Critical Evaluation of Heinz Marketing Strategy - Case Study Example

Introduction Heinz is a US based Food company with numerous branches worldwide. Some of the countries that enjoy their products include the US, UK, India, Australia and many more. The company was founded in Pennsylvania by a twenty five year old known as H.J. Heinz in the year 1869. (Heineman, 1990)Thereafter, the company began growing and eventually became recognized as one of the most reputable food based companies in the world. Given the above fact, one cannot underestimate the role that this company's marketing strategy has played in putting them in the map. The paper shall examine these with specific reference to the initiatives launched by the company and recommendations will be given about the issues that can be changed within the company. 4 Marketing Ps Heinz has established a name for themselves in the food industry through their pricing strategies. Usually, the company studies markets in its respective environs and then looks for a way in which it can stay ahead of that competition. Their prices are normally sufficient enough to attract clientele, while at the same time maintaining a level of profitability and competition within its respective regions. Numerous marketers acknowledge the fact that when sufficient value has been added onto a product, then its pricing becomes a secondary factor in convincing clients to purchase the item. For instance Heinz ketchups contain additional ingredients such as garlic and other flavours that can be used to enhance its overall taste and hence its value. This is the reason why consumers became loyal to the brand. In addition to the latter, pricing is also largely determined by the strength of the brand. For instance, when one considers some of the goods offered by the company, it can be seen that some of them may be much higher than what their competitors sell them for. However, because of the strong brand name, some people who are loyal to the Heinz brand may be willing to pay a little extra for the commodity as long as it comes from the H. J. Heinz food company. (Grant, 2005) Heinz pricing strategies are also largely affected by their geographical proximities. For instance, the largest pickle manufacturing Heinz factory is located in its headquarters within the United States. Consequently, some countries that may be in need of this product but are far from the United States will have to include the additional costs that come along with shipment and the like. Heinz usually incorporates a lot of in-store discounting in its product offering. Most of the time, this is done through a range of grocery stores or it also deals with a series of hyper stores too. The company realises that in order to boost their sales at the last point of contact with the consumer, there is a need for one to establish a mechanism that will encourage this kind of initiative. (Balakrishnana & Coyne, 1995) Perhaps the most important aspect in Heinz's marketing strategy is the strength of its products. First of all, Heinz is largely known for its "fifty-seven-varieties" advertisement and logos. The company has invested thoroughly in offering a range of food items such as pickles, sour onions, tomato sauce and many other varieties. The number fifty seven does not signify the exact number of products available under the Heinz name because these products are much more than this. However, the number is meant to indicate just how diverse the company's product offerings are and also, to capture consumer's attention. (Mc Gahan, 2004) The major strategy behind Heinz's product strategy over the past three years has been to streamline their product offering. The company realized that in order to offer better quality products, it would be more helpful for them if they categorised their items. This was the reason why the company decided to offer all their products under three major brands that included; Sauces Ketchups Baby food Convenience meals The company was determined to grow this category by buying out other companies that had specialised in some of their weak categories such as the baby food sector. Additionally, the company has opted to let go of some of their brands that do not fall in any of the latter mentioned categories. Consequently, the company's product offerings have been designed to boost their image in line with this idea. The company's product marketing strategies also centre on current concerns about various people with regard to their weight. For instance, in the United Kingdom and in the United States as well, many food companies consider their product ranges as incomplete if they do not have a package for their weight conscious consumers. Consequently, this is the reason why the company has chosen to offer this alternative in their product range. By having such offerings, Heinz has managed to capture a new market segment that is willing to invest a little more in their health. The name of this product line is known as the Heinz Weight Watchers ready meals with its loyal clientele. Heinz's promotional strategies have also been instrumental in placing this company on the map. The company invests numerous amounts of its revenue on advertising campaigns. Some of their advertisements have been very persuasive while others have been controversial. But the main promotional strategy employed by the company is to make as many people as possible be familiar with the brand. Part of the reason why Heinz has been very successful in markets around the world is due to the fact that the company has established itself as an icon in the food industry. Most consumers feel that the brand is associated with the family and the overall needs of the family. In fact in order to capture such as image, most of Heinz's advertisements have been organised around that. For instance during one of its product launches, the company wanted to show how it had discarded the old and embraced the new. It did this through the use of a modern family in which a male husband and a male wife were expressing affection to one another. While the latter advertisement may have brought some controversies, one cannot underestimate the attention that the ad managed to grab especially among potential consumers. Promotional activities within the company are also carried out through many in store promotions. (Wheelan & Hunger, 2003) From time to time, retail sellers of Heinz products are required to embrace some of Heinz's ideas. For instance, some products may be offered under the common purchase one and get one free idea. Lastly, Heinz's marketing strategies are never complete without due consideration of place. Heinz usually works hand in hand with their retail sellers to act as sales agents. This is because the company has realised the importance of making strong contacts with their consumers. Most of their plans normally revolve around this aspect. Usually, Heinz Company collaborates with the major supermarkets in their countries of operation. The latter avenue is instrumental in the company's marketing approach owing to the fact that the company's marketing team communicates directly with all supermarkets. Also, such a retail outlet is instrumental in reaching a vast consumer audience owing to the fact that most urban areas do their shopping there. Porter's five forces (Porter, 1985) The latter diagram is a graphical display of the porter's five forces. Starting with the threat of new entrants; Heinz operates in a highly saturated food industry market. It is relatively easy to enter into this industry because start-up costs are not very high and neither are operating costs. Consequently, different companies are always starting up. Sometimes, this is made possible by the actions of older players in the market such as Heinz or it is merely as a result of the food industry's dynamics. Bargaining power of consumers have a large part to play in determining whether a certain marketing strategy will be successful or not. Heinz is operating in an industry where the latter phenomenon is quite high. This is because consumer loyalty is not that highly rewarded in the food industry. Additionally, consumers are highly informed and very sensitive about various industry players. Because of the high concentration of firms offering similar products, consumers have a wide array to choose from and this gives them a relatively high bargaining power. Suppliers within this industry also have relatively high levels of bargaining power. Most of them usually operate in environments where the number of firms in need of their services are much higher than the suppliers themselves. Consequently, suppliers have a high amount of control in this regard. It should also be noted that most of these suppliers emanate from the agricultural sector, the IT sector and the financial services sector. (The Guardian, 2008) Perhaps the most worrying trend within the industry that Heinz Company operates in is the issue of competitive rivalry among players. Heinz is currently not the leading ketchup provider in most of its operating countries owing to the fact that other companies are always looking for ways in which they can penetrate into their market. One such example is Unilever; this company has managed to create a niche for itself through the kinds of product ranges that the company offers. The intensity of competition within this industry has also been depicted by the kind of behaviour that some companies adopt. For instance during 2006, Heinz announced cost cutting measures. It asserted that it would get rid of some of their marketers. Another rival company poached these marketers who had been off laid and was thus able to heighten their competitive levels in the market. Such behaviour goes to show just how intense this rivalry is. (DienStag, 1994) Lastly, threats of substitutes also exist within this company. This is because most frozen food consumers tend to have a high propensity for substituting their products. Additionally, others are highly interested in knowing how other products are performing. This is the reason why they tend to vary from company to company. Also, most of them may opt to switch to other products because there is always constant innovation in this industry in terms of differing product offerings. SWOT One of the major strengths in Heinz's strategy is the fact that this company is quite mature. It has operated in the food manufacturing sector for over a century. Consequently, the brand has an advantage in terms of experience. Brand maturity also encourages loyalty among consumers. It usually discourages other players from attempting to eliminate that respective company because of its years in service. Another strength lies in its diverse product offerings. Through such an approach, products that fail to do well can be eliminated in order for the company to concentrate on those ones that are performing adequately. Heinz marketing strategies have displayed some weaknesses in terms of choosing to air controversial advertisements. (The Times, 2008) Additionally, the company has been handling decreased sales though cost cutting rather than product innovation. In line with the latter argument is the fact that there are certain opportunities that present themselves to this particular company. For example, the company could opt to diversify its product offerings. Instead of dwelling on categories that are already performing poorly, the company could offer a totally different range of commodities. This would allow the company to enter into a new market segment that would neutralise some of the saturation in their current product ranges. Heinz should be prepared to tackle some threats inherent in this industry. For instance, the industry leader Unilever has managed to out-compete Heinz owing to the fact that the latter company is fond of making totally different varieties of products that keep boosting their sales. Additionally, the company has huge turnover of managers who may not share the passion and vision that other managers had. PEST The food manufacturing industry is affected by a range of political factors. For instance, many countries are keen on the ingredients utilised in making some of these products. Consequently, most of these countries end up imposing heavy fines upon companies that are found to disregard these regulations. Heinz fell victim when traces of banned substances were found in their products. (FOE, 2008) The company was forced to close that part of their plant that was producing the item. Economically, Heinz is affected by the low consumer spending power. This has come as a direct result of the economic crisis that has befallen the world with special emphasis on the US. Most consumers have cut down on their purchases in order to heighten their savings and this can definitely be translated to their purchases at Heinz. Additionally, it is particularly difficult for Heinz to produce their commodities at the same cost that they used to prior to the credit crunch. In close relation to the latter facts are the tariffs and taxes imposed by certain countries that do not have manufacturing plants within their borders. Technologically, Heinz has to contend with so many challenges. First, consumers have become more informed due to the technological era and this makes marketing more complex. Additionally, the company has to adjust to changing consumer tastes that arise out of their heightened exposure to competitor's marketing strategies. Technology has improved Heinz's business practices because it has enhanced greater communication with clients, suppliers etc. Also, it has increased marketing opportunities. In terms of social aspects, Heinz has to adjust to offer products that fall in line with cultural lifestyles of their target markets. Positioning Heinz has positioned itself as a respectful brand in the food manufacturing industry; this is especially in terms of convenience foods such as baked beans and baby food. The company heavily relies on their name to lure clients. This is because many people have associated themselves with this company's offerings since their childhood days and thus the reason behind their brand loyalty. Targeting Heinz mostly targets new clientele for their product offerings. Usually, this is done by placing more emphasis on the first transaction rather than on relationship marketing. Most of their clientele are single mothers who may be too busy to cook and are in need of some of their convenience foods. Additionally, they target bachelors and college students who are fond of taking fast foods that need some of their additions such as ketchup. On top of the latter, the company also targets markets because of their bay food offerings. Other smaller segments such as young women are also being targeted due to the diet watchers offers that this company had on offer. (Heineman, 1990) Segmentation Since Heinz operates in different parts of the world, their segmentation is largely geographical. Some of the products found in one location cannot be found in others. Demographic segmentation is highly influential because of the fact that there are products for mothers and there are others for the rest of the family; this is segmentation by age. Segmentation by income also exists owing to the fact that in certain regions, one is likely to find a certain commodity and not another. Identification of a strategy & critic of the strategy The overall strategy in this company revolves around brand loyalty. The latter company is adamant to accept new product offerings. One if its managers; Garrett asserted that the marketing team may work so hard to come up with a new strategy, however, because of disapproval from the company's boards, the new idea has to be revised. By the time, the idea is finally accepted; it is already too late to change anything. Consequently, the company would be much better off if they were more flexible in their marketing approach. Conclusion Heinz is one of the most well known food brands in the world. They have made a name for themselves due to their intense numbers of years; however, this company needs to be less rigid in marketing in order to stay ahead of their competition. Reference Grant, M. (2005): Contemporary Strategy Analysis; Blackwell Balakrishnana, S. & Coyne, K. (1995): Bringing discipline to strategy; Mc Kinsley Quarterly, 4, 69 Porter, M. (1985): Competitive advantage; free Press Wheelan, T. & Hunger, D. (2003): Essentials of Strategic management; Pearson Education Publishers Mc Gahan, A. (2004): Principles for achieving and sustaining superior performance; Harvard Press DienStag, E. (1994): 125 Years at the Heinz Table; Warner Book Publishers The Guardian (2008): Beanz means Bigotz, 25th June FOE (2008): Hormone disruption found can linings, retrieved from http://www.foe.co.uk/ accessed on 17th November The Times (2008): Heinz pulls mayonnaise ad, 27th April Heineman, K. (1990); History of Pittsburgh; Penn State Press Read More