Foundations of Marketing

Marketing

The interview data shows that the majority of the drinkers prefer caffeinated beverages, which supports the market share data. Many consumers of all ages hold little interest for chocolate drinkers. Three interviewees indicated they drink chocolate drinks. Two were female and one was male; they spanned a range of ages. Two were occasional drinkers of chocolate drinks, one was a regular drinker. They consumed chocolate for a variety of reasons -- the younger one as a luxury and the older two before bed. Silk was indicated by all respondents as a good name for a chocolate drink, connoting the smoothness that they expect from such beverages. Males surveyed (both older) indicated that the woman of the household did the shopping. One interviewee volunteered that diet chocolates were not appealing. This data is inconclusive because of the sample size, but indicates the proposed name is good for a chocolate drink, and that three in five at least occasionally drink hot chocolate beverages. The preference of older consumers for chocolate before bed is noted; the younger respondent did not have that use for chocolate.

b. Based on the interview data there are several pieces of advice that I would give this company, based on the marketing mix. With respect to the product, I would recommend that a new product enter the market as a luxury brand. Older consumers have a different use for chocolate, but they also tend to brand loyal with respect to hot beverages. Younger consumers are therefore more likely to adopt a new product. The product should be smooth and rich, and not overly sugary. This would fit the taste profile of a luxury chocolate. The product should also be an instant chocolate drink, as this constitutes the largest portion of the hot chocolate market. Added-milk chocolate is probably more decadent but appeals to fewer consumers. The Silk name is good.

The price should reflect a combination of luxury and accessibility. It should be affordable luxury because the target market skews younger, and because the target market could be somewhat diffuse. The company should be at a price point to get into all the big supermarkets, in order to reach all of the customers. Discount supermarkets can be excepted from this, but certainly the company should aim for distribution in places like Tesco or Waitrose. I would also recommend that the company promote the product in line with a luxury image. The chocolate should be promoted as a treat, something with which to reward oneself. This might put it more into competition with fancy coffee products like cappuccinos. Higher end coffees are the fastest-growing segment of hot beverages, with espresso in particular gaining 109% in the past two years. It is worth noting that there is room to launch this with a healthy promotional budget. Media spending on marketing food beverage brands is declining, and the leaders in the category are not chocolate brands. A new competitor with a splashy campaign could easily stand out in such an advertising environment.

Question 2. The customer audit reveals that hot beverage consumers span a wide cross-section of British society. The largest users of food beverages range from age 25 to 54, but there is significant usage in all age categories. The higher the social class, the more likely the consumer is to use hot food beverage products although again even in the E. class, 48.5% of respondents use such products at least occasionally. Those households earning at least £15,000 per year are more likely to purchase a hot food beverage, but at least half of households in all categories consume these products.

Internally, the company appears to have a good brand name on its hands with Silk, according to the interview analysis. Our company is the second-largest tea provider in the country behind Tetley, but has recently suffered a setback in instant tea, where we have been forced to exit the market. Our tea brand, GP Tops, is the highest-priced national tea brand. With this brand, we have significant national distribution and the financing available to market our new product heavily if we so desire.

We have many strong competitors. Cadbury has an excellent brand name in chocolate, along with strong distribution and good sales. Nestle is a dominant player in the industry and competes in the chocolate market. Kraft Jacobs Suchard (KJS) is a similarly large multinational player, but has less of a presence in chocolate compared to Nestle. Cadbury is the highest-priced among our major competitors, but we are a price setter in tea and can replicate that in chocolate. On a macro scale, there is opportunity in chocolate. Food beverages remain a growth category while coffee and tea are plateauing. As a company, our image and distribution will allow us to launch a premium chocolate, something that the market seems to be lacking on the national stage presently. More luxurious drinks -- such as espresso for the home -- are the fastest growth categories among all hot beverages. Food beverage consumers span the socio-economic spectrum but tend to be concentrated in what will ultimately be our core demographic. In short, the market is ready and so are we.

Question 3. The company should implement a strategy that is based on a careful analysis of its strengths and weaknesses, and the prevailing market conditions. The company's strengths include the ability to integrate the chocolate business into existing production facilities, national distribution and established premium pricing. The sales force knows how to sell high volumes of high end products. The company's main weakness is a lack of experience in chocolate -- it knows the competitors from other businesses but does not know the segment and has no established brand. The market does have opportunity, however, in the form of increasing interest in luxury, favorable demographics and a lack of a true national luxury chocolate. The major threats come from the bigger competitors, Nestle and Cadbury, both of which have great reputations in chocolate.

Market entry should be based on premium-positioning. The product should be the most luxurious chocolate available in most stores. The name Silk tested well, but only connotes quality and not luxury. Other names should also be tested. The price point should be set higher than other chocolates, in line with the higher quality. It is recommended that the launch begin with national distribution backed by a strong marketing campaign. Distribution should be focused on high end stores -- avoid Iceland and other low-end supermarkets as presence in such stores would damage the luxury image of the product. Competitors are not marketing chocolate aggressively, so the campaign is likely to stand out. Focusing on younger demographics (for example 25-44) would allow the company to capture customers whose brand loyalties have not yet been established.