Marketing Planning and Promotion for Innocent Drinks - Report Example

Marketing Planning and Promotion – The Case of Innocent Smoothies ID Number Total Number of Words: 3,501 Executive Summary This report closely examines the past and current marketing strategies used by Innocent Drinks. Using the PESTLE framework, the macro-environmental factors that may contribute or hinder the success of this company were tackled in details. To learn more about the company’s product line, a product portfolio analysis was conducted followed by discussing its product life cycle. Based on the product lines of Innocent Drinks, a market segmentation study was conducted to learn more about its target consumers’ demographic, psychographic, behavioural, and geographic information. In relation to the present case of Innocent Drinks, an action plan was presented in this report. This section provides information with regards to Innocent’s target market, market positioning strategies, pricing strategies, place and promotional strategies, and marketing communication strategies. Eventually, a feedback mechanism and control was provided prior to conclusion. Table of Contents Executive Summary ............................................................................................................... 2 Table of Contents ................................................................................................................... 3 1. Introduction ................................................................................................................ 5 2. PESTLE Analysis ...................................................................................................... 5 2.1 Political Factors .......................................................................................... 5 2.2 Economic Factors ....................................................................................... 6 2.3 Social Factors .............................................................................................. 6 2.4 Technological Factors ................................................................................ 7 2.5 Legal Factors .............................................................................................. 7 2.6 Environmental Factors ............................................................................... 8 3. Market Research ........................................................................................................ 8 3.1 Market Segmentation .................................................................................. 8 3.1.1 Demographic Segmentation ...................................................... 8 3.1.2 Psychographic Segmentation .................................................... 9 3.1.3 Behavioural Segmentation ........................................................ 10 3.1.4 Geographic Segmentation ......................................................... 10 3.2 Product Portfolio ......................................................................................... 11 3.3 Product Life Cycle ...................................................................................... 13 4. Action Plan ............................................................................................................... 14 4.1 Target Market ............................................................................................ 14 4.2 Market Positioning .................................................................................... 14 4.3 Pricing Strategies ...................................................................................... 15 4.4 Place and Promotional Strategies .............................................................. 15 4.5 Marketing Communication Strategies ....................................................... 16 5. Feedback Mechanism and Control ........................................................................... 16 6. Conclusion ............................................................................................................... 17 References …….…………………………………………………………………………... 18 - 23 Appendix I – Market Segment for Innocent Drinks Smoothies …………………………… 24 Appendix II – Historical Inflation Rate in UK ………………………………...................... 25 Appendix III – Historical Trend in UK Population ………………………………………… 26 Appendix IV – Innocent Product Lines .................................................................................. 27 Appendix V – BCG Matrix .................................................................................................... 29 Appendix VI – Product Life Cycle ........................................................................................ 30 Appendix VII – Ansoff’s Matrix ........................................................................................... 31 Appendix VIII – The Big Knit Project .................................................................................. 32 1. Introduction Innocent Drinks was established in 1999 by Adam Balon, Richard Reed and Jon Wright (OReilly, 2012). Back then, these three young entrepreneurs started the business after selling some fruits smoothies in a local music festival in London (Innocent, 2013a). Since then, Innocent Drinks became one of the famous fruit smoothies brand in UK (Evans, 2013; OReilly, 2012). Considering the case of Innocent Drinks, this report will focus on identifying and analysing some external factors that could affect the business. After discussing its product portfolio and product life cycle, some issues related to market segmentation, consumer behaviour and identification, and its marketing communication strategies will be tackled in details. Prior to discussing the feedback mechanism and control, a marketing action plan will be presented using the concept of marketing mix. 2. PESTLE Analysis A PESTLE analysis was purposely conducted to examine the macro-environmental factors that could affect the business performance of Innocent Drinks. 2.1 Political Factors To protect the health and safety of the public consumers, the food and drink industry in UK is highly regulated by the Food Standard Agency (FSA). Basically, what the FSA does is to oblige all food and drink manufacturers to observe the proper labelling and packaging of food and drink products (FSA, 2013). Aside from making sure that there is a sufficient supply of food and agricultural products in UK, the Department for Environment Food and Rural Affairs (DEFRA) highly encourages people to consume more fruits and vegetables (DEFRA, 2013). In 2007, there was an on-going e-petition which aims to reduce the Value Added Taxes (VAT) on fruit juices from 17.5% down to 5% (Fleming, 2008). However, Innocent did not win the fight over their proposed reduction on VAT charged on smoothies (Pidd and Hawkes, 2010). 2.2 Economic Factors Because of the 2008 financial crisis, UK economy is expected to grow at a slow rate of 0.6% in 2013, 1.8% in 2004, and 2.3% in 2015 (ODonnell, 2013; Reuters, 2013). Even though the unemployment rate in UK decreases by 7.7% as of January 2013, Inman (2013) reported that the wages of each employee is expected to remain the same. Although UK economy is showing signs of slow recovery, inflation rate at 2.8% as of February 2013 is remains high as compared to 1.6% in February 2003 (Rate Inflation, 2013). These figures strongly suggest that people in UK may decide to allocate their financial resources to other more important things than an expensive bottle of Innocent smoothies. (See Appendix II – Historical Inflation Rate in UK on page 25) 2.3 Social Factors The total population in UK has been steadily increasing. As compared to the total population of 59.56 million in 2003, the total population in UK has already reached 63.49 million in 2013 (Statista, 2013). (See Appendix III – Historical Trend in UK Population on page 26) The population in UK is ageing (Jeavans, 2004). Since healthy foods can help prevent the risk of acquiring preventable diseases, a lot of companies that manufacture healthy foods and drinks are most likely to target the ageing population and busy people who are health conscious by nature (Business Insights, 2013). 2.4 Technological Factors Manufacturers of fruit drinks like smoothies are highly dependent on environmental-friendly packaging such as the PET recycling technology for PET bottles (Hurd, 2013), the narrow-neck press technology for glass-made bottles (Packaging-Gateway, 2013), and aseptic packaging technology for tetra pack (Tetra Pak, 2013). Likewise, companies that manufacture food and drinks are also highly dependent on the use of laboratory instruments to determine the nutritional content of the food and drinks they sell in the market. In the case of Innocent, this company is using the laboratory services offered by Eurofins UK (Eurofins, 2013). 2.5 Legal Factors Implemented on the 28th of January 2002, the Regulation (EC) No. 178/2002 of the European Parliament and Council provides the legal requirements with regards to food safety throughout the United Kingdom (Europa, 2013a; legislation.gov.uk, 2005). Under the said Act, food and drink manufacturers are required to trace back, notify the public, and withdraw or recall food and drink products that has failed to conform with the food and safety guidelines (FSA, 2007; legislation.gov.uk, 2005). In case Innocent Drinks failed to comply with the provisions of Regulation (EC) No. 178/2002 particularly with regards to food safety requirements like food presentation, food handling, and traceability of Innocent products (i.e. based on its manufactured date and market distribution), this company can be held liable on conviction to a fine of £20,000 or imprisonment for a maximum of two years or both depending on the degree of violation (legislation.gov.uk, 2005). 2.6 Environmental Factors The EC directive 94/62/EC set the guidelines with regards to environmental issues related to waste recovery, the need to promote the use of recycling packaging materials, re-use of packaging materials, and its final disposal throughout the European market (Europa, 2013b). Basically, the main purpose of this Act is to encourage food and drink manufacturers to participate in reducing the adverse environmental effects of packaging waste materials. Innocent Drinks is using 100% recyclable PET bottles to help reduce the risk of climate change (YouthXchange, 2008). Even though new bottles are 10% more expensive than the traditional PET bottles used by most of the local food and drinks manufacturers, these new bottles enables Innocent Drinks to prevent 55% cut on overall carbon emission when packing the Innocent Drinks smoothies. 3. Market Research 3.1 Market Segmentation 3.1.1 Demographic Segmentation Demographic segmentation will examine the age, gender, income, family size, family lifecycle, occupation, educational background, race, nationality, social class and religion of Innocent’s target market (Kotler, 2000, pp. 263 – 266). The fruit smoothies sold by Innocent Drinks are made of 100% natural fruits. It means that Innocent Drinks is free of preservatives and sugar (Innocent, 2013b). Therefore, regardless of age, family size, gender, income, occupation, educational background, race, nationality, social class, and religion, the different product lines offered by Innocent Drinks should be considered as a good healthy food option. At Tesco, a 750ml Innocent Blackberries, Strawberries, and Blackcurrant Smoothie costs around £3.09 each as compared to a 750ml Tesco Cranberry, Blackberry, and Raspberry Smoothie at the price of £2.18 (Tesco, 2013). Considering the high market price of Innocent fruit drinks, demographic variables such as family or personal income, occupation, and educational attainment are among the most significant factors that can affect the market of Innocent (Rogers, 2005, p. 22). Few years ago, it was reported that some of the end consumers who purchase fruit-based smoothies are those individuals between the age of 15 to 19 years old and 25 to 34 years old with busy lifestyle and hectic schedule at work or in school (Grocer, 2007). (See Appendix I – Market Segment for Innocent Drinks Smoothies: Demographic on page 24) 3.1.2 Psychological Segmentation Psychographic segmentation focuses on identifying Innocent’s target consumers’ unique personality, lifestyle and attitude or values about fruit smoothies (Kotler, 2000, pp. 266 – 267). Unlike demographic segmentation, determining the psychographic segmentation of Innocent’s target market is not easy because it is more focused on analyzing non-tangible variables (Mitchell and Haggett, 1997). Considering the health benefits offered by Innocent Drinks, one can easily say that the company’s target consumers are living a healthy and busy lifestyle. It means that the target consumers of Innocent are those individuals with a positive attitude or behaviour and are willing to pay a premium price for convenient healthy foods and drinks. Aside from being health conscious, most of the loyal customers of Innocent Drinks are also expected to patronize fruit drinks and healthy foods from companies that seriously observe environmental protection. (See Appendix I – Market Segment for Innocent Drinks Smoothies: Psychographic on page 24) 3.1.3 Behavioural Segmentation Behavioural segmentation focuses on identifying Innocent’s target consumers’ ability to stay loyal to the brand, their willingness to purchase Innocent smoothies, the target consumers’ buying frequency, and the buying attitude of Innocent’s target consumers with regards to the different product lines offered by this company (Kotler, 2000, pp. 267 – 270). Considering the premium price of Innocent products as compared to other brands, the usage rate and buying frequency of its target consumers are mostly highly dependent on their available financial resources. (See Appendix I – Market Segment for Innocent Drinks Smoothies: Behavioural on page 24) Innocent’s target consumers seem to have a positive attitude with regards to the company’s different product lines. Based on the feedbacks coming from the company’s avid customers, many of them are happy and will stay loyal to the brand because of the product quality, tastes, and health benefits offered by Innocent Drinks (Innocent, 2013c). As a result, the readiness of the target consumers to purchase the brand is expected to increase in the near future. 3.1.4 Geographic Segmentation Geographic segmentation focuses on identifying Innocent’s target market based on geographic boundaries (Kotler, 2000, p. 263; Rogers, 2005, p. 24). Although there are four major regions in UK (i.e. England, Scotland, Wales, and Northern Ireland), Innocent Drinks are most likely to target the urban areas in UK. This includes: London, Manchester, Birmingham, Leeds, Glasgow, Newcastle, Liverpool, Nottingham, Sheffield, Bristol, Belfast, Edinburgh, Brighton, Leicester, Portsmouth, Bournemouth, Reading, Middlesbrough, Stoke-on-Trent, and Cardiff. (See Appendix I – Market Segment for Innocent Drinks Smoothies: Geographic on page 24) Without considering the size of the cities, this company regularly distribute a wide-range of its product line in different grocery store outlets in the urban areas of England, Scotland, Wales, and Northern Ireland. To ensure that it will be easier for the public consumers to purchase the items of Innocent Drinks, this company entered into a business deal with almost coffee shops, department stores, retail food outlets, and the local schools in UK (Foord and Drink Export Ireland, 2013; Reynolds, 2012). For example, Innocent Drinks has entered into a business partnership with McDonald’s such that Innocent Smoothies will be tied up with McDonald’s happy meal whereas iced smoothies will be sold purposely to the adult consumers (Baker, 2012; Reynolds, 2012). 3.2 Product Portfolio Innocent caters different product lines including: smoothies, fruit juices, kid’s smoothies, kid’s juice drinks, fruit tubes, and veg pots (Innocent, 2013p). Under each of these product lines are various flavours which comes in different size and packaging. For instance, Innocent smoothies comes in different flavours such as strawberries & bananas, mangoes & passion, oranges, carrots & mangoes, kiwis, apples & limes, blackberries, strawberries & blackcurrants, and pineapples, and bananas & coconuts among others (Innocent, 2013q). In three different sizes (330ml, 900ml, and family size), Innocent fruit juices are available in different flavours (i.e. apple, orange & mango, apple & berry, apple, peach & pear, etc.) (Innocent, 2013r). Also available in different flavours (i.e. cherries & strawberries, peaches & passion fruits, etc.), kid’s smoothies and kid’s juice drinks comes in 6 x 180 ml and 5 x 200ml per pack respectively (Innocent, 2013s, t). Among Innocent’s product line extention includes: the fruit tubes and the veg pots. Packed in 6 x 40g, fruit tubes come in 2 different flavours like strawberries & raspberries and mangoes & pineapples (Innocent, 2013u). Available in 380g per cup, the veg pots have 8 different variants (i.e. Thai vegetable sweet chilli, Caribbean, and Bombay curry, etc.) (Innocent, 2013v). (See Appendix IV – Innocent Product Lines on page 27) The “Stars” in the Boston Consulting Group (BCG) matrix means that the product line has a very high market growth and market shares (Stapleton and Thomas, 1998, p. 105). Using the BCG matrix, Innocent’s “stars” is the product line of smoothies, fruit juices, and kid’s smoothies. It means that Innocent smoothies, fruit juices, and kid’s smoothies are highly competitive and in demand in the market. To maintain their position as “stars” in the market, Innocent constantly offers new and seasonal flavours to encourage more people to purchase Innocent smoothies. The “cash cows” means that the product line has a relatively high market share but with a low market growth (Stapleton and Thomas, 1998, p. 105). Under the BCG matrix presented on page 29, Innocent’s “cash cow” is the kid’s juicy. As a common knowledge, other brands like Tropicana are also selling fruit juices for kids (Tesco, 2013). Therefore, selling only 2 flavours of kid’s fruit juice means that Innocent has a very strong chance for market growth. The “question marks” means that the product line has a very low market share but is already in the market with a high growth potential (Stapleton and Thomas, 1998, p. 105). Based on the BCG matrix presented on page 29, Innocent’s “question marks” is the veg pots. Even though Innocent is offering 8 variants of its veg pots, the fact that unaware of how these product tastes strongly suggest that there are potential buyers who could be hesitant to purchase this item. (See Appendix V – BCG Matrix on page 29) 3.3 Product Life Cycle The business has been growing since 1999 up to 2007. On the 28th of April 1999, Innocent introduced and sold the first 3 cases of 3 original fruit smoothies (Innocent, 2013d). To increase the demand for Innocent smoothies increases, this company decided to use its cow vans in 2000 (Innocent, 2013e). It was also in 2000 when the company decided to expand its business in Dublin by selling the product in 10 of the Waitrose stores (Innocent, 2013e). Because of advertising campaigns in 5 major supermarkets, demand for Innocent smoothies significantly increased (Innocent, 2013f). To meet the increasing demand, the company adopted the use of their Dancing Grass Vans1 (Innocent, 2013f). To avoid reaching the maturity stage, Innocent started to invent new smoothie flavours and launched its first 750ml Juicy Water in 2002 (Innocent, 2013g). In 2003, Innocent introduced its foundation wherein the group will put in 10% of its profit to charity (Innocent, 2013h). Basically, building a strong foundation will encourage more people to patronize the brand. To increase its product line, Innocent sold its smoothies in 1 litre cartons (Innocent, 2013i). In 2005, Innocent sold smoothies for primary school students (Innocent, 2013j). In 2006, Innocent advertised its product line on TV (Innocent, 2013k). In 2007, Innocent started to use 100% recycled plastic bottles and further expanded its business in Germany and Austria (Innocent, 2013l). It was in 2008 when the company started to experience a slight decrease in market growth. As compared to 55% growth rate in 2007, Innocent had only 63% growth rate in 2008. As a common knowledge, the profitability of Innocent will start to decrease after it reaches the maturity stage (Kotler, 2000, pp. 303 – 313). To prevent the company from reaching the maturity and decline stage, Innocent Drinks had to come up with “our Smoothie of the Month” and “Seasonal Smoothie” campaign (Innocent, 2013u). Likewise, Innocent expanded its business by creating a product line extension known as the “Mighty Veg Pot” in 2008 (Innocent, 2013m) and the fruit tubes for kids in 2009 (Innocent, 2013n). Since Coca-Cola has a ready market, Innocent accepted Coca-Cola’s investment in 2009 (Innocent, 2013n). In 2010, Innocent sold the Bee (lemon, honey & ginger flavour) and opened its 5-a-day café in Shoreditch (Innocent, 2013o). Because of these strategies, Innocent is still far away from reaching the maturity stage (See Appendix VI – Product Life Cycle on page 30) Related to the product life-cycle, the Ansoff’s Matrix can be use in analyzing the significance of Innocent’s product lines and market growth strategies. To enable Innocent penetrate the food and beverages industry in UK, this company manufacture Innocent fruit juices and smoothies. To benefit from product development, Innocent decided to make use of brand extension strategies to sell its fruit tubes and veg pots. (See Appendix VII – Ansoff’s Matrix on page 31) 4. Action Plan: Marketing Strategies 4.1 Target Market Regardless of age, gender, nationality, and race, the target market of Innocent are those health conscious individuals who are willing to pay a premium price for Innocent products. 4.2 Market Positioning Innocent positioned itself in the market as the only drink manufacturing company that produces fruit juices and smoothies that contains only 100% real fruits with no sugar and other additives (Innocent, 2013b). To win the strong support of the public consumers, Innocent has positioned its brand as a company that aims to contribute 10% of its profit to charitable organizations (Innocent, 2013h). 4.3 Pricing Strategies The market positioning strategies used by Innocent has a significant impact in the creation of its brand value. As compared to other similar companies like Tropicana or Happy Monkey, Innocent was able to use product differentiation strategies by making a 100% natural fruit juice drinks without the use of sugar and artificial ingredients. Because of Innocent products’ tastes, various flavour, and quality, this company has been successful in winning the sentiments and strong support of the public consumers. For these reasons, Innocent was able to charge a premium price for its product line and variants. 4.4 Place and Promotional Strategies Even though the product itself is saleable, there are quite a lot of promotional strategies that Innocent is using to promote the selling of its products. For instance, each year, Innocent conducts the Innocent Village Fete which aims to provide the public with a family entertainment. Aside from offering access to different games, the fete also offers some musical jazz and swing entertainment and a wide range of foods and drinks wherein the family members can enjoy (247 Magazine, 2012; View London, 2008). Basically, proceeds collected from this project will go straight to charity purposes (Spoonfed, 2010). Since Innocent Drinks are made out of fresh fruits, Innocent has been using several health promotional strategies to market its different product lines. In 2011, Innocent launched a “healthy new year” by selling on-pack smoothies on promotion. For example, the public consumers were given a chance to win some “money-off coupons for future purchases of Innocent smoothies, health and fitness apps, or free day-passes at Virgin Active gyms” or a daily in-store chance to win “spa holiday in Thailand, a yoga retreat in Spain, and a personal trainer” as prizes for buying a pack of Innocent smoothies (Eleftheriou-Smith, 2011). The “woolly hats” is another one of the most famous strategies used by Innocent for the past 9 years (Innocent, 2013w). Basically, what the company does is to invite thousands of old people to participate in the knitting programme for Innocent buyers. To support the financial needs of the older people during the winter season, the company will contribute 25p for each bottle sold in the local grocery store outlets, coffee shops, department stores, retail food outlets, and the local schools throughout the urban and suburban areas of England, Scotland, Wales, and Northern Ireland (Innocent, 2013w). (See Appendix VIII – The Big Knit Project on page 32) 4.5 Marketing Communication Strategies Based on the BCG matrix, Innocent’s “question marks” and “dogs” are the veg pots and fruit tubes. For this reason, the use of integrated marketing communication strategies should be focused on the promotion of these two product lines. Earlier, it was mentioned that the target audiences for these two product lines are the health conscious individuals. Using a combination of online and printed articles and television advertisements, Innocent should communicate to its target audiences the health benefits and convenience of eating veg pots and fruit tubes. By doing so, the company will be able to create product and brand awareness among its target consumers. Eventually, the use of this strategy will increase the public consumers’ desire to purchase these two products. 5. Feedback Mechanism and Control To modify the gap between Innocent’s veg pots and fruit tubes with its target consumers, the company should make use of effective marketing communication and promotional strategies to capture the interests of the public consumers. To track down any signs of progress with the use of these marketing strategies, the top management of Innocent should closely monitor the sales and profit of these two product lines. Using survey study, Innocent could learn more about what the public consumers like or don’t like about these two product lines. Using the information gathered from the survey, Innocent can modify the quality, taste, pricing, and presentation of these two products based on the preferences of the target buyers. 6. Conclusion and Recommendations Innocent is doing well in the business. To maintain its position in the market, Innocent should closely monitor the sales and profitability and the product-life-cycle of its product lines. Maturity and decline stage in the product life cycle can lead to a significant decrease in the company’s overall sales and profit. Therefore, Innocent should continuously produce different new recipes and flavours. By doing so, Innocent will continuously give the public consumers more reason to buy the product. Thus, preventing the risk of reaching the maturity stage. 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[Online] Available at: http://www.youthxchange.net/main/innocentdrinks.asp [Accessed 22 March 2013]. Appendix I – Market Segment for Innocent Drinks Smoothies Demographic: Age Family Size Family Life Cycle Gender Income Occupation Education Religion Race Generation Nationality Social Class No age preferences 1 – 2; 3 – 4; 5+ Young & single; young & married; with or without children; old & single; old & married Male, female Under £9,999; £10,000 – 14,999; £15,000 – 19,999; £20,000 – 29,999; £30,000 – 49,999; £50,000 – 99,999; £100,000 and up Professional and technical; managers, officials and proprietors; clerical, sales; craft people; forepersons; operatives; farmers; retired; students; homemakers; unemployed. Grade school or less; some high school; high school graduate; some college; college graduates. Catholic, Jewish; Muslim; Hindu; Protestant; Others. Asian; Black; Caucasian; Hispanic; White; etc. Veterans; Baby boomers; Generation X and Y. Americans; British; Belgians; Chinese; Denmark citizens; Filipinos; French; German; Italian; Japanese; Swedish; etc. Lower-lower; upper lower; working class; middle class; upper middle; lower upper; upper-upper. Psychographic: Lifestyle Personality Values Diet/Healthy lifestyle; eco- and social friendly lifestyle; mobile lifestyle. Health and family conscious individuals. Positive attitude and buying behaviour on health products Behavioural Occasions Benefits User Status Usage Rate Daily consumption Better health Non-drinkers; Ex-drinkers; potential drinkers; first-time drinkers; and regular drinkers. Light, moderate, and frequent product drinkers Demographic: Regions Urban Areas in UK City or Metro Size England, Scotland, Wales, and Northern Ireland London, Manchester, Birmingham, Leeds, Glasgow, Newcastle, Liverpool, Nottingham, Sheffield, Bristol, Belfast, Edinburgh, Brighton, Leicester, Portsmouth, Bournemouth, Reading, Middlesbrough, Stoke-on-Trent, Cardiff. Under 4,999; 5,000 – 19,999; 20,000 – 49,999; 50,000 – 99,999; 100,000 – 249,999; 250,000 – 499,999; 500,000 up. Appendix II – Historical Inflation Rate in UK Source: Rate Inflation, 2013 Appendix III – Historical Trend in UK Population Source: Statista, 2013 Appendix IV – Innocent Product Lines Smoothies Juice Kid’s Smoothies Kid’s Juicy Drinks Fruit Tubes Veg Pots Source: Innocent, 2013q, r, s, t, u, v Appendix V – BCG Matrix Note: “1” = Smoothies; “2” = Juice; “3” = Kid’s Smoothies; “4” = Kid’s Juicy; “5” = Veg Pots; and “6” = Fruit Tubes. Appendix VI – Product Life Cycle Appendix VII – Ansoff’s Matrix Appendix VIII – The Big Knit Project Source: Innocent, 2013w Read More