Fever Tree's Strengths and Weaknesses - Case Study Example

Fever Tree SWOT Analysis SWOT Analysis is an important theory in marketing since it identifies strengths, weakness, opportunities and threats in the market within which the good is trading. Getting to know about weaknesses, strengths, opportunities and threats enables manufacturers of goods to strategize and come up with the best strategy to overcome weaknesses, turn threats into opportunities and capitalize on strengths. Fever Tree being a range mixer drinks just like any other good in the market has strengths, weaknesses, opportunities and threats which can be discussed as follows. Strengths Unique position in the market Fever tree was developed to cater for the perceived gap in the market, which was not being met by other premium spirit brands. It was noted that such spirit were rarely taken alone without mixing with other drinks, which took up the large portion than alcohol itself. A premium quality mixer was invented to cover the gap that other spirits like brand and gin were not offering in the market. Fever Tree provided a solution to customers who found it hectic to mix other alcoholic spirits in order to come up with the desired quality of a drink. Fever Tree was invented as a range of mixer drinks and reduced the challenge of the consumers having to mix drinks in order to come up with their own desired flavor. Product superiority Fever Tree made use of the best, natural and exotic natural ingredients to the level of coming up with the first tonic water with low calorie in the entire world. Existing mixers were artificial and were loaded with additives. Fever Tree never used any artificial sweeteners. It was a great product that needed adequate marketing campaign to get it into the market. Fever Tree is a unique brand due to the special natural ingredients used in its manufacture. Weakness Limited marketing budget Fever Tree communication team could not launch a major advertising campaign due to their marketing budget which was very small. They have to look for an alternative way of marketing the product. They opted for drinks and food journalists who gave the product coverage in local dailies. Sunday Times assisted in getting the product stocked by Waitrose. A major marketing campaign would have been more appropriate. High cost of production Fever Tree manufacturing uses special natural ingredients that are obtained from many parts of the world including Rwanda. The cost of getting the ingredient and manufacturing the product makes its cost to be high and hence its price. Competitors cut down on cost by adding such things like Saccharin. The high cost of production becomes challenging despite the fact that the product is targeting a niche in the existing market. Opportunity The gap in the existing market is an opportunity for Fever Tree to realize high turnover before other competitors fall for the idea, and come up with other new brands with a close resemblance. Fever Tree targets a market niche, and hence price fixing is not depended on other brands. Fever Tree targets specific customers who want a drink with a natural taste without many artificial additives. Threats Despite Fever Tree being a unique branch targeting a specific niche in the market, it faces competition from other mixers like those produced by other companies such as Cadbury Schweppes. Cadbury controls the mixers market and is able to produce at a lower cost as compared to Fever Tree mixer. The recession in the global economy is also another threat that inhibits the growth of Fever Tree despite fiercer marketing campaign launched by the management. If the economy does not grow, the purchasing power of consumers goes down, and the market share of the product shrinks. The SWOT analysis is very vital since it gives manufacturers the direction to follow in order to make the product to be profitable and popular in the market. SWOT analysis should be carried out from time to time to give the business new focus. Marketing Mix The marketing mix is made up of the 4Ps in marketing which stand for product, price, promotion, and placement. In the logistics, getting the new product into the market, the marketing mix is always paramount since it gives a precise direction of how the good gets into the destined destination, which is the consumer. The marketing mix of Fever Tree can be explained as follows; 1- Product Fever Tree is a unique brand of product making use of natural ingredients, which are found from all parts of the world. It is a premium quality product which was invented to cater for a market niche that was not being addressed by existing brands. The use of natural ingredients makes Fever True to stand out as a unique product that does not utilize artificial additives, which are sometimes abhorred by the customers. Fever Tree was invented for those customers who were tired of artificial additives and want a feel of natural quality brand. Fever tree is a unique and superior brand, which takes time to manufacture, but with the preference of the consumer in consideration. 2- Price Fever Tree retails at a premium price of 2.99 pounds per a pack of four bottles. The product was manufactured for a certain niche in the market and thus the targeted consumers have to pay as twice as much compared to other products for uniqueness and quality of the product. Ingredients which are natural and used in the manufacture of Fever Tree, are obtained from different parts of the world. The agony of getting natural ingredients together with the target of producing a quality product makes the price of Fever Tree to be quite high compared to other brands such as those of Cadbury. Other competitors have low cost of production and targets the general market hence they fix low prices. Fever Tree has a high cost of production and target a certain niche in the market hence the high price. The price also is the unique selling that differentiates Fever Tree from other products in the market. 3- Promotion Initially, Fever Tree had no major advertising campaign and had to rely on food and drink journalists for coverage in dailies. Later on direct consumer campaign was used to get the product into untapped market. A lot of money was used to run ads in magazines like Private Eye, The Spectator, and The Week. Co-founder, Rolls was amazed at how much was used on direct consumer campaign. 4- Placement The supply chain used by the company to make the good reach the final consumer is very important. Fever Tree did not an established supply chain when it was introduced in the market. Media coverage in dailies through food and drink journalists made the product to be stocked by Waitrose. The other established chain stores such as Fortnum, Harrods, Tesco, Sainsbury’s and Mason’s followed suit, and they now stock Fever Tree. Other retailers which are less known, also stocks Fever Tree. Fever Tree is served in many up-market bars, cafes, gastro-pubs and restaurants, even in six out of the top ten world’s restaurants. Fat Duck in Berkshire is a number one restaurant in UK where Fever Tree is served. The product is delivered to big and established retailers who then distribute the goods to small retailers. Marketing mix enables the business innovator or inventor to understand the modalities of packaging the product, fixing a price, letting the customer know about the product, and delivering the product to the consumer of the good. Marketing mix is an important aspect in marketing. PRESTCOM PRESTCOM encompasses a variety of aspects that affect the running of a business and selling of its product. It is an acronym which stands for Politic factors, Regulation, Economic factors, Social factors, Technology, Competition, Organization and Market. These different aspects govern the operation of the business and its product in the market and determine which strategy should be used in running the business. These aspects can be discussed as follows; Political factors Politics of a country affect trade and situation in the market. Trading partners between countries are defined by political affiliations between countries. Prevailing governments affect regulations needed to start a business or trade in other countries (Moore & Pareek 2006). The fact that the natural ingredients used in the manufacture of Fever Tree are obtained from allover the world including Rwanda. The politics in these countries will affect accessibility to natural ingredients used in the manufacture of Fever Tree. Regulation Regulation in any given country defines the boundaries of business operations in that country. Reregulation on imports and exports will determine the ability of the manufacturer of Fever Tree to trade in the international market. The age limit imposed by countries concerning alcoholic drinks will determine the extent of advertising and stocking of a product like Fever Tree. The government encourages moving towards softer drinks. Economic factors Changes in the economy of a country and in the world affect the consumers pursing power. The recession has made rendered many people jobless and companies laid off staff and other wind up their businesses. If the income of a consumer is reduced, they will not be in a position to buy their preferred brand. Fever Tree may loss sales owing to recession in the global economy. Economic growth increases the purchasing power of consumers as more job opportunities are created and increase in income is realized. Bad economic conditions are making consumers to look for more bargains. Social factors Social factors affect purchasing decisions among consumers. The demand of a product is affected by changes in social factors. Beliefs about certain foods affect the willingness of consumers to purchase certain products like drinks and food. Like and preferences of consumers are determined by their social background and what is commonly held concerning some foods and drinks. Technology Technology is very versatile and new inventions and innovation come up within no time. If a company does not adopt the latest technology, it would be left behind in terms of effectiveness and efficiency (Armstrong et al. 2009, p. 551). A company has to get the best technology for efficient production of products than its rivals. Disruptive technologies if used well can give the firm a competitive advantage over its rivals. Fever Tree has to use the latest technology and take advantage of disruptive technologies as soon as they are discovered. Competition In any given market, competition is a common thing. It is only government protected monopolies that do not experience stiff competition, but they are also few and limited to specific sectors. Competition is the market benefit consumers as companies struggle to outdo each other with quality products at affordable prices (Leahy 2010, p. 48). Despite Fever Tree targeting a niche in the market; it faces competition from other mixers such as that of Cadbury; as customers look for bargains. The high cost of production makes Fever Tree price to remain high while competitors can offer price cuts. Organization Organization affects operations within a company. This includes things like organization culture, decision making process, levels of management and the general structure of the organization. The purpose of the company and its mission will define how it carries out its functions. Promotion and allocation of the budget is determined by the organization of the company. The initially marketing budget for Fever Tree was determined within the organization whole budget. Market Mixers like Fever Tree are meant to complement spirit such as Vodka and Gin. The demand for spirit is directly proportional to demand of mixers. The market for spirits affects the market for mixers. When the market for spirits expands, that of mixers also expands, with the same margin. PRESTCOM is an analysis of eight important factors that affect the growth of a business and movement of goods in the market. The chances of success or failure will be determined by swift interpretation of these factors. Product life cycle Product life cycle is the stages through which a product goes through since its introduction into the market, until when the sales begin to decline. The stages include introduction, growth, maturity, and decline. During introduction stage product growth and market size is small. Marketing costs incurred are high as the product test the market. The product has to undergo promotion and set up channels of distribution. It is not easy for profits to be made during the introduction stage. The growth stage is manifested by fast growth in profits and turnover. At growth stage, the business has to invest more in the product to get maximum returns. Direct consumer campaigns of Fever Tree designs soon after the product experienced growth in the market (Hill 2011, p. 817). Increasing market share is the goal of business at the growth stage in the product life cycle. Differentiation of the good is done during the growth stage. During the decline stage, the market size of the product decreases, while profits fall tremendously. If the life of the product is not extend by any modification, it is better for the product to be withdrawn and launched in a new market, as a new product. Fever Tree is still at growth stage in the product life cycle, as vigorous direct consumer campaigns are being done. There are many ads in the local dailies advertising the product (Deborah & Richards 2010, p. 335). The product targets knowing consumers who are aware of want they want from a product. Awareness promotion has been one of the goals of Fever Tree manufacturers. The product has been differentiated into bitter lemon, tonic water, lemonade, ginger beer, a lower calorie tonic and ginger ale. The product has experienced growth within a short period of time. Understanding the product’s life cycle is important in the determination of which strategy to use to ensure growth in sales. Differentiation is done majorly at maturity while increased promotional activities are conducted during the growth stage. New product development Fever Tree has been embraced as a new product which was developed to cater for a specific niche within the market. Fever Tree obtained the Best New Product award in the world’s mixers market at Tales of Cocktail awards in the USA. New product development comprises of steps that are followed before a product is produced and launched in the market in a stage known as commercialization. The new product development stages can be discussed as follows: 1. Idea generation New product ideas are solicited within and outside the company. Brainstorming sessions can be used to suggest a number of new product development ideas from the workers. The ideas can also come from consumers or supplies suggestions or simply derived from studying the competitor’s product and producing a modified one. 2. Idea screening During idea generation, all kinds of ideas can be put forward but not all of them are worth investing into. The ideas generated are sieved through to remain with the ones which are workable and feasible (Moore & Pareek 2006, p. 196). Ideas which are not practical will waste resources if they are pursued. 3. Concept development and testing Out of the ideas selected, they have to be tested through concept development to remain with the moat feasible ideas. A target audience can be used in the testing of the developed concept from the ideas and analyze their reactions. 4. Marketing strategy and development At this stage, the manner in which the idea will be launched in the market is contemplated. A viable market strategy is proposed outlining the marketing mix of the product, the positioning, targeting, and segmentation strategy and expected sales and profits (Wernerfelt 1984, p. 173). 5. Business analysis If the marketing strategy seems feasible, the business goes ahead and conducts a business analysis. It deeply focuses of the product to determine if the product can be sustainable financially over time. The cash flows expected are analyzed alongside the projected lifespan of the product top see whether is profitable and worth investing. 6. Product development A prototype of the product is generated at this stage. The prototype is taken through a number of tests and a target audience used to suggest any changes needed on the prototype. 7. Market testing The developed product is then tested using a given region as a test market. The marketing mix strategy is monitored within the region to see what modification can be made prior to the official launch of the product. 8. Commercialization If market testing turns out well, the product can then be launched into the wider common market without being localized to a one place. Good time is done before the product is launched. How the launching will be done, will vary from one company to another. A summary of the steps in new product development can be represented in the figure below. http://www.atkinson.yorku.ca/~lripley/imUproduct.htm Branding- brand Image A brand is a symbol, design, name, or a combination of two or more of these for the purpose of identifying the product of a company from those of the competitors’. A brand is meant to conjure a picture of the product in the customer’s mind. Creation of a brand assures the customer of certain benefits from consuming the given brand (Gregory 2011, p. 14-15). Fever Tree brand is associated with superior quality of mixers using unique natural ingredients. Fever Tree was invented to come up with mixers of a superior quality that were not being offered in the existing market. Fever Tree manufacturers targeted a market niche of informed consumers who were fed up with existing brands of mixers that were full of artificial additives. Having a unique brand in the market; that targets a specific niche of customers; makes Fever Tree mixers to experience growth despite the odds in economic conditions that are prevailing. Branding enables consumers to pick out the Fever Tree brand from the rest on the counter. Easy identification has been enabled by branding. SEGMENTATION-TARGETING-POSITIONING Segmentation is the subdivision of the market into sub-markets of consumers who possess needs that are common and whose features are similar. In this respect, Fever Tree has produced a variety of brands targeting different segment of the large market. Fever Tree has been differentiated into bitter lemon, tonic water, lemonade, ginger beer, a lower calorie tonic and ginger ale with the aim of catering for different needs of consumers in the market segments. Consumers have a variety of products to choose from according to their individual needs. Targeting A company manufactures a brand or type of product targeting a particular clientele. Fever Tree was manufactured to target customers who were affair of the effect of other mixers made using lots of artificial additives (Wood 2009, p. 188). Adequate market awareness was done to make sure that the message reached the targeted clients. Fever Tree targeted clients who valued quality and could spent more money on a high quality product as compared to a cheap sub-standard product. Intense direct consumer campaign for Fever Tree was done to make sure that awareness was created. Positioning Positioning is the place that the manufacturer wants the product to occupy in the mind of the consumers. Fever Tree positioned itself as a unique brand of high quality that uses natural ingredients. This is the feature that made it to be of high quality and cost more than other mixers. Consumers who value quality and uniqueness of a brand went for Fever Tree brand. Consumer behavior In the marketing process, it is important to understand what makes consumers of customers to make their decision to purchase. The behavior of consumers while making purchasing decisions is analyzed to determine factors influencing his final choices (Srivastava, Liam & Christensen, 2001, p. 780). The consumer buying behavior pattern is what comprises of consumer behavior. Stages of consumer buying process involve the following; 1. Problem or need recognition The need for a certain product can be occasioned by a marketer through product information. The deficiency that exists in the current state causes a consumer or a buyer to look for a certain product that addresses the deficiency. 2. Information search After the identification of a need, the buyer searches for all possible sources of information concerning goods that can satisfy the need. Relatives and friends are some sources of information while the marketer remains the dominant source of information (Deborah & Richards 2010, p. 333). 3. Evaluation of alternatives The buyer will rank the available alternative using a specific criteria; it could be quality or princes or flavor. 4. Purchase decision The buyer chooses whatever good he sees fit for his consumption or use and prepares to purchase it. 5. Purchase The purchase can be different from the decision made. At this stage, the consumer purchases the product. 6. Post-purchase evaluation The buyer evaluates the satisfaction or dissatisfaction that emanates from using the product or service purchased (Butler 2006). It is important for marketers to understand consumer buying behavior in order for them to project the tastes and preferences of consumers and what shapes them. It is vital for marketers to understand psychological processes leading purchase decision of consumers. List of References Armstrong, G, Harker, M, Brennan, R & Kotler, P 2009, Marketing: An introduction, Financial Times Prentice Hall, New York. Butler, AM 2006, Essentials of Marketing in the 21st century, McGrawHill, New York. Deborah, R & Richards, A 2010, “Agenda development for marketing research: the user’s voice,” International journal of Market research, Vo. 52, No. 3, pp. 329-352. Gregory, RJ 2011, “Corporate Brand Value,” CoreBrand, December 21, 2011. Viewed January 10, 2012 . Hill, PR, 2011, “Social marketing meets interactive media: lessons from the advertising community,” International journal of advertising, Vol. 30, No. 5, pp. 815-838. Leahy, T 2010, “Never waste a good crisis,” Market leader, Vol. 1, No. 1, pp. 47-49. Moore, K & Pareek, N 2006, Marketing: The Basics, Taylor & Francis, London. Srivastava, RK, Liam, F & Christensen, KH 2001, “The Resource-Based View and Marketing: The Role of Market-Based Assets in Gaining Competitive Advantage,” Journal of Marketing, Vol. 27, No. 6, pp. 777-802. Wernerfelt, B 1984, “A Resource-Based View of the Firm,” Strategic Management Journal, Vol. 5, No. 2, pp. 171-180.  Wood, L 2009, “Short-term effects of advertising: some well-established Empirical law-like patterns,” Journal of advertising, Vol. 49, No. 2, pp. 186-192. Read More