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Marketing Management Unit 2
Sikkim Manipal University Page No. 19
Unit 2 The Marketing Process
Structure:
2.1 Introduction
Learning Objectives
2.2 Marketing mix the traditional 4Ps
2.3 Modern components of the mix -additional 3Ps
2.4 Developing an effective marketing mix
2.5 Marketing Planning, Control and Implementation
Marketing Planning
Marketing Implementation and Control
2.6 Summary
2.7 Terminal Questions
2.8 Answers
2.9 Mini-case
2.1 Introduction
The earlier unit introduced you to the meaning of markets and marketing. In
the process you were also conversant with the evolution of the term
marketing. We will take it further to understand what constitutes marketing.
Considering marketing as process, what are the components of this
process? When you land up in a market, to buy something, you find there
are many ‗makes‘ of the same product. You examine several of them,
enquire of their prices, you may find out whether any discount or free item is
available and also how you can take delivery of the product you may finally
purchase. On the other hand had you been looking for a tourist services
provider, you would have been interested to know what facilities it provides
and whether the people involved are nice to you. In short you are
considering the marketing mix of product, price, promotion and place or to
go further, people and processes.
Learning Objectives
After studying this chapter you should be able to:
Understand marketing mix
Understand the implication of each component of the marketing mix.
Identify how these components are being applied in the marketplace
Judge the various marketing mix prevailing in the market
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2.2 Marketing mix the traditional 4 Ps
The marketing mix has been engaging the minds of practitioners and
academicians alike for a very long period. The 4Ps as the mix was known
has been the bulk of marketing literature for a very long period. They still
occupy a major portion of any basic understanding of the subject with
several modifications and extensions. From 4 the mix has become 7now.
While each P can be understood individually at great depth, it can hardly
exist in isolation.
The 4 Ps are: The product, its price, promotion and distribution/place
We shall see each of these in brief detail.
1. Product: It is a good, service, idea that is offered to a customer to
satisfy his/her need. The attributes of a product are variety, quality,
warranty, design, packaging, after sale-service etc.
For example, Marico, a FMCG company offers hair oil in two brand
names i.e. Parachute and Nihar. The brand Nihar, offered in two types of
packaging i.e. Sachets and bottles and are also offered in two qualities
i.e. coconut oil and perfumed hair oil. Sita Traves offer tourism
packages. VLCC offers weight reduction services. Oglivy and Mather
offer ideas on advertising to clients. Competing firms or enterprises
making similar offer would like to differentiate the product on some basis
or the other. The differentiation may be small but they could register in
the mind of the consumer. Products also need to be modified over time
to retain the interest of the consumer. This is where innovation comes
into the picture. This is the reason why you are able to witness the
various models of cell phone from the same company. Have you noticed
how frequently new models are introduced in the market?
A lot of work goes behind the scene before a product is brought to the
market. We will come to it later.
2. Price: the value at which a marketer offers the product/service/idea to a
customer. The actual price at which the exchange may take place
between the offerer and the customer may be different than the initial
offer. The final exchange price may be determined by the interaction
between the supplier and the customer. The supplier may have
determined the offer price by a mechanism of cost determination and
adding a profit margin, there are several other ways by which costs are
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determined. There are professional cost accountants who do this. Their
effort is also to find out ways by which costs can be reduced so that the
price offered can be competitive. Sometimes the same company may
offer one product at a price lower than the cost and compensate this
loss by pricing another product much than the cost.
You must have experienced how the Indian railways fixes the price for
sleeper class as compared to the A/C; similarly the Post and Telegraph
charges a low price for the post card but a higher price for the envelope.
You must also have noticed that there are customers who are willing to
quote their own price for paintings during an auction.
For example, BSNL offers prepaid service recharge coupons in
Rs. 110/-, Rs. 331/-, Rs. 551/-, etc. The Marketing Mix
Figure 2.4
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3. Place: The term place in marketing has a specific meaning. It refers to
the distribution of goods from the point of production to the target
customer. It may include distributors/wholesalers, stockiest/C&F agents
and retailers who are together referred to as middlemen or as ‗channel
partners in modern parlance. There are others too like franchisees,
branches, depots etc. A most recent version made popular by Amway is
known as network marketing although a similar version was adopted by
chit funds. The aspect of distribution involves logistical support like
transportation, warehousing, loading unloading services etc. of the
product often determines the type of logistical support. While the
distribution of milk would require refrigerated vehicles, for the distribution
of liquefied petroleum would require pipelines.
Zenith computers uses authorized distributor to sell laptops and
desktops to the target customers.
4. Promotion: Communicating product features and its benefits to target
customers through different mediums is known as promotion.
Advertising, personal selling, public relations, sales promotion,
sponsorship are some of the promotional tools being used. How quickly
are products brought to the notice of the consumer or end-user, how
persistently and how the differentiations in the products are highlighted,
are some of the questions that the exercise of promotion answers.
Companies run promotional campaigns for a long duration which may
include various components of promotion. These are designed by
specialized agencies like Rediffusion, Everest, Oglivy and Mather,
Thomson, etc. you would be able to recall the famous campaign by
Vodafone in the electronic media where the ‗Zoozoos‘ were used or the
popular Hutch campaign with the dog Chika or Pug and the little girl
were involved. The mediums used in such campaigns are the electronic,
print, outdoors, graffiti etc. For example, Bharati group promotes its
cellular services (AIRTEL) through TV, Radio and news paper.
2.3 Modern Components of the Mix: Additional 3P’s
Modern authors on marketing have added few more Ps namely People,
Processes and Physical evidence to the traditional 4Ps. These have
assumed significance with the offering of ‗services‘ like hospitality, health etc
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becoming more professional and specialized. A brief introduction of each of
them is given below-
People: The front office staffs of a hotel are the most important decision
making catalyst to the visitors stepping into the hotel. Similarly the staff in a
wellness care center would be crucial to the customer who walks in to have
a check up. For services such as these, people become the real
differentiator for the marketer. No doubt that services marketing has
emerged as a separate branch of study in management.
Processes: Many enterprises today are process driven. The term has been
commonly used for manufacturing concerns where the products would go
through processes. Today we talk about quality processes, office processes,
information processes and so on. Since the adoption of total quality
management, marketers are not merely satisfied with quality in the final
product but are deeply involved in the entire processes that an enterprise
puts into practice throughout the organization. Carpet vendors in Germany
were equally concerned with the processes that a carpet manufacturer
would follow in the organization as much as they were particular with the
quality of the carpets. The details in the processes would indicate the work
behind the end product. It has become easier to work out minute details as
these are monitored by computer systems and software solutions like SAP,
ERP etc. In many cases the line between the process and the product is so
thin that the words are being used interchangeably. Some fine examples are
the e-learning programs offered by institutes, the e-library solutions like
Proquest, or EBSCO. The features of these offerings are in the processes
inbuilt to navigate through the software easily.
Physical evidence: About a decade back, you would visit a hotel or a
restaurant on word of mouth evidence and order by the menu. Today many
of these eateries display photographs of their dishes on display boards.
Similarly marketers are offering experiential learning on their products as a
test use before a purchase decision is taken. Similarly a specifically attired
attendant is the evidence of the quality of the service that may be expected
from the service provider.
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2.4 Developing an effective marketing mix:
Following example shows how Big Bazaar has worked out on its marketing
mix in India after doing a SWOT analysis:
SWOT analysis indicates the 4 specific and crucial areas by which an
organization can know its position in the market. SWOT analysis can be
done by any kind of organization, dealing with any kind of products or
services, at any point of time and whenever it feels the need to do so.
SWOT analysis is an analysis showing the Company‘s
a) Strengths – i.e. areas where it has got advantage, its core processes, its
unique or successful brands, key people etc. If the company has a good
reputation in the consumer market then it becomes strength of that
company.
b) Weaknesses – i.e. areas where the company is weak or having
drawbacks and which needs to be improvised or eliminated from the
existing system. If the company is feeling that its sales force has too
many inefficient people then it becomes the weakness of the company.
c) Opportunities – i.e. areas where company can establish itself and the
challenges that it can accept to its benefit as well as the consumers.
Suppose a company knows that there are consumers all over the world
who consume company‘s products then there presents opportunity of
expanding its activities globally.
d) Threats – i.e. areas where the company feels that it might be subject to
pressure situations or where it is unable to pull itself from a possible
crises or the threat may simply come from competitive forces or other
external factors such as Recession.
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Exhibit 1
7P Analysis of Big Bazaar
7P Marketing Mix is more useful for services industries and knowledge
intensive industries. Successful marketing depends on number of key
issues. The seven keys issues are explained as: -
Product
Big Bazaar offers a wide range of products which range from apparels,
food, farm products, furniture, child care, toys, etc. Products of all the
major brands are available at Big Bazaar. Also, there are many in house
brands promoted by Big Bazaar. Big Bazaar sold over 300,000 pairs of
jeans, 50,000 DVD-players and 25,000 microwave-ovens. In all, the
fashion, electronics and travel segments made up about 70% of sales.
Last year, these categories made up only about 60%.
Big Bazaar offers the maximum variety for each category of product and
this is cited by the customers as one of the main reasons why they like
shopping at the hypermarket. The product is the same in every store in
the city but the brand options are more in Big Bazaar. Also, the quantity
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for each product is not limited to large packs only. Observations also
revealed that local brands of popular commodities, like diapers, sugar,
wheat flour garments etc, are very popular in Big Bazaar stores. These
products are never advertised but offer huge margin on sales. In this way
lower middle class customers are targeted well. The commodities sold by
the retail chain also includes its ―own products‖ which get a ready
distribution network. The own products of Big Bazaar include My World
fashion magazine which is not available anywhere else. So costs are low
for such products.
Price
The tag-line is “Is se sasta aur accha aur kahin nahi”. They work on the
model of economics of scale. There pricing objective is to get ―Maximum
Market Share‖. The various techniques used at Big Bazaar are: -
Value Pricing (EDLP - Every Day Low Pricing): Big Bazaar
promises consumers the lowest available price without coupon
clipping, waiting for discount promotions, or comparison shopping.
Promotional Pricing: Big Bazaar offers financing at low interest
rate. The concept of psychological discounting (Rs. 99, Rs. 49, etc.)
is used as promotional tool. Big Bazaar also caters on Special Event
Pricing (Close to Diwali, Gudi Padva, and Durga Pooja).
Differentiated Pricing: Time pricing, i.e., difference in rate based on
peak and non-peak hours or days of shopping is also a pricing
technique used in Indian retail, which is aggressively used by Big
Bazaar.
Bundling: Selling combo-packs and offering discount to customers.
The combo-packs add value to customer.
Price is the critical point in a competitive industry. Big Bazaar works on a
low cost model. It considers its discounted price as its USP. There is an
average discount of 7-8% on all items in respect to their MRP. Prices of
products are low because it is able to secure stock directly from the
manufacturer. There are huge synergies in terms of bulk purchasing,
central warehousing and transportation. These all factors help the retailer
to keep low prices. Survey indicated that low prices were the biggest
factor in customers‘ mind while coming to Big Bazaar. It has never
focused on giving great services, but laid emphasis only on low prices to
attract crowd.
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Place
Big Bazaar stores are located in 50 cities with 75 outlets. Big Bazaar has
presence in almost all the major Indian cities. They are aggressive on
their expansion plans.
Place means the location of the business. Big Bazaar has always worked
on low-cost locations. It targets semi-urban population with its placement.
Its strategy is to find a cheap location and it never goes for hot spots in
the city. The talk with the manager revealed that the Teghoria store was
opened when it was scarcely populated. Even in Gurgaon, Big Bazaar
chose Sahara Mall instead of Metropolitan or City Centre, which are more
popular than Sahara Mall. It relied on promotional activities to make up
for unattractive locations. The channel of place is company owned stores
to have complete control. Another strategy used by Big Bazaar to
overcome location disadvantage is use of internet. It has launched a
merchandise retailing website www.futurebazaar.com which targets high-
end customers ready to use credit cards. Therefore Big Bazaar has made
headway into a potentially high-yielding sector of online trade. Internet as
place has put them in a profitable position because there is minimal
expense of maintaining a website. The promotion of this website is done
through advertisement on Google.
Promotion
Big Bazaar started many new and innovative cross-sell and up-sell
strategies in Indian retail market. The various promotion techniques used
at Big Bazaar include “saal ke sabse saste teen din”, Future Card (the
cardoffers 3% discount), Shakti Card, Endorsement by M. S. Dhoni,
Exchange Offer - ‗Junk Swap Offer‘, Point-of-Purchase Promotions.
Advertising has played a crucial role in building of the brand. Big Bazaar
advertisements are seen in print media, TV, Radio (FM) and road-side
bill-boards. Big Bazaar has got celebrities like Cricketer MS Dhoni and
Film actress Asin to endorse its products as well.
Big Bazaar has huge promotion budgets. The biggest idea behind all
advertisements is to make people do bulk shopping. After talking to the
store manager it was found out that there are 2 types of promotional
strategies. One is the holistic advertisement which promotes the brand
and creates awareness among people. It is not targeted at promoting
each store but only creates an image of Big Bazaar as low-cost shopping
option. The store has advertised through TV, road shows and also
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started reality show-typed promotional campaign ―The Big Bazaar
Challenge.‖ Promotions like ―Sabse Sasta Din‖ are a very successful
strategy to get footfall.
Other type of promotion is the particular store oriented promotion which
includes speaking on the loudspeaker in nearby blocks. Leaflets are
given in local newspaper. There are promotional efforts even inside the
store. During the survey, it was noticed that Buy 2 Get 1 Free type of
promotions are very common. Original prices are cut down and new
prices are shown, of which customer takes quick notice. There are loyalty
schemes which reward the regular clients. Promotion is also done
through co-branded credit cards with ICICI bank.
People
They are one of the key assets for any organization. The salient features
of staff of Big Bazaar are: -
Well-trained staff - the staff employed by Big-Bazaar are well-suited for
modern retail.
Well-dressed staff improves the overall appearance of store.
Employees are motivated to think out-of-the-box. Retail sector is in
growth stage, so staff is empowered to take innovative steps.
Employs close to 10,000 people and recruits nearly 500 people every
month.
Use of technology like scenario planning for decision making.
Multiple counters for payment, staff at store to keep baggage and
security guards at every gate, makes for a customer-friendly atmosphere.
Process
The goods‘ dispatch and purchasing area has certain salient features
which include: -
Multiple counters with trolleys to carry the items purchased.
Proper display / posters of the place like (DAL, SOAP, etc.).
Home delivery counters also started at many places.
Physical Evidence
It deals with the final deliverable or the display of written facts. This
includes the current system and available facilities. The billing system,
the storage or carry bags, the labels put across the products all display
the physical evidence of the Big Bazaar products.
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For The Great Indian Middle Class
It is a unit of Pantaloon Retail (India) Ltd and caters to the Great Indian
Middle Class. It was started as a hypermarket format in Mumbai with
approx. 50,000 sqft of space. Its values and missions are to be the best
in Value Retailing by providing the cheapest prices and hence goes the
tag-line
―Is se sasta aur achcha kahin nahin‖
It sells variety of merchandise at affordable rates, the prices of which it
claims are lowest in the city but the level of services offered is also very
low. Usually the items are clubbed together for offers as on the lines of
Wal-mart and Carrefour and it also offers weekend discounts. It currently
operates out of 64 stores and top 15 stores register a cumulative footfall
of 27 lakhs a month on an average.
The retail life cycle: we can say that Big Bazaar is currently at the
Growth Stage.
(Source: www.managementarticles.info)
Self Assessment Questions
Are the following statements true or false?
1. Marketing of services is based only on the traditional 4 Ps
2. Cellophane wrapped glasses in hotel rooms are an example of physical
evidence in services
3. Services are people intensive
4. Logistics includes all the physical aspects of distribution
5. The final exchange price is usually the same as the initial offer price.
Activity 1:
Identify the promotion mix (i.e. 7 P‘s) of a fast food joint near your place
and list out the features associated with each of the 7 P‘s of modern
Marketing.
2.5 Marketing Planning, Implementation and Control
2.5.1 Marketing planning:
Though strategic plan exists in the organization but it is very essential to
have functional plans to coordinate departmental activities. For example, the
marketing plan guides the sales and distribution activities of the
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organization. Therefore it is essential to know what the contents of a
marketing plan are.
Contents of marketing plan
Executive summary: Brief summary of plan, which help busy executives to
go through the points very quickly.
a. Analyzing the current market situation: The following factors should be
answered in this section.
1. What is the intended market and market segment?
2. What is the consumer buying behavior process for particular
category of products?
3. How conducive is the marketing environment to do the business?
4. Whether company got right marketing mix for intended target
customer?
5. Who are major competitors and what are their marketing strategies?
b. PEST analysis: In this section, the external environment of the company
is analyzed to find opportunities and threats. (for detail see UNIT 3)
c. Objectives and issues: This part of the marketing plan should discuss
marketing objectives that company would like to achieve in particular
period and issues that may affect them.
d. Marketing strategy: This section should highlight on
1. Identifying the segmentation, target customer and positioning
strategy
2. 4P‘s of marketing
3. Planned activities: the following factors should be discussed in this
section
a) What are the programs that company plans to undertake?
b) Who are responsible to monitor these programs?
c) How much time it takes to complete the program?
d) How much will it cost?
e. Marketing Budget: a budget has to be prepared periodically to estimate
the funds and expenses to be incurred on the marketing activities such
as advertising, research, sales promotions etc. The budgets will act as
a reference point when actual figures are accounted.
f. Control: Any program implemented need to be controlled to check its
performance. Hence organization should take periodic auditing by a
review committee. The control process for the plan should be discussed
in this section.
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2.5.2 Marketing Implementation and control
Marketing implementation: The process in which marketing strategies and
plans are converted in to proper marketing actions to achieve the objectives.
Marketing implementation depends on the following factors:
1. Organization structure
2. Organization culture
Marketing control: The process of evaluating marketing performance and
taking corrective actions.
Marketing control involves four steps. They are
a. Set specific marketing goals.
b. Measure the marketing performance
c. Evaluate the market performance against objectives
d. Take corrective actions
Marketing control is divided into two parts. They are operation control and
strategic control. Operation control involves assessing the current activities
against annual plan and taking corrective actions. Strategic control is used
to assess whether existing strategic plans of the company meets the
opportunities exist for it. Marketing audit is used as a strategic control tool.
According to Philip Kotler ―marketing audit is comprehensive, systematic,
independent and periodic examination of a company‘s environment,
objectives, strategies and activities to determine problem areas and
opportunities and to recommend a plan of action to improve the company‘s
marketing performance‖.
Characteristics of marketing audit:
1. Comprehensive.
2. Systematic
3. Independent
4. periodic
Components of marketing audit:
1. Marketing environment audit
2. Marketing strategy audit
3. Marketing organization audit
4. Marketing systems audit
5. Marketing productivity audit.
6. Marketing function audit
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Self Assessment Questions
Fill in the blanks
6. A Marketing audit is used as a __________________ tool.
7. Marketing implementation depends on _____________________.
8. PEST analysis helps to identify a company‘s ________________ and
___________________
9. Segmentation, targeting and positioning is part of a _______________
10. A marketing audit is _____________________ because it examines
all aspects of a company‘s marketing performance.
2.6 Summary
Marketing mix or 4Ps of marketing comprises of product, place, price
and promotion.
The three additional P‘s of marketing include people, processes and the
physical evidence.
SWOT Analysis is basis for organizations to determine their strengths,
weaknesses, opportunities and threats.
Marketing planning, implementation and control is necessary in order to
estimate or determine future marketing strategies/activities, implement
them and then exercise control so as to meet the marketing/company
objectives.
Marketing Audit is used as a strategic control tool.
List of Key Terms
Marketing mix
Product
Price
Place
Promotion
People
Physical Evidence
Processes
Marketing plan
PEST analysis
Segmentation
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Positioning
Marketing control
Marketing audit
2.7 Terminal Questions
1. Briefly explain the contents of a marketing plan.
2. Identify a consumer goods company of your choice and describe its
marketing mix.
3. Identify any organization in the service industry and describe its
marketing mix in terms of the 3 Ps of services marketing.
2.8 Answers
Answers to Self Assessment Questions:
1. F
2. T
3. T
4. T
5. F
6. Strategic control tool
7. Organizational structure/Organizational culture
8. Opportunities and threats
9. Marketing plan/Marketing strategy
10. Comprehensive
Answers to Terminal Questions:
1. Refer 2.5.1
2. Refer 2.4.3
3. Refer 2.4
2.9 Mini-Case
The Kellogg’s story
At Kellogg Company, we promote eating well and healthy living. Our legacy
is based on the philosophy that people can improve their health by eating a
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balanced diet and engaging in regular physical activity. Living a healthy
lifestyle begins with a good understanding of nutrition. We believe in
providing high-quality, nutritious food and helping educate consumers about
the benefits of a healthy diet.
Kellogg‘s has in place a global marketing code and a longstanding
commitment to advertising in a responsible manner.
This means:
We don‘t encourage over-consumption of our foods when consumers
take part in promotions.
We always present Kellogg‘s breakfast cereals as part of a balanced
breakfast.
We run balanced promotional calendars featuring a good mix of fun,
education and wellbeing based activities. Two of our most successful
promotions involved offering consumer pedometers. (Pedometer is a
small device that records/counts the no. of steps a person takes)
The Kellogg’s story starts way back in Battle Creek Sanatorium, Michigan
USA, in the 1870s.
Set up by brothers Will Keith Kellogg and Dr John Harvey Kellogg, it was
founded on a deep belief that ‗you are what you eat…‘ Oh, and plenty of
fresh air, exercise and a strict ban on caffeine, alcohol, tobacco and meat.
In 1876, in pursuit of a breakfast food that was at once wholesome and half-
way pleasant to eat (a rarity in those days); Dr John had a ‗Eureka‘ moment!
While experimenting with different ways to cook and crush wheat to make it
more palatable without losing its goodness, he inadvertently ran a batch of
cooked wheat through the rollers that had been standing around for a day or
so.
And out of the other side came… Kellogg's Corn Flakes! (Or at least, a
prototype version)
Testing their new discovery on their patients confirmed that here indeed was
the delicious, nutritious breakfast the brothers had been seeking.
When orders starting coming for the new flakes from former patients, they
knew they were onto a good thing and set up a separate company to
manufacture their cereal under the name Sanitas.
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But it wasn‘t until 1898 that Kellogg's Corn Flakes as we know them
appeared, and in 1902 Will Keith made the momentous decision to leave the
‗San‘ and set up full time in cereal production.
In 1906, W.K. decided to risk a portion of his hard earned capital on his first
advertising campaign, with spectacular results.
Among many innovations W.K. made that were later to be accepted
wholesale by the food industry was an insistence on consistency and quality
control.
Not just that, he also led a relentless campaign for improvement and
innovation in his products.
Drawing on previous experience as a nutritionist, he printed healthy eating
advice on his packs as well as recipe ideas and product information. Seems
nothing out of the ordinary now, but in its day it was revolutionary.
Going one step further in 1923, he hired a full time home economist to
develop recipes and spread the word about healthy eating to consumers
and schools - the start of a company tradition of providing the latest
information about diet, nutrition and health that persists to this today.
By 1930, almost 60 years after his initial, accidental discovery that led to
Kellogg's Corn Flakes, W.K. decided it was time to ‗put something back‘
and set up the W.K. Kellogg Foundation.
Dedicated to the principle of guidance and self-help, the foundation is still
going strong today. In fact, it is one of the world‘s largest philanthropic
institutions, funding projects in health, education, agriculture, leadership and
youth worldwide.
Kellogg’s in Indian market:
Kellogg‘s came to India with the promise that it will change the breakfast
habits of Indians. Till then, regional staples were the norm at the Indian
breakfast table – paranthas in the North, idli or dosa in the South, for
example. People would give up all the greasy and fatty stuff and eat healthy
cornflakes, Kellogg‘s had thought. It saw no reason why its global success
could not be replicated in India, especially with the growing awareness
amongst its large middle-class population.
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Over the years, it would seem Kellogg‘s has covered all its flanks. It has
products in three distinct segments. There is the kids‘ category with
products like Chocos, Chocos Duet, Planet and Stars and Fruit Loops. Next
is the all-family segment which includes corn flakes and its six variants. And
finally, up the chronological ladder in the adult space are products like
Special K (for weight loss), wheat flakes, Extra muesli and oats.
The market for breakfast cereals is growing at a fast clip – 30 per cent per
annum. But Kellogg‘s is outgrowing it. Its share of the market stands at 48
per cent. Perfect?
Too small, too many
Not really. There is a fly in the ointment. The market for breakfast cereals is
still very small. While the packaged food market is valued at Rs 33,234
crore, the organised breakfast cereal market is just Rs 250 crore. ―The
unorganised breakfast market,‖ says Technopak Advisors Vice-president
(food and agriculture) Sanjay Sethi, ―is far bigger than the organised one.
Milk and fruit are the preferred choice.‖ The import is clear: Kellogg‘s will
have to work really hard to grow the market.
That the breakfast market holds great potential is beyond doubt. The
clearest indication is the growing interest of multinational food companies.
PepsiCo has already entered with its bestseller brand, Quaker Oates. Heinz
India, which has a hugely strong bond with households because of its
Complan health drinks, too has joined the bandwagon.
Even a value-for-money fast-food chain like McDonald‘s wants a share of
the pie. According to McDonald‘s, more and more people are grabbing a
quick bite on their way to work. A study carried out by the company threw up
some interesting numbers: 18 per cent people in cities prefer eating out of
home because of the convenience and variety it offers. Further details
reveal that out-of-home breakfast in Mumbai is high during the whole week
and in Delhi it peaks during weekends. So, it is carrying out pilots of its
breakfast menu across locations in Mumbai and Delhi. The initial response,
claims the company, are encouraging.
Clearly, it is not an easy market for Kellogg‘s. So, it has decided to take the
food safety and nutrition plank for growth. A cue that it perhaps took from its
1999 success story with Iron Shakti, which aimed to address iron
deficiencies in children and boosted sales by 17 per cent.
Marketing Management Unit 2
Sikkim Manipal University Page No. 37
New initiatives
The Company recently conducted a study of breakfast habits on more than
1,000 people in Mumbai. The revelations were startling: One in three people
does not eat breakfast, young girls skip breakfast regularly (probably linked
to weight-control issues) and many children go to school without breakfast
or inadequate breakfast resulting in nutritional inadequacy.
Communicating this idea, Kellogg‘s hopes, will do the trick. ―It‘s important for
us because we are in the breakfast space and our food provides the
micronutrients that are deficient and that‘s the message we are going to
send out to consumers,‖ says Kellogg‘s India Managing Director Anupam
Dutta. The new initiative therefore doesn‘t require rolling out new products.
―All Kellogg‘s cereals are fortified with essential vitamins and minerals
according to the daily requirements of nutrients for Indians and therefore are
excellent breakfast choices,‖ adds Dutta. Not surprisingly, even its
communication has begun to highlight this with ads emphasising better
cognitive performance and academic performance.
Sethi of Technopak Advisors views this positively: ―Consumers are getting
more health conscious and there is an emerging market for cereals. Going
forward, even packed forms of breakfast will gain prominence as people
don‘t have the time in the morning.‖
The problem for Dutta is that rivals are likely to take the same route. Heinz
India in March launched its first breakfast cereal, Complan Nutri Bowl
Muesli. ―Health and wellness is a significant emerging trend and that is our
rationale for entering this segment. Breakfast time offers a huge opportunity
as the health-conscious consumer is looking for something healthy and
convenient,‖ says Heinz India General Manager (new business) Sundip
Shah.
Flavours and pricing
Breakfast cereal players may have a healthy strategy backing them, but
their battle with the palate rages on. Experts feel that Indians find it hard to
move away from their quintessential hot, cooked meals. During its launch,
Kellogg‘s emphasised on the crispiness of its flakes without considering
Indians‘ aversion to cold milk. When mixed with hot milk, Kellogg‘s corn
flakes were no different from local brands, while they were priced far above.
Marketing Management Unit 2
Sikkim Manipal University Page No. 38
To tackle that, the company bet big on flavours. So, when the chocolate-
covered flakes, Chocos, became a huge success, the company was quick to
follow it up with ethnic flavours like coconut, mango and so on. In October
2008, Kellogg‘s Extra muesli was launched in four different variants — extra
nut delight, extra fruit magic, extra crunchy fruit and nut and extra tropical
bonanza. Dutta feels variety is a key need of the Indian consumers and
flavours are the best way to provide that.
The company experiments mainly with fruit tastes like mango, strawberry,
banana and universally favourite flavours like honey. ―Kellogg‘s got it right
when it started launching flavours,‖ Sethi points out. ―People have begun to
take a shine to our products,‖ smiles Dutta. Quick on the uptake, however, is
Heinz which has also come out with three variants of its cereal: Mixed fruit,
crunchy and crunchy with saffron.
Kellogg‘s may have made the right moves with flavours and variants. What
has played spoilsport is its premium pricing. For instance, 250 grams of
Kellogg‘s cornflakes is priced at Rs 75 while Mohan Meakin‘s 200 grams is
Rs-32 lighter on the purse. With heavy down trading visible across all
consumable categories, this could hurt the company in the current scenario.
Dutta on his part counters that Kellogg‘s has not taken a price increase in
any of its products since 2005. ―This is despite significant increase in all
input costs and inflationary pressure. We have so far absorbed the cost
increase and delivered the benefit to the consumer,‖ he says. Alternatively,
its Kpak initiative offers a range of Kellogg‘s products at Rs 10. ―Health and
convenience are the two things we offer. As long as consumers have these
two things in mind, we‘ll be a part of their breakfast choice,‖ Dutta says.
(Source: Company information; The Times100 companies)
After reading the above case, a very young marketing analyst is keen to
identify 7 P‘s of Kellogg‘s and the ways in which Kellogg‘s has replaced the
traditional breakfast in a typical Indian family household. He is also aware
that Kellogg‘s faced a big challenge in the Indian market.
Help the young marketing analyst and what according to you are the
challenges faced by Kellogg‘s in India?
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