brands to the region in which they operate. In 2011, Tetley dominated the market achieving 24% retail value in Canada. Tea products had a retail growth value of 4%. The volume growth in the same year was 1 %. The Canadian market posted C$ 547 million. The Canadians prove to be a good market for tea. They easily try out new tea products with the right persuasion (Masterson and Pickton, 2010:85). Tetley’s products did well in the Canadian market with black tea special brand scooping a 44% share followed by green tea with 31% while standard black tea got 18 %, which was a one percent rise from 2010. In addition, the herbal tea and fruit ranges of products as well as the color therapy proved a real success in the Canadian market. Future prospects indicated a growth in tea sales by 2016. In the United Kingdom, tea prices recorded an increase in 2010. Black tea made more sales in the market though it portrayed minimal growth. Herbal and green tea exhibited more growth in the market because of the health benefits. 12% of total sales of tea were the herbal and green tea. Most of the sales of tea were to people above 65 years accounting for 88% of consumption. Tea consumption was relatively lower for the younger generation. Tea is receiving competition from other products among the younger generation and the 90% breakfast tea sales were going down. The trends in 2011 changed because of the campaigns on the benefits of tea. This year saw Unilever take a lead in the percentage of sales. In the United States of America, tea exhibited an increase in popularity in 2011 because of the increased awareness of tea benefits on health. Tea posted a growth of 2% reaching 72278 tonnes. In this market, Unilever was leading in the percentage of sales. The tea industry in America is likely to show a 10% growth by 2016. The healthier products such as herbal tea, iced tea, and fruit-varieties stand a chance to indicate growth because of the health benefits (Masterson and Pickton, 2010: 86). The Indian market trends portrays that black tea, the standard variety still dominates because of the Indian cultural and traditional set up (Pride et al, 2011:131). In 2011, it accounted for 84% of total tea sales. However, there is an increasing market for green tea and specialty in the urban regions where people are more aware of healthy eating. In this region, Tata beverages took the lead in sales. Tea is likely to maintain its dominancy in India because its prices are fair in comparison to other beverages. Green tea and other specialties are likely to post growth in coming years according to the trends and awareness. In other markets as France and Poland, recent market trends in tea industry indicate that growth of sales is a possibility. In addition, diversification of products will increase the sales. Unilever took lead in Poland in 2011 while Tetley products under Tata beverages took the second place. In France, Unilever was leading. In this market, growth can occur if companies give the people what they desire (Masterson and Pickton, 2010: 86). The French want a product that acts as a representative of their status. An examination of Tetley’s competitors in the market will help formulate new strategies for the markets (Masterson and Pickton, 2010:120). In the United Kingdom, there is stiff competition for Tetley tea. Although the company is among the leading players, Unilever UK is taking the lead. Other competitors include Typhoo tea limited, Red bush tea, and Pukka Herbs. PG tips and Yorkshire tea bags give Tetley a challenge in U.K stores. To maintain the company’s market share, the management has set aside finances for research to enhance innovations. The management must understand that the rate at which technology is changing, any company that does not put the technology in play, their products will easily lose market. This will require extensive marketing and diversification into new markets. The competitive players are diversifying products in order to take advantage of the fast growth of herbal, iced, and other healthy products. In the United States, Tetley is the second in terms of sales with Lipton under Unilever taking the lead. It also faces competition from Twining and RC Bigelow. In Canada, Tetley products dominate the tea industry. Tetley has established market in Canada, United Kingdom, and the United States. In India, the company manages to lead in sales but faces competition from Hindustan Unilever. In this market, it leads under Tata beverages the parent Company. In other regions, Tetley needs to increase awareness concerning its products. The company must establish new approaches that can help Tetley take a lead in the developed markets. In addition, introducing a new product in the market should create an advantage over its competitors. In addition, innovation of a new product will boost the sales of the company because consumers have portrayed a preference for varieties that have health benefits. Since the competitors have a wide range of products as well, Tetley should launch a new product unique enough in order to be the consumer’s choice. From the available data reflecting the market, it obvious that the older generation prefer tea compared to the younger generation. In the United Kingdom, the older generation consumers present 88% sales in the market. Black tea the standard variety is a preference for many people. The market has other segments too. Some consumers are health conscious and have a lot of preference of the green tea, iced tea, the fruit flavored types that offer the most health benefits to the consumers. In India, some consumers prefer the black tea significantly because of the traditional set-up. Competitors have studied the market and are employing innovation to offer the consumer more health benefits in each product (Masterson and Pickton, 2010:120). Tetley invests in advertisement after surveys of the market. The company invested ?9m in the Tetley folk advertisement. The advertisement served Tetley for almost thirty years before 2000. Its come back in 2010 after the huge spending has greatly improved the sale of the company. In addition, the company invests in online advertisement as well. The company invested total of ?2.4m in the ‘color therapy ‘advertisement project and received ?4.2m. This serves as evidence that the company can spend a good percentage of its sales in advertisement. Surveys on the market seeking to reveal where most of the consumers buy their tea products reflects the important role played by supermarkets. For example, Tetley USA ensures that its products are available on several retailer stores in each state. In addition, the consumers have the provision of making specialized orders from the retailers for the product they prefer. In addition, consumers can purchase Tetley’s products online. In the United Kingdom, prices of Tetley’s products vary according to size of package and type of tea in the package. It is important for a company to identify the distribution chain and prices of a product in predicting the effects of a new product in the market (Masterson and Pickton, 2010:120). The tea market trends often change in different markets depending on several factors. In all sister companies, prices vary according to the conditions that define each region. In the United Kingdom, prices of tea are rising because of limited supply. The limited supply results from environmental changes in countries that grow coffee. Economic changes will affect the price of any product in the market. For example, in countries facing inflation, prices definitely shoot. In addition, technology has its effects on the prices of tea products because they affect the cost of production. The above information is very valuable in determining what type of venture that Tetley can take. Before any company launches any new product into the market, it has to examine the market trends. This enables the company to make an informed decision and identify the need that the new product will address. In business, a need should exist before a product. From the above analysis, the younger generation in Tetley’s developed markets brings lower sales than the older generation. This becomes clear that the younger generation have a need. There is a campaign for young people to eat healthy in America. In United Kingdom, the younger generation prefers other beverages. In other markets, the younger generation is moving to urban residences. Through effective persuasion on benefits of a tea product targeting the younger generation, they are likely to try a new product in the market (Masterson and Pickton, 2010:90). From an analysis of market segmentation of the tea industry, the needs of the youth from a beverage need addressing. Tetley and other main players are taking advantage of the ‘niche segment’ and utilizing innovation to bring new products into the market. In most of the markets, a product that addresses the health needs of a consumer is likely to exhibit growth in the market. However, Tetley should realize that many of its competitors have products that will compete with the new product in the market. A new product in the market can address the available need of the younger generation by incorporating health benefits that are likely to attract the attention of the younger generation. An analysis of health priorities of the young generation will give a company a worthwhile direction. For example, a product containing an ingredient that has the potential to boost memory will address the needs of students who need memory for their studies. For a product to address the younger generation in urban areas, it must present a prestige for them. Tetley has the potential to address the need of the younger generation and therefore increase its sales. However, PG tips and other competitors will come to the front to offer competition. In most of its markets, the competitors will launch new products to compete with Tetley’s new product. Marketing Mix Plan A marketing mix is the unique way in which each company uses price, promotion, product, and place in order to ensure that the product reaches its target market. The importance of considering price when designing a mix is the fact that the price assigned to a specific product determines whether the buyer will opt for the product or a cheaper one. Therefore, setting up the right price in a specific market is essential (Masterson and Pickton, 2010:212). A company also considers the main competitors and their prices. More importantly, a company should consider the value of the product in the perspective of the consumer. The value a consumer will attach to the good or service is a determinant of how much they can pay for it. If prices are far below those of competitors, consumers read poor quality goods (Masterson and Pickton, 2010:207). If the price is higher than that of competitors but offering same value to a consumer, the consumer will prefer saving and choose the cheaper product. Promotion is an important venture because it helps in creating awareness to the target consumers of the new product and its unique features. Companies should carry out promotion in areas where the product is available in stores. On awareness of the product, consumers willing to try out the new product should access it. If a company promotes a product that is not available in the market, the initial disappointment proves the company insufficient in addressing customer needs. When an organization makes its decisions concerning promotion, it identifies the type of media it will use and the costs involved. The type of media used depends on the target customers and their demo-geographic features. The product is the third consideration in designing a marketing mix. The product should address a specific need of the target clients. The product should have features that will attract the buyer and persuade him or her to buy the new product. The product should have a unique feature that will help it stand the competition in the market. An organization should also analyze whether the product has any extra features that cost the buyer but are not a necessity. This analysis also considers the name of the specific brand, its appearance, size, and identifies what unique physical feature makes it stand out among competing products (Masterson and Pickton, 2010:202). The fourth consideration involves identifying the distribution channels and the costs involved. Some companies with existing products in the market may use the usual chains for other products. However, depending on the target customers for the new product, an organization may change and create new chains in order to gain access to the new market. An organization should also analyze the need for online selling and strategize on how to introduce the new product online. An examination of the distribution channels of competitors presents the company with new ideas in determining place (Dahlen, Lange, and Smith, 2010: 143). In the case of Tetley, the target customer is the younger generation. The younger generation prefers things that are trendy and satisfy their unique needs. This generation is very critical with the value it attaches to products. The physical appearance captures the eye for them. They need persuasion in order to convince them to buy a product. If the product satisfies their needs, loyalty develops.teh younger generation may take time to compare what different companies are offering and identify what features impress them most. This generation can spend a lot of money on a product as long as it does not disappoint. In addition, this generation can shop online as it stays updated on new technologies. Television advertisements for them should persuade them in a specific way. This generation will opt for health benefits from a product rather than the usual brands. Tetley seeks to present the younger generation with a brand that will serve as their most preferred beverage. This brand must provide health benefits to the people. In addition, it must be able to have taste that is appealing to the younger generation. If it has other unique features that make the individual feeling refreshed, it will impress the younger generation more. Black tea has not been a preference for the younger generation. Tetley’s new product should be able to give the younger generation the satisfaction that they have wanted (Dahlen, Lange, and Smith, 2010: 57). The new product will have an appealing appearance. It will maintain Tetley’s logo for easy identification in the market. Tetley will maintain its orange color in the product. Orange captivates the younger generation. It raises their levels of excitement and it makes the product more edible. Tetley’s logo is blue in color and is a clear indication that it never disappoints its customers and that it commits to meeting the needs of the consumer as a priority. Since the orange impression created in the herbal tea had an amazing effect, some orange in the color blending will raise the excitement of the younger generation. In addition, a shade of green will insist on the importance of nature and its provisions signifying that the product comes with natural ingredients for health benefits. The product will bear the name ‘Tetley Health Power’. The product will be available online from the Tetley website. In addition, the product will be available in all retail stores that stock other Tetley products. However, the distribution channels will expand to new stores that are the preferred choices for the younger generation. Increasing the intensity of the distribution will make the product readily available for the younger generation. Being the target market, the product has to be closer to them. Since Tetley has established distribution channels in the market, expansion of these to other strategic stores will boost the sales of the new product as well as older Tetley products (Dahlen, Lange, and Smith, 2010: 66 and 143). The new product will have many nutritional and beauty benefits for the younger generation. The product will retail at $5.00 in the United States for forty tea bags. The 6-pack carton will retail at $26.00 in the same region. Prices will be higher than the Tetley’s products in the U.S market but due to its key features, the higher price will reflect the value of the product. In the United Kingdom, prices are likely to be higher as the general prices in this region are going higher. Currently, Tetley products are retailing at ?4.49 for the 500g package. Since Tetley intents to regain its lead in the United Kingdom, it has to offer more benefits in the product but introduce that at a slightly lower price to that of its main competitors. Tetley has to establish a price that will take advantage over Yorkshire and PG tips in the market (Dahlen, Lange, and Smith, 2010:227). Tetley will invest a percentage of sales in promotion of the new product. There will be online advertisements that will seek to increase the conversion rates of the website visitors to buyers. These advertisements will enlist the health benefits of the new product listing it as the best option for the younger generation. In the United Kingdom, there will be billboards and television advertisements. In this market, Tetley will emphasize on the health benefits of the products and its suitability to the younger generation. Advertisements will seek to persuade the buyer to acquire the product at a cheaper price but gain maximum satisfaction (Masterson and Pickton, 2010:214). Tetley can utilize the Tetley folk advertisement that has popularity and has helped build the Tetley loyalty among its customers. In this advert, Tetley should seek to bring out the benefits of the new product. Since it is an innovation, the Tetley folks will seek to discover the uniqueness of the product. The content should highlight the need for a healthier product for the younger ones that will not disappoint in taste and aroma. The folks should present the ‘Tetley health power’ as the solution. It should involve a conversation between the folks on the need for the younger generation to have a tea product that offers them health benefits as well as the power to keep working. The conversation should lead up to the Tetley’s answer. For Tetley to create sufficient awareness, infomercials are a necessary tool. These will be longer than the advertisements and will highlight the main ingredients of the new product and explain briefly how they provide health benefits in the body. This will require adequate scientific back up to emphasize the need for the ingredients. The information will be available on online advertisement. The communication mix will also involve personal selling of the marketing team that seeks to build relationships with the buyer (Dahlen, Lange, and Smith, 2010: 278). Direct mailing may also apply to the esteemed customers who have remained loyal to the brand. Due to its established market and potential growth, the company can risk investing a percentage of its sales in marketing. It is evident that Tetley has a command in the market although it must tactfully compete with other giants in the market. Tetley must utilize the niche of segmentation in the market by bringing into the market new products that portray the highest growth in the market. Prospects into the future indicate that the industry is subject to growth although this is dependent on several factors. Effective promotions and price offers can help Tetley survive the stiff competition it faces in the market. Bibliography Dahlen, M., Lange, F., & Smith, T., 2010. Marketing communications: a brand narrative approach. Chichester, U.K., Wiley. Masterson, R., & Pickton, D., 2010. Marketing: an introduction. London, SAGE. Pride, W. M.et al., 2011. Marketing principles. South Melbourne, Vic, Cengage Learning. Read More