A New Cafe Which Incorporates Ethical Policies into Their Marketing - Case Study Example

A new Cafe which incorporates ethical policies into their marketing with an advertising budget of 75,000 pounds Introduction The statement of marketing objectives for new products represents a decision criterion-a goal that the team strives to achieve. A statement of clearly defined, measurable, time-bound objectives is critical, especially if the new product team is large and diverse. Marketing objectives clearly written down and communicated can have a synergizing effect on the activities of the new product team. Typical marketing objectives for the new product should contain: Unit or Rupee value sales of the product by the year. Requirement Location: XXXXX City Centre Product: Coffee and Coffee Powder. Addl centers on franchisee basis. Name&Logo: Pure Coffee; we’ve made a logo Slogan: Pure for you, is pure to us Political & Legal: City council allows fair competition between businesses and provides them with business seminar. Grants are also available. Economic: Citizens of xxxxx City are high income citizens. Coffee and Tea are described as necessary for people so they are high demand products. Social & Technological: Student are an important segment in xxxxx City – most of the citizens are between 20-24 years of age. Environmental: UK is generally concerned with recycling and fair trade products. Legislative: new legislation may create risks of non-compliance with the law, create new administrative burdens etc. Our target market: Age: 20-24 years old Sex: male and female Occupation: student – undergraduate, postgraduate Race: local and international Life-style: meeting point in coffee shop Many marketers use this technique in combination with the more traditional approach, especially in case of packaged goods or food items. It is, partially, because the traditional test marketing is viewed as very expensive, time consuming and open to spying by competitors. The cost difference can be amazing: less than one-tenth. A time period of three months is considered good enough in the simulated technique. Still, it is yet to win wide acceptance for the experts opine that simulations are able to identify potential product failures more than predicting the upside potential of products. Executive summary NEW P RODUCT LAUNCH-THE MARKETING PLAN : When the test marketing results are positive, the new product is ready to enter the final batter ground - the market. In this part of the unit we shall look at the factors and steps involved in developing marketing plan for the launch of a new product. The marketing plan for launch is simply a statement of the course of action to be followed for the products introduction into the market. It should clearly specify the marketing objectives, strategies and programmer. Though this section is placed towards the end of the product development process, it is not to imply that marketing planning for launch can be left till the end to commence just prior to the launch. Marketing planning is a continuous activity in the new product development process and informally may start at the time of idea development itself. Formally, it should commence as soon as the product development stage begins. Like all important plans, marketing planning for launch is an iterative process. Setting objectives for new products: The statement of marketing objectives for new products represents a decision criterion-a goal that the team strives to achieve. A statement of clearly defined, measurable, time-bound objectives is critical, specially if the new product team is large and diverse. Marketing objectives clearly written down and communicated can have a synergizing effect on the activities of the new product team. Typical marketing objectives for the new product should contain: Unit value sales of the product by the year Market share by the year Product profitability in terms of percentage margins and payback, In the early stages of the new product development process, the information at the disposal of the marketer may permit only rough estimates. As more information starts coming in as a result of market studies and test marketing feedback, as well internal cost data, the objectives can be refined and made more realistic. Here the objectives are, 1. To set up café as in retail units. 2. To give away excellent quality coffee to the public. 3. To offer delicious Coffee and Tea to the target customers. 4. Give them quality products like pizza, hotdog, KFC etc. especially to the teenagers Situation Analysis: An analysis of the environment, surrounding the new product is critical to its success and usually is one of the early steps in the development process. It is here being discussed only as an ingredient of the marketing plan. The situation analysis in this respect would comprise of the macro environmental analysis, the market analysis and the internal analysis.( Primary data collection methods (2007), at http://brent.tvu.ac.uk/dissguide/hm1u3/hm1u3text3.htm (Accessed: March 28, 2008) The macro environmental analysis involves the study of variables that lie outside the firm and may have implication on the products market and the company. Specifically, it would include a study of the economic situation, the political-legal situation, the demographic and social trends as well as the technological developments. The analysis gives a useful framework for the marketing plan to be developed. The market analysis is essentially undertaken to provide an input in designing a successful marketing strategy. It should include: UK Market overview-An assessment of the quantitative and qualitative aspects of market size and growth. Segment overview - What is the target segment? How are the segments distinguished, and defined in terms of size and growth trends? Consumer overview-A definition of who are the buyers, the purchase influencers? What, when and how do these target consumers buy? Why do they buy? What are their preferences, needs and wants? Competition overview –A definition of the competitors and their relative strengths and weaknesses segment wise. A critical assessment of their products and consumer’s perceptions of their products, Competitors, strategies for pricing, advertising, distribution; an assessment of their marketing position. (FERREIRA A. 2000. Business strategy: having to cope with waves of change. Management Today, 16(9):11.) Time invested in market analysis usually gives rich dividend at the time of planning the positioning strategies of the new product in the coffee shop. The internal analysis pertains to an assessment of the company's resources with reference to the new product. In respect of the marketing plan one must specifically analyze: The sales force - How do you assess the present sales force in terms of their capabilities of selling the new product? Would they require additional training inputs? Do you require a new sales force? Promotional set-up - Do you require significant changes in the advertising and promotional set-up? Distribution system - How do you evaluate the service and distribution system with reference to new product? Do you require significant modification? What needs to be done to assure dealer support to the new product? The internal assessment must also consider the strengths and weaknesses of the other functional areas that have a direct bearing on new product development. As pointed out, the integrated approach presupposes a critical assessment of manufacturing, research and development, finance and marketing strengths, and weaknesses. (FAHEY L & NARAYAMAN VK. 1986. Macro-environmental analysis for strategic management. St Paul: West.) DEFINING AND SELECTING THE TARGET MARKET Market segmentation, the definition of clusters of consumers within the UK market such that there is relative homogeneity within each group, can utilize several bases. Perhaps the most prevalent method of segmentation for new products is benefit segmentation. Benefit segmentation recognizes that people seek different benefits from their purchases and have different motivation to purchase. Using this approach it is possible for the market to define the benefits and attributes that must be built into the new product Pure Coffee and communicated to the consumers. In fact, the positioning and communication strategies are largely defined by the benefit segment selected. Any segmentation analysis would yield a number of potential segments and present alternative attribute packages that can be built into the product to make it more suited to a segment. It is, therefore, important to identify criteria used to select an appropriate market segment for the new product. Some commonly used criteria are: Segment attractiveness in terms of market size, growth and future potential. Ease of access in terms of selling effort distribution channels etc. Degree of fit in terms of the closeness of match between needs and preferences of each segment and the attributes and possibilities of the new product. Competitive situation in terms of where the competition is lowest, weakest or most vulnerable. •Relative advantage in terms of the differential advantage that you may have relating to product features and benefits as well as entry strategy. Fit and ease I of access only suggest adequacy of the segment. In order to be desirable a segment must offer possibilities of competitive edge. Profitability in terms of offering you to the greatest possibility of meeting your profit and sales targets. (CUSUMANO MA & MARKIDES CC. 2001. Strategic thinking for the next economy. San Francisco: Jossey-Bass.) PRODUCT STRATEGY AND POSITIONING Product strategy takes shape side by side with the definition of target markets. Product strategy in the context of new products would mean finalization of the product benefits features and attributes and developing growth strategy. The product benefit distinct from a feature, which forms part of the physical design of the product, is a character that is of some value to the consumer. It helps to list your product benefits as they become important determinants of your positioning. For example, a benefit of a new lawn-mower may be that it can be easily operated by elderly people. This benefit may be translated into a product feature in the form of rotor wheels to give easy maneuverability and relatively lighter weight material used. Feature and attribute definition in detail may bring you very close to the defining the product specification but it does help to bring the product profile into a sharp focus. Product Positioning: Positioning in the market-place means deciding how the product will be perceived by potential customers. A product positioning statement should clearly show the end-use, and the benefit sought to be delivered. For example, a possible positioning statement for a light commercial vehicle could be "a’ tough, long lasting, durable, reliable, premium-priced vehicle designed for fast and easy loading and maintenance". The specific consumer benefit offer by a product is an integral part of the products position, but position is a more comprehensive concept. Positioning reflects the fusion of product class, product proposition and distance from competing brands to enable the best possible approach to the target consumers. Perceptual mapping and other marketing research inputs are used to map positions in consumer perceptions and products are targeted at these. A statement of product positioning should define how the product will be placed in the market and in consumer perceptions relative to the competitor's products. Consider the following example for the positioning of Eveready Super, Union Carbide's premium brand. In order to meet the demand for a battery less prone to leakage, for cassette tape- recorders, cameras, calculators and battery-operated toys, Union Carbide developed a battery in 1985 using Zinc chloride technology. The product was priced at 20% higher than Red Eveready after considering value to the consumer and price elasticity. (CERTO SC & PETER JP. 1993. Strategic management – a focus on process. 2nd edition. Homewood: Irwin.) The company considered the following positioning options: The most leak proof battery available in India: This position would force comparison against Union Carbide's own "Red Eveready" and may eat into its sales. Again, 100% leak proof performance could not be guaranteed. The Superior Modern Technology position: A valid positioning, but it would again force comparison with Red Eveready and the competitive edge will be lost once competitors like Novino and Nippo follow suit. Performance Positioning: This positioning more than any other would hurt. Union Carbide more than its competitors as it would have implied inferiority for the entire standard range (fed, white, blue) of Eveready batteries which comprise 45% of the total battery market. End-Use Positioning: Market research studies conducted for batteries had clearly indicated that consumers had a definite hierarchical perception of quality relative to the end-use for battery. Since a transistor is perceived to be superior equipment as compared to a torch, a battery designed specifically for a transistor is perceived to be superior to that made for torches. Research also showed the hierarchy order of quality equipments to be photoflash equipment, CTR's motorized gadgets, transistor and torches in that order. It was therefore, decided that positioning Eveready Super as the product for modern machines i.e. photoflash equipment, Cassette tape-recorder and other motorized equipment would make consumer beliefs regarding the equipment hierarchy to rub off on to the new product and would ensure a top-of-the-line battery positioning without harming. Eveready Standards market share. It was also felt that communication of the product positioning should contain some reference to the reason why consumers should believe the claim-the Zinc chloride technology would give the reason. The positioning statement for Eveready Super ultimately emerged as 'No other Battery can deliver such , exceptionally high power and life for your power hungry high drain devices because it is made with the breakthrough, first time in India, Zinc chloride technology. Like all that, the Coffee shop should be well in nature, beautifully designed, exceptionally diversified, qualitatively product designed attempt. Then only we can gather the target customers. PRICING THE NEW PRODUCT There are two basic approaches to pricing a new product, the cost plus pricing and the market oriented pricing. The former involves estimation of all cost elements and adding of the targeted rate of return to arrive at the price. Market oriented approach on the other hand centers on estimation of consumer's valuation of the product/some basic guidelines could be: A) Use the products target market and positioning strategy: If the product is arrived at a niche market, one with specialized needs and if the positioning is a highly differentiated one, in essence you have a mini monopoly situation. A premium price strategy would be a good route to follow. Conversely if the product is not well differentiated from competitive products and if the target market is also served by others, a competitive pricing policy would be more appropriate./ Low price marks a good weapon to apply when you have a real and sustainable advantage. Similarly, a low price strategy makes sense when it is a part of a long- term strategy to sacrifice profits to cultivate market share. b) Skimming versus penetration pricing: The skimming pricing policy the product is aimed at the market segment for which the product has most value and which will pay a premium for it. Profit per unit will therefore be high but volume, lower. The strategy makes good sense when the product is something of a novelty and those who are aware of the product are willing to pay a high price for it. Skimming is also used when the firm expects potential competition and wants-to build up brand preference. A rapid penetration strategy aims at launching the product at a low price and spending heavily on promotion to lower buyer resistance, and bring about a fast penetration. The strategy may lead to a readily growing market share especially when the market is large with a fair reaction of the target market being price sensitive and the company is expecting growing potential competition. The underlying assumption of the penetration strategy is that units’ costs fall with the scale of production. The aim in this case is to attain market dominance and high market shares as a key to profitability. - A combination of the two strategies over time is also possible. Initially a skimming strategy, attracting the high value markets can be adopted, keeping the initial risk low. As the product gains acceptance and when the investment is partly paid back then production is increased, prices are lowered and a dominant share of the entire market is sought. In such cases timing is the critical factor, the shift should be timed before the competitors have had a chance to develop similar offerings. c) The product pricing needs to be in line with the corporate strategy as no new product is a stand-by itself item, it is a part of the larger game plan. In keeping with the long-term corporate plans, high profits and high margins may be sacrificed in return for the effective corporate market development. d) Promotional pricing: When there is a certain degree of perceived buyer resistance, an introductory promotional pricing may be used to induce first sales. This generally takes the form of coupons offering money off deal. In case of industrial goods it simply takes the shape of an introductory low price offer. The advantage of promotional pricing is that it allows the normal price to be retained as the consumer is fully aware that the low price is only introductory in nature. ADVERTISING FOR THE NEW PRODUCT Advertising usually represents the thrust of communication efforts in case of a new product. The new product management is a new line of venture for the company and may involve approaching different markets. A very close interaction with the advertising agency therefore, is the norm in case of new product advertising. Developing the advertising plan in case of new products involves the following decisions. Deciding upon the advertising objective - The firm should clearly define what the advertising for the new product would/should focus on: generating awareness, interest, or favorable attitude? establishing a unique image? promoting trial promoting repurchase (trial having been accomplished through free sampling)? Determining the advertising budget - In the absence of precise information about market definition, determination of advertising budget is a difficult task. Normally the objective and task method is utilized, in conjunction with estimates of Expected expenditures on the new product. Deciding on the advertising strategy- Advertising strategy decisions closely follow the positioning decision and are designed to establish the communication components of positioning. Pre-communication research is used to provide inputs to the positioning by segment decision, and also to provide guidelines for copy development. The generation of a number of messages instead of just one has now become the rule rather than the exception in the development of new product campaigns, all focusing on the same theme/positioning. Examples are the Maggie noodle and Milkmaid ads, featuring varying messages on the same theme. Media Selection - Done in the light of the definition of target market segment, media selection should enable the enhancement of communication effort through specific media characteristics like media image and editorial content. A related decision is that of media scheduling, for new products the media schedule should take into account the time response function to the introductory advertising as well as the likely competitive reactions. PUTTING IT ALL TOGETHER To weave together all that you have read of the new product launch let us consider two new product launch examples. New Product Launch - Pure Coffee coffee shop We as an established manufacturer of alcohol and malted foods, had' decided to make a foray into food processing and work on the Pure Coffee project has to commenced then. Following would be the story of the Pure Coffee launch as told in. The product with which the company chooses to make its entry into the food processing sector was the Pure Coffee. The reason seemed obvious. The market appeared to be a very promising one. The few brands that were around at that time-other coffee shops mainly have seeded the market and aren't doing too badly. Also, it was generally feel that the business is a profitable one. 'It looked like a good proposition. We only want to make sure that our project planning is perfect'. But when the planners put pen to paper, a slightly different picture will be emerged. From a long-term point of view, the company will have to take into account the plethora of brands that are bound to appear on the shelves. Also, there is the major threat of a renowned manufacturer, Pepsi, entering the market. Being just another shop wouldn't do the brand would need a definite USP. What could it be? 'Being a relatively new concept the selling of branded coffee involved re-defining the eating and drinking habits of families, and to find a special position for the product one have to look at this aspect very closely'. The company knew that being a high-priced product (consumers are bound to compare its price with that of potatoes), the brand has to offer something more than chips made either by the local halfway or the housewife. The competition after all, isn't with just other branded coffee shops. In fact, today one guesstimate says that the marker for unbranded coffee shops could be - at 2,000 liters per month - ten times the branded variety. Research provided a clue to the problem. It is found that neither the vendor nor the housewife could season the coffee. In other words, they could provide only plain coffee. If the company could provide a range of coffee powder with different flavors, it would give it an edge over all coffee shops - branded or unbranded. Besides, the English are known to favor spicy flavors. And the diverse cultures that exist across the country have only created a multitude of tastes. If we would capture these tastes in its products, it could have a winner. "Food is like a religion in most UK homes', "If we could give the housewife enough variety in terms of taste, the chance of our product entering homes was much higher than that of our competitors". Plus, the taste strategy looked a very effective way of blocking Pepsi as the 'Yanks would take some times to figure out English tastes". ' . Surveys were conducted in different regions to identify the most popular tastes specific in each area. It can be said as: "Once we have a shortlist of flavors, our scientists are told to simulate them in the form of edible flavors". After deciding in on the flavoring aspect, the company's attention turned to packaging. Here too, the company aimed to differentiate its product. "In this case, we have to strike a balance between economy and flavor. The packaging has to prevent the flavors from flying away, and at the same time it has to be cheap". After considerable deliberations, the company will choose to opt for a two-layered biaxial oriented polypropylene packaging with reverse printing on the outer layer. Other manufacturers are using an outer layer of metallised polyester and either a high-density or low-density polypropylene film for the inner layer. Moreover, the outer layer is surface printed leaving the possibility of the printing wearing off. There is certain logic behind the design of the pack too. "We used a white base since it is the most reflective on the shelves. The pack is fully covered except for a small window so that a consumer can see what he or she is buying. We explain that consumers still tend to be suspicious of anything that comes in a closed pack. The question now is of finding the right communication platform. Says Our Account Manager that the agency handling the account, "since the product is a me-too one, the parameters of the brief are simply based on budget and targets that the company has set for itself". The agency is told that it is to wait initially to introduce the product in the north and is offering four flavors- Regular Salted, Pudina Punch, Masate Munch and Tomato Tickler. The initial choice for the launch strategy lay in either highlighting the product range or the brand itself. The first option, it is felt, is better being left alone since customers would take their pick of the flavors only over time. The second route of projecting the chip as crispier, tastier and better-than-the competitor, the agency felt, is suspect as a consumer may not be persuaded that the new brand is indeed substantially better. "We had to clearly establish a brand image that would become a permanent point of difference and none of these attributes serve that purpose”. It is permanent because brand loyalty is notoriously low. So where do the communication answer lie? Research revealed that around 50 per cent of consumption is accounted for by youngsters in the age group of 18 to 25 years. Another major segment is young housewives. Says our manager: "We, therefore, have to coin a phrase that have to identify with the language of youth". Additionally, this phrase has to be sustainable if it is to create long-term loyalty. All this logic culminated in the spectacularly popular line, “We want Pure Coffee”. There is little doubting that the advertising is able to capitalize on the effort that is to go into product development. Today pure coffee is going to claim to be the number one with sales' of between 45 and 60 liters per day initially. The total off take of branded Coffee powder is to be estimated at around 150 to 200 tones per month which in value terms is, between 1.5 billion and 2 billion. The initial success will also be spurred the company to enter markets in the west and east (the launch in the south is due in the near future). And the company is continuing with its strategy of offering a wide choice. It is going to be launched six more flavors. But there is also a downside to this rush of flavors. While it is to succeed in pulling in buyers, the company found that its regular salted version's share was a mere 5 per cent of total sales. And since the range offers the highest profitability (because flavoring costs are not involved), the company is trying to rectify the situations. We are going to introduce indirect flavoring in the form of a tamarind dip. The company hopes this measure will raise its share of Pure Coffee and Coffee Powder to a higher level. Launch - End of May, Pure Coffee, there would be maker of the world's most branded coffee is going to enter the 800 million UK Coffee markets despite protracted delays and intense opposition by competitors. Moving cautiously in the face of tough competition, Pure coffee launches its product selectively in East and the South. Two months after the entry, it will be launched its 90 second television advertisement on the national network, the longest among UK commercials. While Pure coffee is framing aggressive marketing strategies to take on its giant competitors, the latter is reacting by bringing out new products and improving dealer terms. Pure coffee is treading cautiously in a competitive market, Vice President of the company has the confidence to say: "we would be happy with a 3 per cent market share this year. We plan to build our shares slowly. It is too early to be anywhere remotely near our competitor". Pure coffee is now busy finalizing its plans for an October launch in major markets which constitute 40 per cent of the Country's coffee drinks market. By the year-end we plan to be all over the country. We are planning to come out with UK flavors and with plastic bottles, an orange flavored drink too and even cans". Yet that does not mean that everything is hunky-dory for pure coffee. It is setting up merely 10 bottling plants which is no match for competitor’s 60. Due to a nine-month delay in getting clearance, Pure coffee is forced to enter the market only by end-May- when the peak Pure coffee drinks season (nearly 70 per cent of soft drink sales are between March and June) was about to be over. According to a conservative estimate the company has already lost 8 million, as a result of the delay, on an investment of 75,000 pounds. That obviously bothers Pure coffee, however, it is now trying to overcome bottlenecks by attacking the market. Asserts says that it is their first task is to get people to try a new product in an innovative way first. Secondly, it is to provide better services to the retailer and also build loyalty to the product". Backing, of course, by a media coverage whose budget is a closely guarded secret. Pure coffee is trying all stratagems from the marketing lexicon. Consumers are being prodded to cut the newspaper advertisement of the pure coffee Launch in their-city and exchange it for a free bottle from any shop. The company claims the offer is a resounding success and will reach as much as 25 per cent of the households in each of these cities. At least .1million consumers drink pure coffee free in London!) In order to woo the dealer Pure coffee has introduced plastic crates instead of the wooden one in Manchester and is offering specially designed plastic ice-chests which will cut down the ice costs by as much as 30 per cent for the retailer. In London retail outlets would be serviced twice daily in order to keep retailer investments on storage low in many places Pure coffee is going to be adopted a Village near the historical fort by painting the entire market with Pure coffee hoardings and stocking the product in virtually every- shop in the market. To encourage retailers to push Pure coffee in all over the company introduce a scheme by which a retailer would be given one crate of Pure coffee free if on being asked for a drink by name he would recommend Pure coffee. lf the company sent mystery buyers to various shops to check up on this. In order to mop up margins to the retailer, the company will be launched a refill scheme for every crate sold, two packets would be given free of cost virtually giving the retailer an extra 8 per cent margin. A Pepsi bottler in next season, the company has already spent 2 million on hoardings in the last two months. CONCLUSION Here we encompasses the final stages of the new product development process, namely test making and product launch. The section on test marketing explains the rationale for test marketing and discusses the strategies used to test market. The section on product launch gives a detailed description of the marketing plan for new product launch and the steps needed for defining and selecting the target market. The product strategies including product positioning, pricing and promotional strategy have also been explained. Reference 1. AAKER DA. 2001. Developing business strategies. 6th edition. New York: Wiley. 2. AHIAKPOR JCW. 1998. On the mythology of the Keynesian Multiplier. 3. ANSOFF HI. 1984. Implementing strategic management. New Jersey: Prentice. 4. ANTHONY RN & GOVINDARAJAN V. 2003. Management control systems. 11th edition. Boston: McGraw-Hill. 5. ASBURY S. 2001. Small firms have a part to play. Business Day, July 6, 2001:4. 6. BLANCHARD K & WAGHORN T. 1997. Mission possible: becoming a world-class organization while there’s still time. New York: McGraw-Hill. 7. BHUPTA M & KOTHARI P. 2002. Big four in trouble: balancing cash crunch. Times News Network, August 12:1. 8. CERTO SC & PETER JP. 1993. Strategic management – a focus on process. 2nd edition. Homewood: Irwin. 9. COADE N. 1997. Managing international business. London: Thomson. 10. COVEY SR. 1994. The seven habits of highly effective people. London: Simon & Schuster. 11. CRONJE GJ de J, DU TOIT GS & MOTLATLA MDC (Eds). 2004. Introduction to Business Management. 6th edition. Cape Town: Oxford. 12. CUSUMANO MA & MARKIDES CC. 2001. Strategic thinking for the next economy. San Francisco: Jossey-Bass. 13. DRUCKER F. 2003. Management challenges for the 21st century. Oxford: Butterworth-Heinemann. 14. FAHEY L & NARAYAMAN VK. 1986. Macro-environmental analysis for strategic management. St Paul: West. 15. FERREIRA A. 2000. Business strategy: having to cope with waves of change. Management Today, 16(9):11. 16. Primary data collection methods (2007), at http://brent.tvu.ac.uk/ dissguide/hm1u3/hm1u3text3.htm (Accessed: March 28, 2008) Read More