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Analyze the marketing strategy of an organization, identifying the key success factors or indicators in the marketing mix and the activities of the organization.
Company: Tapal Tea (Pvt) Limited
Company Website: www.tapal.com.pk
Other Sources Used: Tapal’s website, Press releases and other various websites
Company’s Motto: “Never Compromise on Quality”
Company’s Popular Slogan: “Tapal Makes Tea-Time Terrific”
Tapal Tea is the no.1 tea selling company in Pakistan and is a private entity. The
company has been able to instill creativity in its media advertisements which shows
that it has typically understood the nation’s perception of tea. The company’s arch rival
being Lipton Tea, a division of the multinational Unilever. Tapal has built its customer
loyalty over the years through what they consider a confident and stable marketing
strategy. “Tapal was started as a family business in the year 1947. Today the company
is proud of being the largest, 100% Pakistani owned Tea Company in the country.”
(http://www.tapal.com.pk )
For confidentiality purposes, detailed strategies have not been discussed in this report.
However, a fair idea of the approach the company has taken up will be discussed in this
report. The company follows a flexible marketing strategy similar to others that are
faced with a fierce competition. It has eight different brands of tea and implements a
different marketing strategy for each of them. Classifying the products on a BCG matrix
helps in presenting a better picture about each product. This approach serves as a
method of understanding the company’s better performing brands in the market.
The company’s products have been charted-out in the diagram below:
RELATIVE MARKET SHARE
High Low
MARKET GROWTH RATE
High
Low
Stars
Tapal DanedarTapal Family Mixture
Question Marks
Tapal MezbanTapal Gulbahar Green Tea
Cash Cows
Tapal ChenakTapal Tezdum
Dogs
Tapal SafariTapal Jasmine
Tapal Danedar and Tapal Family Mixture are considered as the ‘golden brands’.
Tapal Tea is credited to be the first company to introduce the ‘Danedar’ brand. This
type of tea is slightly different and better in taste and gained so much popularity that
other companies imitated this product and came up with a similar brand of their own.
Tapal Gulbahar Green Tea has good future prospects. It is one of its kind and there is
a possibility of shifting to the ‘Stars’ category.
Tapal Safari and Tapal Jasmine have not yet produced as much revenue as their
fellow brands, the reason being insufficient advertising.
Tapal Chenak and Tapal Tezdum have found more popularity in the rural areas of
interior Sindh, Pakistan. It can be observed through the products’ advertisements that
the target market was well thought out.
The various brands give Tapal Tea an edge over Unilever’s Lipton Tea. Lipton Tea has
only three brands of tea in Pakistan whereas Tapal Tea has eight of them. These entire
eight brands have introduced a unique taste of their own. Therefore, Tapal Tea
provides its consumers with ‘variety’ which comes as an important factor in any
business being carried out.
MARKETING STRATEGY MODEL
The company is consistent with its marketing strategy model. For all brands, new and
old, it adopts the rational model of formulating a marketing strategy. This provides a
systematic way of defining the purpose and attaches a value to the strategy.
Mission & Objectives
Environmental Scanning
Strategy Formulation
Strategy Implementation
Evaluation & Control
(http://www.quickmba.com/strategy/strategic-planning/ )
The rational model assists in defining and taking account of all various variables that
cast an impact on the organization’s strategy. For example, the “Environmental
Scanning is concerned with an internal analysis of the organization (‘SWOT’ analysis)
along with an analysis of external macro environmental factors (‘PEST’ analysis).”
(http://www.quickmba.com/strategy/strategic-planning/ )
During the Strategy Formulation, it is made sure that all objectives of the strategy are
consistent with the objectives of the organization as a whole.
A very general corporate appraisal of the entity using the ‘SWOT’ Analysis is presented
below:
SWOT Analysis
Strengths:
High market share Higher brand image Addresses the varying demands of differing tastes Good relationship with suppliers The only private tea company in Pakistan involved in export ‘Innovators’ of the famous Danedar brand Makes good use of technological advances High quality is maintained throughout
Weaknesses:
Market follower approach is a defensive tactic compared to its aggressive marketing strategy
Product placement may well be a problem since the company is a private company
The advertising is not as frequent as that of the competitors Not recognized internationally
Opportunities:
Exports Expansion in the international market Sri Lankan and Indian market could be explored further Upgrading to a multinational status from a private company could lead to more
financial sources being available Wide base of human resource available
Threats:
WTO impact may open doors for new entrants Lipton Tea’s highly geared marketing strategies Entrance of the international brand ‘Tetley’ into the market Its aggressive marketing policies might force competitors to adopt aggressive
tactics in their defense
IMPACT OF BUDGETING ON MARKETING STRATEGY
Budgets are allocated over a one year term. The task of drawing up a budget is assisted
by a sub-department of the Marketing department called the Marketing Research
Department which provides them with future sales trends. “Tapal subscribes to and
conducts various researches in the area of retail audits, consumer behavior, media
planning and product development. This research is used for continuous improvement in
product quality, brand positioning and communication according to the changing
requirements of the consumer.”
(http://www.tapaltea.com.pk)
Budget allocation is conducted on grounds of experience and future market trends
identified by the company’s research department. Assumptions regarding future
market trends are well-calculated and thoroughly analyzed by senior managers.
The company’s accounts that show a special ‘child’ account in the ‘parent’ account of
Sales Promotion. This sub account comes under the name of ‘Attack Plan’ and its
details include – ‘costs incurred for massive ad-hoc advertising campaign’ . This shows
that the company is prepared to counter-attack any new marketing campaigns
introduced by its competitors. It also shows that the company takes these as a major
threat and retains enough funds to backup a technically sound contingent marketing
plan. The company acknowledges the importance of marketing and relies heavily on it.
It doesn’t find the need to draft a strategy annually and seems confident with its
marketing strategy.
The life span of the marketing strategy is 3-5 years and ‘logical incrementalism’ seems
to have been followed by the company as it involves small scale extensions of past
practices. Thus, every time a new strategy is devised, it is an extension of the old one
shaped up according to the changing circumstances.
The Marketing Department doesn’t seem to be fond of entertaining brand new
marketing ideas. This is because in such a competitive milieu, the company is afraid to
lose its stability.
THE MAIN INGREDIENT OF MARKETING STRATEGY & HOW IT PROVIDES COMPETITIVE ADVANTAGE TO TAPAL TEA
The company faces severe competition from the Unilever tea brand Lipton Tea, which
forces it to adopt a value based pricing strategy.
“Value-based pricing is a method of pricing products in which companies first try to
determine how much the products are worth to their customers. The goal is to avoid
setting prices that are either too high for customers or lower than they would be willing
to pay if they knew what kind of benefits they could get by using a product.”
(http://www.computerworld.com/news/2000/story/0,11280,42848,00.html )
From the various techniques that Tapal Tea can use to facilitate itself with value-based
pricing, a Value Chain Analysis (Michael Porter) is conducted to help locate which
processes add value to the product and which ones don’t. The picture below is a
demonstration of Value Chain Analysis which is discussed further;
(http://www.marketingteacher.com/Lessons/lesson_value_chain.htm )
“To analyze the specific activities through which firms can create a competitive
advantage, it is useful to model the firm as a chain of value-creating activities. The goal
of these activities is to create value that exceeds the cost of providing the product or
service, thus generating a profit margin.”
(http://www.quickmba.com/strategy/value-chain/ )
Value-based pricing helps the company gain a competitive advantage. The entity works
hard to understand how the consumers ‘value’ its products and thus, how much they’re
willing to pay for it.
MARKETING MIX
Obviously, a different marketing mix for each brand is being followed by Tapal Tea. A
very general marketing mix has been drafted taking the whole company into
consideration. However, the marketing mix for Tapal Chenak has been provided in this
report for a better understanding.
Marketing Mix for the whole company Marketing mix for Tapal Chenak
Product: TeaPrice: Lower income (Value- Based Pricing Strategy)Place: Distribution networks
Across PakistanPromotion: Culture-based
Product: Dust TeaPrice: Lower income (Value-
Based Pricing Strategy)Place: Interior of Sindh
InfrastructurePromotion: Culture-based
KEY SUCCESS FACTORS
PRODUCT:
Creation of a Brand Name has helped Tapal become the most prestigious tea brands in
Pakistan. The company has long passed the Introduction Stage in the Product Life
Cycle and has been operating at the Growth Stage and delaying Maturity by offering
new products every now and then. This gives the company a definite edge over other
tea companies.
Quality of Packaging also counts as an important factor in creating a value of the
product in the customer’s eyes. The color scheming used in its packaging is different
and unique from other tea companies and Tapal Tea has always been consistent with it.
The quality of paper used in the packing keeps the tea crisp and fresh for the customer.
Styling and font used by Tapal Tea brands also makes its products stand out. Tapal
should however, still be credited for using a good color contrast with all brands’
packaging.
PRICE:
The company adopts Value-based pricing as its Pricing Strategy. It knows exactly at
which level the market will accept a price and comprehends how exactly its consumers
‘value its product’.
Tapal Tea sells its products to resellers at a higher retail markup than Lipton Tea. Due
to this factor, retailers are themselves interested more in selling Tapal Tea to
consumers. This is a vital part of the company’s marketing strategy. When compared
with Lipton Tea, retailers are expected to sell large quantities of Lipton Tea to
compensate for the low markup. It sells most of its brands at a fixed retail price all
over Pakistan.
Tapal adopts Seasonal Pricing to stabilize its earnings and sales throughout the year.
This itself does not provide competitive advantage in a proper context, but helps in
soothing out the earnings and sales.
PLACE:
Tapal has developed fast and hassle free Distribution Channels of its own. It does not
share its distribution channels with any other entity. Lipton Tea for instance, has seven
distribution channels, and every single one of them is commission based and not
owned by Lipton Tea.
Tapal has a wide Market Coverage ranging from UAE to USA. Internationally, Tapal
faces immense competition from Lipton (Unilever) and various other tea brands.
However, on a national scale, Tapal still enjoys being the favorite undisputed tea selling
company.
The company has its own Transportation and means of delivering stock.
Inventory Management is also in-house. All inventory information systems are up to
date with the latest technological developments available in Pakistan.
PROMOTION:
A great deal of money is spent on Advertising. The company considers mass media
advertisement as its way of ‘communicating with the masses’.
Public relations and Publicity have always been sound for Tapal since the very
beginning. The company is proud of its reputation of being a 100% owned private
Pakistani company.
HOW THE CURRENT MARKETING STRATEGY RAISES BARRIERS TO ENTRY
The mass media advertisements on cable television make Tapal Tea look extremely
strong. Despite being a private entity it spends heavily on advertising. Hence, any new
entrant will for sure be intimidated by Tapal Tea’s advertisements and its level of
spending on advertising. It has set the benchmark for new entrants ‘too high’ for them
reach. Thus in order to establish themselves, the new entrants either end up spending
more than required or get daunted by the idea of a huge spending on advertising.
Various other marketing campaigns and schemes over the years have helped Tapal
create a good brand image and strong customer loyalty. For example, the current
marketing strategy also included free sampling of its new brands in the interior of
Sindh (this was the ‘place’ targeted for promotion of new brands). Tapal Tea’s frequent
marketing campaigns have made it a popular company and along with its sound
financial history, it has developed a strong bargaining power over its suppliers.
OTHER FACTORS RELEVANT TO THE MARKETING STRATEGY
Tapal Tea enjoys its reputation of being the innovators of the ‘Danedar’ brand. Other
companies have also imitated this brand but the psychological impact that the
organization has left on the people (of being the first to do so) has established a unique
brand loyalty amongst the consumers. “A brand's name is perhaps the most important
factor affecting perceptions of it. In the past, before there was a wide range of brands
available, a company could name a product just about anything. These days, however, it is
necessary to have a memorable name that conjures up images that help to position the
product.”
(http://www.quickmba.com/marketing/ries-trout/positioning/ )
The company undertakes a lifecycle analysis of its tea brands. This is critically related
to the marketing approach for a specific brand and thus, directly related to the
marketing budget allocated to it. It has a brand-specific marketing strategy and each
brand undergoes a rigorous analysis before its marketing strategy is drawn up.
However, the company remains consistent with its approach of formulating a strategy
(i.e. applying the rational model). By doing this, the organization makes sure that all
objectives are clearly communicated and the purpose of the strategy is consistent with
that of the whole organization to achieve goal congruence.
The profits have increased since the marketing strategy was implemented. However, it
should be noted that this trend has continued over the history of the entity and the
steady increase in profits might not always have much to do with the current marketing
strategy. The marketing department is appraised every three months. Sales and profits
are the measures against which the appraisal is carried out. This again shows that the
appraisal might not actually be worth the time it takes. The company should also find
other yardsticks against which it should appraise its marketing department. Such
yardsticks can definitely be non financial measures.
The following figure shows sales in kg tons of Tapal Tea compared with Unilever’s
Lipton Tea for four years;
2004 2003 2002 20010.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
Tapal
Lipton
Tapal Tea offers retail markup of at least Rs.3 on all its brands to retailers, which is
more than twice what Lipton Tea offers (i.e. Rs.1.40). Price offered to consumers and
retailers has always been a vital tactic of the marketing strategy of Tapal Tea. The
company enjoys a fair lead over its most daunting opposition. The ‘aggressive
marketing strategy’ is the reason why Tapal Tea has become the most dominant tea
company in Pakistan.
RECENT MARKETING CAMPAIGNS
Tapal Tea is always coming up with different ideas to counter attack its competitors
marketing campaigns. It should be noted though, that hardly any of these plans are ad-
hoc. Tapal Tea remains consistent with its marketing strategy and this shows how much
faith the company has in its existing strategies.
Recently, Tapal Tea launched its own program on local radio by the name Tea Time.
Apart from that, various other schemes are also in place which offer discounts to
consumers. Another scheme which now has expired, offered free tea bags with three
large packs of Tapal Tea.
At a recent event, Tapal Tea was offering free samples of tea. There is hardly any time
of the year when Tapal Tea is not seen on the billboards. The marketing department
seems to be exceptionally active and prepared throughout.
RECENT ACTIVITIES OF THE ORGANISATION
Tapal has just recently started exporting tea to Italy. The company places great
confidence and faith in its research activities. All statistics and figures required to move
ahead with a strategic plan are provided by the Marketing Department. The company
exploits current opportunities and plans accordingly for the future with the help of its
Research Department. The performance of this department is hence to an extent
directly related to the successful marketing strategies.
According to the data gathered, the company does not have any special activities lined
up apart from its never ending marketing campaigns. But it should be noted that
sponsoring musical evenings and live concerts are a part of the entity’s public
relations activities. Only recently, on the occasion of Eid in Pakistan, Tapal Tea
organized three musical events which were shown on a popular cable television
channel on all three days of Eid. The organization currently has a lot of celebrities
working as Brand Ambassadors.
CONCLUSION
Tapal Tea’s marketing strategy formulation has its own pros and cons. In technical
terms, budget allocation is considered as a ‘tactic’ which is used to attain an objective
as set by the marketing strategy. The company allocates budget to a marketing strategy
on an annual basis. The company is always ready to slightly alter its strategy at a given
point in time to counter attack its rival’s marketing campaigns. A formal rational model
helps to clearly identify objectives and takes into account all the elements that might
influence its strategy.
If considered in a larger context, Tapal Tea takes nearly all possible steps to maintain
its market share. The entity considers marketing as a strategic weapon. Its marketing
policies and tactics have always been aggressive.
The strategy formulation is re-drafted after every 3-5 years. And the company utilizes
the rational model of strategy making. Using the rational model for marketing strategy
is believed to be too time consuming. It takes into account various factors that remain
constant over a long period of time. People are afraid to question once such a strategy
is implemented because of the time and effort put in it. And above all, the rational
model is used when a strategy is being implemented from scratch. However, the
strategy making process also depends on the various other factors such as the
organization’s age, structure and internal politics.
Also by refusing to accept new ideas to infuse in the marketing strategy, the top level
manager might just be de-motivating the employees and might be discouraging
initiative. Sometimes employees have a direct contact with consumers and are able to
get a better feedback from consumers than senior managers. Therefore, creativity
should be encouraged as Tapal can afford to experiment.
Another interesting thing that should be noted is that the marketing department is
appraised every three months. Such a short term appraisal sometimes becomes more
of a routine procedure just to fulfill the formality of performing a task. Compared to
the life span of the strategy, the time interval between appraisals is just too short. A
massive marketing campaign might not even produce meaningful results to examine in
such a short time period.
Although, the company has introduced at least two new brands of tea lately, it has not
altered its basic pricing strategy for the new brands, i.e. value-based pricing. A
different pricing strategy such as market penetration could be tried out. Tapal enjoys a
fair lead over its rival Lipton Tea.
Tapal Tea’s history reveals that the company tried out market penetration to out stead
the then favorite Lipton Tea. Perhaps, the entity has gained such a great proportion of
the market that now they believe value based pricing is better in today’s market. It
should also be noted that the company has not diversified into other businesses like its
competitor. Lipton Tea is one of the several hundred divisions of the multinational
company, Unilever.
Tapal Tea considers ‘innovation’ as the key factor behind its success. An excerpt taken
from the company’s own website provides shows various areas in which it has excelled
because of innovation:
“Always on the move, Tapal Tea is honored to have taken the lead in a number of areas in the
tea industry. Tapal has been:
• The first to introduce soft packs in the country.
• The first tea company to introduce metal-free tea bags.
• The first to develop an entirely new blend and category-Tapal Family Mixture (the mixture
of leaf & dust).
• The first to invent the highly successful brand Danedar Leaf Blend.
• The first to market Kenya teas in Pakistan.
• The first tea company to be awarded the ISO 9001/2000 Quality Certification”
(http://www.tapaltea.com/saga_of_success.htm)
When examined from a bird’s eye view, the marketing strategy of Tapal Tea serves just
right for a privately owned company. But it should be noted, Tapal Tea’s methods of
evaluating its marketing strategy fails to serve the rationale behind the appraisal. This
might again be because the company might be satisfied with how things are currently
going as it is enjoying an era of Market Leadership.