Meeting marketing challenges
Abstract:
Kellogg’s is the world leading producer of breakfast cereals
and convenience foods, such as cereal bars. In order to
maintain or enhance its position it makes effective use of
marketing strategies. This case highlights different strategies
adopted by the firm in order to maintain its position as the
market leader. An example of one of its failures is also
elaborated upon.
1.0 INTRODUCTION
When Will Kellogg accidentally invented a new breakfast food in Battle Creek, Michigan
in 1894, he did not realise that he was on the threshold of forming a major food manu -
facturing company. His name would become one of the most instantly recognised
throughout the world. Today, Kellogg’s is an American owned organisation that has a
true global market. It has four main divisions covering North America, South & Central
America, Asia Pacific, and finally Europe, Africa and the Middle East. The European
Headquarters is in the UK, which along with Ireland has the highest per capita
consumption in the world. However, Kellogg’s has manufacturing operations in several
different European countries. The supply chain management, covering all aspects of
production, logistics and finance is organised on a pan-European basis, which gives
substantial economies of scale. However, marketing and sales tend to be more locally
based to meet the different cultural needs, as the markets across Europe can vary
enormously.
Businesses need to set themselves clear aims and objectives if they are going to
succeed. In 2006, Kellogg had total worldwide sales of almost $1 1 billion (£5.5 billion).
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In 2007, it was Britain’s biggest selling grocery brand, with sales of more than £550
million. Product lines include ready-to-eat cereals (i.e. not hot cereals like porridge) and
nutritious snacks, such as cereal bars. Kellogg’s brands are household names around
the world and include Rice Krispies, Special K and Nutri-Grain, whilst some of its brand
characters, like Snap, Crackle and Pop, are amongst the most well-known in the world.
Kellogg’s has achieved this position, not only through great brands and great brand
value, but through a strong commitment to corporate social responsibility. This means
that all of Kellogg’s business aims are set within a particular context or set of ideals.
Central to this is Kellogg’s passion for the business, the brands and the food,
demonstrated through the promotion of healthy living.
1.1 RE-BRANDING A CORPORATE IMAGE
The marketing of Kellogg’s and the creation of some of the most valuable individual
brand names has been key to the Company’s success. Firms are keen to give
products their own identity, which will clearly distinguish them from any competition. A
successful brand name will encourage loyalty amongst consumers who will be more
likely to buy the product on a regular basis. An effective brand will distinguish one
product from the next on the supermarket shelves. This familiarity adds extra
perceived value to the product and this means that a customer’s decision to buy is
not purely determined by price. This sensitivity is called the price elasticity of demand.
Small changes in the price will not lead to big changes in the amount demanded by
consumers.
Firms may try to build loyalty by creating a corporate brand name that will suggest an
identity or characteristics that would apply to all its products. This is known as
corporate branding. Alternatively, firms may choose to establish a brand identity for
each of its products. Kellogg’s does both effectively. Kellogg’s is an example of mul-
tiple product branding, where each product within the range is given its own clear
identity and personality but is also marketed using the Kellogg’s name as an
umbrella.
Kellogg’s has, over the years, built up some key core brand characteristics,
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emphasising quality and nutritional benefits that will apply to any Kellogg’s product.
Consumers will trust the Kellogg’s brand name to fulfil these requirements whichever
type of cereal they choose. To these core brand values are added the elements of the
individual brand personality. Like members of a family, each will bear the same
surname, but each individual has its own characteristics and strengths. There are
currently 29 products in the Kellogg’s family.
One of the key factors is the creation of the brand identity. What characteristics would
the company want its products to show? This is known as positioning. Kellogg’s
products are positioned to highlight the quality of the goods and to build on the
emotional attachments. Consumers who have grown up with Kellogg’s breakfast
cereals will have strong associations of childhood and home. Having decided on the
position of the products within the cereal market, Kellogg’s can consider the
elements of the marketing mix, the different marketing tactics it will employ to make
its products more desirable
When Kellogg’s Corn Flakes were launched in the UK in the early 1920’s the
company faced a formidable task of persuading a skeptical nation, accus tomed to
porridge and bacon and eggs, to try a brand new breakfast food. What followed was
one of the most remarkable marketing achievements of the 20th Century. Kellogg’s
used a team of dedicated salesmen who employed armies of casual labourers and
Boy Scouts to cover the country, to knock on doors and literally give away millions of
sample packets of Corn Flakes and Rice Krispies. The free samples encouraged
consumers to buy the products and within ten years Kellogg’s had revolutionised the
eating habits of a nation.
This was an example of sales promotion. Today, advertising and packaging are also
key aspects of the marketing mix. Kellogg’s advertise using a whole range of media: in
the press, on posters, radio and cinema, direct mail and, most recently, on the
Internet. However, the main channel for its advertising is on television, where
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individual brands are given their own air time, aimed specifically at a target audience.
Although breakfast cereals are consumed by the whole population, individual products
may be aimed at specific groups. For example, Special K is aimed towards women,
Start has a sporty image and Frosties and Coco Pops are primarily aimed at children.
Corn Flakes, by contrast, are aimed at the whole family. This targeting will determine
the content of the advert and the time of broadcast.
The packaging of Kellogg’s break-fast cereals is also a key element of the marketing
mix. The packaging has to provide a representation of the brand identity and appeal
to the target market. It also has to have space for nutritional information and any
promotional offers. Kellogg’s has to deal with the problem that the purchasers of
cereal, usually adults and often females, are not always the con sumers, often
children. The packaging has to appeal to both groups. By combining some elements
of corporate branding with the individual product’s own identity, it can provide the
assurances of quality and nutrition that come with the Kellogg’s name and also
appeal to the end user.
In Spring 2000, Kellogg’s took the major step of launching a bright,
colourful new corporate image for all its cereal brands. This is not a
course of action that should be taken lightly. Once consumers have a
popular brand image in mind, it may be risky to change it, but Kellogg’s
was concerned that, in a highly competitive market, it was becoming increasingly
difficult to differentiate between supermarket own label and other manufacturers’
brands. Consumers were becoming confused when confronted with so many similar
packs on the supermarket shelves.
To further reduce any risk, Kellogg’s undertook a considerable amount of market
research. One thousand consumers were asked a series of questions about the
Kellogg’s brands and were shown some initial designs. In particular, the researchers
wanted information about the impact of the designs on the shelf, the ease of recog-
nition and the clarity of the brand name and product. The results of the market
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research confirmed that one design led the field. It highlights the ‘K’ logo, which was
based on the original signature of W. K. Kellogg. The big advantage of using the ‘K’
logo was that it was a protectable brand image. Other competitors would not be able
to imitate it. Having decided on the new corporate brand icon, the designers had to
incorporate it into the design of the packaging for all 29 individual brands
1.2 USING MARKET RESEARCH FOR NEW PRODUCT DEVELOPMENT
For more than 100 years, Kellogg’s has been a leader in health and nutrition through
providing consumers with a wide variety of food products. These are designed to be
part of a balanced diet and meet the different tastes of consumers. Kellogg’s focuses on
sustainable growth. This involves constantly looking for ways to meet consumer needs
by growing the cereal business and expanding its product portfolio. One technique
which has been advantageously used by Kellogg’s is market research.
Market research is a specific area of marketing that informs businesses like Kellogg’s
about the things consumers need, how best to design products to answer those needs
and how to advertise those products to consumers. Market research goes beyond
finding out what consumers are thinking today. It can identify what consumers might
want in the future. In this way market research helps a business to make more informed
choices. This reduces the risks for any new product development (NPD). It also
increases the likelihood that products will be well received by consumers, when they are
launched.
Kellogg’s launched Crunchy Nut Cornflakes in the UK in 1980. Since then, it has
become one of the most important brands for Kellogg’s, with a sales value of £68
million. In 2003 the Crunchy Nut brand created a brand extension. This involved using
the Crunchy Nut name to launch a new product called Crunchy Nut Clusters. This
variant has two varieties, Milk Chocolate Curls and Honey and Nut. Both of them have
enabled the brand to reach a wider group of consumers. This brand extension is now
worth £21 million in annual value sales. The importance of market research during the
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development and launch of Crunchy Nut Bites, a more recent extension to the Crunchy
Nut brand is now being elaborated upon. The objective of this innovation was to provide
a new flavour and texture for consumers, helping Kellogg’s extend its share of the
breakfast cereals market.
In an established market, such as breakfast cereals, there is little room to increase the
overall sales in the market. Kellogg’s is therefore always looking for ways to strengthen
its own portfolio. Designing new products is a good way of doing this. However, this can
take a long time and may involve considerable costs. In addition to the resources
required during development, suppliers must produce an advertising campaign to raise
awareness of the product among consumers and encourage retailers to stock the
product. Launching a new product can be a risky business. Of the hundreds of products
launched every year in consumer goods markets, very few reach significant market
share. In order to reduce risks, market research is, therefore, essential. A product
extension is a less risky way of increasing market share by providing consumer
products with new features under an existing brand. New product extensions give more
choice to consumers.
To develop a new Crunchy Nut brand extension, Kellogg’s commissioned primary
research. For the development of Crunchy Nut Bites, Kellogg’s used various different
methods of primary data collection. In addition, Kellogg’s used secondary research. The
following stages were employed in the research.
Stage 1: Discovery
Initial research aimed to identify a set of new food ideas that would be suitable for
developing a new Crunchy Nut product. Secondary data from Mintel and Data monitor
were used to find out about innovation trends in the cereal market. It was also used to
find out about new products and foods from around the world. Food developers at
Kellogg’s used this information to come up with a number of new food ideas. Focus
groups were used to show consumers the new food ideas in the form of a number of
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different (real) food prototypes, including a mini crispy lattice product and a nutty
triangle. The focus groups captured the attitudes and feelings of consumers towards the
new foods. This primary research helped Kellogg’s to find out how new product
suggestions could be developed and still fit in with the Crunchy Nut brand. It helped
Kellogg’s to establish what consumers were looking for in terms of potential new
flavours and textures.
Stage 2: Selecting the best idea
This stage aimed to select the best idea arising from stage 1 research. Kellogg’s put the
ideas from the focus groups on boards. The boards had pictures showing product ideas
and a description of what the new product would be like. These boards were then
shown to a large group of representative consumers in a quantitative survey. They were
asked to rate these ideas against a number of scales, so Kellogg’s could identify which
product ideas consumers liked best or disliked. The quantitative data created specific
statistical information that indicated that a new Crunchy Nut Bites idea was perceived as
the most appealing amongst all the ideas tested.
• It established what proportion of people liked the new product idea enough to buy it.
• It also identified those product ideas that had the best or least sales potential.
Stage 3: Crafting the idea into a complete new product
Once the best idea had been selected from stage 2, Kellogg’s needed to make this idea
become a real product. The Crunchy Nut Bites food prototype recipe was refined using
the feedback from another qualitative and quantitative survey. The qualitative research
helped Kellogg’s food technologists to explore the taste and texture of the new food
idea in more detail. Kellogg’s needed to understand the ‘eating experience’ of the
consumer before a decision could be made about how to develop the recipe. Following
this stage, four product recipes were developed and these prototypes were then tested
with representative groups of consumers in a quantitative survey, to see which product
consumers preferred. Also, at this stage, the pack design for the new Crunchy Nut Bites
was developed. Several designs were developed aimed at giving the new product the
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same look and feel as the rest of the Crunchy Nut family. The packaging designs were
tested with consumers, which enabled Kellogg’s to select the final packaging design for
Crunchy Nut Bites
Stage 4: Forecasting sales for the new Crunchy Nut Bites
At Kellogg’s, every product has to undergo one final test prior to a new product launch.
This is called the ‘In Home Usage Test’. The consumers are given the product to try for
several days and this enables Kellogg’s to capture how consumers interact with the
product for the first time. At the end of the trial, consumers complete a report, on what
they thought of the food, in the form of a questionnaire. This final survey measures how
appealing the new product is to consumers and how likely they would be to buy it in real
life.
The data collected also helped to calculate a sales forecast for the new product for the
first and second year in market. The forecast was used by the finance department to set
budgets, organise the supply chain and to schedule food production. Once the data
were analysed and the product concept tested, Kellogg’s was able to make the strategic
decision to go ahead with the new product. Production could then take place.
Kellogg’s used market research throughout the whole development process for a new
product for the Crunchy Nut range, from the initial idea to the planning of production and
delivery. During the earlier stages of research, consumer responses helped Kellogg’s to
explore lots of different ideas in an open way. It then crafted some ideas in more detail
and screened those ideas with consumers to select the one which seemed to have the
highest appeal. The idea became real by testing several recipes, refining the food
prototype selected and developing the design for packaging. Once the food and
packaging elements for the new product had been developed, the whole product was
tested with consumers to ensure it met their needs. The data also provided a sales
forecast to predict the first two years of sales of Crunchy Nut Bites.
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Crunchy Nut Bites has extended the Crunchy Nut family of products. In doing so it has
brought new consumers to the brand and increased its consumption. Kellogg’s
launched Crunchy Nut Bites in September 2008. Sales data shows it was one of the
best performing brands to launch in the breakfast cereal category with a sales value of
£6.9 million in its first full year of sales. This illustrates that the detailed market research
undertaken during the planning stages was valuable. It helped to ensure that the
product extension hit the spot with consumers straight away.
1.3 BUILDING A BRAND IN ORDER TO SUSTAIN ITS LIFE CYCLE.
Kellogg’s All-Bran has a long and distinguished history. Like many other famous
products, however, it is important from time to time to re-energise its life cycle. While
All-Bran continues to be a powerful brand, a number of other high fibre brands made by
Kellogg’s have not had the promotional support or sales of the All-Bran brand. Kellogg’s
has therefore sought to support these other fibre products, by associating them with the
master brand ‘All-Bran’.
Kellogg’s has looked to raise consumer interest by creating a family of fibre-based
cereal brands focused around the All-Bran banner in order to create a power brand
structure. These bran products have now been marketed as a family. This has added
extra strength to each separate product. The decision to create the power brand was a
strategic change, made at a high level. It involved managers at Kellogg’s planning for
the long term future. It also needed heavy resource commitments, e.g. to finance and
market the initiative.
The product life cycle is the period over which it appeals to customers. The cycle can be
illustrated in a series of stages showing how consumer interest, and hence sales, has
altered over time. For example, a company like Kellogg’s is continually developing new
product lines, which it then market tests. For many of these products, test marketing will
indicate that the product might be popular for a short while and then interest would
quickly fizzle out. Such product ideas are screened out (eliminated). Before committing
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resources to creating the family of All-Bran brands, Kellogg’s needed to conduct
research to discover whether a change was worth making and the nature of these
changes. This involved carrying out a SWOT analysis.
Kellogg’s created All-Bran as a product and the fibre sector of the cereal market, in the
1930s. From then onwards the product experienced steady growth with the company
injecting regular promotional spends to support product development. The most
spectacular growth was in the 1980s with widespread publicity for the ‘F’ Plan Diet from
nutritionists and health experts. This diet had an impact similar to that of the Atkins Diet
in recent years. Following this, the Kellogg’s ‘bran’ range has been moving into a more
mature stage: Because the product is mature, Kellogg’s has looked to re-brand a range
of fibre cereals in order to inject renewed growth and interest. The company has run a
£3 million campaign that urges consumers to re-appraise these products. Large
investment was needed to support the strategy and to evaluate the consumer response.
Kellogg’s needed to identify the benefits that would result from any changes it made: An
important advantage related to managing the product range. Kellogg’s identified which
of its existing fibre based products offered the best present and future prospects and
decided to concentrate on those. This simplification made it easier to manage the
product portfolio. Managers could concentrate on the common elements of the chosen
range and focus marketing activity on them. This action produced management and
marketing economies of scale, rather than production economies - the complexity of
manufacturing individual products has not been reduced. The smaller brands were
pulled together into the All-Bran range.
Kellogg’s market research showed that, in choosing a cereal product, consumers place
high priority on taste. Although they want a healthier cereal, it still must taste good. So
Kellogg’s decided to develop new ‘tastier’ products under the single All-Bran umbrella.
Before proceeding with the change, Kellogg’s carried out some detailed market
research with consumers to discover their thoughts and feelings. Both qualitative and
quantitative researches were used. 10.
Qualitative research involves working in detail with a relatively small number of
consumers, e.g. observing and listening to them talking in small groups in which they
discuss the brand, products, packaging, advertising ideas, etc. This qualitative research
helped to assess consumers’ perceptions, e.g. by giving them pictures of possible new
packaging and letting them give their views on the benefits of the product and reasons
why they use fibre based cereals. The qualitative research helped Kellogg’s to develop
the concept of a family of fibre brands. The advertising and promotional materials with
which the consumer groups worked were very similar to the end promotions that
Kellogg’s wished to communicate.
Once the qualitative market research was complete, it was possible to test the concept
through quantitative research. This involved using questionnaire and survey approaches
with a much larger sample of targeted consumers to estimate the impact on sales, if
these changes were put into market. The market research revealed several matters that
Kellogg’s needed to address when alerting the public to changes in the brand family.
Some consumers might find the act of placing a range of separate products under the
All-Bran brand confusing. The solution was to ensure that packs clearly display both the
power brand name (All-Bran) and also the product name (e.g. Bran Flakes). To maintain
continuity, it was vital to use consistent type fonts and colours from the old packaging,
as well as consumer understanding of the new range, the back of each pack featured a
range sell detailing the different attributes of each of the products in the range. This
allowed consumers to make purchase decisions on the basis of taste and the amount of
fibre they require in their diet.
Research showed that consumers see cereals as a ‘natural product’. This is a strong
selling point. It makes it vital to feature the ingredients on the packaging. This is
because the All-Bran range can be seen as part of a daily healthy diet. For example, the
latest addition to the All-Bran range, the delicious Bran Flakes Yoghurty, claims to
promote users’ inner health by providing 17% of daily fibre needs. To give the campaign
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maximum impact, Kellogg’s carefully co-ordinated television and radio advertising, PR
and in-store promotions. These encouraged consumers to try out and reappraise the
revamped products. For example, in September 2004, Kellogg’s introduced the All-Bran
‘Feel Great in a Fortnight’ Challenge. This campaign was designed to make the brand
benefit more relevant to consumers. Adopting the ‘feel great’ message moved the brand
away from the outdated ‘keeps you regular’ message and into the feel good territory of
better inner health. This promotion featured on 8 million packs and on the All-Bran
website. It used William Shatner, best remembered from Star Trek’s Starship
Enterprise. The challenge invited consumers to eat one bowl of any of the cereals in the
All-Bran range for two weeks and see if they could feel the benefit. It focused on the fact
that high-fibre diets may help people to feel lighter and more energetic, as well as aiding
the digestive system.
If a business wants to make a product’s total sales grow, it must carefully consider how
best to extend its life cycle. By creating the power brand ‘All-Bran’ and providing the
right sort of well researched promotional support, Kellogg’s has been able to inject
renewed vigour into a family of related products. Through appropriate promotional
activities and more relevant messages, Kellogg’s has re-awakened consumers’ interest
in products that can play an important part in developing a healthy diet in a health-
conscious world. Regular campaigns of promotional activity are helpful in enabling all
organisations to sustain their own life cycle and those of their brands and products. It is
early days in evaluating the success of the marketing activity supporting All-Bran but the
signs are good. Till now the discussion has been on mainly the successes of Kellogg’s.
However it did fail in one of the emerging markets.
1.4 KELLOGG’S FAILURE IN THE INDIAN MARKET
Launched in September 1994, Kellogg's initial offerings in India included cornflakes,
wheat flakes and Basmati rice flakes. Despite offering good quality products and being
supported by the technical, managerial and financial resources of its parent, Kellogg's
products failed in the Indian market. Even a high-profile launch, backed by hectic media
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activity failed to make an impact in the marketplace. Meanwhile, negative media
coverage regarding the products increased, as more and more consumers were
reportedly rejecting the taste. There were complaints that the products were not
available in many cities. According to analysts, out of every 100 packets sold, only two
were being bought by regular customers; with the rest 98 being first-time buyers.
Converting these experimenters into regular buyers had become a major problem.
By September, 1995, sales had virtually stagnated. Marketing experts pointed out
various mistakes that Kellogg’s had committed and it was being increasingly felt that the
company would find it extremely difficult to sustain itself in the Indian market. Kellogg’s
realized that it was going to be tough to get the Indian consumers to accept its products.
Kellogg’s banked heavily on the quality of its crispy flakes. But pouring hot milk on the
flakes made them soggy. Indians always boiled their milk unlike in the West and
consumed it warm or lukewarm. They also liked to add sugar to their milk. When
Kellogg’s flakes were put in hot milk, they became soggy and did not taste good. If one
tried having it with cold milk, it was not sweet enough because the sugar did not
dissolve easily in cold milk. The rice and wheat versions did not do well. In fact, some
consumers even referred to the rice flakes as rice corn flakes.
1.5 Integrated Marketing communication
In order to reverse the trend on the Indian market, Kellogg’s decided to make use of
IMC. First of all the CEO of Kellogg’s gave an interview in Times of India, the number
one newspaper. The benefits of breakfast cereals were highlighted. The various
products were also advertised on the doordassan TV channel and on all India radio.
Issan the popular child artist of ‘Tare Zameen Par’ was used as the model for promoting
the benefits of Kellogg’s products. The organisation also made use of personal selling.
Some teenagers were recruited to visit housing societies and go house to house in
order to give samples of the product in the first instance and to subsequently to sell the
product. The organisation also made use of sponsorship. The famous Ranji cricket
competition was sponsored by Kellogg’s. All the elements of the IMC were fully
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integrated, Following the campaign, success was immediate. Sales soared by 200%
over the previous year’s figures and the organisation made 125 million dollars sales in
India in 1997.
1.6 Conclusion
Successful businesses use all the tools at their disposal to stay at the top of their
chosen market. Kellogg’s was able to use a number of business tools in order to
successfully maintain its position as the leader in the breakfast cereals and convenience
foods market. However success is never guaranteed. It has to be earned.
NOTE: The name Kellogg’s has been used throughout the case, since this is the one
which appears prominently on the packaging of all products, although the company’s
name is Kellogg.
(Written by Dr Bhimsen Abacousnac for the MBA Module)
QUESTION 1
(a)Discuss, with reference to the case study, how Kellogg’s develops and applies the
marketing mix elements and how the latter contribute to the overall success of its
marketing strategy.
(b)(i)Describe the benefits of branding for marketers of Kellogg’s.
(ii)Identify the reasons behind the failure of the brand in the Indian market and
suggest how this might have been prevented.
(c)With the rise in the standard of living of the Mauritian population, breakfast cereals
and convenience foods have become a common item of the daily breakfast of arge
segment of the population. At present the market is flooded with a variety of such
products and brands.
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Using an appropriate model, critically analyse the competitive structure of the breakfast
cereals and convenience foods market in Mauritius.
(d)Kellogg’s is an innovating organisation and has developed a number of products.
However new product development is a systematic product and involves at least seven
steps.
Discuss the seven steps involved in the development of the new Crunchie bar snack
cereal.
(e)Carry out an internal analysis of Kellogg’s. Consider the value chain and
competencies.
(f)With reference to the communications strategy adopted by Kellogg’s evaluate
whether the communications tools adopted by the firm fulfill the criteria of a fully
integrated communications program.
QUESTION 2
JM&A Co. Ltd provides advice and training to companies in the areas of air pollution
and industrial hygiene and it assists clients in meeting federal industrial environment
regulations, Including safety compliance inspections, process ventilation efficiency
studies, employee training, indoor air quality investigation and on green production
processes.
Julia, the newly appointed Marketing Director, worked for three years in sales for an
industrial products manufacturer, before joining JM&A Co. Ltd. Despite her technical
background and knowledge in marketing, Julia realises that she is in for a challenge in
marketing chemical and environmental consulting services.
(a)Explain in detail the growing concern for business organisations to be perceived as
green and socially responsible and elaborate on how these can be achieved by a
service provider like JM&A [Link].
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QUESTION 3
EnvironServ Indian Ocean Ltd started operations in Mauritius, in collaboration with
ATICS Ltd, in 2010. It operates a mobile shredder that can offer both on-site and off-site
mobile shredding service. The shredded materials are then compressed into cubic bales
and then exported in order to be recycled. It thus offers an environmentally friendly
solution for the disposal of confidential records, in line with the concept of sustainable
development and Maurice, Ile durable. However sales have not picked up, as initially
expected.
As a consultant for the company, you have been requested to develop appropriate
marketing strategies in order to boost up sales.
(a)Discuss how the market for EnviroServ Indian Ocean Ltd can be
segmented?
(b)Discuss how EnvironServ Indian Ocean Ltd can be better positioned. Relate your
answer to the concept of sustainable development.
(c)Propose appropriate communication strategies for the company.
QUESTION 4
Cernol Chemicals developed a bio-mosquito repellent. It is in search for a distributor to
better distribute its new product.
(i)Discuss the factors to be considered in planning the distribution of the new product.
(ii)Propose an appropriate distribution channel for the new product.
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