Principles of Marketing Term ProjectPhase 105- April-2012

Group MembersMoeenuddin HashimMohammad Saud Ahmed

Build Branded food business to improve quality of life by offering tasty, affordable and highly nutritional products to our consumers while maximizing stake holders' value.Olpers Mission

MARKET SEGMENTATION OF OLPERSMarket segmentation is a very common and quite an important concept in the world of marketing. This enables one to divide the whole population into sub segments or section so that it becomes easy to identify the target market and thus enables the company or entity to effectively market themselves. There is no single way to segment a market. A marketer has to try different segmentation variables, alone and in combination, to find the best way to view the market structure. Olpers needed to divide the whole of Pakistani population into sub section so as to derive probable target market.

Olpers is a milk product and thus the situation is such that it being a necessity would surely be demanded by the majority, however, there is a clash between loose milk and packaged milk. It is often perceived that packaged milk is expensive and is treated with chemicals therefore it should be avoided. Olpers needed to tread on careful waters as to identify the relevant segments of its market.Olpers did so by placing itself in such a manner that it became the households number 1 choice in terms of milk used for everything, be it plain drinking, to tea and even for dessert. Engrofoods Pakistan had to establish different basis for segmentation such as demographics, psychographics, behavioral segmentation (this type of segmentation tends to divides buyers into groups according to their buying behavior and pattern), personal demographics (preference is given to income and household structures) and benefit segmentation (this involves specifying a base which benefits the end consumer). It is interesting to note that only in Karachi sale of Olpers is 50% of the total sales thus leading to the conclusion that urban sales are more in percentage than the rural ones. Tea being the major consumption item in Pakistan at mornings and even during lunches and evenings is a particular example and idea of how Olpers did its behavioral segmentation.

Olpers products are not bounded to any particular age, gender or lifecycle stage. The brand is meant for all the users in the higher income and middle income classes, as is evident from its television commercials. Though the cost constitutes a small amount of the familys income, low income families usually are price sensitive and/or prefer loose milk as compared to packaged milk. The psychographic segmentation such as on the basis of personality traits, lifestyle and values the aim of Olpers is to target those who are career centric and goal oriented. Along with that it targets those who seek variety in things and so provides variety in milk.

TYPE OF PRODUCT

There are basically 3 types of categories of products along with two special types. These include convenience, specialty, shopping, emergency and unsought products.Convenience products are those that are usually preferred by a large market segment, their consumption and purchase is on a regular basis. Examples include household items such as food. Shopping products are those which are consumed on an infrequent basis and usually involve more planning and cognition on the part of the purchaser, an example could be the purchase of clothes. Specialty products are such that they involve expensive purchases and once of buying are usually done. There is no pattern in the buying schedule and the buyers usually prefer something according to their taste, for example a luxury or sports car. Emergency products as the name suggest are bought in times of emergency or due to some unexpected occurrence or reason. Unsought purchase is when the buying is completely random and not expected at all.

Olpers belonging to the milk category and the ascending the food chain lies under the category of convenience products, as milk is purchased regularly often without much thought at times. The purchase at times is in large quantities and thus lower prices are expected.

Olwell Lo-FatOlpers CreamOlpersMilk

LIFE CYCLE AND ATTRIBUTES

Olpers product related attributes, such as white color, hygienic and processed milk, are quite similar to other brands such as Nestle and Haleeb. However the non-product related attributes such as the usage of red color packaging and the use of imagery that is portrayed in every advertisement of Olpers, can be distinguished from the competitors brands. Olpers is promoted with the viewpoint that the milk is meant for all-purposes. This obviously shows the usage imagery of the brand.It has attained market leadership in Ultra High Temperature (UHT) Industry at the end of 2010 and has launched multiple new products including Ice Cream, Flavored Milk, Fruit Juices and Milk Powders, that show great potential for future.

Being in the milk category, Olpers has been growing quite rapidly and capturing ample amounts of the market. The stage at which Olpers milk would be currently be operating is somewhere between growth to saturation. Milk is a necessity and in constant demand, thus Olpers has always room to grow. Also with the introduction of different types of milk categories such as low fat and skimmed milk, Olpers has a better scope to sustain its growth rate and try to be the market leader in the next couple of years.

The placement of Olpers in the market is such that it has developed into a star which is battling for high market share and growth rate is high too, the product could also pass of as a cash cow because the revenue generated from it is sufficient to cover the rest of the products which are not doing so well, example can be Olwell.

Tarang is also been classified as a dog, meaning that the time is over for it to continue as a product and should be decided to discontinue from the market, however strategies have been placed in order to revamp the product on a whole new different level and try to place it in the star category so that it too can be in its growth phase.

The strategy at play here is currently to ensure that Olpers keeps on growing and remains in the star category as to retain high market share and reap from the growth rate. The marketing departments job is now to ensure that no such mishap occurs which could be damaging for the brands image. The overall image portrayed by Olpers is that it is the milk for all. Below is the snapshot of the product portfolio expansion of Engro Foods.

PRICE AND THE ASSOCIATED STRATEGYBeing in such a category where pricing matters a lot, Olpers has to be careful of what price it is charging to the general masses and that whether it is in line with other competitors or not. Olpers milk is packaged milk and therefore it could be safely contested that it is in direct competition with the loose milk section. However Olpers establishes its basis for a bit higher price than the loose milk is that it treats the milk and packages it and makes it germ free, altogether enriching the milk too in the process. Thus then Olpers major competitors would then be Nestle and Milpak.Olpers is claimed to be carrying out a competitive pricing strategy in essence. This is because it has to ensure that its product remains highly competitive within the UHT Milk market and that it is able to contest with the others on an equal footing. Also Olpers at times ensures that its prices are a little bit below what the competition is offering.Discount pricing is often done at times such as special occasions or periods to boost sales and revenue. Example could be the reduction of pricing during the holy month of Ramadan. During this month, milk is consumed in huge quantities and thus this strategy is quite beneficial for Olpers in the season. At times psychological pricing is also deployed by Engro Foods for Olpers so as to lure in more additional customers and to give them the perception that the milk is cheaper then they think, for example a carton maybe sold for Rs. 320 instead of Rs.335 as to give off an image that it is more nearer to Rs.300 and thus cheaper. Meet the competition pricing is also another strategy that Olpers employs.NATURE OF THE MARKETING CHANNEL

Olpers launched its product simultaneously in 20 cities across Pakistan and has gradually expanded its distribution. Currently, Olpers is available in more than 80 countries in Pakistan. Since the area is so wide, therefore the distribution of Olpers is outsourced. Olpers currently has more than 150 distributors. Criteria for the selection of distributors: Past experience and market knowledge of the distributor. Financial strength of the distributor. Reputation of the distributor. Whether the sales force is efficient or not.For distribution purpose, Pakistan is divided into three major geographic regions by the company and then it is further divided into Regional Sales Offices. 1) North a) Rawalpindi.b) Peshawar.

2) Centrala) Lahoreb) Gujranwalac) Multan.

3) Southa) Karachib) Hubc) Punjgur.d) Nawabshah. Major cities such as Karachi have many different distributors which cover different areas. Some of the distributors of Olpers in Karachi are Aftab traders, who cover Defence and Clifton. Pacific Distributors, who cover Gulshan-e-Iqbal, Bahadurabad and Tariq Road. Tawakkal Distributors, who cover PECHS and Saddar. M and Sons cover Nazimabad and Orangi town.

The following chart illustrates the ways in which distribution takes place:

Olpers distribution channels are one of the major reasons behind its success. During the first six months after its launch, Olpers was able to acquire 13% of share of Nestle. Currently, it is the second largest selling brand in Pakistan. Effective distribution channels have contributed a lot to its sales.

MARKETING / DISTRIBUTION CHANNELA couple of factors were of utmost importance when deciding the distribution channel:

CoverageThe first important factor to consider was which areas Olpers would reach. For this purpose firstly, an in depth analysis of the alreadyestablished distribution networks of Nestle and Milk Pack wereconsidered. Based on the reach of these networks, a coverage plan was put in place and it was decided that milk will be collected from 700 big village milk collectors and 400 milk collection centers and around 2400 villages will be covered across Pakistan. Then after processing the milk, it will be moved on to wholesale networks and then retailers. In the coverage plan it was decided that Olpers will be available in every corner and 98% retail outlets in Pakistan. Not an easy feat!

TransportationTransportation was another important factor. The milk is process and packed into standard sized boxes but it was important that thetransportation is safe and free from any contamination. For differentregions different transporters were contacted and they were totransport the milk on specified scheduled to prevent the product fromcrossing its expiry dates.

PriceAnother important factor was that the price is consistent throughoutall the retail outlets in Pakistan as prices are not quoted on theproducts and may change quickly. It is easier to maintain a standard price in big cities where consumers are more aware of the generalprice levels and can easily check and report discrepancies. It isimportant that in no place in the distribution channel there ismiscommunication of any kind which can lead to the product being soldat higher prices in remote areas. For this purpose sporadic checks are conducted by the Olpers team all over Pakistan to maintain consistency.

CHALLENGES

Managing such a wide distribution channel is not an easy task. Nowthat the system is in place there are no major issues that areencountered, however some challenges do spring from time to time:It is important all channel members are up to date with the Healthand Safety Policy of Engro Foods. There was an instance when therewas a breach in Olpers distribution network and Olpers milk was being removed with a syringe and injected with inferior milk mixed withwater mixture. Once this breach was detected an inquiry was put inplace and the channel members involved were removed with people whofollowed the policy of Health and Safety Policy very closed.Channel members involved often want to renegotiate the ratesespecially when transportation costs keep rising and there ispolitical uncertainty and constantly rising level of prices. Toovercome this challenge, longer term contracts are negotiated with thedistribution channel member so that Engro Foods can manage the cost of Olpers distribution.Communication is also another problem that is faced. Channel membersare in remote areas and it becomes hard to communicate with them whencommunication channels are severed due to weather issues or politicalturmoil. For this purpose, weekly reports are collected from differentregions and any problem is investigated in time. CONCLUSIONOlpers entry in the market and its rapid growth indicate its resounding success, successive market share and a good place in the hearts and minds of the people, making it the ultimate choice for milk over the other competitors.