Market Audit Report of Arnottss Tim Tam - Case Study Example

Name) (Course) (University) Date of presentation: Lecturer: Market Audit Report of Arnotts’s Tim Tam Introduction The following report discusses how Arnotts’s has utilized its marketing mix to promote the Tim Tam chocolates and maintain a large market share. The Tim Tam chocolates, which have been in the market for several decades, face increased competition than before. Nevertheless, the brand is able to not only survive through the competition but is able to be one of the most poplar and valuable brands in Australia and beyond. In its maturing stage, the brand is capable of expanding customer base in spite of the increasing competition. Through augmentation of products, Arnotts’s has managed to gain superior customer loyalty, which is in turn related to increased revenue and profitability (Company Profile, n. d). The company uses the price-skimming strategy in which it sets lower price but higher quality compared to competitors. This way, the company utilizes pricing as a signaling tool. The company spends heavily in advertising and public relations. The Tim Tam chocolates are distributed widely in places that allow customers to reach them easily. Arnott’s uses a vertical marketing system in which the Tim Tam chocolate is distributed through indirect and direct channels. By utilizing these strategies efficiently, arnotts’s are able to increase the Tim Tam’s customer loyalty, the rate of adoption and brand equity. Company background and Product Description Tim Tam is one of the chocolate brands manufactured by Arnott’s. Arnott’s is the largest chocolate biscuit manufacturer in Australia. With an extensive brand portfolio strategy, Arnott’s is focused on increasing production capacity, market penetration and distribution network. Over the years, the company has recorded impressive revenue and profitability growth except during periods of economic recession when consumer expenditure declines. This chocolate brand was first introduced in Australia in 1963 and has been marketed intensively to become Australia’s most favorite chocolate biscuit. Currently, Arnotts’s sells about 30 million Tim Tam packs each year in Australia alone. The Tim Tam chocolates are designed by combining different ingredients, chief among them being caramel, vanilla, milk, chocolate flavor and butter (Tim, 2004). Target Market Analysis According to Roswell (2005) Australia’s chocolate biscuit consumption per capita per year is one of the highest in the world. This is because in Australia, chocolate biscuits are considered part of the daily diet and are hence eaten as food rather than as snack as is the case in other countries. Constant value sales of chocolate biscuits are expected to increase by 15% over the next few years. Generally, chocolate consumers in Australia as in other countries continue to look for more indulgent and healthier functional products with original flavors even if at a premium price. Arnott’s Tim Tam chocolates are the most favorite in Australia. The brand has a market share of 68%. The brand is well represented in all parts of the country and enjoys strong brand equity as a domestic manufacturer with a time tested legacy. Originally, Arnott’s Tim Tam chocolates were marketed as a gourmet biscuits that could be enjoyed on special occasions. The initial brand targeted a high-class market niche that valued quality and prestige. Part of the target audience included successful women and children. However, the target market was repositioned to include different market segments (Company Profile, n. d). Currently, Arnott’s targets its products through geographic and demographic segmentation. Regarding geographic segmentation, the company has implemented various strategies to ensure that its Tim Tam chocolates are available countrywide with over 95% of supermarkets selling the product. The company has a large concentration of distribution outlets in major cities and urban centers where the product has a huge following. Arnott’s however pays special attention to particular areas such as richly populated metropolitan areas where the range and quantity of substitute products are great. Regarding demographic segmentation, Arnott uses age as the primary segmenting parameter. The main target segments are children, youth and young urban families. Children constitute a special market segment for Arnott’s Tim Tam chocolates because the young ones are more attracted to chocolate biscuits than other segments. The youth prefer Tim Tam chocolates as a sign of prestige and for use as gifts. The company pays special attention to attract males while maintaining the traditional relation with women. The company strives to improve product quality by combining a wide range of quality ingredients in order to attract children and special market segments (Roswell, 2005). Market Mix Strategies i. Product Strategy Product strategy refers to how a company designs and manufactures its products so that it enhances the customer experience. Product is the physical good or service that a company offers to its customers. Arnott’s includes certain aspects to its product strategy which include packaging, looks and desirability. Arnott’s features several products under the Tim Tam brand that are permanent and do not change. This strategy ensures that there is always something familiar for customers. In addition to developing permanent product brands, Arnott’s also uses an adaptation strategy where it takes existing products and modifies them to suit local tastes. An important aspect of Arnott’s product strategy is packaging. The Tim Tam chocolate packaging has been specially designed to fulfill four important functions: uniqueness, customer safety, easy to remove and promotion of product brand. In the Australian market, the Tim Tam package stands out from the rest of chocolates and is easy to differentiate. Undeniably, the company does not want its customers to confuse products with those of the competitors. The Tim Tam package also offers useful nutritional information which enables customers to decide why they should consume the product. By being able to promote the benefits of the product, the Tim Tam package reinforces brand equity. Regarding the stage of product development, the Tim Tam chocolates are in the maturity stage. This is because the product is mass produce and its sales are at their peaks. Being the largest chocolate producer, Arnott’s production costs are very low compared to its competitors. This is partly because Tim Tam’s brand recognition and loyalty means minimal advertising costs. At this stage, the demand for the Tim Tam chocolates is very high. The company must therefore make special efforts to differentiate the Tim Tam brand from the competitor’s product. It is for this reason that Tim Tam has augmented the Tim Tam chocolates with services, price reductions and promotions to hold the market share (Roswell, 2005). ii. Place strategy Arnott’s place strategy consists primarily of distribution channels as well as outlets through which the product is availed to customers. The place strategy is considered an important one because it connects the company to the customers. The baseline of Arnott’s place strategy is to ensure that its products are available within a distance of 3 minutes in urban areas. To this end, the company has partnered with distributors and retail outlets to ensure that the Tim Tam chocolates are rapidly availed to the market in the right quantity and at the right time. In order to ensure strategic location, Arnott’s focuses on store placement and are always looking for the best locations. This strategy has created immense strengths for the company over the years because strategic location of stores means increased publicity and sales. Arnott’s has also made convenient a central focus in its place strategy, not only through how fast has to distribute its products to the market but also in the location of outlets (Dowling, 2011). Because the Tim Tam chocolates are pretty well saturated in the major cities in Australia, the company’s only real opportunities for growth lie in expanding to the suburbs where competition is not cutthroat. The company also has opportunities to introduce new brand concepts other than Tim Tam. The company’s bottom-line objective is to increase market share. In this case, the primary focus is purely on localization with different strategies for different regions and market segments. iii. Promotional Strategy Tim Tam is the most popular and valuable chocolate brand in Australia. Undoubtedly, Arnott’s is an organization of tremendous magnitude with hundreds of outlets spread across Australia. The company has successfully used the differentiated promotional strategy to target family units and children with its Tim Tam chocolates and special prices. The location of its distribution outlets is ideal and very successful. It was the first chocolate biscuit manufacturer to expand into suburbs and into the crowded downturn areas of Australia’s cities. Arnott’s relies on commercial advertising to promote its products and to target markets. In addition to print and TV adverts, the company relies heavily on online marketing as a major promotional strategy. The Tim Tam chocolate is aggressively marketed not only on the company’s website but also on social websites and blogs. This way, the company reaches out to a large number of potential customers (Dowling, 2011). Arnott’s Tim Tam adverts are primarily meant to support sales promotion campaigns and to persuade potential customers to buy the product. Essentially, strategic advertising is a unique selling point for Arnott’s. The advertisements not only use emotions to attract target audience but are also tailored to appeal to specific market segments. Although many of Arnott’s promotional adverts have one specific target audience, it is possible for some commercials to address multiple target audiences and still achieve the required identification. In addition to advertising, Arnott’s uses public relations to promote the Tim Tam chocolate biscuits in Australia. With regard to the public relations strategy, the company conducts campaigns through different media platforms such as internet to update customers on new product launches and hot promotions. As such, public relations are an easy way of promoting public relations. The company also enhances its brand image through sports and event sponsoring (Boag, 2003). Another promotional strategy that Arnott’s has skillfully adopted in the recent years is the promotion of healthy lifestyles. The company incorporates different ingredients into its Tim Tam chocolates. These ingredients include fruits extracts, milk, honey, cheese and other healthy foodstuffs. The company also makes public the nutritional values of its products. This is not only an attempt to appeal to new consumers but also a strategy for downplaying the less than positive nutritional values of many of its traditional offerings. The company has long recognized that customer preferences keep changing regularly hence product offering should be changed regularly to accommodate these changes in customer preferences. Essentially, Arnott’s strategy is an example of a marketing strategy that evolves in relations to changes in customer needs and preferences and hence it is truly innovative (Tim, 2004). iv. Price Strategy Arnott’s price strategy is based on the premise that the company can achieve its profitability objectives by offering quality products at a good value. The company’s pricing structure has over the years supported this message. For the Tim Tam chocolates, the company sets appropriate prices by looking at competitors’ offerings. In Australia, Tim Tam chocolates retail at an average price of 4 Australian dollars. Generally, the company uses the same price offering for different market segments except for outlets that are located in exclusive neighborhoods in which case the prices are slightly higher. Having the same price for the chocolate regardless of where it is sold is a good strategy which among other things ensures consistency in customer expectations. In addition, Arnott’s has developed strategic policies for price objections, economic downturns, price increases aimed at allowing low income households to enjoy the product. Through this pricing strategy, the company communicates psychological value to customers. In particular, young children and the youth find the Tim Tam chocolates very satisfying along with the great customer experience that the company offers (World News, 2011). Competitive Advantages Arnott’s is the largest biscuit brand in Australia. The company has several decades of development and has recorded many achievements not only in Australia but also in the world. Being an international business with production feasibilities in many countries, Arnott’s has the necessary financial base to improve its product competitiveness. Perhaps, the company’s biggest competitive advantage with regard to the Tim Tam chocolate is that it manufactures, markets ad sells branded chocolates. As a matter of fact, the Tim Tam chocolate is the strongest brand in not only Australia but also New Zealand and neighboring countries. Another important competitive advantage is that the company has a strong and dedicated research and development team with high capabilities in innovative developments (Dowling, 2011). Another competitive advantage is that the company has developed necessary capabilities that enable it to anticipate and respond to changes in market trend and consumer demographics and preferences. For instance, Arnott’s business prospects were not severely affected during the 2008-2010 global economic crises because of the company’s consumer friendly pricing strategies. Arnott’s marketing team understands what customers need and have been developing delicious and high quality products in the Tim Tam. In addition, Arnott’s has several, large and well established factories distributed throughout Australia. The company uses the best ingredients and this has made its Tim Tam the most favorite chocolate brand in Australia and beyond. Technological innovations in product design and packaging are an important opportunity that Arnott’s has taken advantage of to revitalize its position in the Australian market. The company consistently upgrades its production and marketing strategies in order to minimize production costs (Tim, 2004). Overall Analysis and Conclusion Tim Tam is indeed the largest and most popular chocolate brand name in Australia. The key behind Tim Tam’s market success lies in the company’s ability to respond effectively to changes in customer demands as well as economic conditions. The company has well refurbished production facilities and committed employees, which have enabled it to become a market leader and a favorite brand. A major weakness facing Tim Tam is that because it is the largest and most popular brand, it has to deal with many challenges related to competition. Collecting information and feedback from customers are two of the most important challenges that the company faces. Nevertheless, the company has opportunities to expand the geographic scope of its market by investing in other countries in the Asia Pacific region. Moreover, innovation in product design and packaging are offers immense opportunities for the company to reposition its products strategically (Euromonitor International, 2010). Because cost savings are an important aspect in any business endeavor, it is imperative that the company considers low cost production. Through this strategy, the company can offset high costs associated with raw materials such as wheat and food oils. Moreover, Arnotts’s can significantly reduce its production costs by partnering with suppliers and other stakeholders such as the distributors. The company can overcome strong pricing pressures from its competitors by adopting the low cost leadership strategy. Al these can result in increased competitive advantages and rapid realization of strategic objectives. References Boag, C 2003, The Story of Arnott's Famous Biscuits: A History & A Celebration. Lansdowne: Sydney. Company Profile (n. d). Retrieved 1st December 2012 from, from http://www.arnotts.com.au/about-us/corporate-profile.aspx  Dowling, G 2011, Media analysis: what is it worth? The Journal of business strategy (0275- 6668), 32(1), pp.26 –33. Retrieved 1st December 2012 from .http://www.emeraldinsight.com.ezp01.library.qut.edu.au/journals.htm?articleid=189687 7&show=abstract. Euromonitor International 2010, Biscuits in Australia. Retrieved 1st December 2012 from http://www.portal.euromonitor.com.ezp01.library.qut.edu.au/Portal/Handlers/accessPDF. ashx?=06PDF&f=S-163372- 18690006.pdf&code=TidTcRby0cjj8IbAFX4GzUHyn24%3d.  History of Arnott’s. Retrieved 1st December 2012 from http://www.arnotts.com/history.aspx Arnott’s (n.d.). Roswell, A 2005, Tim, Tam and Tom Settling the Tariff-trust Question: A Debate. Arguments on Both Sides Fully Reported, Sydney, Rohde & Haskins. Tim, A 2004, Dr. Arnott's 24 Realistic Ways to Improve Your Health, Perth, Pacific Press Publishing. World News 2011, TimTam Lovers TV Commercial, Retrieved 1st December 2012 from http://wn.com/TimTam_Lovers__TV_Commercial.    Read More