Marketing Plan for ACME Tea - Assignment Example

Section A Marketing Plan for ACME Tea 1 Introduction ACME Tea is a Muscat-based tea company that seeks to expand into the UK. However, the owners have no experience in international business and trade. The company offers exclusive Ceylon loose leaf teas at affordable prices under the brand name ACME Tea. The founder is a qualified tea taster and regularly visits tea plantations in Sri Lanka (Ceylon) to pick the best teas. The tea is picked and inspected personally by the founder, thereby ensuring quality tea. Tea produced under the ACME brand is traditionally produced and are not blended. Loose leaf tea is more expensive than tea bags but ACME is going to keep it affordable. However, ACME is not a global brand and has presence only in Muscat. Moreover, the company lacks marketing experience, and hence this report suggests a marketing plan based on the situation and industry analysis. 1.2 Situation Analysis The retail sales value of tea in the UK jumped 22% between 2006 and 2011 and was valued at £655 million in 2011. Almost 87% of the Brits are tea consumers. Sale of loose tea has dropped between 2009 and 2011. Consumers are particularly cutting back on the use of higher price loose tea. However, tea being a staple item for every household, economic downturn is unlikely to have any significant impact on the consumption of tea. The overall tea market is expected to grow by 8% between 2011 and 2016 and reach £708 million (Mintel, 2012). Sales of ordinary tea bags have been declining steadily over the past few years (73% in 2009 to 70% in 2011) (Mintel, 2012). More exotic varieties such as Green Bags, Fruit and Herbal Bags, Speciality Bags and Decaffeinated Bags, are now preferred by the Brits. Sale of green bags has grown a sensational 83% between 2009 and 2011. As many as 12% of the Brits, drink green tea on a weekly basis. A SWOT analysis has been conducted (Appendix A). 1.3 Industry Analysis The tea industry is experiencing growth as consumers seek health drinks and consider tea to be a health drink. Competition with other beverages and drinks are prevalent but tea is being promoted as a health drink. Green tea and new herbal infusions have been gaining popularity among health-conscious consumers even at the expense of other hot drinks (Groosman, 2011). Suki Tea is a strong contender in the UK tea market as it provides finest loose tea, herbal infusions, and fruit blends from around the world. They focus on ethical sourcing and their teas have Fairtrade, Organic, and Rainforest Alliance accreditation, which have served to enhance their market position (Suki Tea, n.d.). In the UK four companies dominate the market and make up for 74% of the retail market in terms of value – Tetley (TATA Tea), PG Tips (Unilever), Twinnings (Associated British Food), and Yorkshire Tea (Taylors of Harrogate) (Buying Social, 2014). Twinnings dominates the UK leaf tea market and is readily available and served at supermarkets, homes, cafes and conferences (BrandOpus, 2013). Others competing in the loose leaf tea market include Tata Tea, Unilever, Tea Pigs and Charbrew, with Tea Pigs having captured 50% of the market share (BrandOpus, 2013). Several other tea companies are thriving in the UK market but as the sector is poised for growth there is room for new entrants. Tea is even served at restaurants as a substitute to dessert wine (Briggs, 2013). 1.4 Porter’s Five Forces Analysis Bargaining Power of Buyers Bargaining power of buyers is high because several companies are dealing in loose leaf tea although the segment is still nascent and the demand is on the rise. Within the loose leaf tea market also there are several options available in terms of different flavours. However, since the consumer base is increasing, ACME can pursue a push strategy by creating product differentiation. Bargaining Power of Suppliers A large number of suppliers are available that supply unprocessed tea leaf which is then processed again by a large number of processors. Switching cost being low, the bargaining power of suppliers is low. Competitive Rivalry Brands such as Tetley, Unilever, Dilmah and Twinnings have a very strong presence and have a valued brand identity. Competitive rivalry being high, it would be difficult to penetrate unless there is some point of differentiation either in pricing or in product. Threat of New Entrants There is no restriction imposed by the government or the industry and hence firms with a large capital base to spend on marketing, can easily enter with new products. However, consumers do value brand and ethical sourcing. Threat of Substitution The market is full of alternative beverages such as several reputed brands of coffee, aerated drinks, health and energy drinks. It is very convenient for consumers to switch to other forms of beverages. An analysis of Porter’s Five Forces suggests that unless there is a strong differentiation that ACME is able to provide, it may not be able to sustain competition. This is because the bargaining power of buyers is high and threat from substitution also persists. Strong brands have achieved success and since they belong to large corporate houses, penetration would be difficult. However, Tata, Unilever, Dilmah and Twinnings are global brands; there are very few in the mid-price category. While keeping prices low if ACME can maintain quality and add value to tea consumption, the youth may prefer to choose ACME. However, it would all depend on the marketing mix strategy adopted by ACME. The marketing strategy is being devised based on this analysis. 1.5 Marketing Objective ACME should not have immediate sales as its marketing objectives. This would be a short-term strategy but a certain amount of market penetration should be achieved before sales is targeted. The focus should be to create new customers that can have fun over a health drink while relieving stress. This objective is achievable because the trend of the youth in the UK demonstrates a major shift towards loose leaf tea consumption. 1.6 Marketing Strategy 1.6.1 Segmentation Thus ACME should position itself basically to cater to the younger segment as this is the segment keener for loose leaf tea. Thus ACME should first follow geographic segmentation and adhere to a few select cities in the UK. Demographic segmentation suggests that the age group 18-35 should be targeted as they seek products that are innovative. The youth can be targeted by directing messages that stirs their consciousness and directs them towards responsible living. At the same time, benefits of healthy tea drinking should also be advertised targeting the middle-age segment (above 35 years of age) as this would help create new users of loose leaf tea. Segmentation enables the company to direct its targeted efforts towards specific market and its needs 1.6.2 Target Market Drinking tea in the UK is “quintessentially British”, a calming aid in times of crises and a companionable pastime (Briggs, 2013). Black tea is still the most preferred way of drinking tea in the UK but herbal and green tea has grown in popularity among the 16-24 year olds. English breakfast tea is still remembered but trend has shifted towards exotic flavours of herbal, fruit and green teas as consumers have diversified their consumption habits. The biggest consumers of loose tea are surprisingly aged between 25 and 34 (12%) while the over 65 age group comprise of only 10% of the loose tea users (Mintel, 2012). This is surprising because those over 65 years of age are more likely to have grown up using loose leaf rather than tea bags. Tea has a “cool image” and hence its popularity with the younger consumers. The younger segment is more likely to be more open to discovering the benefits of loose tea – they are keen to discover the full flavour of the larger leaves. 1.6.3 Product Positioning Product positioning depends upon consumers’ perceptions of important product attributes. These perceptions enable consumers to distinguish and make comparisons among competing products (Lee and Liao, 2009). Thus, ACME must have a point of differentiation so that consumers could immediately distinguish among the various products on offer. At the same time, product offering should be able to deliver the brand promise (Aaker, 2004). Tea has traditionally been used in the UK “to keep calm and carry on” which means in times of adversity Britons reached for a cup of tea (Mintel, 2012). Tea for the younger generation has to be appealing to the next generation and this can be achieved by making it ‘fun and relevant’ to that age group (Oliver, 2012). One of the important areas of major concern to the youth is ethical trading and social responsibility. This is different from corporate social responsibility. ACME should position itself as a socially responsible company and convey this message through their advertising campaigns. They can demonstrate their sourcing strategy (which should take into account the environmental concerns and concern for labour). However, product quality must be superior at affordable prices, marked lower than the well known brands. The well known brands are premium products and ACME should position itself as a mid-category product appeal to the masses. ACME does not blend tea and produces it the traditional way. Thus, they could use ethical production as they positioning strategy. ACME could use Fairtrade mark on their products, which is a tool for development for disadvantaged farmers in developing countries (Suki Tea, n.d). Thus, these farmers are able to get a better deal in the international market. Consumers have become conscious of such products and do not kind paying a premium for ethically sourced and produced products. 1.7 Marketing Mix The marketing mix concept suggests that the buyers are a homogeneous group of people with common buying behaviour (Bennett, 1997). However, if the target market is the youth between 16 and 35 years, needs and expectations would differ. Besides, the UK has a large number of migrant communities which makes it difficult to develop a homogeneous marketing mix strategy. Product Based on the findings by Mintel (2012), ACME should focus on green tea and also several other varieties such as fruit and herbal teas. Such innovative, energy-giving products would immediately appeal to the youth as Tea Bars are becoming popular in the UK (Stewart, 2013). The UK now has urban tea rooms, mobile brew bars and two-tier tea shops selling as many as 40 varieties of tea in different forms. These bars are equipped with food, music, cocktails and a variety of tea. Therefore the product has to be given an image of a beverage over which the youth can discuss and exchange notes. Price The tea sector in the UK has shown an oversupply of different products as a result of which there is a downward pressure on prices (Groosman, 2011). Besides, global giants such as Tata and Unilever have a strong presence in the UK market which makes it difficult for new entrants to penetrate easily. Therefore, competition prices have to be evaluated before pricing is undertaken. To make a differentiation, ACME should adopt bundling pricing strategy. This implies that they attract consumers by offering small packets of three different varieties per month for a bundled price. Individually these sample packets may cost more but when three or more varieties are purchased, the prices come down. This would also enable the company to distribute variety of tea flavours to a large segment. Place Place is no more restricted to retailers and dealers. Distribution takes place through multiple channels. ACME can sell through its own website as well apart from tying up with supermarkets and other retailers. At the same time, Tea bars, restaurants and other speciality food outlets also serve tea and hence ACME should approach them as well after the initial campaign is undertaken and some brand awareness created. Promotion Advertising is a special mass media discourse which carries both verbal and non-verbal messages as a single entity (Ustinova, 2008). Thus they must carry very string messages to instantly attract consumers. Conventional advertising has become redundant and hence ACME should create its own website. Cost for developing a website is nominal with some tools available to facilitate website designing. Advertising at this stage should be aimed at brand building and not to attract sales. Consumers are marketing and advertising literate and they are capable of judging a product and its quality based on the advertising undertaken (Cruz and Fill, 2008). Word-of-mouth (WOM) is an important part of marketing for disseminating information to consumer before the purchase decision is made (Grace and O’Cass, 2005). With the proliferation of the Internet, WOM is now termed as eWOM. For viral spread of information, marketers post videos on platforms such as YouTube. They then seek help of agents, who, through their own social network, spread the buzz about the product quickly (Strategic Direction, 2005). These conform to the characteristics of Gen Y who are internet savvy and tend to be attracted to products and advertisements on the internet. More details on social networking are discussed in Section B. Personal selling is an important marketing communications element as it enables capturing consumer details that can be used later for targeted marketing (Avlonitis and Papastathopoulou, 2000). However, personal selling is now replaced with virtual communities where consumers with common interest converged and carry on discourse (Lagrosen, 2005). This has been discussed at length in Section B. Public Relations, is the act of building good relations with consumers or the public. This can be developed through press releases, news and through sponsorship of events. ACME should communicate messages through these platforms as they considered more effective than paid advertising as these messages are not sponsored by marketers (Xifra and Huertas, 2008). Blogs are considered effective tool for two-way online public relations. Youthful contemporary style ad campaigns of loose tea products would help manufacturers stimulate demand among this group (Mintel Store, 2012). This would help build public relations while creating brand awareness. A major element of the marketing strategy is to educate the consumers about the difference between tea bags and loose leaf tea. Road shows and training sessions are some of the ways that this can be achieved. People have to be educated on the right temperature at which tea should be brewed and for what length of time (Oliver, 2012). In addition, workshops can be organized where some videos can be run highlighting the benefits of tea that is being marketed. Following the workshops open house sessions should be held where consumers can clarify any issues they have. This also adds to public relations because it is also important to listen to the customers and pay heed to their needs and concerns. Sample packets may be sold at these workshops at nominal price and feedback forms should be attached with it, requesting the consumers to send their feedback. Such feedback would also help ascertain the particular flavour that is in demand and the perception of quality among consumers. Another interesting method to develop public relations is to request the consumers to send some catch words or phrases on the product based on their experience with the tea. This is a method to generate advertising messages and the selected responses could be rewarded by way of gift coupons. During such workshops, media should also be invited and free samples given out to them requesting their feedback. Even if no feedback is returned at least some form of message would be circulated in the media about the product launch. Public relations can also be developed through the online media which is an interactive platform. Sales promotions are techniques used by marketers to induce sales. These inducements can be offered at any point in the distribution channels. These can take the form of price discounts, retail coupons of offer of extra features. Bundling pricing is one such strategy. Other forms of sales promotion could be free packets along with large orders or free tea packs for referrals. Special Christmas gifts can be bundled together or for other special occasions such as Mother’s Day and Father’s Day. Overall, web is an important part of the marketing strategy, be it for advertising, sales promotion or for developing and maintaining public relations. The web indeed, constitutes a disruptive innovation for marketing. How the promotion mix can be effectively undertaken through the Web is discussed in Section B. 1.8 Packaging Packaging is an important promotional function. Tea is a product that has to be packaged and sold and hence theories of packaging are of great relevance. Packaging appears to be a crucial factor in the success of tea marketing. Twinnings packaging has a story book approach (BrandOpus, 2013) and packaging has to be eye-catching (Oliver, 2012). As a result of reduced marketing budgets, and in the case of ACME being a new entrant, marketing focus has to shift to the point of sale communication and sales promotion (Ampuero and Vila, 2006). Most purchase decisions are made at the point of sale and besides, retail counters being self-service centres, there is more intense contact between the product and the consumer. Therefore, product packaging should be realistic and attractive to draw the attention of the consumer ‘as being something different’. Pictures are vivid stimuli when compared to words and hence incorporating pictures would enhance accessibility of the product (Underwood, Klein and Burke, 2001). Section B Implementation of Promotion Mix The function of marketing itself has evolved and it is no more a one-way functional discipline; it is an interactive process aimed at understanding and fulfilling customer needs and preferences. The advent of web 2.0 technologies has re-written the rules of marketing (Zyl, 2009). User-generated media content is considered revolutionary and has pervaded every business function. Marketers too, have been extensively making use of this new media. Another major change is that the power has now shifted from the marketer to the consumers. The benefits of social media for marketers are many including opportunity to be close to their markets, collect and assimilate information, and host communities (Palmer & Keonig-Lewis, 2009). It has now become important for companies to have direct contacts with customers and build a customer database while adapting a customer-oriented system (Gronoos, 1996). Web 2.0 technology has enabled organizations to maintain contact with customers, which was hitherto not possible through traditional advertising channels. However, information technology has opened several avenues for marketers. ACME can make use of this platform to attract and interact with the youth particularly as 70% of the consumers have turned to social media for information on a company, product or brand and 49 percent actually use these reviews to make their purchasing decision (Coyle, Smith & Platt, 2012). Three out of five consumers create their own reviews about products and services. The first step for ACME is to set up its own website and simultaneously start a forum or consumer blog. Blogs are platforms that enable consumers to read reviews, exchange product information and experiences. Consumers prefer to read reviews of products before the purchase decision. In fact these are preferable to advertisement slogans and claims made through advertisements. Rich user-generated content enables users to share experiences and form online communities. Weblogs or blogs produce immediate results as they are interactive in nature and support link-sharing (Ireland, 2004). ACME should incorporate generic search terms such as herbal tea, health drink, energy drink, fun times, and lifestyle drink into the referral link thereby lending creativity to the blog. This can have profound effect particularly if opinion leaders add the link as this would help to spread the word around much faster. Blogs are also used to enhance public relations. However, ACME must immediately appoint a social media manager because any posts/messages posted on the blogs or the company website must be promptly attended, including response to negative feedback. As ACME aims to position the loose leaf tea as a fun and health drink, it should create a video showing how tea should be prepared, with the right temperature, the time taken to brew it. This should be posted on YouTube as this is likely to attract the attention of young consumers better than any other form of advertising. YouTube enables people to share their files with their friends in their network and this implies that video viewership can be phenomenal. Another major advantage of YouTube is that one can watch a video even without being a member, and even comment and interact with others (TechMedia, 2014). ACME can also embed YouTube videos on their corporate website or blog, which implies that they can reach a wider audience. Facebook is another platform very popular with the youth. Initially meant to be a personal space, Facebook is now used by marketers as they have created their own pages. Facebook can be used as a marketing tool to tap potential clients for ACME tea, to post new product information and launches, to offer advice and support, and promote products by engaging customers through giveaways (Champoux, Durgee & McGlynn, 2012). Facebook is more popular than websites which is evident from the statistics of Starbucks. Its Facebook page has over 21 million “LIKES” while its corporate page on the internet has just about 1.8 million visitors per month. However, social media has a major disadvantage as information is shared and exchanged. One negative review can dissuade several other potential consumers away from the product. Social media has changed the way people think and evaluate a product. Other forms of public relations that can enhance brand awareness include inviting panel discussions on the subject. Opinion leaders should be selected and an interactive session organized online. Web campaigns can also be organized and such campaigns enable data collection and tracking visitors which further helps in targeted marketing. Customers’ unique preferences and psychological profile can help create sales appeal (Chester, Montgomery and Dorfman 2010). Printing of hard-copy brochures may not be cost-effective at this stage when ACME is just planning to launch its product in the UK. However, e-brochures can be prepared and link to it provided in all posts made on social networking sites. This brochure should contain all details including its ethical sourcing, the quality of tea, how tea should be prepared to enjoy the flavor, the different packaging available and the distribution points. These e-brochures should be available for download by anyone from the corporate website as well. The Internet and web 2.0 technology is actually disruptive innovation as it was initially accessed through simple applications such as website but it now it has totally changed the way businesses function. Marketers in particular, utilize several applications and tools online to create value for the customer, to develop and maintain direct contact with the customer and collaborate with the customer to enhance customer experience. 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Public Relations Review, 34, 269–275 Appendix A SWOT ANALYSIS Strengths Developed a range of specialist teas Offers Ceylonese tea at affordable prices Owner trained qualified tea taster Hand-picked best tea from Ceylon Tea produced in traditional manner Weakness No experience in trading The UK market is unknown Lack of experience in business and trading Opportunities Increasing demand for tea with rising health concerns Young consumers in the UK prefer loose leaf tea over tea bags Flavoured and speciality tea in demand Tea market in the UK expected to grow 8% Tea has a ‘cool image’ with the youth Loose leaf tea served as alternative to dessert wines at star restaurants (Briggs, 2013) Threats Competition with other beverages such as Starbucks Coffee chains Starbucks has also entered the tea market through tea bars Consumer cutting back on higher price loose tea Oversupply of tea in the market exerts downward pressure on prices and is a threat to the long-term economic health of the industry (Groosman, 2011) Read More