The Marketing Director Of Nestle Company Marketing Essay

Introduction

The assignment investigates about a marketing strategy, tactics for a new product innovation and product improvements of Nestlé, one of the fastest growing FMCG Company with its product innovations. In this assignment, the STP analysis and tactics of marketing is applied for the new product design of the existing product from Nestlé. Firstly, Wheelwright and Clark, 1992 state that New product development (NPD) is due to three reasons such as increasing international competition, the challenging markets and the diverse or various technologies. Montoya- Weiss and Calantone (1994) add that the success or failure of NPD depend on the performance and factors done by organisation according to the strategic factors, development process and market innovation skills. The total word count of the assignment is () excluding references and appendices.

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The overview of the company (market and existing portfolio of its products and brands)

Nestlé is a Swiss multinational packaged food company formed by the merger of the Anglo- Swiss Milk company in 1905 (Nestlé, 2012). It is not only the largest food company in the world possessing 8,000 brands and a range of products but also one of the shareholders of L’Oreal, the world’s largest cosmetics company (Tom Mulier, 2011). The logo of Nestlé symbolizes not only the activities of the company but also illustrates the average modern family of two children where the tree symbolizes an oak and the birds’ thrushes. The blue colour logo characterizes purity, care and goodness (famouslogos.us, 2012).

Figure 1: The logo of Nestlé (Nestlé, 2012)

Nestlé has sustained great performance in UK and Ireland which is due to its well- known brands, Kit Kat and Nescafé and gained good sales growth through the year, 2012. Moreover, its successful innovations such as Nescafé Azera and Maggi brand had made the company, Nestlé outstanding from its competitors- both major competitors (Unilever and Mass Incorporated and Kraft foods) and competitors from local markets. The company has invested more than £500 million to launch next generation of world class manufacturing facilities in the UK. Additionally, the company will hire more than 300 employees for their Nescafé Dolce Gusto plant, which has increased the market share to supply not only to the UK market but also to export markets around the world (Nestlé, 2012).

The type of the NPD for Nestlé Company

Trott (1998) defines new products as the developments or variations on existing formats. Although the products have appeared before in the market, it is still new to the market due to the changing innovation of including application advice for the product. Among the brands from Nestlé, the new product development would be the combination of dairy products (condensed milk and sugar) and coffee in one packet. That is also known as the ‘additions to existing product lines’ (Trott, 1998). What makes it different from the previous packaging is not because having more than one product but because of launching new product innovation which is different from its competitors’ products.

Figure 2: New Product Design for Nestlé

Our new product will meet the functional needs such as Biogenic needs or Biogenic drives often known as physiological drives and satisfy the physical needs such as food, water, air and shelter (Solomon and Bamossy et al, 2010). According to the Maslow’s hierarchy of needs, it satisfies the physiological needs which in turn dominate an individual’s attention (Chisnall, 1995). Importantly, the needs of people differ according to the individual’s unique history, learning experiences and the cultural environment and background (Solomon and Bamossy et al, 2010). Moreover, Motivation is the psychological process that allows consumers to recognize the needs (Wells and Prensky, 1996). Therefore, the new product of Nestlé will definitely give positive motivation to customers where they will find out the positive mood, pleasure and comfort where it will lead to operant conditioning where the attractiveness of the product will provide the consumers through their benefits (Evans, Jamal and Foxall, 2009).

Segmentation through Demographic, Psychographics, Values, Culture and Influencing factors

Clearly, the purpose of segmentation, a creative process is to fulfil customers’ needs and requirements creating competitive advantage for the company. However, Weinstein (1987) argue that companies treat everyone is their customers not targeting as segments groups in most companies. Macdonald and Dunbar (1998) explain that according to the Ansoff matrix, our new product includes in extending existing products to new segments. They suggest that a clear and realistic goal is necessary for a company as it plays a crucial role in the marketing planning process. Therefore, select segmented customers play an important role as targets for marketing activity and then develop a unique marketing program to carry out the prospects.

Segmentation creates opportunities for the company where they can meet customers’ needs not only for today but also for the future (Macdonald and Dunber, 1998). Firstly, to know who to focus on and why, then we need to identify attractive segments from United Kingdom to know the consumer criteria. The Ethnicity results of 2001 Census show that 85.67% of proportions of total UK population are White British. 1.8% is of Indian, 1% is of Black Caribbean and 0.4% is of Other Asian excluding Chinese. See more in Appendix ().

According to Evans, Jamal and Foxall (2010), consumer psychographics consist of lifestyle, personality and self- image. However Ries and Trout (1972) suggest that learning Psychographics, we become to recognize and understand about the values, perceptions, lifestyle, attitudes and motivations of the people.

The lifestyle groups of people from UK are self- actualizers, innovators, esteem-seeker, strivers, contented conformers, traditionalists and disconnected The Consumer Insight’s ‘Social Value Groups’ (2005), 18% of UK population like to self- actualises.

Antonides and Raaij (1998), claim that values play an important part in Christianity and West European Culture. The values of UK can be learnt according to the indexes of Greet Hofstede (1991). Ronen and Shenkar (1985) stated UK as one of the Anglo countries. According to Hofstede’s maps, UK ranks small on Power Distance and weak Uncertainty. Besides, amongst the types of self- congruence and self – concept motives, Jamal and Goode (2001) investigate that individuals with higher levels of self-image congruence prefer higher levels of satisfaction. Thus, the attitudes towards buying new product behaviour can change with Heider (1958) theory.

Targeting for the new Nestlé product

The target market of Nestlé would be ‘demographic targeting’ (N generation and Generation X or Baby Busters). Adam Smith Institute (1998) mentions that Generation Y or the millennial generation sometimes known as ‘N generation’ are between ages 16 to 33 year old in 2010. Coupland (1991) indicates that age ranges from 34 to 44 year olds in 2010 are Generation X or Baby Busters. Ahmad, 2002 remark that over 20 million people in UK are of baby boomers (45-65 year olds in 2010) which can be estimated as 25 million by 2021.

Moreover, Benefits sought can differ according to the social classes. See the social classes of UK (2008) in Appendix. Middle class people consume healthier food than the low ones. According to Freud’s psychoanalytic theory, middle class people show superego structure from their conscious mind and control their behaviour according to morals and values. Oppositely, people who grew up in poverty are observing for physiological and safety needs from Maslow’s hierarchy of needs. Therefore, we should motivate these people to have healthy nutrients.

In order to attract new product of Nestlé, the influencers are important as people are usually addicted to what the influencer speaks. Therefore, M Evans and C Fill being cited in Evans et al (2010) explain that opinion formers are targeted first and after that opinion leaders may receive the information from the opinion formers. But Antonides and Raaij (2010) claimed that opinion formers are informed via social contents by opinion leaders as they know new products via mass media. So, opinion leaders can give positive or negative advice and further information to opinion formers as they are influenced by opinion leaders. Park and Lessig (1997) suggest that information influence helps a lot in motivating people buying behaviour as they ask first from relatives upon which products to buy when they consider buying a product.

Consequently, the motivation can acquire from external environment (Evans, Jamal and Foxall, 2010). McGuire (1974, 1976) show that cognitive motives can make individual’s need for being adaptively concerned with headed for the environment and for attaining a sense of meaning. He and Greenberg, (2009) explain that cognitive dissonance motivates customers of the inconsistency between their attitude and behaviour, and encouraging a change headed for sustainable behaviour. Evans, Jamal and Foxall (2010), suggest that Maslow hierarchy of needs shows the motivational hierarchy of people.

Positioning

Fifield (2007) states positioning possesses an idea or perception in the customer’s attention. While Shimp (2011) defines that positioning has two actions namely, brand in (the consumer’s mind) and against (competitive positioning strategies). However, Clancy and Krieg (2000) show that positioning is all about stating a short statement or message to imprint in customers’ minds. Nowadays, most companies are expanding their positioning strategies to appeal more segments (Kotler et.al, 2005).

For new Nestlé product, the communication message ‘Time Saving’ is crucial to receive the customers’ attention (Evans, Jamal and Foxall, 2009). This would be positioning based on functional needs to deliver solutions to consumers’ current consumption-related difficulties or potential problems by telling that the brand has specific benefits capable of solving those problems (Shimp, 2011). It becomes product related attributes as it offers product advantages such as saves time, affordable and convenient to carry which in turns motivates customers and creates values for their wants. Nevertheless, Kotler et.al (2005) outline that the competitive advantage – being low and high quality influence on product’s position. For Nestlé, firstly, Nestlé’s current position in the mind of consumers will be supported where introducing unoccupied position which values consumers and allowing reposition the competition.

Finally, a company should deliver and communicate the desired position to target consumers because the company’s marketing mix- product, price, place and promotion support its positioning strategy. Importantly, Nestlé should support its position through performance and communication avoiding changes that might confuse consumers (Kotler et.al, 2005).

Marketing Mix Strategies

Product

Kotler et. al, 2005 explain product offers market for attention, acquisition which satisfies customers’ needs and wants. A product can be physical objects, services, persons, places, organisations and ideas.

Actual product of new Nestlé includes its features, design, band name and packaging. It is vital to gain strong brand equity to capture customers’ loyalty and preference (Kotler et.al, 2005). Aaker (1991) recommend that a brand is a distinguishing name or symbol (such as a logo, trademark, or pack design) intended to identify the goods and services of either one seller or a group of sellers, and to differentiate those goods or services from those of competitiors. In order to launch the brand extension or brand stretching, new product can easily get recognition whereby saves high advertising cost. Essentially, a failure of brand extensions sometimes occur ‘Brand dilution’ which may damage consumer attitudes towards other products as well (Kotler et al, 2005).

For the new product, the original logo and name of Nestlé would use. This could bring several advantages not only gaining customers’ attention because of creating a good product quality but also enabling the supplier to attract a loyal and profitable set of customers. As the package colour is of green and gold which is likeability legally protectable and made with higher- quality products. Packaging, an activity of designing the container or wrapper of a product for new Nestlé can fulfil customers’ coffee breaks as it saves time and budget for them. For the new product, the logo and slogan will be the same as the original Nestlé product. The design of the new product comes with 20 small packets inside a huge pack. Also the product is available with a small one whereas including 3 ingredients.

This new packaging style would bring several benefits for the customers since it includes three products at the same time which offers the basic problem solving for them. They can easily carry and consume it whenever they go or can keep it since it comes along with ‘zip-lock’ pattern. Moreover, it saves time for the customers when they are having a cup of coffee which in turn offers augmented benefits. Furthermore, it provides core benefits to middle class people. Since it is a consumer product therefore, consumers frequently purchase it for their own consumption.

Furthermore, product quality has a direct impact on product performance; therefore, Nestlé should link its new product quality to customers’ value and satisfaction (Kotler et.al, 2005). Nestlé firstly should create quality level to support the new product’s position in the target market. Customer- driven strategy should introduce here to create a better quality for customers.

The Product life cycle identifies a product’s sales and profits over its lifetime (Kotler et.al, 2005). During Introduction stage, since the product is new, the profits are negative or low because of the low sales and high distribution and promotion expenses. A rapid penetration strategy should apply to get fastest market penetration and largest market share (Kotler et al, 2005). If the new product meets market needs in the growth stage, sales will start increasing. Thus, the early adopters will begin buying and later buyers will start following their lead, because of the word-of- mouth. Later, new competitors will enter the market. It is essential to aware the product not to reach to maturity and to decline stage. The PLC of existing Nestlé brands and new product is shown in Appendix ().

Price

Obviously, among the 4 elements of marketing mix, Price only can bring revenues. It is essential to avoid pricing which is cost-oriented rather than customer-value oriented. Since the segment and target market is carefully done, it is easy to set up the price for the new product.

Being a new product, Nestlé should apply market- penetration pricing while setting a low rice in order to attract large numbers of buyers and penetrate the market. Nestlé should maintain its low price position to get penetration in the market. Among five products mix strategies, Nestlé comes with product line pricing as there are cost difference between the products from the product line that have difference features and competitors’ prices.

The selling price for the new product would be £3 pounds for the whole packet which has 20 small packs inside. Being oligopolistic competition pricing, Nestlé Company is always alert to its competitor’s strategies. Moreover, the customers’ perceptions of price effect on their buying decisions. Thus, if the new product’s demand falls by 10 %, when Nestlé raises its price by 2 % the demand would be elastic occurring -5. However, if demand falls by 1% when the price is increased by 2%, inelastic demand occurs with -1/2 (Kotler et.al, 2005).

Place

Place is where transporting the right product to the right place at the right time to the customers (The times 100, 2012). It is known as Nestlé’s distribution channel within marketing mix is to reach to its target market. New product of Nestlé should be transported using indirect-marketing channels as below:

The product is firstly targeted to consumers from UK in the introduction stage, it will distribute to all over the countries later. Marketing channel is part of customer value delivery network therefore; each channel adds value for the customers. The intermediaries of Nestlé (wholesalers and retailers) take part a number of activities when delivering the products. For example: wholesalers can provide quicker delivery to the customers and retailers offer final link between the consumers and Nestlé company (Kotler et. al, 2005). For the logistics functions, Nestlé should store the goods in the warehouses while making stock available before the products are ready to be sold.

Promotion

The communication message ‘Time Saving’ is crucial to receive the customers’ attention (Evans, Jamal and Foxall, 2009). In order to communicate with the target customers (external stakeholders), a variety of promotion methods will use with the purpose of

Effectively attainting new customers by increasing customer base and

Retention of existing customers by keeping up customer relations

New product is going to be promoted through television, internet among the major media types. Nestlé’s new product should Reach 70% of its target market during the first three months.

I. Broadcast advertising (Television and Internet)

The benefits would be ‘good mass-market coverage and low cost per exposure. Frangi (2011) states that the proportion of media activities during the day time in UK as follow:

For Nestlé new product, an advertisement should create using Beyoncé’s family (Appendix). Celebrity Endorsement promotes a sense of belief among the target audience and approves brand equity (Till, 1998). Moreover, since a celebrity can make advertisement believable (Kamins et.al;.1989), there will be certain awareness of the target group by breaking the disorder of ad and creating the ad and brand more obvious.

As celebrity can help in brand name recognition (Petty, Cacioppo, Schermann, 1983), people will have a high recalling member for their favourite celebrity. Celebrities are appreciated and adored and respected by their audiences or fans and advertisers so, using stars as PR can influence the fans or customers towards the brand.

Additionally, using Social networks – Facebook, MySpace and Twitter could lead the customers to memorize the new product in a short period of time. It could especially attract to teenagers by looking at the proportion of their internet usage (Appendix).

Proportion of adults who browse over social networking sites on the internet

Conclusion

Using the marketing mix creates a lot of advantages which brings customers’ satisfactions. Importantly, brand loyalty is necessary to make customers’ willingness to repeat purchase. It is essential to make a brand to be available in every shop including benefits such as good brand image, affordable price and packaging style. Marketing Strategies of Nestlé would bring benefits along with the AIDA model. Attention (Awareness) – attracts customers’ attention and awareness. Interest- creates advantages and benefits of Nestlé. Nestlé should let its stakeholders know that fair ingredients include in it which is suitable to everybody. Mind will be fresh and everybody can concentrate on their work, after consuming the new product. Desire- The five performance objectives quality, speed, dependability, flexibility and fair price should consider getting customers’ desire. First error free goods should introduce which brings quality advantage to customers. ‘Speed’ is important in providing goods and services to customers. Besides, doing or making things on time is important too. This is dependability. Next, flexibility requires fulfilling all customer requirements and dealing with all customer possibilities. Action- Customers action will meet as soon as they buy the new product. It is important to offer a value more than customers’ expectations. Thus, they have satisfaction which in turn creates them hard-core loyal and will unlikely to switch brands in the predictable future.

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As a recommendation, Nestlé should consider internally and externally for its new product development. Internally, all departments have to work together, discuss and consider how they should make to build the brand image of new products and get the customers’ trust. Externally, it should consider about relationship, integrated and social responsibilities marketing. Nestlé brand has long-term relationship with its customers, employees, suppliers, distributors, members of the financial community; shareholders and investors and other marketing partners (channels, distributors and advertising agencies). According to Kotler & Keller (2006) Holistic Marketing is important in developing, designing and implementing of marketing programs, processes and activities. The relationship should not end in order to earn and retain the business. A strong relationship is essential to give a value which is more than customers’ expectations that would bring satisfactions and loyalty.

Figure 1.1 Demography of UK in the year 2010

Classification of classes

Explanations

Lower middle class

White collar workers

Middle class

Got tertiary education

Upper middle class

Earn higher incomes. They all are traditionally accomplished from private schools.

Nouveau riche

Working class, lower middle class

Under class

Long- term unemployed, elderly pensioners, economic immigrants, dependent on state benefits

Upper class

Statistically very few nowadays

Skilled working class

Blue- collar workers

Work mostly in the construction and manufacturing factory.

Unskilled and semi- skilled working class

Blue- collar workers

Work mostly in car factories, steel mills and textile mills

Figure 1.3 Social classes of UK

New product of Nestlé

Existing Nestlé products