The Success in Promoting Company's Market : of Nestle Milo - Case Study Example

Marketing Audit Report About Nestle Milo University Name Table of Contents 1.0 Introduction 3 2.0 The Australian Target Market 3 3.0 The marketing mix 4 3.1 Product 4 3.2 Promotion 8 3.3 Place 10 3.4 Price 12 4.0 Competitive advantage 14 5.0 Assessment of the Firm’s Success 15 6.0 References 18 1.0 Introduction This report analyses the target market of Nestle Milo, an Australian company that was established in 1930s. It was created using domestic milk knowledge together with cocoa expertise. The product is named after a character in Greece known as Milo known for his energy. The product was launched in 1934 in a public showcase of new products in the market. Nestle Milo was developed in a time when there was the great depression. At this time, children had received low nutrients that were available in their daily diet (Milo Nestle, 2012). The report moves forward to analyze Milo’s marketing mix using the four principles of marketing namely; product, place, price and promotion. It also shows the major differentiation of the product in the market which earns it a competitive edge in the market. Finally, there is the conclusion and recommendations for Milo. 2.0 The Australian Target Market Nestle Milo targets children at the age between 3 years and 13 years old in terms of demographics. These include both the male and female children (Villagarcia, 2010). Additionally, the needs of the target market is the need for energy for taking part in sporting events, competitions, studying and involvement in an active lifestyle. These are the psychological needs of the market. In addition, this target market has the self actualization needs of belonging in a higher social status, boosting one self esteem and self actualization (Villagarcia, 2010). The market believes that through consumption of Milo it obtains a healthier body and mind. One becomes a future champion, and one involves in an active lifestyle (Villagarcia, 2010). 3.0 The marketing mix 3.1 Product Nestle Milo is a beverage that was developed in 1930s by Thomas Mayne (Milo Nestle, 2012). It was created using domestic milk knowledge together with cocoa expertise. The product is named after a character in Greece known as Milo known for his energy. The product was launched in 1934 in a public showcase of new products in the market. Nestle Milo was developed in a time when there was the great depression. At this time, children had received low nutrients that were available in their daily diet (Milo Nestle, 2012). Nestle Milo was developed in response to this situation in order to help children grow stronger and healthier at these hard times. Since 1930s, the product has remained relevant in the market despite the many competitors that have been introduced in the market (Milo Nestle, 2012). This tells one that Milo has a sustained competitive edge complimented by a strong marketing mix that will be reviewed in this report. It has a unique great taste. It is rich in carbohydrates, and has preferred energy that acts as nourishment to the human brain, muscles and the nervous system. It has other nutrients such as calcium, high amounts of proteins and starch (Milo Nestle, 2012). This product gives children essential nutrients that are needed in an active lifestyle of sports, competition, study and play. In addition, it satisfies the social needs of being in a high social status. These needs are joined together with the self esteem needs and self actualization. In its advertisement, Milo is associated with championship. It is said to be favorable for people who are involved in sports. As seen earlier, Milo is highly nutritious containing nutrients such as calcium, proteins, starch and 6 other minerals (Nestle Milo, 2012). Milo can be categorized as a specialty product that is shopped mainly for the sake of feeding young children with the intention of ensuring that they grow healthier in body and mind. Moreover, it ensures that young children live an active lifestyle of exercise which helps them to be physically fit. This product was chosen because the market has faith and confidence in the product. Additionally, it has been available in the market for many years since 1934. This shows that it has an established market. It is also a successful product that is interesting to learners because of its strong marketing mix. Milo has an effective brand that has been in circulation for several decades. It was introduced to the Australian market in 1930s, and has been competing well up to date. In addition, there are several other companies that have introduced substitutes for Milo but it has still survived in the market. The major aspects of Milo that make consumers to choose it over other products is its taste, credibility in the market, its promotional tools, packaging and nutritional facts (Villagarcia, 2010). Milo is packaged in green tins with sports activities graphics drawn on the packaging. Its packaging plays a big part as a promotion function in the market (Versicherungswirtschaft, 2012). The package depicts the association of Milo with sports activities, and an active lifestyle. This relays the energetic nutrients that are contained in the market. It also signifies championship. Many people like being associated with superior products in order to look and feel superior. The tin packaging with energetic sportsmen signifies championship and victory. Many kids like being associated with given sporting activities like soccer. Therefore, its packaging acts as a motivation for these young ones to buy and consume the product. Its packaging has also been changing over the years. This nourishes the consumer’s perception of the product. The consumer perceives the product as new. Over the years, the packaging has been changing from time to time. However, the color of the graphics has remained similar such that it does not alter the image and identity of the product in the market. In addition, Milo’s packaging offers differentiation to the market in terms of color of the packaging and the sports activities drawn in the packaging. They help young and active children to associate themselves with the champions drawn on the packaging. Product life cycle relates to the various phases or rather stages that a given product passes through since introduction as an idea to the final stage of removal from the industry (Riley, 2012). The major stages include the introduction stage where it is researched on, developed and produced for launching. Secondly, there is the growth stage when the sales are on the peak. and the product is doing extremely well in the market (Riley, 2012). The third stage is the maturity stage when the sales of the product are slowing down especially due to introduction of new competitors in the market. The final stage is when the sales start declining (Riley, 2012). Milo has several competitors that have invaded the market lately. The industry has been invaded by several competitors offering energy products. These products are like Muscle milk, Redline rush, Pitbull energy drink and Red bull. However, Nestle Milk is abit elderly in the market when compared to other companies, having been founded in 1930s. According to these observations Nestle Milo is at the maturity stage. This is due to the introduced competitors that have divided its market leaving it with relatively lower sales compared to when it was at its growth stage. However, due to its competitive edge of its chocolate nature and energetic nutrients Nestle Milo still has above average profits that are supported by its established distribution network, experience in the market and the good reputation of its brand. A competitive strategy therefore, is very important for a company’s survival in the market. It is concerned with showing the way a firm would gain a competitive edge by using a certain distinctive way of competing (Michael, 2011). Competitive advantage often relates to the ability of a company to attain above average profits in a given business (Jackson R. 2011). Nestle Milo dominates the beverage industry with about 84% market size in Philippine (Villagarcia, 2010). It is well distributed in several countries including Malaysia, South Africa, Ghana, Kenya, United States, Philippines and United Kingdom. This shows that the product’s distribution strategy is effective, and has been doing well in the market. In addition, Milo products are better priced when compared to major competitors like Olvaltine. Olvaltine is almost the same price as Milo’s products. However, Olvaltine’s price is 28% higher when compared to Chocquick. On the other hand, Chocquick is 11% higher than Rich-O. This is evidence showing that Milo has a well established market complimented with an effective marketing mix that allows it to sell its product at a reasonable price compared to its competitors. Hence, Milo earns above average profits which shows that it has an effective competitive strategy. The pricing strategy is consistent with its life cycle. In promoting its products, Milo has already started using online marketing tools such as social networks like Facebook, YouTube and twitter. Social networks are groupings of human beings into given groups such as neighborhood subdivision, into a community, and in person using social network sites in universities, high school and at the work place. People use social networks to share ideas, gather information, to create friendships to do business, to meet people, find employment and to share past experiences. On top of that, Milo also uses television and radio broadcasting as a form of advertisement. The company also sponsors events such as basket ball tournaments. Therefore, the company’s promotion tools are in line with its life cycle. In addition, the company distributes its products through credit and cash transactions, it uses supermarkets, drug stores, convenience outlets, market stalls and sari-sari stores (Villagarcia, 2010). 3.2 Promotion There was a time when Nestle Milo was promoting the Milo pack by offering a free jug. It was known as the “champion jug.” Nestle Milo also sells other derivatives such as chocolate. It has given one free sachet as a way of promoting its sales. The drawing on the chocolate package indicates “1 free sachet.” (Villagarcia, 2010). Milo also sponsors events as a way of promoting its products. There is the MILO in2Cricket event (qldcricket, 2012). This is a program that gives a chance to little kids between five years and 10 years to start playing, and learn to play cricket as a career (qldcricket, 2012). The program gives the kids a chance to learn skills such as bowling catching, throwing and battling. These children also learn social skills that include making new friends and even having fun (qldcricket, 2012). In addition, Milo sponsors another event known as the MILO backyard event. This event was created in Facebook where the event allows parents to take their family to a youth town event on Friday. The event is sponsored by MILO. The objective of the event is to encourage parents and children to spend time together in unstructured system of playing together. This event was started after the company got a report that 46% of children in Australia are not involved in playing (Facebook, 2012). This is considered as inappropriate socially speaking. This event has helped many children to get an opportunity to play, and be actively social. Sales promotion helps to accelerate sales in the most competitive markets hence increasing profits. Sales increase as a result of offering discounts on new products and even giving price off offers (Demand and media, Inc 2011). Sales promotion also aims at introducing new products through drawing attention of consumers who have the potential to buy. This could be achieved through offering of free samples to customers. Demonstrating the special features and characteristics of the product or service can also work. Scratch and win offers can also attract potential clients. In case of change in preference and taste or rather fashion in the market, sales promotion enables marketers to dispose the stocks at hand quickly. Another role is to stabilize the volume of sales through maintenance of the market share of the firm. The customers can get all the important information concerning different products, and their features and quality through sales promotion. Sales promotion also helps to raise the standard of living of people. People can exchange their old items with new items. It also promotes cheap prices for products through enhancing competition. It also promotes intermediary sales. People are also able to buy more during off-peak times. Another role comes where sales are increased during major events, vacations and important events. Sales promotion also encourages selling of services usually done by travel intermediaries. Sales promotion also helps an enterprise to be able to compete with a manufacturer of a similar product. In television broadcasting, MILO uses the motion control rig to air and advertise its product. The motion control rig shows various pictures at the same time, and their collections are aired on TV (Visual effects company, 2012). Milo is a market leader in using the motion control rig in advertising its products in form of video. The motion control rig is fully interpretable with 3D pictures (Visual Effects Company, 2012). Milo has a widely available nationwide. It is also a multinational company today and hence available in many countries including, south Africa, Ghana, United Kingdom and USA. The company mainly depends on online communications in passing information that concerns change of package, new events to be held by the company and introduction of new products. However, the company has also established local communication channels that include use of television broadcasts to advertise and pass important information. All in all, in Australia, Milo uses both direct and indirect modes of communication in passing vital information. On top of that, Milo also uses television and radio broadcasting as a form of advertisement. The company also sponsors events such as basket ball tournaments. Therefore, the company’s promotion tools are in line with its life cycle. 3.3 Place Distribution Strategy: Distribution is a medium that facilitates the movement of goods to a place where the consumer can access with little or no efforts. Distribution channels refer to the medium used to move goods from the producer to the consumer. Measures will be put in place to ensure that all the needs of the consumer are fully satisfied. One of the distribution strategies adopted by Milo is the Vertical Marketing Strategy (Kennedy, 2011). The main target of this distribution channel is to reduce conflict while at the same time enhancing efficiency in the distribution of products. Vertical Marketing System takes any of the three types: Administered VMS: This is the type of Vertical Marketing System that is characterized by dominance of one channel. The dominant channel is mostly referred to as the channel captain (Kennedy, 2011). The channel captain in this scenario can be a wholesaler, a retailer or the producer himself. In most cases, the channel captain is the producer. He has been in recent past been in charge of mobilizing other members. Contractual VMS: This is a distribution channel where all participants are guided by a legal agreement. Examples of contractual VMS are the likes of franchises; wholesaler sponsored marketing chain, etc. In the case of wholesaler contractual agreement, the wholesaler is responsible for providing necessary marketing programs, selection of merchandize to retailers who have agreed to buy the wholesaler’s products under the VMS contract. Another kind of contractual VMS is the retail cooperative. This is where retailers set up their own distribution system where they act as wholesalers (Kennedy, 2011). In this operation, the retailers agree to acquire merchandize from wholesaling operations and later on develop their own private line of goods Corporate VMS: It is the case where channel members are owned by a single enterprise. This shows that the distribution of products shall be fully in the hands of one member. The channel in charge of all distributions will basically transact on behalf of other members. Milo Nestle basically concentrates on the first two types of distribution systems that involve the wholesalers and the retailers. This is with consideration that Milo is a multinational company that operates in other countries apart from Australia. This distribution system gives the consumers satisfaction by ensuring that consumers in the rural towns can access the product. A distribution channel involving the retailers is convenient to the customer because the consumers are able to reach the product from local supermarkets rather than contacting the producer. Moreover, it reduces delay and too much time consumption as a result of contacting the producer who would be far from a realistic point of view. This is because in, in many cases, most of the consumers of Milo as distanced from the producer. Therefore, shipping via containers is involved to reach customers in Australian rural areas. Direct contact with producers dictates a need for prior communication to delivery of the product. On the other hand, when wholesalers and retailers are involved the customer can buy the product at anytime anywhere, even at night. Therefore, this distribution system is convenient to the producer and the customer. It saves the consumer’s time. It reduces costs involved with contacting the producer directly for direct delivery. Considering that Milo Nestle is at its maturity level. There are various developments that are expected at this lee. One of the developments is a wide market base. The second development is that the company has started doing business in foreign states. The third development is that the transport of its product is abit complex compared to when the company was doing business locally. Therefore, use of the vertical marketing strategy of distribution is in line with the prevailing conditions or rather circumstances that are facing Milo Nestle. 3.4 Price There are three major strategies of pricing namely; penetration pricing, skimming pricing strategy and status quo pricing strategy. Milo uses the penetration pricing strategy where its products are lowly priced relatively to its competitors so that the company can be able to touch a bigger market. Pricing strategy must be put into consideration with the life cycle of the product in the market. Moreover, it must be formulated in consideration with the amount of profit the company intends to make, the cost of operations in Milo and demand derived from the prevailing marketing trends. Milo is available in about 6 tin sizes; these are 1000g, 600g, 200g, 300g, 26g and 20g. Milo 20g costs $4.39; 26g costs $7.80; 100g costs 195.80; 600g costs $121; 200g is priced at $43.30; finally, 300g is priced at $62 (Villagarcia, 2010). Basically, Milo is usually at 13% premium price. The closest competitors of Milo Nestle are Olvaltine, Rich-O and Chocquick (Villagarcia, 2010). Olvaltine is almost the same price as Milo’s products. However, Olvaltine’s price is 28% higher when compared to Chocquick. On the other hand, Chocquick is 11% higher than Rich-O (Villagarcia, 2010). As seen earlier, price of the Nestle Milo always varies in relation to the demand, cost of operations and profit. The company always estimates the profit that it expects to earn in a given region. Every region is affected by other dynamics like the income earned by consumers, the population of children occurring to be smaller or larger, and the level of demand for Milo in that specific area. That is why it is found that the price of Milo in United States is higher when compared to African countries like Ghana and South Africa. This is because in United States the number of high income earners is larger compared to the number of high income earners in South Africa and Ghana (Villagarcia, 2010). The competitor’s activities of Olvaltine and Rich-O also affect the pricing strategy of Milo. This is where whenever Milo introduces a new product, and the other companies also introduce a new commodity then it dictates that Milo is restricted in terms of pricing strategy. Hence, it must price its product in line with the competitor’s price. The price difference should not be very large to prevent discrimination of one product against the other. Milo being at the maturity stage it has a relatively greater experience with the prevailing market conditions. Due to the rising number of competitors, and the level of competitors Milo must use the penetration pricing strategy that will help it to acquire a larger market through greater market penetration. At the maturity stage a product has established a considerable market, and hence it has to find ways of customer retention. Milo is doing well in its approach of advertising and using other promotional tools that are consistent with the product life-cycle. This is with regard to the packaging, different sizes of the product, and use of sponsorship of events and positive public relations. Therefore, Milo’s pricing strategy is consistent with promotion, place and product and its lifecycle. 4.0 Competitive advantage A competitive strategy is very important for a company’s survival in the market. It is concerned with showing the way a firm would gain a competitive edge by using a certain distinctive way of competing. Competitive advantage is usually the ability of an organization to attain above average profits in a given business (Jackson R. 2011). Milo differentiates itself from its competitors by associating its products with sports in a variety of ways. Nestle Milo moves forward to sponsor events such as the national marathon event held every year. Sponsoring events is one of the major promotional tools used by serious companies (Scribd Inc, 2012). It intends to associate the company with big events that influence consumers in certain ways. Sponsoring events is also part of creating positive public relations as well as giving the company an opportunity to introduce new products to the public. During such events, people that participate in those events wear caps and T-shirts with Milo graphics (Scribd Inc, 2012). This is a very effective way of promoting a company’s products. Milo Company has differentiated its products from other companies or rather competitors through capitalizing on sponsoring events, and these are sports events like marathon events. Even during short commercial breaks on the television Milo usually advertises its products by showing a girl and a boy who become champions in sports especially in races (Scribd Inc, 2012). In addition, Milo’s packaging also contains graphics showing young girls and boys in given sporting activities. This communicates to the consumers and market at large that Milo is a better beverage for young children who intend to engage in sporting events and become superstars. Many people especially children are highly active in sporting activities (Scribd Inc, 2012). This is a perfect promotional tool that makes the young to believe that they are going to become stronger and healthier, and hence fit for sporting activities. As a product, Milo is made of milk and six nutritients that include calcium, Vitamin B, protomalt, actigen E, fats, and carbohydrates that are a good composition that make one energetic for sporting activities (Scribd Inc, 2012). 5.0 Assessment of the Firm’s Success Milo has been in the market since 1930s. It has been in operation for more than 8 decades. It has adapted from traditional promoting tools such as radio broadcasting to present advertisement using social media like Facebook and Twitter. Social media is largely based on social networking which has a great influence on people. In online networking, sites like Facebook, netlog and Twitter are the most commonly used sites. Milo has created several events using its Facebook fan page. The events have specific objectives that help in improving the living standards of the children and families in Australia. The product itself is made of six nutrients that help the Australian child to grow healthier in body and mind. In addition, the company sponsors various events like the National marathon held every year. Such events help in nurturing children’s talents, encourages them to play for physical fitness as well as promoting knowledge on the importance of a healthy body. These are some of the important parts of life that are taken for granted by many people. In addition, Milo has been using the vertical marketing distribution system in distributing its product to various parts of Australia through relying on retailers and wholesalers. The company relies on recognized supermarkets, large chain stores in Australia and use of cash and credit transactions. The company has been able to maneuver through to more than 8 decades to an extent of entering new foreign markets where its distribution strategy has been successful with regard to the number of states that the company has entered including South Africa and Ghana in Africa. Conclusions and Recommendations Milo is an Australian company that has been able to be successful in obtaining a sustainable competitive advantage in almost 9 decades. The company produces Milo a product composed of about 6 nutrients that help a target market of children between the age of 3 and 13 years. The company was founded after the great depression when many children were affected by malnutrition. The company has moved forward to satisfying customer needs through sponsoring events that promote a healthy mind and body. Moreover, this target market has the self actualization needs of belonging in a higher social status, boosting its self esteem needs and self actualization (Villagarcia, 2010). The market believes that through consumption of Milo it obtains a healthier body and mind, one becomes a future champion and one involves in an active lifestyle (Villagarcia, 2010). In order for Milo to succeed in promoting its market it would be important for the company to implement mobile ads. Mobile ads are a mobile function that is preferred by many people in emerging economies. Facebook ads are available in about 70 languages. It sells its ads to some of world’s most recognized brands including Ford Motor Company and Nestle (Bloomberg, 2012). The network is known to possess around 488 million mobile users, and with more than 83 million of the users accessing the facility via mobile devices. Many companies have not exploited this new facility which will be highly effective in developing states and emerging economies. Facebook also acknowledges that most people nowadays prefer socializing via mobile cell phones (Bloomberg, 2012). Therefore, a wise company like Milo which seeks to catch the emerging markets should concentrate on mobile ads. Mobile ads were started by Facebook in early 2012, and Facebook predicts that the annual ads function is likely to add annual revenue of the company by a double of $8.68 billion by the year 2014 from $3.71 billion in 2011. 6.0 References Bloomerberg Business week (2012). Coca Cola Gives Facebook Global Reason for Boosting Mobile Ads. Retrieved from: http://www.businessweek.com/articles/2012-07-03/coca-cola-gives-facebook-global-reason-for-boosting-mobile-ads [accessed on 29 November 2012] Demand media Inc (2011). Role of Sales Promotion. Retrieved from; http://ehow.com/about_6458153_role-sales-promotion.html [accessed on 29 November 2012] Facebook (2012). The Milo backyard- Youthtown, Auckland. Retrieved from: http://www.facebook.com/events/366111766800161/ [accessed on 29 November 2012] Jackson, R. (2011). The practice of strategic Management. Manchester: Manchester Business School of MBA MBS worldwide. pp 16 Kennedy, S.D. (2011). The Ultimate Sales Letter: Attract New Customers, Boost your sales. Avon, MA: Adams Media. Michael, E., (2011). Competition and firm strategy, Institute for Strategy and Competitiveness. Porter publications, Retrieved from: http://www.isc.hbs.edu/firm-competitve.htm [accessed on 29 November 2012] Milo Nestle (2012). The Nutritious Drink Kids Love. Retrieved from: http://www.milo.com.au/products/milo/ [accessed on 29 November 2012] Qldcricket (2012). Getting Involved. Retrieved from: http://www.qldcricket.com.au/default.asp?PageID=894 [accessed on 29 November 2012] Riley J. (2012). Marketing: Product Life Cycles. Retrieved from: http://www.tutor2u.net/business/gcse/marketing_product_life_cycle.htm [accessed on 29 November 2012] Scribd Inc, (2012). Good Food Good Life. Retrieved from: http://www.scribd.com/doc/38800985/Milo [accessed on 29 November 2012] Villagarcia M. (2010). Future Champions (NWE). Retrieved from: http://www.slideshare.net/mackyvillagarcia/marketing-plan-milo-villagarcia [accessed on 29 November 2012] Versicherungswirtschaft (2012). Functions of Packaging. Retrieved from: http://www.tis-gdv.de/tis_e/verpack/funktion/funktion.htm [accessed on 29 November 2012] Visual effects company (2012). Milo Motion Control Rig. Retrieved from: http://www.milomotioncontrol.net/ [accessed on 29 November 2012] Read More