Marketing Management - Kelloggs - Research Paper Example

? IN INDIA – A COMPLETE TURNAROUND It is amazing to see that marketing today has transformed from an essential function to almost an art. Marketing today can also be termed as a scientific art. It is combination of beauty of sensitivity and logic of science. In this paper we are going to analyse various functions of marketing such as customer segmentation, consumer behaviour pattern, cultural influences on buying decisions and acceptance of the product and most importantly how the product should go from strength to strength for more profit and market advantage. The case cites an example of Kellogg’s in Asia-Pacific region especially in India. This case is a classic example of concerted marketing efforts going haywire to produce reverse results. When a multinational giant organization such as Kellogg’s launches into an unknown region and area it needs to do the homework and establishes itself. The case highlights on the turnaround strategies used by the company to control the damage and survive. Today Kellogg’s is a household name in most Indian families and also the most preferred breakfast cereal, irrespective of that Kellogg’s needs to be alert in the volatile market. In an upcoming and third world market the options available are many for the consumers as the competition keeps offering one product after the other, which eventually widens the choice for the average consumer. Hence to not only to survive, but also sustain profitably, Kellogg’s has to innovate and in product as well marketing strategies. This paper also suggests a few such strategies with its implications and challenges. No organization can capture a market and be complacent, because capturing a market may be a onetime effort but retaining the market with profitability requires new challenges to be taken and met with competence, effort and good marketing. Kellogg’s – The Indian Story We all love breakfast cereals and the crackling sound they make early morning. They give us an idea about how fresh and beautiful each day is going to be after a healthy breakfast. We are now going to look into a healthy breakfast story of none other than the breakfast giant Kellogg’s in India. Kellogg’s so far in western market has always maintained its upper hand. It was introduced in the Indian market in the year 2005 and was an absolute flophouse. From there on the company looked into various perspectives to make the product a success and has continued to grow in the market steadily. Today even if it has not captured the so called breakfast market share it has managed to survive and even run profitably and smoothly in India. We are going to study the turnaround of Kellogg’s in India in this assignment. Kellogg’s started its way in 1906 and today is the leader of corn flakes and breakfast cereals. Its worldwide expansion program goes as back as 1914. Kellogg’s expanded in England and Australia. By the year 1958 Kellogg’s settled in America making it the most popular breakfast frosty cereals and corn flakes. Over the years Kellogg’s has acquired Worthington Foods, Kashi Company and Keebler Foods. They also have a marketing tie up with Disney. Today Kellogg’s is manufactured in 17 countries and marketed over 180 countries worldwide. It has multiple products such as corn flakes, nutrition bars, ice cream cones, pies, and waffles etc. Today it is a company with billions of dollars of turnover world over. With this strength, history and backing Kellogg’s launched with many trumpets in Indian market. It started with its basic product - cornflakes. SWOT Analysis of Kellogg’s: Strengths: 1. Kellogg’s is a multi-billion dollar company having presence worldwide. 2. The product quality that is offered is uniform across the markets world over. 3. It has an excellent brand name and enjoys a healthy brand image. 4. Through various acquisitions it has acquired a range of products starting from breakfast cereals to nutrition bars and diet cereals. 5. Its primary strength lies in baking and innovative products it keeps coming out with to appease and retain the market share. 6. Kellogg’s has got very strong production lines and distribution channels. For example, Kellogg’s is manufactured in 17 countries; more than 180 countries all over the world enjoy breakfast cereals of the same fine quality. Weakness: 1. Although Kellogg’s continues to mesmerise Indian markets with new marketing and branding strategies, it is actually repeating its products introduced worldwide. There is not new cereal developed by Kellogg’s for quite some time. 2. As for a product life cycle, Kellogg’s would want to stay on the maturity plateau for a long while, but unfortunately with no revision of the product it tends to slide the plateau towards decline very fast. Opportunities: 1. Kellogg’s entered India when Indian economy was opened for foreign investment and collaboration. Indian economy had registered a growth rate of 5.5% and service sector comprised 45% of the total economy. The new upcoming middle class possessed a purchasing power of $1800, which meant new buying power in the economy. 2. This new middle class is ready to experiment, wants to liberate itself from traditional mould of economy and hence is eager to spend. 3. With better pricing and taking almost total absence of competition into account, Kellogg’s has an opportunity to establish its leadership in the market. Threats: 1. Acceptance of the product is not a sure platform in India. Customer segmentation is children of the family but the family patrons do not believe in consistent purchase of the product. 2. Kellogg’s faces intensive competition from its rival brands such as Quakers. 3. Indian market is extremely price sensitive. Although it has acquired the purchasing power and seeks new avenues to spend the money, it will always have a discretionary approach towards spending the money. 4. Culture and eating habits dominate a very sensitive market such as food and preference of food. 5. The raw material used for making of the breakfast cereal is to be made available locally. Besides, there is no centralised machinery to regulate the prices demanded affecting the cost of raw material component in the making of the breakfast cereals. Segmentation and marketing strategy of Kellogg’s in India 15 years ago Kellogg’s launched its breakfast cereal segment in India. The target segment was adult and children alike. Kellogg’s introduced wheat flakes, rice flakes and corn flakes in India. Kellogg’s marketing strategy revolved around insisting upon high quality of the product and assuring Indian consumers that they are getting the same quality that is offered world-wide. However, the culture and tradition played a very significant role in acceptance of Kellogg’s by the average Indian consumer. Kellogg’s initially failed to take off the segmentation of middle class consumers in India. Research showed that eating habits clashed with the cold milk cereal concept. Indians prefer and have a habit of eating piping hot food and especially freshly prepared food for breakfast. Unlike everywhere in the world, Indians do not buy cartons of milk. Hence the milk is consumed warm or lukewarm. Initially Kellogg’s concept of milk and cereals did not catch on because the cereals after pouring of hot milk became soggy with sugar not getting dissolved in it. This led to flakes losing its taste and finally the appeal to the consumer. This gave a serious setback to the company as the flakes did not simply catch on. Kellogg’s also tried to get in new flavours like chocolate to increase the appeal to the children. However, it did not work. Kellogg’s hence changed the focus of the strategy implemented in India. The organization realised that they will have to teach the Indian consumer how to eat breakfast cereals in order to make the product a hit. Also the company changed its focus from general adult consumer to the more focussed segment of children of the family. The flakes were now introduced and repositioned on nutrition value. The advertising stated that the flakes are iron rich and mineral supplemented, contributed in the child’s growth significantly. This appealed to the mothers or women of the family who were conscious of family health and nutrition. Kellogg’s further studied the eating patterns of the family and realised that Indians usually like to snack in the evening, reducing the packet size to a mere 10Rs. pack which was not a big sum compared to the nutrition it offered. Steadily Kellogg’s regained its market position and is now a significant name in Indian households. They have further appealed to the diet and weight conscious segment of women and introduced the “K” series of flakes. It has also roped in Indian starlets such as Karisma Kapoor and Lara Dutta to promote the brand. This has worked well in the celebrity conscious Indian market. Some of Kellogg’s Products available in India: Desired Product changes for Kellogg’s: Although Kellogg’s is well settled in Indian market, now it should introduce new products or new appeals to the market. In an extremely price sensitive market such as India, Kellogg’s needs to constantly revise its products, their prices and marketing strategies. Following are the changes suggested to make it more appealing in the Indian market: 1. Keeping its flakes appeal constant Kellogg’s can now come up with Indianised version of flakes to appeal the taste. Flakes are essentially eaten with cold milk and cannot be eaten in the original form. Cadbury’s India introduced chocolate filled small dry waffles as a mid-time snack. The advertisements carried a slogan which changed the concept of mid-time snack from spicy to sweet. Kellogg’s can follow suit by introducing a healthy snacking option to the market. 2. There is readiness to eat Indian breakfast dishes available in the market. The significant issue in India is that the culture and the language changes from region to region. This factor can be leveraged to the best by taking into account local flavours and modifying the product accordingly. For example, in Western India, the food is subtly spicy unlike very strong spices used in northern region. While making the ready to eat breakfast mixes Kellogg’s can take this into account to modify the products accordingly. These products can be consumed by adding hot water to the precooked packet. 3. Interesting enough, Kellogg’s can also break the mould by making nutrition bars available at a very low price in the rural and semi urban market of India. The key to establish in this market is effective pricing and taste, rather than nutrition. The challenge is to make a nutritious product which is tasty and can be sold at a reasonable price. The option of moving into semi urban markets is lucrative as more and more companies are getting drawn into these vast markets that are yet unexplored in Indian economy. Customer segments for Kellogg’s for its products changes: 1. With Kellogg’s stringent quality standards enforced, the quality and taste of the mid time snacks has to be good. The target market for the same is young crowd (age group 16 to 25) who are constantly on the move. This is a college or university going crowd who survives on pocket moneys and still gets the education funded by the family members. Keeping it medium spicy and low in cost will definitely appeal this segment. 2. Readiness to eat pre-cooked breakfast is the extension of breakfast cereal concept. This will have an appeal to working mothers who are looking for healthy alternatives to the everyday routine breakfast cooking. 3. Rural and semi urban segment is the most appealing segment of Indian economy currently. Kellogg’s can launch products that are designed especially for this segment. Promotional methods need to be taken into account by Kellogg’s: 1. Celebrity appeal works for the youth segment tremendously. Hence hiring of a youth icon such as Sachin Tendulkar or a superstar like Aamir Khan can boost the product to no heights in the market. 2. The packaging for the pre-cooked breakfast product has to be convenient, less elaborate and again the price should not exceed the budget of the family. The promotion has to have freebies associated with it. Initially the company can launch the product in small trial version packets. These later can be made available in bigger quantities. 3. The packaging for rural and semi urban areas need not be glossy which cuts down the significant cost for the product. This segment is awakening to its purchasing power is ready to try new products and purchase options. Trial version packets can be introduced to this market as well. Another option is to provide the product through schools. This will also create a goodwill image for the company. Market and competition analysis: The competition for all the three segments is fierce in India. Mid time snack market is captured by local brands such as Haldiram’s, Lays, Bingo who present a range from potato chips to traditional Indian snacks. All these products are available in as low cost as 5Rs. and 10Rs. The profits are good but economies of scale need to be achieved which is the unique point of Indian market. For pre-cooked ready to eat breakfast mixes, homemade breakfasts pose a great competition. Traditionally Indian women are taught cooking from their very childhood and by the time they take charge of the household they are fully equipped in culinary skills. This already restricts the entry of outside and purchased ready to eat food in the kitchens of Indian households. If Kellogg’s has to make this idea work then there has to be an emotional appeal in the campaign and to the particular segment of women of the families. This is also a logical extension of Kellogg’s previous appeal of ‘child’s nutrition through healthy breakfast of corn flakes’. Brands like MTR and numerous local brands which offer these pre-cooked foods are a direct competition to Kellogg’s. These alternatives, if adopted, would give Kellogg’s a wider market appeal in India. The brand image of healthy good food will be supplemented by the social responsibility perspective as it has been at other locations for Kellogg’s. In its turn, this will help the company to shed its western image and blend itself with the local culture. It has been proven that in order to appeal to the local market and reap profits from it, organizations have to study and change as per the cultural requirements. Expansion of markets will happen with extension of segments such as youth segments. Expansion of the previous concept to healthy wholesome breakfast for adults will refocus the strategy on the family segment. Expansion of geographical segments will in turn increase the distribution channels and market penetration for the company. All these segments would yield into increased revenues for the company. Meanwhile, the company has to maintain it high and stringent quality standards in order to retain these markets successfully. Summary Although a turnaround success in India, Kellogg’s should not be sitting idle in the market. The competitors such as Quakers oats have already gained a strong foothold and are concentrating on appealing through the health of the heart. Nutrition ground of Kellogg’s is fast losing its value. Additionally, the traditional hot Indian breakfast cannot be substituted in Indian households. Kellogg’s is still facing a problem of converting itself into daily healthy breakfast option. It is still once in a week breakfast option in many families. Kellogg’s manages to run the show in India because of the size of the population. If it aspires to sustain and earn well, it has to shed its “western breakfast” image and get blended into Indian culture. It all the more becomes essential that Kellogg’s explores other snacking options in Indian market. Quaker has already learnt its lesson from Kellogg’s and is changing its way. Today Quaker also appeals to Indian tastes by moulding itself into Indian cuisine and delicacies. Kellogg’s hence needs to learn its lesson soon and mould accordingly. References 1. Bhan Niti, N. B. (2006). Brand Magic in India. Bloomsberg BusinessWeek. Retrieved from http://www.businessweek.com 2. GrewalDhruv, L. M. (2011). Marketing (2nd ed). TATA-McGraw-Hill. ISBN – 13: 978-0-07-133275-0, ISBN – 10: 0-07-133275-8. (Chapter 5: Consumer Behaviour) 3. Kotler Ph., & Keller K. L. (2009). Marketing Management (13th ed). Prentice-Hall Inc.: Pearson Education. ISBN – 978-81-203-3570-7. (Chapter 8: Identifying Market segments and Targets, Chapter 9: Building Strong Brands) 4. Kellogg’s - Our History. Our Company. Retrieved from http://www.kelloggcompany.com. 5. Indian economy in the year 2000. 2000 Index. Retrieved from http://www.photius.com Read More