NEW PRODUCT DEVELOPMENT Nestl Fruit Yogurts

Vision Statement of Nestl

The strategic priorities of Nestl are focused on delivering shareholder value through the
achievement of sustainable, capital efficient and profitable long term growth.
Improvements in profitability will be achieved while respecting quality and safety
standards at all times.
In line with this objective, Nestl envisions to grow in the shortest possible time into the
number one food company in Pakistan with the unique ability to meet the needs of
consumers of every age group - from infancy to old age, for nutrition and pleasure,
through development of a large variety of food categories of the highest quality.
Nestl envisions the company to develop an extremely motivated and professionally
trained work force, which would drive growth through innovation and renovation.
It aspires, as a respected corporate citizen, to continue playing a significant role in the
social and environmental sectors of the country.

Brief Introduction of Nestl

In the 1860s Henri Nestl, a pharmacist, developed a food for babies who were unable to
breastfeed. His first success was a premature infant who could not tolerate his mother's
milk or any of the usual substitutes. People quickly recognized the value of the new
product, after Nestl's new formula saved the child's life, and soon, Farine Lacte Henri
Nestl was being sold in much of Europe.
By the early 1900s, the company was operating factories in the United States, Britain,
Germany and Spain. World War I created new demand for dairy products in the form of
government contracts. By the end of the war, Nestl's production had more than doubled.
The 1920s saw Nestl's first expansion into new products, with chocolate the Company's
second most important activity
Nestl felt the effects of World War II immediately. Profits dropped from $20 million in
1938 to $6 million in 1939. Ironically, the war helped with the introduction of the
Company's newest product, Nescaf, which was a staple drink of the US military. Nestl's
production and sales rose in the wartime economy.
Nestl with headquarters in Vevey, Switzerland was founded in 1866 by Henri Nestl and
is today the world's biggest food and beverage company. They employ around 250,000
people and have factories or operations in almost every country in the world.
Nestl Pakistan currently has 1958 employees and has a market capitalization of
41,268,136,000.

Introduction to Nestl Fruit Yogurt

Nestl is committed to offering consumers high-quality food products that are safe, tasty
and affordable. The Nestl Seal of Guarantee is a symbol of this commitment. Keeping
this in mind, Nestl developed a unique healthy product which is a substitute to sugary
junk food like carbonated drinks, ice-creams and desserts.
Nestl Fruit Yogurt, a value added product, is categorized as a chilled dairy product
which has all the goodness of milk, yogurt and fruit. Such products need to be
refrigerated between temperatures of 0 4 degrees from manufacturing till it reaches the
consumers because they contain live bacteria. Nestl Fruit Yogurt has a shelf life of 28
days.

Marketing Ethics and Social Responsibilities

Keeping in mind Pakistans social responsibilities and marketing ethics, Nestl adopts the
following practices in its production of Nestl Fruit Yogurt.

Quality of the product is maintained by foreign quality control supervisors on a

random weekly basis.

The product is produced using all Halal foods.

Product wastes are properly treated.

Workers, especially those involved in the production process, are provided with
specially designed clothing/suits.

The price of the product is kept low.

Nestl Fruit Yogurts Current Marketing Mix

The marketing mix comprises of the 4 Ps namely: Product, Place, Price and Promotion.
Following is a detailed study of the contents of Nestl Fruit Yogurts marketing mix.

1. Product
Products are need-satisfying products of an organization. The idea of a product as
potential customer satisfaction or benefit is very important.
Nestl Fruit Yogurt is a new product in Nestls product line in Pakistan.

Branding
Branding is the use of a name, term, symbol or design or a combination of these to
identify a product.
The fruit Yogurt has well known brand name Nestl which has gain popularity over years
and is known for offering healthy nutritious food items.

Advantages of Branding
a) Identification
Branding has helped Nestl Fruit Yogurt gain a distinctive identification and has
presented an ease of gaining customers. Most people prefer trying fruit yogurt of
familiar trusted brand rather than of the brands they havent heard of before. It has
also helped reduce the costs for designing and implementing programs for promoting
the product.
b) Brand Familiarity
Brand familiarity refers to how well customers recognize and accept a companys
brand.
Nestl has earned brand acceptance with high quality products and their regular
promotion and its high degree of brand familiarity affects the planning of the
remainder of the marketing mix. Therefore Nestl Fruit Yogurt is placed in all super

markets and general stores of Pakistani market and doesnt require extensive
promotion because of its already built brand familiarity.
c) Brand equity
Since brand equity refers to the value of brands overall position in market we can
safely say that Nestl has higher brand equity on the basis of its satisfied customers
and eagerness of customers to have it in stock.
Manufacturer Brand
Nestl is a manufacturer brand (national brand) i-e it is created by producers and is
promoted throughout the Pakistani market in addition to markets of other countries.

Packaging
Packaging concerns with designing and producing the container or wrapper for a product.
Nestl Fruit Yogurt comes in an attractive and convenient to use package and serves the
following purposes of packaging:

Protects the contents on their way to consumer: Its package id well designed so
as to protect it during shipment and prevents tampering with it in the warehouse
or retail stores.

Protects the product after purchase: Nestl Fruit Yogurt is convenient to use,
cleaner and less susceptible to losses from spilling and spoilage because of its
good quality packaging.

Packaging acceptable to middlemen: Packaging is acceptable to middlemen

because it is suitable for displaying and stacking in stores.

Helps persuade the consumers to buy the product: Packaging is attractive and
colorful with the illustrations of fruits and creamy delicious yogurt which
persuades the customers to taste it.

Labeling
A label is a part of a product which carries information about the product and the seller. A
label may be a part of the package or a separate tag attached to the product. Types of
labels include:

A brand label

A descriptive label

A grade label

Nestl Fruit Yogurt employs descriptive labeling which is a part of its package. It carries
information about ingredients, nutritional contents, products weight, and the fruit flavor.

Product quality and customer needs

Quality is the ability of a product to satisfy a customers needs or requirements. Since
consumers mainly require satisfaction, marketing managers must be constantly concerned
with product quality.
Therefore, Nestl is committed to offering consumers high-quality food products that are
safe, tasty and affordable to cater to the customer satisfaction aspect. The Nestl Seal of
Guarantee is a symbol of this commitment. Keeping this in mind, Nestl developed a
unique healthy product which is a substitute to sugary junk food like carbonated drinks,
ice-creams and desserts.

Promotion
Promotion is one of the major tools used in marketing and an essential part of the
marketing mix of an organization. Marketers usually use promotion to inform the public
of their product and communicate with customers with respect to product offerings.
Promotion is also however used to influence the marketers target market usually via:

Advertisements and commercials through interpellation

Streamers

Outdoor billboards

Magazines newspapers and posters

Personal selling

Sales promotion

Public relations etc

Promoting their product as better then any other similar products or by changing views,
awareness, beliefs, and feelings of perspective customers.

Promotional roles
Three essential promotional roles are given below:

Informing

Persuading

And reminding target audiences

Nestl Fruit Yogurt is a new product in Nestls product line in Pakistan. The products
present market constitutes all the citizens that consume yogurt. Nestl Fruit Yogurts
production began in the second quarter of 2005 but due to very limited budget and the
product being an entirely new concept to the existing market, a discrete analysis of all the
entities that would affect the new product were taken into consideration. As the product
was new, marketers immediately felt the need of informing the people about it. Providing

Information is the first and the foremost task of promotion because people need to know
about the existence of a product, its benefits, usage and working. The most useful product
will be a failure if no one knows it exists. For the promotion of Nestl Fruit Yogurt
analysis of the scenario was conducted. It revealed that in 2004 there ware 250 brands
being advertised on TV; by the start of 2005 the number had doubled and before the
launch of Nestl Fruit Yogurt it reached to about 500 brands. Because of the flooding of
television with advertisements, company decided to promote the product distinctively and
differently using: streamers, posters, magazines, and outdoor billboards as the marketing
mediums. The common observation is that the more the people get to see various
advertisements on T.V the less they pay heed to them. Its human nature to get fed up or
become indifferent to things that go beyond limit I-e the flood of advertisements coming
up everyday. To promote fruit yogurt through means other than mass media was a very
wise decision on the part of the management of Nestl. If Nestls fruit yogurt had been
advertised on T.V, it would have been forgotten or lost its charm very soon.
Another purpose of promotion is persuading. Intense competition among firms in market
provides people with many alternative products for satisfying even basic physiological
needs. As a result, persuasive promotion becomes essential. Nestl, keeping this into
mind, have made billboards, streamers, advertisement and magazines captivating and
attractive enough to play upon the weaknesses of fruit, dessert lovers and diet conscious
people who were since long looking for some healthy and hygienic alternative to junk
food.
Last but not the least is reminding the market of the products availability and its
potential to satisfy. This is done by bombarding the target market with messages, symbols
etc which have the ability not only to retain but also to attract new customers. Previously
Nestls message regarding their fruit yogurt was fruit yogurt with real fruit chunks
which later on changed to imagine the taste. So we conclude that Nestls current
message of imagines the taste and delicious cup of fruit yogurt serves both persuasive
and reminding roles of promotion.

The message of Nestls fruit yogurt

(This message helps reminding the target market of fruit yogurt)

The captivating fruit yogurt of Nestl

(Persuades the market to buy this product)

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2. Place
Raw yogurt, which is one of the competitors of fruit yogurt, has been into market since
long. It is not only cheap but also available in quantities of ones choice (more or less).
Management of Nestl Fruit Yogurt correctly figured out that the perception of raw
yogurt of one particular class of Pakistan is hard to change. They knew that introduction
of fruit yogurt, which is of RS.12, delicious, hygienic and nutritious, among low-income
group and low socio-economic status will not be a wise decision, as they wont readily
accept it. They also correctly judged that less knowledgeable and illiterate people will
resist switching from raw to fruit yogurt because they are either less aware or indifferent
to the hygienic factor and nutritive values of food. They willingly compromise on quality
for price and some among them, without striving to get information, perceive the Nestls
fruit yogurt to be of high price and do not buy it ultimately. Keeping these attitudes and
behaviors of different classes in mind, Nestl decided to start off from the safe side I-e
they introduced their fruit yogurt in Islamabad, Lahore, Karachi and Peshawar. These
cities of Pakistan are thickly populated and have relatively high awareness and literacy
rate. We can safely say that this product is targeting A class of our country and became
popular among them because of the following characteristics of this class:

A class people are mostly literate, knowledgeable, have awareness and the
resources to try out every new food item that comes into the market.

They are much aware of the nutritive values of food and know the advantage or
edge of fruit yogurt over the raw one.

They dont usually compromise on quality, hygiene and delicacy for price.

This amalgamation of flavored yogurt with fruit chunks came as good news for
fruit lovers.

It became popular among teenagers of this class because it is a healthy alternative

junk food etc

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3. Price
The ultimate aim of any organization is to set a price that satisfies both the consumers
and the manufacturers.
Nestl Fruit Yogurt comes in a small sized pack of 12 Rupees which is affordable to
every socioeconomic status. The competitors of Nestl Fruit Yogurt include:

Olpers

Prime yogurt

& Raw yogurt mainly

In order to outweigh the competition of raw yogurt which is very cheap and a preference
of price-conscious people, Nestl Fruit Yogurt comes in a small pack which is reasonably
priced keeping in consideration its fruit-contents which make it nutritious and tasty. This
has been achieved by working on price strategy which starts by reducing the production
costs so as to reduce the sales costs.
Low price feature of the product targets the lower and middle classes too. It is now
commonly used as a substitute to mashed foods for kids and also to junk sugary foods
and as a dessert, all because it combines the benefits of taste, quality and low price and is
gaining popularity due to these multiple features.

Price Level Policies over Product Life Cycle

Price level policies vary according to the life cycle stage product is in at any given time.
Therefore pricing policies are different in introductory, growth, maturity and decline
stage. Since Nestl Fruit Yogurt is in introductory stage we discuss the pricing policies of
introductory stage as under:

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Introductory stage
Pricing strategies used at introductory stage or market entering price strategies are:

Skimming

Penetration

In preparing to enter the market with a new product, management decides whether to
adopt a skimming or a penetration price strategy.

Market-Skimming Pricing
Skimming defines the pricing strategy of entering market at a high price with high quality
products. This strategy is applied in case of less elastic or inelastic demand of products.

Market-Penetration Pricing
This strategy involves introduction of products at low prices. This strategy is applied in
case of products with more elastic demand and particularly for consumer goods.

Nestl Fruit Yogurt: Market-Penetration Pricing

The pricing strategy adopted by Nestl Fruit Yogurt is market-penetration pricing since it
is a consumer product and has entered market with price as low as Rs. 12 and also
because it fulfills following conditions of market-penetration pricing.

A large market exists for the product.

Demand is highly elastic.

Economies of scale are possible i-e substantial reductions in the unit cost of the
product can be achieved through large-scale operations.

Competition for this product already exists in market i-e Raw yogurt which
presents a fierce competition.

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Price Objective
Every marketing activity including pricing should be directed towards a goal. Thus
management should decide on its pricing objective before determining the price itself.
Nestl like a few other firms has consciously established a pricing objective for fruit
yogurt. Following are the common pricing objectives:

Profit-oriented:
To achieve a target return
To maximize profit

Sales-oriented:
To increase sales volume
To maintain or increase market share

Status quo-oriented:
To stabilize prices
To meet competition

Nestl price objective: Status-quo oriented

The pricing objective taken up by Nestl Fruit Yogurt is status quo which is intended
simply to maintain the firms current situation that is the status quo. With either of the
goals of this objective a firm seeks to avoid price competition. Price stabilization is
often the goal in industries where one large firm such as Nestl acts as a leader in setting
prices. Smaller industries tend to follow the leader when setting their prices or simply
price the products to meet the prevailing market price. This pricing policy gives
management an easy means of avoiding difficult pricing decisions.
Nestl also adopts this strategy to avoid price competition. It focuses more on using
other marketing mix elements such as product distribution and product rather than price.
Nestl Fruit Yogurt is concentrating more on innovation that is introducing new flavors
and previously introduction of real fruit chunks rather than changing prices.
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Nestl Fruit Yogurts Macro environment

Nestl Fruit Yogurts External Macroenvironment includes:

1. Demographics
a) Age
Briefly, we can say that fruit yogurt is popular among every age group. This is
because its delicious, nutritious, hygienic and the best alternative junk food. People
for a long time were looking for one such yogurt that is energizing, creamy, thick, and
full of fruits. Once this product came, it took the Pakistani market by storm. Because
of its low fat contents it came as good news for the diet conscious people. Mothers
and wives, who have always been the most considerate for their kids and families,
preferred to buy fruit yogurt as it is of high quality and distinct taste. It has loads of
flavors suited to the taste of almost every member of the society. Previously it was
taken with meals only but now it has become an all time favorite dessert as well.

b) Sex/gender
It has been a common observation that men have never been much into eating yogurts
but with the launch of this product scenario changed. Men who used to be most
reluctant to eat yogurt, enjoy this product as much as they can. So we can safely say
that fruit yogurt is popular among men and women alike.

c) Location of residence
Nestl Fruit Yogurt is not available everywhere right now. It has been first introduced
in Karachi, Lahore, Islamabad and Peshawar where education and awareness level is
relatively high and people willingly go for the hygienic, nutritious and high quality
products irrespective of their prices.

d) Socioeconomic status
Previously, people used to prefer khula yogurt. The reason was that it used to be
cheap, available in large quantities and worth a compromise on quality for price. To
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target such people, Nestl came up with a 12 rupees economical fruit yogurt which is
within the affordability of every income group of Pakistan. With this introduction low
income people switched to fruit yogurt as it provided them with high quality,
nutrition, and delicacy at a very reasonable price.

e) Religion
With religion comes the concept of Halal, Haram products primarily. If you take a
look at the above-mentioned ingredients of fruit yogurt .youd know that they are all
Halal according to our religion Islam. This is because one of the foremost strategies
of Nestl Fruit Yogurt is to take well into consideration the countrys legislatures and
religious constraints of the country before the introduction of a product. In addition to
this, fruit yogurts of Nestl are of high quality, they are nutritious and hygienic as
well.

f) Education
Education and knowledge bestow a person with awareness which actually effects the
buying decisions of individuals. Only the educated people know the importance of
nutritious and hygienic foods and such people never compromise on quality for price.
They prefer to buy expensive products but in return expect the highest possible
quality n wide variety. Keeping this aspect into consideration, Nestl launched its
fruit yogurt initially in Karachi, Islamabad, Lahore and Peshawar where the literacy
rate is relatively high and people have the urge to know more and beware of their
surroundings.

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2. Economics Conditions
The economic conditions prevalent in the country did affect the investment in the
Nestl Fruit Yogurt industry.
Some common restrictions and barriers that prevented the investment of capital in this
project included:

a) Operations Restrictions
Restrictions on procurement, hiring foreign personnel, or locating business activities,
as well as the efficiency and honesty of officials with whom business executives must
deal and the effectiveness and integrity of the judicial system. To deal with problems
like these Nestl Fruit Yogurts board of directors lessened the use of the middle-man
and did most of the sale by their own department.

b) Labor Policies
Government policies, trade union activity, and productivity of the labor force that
create either high or low costs for businesses. Apart from this Nestl Fruit Yogurt
team discourages the use of child labor in its plants. This comes at a cost. The labor
expenses for the company raised more than forecasted.

c) Domestic Economic Problems

A country's ranking according to its most recent five-year performance record in per
capita GDP, GDP growth, inflation, unemployment, capital investment, and budget
balance. During the year 2005-06 the country did experience inflation, a low GDP
and unemployment all these factors contributed in a low investment by the investors
into this fruit yogurt project
Nestl Fruit Yogurt used the process of strategic planning. Strategic planning involves
identifying future trends and analyzing how the corporation can take advantage of
those trends. Such analysis traditionally concentrated heavily on economic trends, but
since political decisions and events substantially influence these trends, planners now
incorporate political risk analysis. Current planning activities made by Nestl involve
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an attempt to assess the impact of political and economic trends, but strategic
planners can find it difficult to incorporate political analysis into their traditional
economic and business research. Political analysis, by its nature, is qualitative,
dealing with more abrupt and sweeping factors. Many planners have found systematic
risk ratings particularly useful because they allow for the cross country comparisons
that are an integral part of their analytical approach. Most firms use risk information
for many reasons and in several different offices.
Another important reason for the low investment of capital in the Nestl Fruit Yogurt
project was the increased interest rates. Fewer investments were made which created
a need for capital. This affected the companys marketing strategy and the number of
advertisements made was decreased.

3. Competition
Nestl Fruit Yogurt has three main competitors namely:
1.

Olpers

2.

Prime Yogurt

3.

Raw Yogurt

Competitive strategies of Nestl

In order to counter the present competition, Nestl Fruit Yogurts marketing team
adopts the following measures:

Innovations in their products (yogurts) so that the market never gets fed up.

Fruit yogurt of high quality and a distinct taste.

Low fat contents to target the diet-conscious section of the market.

Low price of 12 rupees that is affordable to every socioeconomic status.

Nutritious, hygienic and the best alternative to junk food.

Attractive packaging and use of imported seals.

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High budget, advertisement of this new product (fruit yogurt) on mass

media.

Advertisement through streamers, posters, magazines and outdoor

billboards.

Different fruit flavors in the yogurt that specifically attract kids and fruit
lovers.

4. Social and Cultural Forces

First of all, we have to define what society is. Society is all about people in general,
living in communities. Then we have to know what culture is. Culture is basically the
customs, beliefs, way of life, and social organization of a particular country or group.
Now we have to see how and in what ways the cultural and social forces affect the
marketing of our chosen organization, Nestl in Pakistan. The first aspect that will
be brought under consideration is:

a) Family
In a country like Pakistan, family plays a pivotal role in the everyday life of an
individual. Where there is a family, there is food, and where there is food there are
accessories e.g. raita, pickles, salad, packed or raw yogurt. This is a part of our
culture. Nestl provides the families with the dairy products like packed simple
yogurt, raita, and fruit yogurt. Besides having it as an accessory of food, simple
yogurt is also used as a raw material for cooking, which is again a part of our
tradition, our culture. Nestl provides the Pakistani families with all that they require
purity, taste, hygiene everything.

b) Customs and Behaviors

The normal custom is that this particular product is usually consumed in the summers.
As previously mentioned, the country runs on traditions and culture, and it tells us

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that it gives the body a cool effect; therefore, people prefer having yogurt in the
summers.
Here in Pakistan, the majority of the people are either illiterate or live below the line
of poverty, so how this edible product is packaged does not really matter as it has to
be consumed anyway.
The behavior of the customers changes at certain points in a year where the demand
of this particular product increases e.g. Moharram, Ramadan, Eid etc.

5. Political and Legal Forces

Political and legal forces also influence every companys conduct. Political and legal
forces on marketing would be categorized into:

a) Trade policy
Taxes (state and local taxes) delivery services result in higher taxes due to increase
in number of vans since Nestl mostly relies on its self service for transportation so
that the chilling capacity and other such requirements can be observed. Increase in
vans for transportation is thus an uncontrollable factor and demands tax payments.
Quotas and tariffs when importing seals Nestl also faces import barriers in the
form of quotas and tariffs which also limit the imports.

b) Quality Control
Since Nestl is an ever increasing food company quality control also presents a
problem which has to be observed. Nestl Milk related products have established an
Extension Service, staffed by qualified veterinary doctors, who assist farmers in
vaccination and treatment of livestock, improved breeding, good animal husbandry
practices, provision of high yield fodder seed etc so as to come up with highest
quality food products.

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c) Open/close economy:
Its an open economy facilitating foreign investments and allowing free trade.

6. Technology
Nestl, the world's biggest food Group is also the global leader in the industry with
regard to Research and Development (R&D), No other food company dedicates so
many human and financial resources to R&D: an international staff of 3500 engaged
in the search for innovative new products and the renovation of existing ones. Year
after year, Nestl invests some 800 million Swiss francs into R&D as a major driving
force of its double strategy: to strengthen the Companys brands worldwide and to
continue to support future long- term growth and competitiveness through innovation
and renovation. At the threshold of this new millennium, Nestl Fruit Yogurts
objective is to consolidate and strengthen its leading position at the cutting edge of
innovation in the food area, in order to meet the needs and desires of consumers
around the world, for pleasure, convenience, health and well being.
Nestl Fruit Yogurt-processing industry has special concerns about the health and
safety of the consumers. This is the reason why abundant and productive agricultural
sources, conducive climate conditions, and modern technologies are all important
factors for providing Nestl Fruit Yogurt-processing industry with ample and high
quality raw materials. For the most part, Nestl food-processing facilities are located
close to their agricultural source.
Nestl uses the term "clean technologies" to describe its working environment. This
term is defined as "manufacturing processes or product technologies that reduce
pollution or waste, energy use, or material use in comparison to the technologies that
they replace."
Nestl Fruit Yogurt is Mass-processed by heating concentrated milk, or milk fortified
by skim milk powder, to about 90 C (194 F) for a few minutes, then cooling it to
about 44 C (111 F), at which point a controlled culture of Lactobacillus bulgaricus
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and Streptococcus thermophilus is added. These two lactic organisms produce the
required acidity and the delicate yogurt flavor. Souring and thickening take place in
about 3 hours at 44 C (111 F), and stop when the mixture is cooled to 5 C
(40 F).At this stage chunks of fruit are added to give the yogurt the desired taste.
Because the milk has been heated and soured, and due of its high acidity, pathogens
cannot grow in yogurt, and it is probably the safest of all perishable foods. Well-made
yogurt made by Nestl industries of any type should last for 14 days if kept at 5 C
(41 F).

Improved Packaging
Nestls fruit yogurts main aim is the use of less excessive and more environmentally
friendly packaging products. It uses special packaging techniques that minimizes and
eliminates loss by leakage or evaporation and reduces spoilage and contamination by
dirt, insects, bacteria, mold, moisture or oxygen.
Another important technique used in the packaging of Nestl Fruit Yogurt is that of
Aseptic packaging. Aseptic packaging sterilizes the fruit yogurt and then packages it
in a sterilized container. The typical aseptic containers include foil-lined cartons,
plastic cups, and plastic bags. These containers cost and weigh less than the metal
cans or glass bottles traditionally used in packaging. Another advantage of aseptic
packaging is better flavor. Cans or bottles require much longer heating time for
sterilization. The longer foods are heated, the more the flavor changes. In the aseptic
process, foods can be heated rapidly outside of the container. Therefore, aseptically
packaged foods have a more natural flavor as well as more nutrients.
Above everything to keep up with the quality standards Nestl used imported seals
specially designed for packaging dairy products. All this makes Nestl Fruit Yogurt a
flavored product with only a few calories per serving and is popular for low calories
diets.

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Nestl Fruit Yogurts Microenvironment

1. Market
In marketing, the term market refers to the group of consumers or organizations that
is interested in the product, has the resources to purchase the product, and is permitted
by the law and other regulations to acquire the product.
In marketing any given good or service, three specific factors need to be considered:

People or organizations with needs,

Their purchasing power, and

Their buying behavior

Nestl Fruit Yogurt is an indulger for all males, females and adults who are health
conscious people and who want healthy alternative to junk food but with good taste.
This product is unvaryingly for all fruit-lovers and fans of desserts. However the main
target market of this product is not only kids, who are appealed to a variety of fruit
flavored yogurts with real fruit chunks i.e. Peach, Strawberry, Pineapple etc because
of their delicious tastes, but are also a choice of mothers because they are safe and
because of their nutritive values.
Briefly Nestl Fruit Yogurt has a wide range market including all age groups and
income groups with price Rs.12 per yogurt.

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2. Suppliers
The people or firms that supply the goods or services required by a producer to make
what it sells and also the firms that provide the merchandise, a wholesaler or retailer
resells are the suppliers and are a vital part of a firms marketing success.
The core raw materials of Nestl Fruit Yogurts are milk and fruits. Driven by its
commitment to quality and having realized that only self collection could eliminate its
dependence on poor quality milk from outside sources, the company successfully
established its own collection system and expanded its operations over a very large
milk shed area in Punjab. Milk is collected through a vast network of village milk
centers (VMCs), sub-centers and centers. At these centers chillers have been installed
to lower milk temperature to 4 degree centigrade for preventing bacteria development
during long hauls to factories, which are undertaken by a fleet of specially insulated
tanks.
Initially Nestl Milkpak ltd. Acquired services of Kabirwala Dairy ltd. But now with
the merger of this factory with Nestl Milkpak in April 1997, Kabirwala factory is a
fully owned unit of Nestl Milkpak ltd.

3. Marketing Intermediaries
Marketing intermediaries are independent business organizations that directly aid in
the flow of goods and services between a marketing organization and its markets.
There are two types of intermediaries:

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a) Middlemen, wholesalers and retailers

As for Nestl Fruit Yogurt wholesalers are given license (i.e. those with best
chillers).However middlemen are less involved because it mostly done by their self
owned departments.

b) Channels of distribution
They operate between a company and its markets and between a company and its
suppliers. These are the facilitating organizations that provide services such as
transportation, warehousing, and financing that are needed to complete exchanges
between buyers and sellers.
Milk collected by Nestl is low on Sodium high on fat and solid-non-fats and has
reduced bacteria count. This was achieved through a comprehensive strategy and
sustained efforts to overhaul the milk collection process, intensive education program
for the farmers and the milk collection staff, up gradation of milk loading and
transportation system, increase in the chilling capacity and above all, adherence to the
highest acceptance standards at all milk collection points, including the factories.

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Segmentation
Market segmentation is one of the steps that go into defining and targeting specific
markets. It is the process of dividing a market into a distinct group of buyers that require
different products or marketing mixes.
A key factor to success in today's market place is finding subtle differences to give a
business the marketing edge. Businesses that target specialty markets will promote its
products and services more effectively than a business aiming at the "average" customer.
Opportunities in marketing increase when segmented groups of clients and customers
with varying needs and wants are recognized. Markets can be segmented or targeted
using a variety of factor. The bases for segmenting consumer markets include:

Demographical bases (age, family size, life cycle, occupation)

Geographical bases (states, regions, countries)

Behavior bases (product knowledge, usage, attitudes, responses)

Psychographic bases (lifestyle, values, personality)

A business must analyze the needs and wants of different market segments before
determining their own niche. To be effective in market segmentation keep the following
things in mind:

Segments or target markets should be accessible to the business

Each segmented group must be large enough to provide a solid customer base.

Each segmented group requires a separate marketing plan.

Large companies such as Nestl segment their markets by conducting extensive market
research projects. This research is often too expensive for small businesses to invest in,
but there are alternative ways for to a small business to segment their markets.

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There are many reasons for dividing a marketing into smaller segments. Any time one
suspect there are significant, measurable differences in the market he/she should consider
market segmentation.
Market segmentation is the process in marketing of dividing a market into distinct
subsets (segments) that behave in the same way or have similar needs. Because each
segment is fairly homogeneous in their needs and attitudes, they are likely to respond
similarly to a given marketing strategy. That is, they are likely to have similar feeling and
ideas about a marketing mix comprised of a given product or service, sold at a given
price, distributed in a certain way, and promoted in a certain way.
Small segments are often termed niche markets or specialty markets.
The process of segmentation is distinct from targeting (chosing which segments to
address) and positioning (designing an appropriate marketing mix for each segment). The
overall intent is to identify groups of similar customers and potential customers; to
prioritise the groups to address; to understand their behaviour; and to respond with
appropriate marketing strategies that satisfy the different preferences of each chosen
segment.
The requirements for successful segmentation are:

Homogeneity within the segment

Heterogeneity between segments

Segments are measurable and identifiable

Segments are accessible and actionable

Segment is large enough to be profitable

These criteria can be summarized by the word SADAM:

S - Substantial: the segment has to be large and profitable enough

A - Accessible: it must be possible to reach it efficiently

D - Differential: it must respond differently to a different marketing mix

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A - Actionable: you must have a product for this segment

M - Measurable: size and purchasing power can be measured

Currently a college student studying the marketing mix is now introduced to the Four Ps
of the Marketing Mix; Product, Place, Promotion, Price. Product (service) is whatever it
may be that is being sold/marketed. Price refers to not only the actual price but also price
elasticity. Place has evidently replaced distribution simply by where or what area the
marketing campaign is going to cover. Today the idea of place is not limited to
geographic profiling but also demographics and other categorizing variables. This has
only occurred over the last ten years with the expansion of internet use and its ability to
target specific types of people and not just people in a geographic area. Promotion simply
refers to what medium will deliver the message and what the overall marketing strategy is
offering as a benefit.
The variables used for segmentation include:

Geographic variables
o

region of the world or country

country size

climate

Demographic variables
o

age

gender

sexual orientation

family size

family life cycle

income

occupation

education

socioeconomic status

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religion

nationality/race

Psychographic variables
o

personality

life style

value

attitude

Behavioral variables
o

benefit sought

product usage rate

brand loyalty

product end use

readiness-to-buy stage

decision making unit

When numerous variables are combined to give an in-depth understanding of a segment,

this is referred to as depth segmentation. When enough information is combined to
create a clear picture of a typical member of a segment, this is referred to as a buyer
profile. When the profile is limited to demographic variables it is called a demographic
profile (typically shortened to "a demographic"). A statistical technique commonly used
in determining a profile is cluster analysis.
The most successful small businesses understand that only a limited number of people
will buy their product or service. The task then becomes determining, as closely as
possible, exactly who those people are, and 'targeting' the business's marketing efforts and
dollars toward them.
As a manufacturer of dairy products, Nestl knew that there were plenty of other
companies operating in the local market with their own product lines. So they decided to
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offer something different something unique to their customers, they came up with the
Nestl Fruit Yogurt. In doing this they eliminated a percentage of the market- but it also
gave them a niche that they could capitalize on, and expanded their market in a way that
other manufacturers could not take advantage of.
One needs to understand that people purchase products or services for three basic
reasons:

To satisfy basic needs.

To solve problems.

To make themselves feel good.

You'll need to determine which of those categories your product or service is the solution
to, and be prepared to market it accordingly. Your product or service may fit more than
one category
The next step in creating an effective marketing strategy is to zero in on the target market.
Zeroing in on the target market is done by using Market Segmentation.
The primary market of Nestl is local or regional. The first thing they did was to research
the 'demographics' of the community, and divide it into market segments:

Age: children, teens, young, middle, elderly

Gender: male, female

Education: high school, college, university

Income: low, medium, high

Marital status: single, married, divorced

Ethnic and/or religious background

Family life cycle: newly married, married for 10 20 years, with or without
children.

This information was available to them through the local town, hall, library, or Chamber
of Commerce.

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Next, they needed to segment the market as much as possible using 'psychographics' as
their guide:

Lifestyle: conservative, exciting, trendy, economical

Social class: lower, middle, upper

Opinion: easily led or opinionated

Activities and interests: sports, physical fitness, shopping, books

Attitudes and beliefs: environmentalist, security conscious.

In addition, they wanted to find out how they purchased: seasonally, locally, only in
volume, who makes the decisions? It is important to note that businesses, unlike
individuals, buy products or services for three reasons only: to increase revenue, to
maintain the status quo, or to decrease expenses. If Nestl filled one or more of these
corporate needs, then they might have had found a target market.
By now they had a picture emerging of who they thought their 'ideal' customer was or
who they wanted him to be. Depending on the nature of their business, Nestl might even
be able to write a description of their customer.
"My target customer is a middle-class woman in her 30s or 40s who is married and has
children, and is environmentally conscious and physically fit."
Based on the numbers Nestl uncovered in their research, above, they may even know,
for example, that there are approximately 9000 of those potential customers in their area!
It may well be that 3000 of them are already loyal to a competitor, but that still leaves
6000 who are not, or who have not yet purchased the product from anyone.
Lots of times prospective customers don't know about the company Nestl or their
product the fruit yogurt, or can't tell the difference between Nestl and others. It is the
job of people at Nestl, once to know who their best customers are, to 'target' the group
that they've identified even if they have competition.

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In addition, they may decide, using the example above, that Nestl would like to extend
their target market to include women from 50 60 years of age. If they go back to the
basic reasons why people purchase goods or services, and can find ways to target their
efforts to that age group, they may be successful in capturing a bigger share of the
market!
On the other hand, what if Nestl 'specialized' the product or service and then researched
the target market, only to discover that there are probably less than 75 people who will
buy from them?
First of all, if those 75 are corporate customers who will spend hundreds on your product
or service annually, then Nestl has nothing to fear. But if those 75 are only going to
spend Rs.600 every decade on your product or service then Nestl needs to go 'back to
the drawing board' of planning the business and perhaps determining a wider target
market but at least they would be armed with all the information they need to start
again, or go in a different direction.
Let's face it there's a market, and a target market, for everything.

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Target Market and Strategies

After a company has defined market segments, it can enter one or many segments of a
given market. Target marketing involves evaluating each market segments attractiveness
and selecting one or more segments to enter, these selected segments are called target
markets. A company should target segments in which it can profitably generate the
greatest customer value and sustain it over time.
Target Marketing involves concentrating your marketing efforts on one or a few key
segments. Target marketing can be the key to a businesss success.
The beauty of target marketing is that it makes the promotion, pricing and distribution of
your products and/or services easier and more cost-effective.
A company with limited resources might decide to serve only one or a few special
segments or market niches. Such niches specialize in serving market segments that
major competitors overlook or ignore. Alternatively, a company might choose to serve
several related segments perhaps those with different kinds of customers but with the
same basic wants. Nestl Fruit Yogurts marketing team could choose from either of the
following strategies:

1. Cost Leadership (Undifferentiated or Mass) Strategy

This strategy emphasizes efficiency. By producing high volumes of standardized
products, the firm hopes to take advantage of economies of scale and experience
curve effects. The product is often a basic no-frills product that is produced at a
relatively low cost and made available to a very large customer base. Maintaining this
strategy requires a continuous search for cost reductions in all aspects of the business.
The associated distribution strategy is to obtain the most extensive distribution
possible. Promotional strategy often involves trying to make a virtue out of low cost
product features.

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To be successful, this strategy usually requires a considerable market share advantage

or preferential access to raw materials, components, labour, or some other important
input. Without one or more of these advantages, the strategy can easily be mimicked
by competitors. Successful implementation also benefits from:

process engineering skills

products designed for ease of manufacture

sustained access to inexpensive capital

close supervision of labour

tight cost control

incentives based on quantitative targets.

Examples include low-cost airlines such as EasyJet and Southwest Airlines, and
supermarkets such as KwikSave.

2. Differentiation Strategy
Differentiation involves creating a product that is perceived as unique. The unique
features or benefits should provide superior value for the customer if this strategy is
to be successful. Because customers see the product as unrivaled and unequaled, the
price elasticity of demand tends to be reduced and customers tend to be more brand
loyal. This can provide considerable insulation from competition. However there are
usually additional costs associated with the differentiating product features and this
could require a premium pricing strategy.
To maintain this strategy the firm should have:

strong research and development skills

strong product engineering skills

strong creativity skills

good cooperation with distribution channels

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strong marketing skills

incentives based largely on subjective measures

be able to communicate the importance of the differentiating product

characteristics

stress continuous improvement and innovation

attract highly skilled, creative people

3. Segmentation Strategy
In this strategy the firm concentrates on a select few target markets. It is also called a
focus strategy or niche strategy. It is hoped that by focusing your marketing efforts on
one or two narrow market segments and tailoring your marketing mix to these
specialized markets, you can better meet the needs of that target market. The firm
typically looks to gain a competitive advantage through effectiveness rather than
efficiency. It is most suitable for relatively small firms but can be used by any
company.As a focus strategy it may be used to select targets that are less vulnerable to
substitutes or where a competition is weakest to earn above-average return on
investments.
The following diagram illustrates the use of each target marketing strategy accroding to
its market scope and compentency.

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Due to the nature of the product ( uniquely traditional yet contemprary ) and the available
market segments, Nestl Fruit Yogurts marketing team chose to combine multiple
strategies. The team combined market segmentation strategy with product
differentiation strategy which was an effective way of matching Nestl Fruit Yogurts
product strategy (supply side) to the characteristics of its target market segments (demand
side). But before any further decision was made, the marketing team evaluated the market
segments.
In evaluating segments to target, Nestls marketing team observed three factors:

Segment size and growth

Segment structural attractiveness

Company objectives and resources

The team collected and analyzed data on current segment sales, growth rates, and
expected profitability for various segments. It was observed that due to Pakistans uneven
income distribution and education level, it would be difficult for consumers to accept a
product of price Rs.12 (although low) and realize the health benefits and nourishment the
product provides. Only developed cities such as Karachi, Lahore and Islamabad had an
even income distribution level and literacy rate that was adequate. For this reason, only
A class citizens of the major developed cities of Pakistan including: Islamabad, Lahore
and Karachi were chosen as first target segment.
A survey also underlined that the changing consumer patterns of young males and
females mainly due to diet awareness, health consciousness and eating out habits has
increased the rate of consumption of ready to go (fast food) food products. Hence a
product, such as Nestl Fruit Yogurt itself, that offers combined benefits of a healthy diet
in addition to being ready to go, would definitely catch the eye of the youth population.
This led the marketing team to choose all health conscious males, females and adults to
be put up as the second target segment of Nestl Fruit Yogurt.
On the basis of this information, Nestl Fruit Yogurts marketing team identified Nestl
Fruit Yogurts target market to constitute class A citizens of Karachi, Islamabad and
Lahore all males, females and adults who are health conscious people and who want
healthy alternative to junk food but with good taste.
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Positioning
Positioning can be defined as how your target market defines you in relation to your
competitors. A good position makes the product unique and is considered a benefit by the
target market. Now we will talk about how our chosen organization Nestl is
positioned in Pakistan.
There are many factors that we will be taking into consideration. The first and foremost
factor that we will be considering is the number of competitors. According to what the
studies show there are three main competitors of Nestl i.e. Olpers, Prime yogurt, and
raw yogurt. As stated above, the first requirement of good positioning is that the product
should be unique. When we relate this factor to the Nestl Fruit Yogurt we see that the
product indeed is unique, as no competitor before introduced yogurt that was flavored.
But being unique is not enough. The product has to be beneficial for the target market
and we see that Nestl Fruit Yogurt is very much liked by kids and the fruit lovers.
When we are comparing one thing with another we have to look at all the competitive
factors that make the product conspicuous and prominent among the others. The next
factor is flavor. Nestl Fruit Yogurt is available in different flavors with a tinge of
originality which boosts up the level of quality. And as mentioned previously this product
is not subjected to high amounts of heat therefore it retains the original taste. This high
quality product is available at a very affordable price or PKR 12. A price that is
affordable to almost anyone. In a country like Pakistan, price does play a pivotal role in
helping the target market to decide which product to buy. Besides this, according to our
culture, accessories of food include lots of things. One of them is raita. Nestl has been
innovative enough to introduce the Nestl raita in order to stand out in the row of
competitors.
The next factor that were going to discuss is quality packaging. Packaging is another
factor by which Nestl Fruit Yogurt stands out in the row of competitors. According to
the studies, it has been seen that most of the sales are in the major urban areas of

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Pakistan. Rural areas and minor urban areas still use the conventional raw yogurt. So its
basically the people of the urban areas who are more literate, knowledgeable, and
hygiene conscious, whereas the people in the rural areas neither know this stuff nor care
about this. The packaging is composed of imported seals and a sterilized plastic container.
The next factor is the high budget advertising activities. Nestl spends huge amounts in
the ATL and BTL activities in order to become the prominent members among the
competitors and to have a good image in the eyes of the target market.
All these positioning factors are then subjected to the perceptual map. The perceptual
map is a two dimensional map used by marketers in order to perceive the comparative
importance of each point of every brand available.

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Strategic Direction of Nestl Fruit Yogurt

Setting strategic direction involves answering two questions: Where are we now? And,
where do we want to go?

Where are we now

A detailed approach of assessing where we are now includes SWOT analysis and
environmental scanning. Each is explained in detail below:

SWOT Analysis
STRENGTHS
Their brand recognition.
The employees want to achieve higher
volumes by renovating existing
products and innovating new products.
Nestl is a low cost operator which
allows them to beat the competition by
producing low cost products and also
edging ahead with low operating costs.
They have a great research and
development team.

WEAKNESSES
They have not entered into many local
cities.
Packaging is not that attractive.

OPPORTUNITIES
Health-based products are becoming
more popular in the world including
Pakistan.
Because they are a market leader
(42.9%), they can introduce more
health-based products without any
doubts.
Sponsorship can be gained through
different means, such as sporting
events.

THREATS
There is a potential intense competition
amongst the top players in the
competition.
Competitors can use aggressive
marketing strategies like cutting prices.
Along with this comes increased
competition to gain market share.

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Where do we want to go
Knowing where the organization is at the present time enables managers to set a direction
for the firm and start to allocate resources to move towards that direction. Two techniques
to aid in these decisions are: Portfolio and Market Product analysis.

The Portfolio of Business: BCG Matrix

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Market Product Analysis

Firms can also view growth opportunities in terms of four combinations of current and
new markets and current and new products. As Nestl attempts to increase the sales of its
fruit yogurts business, it must consider all four of the alternative market-product
strategies.

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CONCLUSION

Nestl is committed to offering consumers high-quality food products that are safe, tasty
and affordable. The Nestl Seal of Guarantee is a symbol of this commitment. Keeping
this in mind, Nestl developed a unique healthy product which is a substitute to sugary
junk food like carbonated drinks, ice-creams and desserts.
Nestl Fruit Yogurt, a value added product, is categorized as a chilled dairy product
which has all the goodness of milk, yogurt and fruit.

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BIBLIOGRAPHY

Book reference
Marketing Strategy and plan
Michael vag,

Website
www.nestle.in
www.business.gov.in
www.wikianswar.com.

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