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Balancing the marketing mix through creative and innovative strategies

A Kellogg's case study

Page 1: Introduction

The Kellogg company was founded in 1898 by W.K. Kellogg and his brother, Dr. John Harvey Kellogg. Through experimentation with flaked corn, W.K. Kellogg created the recipe for Corn Flakes. In 1906, he opened the “Battle Creek Toasted Corn Flake Company” and recruited his first 44 employees. Together with these employees he developed the initial batch of Kellogg’sCorn Flakes bringing to life his vision for great-tasting, ‘better-for-you’ breakfast foods.

Balancing the marketing mix through creative and innovative strategies A Kellogg's case study Page 1: Introduction

Kellogg embraced every opportunity to make a difference in peoples’ lives and was motivated by his passion to help people improve their health. Today, over a hundred years since it was first founded, the Kellogg company still upholds his original values. The company is the world’s leading producer of cereals and a market leader in health and nutrition. Kellogg’s was one of the first companies to print nutrition labels on its packaging and, in 2007, was amongst the first companies to print Guideline Daily Amounts (GDA) on its products to inform the public about the food they are eating. This has helped the company to engage with a market more concerned with healthy living.

With a vision ‘to enrich and delight the world, through foods and brands that matter’ Kellogg’s employs over 31,000 people worldwide. Its products are manufactured in 18 countries and sold in over 180 countries. Kellogg’s well known cereal brands include Coco Pops®, Rice Krispies®, Crunchy Nut® and Special K®. With a 37% market share of the value of the UK’s breakfast cereal market, Kellogg’s has a wide range of products including 25 brands of cereals, cereal bars, and snacks.

The food manufacturing sector is highly competitive, with consumers having considerable choice over which products they buy. For Kellogg’s to remain as market leader it needs innovative marketing strategies to help ensure that it is manufacturing the right products to meet consumer needs, that the products are sold at the right price and in the right locations (place) and that the promotion of its products is suited to the target audience.

Page 2: The marketing mix

Marketing is a key business function that enables a company to ensure that its products and services either match or exceed a customer’s needs or expectations. The Chartered Institute of Marketing defines marketing as:

“Marketing is the management process responsible for identifying, anticipating and satisfying consumer requirements profitably.”

A marketing strategy determines what a company is going to produce in terms of products or deliver in terms of services, how much it is going to charge for these products or services, how it will deliver these products or services to the customer, and how it is going to tell its customers about its products and services. This is known as the marketing mix and is often referred to as the 4Ps of marketing. The mix involves creating the right product, sold at the right price, in the right place, using the most suitable methods of promotion. Although the marketing mix will vary from business to business and market sector, its purpose is to assist a business to balance these four key factors to meet the needs of the customer.

Kellogg’s balances the 4Ps by:

• offering a wide range of popular products and regularly introducing exciting new products to the market - Product • pricing its products to ensure that customers receive the best possible product for their money - Price • help ensuring its products are available wherever shoppers are, from supermarkets, to the internet or on-the-go, and by understanding shopper behaviours - Place • delivering engaging and exciting marketing communications – Promotion.

Marketing is a key business function that enables a company to ensure that its products and

Every business will determine its own balance of the 4Ps to suit the needs of its customers. In addition, a business needs to incorporate other factors into the mix; internal factors such as the amount of finance for marketing, the types of products being sold, as well as external factors such as the market sector and competitors’ products and services.

Page 3: Marketing strategies and market research

The marketing strategy of a company sets out its overall aims and objectives through a detailed plan. For many businesses a key objective within the strategy will be to increase profits and gain market share. One of Kellogg’s marketing objectives is to get its products into as many households as possible by providing new ways to make a positive impact on people. To achieve this objective Kellogg’s needs to undertake detailed market research to understand and test the market for customer preferences.

In a groundbreaking initiative Kellogg’s created and implemented a Crunchy Nut (CN) restaurant in 2012, and

In a groundbreaking initiative Kellogg’s created and implemented a Crunchy Nut (CN) restaurant in 2012, and again in 2013, which invited consumers to a unique ‘outdoor’ experience to taste new products and actively engage with the Crunchy Nut brand.

“You are invited to enter the Crunchy Nut restaurant – at your own risk! Inside you can enjoy one of the eight irresistibly tasty options from the menus with a choice of juices to compliment your food.” Located at the Manchester Arndale shopping centre, the 2013 restaurant served 9,049 customers over a 12 day period. Many customers were surprised that everything was free of charge, over 8000 50p-off coupons were distributed, and the redemption rate of those coupons exceeded the industry average. Customers were invited to leave feedback on their experience through the use of social media channels, as part of Kellogg’s digital marketing strategy. The use of Facebook and Twitter enabled Kellogg’s to reach almost a million people. As part of the event, the CN restaurant ran a Twitter competition and offered a specially designated Wi-Fi code to encourage Facebook/Twitter usage:

‘Both Facebook and Twitter were used to amplify the UK Crunchy Nut Restaurant experiential activity’. Feedback from one of the event managers indicates that it was a very positive experience for customers:

‘Consumers constantly made comments on their shock that they were being given a free bowl of cereal. The overall look of the stand impressed many people with them thinking it was a proper eatery and queuing up expecting to pay’.

In a groundbreaking initiative Kellogg’s created and implemented a Crunchy Nut (CN) restaurant in 2012, and

As a result of this initiative, £10,000 in media value was delivered across social channels and 2m shoppers were exposed to the CN restaurant, which has enabled the company to conduct further and more diverse market research into its products.

Page 4: Above and below the line promotion

A business needs to use different promotional activities to raise awareness of its products and services. When planning promotional activity, the acronym AIDA is a tool that can be used to make marketing communication more effective:

initiating awareness amongst non-customers or increasing knowledge of new offers for existing customers generating interest for and a desire to have the product ensuring action to purchase.

There are different methods of promoting products and services. Above-the-line promotion aims to inform and raise brand awareness. It includes advertising in magazines, newspapers, online or through television advertisements. However, these methods are expensive and in an increasingly cluttered media world it is harder to cut through with just advertising. Increasingly, below-the- line promotional activity is being used in addition to advertising, to reach and engage with consumers. Below-the-line promotion gives a business more control over how it communicates with its target audience. Below-the-line methods include social media, direct marketing through targeted mailshots, personal selling and sponsorship. Kellogg’s uses both above and below-the-line methods to promote its products. Television, radio, online, cinema and press advertising are examples of its above-the-line activity with on-pack promotions, sampling and coupons examples of its below-the-line activity. In 2013, Kellogg’s launched its new Crunchy Nut Oat Granola (CNOG) product which was promoted through a 2-stage door-drop sampling campaign using specially selected postal areas. These postal sectors, which were clustered around stores, enabled Kellogg’s to target ‘adult taste seekers’ aged between18-45, who eat a range of breakfast cereals. The first stage of the door- drop involved the delivery of branded bags to 907,435 targeted homes in 1,014 postal sectors. These bags offered the consumer a free pack of CNOG, and to accept they had to tick a box and leave the bag on their door-step for the following morning. The second stage of the campaign consisted of filling the bags (of households who had chosen to opt-in) with a free full-size packs of Crunchy Nut Oat Granola.

The campaign was a success with a significant impact on sales through new customers trialling the product. It also had a positive effect on existing customers, demonstrated by an increase of 6.4% in repeat purchase. The outcome of the campaign was £155.500 of extra sales and 64.800 in units, resulting in a small market share increase. As with the CN restaurant campaign, Kellogg’s social media channels were integral to the promotional activity. A twitter hash-tag on each bag resulted in consumers sharing their positive experiences online. Kellogg’s also uses promotional campaigns in-store to drive brand awareness at the point of purchase. An example of this was a five week sampling tour at Tesco stores across the UK. Using branded Crunchy Nut vans, two teams drove around the UK handing out samples of Crunchy Nut chocolate cereal. Locating themselves in prime positions in stores, to capture the highest footfall, nearly 30,000 samples were distributed to customers. This type of promotion both highlights and increases demand for products close to the point of purchase, as well as creating greater engagement with customers.

Page 5: Evaluating promotional activity

Promotional activity is expensive and a business needs to be able to measure the return on the investment (ROI) it has made in developing and implementing promotional campaigns. A business also needs to learn from the marketing initiatives it carries out so that the findings can be used to improve future strategies.

Learning from the experience of both their 2012 and 2013 CN restaurants, and the use of hash- tags on the door drop bags initiatives has shown Kellogg’s the benefits of utilising social media, especially when trying to reach a wider and younger audience. By developing and delivering a digital strategy that worked alongside the CN restaurant, Kellogg’s significantly increased the number of customers reached by the activity amongst those who were unable to attend the restaurant in 2013. The use of Twitter competitions enabled Kellogg’s to engage with a wider audience. The first competition, ‘tip with a pic’, encouraged visitors to take photos of themselves and friends, upload them to Twitter and use the hash-tag ‘CrunchyNutTip’; this competition reached 86,893 people, with 323,492 impressions served by the hash-tag. For those who were unable to attend the restaurant, Kellogg’s launched a second competition which allowed the company’s wider Twitter community to get involved for a chance to win a year’s supply of CN Chocolate, reaching 766,132 people and 2,285,167 impressions served by the hash-tag ‘CrunchyNutChocolate’. Kellogg’s use of social media demonstrates how a business can engage with and generate excitement in its products, achieving a far greater reach than traditional marketing techniques. Monitoring and evaluating promotional activity generates sales and financial data that enables a business to measure key information. This includes consumer product preferences, increase or decrease in market share and the level of sales growth as a result of the promotional activity. Kellogg’s, by data sampling and measuring the effectiveness of their promotional activity, have shown that effective targeting drives ROI, for example targeting households is more effective than mass-sampling at events.

Page 6: Conclusion

Getting the right product or service to the customer, at the right price, in the right place and at the right time is fundamental to business success. Understanding and balancing the marketing mix enables an organisation to uniquely position its brand to drive sales of its products and services. To remain as a market leader a business needs to continually look at new ways of engaging and exciting customers in its products and services. This case study has shown how Kellogg’s is able to remain as market leader through its implementation of groundbreaking marketing strategies and by learning from every marketing campaign it undertakes. Through the use of social channels, Kellogg’s is able to innovatively market its new products in creative and interesting ways, generating opportunities to gain new customers and retain existing customers.