WM Soft Drinks Company - Essay Example

Marketing Case Study: WM Soft Drinks Company Submitted by: XXXXXXX Number: XXXXXXX of XXXXXXXXX XXXXXXXXX XXXXXXXXX Subject Code: XXXXXXXXXX Date of Submission: XX – XX – 2009 Number of Words: 1646 words (Excluding Bibliography) 1. Explain why segmenting, targeting and positioning (STP) are considered a vital part of the marketing process and compare the targeting and positioning strategies for both the existing and new ranges. Solution: Segmentation, Targeting and Positioning (STP) form a very essential three step process of the marketing process. These steps form a basis for marketing activates. It is essential to gain a brief knowledge on these to be able to understand their importance in marketing process. Segmentation: This step involves researching to find out what kind of customers and consumers exist. For example, while considering an automobile company, the customers have a number of different demands, like speed, performance, roominess, while others have demand pertaining to the looks, safety, economy and also the engine power. Thus, the needs are different for different customers and a company cannot accommodate all the demands into one product. There have been various studies that have been conducted and these show that companies which choose one group of customers over another tend to be more successful. Segmentation is not a simple decision and in a number of cases it requires the companies to take extremely tough choices. Taking the example of WM Soft Drinks company, there are a number of variables that are related which need to be considered before segmenting the customers, these include factors like, a) preference in tastes vs. the number of calories, b) preference in the tastes, i.e. cola or non cola, c) price Sensitivity and d) or even heavy versus light customers. Targeting: The next step that needs to taken is targeting. This is where the companies target one or more segments. The choice of the target markets is based on a number of factors. This includes analyzing the existing segments that are catered to by other manufacturers. In this case it would be best to choose the segments that are catered to by smaller companies and local soft drink companies. This will provide WM Company with a fair idea of the target market based on which the company can move forward and start targeting customers and build strategic plans based on this. Positioning: This involves the implementation of the previous section, i.e. Targeting. One of the best examples of this is of Apple Computers. The company has created a brand image for itself by high number of advertisements. It has positioned itself in the markets as computers for ‘non geeks’. Similarly if the WM soft drinks need to position their own products of ‘First – Fruits’ it is essential that the company is able to overcome the image of being a soft drink company only for kids. The figure below provides a better understanding of the entire process of the segmentation, targeting and positioning process. This can be used to analyse the positioning strategy of WN drinks as well. Figure: STP Process (USC Marshall, 2008) Targeting vs. Segmentation Strategies: The key elements of a customer driven marketing strategy include market segmentation and targeting, differentiation and positioning. In order to develop a customer driven marketing strategy, the market is divided into smaller segments and the segments which will be targeted are chosen. This is carried out by collecting data related to the demographics, consumer behaviour, customer requirements and substitutes for the offerings in the market. These data are then carefully analysed to segment the customers based on the various factors. These factors are decided based on the products or services under consideration (Kotler et al, 2002, p185). The segments which require the product or service the most are chosen as the target segments. The product offerings are differentiated from the competitors so that they create superior value to the targeted customers. These product offerings are positioned in the minds of the customers as desirable and reliable, relative to other offerings in the same segment. This provides the competitive edge to the business and creates value to the customer as well (Kotler et al, 2002, p203). A Customer driven marketing strategy should give importance to the three pillars of customer satisfaction. These are mentioned as below. 1. Customer Insight “Who are my [the] most valuable customers and how do I [company] build relationships with them?” 2. Customer Experience “How do I [company] create interactions that maximise the profitability of each relationship?” 3. Customer Alignment “How do I [company] structure the organization to deliver on the promise of customer-centricity?” (Peppers & Rogers, 2005). There are different marketing orientations that guide the marketing strategy. The targeting and segmentation for the products i.e. Phun! and First fruits are completely different. The target market for the company in terms of the Phun! Drink is children and the aim for the first Fruit drink is more aimed at towards the adults and teenagers. This target markets have a completely different style and approach that is needed by the company to be able to focus on these markets and reach out to the groups. The style of marketing and advertisements will change completely and will also require complete different concepts. The market segmentation as has been understood is the process of identifying the key groups and the segments within the general market and has similar characteristics and consumer habits. Segmenting is mostly done keeping only the marketing and advertising techniques in mind for the company. For the company to be able to identify the segments, it is essential to gain the knowledge of the interest, tastes, preferences and also the socio economic characteristics (Doyle, P., 2001). These will allow the company to gain details of the patterns of consumption and will also allow them to estimate how the customers might react to the strategies. Hence if WM drinks gains all these details, the company will be able to make good strategies to be abele to reach out to the right markets and will also allow the company to find out the best medium as well. 2. Discuss and evaluate the strategic options presented within Ansoff’s growth matrix AND Porter’s generic competitive positions for the new range. Solution: Ansoff’s Model: This was a theory that was developed by Igor Ansoff which helped firms correctly focus on the present market and products that are dealt with and considering newer ways to grow into newer markets and better products. There are four possible combinations which have been described by Ansoff. The diagram below provides a better understanding for the same. Market Penetration: WM Soft Drinks Company has been able to create a market for itself over the years and has created a strong brand image for itself over the years with its brand ‘Phun!’ The company has penetrated the markets using the local convenience stores, sweet shops, and major super markets. The company has a lack of customer attention though and the brand is not one which is very well recognised like brands like Coca Cola or Pespi or even other brands Market Development: WM Soft drinks has been able to create a strong brand image for itself. However the company is recognised to be a brand for children. This is post the success of its ‘Phun!’ brand. The company however has a strong chance to be able to move into the market easily because of the name and the brand image that it has been able to create. This can allow easier and faster entry of ‘First – Fruit’ brand into the markets as well. Product Development: WM Soft Drinks is known for the differentiation in terms of the products, however the company can increase the horizontal differentiation to a great extent which will thereby allow the customers with a wider choice and will thereby lead to higher levels of customer satisfaction. Diversification: The company also has a number of chances for diversification. This can be into a number of different businesses like the moving to development of small fruit juice stalls, or small aerated drink stalls in the city centre and other busy areas of the cities. The company can develop new products for the new markets which will thereby increase its market presence and recognition across the markets (Doyle, P., 2001). Porter’s Five Forces Analysis: Michael Porter has devised a framework which provides a better understanding of the industry and how companies can be affected by forces within the markets. The five forces that he has described are: a) Threat of new entrants, b) Determinant of buying power, c) Threat of substitutes, d) Determinants of supplier power, and e) Rivalry among the firms. Competitive rivalry, for WM Soft Drinks is quite high with a number of players in the markets. This is majorly due to the fact that the company is in a sector where there are several competitors and there are wide ranges of products that are available in this sector. Threat of New Entrants, is very low, mainly due to the fact that carbonated drinks are in not well received across the world. Though the market is very high for this product, it is not ethical and also the competition is very high for the new entrants due to which most new companies prefer not to come into these markets. Threat of Substitute Product, is very high for the company. There are major leading brands like Coca Cola and Pepsi which play a dominant role in the markets. Hence with such big companies it is likely that the substitute products will be many and the competition is extremely high. Bargaining power of the buyers also plays a very important role in the working of the company. This is mainly because with the buying power of the customers going down the sales of the company will also decrease. Bargaining power of the suppliers is very high as there are several companies in this field and the suppliers are numerous. Hence the bargaining power of the substitutes is also very high. 3. Discuss the problems involved with setting market awareness/action and sales objectives for the launch of the First-Fruits range of soft drinks; suggest methods for doing this. Solution: Market awareness is a very essential aspect of the every business. Any company launching products need to create brand awareness in the market and increase its customers. The marketing of the business along with branding play a very important role in the success of every company. Creating a brand image and name for a company ensures that customers are able to differentiate the products and recognise the product that satisfies their needs the most and thus improving the customer loyalty. Branding plays a very essential role in every business. A brand helps the consumers differentiate between two competitors and the name, packaging and design of the products becomes the brand of the product. Management of products and brand play a very essential role in the marketing success. In simple word branding is the process of creating a different image from that of the competitors (Jobber, 2004). First – Fruits range of drinks is a drink which is being aimed at teenagers and adults. This drink is a fruit based soft drink and is aerated. The main issue for the company is being able to create a brand name and company awareness. This is Suggestions for the case: The company can utilise ‘brand leveraging’ as a mode of creating awareness and to help increase the sales. Leveraging a brand is a concept which requires a strong strategic plan. Since brand leveraging is in simple words, is the strategy of using an already existing strong brand to include a newer product into the market (Evans and Moutinho, 1999). A company which has been able to establish itself well into the market segment they deal in, can easily increase their product portfolio and can gain out of the new products based on the brand image that has already been created in the past. The most beneficial brand leveraging strategies are those which include a company where the customers recognize the brand and have a strong positive image of the brand (Baldwin, 2008). There have been a number of brand which fall into this category. Brands like Tesco, in the retail industry, Toyota in the automobile industry, and many more are some very strong examples of strong branding. These companies have used all the resources and efforts to ensure that the brand image that is created is strong and positive to the customers. However for this paper Tesco will be chosen as the brand of discussion. Tesco has been in the industry for a very long period and the company has been able to create a strong brand image with the customers (Jobber, 2004). The company has created a name for itself to be one which is to provide the ordinary customers a chance to buy the same thing as the rich people would buy. This branding and this method of portraying themselves to a great extent is more for the masses and the company is able to reach out positively to the people. This brand image has made the company the biggest retailers in the world. If the company does come out with a newer product that they launch it is sure that the product will be a huge success as well (Evans, M., (O’Maley and Patterson, 2004). Again even Toyota which is the world leaders in the automobile markets, has also created a very strong image for itself. If Toyota introduces a new product to the product line, it is seen that the people will be sure to buy the product and simply because of the fact that the quality and performance of the products from this company is always proved to be excellent. It has also been noted that the reputation of a company can contribute to the customer’s choice of the product. However each of the companies has their own challenges that they face while leveraging the brand. In the case of Toyota, the company has had the leveraging the brand was way back after the World War II, hence the company’s main issue was the marketplace confrontation with the American and British automakers (Liker, 2004). Taking the case of Tesco, the company’s major challenge has been to be able to move into newer markets with the low prices as well, for instance the leveraging into the medical stores in the stores. 4. Suggest why and in what ways each element of the marketing mix (4Ps) would differ between the new adult and existing, well established, range of children drinks. Solution: This is one of the most essential concepts of marketing. The marketing mix, also called the marketing tactics, includes the basic elements and main components of marketing. These include the four P’s, i.e. Price, Place, Product and Promotion. The newer version of the marketing mix however includes other elements like the people, packaging, and physical evidence. Product: managing an effective and profitable product line is not an easy task and it requires a lot of expertise, analytical thinking and a good knowledge of customer preferences. It is also essential to effectively eliminate the issues involved in the product mix strategy. According to me, I feel that it is very important to cover the requirements of the customers to the expected amount by tailoring the mix to meet the needs, and not just overload the number of products and varieties available to a customer. According to Kotler (1965), firms find it very difficult to delete products in the product line that do not fit in and are not accepted by the customers since they feel that those products might still contribute to the costs incurred. Price: The factors influencing the customer’s price assessments have a profound effect on the pricing policy of a company. It is the most important and powerful factor. This is because it has an effect on the other external factors as well, such as the price of competitor’s products, demand and supply of goods, channels of distribution, etc. (Jobber, D and J. Fahy, 2003) As the decision making process varies depending on the problem that requires a solution, the customer attitude towards pricing will also vary based on that (Jobber, 2004). In the case of products that are very expensive, the decision making process is lengthier and various factors other than price are also taken into account. Quality and reliability are given importance. Consumers are willing to pay a high price for a product that comes with a warrantee or a guarantee for a period of time (Evans & Moutinho, 1999). Place: It has become inevitable that companies have to choose a combination and not just stick with one channel. A number of factors play an important role in the selection of channel strategy. With supermarkets gaining more and more customers and market share of the sales, and internet gaining entry to almost all households, has completely affected the channel distribution strategies of the firms (Evans & Moutinho, 1999). But care has to be given to channel integration as well, which involves setting the right combination of channels. The changes in the technology and the increased usage of Internet have completely changed the distribution strategies of the companies. In this era where Internet has penetrated into virtually every house, the consumer expectations have gone up and they expect the companies to provide the products at the convenience of their homes. Promotion: We had detailed discussions on the components of market evolution - the product adoption process, the evolution and acceptance of technology and the impact of competition. Understanding what customers are looking for in products and how they would react to innovations is very essential. There are five categories of adopters of new innovations: innovators, early adopters, early majority, late majority and laggards (Jobber, 2004). Each of these stages deals with people who have different levels of interest in products at different stages of its life. There are certain people who like to be different and like to try new products, these people fall into the innovators category. These people are those who have the money and are prepared to spend it to try out something new. However there are others who want to ensure that someone else has taken the risk and tried and tested the product before them. These people are quite similar to the innovators however the only aspect they differ is the fact that they would rather follow others than be the first ones to take risks. The early and late majorities form the biggest part of the market. This is the mass of the population, who buy products only after they have proved themselves in the market and are safe to invest. The last set of people called the laggards are the part of the population who are traditional and mainly comprise of the older and less well educated individuals who need to make sure the product is traditional before they buy them (Rogers 1983). Using the four Ps in the case of the two drinks, i.e. Phun! and First Fruit, there are number of aspects to be considered. Product: The drinks that have been chosen meet the requirements and needs of the target markets. This would mean that the company needs to take into account the various demands of the target markets. For example if the company is focusing on the child population then the company would need to consider making the product more colourful, which would allow for better attraction of attention (DeChernatony and McDonald, 1998).. Whereas, for the First Fruit drinks, the emphasis needs to be on the ‘fruit’ part, which indicated healthy living and will draw the attention of the customers. Price: Since both these products cater to very different target markets, care needs to be taken while choosing the prices. The prices of the ‘Phun!’ can re relatively lower than the prices of First Fruit. This is simply because if the Phun! drinks are costly the children will not buy then products. Hence complete care needs to be taken to rightly and impartially price the product overall. Place: The areas to sell the drinks for each of the two cases will be very different. Phun! Drinks are best suited for supermarkets, convience stores, theatres, schools, children gaming zones and also the sweet stores. However in the case of the First Fruit drinks, the drinks need to be stored and sold at the major supermarkets, office vending machines, vending machines at the universities. Since this is majorly focused on teenagers and adults care needs to be taken that the products are aimed at these areas (Brassington & Pettitt, 2003). Promotion: The promotional activities will differ a lot form each other. This is simply because the selling activities that will work on a child will not work on an adult and vice versa. Thus the promotional activities need to be different with completely different approaches for the different target audiences. Bibliography Brassington & Pettitt, 2003, Principles of Marketing, 3rd Edition, FT/Prentice Hall De Chernatony, L and M. H. B. McDonald, 1998, Creating Powerful Brands, Oxford: Butterworth-Heinemann Doyle, P., 2001, Marketing Management and Strategy, Hemel Hempstead: Prentice Hall Evans, M. and Moutinho, L., 1999, Contemporary Issues in Marketing, Palgrave MacMillan, Hampshire Evans, M., O’Maley, L. and Patterson, M., 2004, Exploring Direct and Customer Relationship Marketing, 2nd Edition, Thomson Learning, London Jobber, D and J. Fahy, 2003, Foundations of Marketing, Maidenhead: McGraw-Hill. Jobber, D., 2004, Principles and Practise of Marketing, McGraw Hill, Berkshire Kotler, P., Armstrong, G., Wong, V. and Saunders, J., 2002, Principles of Marketing, 2nd Edition, Prentice Hall, Milan Peppers, D. and Rogers, M., 2005, ‘Loyalty Programs Must Create Real Value’, 1to1 Magazine, 29th August 2005 USC Marshall, 2008, ‘Segmentation, Targeting, and Positoning’, Accessed on 7th August 2009, Retrieved from http://www.consumerpsychologist.com/cb_Segmentation.html Read More