Understanding Marketing

1. Identify the product of the company

Chocolates and candies are one of the best-loved gourmets in the world. These are
one of life's little pleasures. The attractive tastes and textures of chocolate and
candies delight the senses of all ages.

As far as Nestle chocolate Kit Kat is concerned, the

product developed as Wafer Crisp, was initially launched
in London, UK in September 1935 as Rowntree's
Chocolate Crisp.

Within two years of launch Kit Kat was established as Rowntree's leading product, a
position that it has maintained ever since. The 1997 Guinness Book of Records
states that 13.2 billion Kit Kat fingers were sold worldwide in 1995 and that
every second, 418 Kit Kat fingers are consumed worldwide.

Most of us love chocolate in one form or

another and every week a typical UK citizen
spends around £1.80 on it. Amazingly, UK
consumers have a choice of over 5,000
chocolate lines available from 150,000 outlets.
Because it is so widely and readily available,
we tend to take chocolate for granted, and few
of us probably ever consider what is involved in producing it.

This case study looks at the massive, complex worldwide operations that ensure that
chocolate products are on the shelves of retail outlets 365 days a year. We tend to
treat this achievement as routine. In reality, it represents a triumph for careful
planning and meticulous organisation.

Three producers dominate the chocolate market. Cadbury with around 28% while
Mars and Nestlé each have around 24% Sales of milk chocolate (96 predominate,
with plain and white chocolate accounting for about 2% each). Boxed chocolates
such as Quality Street make up 15% of the confectionery market. Other big sellers
have 5% of the market.
Nestle is now the world's largest food company. It is present on all five continents,
has an annual turnover of 41.9 billion pounds, runs 509 factories in 83 countries and
employs about 231,000 people the world over.

Emotional aspects

During the last decades marketing practices have been subject to a rather radical
shift towards emotional elements of marketing communication. Previously, traditional
approaches, such as Kotler’s 4 P’s were adopted by companies when developing
strategic positioning and communication. This somewhat static approach has,
however, been doomed insufficient for the increasingly competitive environment,
which is characterised by fragmentation and information overload (Gobé (2001)).

In general, the above mentioned development has caused focus to turn more to the
company behind the brands as opposed to the functional benefits of products. Now a
day’s brand position is more important. Products have thus become brands, which
serve to offer added value to the consumers. Consumers are increasingly looking for
brands that correspond to their self perceptions, and which they can use to express
their individuality and values. The customers are buying chocolates not just because
it is cheaper or they don’t have any other choice, consumers are emotionally
attached with this brand and the taste of chocolates. People buy the chocolates at
the time of celebration, birth days; they eat chocolates to express joy, happiness.
Chocolates are the part of their life.

2. RESEARCH & DEVELOPMENT

Nestle, 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 matches the
R&D presence of Nestle, with a worldwide network of centers in 17 locations on four
continents. 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, Nestle invests
some 448.8 million pounds into R&D as a major driving force of its double strategy:
to strengthen the Company's brands worldwide and to continue to support future
long- term growth and competitiveness through innovation and renovation.
At the threshold of this new millennium, Nestlé’s
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.
Today, Nestlé produces in over 81 countries and
achieves 98% of its turnover outside Europe.

Nestlé is the world’s largest food company, which does 98% of its business. It has an
annual turnover of 39 billion pound, 522 new factories in 81 countries, 200 operating
companies, 1 basic research outer and 20 technological development groups, has
more than 231,000 employees and more than 8000 products around the globe.

There are three companies co-ordinate the activities of some 200 operating
companies around the globe. Their functions and details are as follows:

The first, Nestlé, holds the financial shares in the allied companies. It also checks the
profitability of these companies and to ensure the profitability of the group as whole.

The second, Nestlé, has two areas of activities that are as follows:

 Research and technological development

 Technical assistance

Beside this, it provides know-how in engineering, marketing, production,

organization, management and personnel training on a continuous basis.

The third company is Nestlé World Trade Corporation that oversees the import and
export of merchandise worldwide.
 3. Marketing mix

Marketing Mix is defined as a set of controllable tactical marketing tools that firm
blends to produce the response it wants in the target market. The marketing mix
consists of everything the firm can do to influence the demand for its products. The
many possibilities can be defined into four groups of variables known as the 4 P's
that are as follows:

I. Price
II. Product
III. Place
IV. Promotion

3.1 PRICE

The amount of money charged for a product or service, or sums of the values that
consumers exchange for the benefits of having or using the product or services. The
price of Nestlé Kit Kat varies increases with the increase in its size. As size increase
the piece increase simultaneously.

3.2 PRODUCT

Product stands for goods and services that the company offers to target market. The
shape and the color of the Kit Kat is quite attractive for the customers. The labeling,
packaging of the Kit Kat includes the Nestlé brand and logo. The packaging includes
an expiry date and time along with a manufacture date. Second part of labeling
includes the quantity of product in grams along with ingredients and contents of
chocolates i.e. the amount of protein, fat, fiber etc.

3.3 PLACE

The third ‘P’ is for place; it stands for company's activities that make the product
available to the target consumer. Nestlé' distribution is using the direct distribution
channel to supply confectionary products weekly to the retailers.
3.4 PROMOTION

There are many other problem that company need to solve including producing a
quality product, pricing it attractively and making it available for the target consumer.
Modern era is the era of communication with customer, assuring customer
satisfaction, demands for personal and non-personal communication with the target
customer to build a customer relation. In an area-storming activity, giving out
products free, gift hampers, attracts new customers; kites depending on the season
(for existing and potential customers) are given. The basic purpose is to explore the
area that is being unexposed and to bring awareness in the people.

4. Pricing strategy

Table shows Different chocolates and their price per 100 gm.

No. Names of chocolates Price per 100gm

1 Cadbury dairy milk £ 1.02

2 Cadbury caramal bar £ 1.06

3 Cadbury wispa bar £ 1.23

4 Galaxy milk £ 0.98

5 Guylian praline bar £ 1.13

6 Kit Kat four finger £ 0.94

7 Mars Planets Bag £ 1.16

8 Maltesers standard £ 1.16

9 Snickers single £ 0.66

10 Bounty Milk £ 0.72

Premium pricing

Practice in which a product is sold at a price higher than that of competing brands to
give it snob appeal through an aura of 'exclusivity.
Penetration pricing

Strategy adopted for quickly achieving a high volume of sales and deep market-
penetration of a new product. Under this approach, a product is widely promoted and
its introductory-price is kept comparatively lower. This strategy is based on the
assumption that the product does not have an identifiable price-market segment, it
has elasticity of demand, the market is large enough to sustain relatively low profit
margins, and the competitors too will soon lower their prices.

Research methodology

The data had been used to cover various aspects like consumption, consumer’s
preference and customer’s satisfaction regarding chocolates. In collecting requisite
data and information regarding the topic selected, I went to plas gwyn campus and
collected the data.

A sample of 100 people was taken on the basis of convenience. The actual
consumers were contacted on the basis of random sampling.

SUB-BRANDS PERCENTAGE OF PURCHASE

Cadbury dairy milk 13
Cadbury caramal bar 12

Cadbury wispa bar 11

Snickers single 9

Galaxy milk 7

Guylian praline bar 10

Kit Kat four finger 11

Mars Planets Bag 11

Maltesers standard 9

Bounty milk 7
 Cadbury dairy milk
percentage of purcahse
Cadbury caramal bar

Cadbury wispa bar

Snickerssingle

Galaxy milk

Guylian praline bar

Kit Kat four finger

Mars Planets Bag

Maltesers standard

BoundyMilk

Sales promotion

Preference (or "taste") is a concept, used in the social sciences, particularly

economics. It assumes a real or imagined "choice" between alternatives and the
possibility of rank ordering of these alternatives, based on gratification, enjoyment,
utility, happiness, satisfaction they provide. More generally, it is a source of
motivation.

The study of the consumer preference not only focuses on how and why consumers
make buying decision, but also focuses on how and why consumers make choice of
the goods they buy and their evaluation of these goods after use. So for success of
any company or product promotion it is very necessary to depart its concentration
towards consumer preference.

Sales promotion is any initiative or technique undertaken by an organization to

promote an increase in sales, usage or trial of a product or service (i.e. initiatives that
are not covered by the other elements of the marketing communications or
promotions mix). Often they are original and creative, and hence a comprehensive
list of all available techniques is virtually impossible.
Here are some sales promotion techniques which Kit Kat uses:

 Buy-One-Get-One-Free
 Customer Relationship Management
 New media
 Discounted prices

Buy-One-Get-One-Free (BOGOF) - This is an example of a self-liquidating

promotion. For example if a four finger kit Kat is priced at $1, and cost 10 cents to
manufacture, if company sell two for $1, they are still in profit - especially if there is a
corresponding increase in sales. This is known as a PREMIUM sales promotion
tactic. And kit Kat is using the same premium pricing like buy 1 get 1 free, buy 7 at
the price of 5, Family pack.

Customer Relationship Management (CRM): incentives such as bonus points or

money off coupons. There are many examples of CRM, from banks to supermarkets.

New media: Websites and mobile phones that support a sales promotion. For
example, in the United Kingdom, Nestle printed individual codes on KIT-KAT
packaging, whereby a consumer would enter the code into a dynamic website to see
if they had won a prize. Consumers could also text codes via their mobile phones to
the same effect.

5. Target Audience on the basis of occupation

COLLEGE GOING OFFICE RETIRED

 

The above chart shows the target audience in the basis of occupation. Our product
wants to target the youth of the country who are health conscious and who want to
eat chocolates for a good experience. Thus, we are targeting a sophisticated market.
Target audience will include college going students and office going crowd. This
makes them more likely to carry the brand with them for a lifetime.
6. Howard and Sheth in 1969 came up with a model of the buying behaviour of the
people. They made a model and they came to a final conclusion that the 5 of the
most important things that people would consider before buying any product were:

 Attention of the consumer is the most important step of the buying behaviour.
This is because the consumer first needs to be aware of the product which
needs to be sold. In kit Kat’s case the consumer has already been aware of
this product since a long time but new packaging and cheap prices would also
divert the mind of the consumer to this product.

 Brand comprehension, with respect to Kit Kat there is no issue of brand

comprehension as the brand behind the whole thing is nestle and this
company has a very big name and image globally. A consumer who wants to
buy a chocolate would not think twice before buying Kit Kat because there is
such a big name behind it and this chocolate would also be well known due to
its presence throughout all this time.

 Attitude; there has to be the right attitude of the consumer to buy the product.
In Kit Kat’s case I would say that there would a positive attitude mostly as of
the rankings shown above and the brand name also does play a vital role in
the attitude of the buyer.

 Intention of a consumer is said when the consumer is willing to pay the price
for the product and has the spending power. In Kit Kat’s case the intention of
the consumers would be strong as everybody in this world like chocolates and
Kit Kat is not exception to that. So the intention of the consumer would only
change to another chocolate but there would be an intention by almost every
buyer to buy a chocolate. Since prices of Kit Kat are low and consumers like
chocolates, any buyer of Kit Kat would have an intention of buying this
product.

 Purchase; after all these factors have been considered by a particular buyer,
he/she would then proceed to buy this product. In Kit Kat’s case the product is
fast selling and has done good sales as well. In this case a consumer who
does like chocolates and has never tried Kit Kat would also buy this product
 because it is inexpensive and does have a good image and a good brand
name.

7. External business environment

Economic and technological

The wafer-finger snack suffered a dramatic shift in its fortunes last year when sales
dropped nine per cent to £95.2m and it was deposed by Dairy Milk as the most
popular product in a British confectionery market worth £6bn a year. Earlier this year
the company's new managing director described Nestlé Rowntree as a "business in
crisis" amid ruthless competition from rivals such as Cadbury, which is launching a
direct competitor to Kit Kat.

But at the end of this year, the Swiss firm says sales have never been sweeter.
Despite the economic slowdown, they were up a tasty 18% in the 10 months to
November 8, 2008. It took Nestlé’s share of the UK confectionary market - worth
£4.5bn a year - to 15.6%. Nestle kit Kat is the only one, who has not seen any effect
from the credit crunch in the UK. Christmas is always competitive but we are
confident we can hold our own says by Paul Grimwood, managing director of Nestle
Confectionery UK

The group says it is confident of maintaining sales over the "tough" Christmas
period. Rival Cadbury has also increased its share of the UK market by 0.2% to
26.8%. But Mars, the world's biggest confectionery group, saw its share fall 0.3% to
19.1%. Kit Kat accounts for a quarter of Nestlé’s UK confectionary sales.

Net profit in millions of pounds

 7000

6000

5000

4000

3000

2000

1000

0
2003 2004 2005 2006 2007

Social

Nestlé is travelling its own road with a proposed new corporate social responsibility
model. Nestle is not only focusing on the profit but it is also contributing to the social
responsibility. Nestlé’s recently unveiled Latin America corporate social responsibility
report is the food giant’s bear-hug attempt to understand its operational impacts
across a vast sourcing, production and distribution chain. It is also a stab at defining
a new corporate responsibility model, one that sits more comfortably with the firm’s
defiantly unapologetic corporate culture.

The company’s operational reach is huge, involving sourcing from close to 275,000
farmers (for its three principal raw materials – 218,000 coffee farmers, 35,000 milk
farmers and 22,000 other farmers), who supply some 4 billion Swiss francs (£1.8
billion) worth of goods and services, for 72 factories domiciled in South America.
These have more than 38,000 workers, producing products for more than 400 million
consumers in the region. Nestlé’s milk-producing district in Brazil alone is larger than
Switzerland.

Micro environment

Customer
Nestle firmly believe in creating long-term, mutually beneficial partnerships with their
suppliers and retail trade customers. The growth is built on excellent relationships –
from farm to shop. In so doing, nestle also ensure the best results for shareholders
and, most important of all, consumers.

Perhaps it’s because food is such a fundamental human need. Perhaps it’s because
company has to be extraordinarily close to the consumers and understand their
physical and emotional desires. Whatever the reason, Nestlé is a very human
company. They care about our people, encourage and bring out the best in them.

Suppliers

Over many years it has been the major sponsor of the London Mozart Players, part
of which sponsorship entails music being taken out many times a year into schools,
old people’s homes and the like. We also soon discovered that Nestle also had
excellent employee and Union relationships –indeed many had been upset by the
implied criticism of the company in the takeover battle. It also had a policy of building
long term relationships with its key suppliers.

Competitors

Nestlé’s biggest competitor is the market is Cadbury. In the market Cadbury is

leading with 28%. There are more small competitors like Snickers, Guylian and
Mars. Kit Kat is the only wafer biscuit in the market and the sales in the end of this
year has also increased regardless of the financial crises.

8. Ethical and environmental issues

The Nestlé Corporate Business Principles outline the Nestlé way of doing business.
They include sections on Infant Health and Nutrition, Human Rights, Child Labour
and the Protection of the Environment, as well as a set of Consumer Communication
Principles. They include all ten principles of the United Nations Global Compact, as
well as the International WHO Code of Marketing of Breast-milk substitutes.
To give an idea of the scale of Nestlé’s environmental improvements, during a recent
four year period they reduced water consumption in our factories by 42%, energy
consumption by 30%, and emissions of greenhouse gases by 34%.

They are applying our nutritional expertise to these products as well. In

confectionery, they have introduced many sugar-free products, including Polo, as
well as lower sugar content in products such as Kit Kat Light. The over-riding factor
is not to sacrifice taste. But whenever there is an opportunity, they find solutions that
also contribute to nutrition, health and wellness.

Reference

Gobé, M. (2001) Emotional branding: the new paradigm for connecting brands to
people, Allworth press. New York.

http://www.nestle.com/

http://kitkat.co.uk/home/index.aspx

McDonald, M. (2002) Marketing plans: how to prepare them, how to use them (5 th
edition), Butterworth-Heinemann, Woburn.

Malhotra, K. (2007) Marketing research: an applied orientation (5th edition), Pearson

education, New Jersey.

Petersen, C. and Toop, A, (1994) Sales promotion in postmodern marketing, Gower

Publishing limited, England

Ranchhod, A. (2004) Marketing strategies: twenty-first century approach, Pearson

education limited, England