The Alpino Project

Restructuring the Product Mix

Submitted in partial fulfilment of the RMD Course Project to

Professor Avinash G Mulky

Lavanya Yadlapalli
Sarayu S
Borale Nikhil Madhukar
Ekansh Nayal
Namala Madhuri

1311027
1311257
1311365
1311371
1311418

Product Mix Restructuring for Nestle Alpino

Lavanya Yadlapalli, Sarayu S, Nikhil B, Ekansh Nayal and Madhuri Namala
IIM Bangalore

Abstract
India has a 5562 crore chocolate market concentrated by a few major firms. Among these are
Cadbury, Nestl and a few premium segment players such as Ferrero. Of the chocolate
industry, a 30% share can be attributed to the premium segment. With growing disposable
incomes and an increasing appetite for premium chocolates, an expansion into the premium
segment is a logical step towards gaining and retaining market share in the long term.
The recent introduction of Nestls premium segment offering, The Alpino, received a halfhearted response in the Indian market. Since this product has only recently been launched,
product awareness is also extremely low. With this study we aim to understand how the
customer perceives the Alpino. In addition, we propose alternative product concepts for
consideration by Nestls management team with an aim to increase product liking and
improve product reception. The project also aims to identify the consumer segments that
should be targeted with the new Nestl Alpino. Additionally, we develop and test a new Ad
concept and try to demonstrate the effectiveness of the inclusion of the Country of origin in
all customer communications.
The project proceeds in 2 steps. The first step is an exploratory research phase to identify the
various factors considered important in determining the overall perception of a chocolate.
This step helps us identify a number of hypotheses listed in the later pages of this report. In
addition, we also identify the characteristics of the ideal chocolate. The concepts are
developed with these inputs. Further, the exploratory research phase provides an indication of
things and occasions that people associate with chocolate consumption. These are used as
input to the descriptive research phase where we use quantitative data to determine the
concept that comes closest to peoples perception of an ideal chocolate. Specifically we use
Multidimensional Scaling to construct a perceptual map consisting of the 3 concepts we
propose along with the 2 closest competitors as indentified from exploratory research
Ferrero Rocher and Cadbury Toblerone. Next, we use psychographic data to segment the
target population into a number of mutually exclusive categories using factor analysis. Output
from factor analysis is fed into a number of Discriminant analyses to identify the target
segment. The attributes that are important in determining the perception of a chocolate is then
identified using linear regression with overall perception as the dependent variable. The
occasions most closely associated with each concept is given a cursory analysis using
frequencies and percentages. Finally, the above analysis is combined with Ad perceptions to
finalise on a relevant positioning for the product.

Management Decision Problem (MDP)

To develop a Marketing Mix and Promotional Strategy for the New Nestle Alpino in the
Indian Market.

Marketing Research problems

In light of the MDP described above, we would like to conduct concept design and testing to
arrive at the concept that comes closest to the consumers ideal. We therefore define the
following MRPs for The Alpino Project.
1. To understand the underlying behaviour of consumers towards chocolate purchase
and consumption in India.
2. Establishing Positioning and Marketing Mix of The New Nestle Alpino concept.
Market Research Problem 1

Components

Information required

Who are the buyers of Demographics

premium chocolate? (Buyer
Psychographics
profile)
Purpose of purchase / Usage
Intention
Nature of purchase (When
are
the
chocolates
purchased?)
Understand the underlying
behaviour of consumers What is
towards chocolate purchase behaviour?
and consumption in India

the

Nature
of
consumption
purchase (When are the chocolates
consumed?)
Quantity (pack size) of
chocolate purchased each
time
Product Attributes Taste,
flavour, texture, melting rate,
viscosity etc.

Barriers and triggers

Chocolate purchase

to

Product packaging shape,

size, package look and feel
Price
Brand Image and Quality

Market Research Problem 2

Components

Information required

How many categories of

What is the customer buyers are there?
segment of interest for The What is the purpose for
New Alpino?
which
they
Purchase
Premium Chocolates?
Establishing
Positioning
and Marketing Mix of The
New
Nestle
Alpino
Concept.

What is the optimum pricing

strategy for The New Alpino
to gain market share?
What
should
be
the What kind of packaging and
marketing mix of The New Pack quantities do consumers
Alpino?
prefer?
What should the advertising
strategy be to establish
desired positioning?
How
is
the
product
positioned with respect to its
competitors?

How does The New Alpino

fare with respect to its Are there any POP/POD?
Measure
Image
and competitors?
How many customers are
Positioning of Nestle Alpino
willing to sign an Intention to
purchase agreement?

Research Methodology
The following research methodology was followed to obtain the necessary information as
listed in the MRP section above:
Exploratory Research
The exploratory research was used to gain insights and understanding about the buying
behaviour of chocolate consumers as well as the consumer image of an Ideal Chocolate.
The following exploratory methods were identified to be relevant and applicable:

Secondary Data Analysis

Depth Interviews
Projective Techniques (Association)

Descriptive Research
The descriptive research was used to obtain quantitative data for concept testing and Ad
concept testing. We used online survey as the chosen method of data collection. A
questionnaire capturing information required was prepared as explained in later sections.
A number of statistical analysis procedures such as MDS, factor analysis, Discriminant
analysis and Regression were used for various units of data. This will be dealt with in detail
in the data analysis and interpretation part of the report.
The output of the descriptive research phase is a chosen concept, user imagery and an Ad
concept which coupled with the user imagery serves as a guideline for product positioning.

Exploratory Research
With a basic secondary analysis on the chocolate industry, we found out that there are three
categories of chocolates: Luxury, Premium and Mass Produced. Nestle Alpino is positioned
in the premium category with competitors as Ferrero Rocher and Toblerone. As we found out
that Nestle Alpino has very low brand awareness, we identified two objectives for the
exploratory research:
1. Use secondary data analysis and projective tests to come up with few concepts that
could be tested later
2. Use depth interviews to test out the concepts as defined from the above stage
For coming up with the concepts, we needed to understand the consumers perception of an
ideal chocolate and thus we focused on the hedonic, symbolic and emotional benefits that
chocolates provide. Two kinds of projective techniques (Word Association & Sentence
Completion) were used and the following tables capture the key findings:

Chocolates trigger memories that include celebrations

Emotions drive most chocolate consumption
Chocolate shape has a significant impact on the consumers perception of
premiumness

Based on these findings, we came up with three concept designs and then proceeded to the
depth interviews phase. The concepts have been captured below for reference:
Concept 1: To love is to share
A packet of twin chocolate bonbons filled with a creamy mousse centre, each wrapped with a
message of love. Share it with your loved one and delight them with flattering messages over
a box of chocolates.

Concept 2: A chocolate from the alps for those with a taste for life
A chocolate from the land of the Alps - Made from the finest cocoa and the creamiest milk.
Just break into the hard nutty round shell to see yourself melt in the bitter sweet taste or gift
the feeling to someone today.
Concept 3: A chocolate is an expression of all things fine
Gift your loved ones a chocolate that is made from the creamiest cocoa butter nestled within
the opulence of dark chocolate. Light up their day with a small message cocooned inside
every chocolate.
The highlights of the depth-interviews have been captured given below:

Consumers use chocolates both for self-consumption and gifting purposes

Package size is closely linked to usage intention
Gold colour package is generally perceived to be Premium
Messages are considered a novel attraction
Concept 2 is perceived to be closer to an ideal chocolate

Based on the above analysis, we generated few hypothesis that can be tested later in the
descriptive research phase.
Hypothesis 1: There are at least two categories of customers The buyers and The
consumers. The buyers generally purchase Premium chocolates for gifting purposes and the
consumers buy Premium chocolates for individual consumption.
Hypothesis 2: At least 2 different package sizes are needed a small pack of 2 - 4 units for
individual consumption and a larger pack of 8 10 units for gifting.

Questionnaire design:
The questionnaire sought to collect the following information:
1. Consumption related information:
Purchase frequency
Usage intention
Preferred brand of chocolate
Serving sizes for consumption and gifting
2. Data for constructing perceptual maps Positioning related information on concepts
Similarity data on 3 concepts and 2 competitors

Attribute rating data for PROjective FITting analysis

3. Concept evaluation data

Uniqueness of concepts
Concept believability
Purchase intention
4. Occasion suitability data
5. Ad concept evaluation data
Ad uniqueness
Ad believability
Purchase intention
6. Psychographic data for customer segmentation
7. Demographic data for additional analysis

A sample of 76 complete responses was recorded. A reasonable mix of male and female
respondents was obtained with about 51.3% of male respondents. A majority of the
respondents were in the age group of 20 30 years. The following sections discuss the
insights gathered from data analysis.

Usage Intention
As given in the questionnaire sheet, one of the questions was to
find out the usage intention of Premium Chocolates: whether it
is for self-consumption or for gifting purposes. From the pie
chart below, it can be indeed noticed that there are two types of
usage intentions of Premium category chocolates. Thus, we can
accept the Hypothesis 1 that was mentioned in the Exploratory
Research section.

People purchase
premium chocolates for
two purposes: Selfconsumption and gifting

Self Consumption
Birthdays
14%
Gifting Family

78%

64%

Moo
d lifting
25%

33%
33%

Pacif
ying a friend / relative
Gifti
ng friends
Gitfting professional
relations

53%

Package Sizing
As given in the questionnaire sheet, one of the questions was to find out the package size that
people prefer for various purposes: Do they prefer one size for self-consumption
self consumption and a
different size for gifting? As the pie charts show below, significant % of people (49%) prefer
p
50gm package size for self-consumption
consumption and significant % of people (53%) prefer 300 gm
package size for gifting. Thus our Hypothesis 2 can be accepted.

People prefer small pack

size (~50gm) for selfconsumption and bigger
pack size (~300gm) for
gifting

7%
17%

49%

25gm (A small snicker

bar)
28%

50 gm (A dairy milk
fruit and Nut)
100 gm (A 5 piece box
of Ferrero Rocher)
300 gm (A 16 piece
box of Ferrero
Rocher)

25gm (A small
snicker bar)

1%
5%

53%

50 gm (A dairy milk
fruit and Nut)
41%
100 gm (A 5 piece
box of Ferrero
Rocher)
300 gm (A 16 piece
box of Ferrero
Rocher)

Factor Analysis on Psychographic data

There is a list of 30 questions in the Questionnaire form to get the psychographic profile of
the survey respondents. A factor analysis is performed on this psychographic data to identify
the underlying
ng factors that influence the profile.
The KMO measure of sampling adequacy has a value of 0.617, which is high enough to say
that the factor analysis is appropriate. The Bartletts test of sphericity has a very high chichi
square value and significance value
value of zero at 95% confidence level. Thus, the null
hypothesis that the variables are uncorrelated can be rejected.
On further analysing the Total Variance Explained matrix, 5 factors have been identified
and cumulatively explain about 55% variance. The rotated component matrix has been
studied to find out the factor loadings. The details have been captured below in the matrix:
Factor
1
2
3
4
5

Loadings on factors (questions from the psychographic profile)

Question 6,7,8,11,1215,17,19&23
Question 3,9,10,13&20
3,9,10,13&
Question 14,16,22,24,26&29
Question 1,2,18,27&28
Question 4,5,21,25&30

After looking at the question loadings on the factors and the actual questions, the consumers
of premium chocolates have been identified into the following 5 categories/segments:
categories/se
Variety Seeking
Organized Know all
Risk averse Family oriented
Status Seeking
Self-sufficient
sufficient Party animals

The highlights of the factor analysis have been captured below. These factors and the factor
scores obtained out of SPSS have been used for further discriminant analysis as explained in
the next sections.
The psychographic profiles of the Premium
Chocolate consumers can be used to
categorize them into 5 mutually exclusive
segments: Risk-seeking, Organized Know
all, Risk averse & Family Oriented, Status
Seeking, Self Sufficient party animals

Discriminant Analysis Purchase Frequency

The frequency of purchase of premium chocolates has been obtained for each survey
respondent. The respondents have been categorized based on this purchase frequency (once
or twice a week, once in 15 days, once in a month & less than once in a month) and then a
discriminant analysis has been performed with the category of people based on purchase
frequency as the dependent variable and the factors obtained from factor analysis as
independent variables.
From the Tests of Equality of Group Means table, it can be
The consumers belonging
noticed that the F-values are greater than 1.85 only for the
to the Party-animals
factors Party Animals and Status Seeking. Thus only these
segment purchase the
two factors discriminate the consumers based on the
premium chocolates
purchase frequency. The Eigen value for function 1 is 0.279,
frequently
which implies 27.9% of variance is explained and also the
canonical correlation value is high. The other two functions
have very low Eigen value, low canonical correlation and high Wilks values and thus cant
be used further.
From the Structure Matrix, it can be seen that only the Party Animals factor is loaded on the
first function. 48.7% of the original cases have been classified correctly and 42.1% of crossvalidated cases have been classified correctly, both of which are higher than the 32.5%
needed for 4 categories.

Multi-dimensional Scaling
The respondents have been asked to rate the similarity/dissimilarity between the three
concepts (Concept 1, Concept 2 & Concept 3), Ferrero Rocher and Toblerone. The average
values from this similarity/dissimilarity matrix have been taken and an MDS analysis is
performed to produce a perceptual map. The R-square value obtained is very high (0.95095),
i.e. 95% of variance can be explained using this model. The stress value is 0.1 (low), which
indicates that the fit is good.

The map above shows that the Concept 2 is perceived to be very close to Ferrero Rocher and
Toblerone is not at all perceived to be close to any of the concepts.
The Multi-dimensional scaling has also been performed separately by taking the Gender
(Male/Female) data to see if the perceptions of these concepts and brands overall differ from
those of Male and Female respondents.
Based on the MDS analysis for the data of Female respondents, the R-square value obtained
is 0.89624 i.e. 89.6% variance is explained. The stress value is 0.16, a low value that
indicates the fit is good. The perceptual map obtained with this analysis has been given
below:

It can be noticed that the female category respondents perceive Concept 3 as being close to
Ferrero Rocher, which is different from that of the overall perception.
Based on the MDS analysis for the data of Male respondents, the R-square value obtained is
0.9775 i.e. 97.75% variance is explained. The stress value is 0.075, a low value that indicates
the fit is good. The perceptual map obtained with this analysis has been given below:

It can be noticed that the male category respondents perceive Concept 2 as being somewhat
close to Ferrero Rocher, which is somewhat similar to that of the overall perception.

The overall perception shows that the

respondents perceive Concept 2 as being
close to Ferrero Rocher, however it can
also be noticed that Female and Male
perceptions about similarity/dissimilarity
of concepts and brands are different

Occasion Suitability
Ratings on a five point Likert scale were obtained for each of the 3 concepts and 2
competitors products on 6 consumption occasions. Average ratings for each product
occasion pair are listed in the table below. The results are intuitively significant.

Birthday

Gifting Family

Mood
Lifting

Pacifying

Gifting
Friends

Gifting Professional
Relations

C1

2.770

2.873

3.803

4.042

3.197

1.803

C2

3.694

3.958

4.056

3.817

4.070

3.746

C3

3.534

3.634

3.563

3.563

3.690

2.817

Ferrero Rocher

4.403

4.380

4.366

4.243

4.465

4.296

Cadbury Toblerone

3.667

3.662

3.310

3.183

3.887

3.549

Ferrero Rocher seems to have a high rating on almost every occasion. This might be an
indication of the high brand equity that it enjoys. For every other product we have one
occasion stand out from the rest.
C1 Concept 1 carries a message to be shared with your loved one. The low value that this
concept has for the occasion - Gifting professional relations is intuitively meaningful. Also,
Pacifying seems to be the most suitable purpose for which this concept is consumed. This
shows that although the concept has been positioned under the To love is to share banner,
there might be untapped
areas and uses such as this.
The presence of a
C2 This concept was the
most similar to Ferrero
message shifts focus
Rocher from the product
itself to package and
from self consumption to
gifting. Dark chocolate is
product
communication.
The one difference was that
perceived
as
a
good
this concept used a dark
chocolate outer layer unlike
Cheer-me-up
Ferrero
Rocher.
The
concept is perceived to be
most suitable for Mood
lifting (Self consumption)
and Gifting friends. So the concept should primarily be targeted at women and people in the
age groups of 20 35.
C3 This concept comes with a small message but unlike C1 the messages are generic and
not those that express love. The addition of messages over C2 has shifted its suitability from
Mood lifting (Self consumption) to Gifting Family and Friends.

PROjective FITting using Attribute rating

Attribute rating on the 7 attributes identified through the exploratory research phase was used
to conduct 2 different analyses.
1. It was used to construct a perceptual map that can be compared for similarities with
the overall perceptual map
2. It was used in linear regression to identify the relative importance of the 7 attributes
and the amount of variance that they explain.
PROXSCAL to obtain perceptual map:
We used SPSS MDS procedure PROXSCAL to arrive at the proximity data based on attribute
ratings. The validity of the analysis can be seen by the following goodness of fit measures.

The normalized raw stress is significantly low at 0.00108. And this is obtained with 4
dimensions. The Scree plot indicating Normalized raw stress reduction is below. Addition of
a new dimension seems to be able to accommodate further reductions in normalized raw
stress. However that would make the number of dimensions greater than the number of
objects. Therefore this is the best fit than can be obtained.

Tuckers coefficient has a value of 0.9999 which is greater than 0.95 indicating a high degree
of similarity among the different attributes included in the rating matrix. This makes the data
suitable for a treatment of proximity analysis.
The perceptual map that is obtained is reproduced below. Although this is not exactly similar
to the one obtained with a consideration of the overall ratings, it does indicate that concept 2
is the closest to Ferrero Rocher among all products.

Concept 1 is the most dissimilar when compared to both concepts 2 and 3 as well as Ferrero
and these findings are the same as before. The above MDS is identical to the MDS obtained
earlier tilted 900 in the anti-clockwise direction. We find that even attribute wise Toblerone
is similar to the other chocolates, it has been positioned differently.
Linear Regression on Attribute ratings:
Stepwise regression was performed to identify the attributes most important for explaining
the overall rating that was given on each concept/product. A model summary is presented
below. It shows that all attributes were included at the end of step 7. This also validates
results from exploratory analysis about the attributes important in the consideration of the
ideal chocolate.

The R square at the end of the 7th iteration is 0.532. This implies that about 53.2% of peoples
preferences about chocolates are explained by these attributes. This is a significant amount of
variance because chocolate is essentially a hedonic good. A higher number would have made
us doubt the validity of responses and a lower number would have meant too little
significance of attributes.
The F Values are all significant at 0.000. This indicates that at each step the addition of a new
attribute does not change the coefficients of the regression equation from non-zero to all zero.
The PP plot neatly aligns with the 450 line. This indicates an absence of multicollinearity.
Therefore the attributes are mutually exclusive. The residual statistics also show that mean
residuals are 0 with a very small standard deviation. This indicates that the model fits well.
From the marketing perspective After taste seems to be the
most important attribute. What encompasses after taste is
After taste, Taste and
slightly undefined but it would be reasonable for us to
texture are the most
include all feelings that the customer experiences post the
important of a
consumption of the chocolate. This is also intuitively
chocolates attributes.
appealing because people associate a number of feelings with
People do really enjoy
chocolate consumption and purchase as indicated by
eating the chocolate
itself and seem to carry
association tests during the exploratory research phase. Taste
forward the happy
is the next in line of significance, which also follows
feeling post
logically, followed by texture. The three physical attributes
consumption
of the product itself account for 41.4% of variance in overall
rating. The shape of the chocolate accounts for only about
2.3% of variance. This means that our hypothesis about peoples preferences for round shape
were not actually true.

Intention to buy Percentage of Purchase expectation

We use an extremely simple model to translate intention to purchase data on concepts into
probability of purchase. A weighted probability model is used with the following weights.
Rating
Definitely will buy
Probably will buy
Probably not buy
Definitely not buy

Probability
1
0.66
0.33
0

Although the model is extremely simplistic it gives a sufficiently reasonable estimate of the
number of people who might purchase Alpino from the set of those who are aware. With
these probability weights and intention to buy data we derived the following purchase
probability percentages.

We notice that concept 2 has the highest purchase probability which is also in line with all the
other findings. Concept 2 has higher ratings on the most important attributes obtained earlier,
it is the closest product wise on the perceptual map with Ferrero Rocher and also has high
uniqueness and believability scores. It also serves both for Self consumption as well as
Gifting implying a higher segment of the population has Concept 2 in the consideration set.
A summary is presented below:
Question

Definitely not
buy

Probably not
buy

Probably will
buy

Definitely will
buy

Not buy but

gift

Percentage of likely
purchase

Concept 1

32

15

14

39.09

Concept 2

25

32

51.47

Concept 3

38

19

10

46.06

Notice that both concepts 1 and 3 have a higher percentage of people who do not want to buy
for consumption but would like to gift it. This is also in line with our interpretation earlier
that presence of messages shifts focus from Self consumption to gifting.

Ad concept analysis
In devising Ads for communication we considered two approaches.
1. An emphasis on product related attributes and an allusion to the country of origin.
2. An appeal to the emotional side of the customer.
A preliminary examination indicates that people considered the first Ad more unique than the
second. This could be because most chocolates use the emotive route since chocolate is a
hedonic good. However, people considered Ad 2 more believable, expressed more intention
to buy the chocolate in Ad 2 and preferred Ad 2 overall.

Ad Preference
Answer
1 Ad 1
2 Ad 2
Total

Bar
Response %
0.355263
27
36%
0.644737
49
64%
76
100%

We also conducted a discriminant analysis to group people on the basis of Ad preference. Ad

preference in the table above was taken as the discriminating variable i.e. we have two
groups of people: People who prefer Ad 1 and those who prefer Ad 2. Output from Factor
analysis was used as the independent variables that discriminate between the two groups.

The pooled within group matrices indicates very low correlation between the five factors.
This implies an absence of multicollinearity. This not only makes discriminant analysis
feasible but also validates Factor analysis on
psychographics.
Wilks is slightly high but is significant at the 5% level.
This helps us reject the null hypothesis that the discriminant
functions estimated are not statistically significant. The
Eigen value is somewhat small meaning that additional
variables are needed to discriminate more fully between the
two groups. We however perform this analysis to gather a
basic level of insight.

Family oriented and

Variety seeking people are
more likely to be influenced
by emotional Ads. People
who crave for status and
excitement go for product
attributes and Country of
Origin

The results indicate that the Factor Party Animals is the most important in explaining group
membership and it has a positive sign indicating that people who belong to this category are
more likely to prefer Ad 1.

We also see that Risk averse, family oriented has a negative loading on the discriminant
function. This can be explained by the emotional aspect of the Ad. It might imply that family
oriented people are more open to emotional appeals and are likely to be more influenced.
Variety seeking also has a negative loading. This might simply be because of the presence of
messages the Ad makes the chocolate more interesting.
The discriminant function classifies 76.3% of cases accurately. This is a good number for two
group classification. We may therefore base our decisions on Ads on this discriminant
analysis.

Recommendation
In light of the above data analysis we have the following recommendations for the choice of
new product concept and communication strategy:
Concept Choice: Concepts 1, 2 and 3 are more or less aligned with each other and with
Ferrero Rocher along the X Coordinate. The differences among products exist mainly along

the Y axis. This implies that the chocolates have similar attributes product wise but
dissimilar attributes with respect to packaging and brand perceptions.
Concept 2 has the highest rating on all attributes as well as usage occasions among the three
concepts. We therefore suggest Nestl to adopt this concept for product design.
We however find that concept 1 occupies a unique space in the perceptual map. We believe
that this might be because of its unique positioning To love is to Share. We therefore
recommend retaining the message aspect of the product. To make it palatable to a larger
customer base we recommend adopting more general messages rather than those expressing
love.
Pricing: Intention to buy scores seemed significantly high for concept 2. We would like to
price it at the same level as the primary competitor Ferrero Rocher in order to maintain the
perception of Premiumness.
Promotional Strategies: We identify 5 groups of customers. Of these the party animals have
the highest purchase frequency. In addition we also notice that these are the group of
customers who prefer the new better tasting version of the product. From the Ad concept
analysis we find that this customer segment is closer to its cognitive side of perception.
We therefore recommend that the communication should be targeted at the Party animals and
the status seekers using product attributes and country of origin as key highlights.