Launching a Cigarette Product Called F&H Cigarette - Essay Example

Launching a Cigarette Product Called F&H Cigarette Grade Introduction Marketing is concerned with communicating the value of a brand, service or product to customers, for the main aim of promoting and selling that brand, service or product (Kotler and Armstrong 1991). The techniques that are employed in marketing by marketers include choosing market segmentation and targeting a market through analysis of the market, in addition to understanding the behaviour of consumer and promoting a product’s value to consumers. Marketing activities like promoting a product in marketing is different from production or manufacturing, which involves producing a product that is intended to serve a particular target market. A strategy known as marketing mix is used to undertake a SWOT analysis in identifying a target market mentioned above. The term marketing mix is considered a tool of business utilized by marketers in the market for developing an effective strategy, which creates a successful product mix concerning a suitable product that is sold at a suitable price in a suitable place while using a suitable promotion strategy (Kotler and Armstrong 1991). This product mix is what is known as the 4 Ps which incorporates price, product, promotion, and placement. The term SWOT analysis is an organized method of planning used to assess the weaknesses, strengths, threats and opportunities involved in a business or a project (Kotler and Armstrong 1991). In this paper, we will examine the use of the marketing mix information in undertaking a full SWOT analysis and create a new design for our F&H cigarette product in task 3 and 4. Task 3: SWOT analysis There are different aspects of a marketing mix of competitors, such as product characteristics, their prices, how they promote and how they distribute their products to different customers. The table below shows a marketing mix strategy for Pall Mall London. Marketing Mix Strategy Description Product This is the services and goods a company offers to its target market. Hence, Pall Mall cigarette is a product that offers smokers worldwide a real and high quality value (BAT 2013). Price This is the amount of money customers have to pay to get a product. Pall Mall cigarette London charges premium for its cigarettes because of its perceived high quality which is described as “smoother” and “full flavour” (BAT 2013). Place This involves a company’s activities that make a product available to customers who have been targeted. Pall Mall cigarette store in the United Kingdom is located in London because it targets high end customers who have high disposable income and like smoking (BAT 2013). Promotion This implies activities that talk about the merits of a product that persuade customers to purchase it. In 1951, Pall Mall used a popular figure like Santa Claus to sell its cigarette to people especially Christians celebrating Christmas (Elliott, 2008). The marketing mix for Pall Mall London described above illustrates how the cigarette product is promoted, placed and priced. However, there are examples of online and in store promotion, displays and pictures that are used to promote the product. In appendix 1a, we can see that Santa Clause advertising display was used to promote smoking of Pall Mall cigarette to Christians celebrating Christmas (Elliott 2008). Pall Mall’s cigarette social media activity on Facebook provides promotional messages like “I love Pall Mall” in its status and 1970s advertisement showing its perpetual effect on high end people, encouraging customers to visit their stores (Facebook 2015). Even with these promotional strategies, there are gaps where Pall Mall does not meet its customers’ needs. SWOT analysis is utilized in identifying these gaps when looking at the marketing mix strategy. Marketing Mix Strategy (4 Ps) SWOT Analysis Strengths This refers to business characteristics that provide a competitive advantage over other businesses. Pall Mall cigarette product being the third largest cigarette company in the world, has tangible assets, such as existing customers, capital and distribution channels that give it a competitive edge over other cigarette companies. Weakness This refers to business characteristics that place a business at a disadvantage in relation to other businesses. Pall Mall London charges a premium price on its cigarette in London because individuals have more disposal income. This means it cannot sell to numerous smokers who cannot afford expensive cigarette. Opportunities This refers to external factors that could be used by a business to make it prosper. In 2006, Pall Mall increased its market share from 1.6 billion (1.95%) to 5.5 billion (7.95%) in 2010 (Craver 2012). This means it has enough funds to invest in other places like the emerging markets of Africa to increase its market share. Threats This refers to external factors that are beyond a business that could put a business strategy at risk. Due to its premium price per packet, Pall Mall’s customers may leave their brand to other cigarette brands like Marlboro and Camel (Craver 2012). This may result in Pall Mall losing its customers to its competitors. In order for this above SWOT analysis to be discussed in detail concerning unmet customer needs, quantitative market research is required. This research focuses on asking individuals for their opinions in a structured way in order to come up with statistics and hard facts to guide a business on how to proceed with market strategies of their new products in the cigarette market (Kotler and Armstrong 1991). In looking at international markets, this quantitative market research can be used to assist marketing managers to make informed decisions on which international markets to invest based on statistics concerning smoking. Task 4: Product The marketing mix discussion using SWOT analysis above of Pall Mall cigarette has revealed market segments relating to unmet consumer needs that our cigarette product F&H will utilize to enter the competitive cigarette market. Let us design our new F&H cigarette product. Product F&H is a clove cigarette that will be provided in England. While many cigarette companies focus on premium prices like Pall Mall, they forget individuals who desire to smoke that cannot afford the premium prices. F&H offers benefits of high quality cigarette that have a special aroma at an affordable price. Key Objectives Create a sustainable cigarette product business that produces cigarettes with an aromatic smell that will be capable of attracting customers. Achieve the following target sales volume as shown in appendix 1b in order to make profit for the business and allow it to sustain itself without losses. Year 1: 100,000 cigarette boxes Year 2: 200,000 cigarette boxes Year 3: 300,000 cigarette boxes Get to break-even point in 12 months. Competitive Comparison There are three distinct types of competitive advantages. Type 1 – Special aromatic smell of F&H cigarettes The cigarette will have a nice aromatic smell that will provide high quality cigarettes that will attract more potential customers to our cigarettes. Pall Mall cigarettes do not have a sweet aromatic smell. This will assist us in competing with them based on product differentiation. Type 2 – Affordable price of F&H cigarettes for customers F&H cigarettes will be affordable for customers who cannot afford expensive cigarettes like Pall Mall. The affordable price will give us a competitive edge as many customers will want to smoke cigarettes that are affordable and have an aromatic smell. Type 3 – Cheap production of clove raw material in Indonesia The clove raw material that is produced in Indonesia is cheap, and F&H will use this advantage to introduce affordable prices to customers. This means that we will still make profits even with low prices. Market Segmentation The cigarette market is segmented by spending and age with more emphasis on students of age between 18 and 30 years old with little money to spend. Students who smoke usually have little money to spend, and this gives F&H the advantage of targeting this segment. Another reason for targeting this segment of students is the popularity that comes with smoking. Students who smoke tend to look cooler than those students who do not (Blythe 2008). Market Strategy The segmented market of students of age between 18 and 30 years is significant in creating a market strategy. Quantitative market research will be used to ask students for their opinions concerning F&H cigarette and this will be done using a questionnaire. The students who will be interviewed will provide statistics that will be used in making informed decisions on whether to price cigarettes at a cheaper price or not and where the cigarettes should be sold. However, F&H will maintain the low price strategy of cigarette because of the benefit of cheap raw materials. Conclusion In the discussion, it is true that marketing is concerned with the value of the brand, service or product to customers with main concentration placed on marketing mix that include promoting and selling of a product’s services. SWOT analysis has also given us insight on how to assess a business and where another business can take a competitive advantage. In the end, F&H cigarette marketing will be concerned with getting new customers to purchase the cigarette at the same time attracting, retaining, and meeting business objectives. Bibliography BAT 2013, Our brands: A strong heritage and ahead of the curve. [Online] Available at: http://www.bat.com/brands [Accessed 25 Mar. 2015]. Blythe, J 2008, Consumer behaviour, Thomson Learning, London. Craver, R 2012, Marketing war brewing between Pall Mall and competitors. [Online] Richmond.com. Available at: http://www.richmond.com/business/article_54133120-2d8f-538a-a1ad-bfef998304af.html [Accessed 25 Mar. 2015]. Elliott, S 2008, Advertising - when doctors, and even Santa, endorsed tobacco - NYTimes.com. [Online] Nytimes.com. Available at: http://www.nytimes.com/2008/10/07/business/media/07adco.html?_r=0 [Accessed 25 Mar. 2015]. Facebook, 2015, PALL MALL. [Online] Available at: https://www.facebook.com/pages/PALL-MALL/139620259428996 [Accessed 25 Mar. 2015]. Kotler, P & Armstrong, G 1991, Principles of marketing, Prentice Hall, Englewood Cliffs, N.J.: Appendix 1a Figure 1: Pall Mall Advertising 1b Table 1: F&H Financial Statement Year1 Year 2 Year 3 Total revenue 1014500 1114500 1214500 Cost of Goods Sold      426200      426200      426200 Gross Profit 588300 688300 788300         Expenses       Accounting and legal fees 11700 11700 11700 Advertising 15000 15000 15000 Depreciation 38000 38000 38000 Electricity 2700 2700 2700 Insurance 15200 15200 15200 Interest and bank charges 27300 27300 27300 Postage 1500 1500 1500 Printing and stationery 8700 8700 8700 Professional memberships 1800 1800 1800 Rent for premises 74300 74300 74300 Repairs and maintenance 21100 21100 21100 Training 6900 6900 6900 Vehicle operating costs 20000 20000 20000 Wages and salaries 223500 223500 223500 Workers compensation 6500 6500 6500 All other expenses          14,100          14,100          14,100 Total Expenses        488,300        488,300        488,300 Net Profit 100000 200000 300000 Read More