Marketing Mix. Katherine Mulhall. This assignment has been prepared with the highest standards of academic integrity

Transcription

1 Marketing Mix Katherine Mulhall This assignment has been prepared with the highest standards of academic integrity

2 Table of Contents TABLE OF CONTENTS...2 TABLES AND FIGURES...3 COMPANY HISTORY/BACKGROUND...4 JOHN HARVEY KELLOGG-BROTHER...4 THE ACCIDENTAL CREATION OF KELLOGG S CORNFLAKES...5 CORPORATE IMAGE...5 MARKET SEGMENTATION & TARGETING...6 MARKET SEGMENTATION...6 TARGET MARKETING...7 MARKET POSITIONING...8 POSITIONING STRATEGIES...8 PRODUCT...9 NEW PRODUCT DEVELOPMENT...9 New Product- Special K...10 PRODUCT LIFE CYCLE...11 Introductory Stage...11 Growth Stage...11 Maturity Stage...12 Decline Stage...13 PRICING...14 INTERNAL & EXTERNAL FACTORS...14 Internal Factors Affecting Pricing Decisions...14 External Factors Affecting Pricing Decisions...16 PLACE (DISTRIBUTION)...17 DISTRIBUTION STRATEGY...17 ONLINE MARKETING...18 What business benefits can the Internet provide?...18 Kellogg s Online Marketing...18 PROMOTIONS...20 ADVERTISING...20 Institutional Advertising...20 Product Advertising...20 CONCLUSIONS & RECOMMENDATIONS...22 CONCLUSIONS RECOMMENDATIONS...23 REFERENCES P a g e

3 Tables and Figur FIGURE 1-WILLIAM KEITH KELLOGG...4 FIGURE 2-JOHN HARVEY KELLOGG...4 FIGURE 3-SNAP, CRACKLE & POP...7 FIGURE 4-KELLOGG'S SPECIAL K...10 FIGURE 5-SPECIAL K BLISS...10 FIGURE 6-NUTRI-GRAIN...13 FIGURE 7-SPECIAL K LOGO...19 FIGURE 8-DROP A JEAN SIZE...19 FIGURE 9-CRUNCHY NUT...21 FIGURE 10-KELLOGG'S LOGO...25 Y TABLE 1-THE SEGMENTATION PROCESS...6 TABLE 2-NUTRI-GRAIN SALES FIGURES P a g e

4 Company History/Background Kellogg s began on February 19 th William Keith Kellogg was born April 7 th, 1860, in Battle Creek, Michigan and he died in October 6 th, 1951.William Kellogg was the person responsible for it all and was the person who signed the papers that officially incorporated the Battle Creek Toasted Corn Flakes Company which is now commonly known as Kellogg s. Will Kellogg started his business ventures by selling brooms, before helping his brother, John Harvey Kellogg, run the Battle Creek Sanitarium. Now he is responsible for the W.K Kellogg Co. Although William Keith Kellogg is the official founder of the cereal, it was his brother John who had first attempted to develop the first breakfast cereal. John Kellogg failed to invent the cereal as the taste was not appealing and then that is when William stepped in and took over and with the addition of a simple ingredient, sugar, it became a huge success. The popularity of his new Corn Flakes cereal was discovered by accident in 1876, which Figure 1-William Keith Kellogg encouraged William Kellogg to set up the Kellogg company, now the most successful cereal manufacturer in the world (Kellogg's ). John Harvey Kellogg-Brother John Harvey Kellogg (February 26, December 14, 1943). Kellogg was a dynamo of human energy, a personification of the work ethic, who needed only 4 to 5 hours of sleep a night, went cycling or jogging every morning, dictated 25 to 50 letters a day, adopted and reared 42 children, wrote nearly 50 books, edited a major magazine, performed more than 22,000 operations, gave virtually all of his money to charitable organizations, loved human service, generally accomplished the work of ten active people, and lived in good health to age 91. (John H, 1999). Whilst Dr. John Harvey Kellogg worked at the hospital and health spa in Michigan, his brother William worked alongside him as the business manager. The hospital stressed healthy living and kept its patients on a diet that eliminated caffeine, meat, alcohol, and tobacco. Figure 2-John Harvey Kellogg 4 P a g e

5 The Accidental Creation of Kellogg s Cornflakes The two brothers invented many foods that were made from grains, including a coffee substitute and a type of granola, which they forced through rollers and rolled into long sheets of dough. One day, after cooking some wheat, the men were called away. When they eventually returned, the wheat had become stale. They decided to force the tempered grain through the rollers regardless of its condition. Surprisingly, the grain did not come out in long sheets of dough as it previously had done. Instead each wheat berry was flattened and came out as a thin flake. The brothers baked the flakes and were delighted with their new invention. They had discovered a new delicious cereal but they had no way of knowing they had accidently invented a whole new industry. There was one problem, it didn t taste very good, and it was dull and tasteless. John Kellogg gave up and decided he wanted out on the new discovery and left it up to his brother. By taking a cheap commodity and simply adding value such as sugar, William came up with a great business opportunity for success. Will Keith eventually opened his own cereal business, and its most famous products are still sold today. It wasn t until 1906 that Kellogg s Corn Flakes were made available to the general public. (Kellogg's ). It soon became a leading U.S. producer of these and other convenience foods. By the early 21st century, its annual sales exceeded $9 billion. (Answers.com). But Kellogg s did not stop there. The company introduced a wide range of products such as: All-Bran Bran Flakes Coco Pops Crunchy Nut Elevenses Fibre Plus Frosties Fruit n Fibre Wheats Fruit Winders Hot Oak Krumbly Krave Nature s Pleasure Nutri-Grain Optivita Pop Tarts Rice Krispies Special K Corporate Image Kellogg s portrays their corporate image with various advertising for each individual product. Advertising wasn t their only campaigns to polish their corporate image, Kellogg s also contributes back to the society and very generously. The W.K. Foundation was founded in 1930 by William Kellogg. It all began when his grandson, Kenneth Williamson, was involved in a tragic accident which left him paralysed. This, along with the cereal company s fast growing capital and W.K. s love of children, inspired him to form the foundation. Initially, the Foundation was meant to assist handicapped children in securing better health, confidence and trust in the country and its institutions. Now the principle of the foundation is for the promotion of the health, education and welfare of mankind, but principally for children and youth. By 1934, W.K. Kellogg donated $66 million to the foundation. 5 P a g e

6 Market Segmentation & Targeting Segmentation and targeting are two key elements of marketing planning. Segmentation involves dividing the market of potential customers into homogenous groups. These groups may be distinguished in terms of their behaviour, attitudes, demographic characteristics, age, gender, work status, social class etc. Target marketing follows on from the initial segmentation decision. Market Segmentation Why segment? Market segmentation is the strategy of last resort. (Kotler, 2001) An organisation would rather attract a large market than a specific part of that market and then target to that market as a whole but based on the fact that most markets consists of buyers who have different needs and who cannot all be served with the same product offering this is why organisations segment their market. Specify the market Describe who buys, what they buy, where they buy, and how they buy Build profile of individual segments, using any or all of the possible segmentation bases Determine the attractiveness of each segment Determine firm's ability to serve the most attractive segments Table 1-The Segmentation Process Behavioural segmentation is based on buyers behavioural patterns. These patterns can include the occasion when the buyer uses the product, timing of use etc. For instance, most consumers of Kellogg s ate the product at breakfast, but the company mounted an advertising campaign to encourage consumers to use the product at other times of 6 P a g e

7 the day as a snack. Kellogg s hoped this would open up a new segment for them. (Rogan, 2007) Target Marketing Targeting means selecting particular customers or customer groups at which to aim the firm s marketing mix. It may involve the development of different marketing mixes for different segments. Targeting is the decision about which segment(s) a business decides to prioritise for its sales and marketing efforts. (Dibb, Simkin, Pride, & Ferrell, 1997) Kellogg s targets its products at different segments depending on the product. For example Special K is targeted at women as Kellogg s was aware of the increasing demand for health products for women. Another example would be Kellogg s Rice Krispies: They target this product at children as a fun cereal that snap crackle & pops and they also associated the cereal with characters to catch the kids interest. Figure 3-Snap, Crackle & Pop 7 P a g e

8 Market Positioning Marketing positioning has been defined as the place a product occupies in a given market, as perceived by the relevant group of customers (Blythe, 2001) Product positioning is strongly related to perception and image. Marketers hope that the buyer will perceive their product to be unique and that they will have a distinctive image of the product and its benefits. Product positioning involves establishing a unique position for the product in the mind of the consumer. (Rogan, 2007) Buyers are being constantly bombarded with advertising and promotions which are all attempts to position products in the buyers minds. Marketers try to find a distinct position and must compete for attention with other existing competitors. The product s positioning will be based on the value offered to the consumer. This value can be expressed in a number of ways including: Product benefits Features Style Value for money Uniqueness Sophistication Positioning Strategies There are a number of product positioning strategies, and which one the marketer select will depend on the nature of the buyer s needs. The positioning strategies are: Product features- emphasised by some marketers to differentiate their products. Benefit positioning- involves the marketer concentrating on the benefits of the product. Usage occasion- depending on how the consumer uses a product. Type of user- Heavy users, medium users, and light users. Competitive users- differentiate their product offering to other competing organisations. The type of user- heavy users can be encouraged to continue using the product, while medium and light users can be encourages to increase their use... Kellogg s aim brands such as Special K at female users, while Frosties and Coco Pops are aimed at children. (Rogan, 2007) 8 P a g e

9 Product A product is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or a need (Kotler, Armstrong, Saunders, & Wong, 2005) Kellogg s cereals and snack bars are non-durable products; they are consumed quickly on one or a few occasions. Kellogg s products would be classified as convenience. They are low priced, frequently purchased and can be found in most locations such as convenient stores and supermarkets. New Product Development New product development is the development of original products, product improvements, product modifications and new brands through the firm s own R&D efforts. (Kotler, Armstrong, Saunders, & Wong, 2005) In a rapidly changing and competitive business environment it s not easy to predict future trends in consumer tastes, competitor s actions, and market conditions. Creating new products or adjusting and making changes to existing products can be expensive. It involves making investment decisions now with the hope that it will make a return later on. Market research helps to predict future events and effects. Whether an organisation decides to develop the product, maintain it, allow it to decline or kill it off requires time and heavy decision making. New product development is extremely risky as most new products fail but it also important for organisations to have product-lines and also product mixes to continue a steady profit flow and to prevent their individual product to sink beneath the depths of the current market. Life blood of corporate success is bringing new products to the marketplace (Kotler, Armstrong, Saunders, & Wong, 2005) Kellogg's is a global organisation. Its products are manufactured in 19 countries worldwide and sold in more than 180 countries. Kellogg s produce over 70 products, a variety of cereals and snack bars. They have successfully succeeded in the development of new products since their first product, cornflakes, and this is down to the fact that they own most of the market for cereal as they were the first to establish it and competitors have only invaded a fraction of what Kellogg s own. Kellogg s also have a really good reputation of good quality produce so consumers purchase new products by Kellogg s as they are familiar with their standard. Kellogg s has been in the market for over a century and their existing products have been very sustainable and most of their products are now known as cash-cows so they are able to generate the money from these cash-cows and pump it back into investment to help aid the development of new products so prices would not be extremely high as the investment from existing products covers the cost of resources and manufacturing. 9 P a g e

10 New Product- Special K Kellogg s kept up with current tastes and attitudes of is consumers. As the desire for a healthier lifestyle became more demanding, Kellogg s seen this growth and acted on it when they extended their product mix by launching Special K in October Figure 4-Kellogg's Special K Special K is the delicious crunchy multi-grain flakes made with rice and wheat that is less than 3% fat and it is also a great source of 6 essential B vitamins, vitamin C, D, and iron. This proved to be a huge success especially with the women. The Special K challenge encouraged women around the world to Drop a Jean Size. Kellogg has sustained healthy success, generating nearly $13 million in 2009 sales which is phenomenal. Most of the products in the Special K line build on the famous Special K diet and provide versatile weight management solutions that are marketed toward a largely female consumer segment. Kellogg s then launched Special K Peach & Apricot in February 2003 to widen their flavours and sustain interest in the product. A line extension involves the development of individual offerings that appeal to different market segments, but that remain closely related to the existing product line. (Boone & Kurtz, 1995) Kellogg's already knew that women who are keen to watch their weight and shape seek a range of solutions throughout the day - not just at breakfast. They examined the accomplishment of Special K cereal and expanded its product line by producing similar low fat, healthy snack bars and nibbles for women to enjoy on the go. Kellogg s was aware that people would not eat a bowl of cereal at their desk during the day so this new product was perfect for them mid-day snacks. They brought out a wide range of Special K Snacks such as Special K Bar (original, apple & pear, chocolate, bliss), Special K Mini Breaks. Figure 5-Special K Bliss 10 P a g e

11 Product Life Cycle Products are like people, they go through stages of life. A person s life cycle progresses progress from infancy to childhood to adulthood to retirement to death whereas successful products progress through four basic stages: introduction, growth, maturity and decline, this is known as a product life cycle. Introductory Stage The firm s objective in the early stages of the product life cycle is to stimulate demand for the new market entry. (Boone & Kurtz, 1995) Financial losses are common in the introductory stage due to high expensive to develop the product and heavy promotion costs and extensive research expenditure. Advertising is an extremely expensive component of marketing a new product as you have to let your potential customers aware of this new product on the market. A negative profit is usually the outcome as sales are low and expensive is high. Innovators would be the main type of consumers at the beginning. Although introduction is a highly expensive and rocky stage there are ways to assist your product through the unpleasant stage; I. Launch a basic product- start from the bottom and work your way up, test the waters first to make sure that there is an interest in it. Product complexity- makes sure the product is easy to understand and use. II. Selective distribution- don t distribute everywhere, begin in one place and see the reaction. III. Use heavy sales promotions- such as 50% off next buy or buy one get one free are great promotions to kick start your sales. IV. Advertising- Build up consumer awareness, let people know about the product. Some Kellogg s products, like Kellogg s cornflakes, have retained their market position for a long time. Many products do well when they are first brought out and Nutri-Grain was no exception. It was launched in 1997 and it was an immediate success as it was designed to meet the needs of busy people who had missed breakfast. Nutri-Grain gained more than 50% share of the cereal bar market in just two years which is a great introduction for a product of any kind. Growth Stage During the growth stage, the pace of consumer acceptance and sales quickens. (Harrell, 2002) The growth stage of a product life cycle is crucial as this is when competitors notice the increase in sales and will develop competitive products and aggressively pursue distribution channels. Majority of firms in a particular industry enter the market at the growth stage as they notice success and substantial profit which attract rivals. 11 P a g e

12 Nutri-Grain s sales steadily increased as the product was promoted and became well known. It maintained growth in sales until 2002 through expanding the original product with new flavours and format. This was a good idea for the business as it does not have to spend money on new machinery or equipment for production. The market position of Nutri-Grain also subtly changed from a missed breakfast product to an all-day healthy snack. (The Times 100, 1995) Maturity Stage Sales continue to grow during the early part of the maturity stage, but eventually they reach their potential peak as the backlog of potential customers dwindles. At this stage a large number of competitors have entered the market and the firm s profits begin to decline as the competition intensifies. As competition intensifies, competitors tend to cut prices in an attempt to attract new buyers. Although a price reduction may be the easiest method of inducing additional purchases, it is also one of the simplest moves for competitors to duplicate. (Boone & Kurtz, 1995) Gilbert Harrell indicates that weaker competitors are likely to lower prices, while stronger rivals may sacrifice market share to maintain a satisfactory profit level. (Harrell, 2002) Also a lot of companies drop out of the market as their profit margins are suffering too much. Kellogg s Nutri-Grain bars were faced with a competitor, Alpen bars, which offered the same benefits as the Nutri-Grain bar. This slowed down sales and chipped away at Nutri-Grain s market position. Kellogg s was one of the strong companies who fought for their product to succeed and overcome this stage. Kellogg s continued to support the development of the brand but some products such as Mini s and Twists struggles in the crowded market. Elevenses continued to succeed, this was not enough to offset the overall sales decline. Not all products follow these stages precisely and time periods for each stage will vary widely. Growth, for example, may take place over a few months or, as in the case of Nutri-Grain, over several years. (The Times 100, 1995) 12 P a g e

13 Sales of Nutri-Grain Range Tonnes Chewy Minis Elevenses Twists Soft Bake Table 2-Nutri-Grain Sales Figures Decline Stage In the decline stage of the product life cycle, sales start to diminish. For some products, the decrease of sales may be very quick, for other products, it may be slow and steady. Companies are likely to return to a much shallower product line at this stage, focusing all their time and money on the products that generate adequate cash flows. Profit is extremely low at this stage as they had to reduce the price of the product to keep consumers purchasing it. The product life cycle implies that companies should have products in all stages at all times. Firms with only mature and declining products can expect dwindling profitability. Yet product development and the introductory stage are likely to absorb much of the profit generated from growing and mature products. By mid 2004 Nutri-Grain found its sales declining whilst the market continued to grow at a rate of 15%. Clearly, at this point, Kellogg s had to make a key decision. Sales were falling; the product was in decline and losing its position. Should Kellogg s let the product die or should they extend its life? Kellogg s decided to extend the life of Nutri-Grain rather than withdraw it from the market. This meant developing and extension strategy for the product. Figure 6-Nutri-Grain 13 P a g e

14 Pricing Price is the amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service. (Kotler, Armstrong, Saunders, & Wong, 2005) Price is the only marketing mix element that generates income. The other variables include making the product, telling consumers about it, and making it available to them, all these other elements generate costs. Internal & External Factors Pricing decisions affect profit, volume, share of the market and social stance. In turn, pricing policy takes account of internal and external factors. Oscar Wilde once wrote that a cynic is a man who knows the price of everything and the value of nothing. But the concepts of price and value are hard to separate. (Hill & O'Sullivan, 1999) Internal Factors Affecting Pricing Decisions According to Kotler internal factors affecting pricing include the company s marketing objectives, marketing-mix strategy, costs and organisation. (Kotler, Armstrong, Saunders, & Wong, 2001) Marketing Objectives Before setting a price, the company must decide on its strategy for the product. Whether or not the organisation has set its target market and positioning carefully will determine if its marketing mix strategy, including price, will be straightforward or not. For example Kellogg s Special K targeted towards women and carefully positioned themselves in the healthy foods section, this allowed them to price Special K a little higher than their existing products such as Rice Krispies or Cornflakes. Company objectives are general aspirations toward which all activities in the firm, not only pricing, are directed (Nagle & Holden, 1995) To be effective and efficient, the company s pricing decisions must fit into the marketing strategy, and be in line with decisions on other marketing-mix elements. Reflections on appropriate prices should occur at the time the product, communication, and distribution are conceived, because the different instruments of the mix have a synergic influence on the market. (Blois, 2000) The company may seek additional objectives, the clearer a firm is about its objectives, the easier it is to set prices. Examples of common objectives are survival, current profit maximisation, market-share maximisation and product-quality leadership. (Kotler, Armstrong, Saunders, & Wong, 2001) 1) Survival- Companies set survival as their fundamental objective if they are troubled by too much capacity, heavy competition or changing consumer wants. (Kotler, Armstrong, Saunders, & Wong, 2001). Kellogg s deals with survival by producing 14 P a g e

15 new product mixes to meet consumers ever-changing wants such as All-Bran. People became aware of their health and how much fibre they consumed and this is why Kellogg s launched All-Bran to meet their consumer wants and needs. In some cases profit is less important than survival, as long as their prices cover variable costs and some fixed costs, they can stay in business. In Kellogg s situation they make enough profit to cover all costs and this is because they are a well-known organisation with such a huge product line that customers consume their products on a daily basis. Kellogg s also introduce promotional pricing such as; 50% off, buy 2 get 1 free etc. This encourages customers to purchase Kellogg s products above other existing competitors. 2) Current profit maximisation- Many companies use current profit maximisation as their pricing goal. They estimate what demand and costs will be at different prices and choose the price that will produce the maximum current profit, cash flow or return on investment. (Kotler, Armstrong, Saunders, & Wong, 2001). Kellogg s Cornflakes is so well known that they do not have to promote it which means costs are low. Also it has such a high demand because of its familiarity that Kellogg s can keep the price of Cornflakes relatively low and still generate profit off the frequent sales. 3) Market-share leadership- Other companies want to obtain market-share leadership. They believe that the company with the largest market share will enjoy the lowest costs and highest long-run profit. (Kotler, Armstrong, Saunders, & Wong, 2001). Kellogg s posses most of the market-share as they are the ones that invented cereal so yes their costs are low and profit is high. 4) Product-quality leadership- A company might decide that it wants to achieve product-quality leadership. This normally calls for charging a high price to cover such quality and the high cost of R&D. (Kotler, Armstrong, Saunders, & Wong, 2001) Costs Costs can determine the price that a company can charge for its product. A company will want to charge a price that will cover its costs for producing, distributing, and selling the product but also that will retrieve a fair rate of return for the effort that was put into producing it. According to Armstrong many companies work to become the low-cost producers in their industries. Companies with lower costs can set lower prices that result in greater sales and profits. (Armstrong & Kotler, 2000). As I have mentioned. Kellogg s Cornflakes is known as their cash-cow as it extremely well recognised so Kellogg s does not have to pump much investment into the product so costs are low. With having low costs means that Kellogg s can set low prices but still generate a substantial amount of profit. 15 P a g e

16 External Factors Affecting Pricing Decisions As well as factors internal to the firm, there are factors that are external to the firm that must be taken into account when prices are set. External factors that affect pricing decisions include the nature of the market and demand, competition, and other environmental elements. (Armstrong & Kotler, 2000) The Market and Demand Whereas costs set the lower limit of prices, the market and demand set the upper limit. Both consumer and industrial buyer balance the price of a product or service against the benefits of owning it. Thus, before setting prices, the marketer must understand the relationship between price and demand for its product. (Kotler, Armstrong, Saunders, & Wong, 2001). The seller s pricing freedom varies with different types of market. Economists recognise four different types of market, each presenting a different pricing challenge; pure competition, monopolistic competition, oligopolistic competition, and pure monopoly. I believe that Kellogg s falls under oligopolistic competition which defines as a market in which there a few sellers that are highly sensitive to each other s pricing and marketing strategies. (Kotler, Armstrong, Saunders, & Wong, 2001). In the cereal industry there are not a lot of competitors, the main competitors for Kellogg s would be Nestle and own brands such as Tesco and St. Bernard. With few competitors in the market each one can be aware and keep an eye on the other. If Kellogg s lowered their price, competing companies will follow to survive. Each price the company might charge will lead to a different level of demand. Kellogg s products would be elastic as even the slightest change in price will affect the quantity of demand. If prices went up customers would just change to a substitute brand such as an own brands which would be cheaper. Their demand changes because they are aware of other competitors in the market and they become conscious that they do not have to pay this higher price for Kellogg s when they can get a similar product for less. If Kellogg s had no competition then they would be inelastic as consumers would have no choice but to purchase their products. 16 P a g e

17 Place (Distribution) Products need to be available in adequate quantities, in convenient locations and at times when customers want to buy them. Producers need to consider not only the needs of their ultimate customer but also the requirement of channel intermediaries, those organisations that facilitate the distribution of products to customers. (Jobber, 2004) Distribution Strategy Establishing a supply chain that is efficient and meets customers need is vital to marketing success. This supply chain is termed a channel of distribution, is the means by which products are moved from producer to the ultimate customer. Gaining distribution outlets does not come easily. Choosing an effective channel of distribution is an important aspect of the strategy. Supermarkets is a type of distribution and effectively shortens the distribution channel between producer and consumer by eliminating the wholesaler, for example, Kellogg s distributes to Tesco, Dunnes Stores, SuperValue etc. The most basic question to ask when deciding distribution strategy is whether to sell directly to the ultimate customer or to use channel intermediaries such as retailers and/or wholesalers. The company has to decide if they want to use a direct distribution channel, where a company use their own employees and physical assets to serve the market, which is economically feasible for small markets, or if the company wants to use indirect distribution channels which are, as I have already mentioned, wholesalers, retailers, distributors and dealers, franchises and agents. Many manufactures want to connect with customers in as many ways as possible. Multiple channel systems make use of more than one channel to access markets for the same product. (Harrell, 2002). For example, Kellogg s distributes its products through company-owned stores, wholesalers that resell to supermarkets and convenience stores, and franchised outlets. Intensive distribution aims to achieve saturation coverage of the market by using all available outlets. (Jobber, 2004). Kellogg s choice of distribution intensity was not selective distribution or exclusive distribution but intensive distribution. Kellogg s has achieved saturation coverage of the market and uses every available outlets ranging from local corner shops to huge supermarkets to college vending machines for their Special K and Nutri-Grain bars. Kellogg s does not sell directly to its customers or use their website as a distribution channel as who would want to buy a box of cereal online? Although selling online has become a major source of distribution in this modern age it does not fit well for Kellogg s as their products are those that people would not purchase individually from the website but Kellogg s has intermediaries such as Tesco that have an online website that allows customers purchase their wide range of products online and it is then delivered to their door and Kellogg s products are included in their range. This is more suitable as customers would purchase a box of cereal as part of their weekly shopping. Kellogg s has a fantastic distribution strategy and its products are distributed nationwide. 17 P a g e

18 Online Marketing More recently the Internet has been playing a key role in distribution. Internet marketing can be defined as the use of the Internet and related digital technologies to achieve marketing objectives and support the modern marketing concept. (Chaffey, Mayer, Johnston, & Chadwick, 2000) What business benefits can the Internet provide? According to Dave Chaffey, the Internet can be used to achieve each of the four strategic directions as follows: 1) Market penetration. The Internet can be used to sell more existing products into existing markets. This can be achieved by using the power of the Internet for advertising products to increase awareness of products and the profile of a company amongst potential customers in an existing market. 2) Market development. Here the Internet is used to sell into new markets, taking advantage of the low cost of advertising internationally without the necessity for a supporting sales infrastructure in the customers country. 3) Product development. New products or services are developed which can be delivered by the Internet. These are typically information products such as market reports which can be purchased using electronic commerce. 4) Diversification. New products are developed which are sold into new markets. (Chaffey, Mayer, Johnston, & Chadwick, 2000) Kellogg s, like most companies, takes advantage of the internet to advertise and market their products due to the low cost of advertising, selling and distributing their products online. E-commerce transactions are the trading of goods and services conducted using the internet and other digital media. (Chaffey, Mayer, Johnston, & Chadwick, 2000). The Internet has grown immensely in the past couple of years and nowadays people do everything online include shopping. Customers purchasing power has increased because since e-commerce has been introduced as they can buy items that may not be in shops or from other countries. Companies have realised this and have opted to using e-commerce themselves and have found it beneficial. The reason for this is that many companies, having decided that e- commerce offers an opportunity for revising distribution management practices, perceive cyberspace as a way to regain control over transactions by cutting out intermediaries and selling directly to the end-user customers. (Chaston, 2001) Disintermediation is the removal of intermediaries such as distributors or wholesalers that formerly linked a company to its customers. Kellogg s Online Marketing Although Kellogg s does not use the Internet for selling directly to its customers as I have already explained, it does use the Internet effectively to promote and advertise its products, events they organise, charities, etc. Kellogg s website, s.com, consists of all their products with nutritional information about each one. It informs people about the 18 P a g e

19 company itself and also about job opportunities within Kellogg s. Any recent events or charity events are also advertised such as their new fundraiser for schools called Kids4Fun. Another popular aspect of the website that has been a success, especially with the women, is their Special K drop a jean size challenge where it allows women to record their weight and what they eat and watch their progress over the weeks. This is a huge encouragement for women to get fit and healthy whilst also promoting Special K. Figure 8-Drop a Jean Size Figure 7-Special K Logo 19 P a g e

20 Promotions Few goods or services, no matter how well developed, priced, or distributed, can survive in the marketplace without effective promotion. According to Charles W. Lamb, Jr. Promotion is communication by marketers that informs, persuades, and reminds potential buyers of a product in order to influence their opinion or elicit a response. (Lamb, Hair, & McDaniel, 2000) Advertising Advertising can be defined as any paid form of non-personal promotion transmitted through a mass medium. The key difference between advertising and other forms of promotion is that it is impersonal and communicates with large numbers of people through paid media channels. (Brassington & Pettitt, 1997) There are different types of advertising. If the company s aim is to build up the image of the industry then institutional advertising may be used. In contrast, if the company wants to enhance the sales of a specific good or service then product advertising is used. There are also other forms product advertising such as pioneering advertising, competitive advertising, and comparative advertising. Institutional Advertising Institutional advertising promotes the corporation as a whole and is designed to establish, change, or maintain the corporation s identity. It usually does not ask the audience to do anything but maintain a favourable attitude toward the advertiser and its goods and services. A form of institutional advertising called advocacy advertising is typically used to safeguard against negative consumer attitudes and to enhance the company s credibility among consumers who already favour its position. (Lamb, Hair, & McDaniel, 2000) Kellogg s does not use this style of advertising as it is a worldwide organisation that is well known to consumers for its loyalty and quality. Because Kellogg s has such a big variety of products of different types it is best to advertise these products individually. Kellogg s does not feel the need to advertise the organisation as a whole as they have an extremely impressive corporate image. Product Advertising Unlike institutional advertising, product advertising promotes the benefits of a specific good or service. The product s stage in the life cycle often determines which kind of product advertising is used: pioneering advertising, competitive advertising, and comparative advertising. Kellogg s uses product advertising frequently as they have so many products which are at different stage of their life cycle. I will give an example of a different product for each type of product advertising to give you an idea of how Kellogg s advertises its different products. 20 P a g e

21 Pioneering Advertising Pioneering advertising is used in the early stages of the life cycle when it is necessary to explain just what the product will do and the benefits it can offer. (Brassington & Pettitt, 1997). Pioneering advertising also seeks to create interest. Kellogg s uses pioneering advertising when launching new products to creative interest to its consumers and let them know how good it is. When Kellogg s launched Crunchy Nut they had to advertise it so as people would take an interest in it because after all it is just another cereal and how would people know or want to know how good it tasted? Kellogg s had to persuade consumers to try Crunchy Nut and they done this by advertising it as something that people couldn t get enough of. The common television advertisement that everyone is aware of consists of people being in love with Crunchy Nut and not being able to resist eating it anywhere, anytime. For example, one advertisement showed a man getting into his car after being at the supermarket and just pouring the milk directly into the Crunchy Nut cereal box. The advertisement shows that he could not wait to eat the delicious cereal and they use the slogan obviously another Kellogg s Crunchy Nut, this indicates that this man is not alone when it comes to be addicted to the cereal. Competitive Advertising Firms use competitive advertising when a product enters the growth stage of the product life cycle and other companies begin to enter the marketplace. Instead of building demand for the product category, the goal of competitive advertising is to influence the demand for a specific brand. (Lamb, Hair, & McDaniel, 2000). Kellogg s Special K bars have been a huge Figure 9-Crunchy Nut success, especially for the women. Kellogg s was one of the first companies to create a healthy snack bar. As this product started to grow competitors started to enter the market as they seen how well Special K bars were attracting customers. Competitors such as Go-Ahead bars promoted their product as a healthy snack. With competition Kellogg s had to do something other than just promote Special K as just a healthy snack but to do something that will attract consumers to Special K instead of Go-Ahead. Kellogg s decided to direct Special K towards women and introduce a challenge to help keep them motivated about maintaining a healthy life style, and if they maintained a healthy life style they would maintain consuming Special K as that was their initial motivator. Kellogg s advertised Special K as women taking the Special K challenge to drop a jean size and their advertisements consisted of slim, healthy women wearing red as that is their trade mark and it also looks great. Everyone knows that Special K is associated with this image and that is what gives Special K a competitive advantage over Go-Ahead bars. Not all advertising activity is meant to have a direct effect on sales. Corporate advertising is not tied to any particular product. (Hill & O'Sullivan, 1999). Kellogg s advertises events such as charity sponsors (Fun4Kids) or promotions on back to school equipment. This type of advertising does advertise the corporation, Kellogg s, but no specific product or even a mention of their products in general. 21 P a g e

22 Conclusions & Recommendations Conclusions Overall, Kellogg s is such a massive successful organisation that has done extremely well over the past decade. The company has grown from an accidental creation to the main brand in the cereal industry. Although they still produce the first product that was invented, cornflakes, they also produce over 70 different products. This shows me how much they have grown as an organisation throughout the years. As a result of William Keith Kellogg, people in Ireland eat more breakfast cereal at 8kg per head than any other country in the world. This shows me the huge demand the Ireland has for this market. An Irish survey states that together we consume 360,000 bowls of Kellogg s Corn Flakes everyday in Ireland, that s 130 million bowls every year! (Kellogg's ). Kellogg s is the leading supplier of breakfast cereals in Ireland. The reason for this success is due to the fact that Kellogg s have consistently increased their range to meet the ever-changing needs of Irish consumers. Alongside Kellogg s successful breakfast cereal range, they have pioneered the development of a wide range of nutritious snacks and cereal bars. This was a response to today s fast moving society; people often skip breakfast as they are constantly on the go. By Kellogg s continually launching not only new products, but campaigns, has been one of the reasons why Kellogg s is still such a huge success today and has not matured and declined as most organisations and products do. Kellogg s kept their customers interested by launching promotions such as Special K Drop a Jeans Size challenge which was launched in 2003 and it became one of the company s most successful promotions. In my opinion, the main cause of Kellogg s still being a success is down to the fact that they altered their segmentation. Kellogg s segmentation was targeted towards behavioural segmentation which was based on time of use. Different people consume the same product at different times. Kellogg s targeted Corn Flakes as a breakfast cereal, to be eaten in the morning time. Kellogg s then identified that a significant proportion of its customers ate Corn Flakes as a snack food later in the day. Kellogg s decided to sustain sales and to promote Corn Flakes to late-night snackers and also during the day snacks by introducing cereal bars that can be consumed anywhere at any time. Kellogg s has a fantastic corporate image because of all the charity work they involve themselves in and because it is such a familiar company with good quality products and nutritional foods. They are known for their good advertising and promoting and their exceptional marketing mix which is important. If Kellogg s continues to do what they are currently doing then they will remain successful in the future. Although, I do feel there are some areas in which they could improve or alter as I have mentioned in my recommendations below. 22 P a g e

23 Recommendations Although Kellogg s has been, and still is, a huge success due to their effective marketing mix strategy, I feel there are some recommendations that would benefit the company in so many ways. Targeting- From researching Kellogg s I have learnt a lot about their products and who they are aimed at. For example, Rice Krispies, Frosties, and Coco Pops are targeted at children because of their delicious sugary taste and eye-catching packaging, Special K is targeted at women who are health conscious and want to lose weight. With Special K s low fat and nutritious goodness it really attracts women who want to be healthier. What about men? Kellogg s has aimed its products at most of the market but hasn t yet succeeded in reeling in the male population. Some men might have a bowl of Corn Flakes but there is nothing specifically aimed at them or is unique to men in general. This is something I feel Kellogg s can focus on and improve even if it is just something simple like a sports bar. New Product Development- Kellogg s has accomplished launching new and great products and now they have such a wide range of products available. Advice I would give Kellogg s would be to accomplish something completely new, to branch away from the breakfast and cereal industry and maybe bring out something from another food section such as minerals, confectionary, etc. Distribution- Kellogg s uses multiple channel distribution systems as they distribute to supermarkets, local convenience stores, franchised outlets etc. The one type of distribution Kellogg s does not use is online distribution. I can understand that a business to consumer (B2C) distribution would not be ideal as not many customers would buy cereal online from Kellogg s website. However, I do think that Kellogg s should consider using business to business (B2B) type of distribution as it would be great for Kellogg s to handle and keep track of their transactions and it will also reduce costs as it would cut out the wholesaler. Promotion- I mentioned institutional advertising and how this type of advertising promotes the corporation as a whole not just one individual product. Kellogg s does not seem to do this as they advertise their products separately but I think institutional advertising could be beneficial for Kellogg s as it helps maintain customers interest and loyalty. It reminds customers of what your company is and what it does not only trying to sell your products to them but trying to sell your business also. 23 P a g e

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25 Lamb, J. C., Hair, J. J., & McDaniel, C. (2000). Marketing, 5th Edition. Ohio: South-Western College Publishing. Nagle, T. T., & Holden, R. K. (1995). Tactics of Pricing: A Guide to Profitable Decision Making. Englewood Cliffs, NJ: Prentice Hall. Rogan, D. (2007). Marketing- An Introduction for Students in Ireland, 3rd Edition. Dublin: Gill & Macmillan Ltd. The Times 100. (1995). Retrieved March 21st, 2011, from thetimes100.co.uk: Figure 10-Kellogg's Logo 25 P a g e