Case Study On Kelloggs

Marketing is not a one-night stand – it is a process. Marketing managers are responsible for a variety of activities that together represent the marketing process, Lamb et al (2008:24). He also mentions that the marketing process includes understanding the firm’s mission and the role marketing plays in fulfilling that mission, setting marketing objectives, scanning the environment, developing a marketing strategy by selecting a target market strategy, developing and implementing a marketing mix, implementing the strategy, designing performance measures, evaluating marketing efforts, and making changes if needed, Lamb et al (2008:30).

Kotler and Keller (2009:131) mention that effective marketing research follows six steps shown below:

Define the problem and research objectives

Develop the research plan

Collect the information

Analyze the information

Present the findings

Make the decision

Kellogg’s is the world’s leading producer of cereal products and convenience foods such as cookies, crackers and frozen waffles. Its brands include Corn Flakes, Nutri-Grain and Rice Krispies. Kellogg’s strategy is to focus on products and brands that are either the market leader or in a strong second position the company believes that this focus upon core and successful products enables it to provide consistent and reliable returns and rewards for its stakeholders. When Kellogg’s investigates a change in its marketing it considers the 4P’s or the marketing mix, the 4P’s are:

Product

Price

Place

Promotion

Special K was already a well-established brand; its full potential had never been reached. Special K was viewed as a stand-alone product, and Kellogg’s had not created any variants or brand extensions to develop the core product. Although Special K was a successful product, Kellogg’s recognised the opportunity to stretch the brand by investments that would:

Revitalise it

Extend and further develop its growth phase

Help to delay the onset of the maturity phase.

Before taking any investment decisions, Kellogg’s undertook market research. It wanted to answer these questions:

What changes taking place in society are likely to affect the product?

How might new technologies affect our business?

What are likely to be the future market trends?

Where are the opportunities within the market place?

What new categories would appeal to the target market?

How far do consumers think the brand could stretch into the market for different product categories?

Since Special K was already a well-established brand, Kellogg’s did not require paying much attention to the 4 P’s or marketing mix but rather had to understand how Special K could be extended into a series of variants which would keep the core product strong, but grow the brand as a whole. Kellogg’s France introduced red berries into the cereal. This new product performed well. Market research in the UK, including consumer tests, also identified a real opportunity within the UK market.

In October 1999, Kellogg’s launched Special K Red Berries in the U.K, this had performed very well. Evaluating the launch revealed further scope for product development. It was important to ensure that any new products tasted different from the original Special K and the Special K Red Berries, so as not to harm their sales. Extensive product development research was carried out by food technologists. Kellogg’s then tested the product with quantitative research (Quantitative research is used to measure how people feel, think or act in a particular way, surveys and questionnaires could be used to get an idea of how people feel and react to a specific item or brand). Kellogg’s launched Special K Peach and Apricot in February 2003.

Kellogg’s knew that women who are keen to watch their weight and shape seek a range of solutions throughout the day – not just breakfast. Market researches undertook further quantitative tests of product ideas across a range of food categories, the research identified that cereal bars offered the strongest opportunity to develop Special K as a healthy snack. The brief was then developed and the Special K bar was launched in July 2001, with significant television coverage. Consumers were also able to sample the bar through specific promotional activity.

Kellogg’s realised that the variants were responsible for a huge growth in the Special K brand. New product development had transformed the brand within the UK which gave a huge opportunity to roll-out other developments in other markets. Product research showed that the UK products could be adapted to meet the individual tastes of consumers within those markets. The Kellogg’s strategy was truly global, it developed an idea in Europe which it then adapted and applied worldwide.

QUESTION TWO

SPECIAL K WAS ALREADY A WELL-ESTABLISHED BRAND; ITS FULL POTENTIAL HAD NEVER BEEN REACHED. IT WAS VIEWED AS A STAND-ALONE PRODUCT, AND KELLOGG’S HAD NOT CREATED ANY VARIANTS OR BRAND EXTENSIONS TO DEVELOP THE CORE PRODUCT. EACH PRODUCT HAS ITS OWN LIFE CYCLE. IT WILL BE ‘BORN’, IT WILL ‘DEVELOP’, IT WILL ‘GROW OLD’ AND, EVENTUALLY, IT WILL ‘DIE’. SOME PRODUCTS, LIKE KELLOGG’S SPECIAL K, HAVE RETAINED THEIR MARKET POSITION FOR MANY YEARS. ALTHOUGH IT WAS A SUCCESSFUL PRODUCT, KELLOGG’S RECOGNIZED THE OPPORTUNITY TO STRETCH THE BRAND BY INVESTMENTS THAT WOULD:

Revitalise it

Extend and future develop its growth phase

Help to delay the onset of the maturity phase

THE TRADITIONAL PRODUCT LIFE-CYCLE SHOWS HOW A PRODUCT GOES THROUGH 4 STAGES DURING ITS LIFE IN THE MARKET PLACE. AT EACH STAGE IN THE PRODUCT LIFE-CYCLE, THERE IS A CLOSE RELATIONSHIP BETWEEN SALES AND PROFIT SO WHEN A PRODUCT GOES INTO DECLINE, PROFITS DECREASE.

When a product is introduced to the market, growth is slow due to limited awareness. As the product is establishing itself, sales will start to increase during the period of growth. As the product reaches maturity, the company needs to inject new life into the product, either by creating brand extensions or variants otherwise the product will reach maturity and start to decline.

Before taking any investment decisions, Kellogg’s undertook market research. It wanted to answer these questions:

What changes taking place in society are likely to affect the product?

How might new technologies affect our business?

What are likely to be the future market trends?

Where are the opportunities within the market place?

What new categories would appeal to the target market?

How far do consumers think the brand could stretch into the market for different product categories?

Kellogg’s had to understand how the product could be extended into a series of variants which would keep the core product strong, but grow the brand as a whole.

Manufacturing capability is another key issue. If launches of new products are successful in global markets, Kellogg’s must have the manufacturing capacity to meet consumer demand as well as the supply chain necessary to reach those consumers.

Introduction Stage

Special K was already a well established brand, its full potential had never been reached.

Growth Stage

Growth in Special K began to rise and Special K became a brand that was well known to the consumers. It grew steadily but did not reach its peak as it was viewed as a stand-alone product. Kellogg’s had to understand how the product could be extended into a series of variants which would keep the core product strong, but grow the brand as a whole. Kellogg’s introduced Special K red berries, Special K Apricot and Peach and Special K bar. Kellogg’s realised that the variants were responsible for a huge growth in the Special K brand, without a drop in sales of the core cereal product.

Maturity

In my opinion the Special K product had never reached its maturity stage, its full potential had never been reached and that is the reason why Kellogg’s decided to grow the brand as there was potential in the Special K brand. Special K had developed a series of variants, which has put the Special K brand into a different level which saw a huge growth in the Special K brand. The brand had achieved global coverage, and was providing not only significant developments in sales value and volume of Special K products, but also a huge boost to the brand’s equity.

Decline

I strongly believe that the Special K brand is still far from the decline stage, with the introduction of the variants to the Special K brand there was a huge boost to the brand’s equity. Capacity had to increase as demand grew for the brand, a portable foods plant at Wrexham had to be opened to produce bars and other capacity was created by commissioning the production of Special K cereal in Spain. The Kellogg’s strategy was truly global, it developed an idea in Europe which it then adapted and applied worldwide.

QUESTION THREE

3.1. Many businesses can’t answer the question: Who is your target market? They have often made the fatal assumption that everyone will want to purchase their product or service with the right marketing strategy. A target market is simply the group of customers or clients who will purchase a specific product or service. This group of people all has something in common, often age, gender, hobbies, or location, Bryan (2008:1)

Kellogg’s is a global organisation. Its products are manufactured in 19 countries worldwide and sold in more than 180 countries. When a company like Kellogg’s is investigating a change in its marketing it can consider four elements, these are known as the marketing mix or 4Ps:

Product

Price

Place

Promotion

Kellogg’s concentrated on changing Special K through new variants. Special K was already a well established brand, its full potential had never been reached. Kellogg’s introduced Special K Red Berries, Special K Peach and Apricot.

Kellogg’s Special K was more of a breakfast cereal. Kellogg’s already knew that women who are keen to watch their weight and shape seek a range of solutions throughout the day. Kellogg’s target market was women. In my opinion, Kellogg’s market potential was great as majority of women are looking to lose weight or keep in shape and women are always willing to try new products to lose weight or keep in shape.

Kellogg’s undertook quantitative tests of product ideas across a range of food categories. According to The Times 100, “quantitative research is research that seeks structured responses that can be summarised numerically, for example as averages, percentage or other types of statistics to help an organisation understand how customers perceive its products/services”.

The research identified that cereal bars offered the strongest opportunity to develop Special K as a healthy snack. When Kellogg’s launched the Special K bar, Kellogg’s created market awareness by advertising via television coverage and was also giving the consumers samples through specific promotional activity.

Kellogg’s realised that the variants were responsible for a huge growth in the Special K brand; market research suggested that using funds to develop variants on Special K looked like a low risk project that offered the prospect of a good rate of return. This was largely because it involved developing and extending a brand that already enjoyed huge consumer support in ways that could be adopted to the market place worldwide.

3.2. Since Kellogg’s is a global organisation and manufactures products in 19 countries worldwide and sold in more than 180 countries, its infrastructure is setup by means of having a well organised supply chain and distribution channel. The Kellogg’s brand is well known and therefore I don’t think it will be difficult for Kellogg’s to penetrate the market with its new variants.

The concerns Kellogg’s will have if the launch of new products is successful globally will be more of an internal factor, such as manufacturing capabilities to meet consumer demand. In my opinion I think this will be the major concern for Kellogg’s as a dedicated team will need to manufacture, produce and distribute the product. Kellogg’s would have to increase its manufacturing capacity and also refine supply chain management processes to ensure that the product would be available at the point of purchase.

QUESTION FOUR

4.1. Lamb et al (2008:242) mentions that “many products fail simply because their manufacturers lack a well-developed marketing strategy. Moreover, they do not realise the importance of creating a product to meet the consumers need rather than producing ‘what we know best’.”

Kotler and Keller (2009:610) mention that “new products can fail for many reasons: ignored or misinterpreted market research; incorrect positioning; ineffective advertising; or wrong price; insufficient distribution support; and competitors who fight back hard.

Kotler and Keller (2009:611) summarize causes of new product failure as:

Market/marketing failure

Small size of potential market

No clear product differentiation

Poor positioning

Misunderstanding of customer needs

Financial Failure

Low return on investment

Timing Failure

Late in the market

“Too” early-market not yet developed

Technical Failure

Product did not work

Bad design

Organizational Failure

Poor fit with the organizational culture

Lack of Organizational support

Environment Failure

Government regulations

Macroeconomic factor

_*Source: Dipak Jain, “Managing New-Product Development for Strategic Competitive Advantage,” Table 6.1 in chapter 6 in Kellogg on Marketing, ed. Dawn Lacobucci (New York: John Wiley, 2001), p.131._

4.2. Mayo mentions that “the new product development process has been conceived in discreet terms with a beginning and an end. Different companies and different industries may alter this seven-step process for different products, or the steps themselves may become blurred as companies become engaged in several stages at the same time.”

There are many opinions on what are the steps for the new product development process, I have found that most of the new product development steps have the following:

*source:http://images.google.co.za/imgres?imgurl=http://www.referenceforbusiness.com/management/images/eom_0005_0001_0_img0129.jpg&imgrefurl=http://www.referenceforbusiness.com/management/Mar-No/New-Product-Development.html&usg=__jBlW75EQ0I-RAq5gIM4B-7AWOfs=&h=430&w=425&sz=49&hl=en&start=2&um=1&tbnid=m4t13sO6pPeIGM:&tbnh=126&tbnw=125&prev=/images%3Fq%3Dnew%2Bproduct%2Bdevelopment%2Bprocess%26hl%3Den%26sa%3DG%26um%3D1 (accessed 28 April 2009)

Idea Generation: Kellogg’s had developed two successful variants to the Special K brand

Special K Red Berries – this development came from France

Special K bar – Kellogg’s already knew that women who are keen to watch their weight and shape seek a range of solutions throughout the day – not just as breakfast.

Idea Screening:

Special K Red Berries – The marketing team done research and also included consumer tests

Special K bar – Market researches undertook quantitative tests of product ideas across a range of food categories. Concept Developing and Testing:

Special K Red Berries – From the marketing research and consumer testing, Kellogg’s identified a real opportunity within the UK market

Special K bar – The research identified that cereal bars offered the strongest opportunity to develop Special K as a healthy snack

Business Analysis Stage

Kellogg’s Special K was a well established brand and its full potential had never been reached. Market research suggested that using funds to develop variants on Special K looked like a comparatively low risk project that offered the prospect of a good rate of return, this was largely because it involved developing and extending a brand that already enjoyed huge consumer support ways that could be adapted to the market place worldwide.

Prototype Development

Since Kellogg’s is a well established brand, I feel that it would not have a problem in developing a new product as Kellogg’s is in the category as “Superbrands”. The challenge Kellogg’s will have when developing the variants is to ensure that any new products tasted different from the original product. Kellogg’s tested the products with quantitative research, ensuring that the new product meets the customer’s needs and meet desired quality levels.

Test Marketing

In the test phase, Kellogg’s done research to see how their client market will react to the development of new variants. For the Special K bar, Kellogg’s undertook further quantitative tests of product ideas across a range of food categories. The research identified that cereal bars offered the strongest opportunity to develop Special K as a healthy snack. When Kellogg’s launched the Special K bar, Kellogg’s advertised the product via television coverage and also made consumers aware of the product by allowing consumers to sample the bar through specific promotional activity.

Commercialization

This is the final stage where the product is introduced full scale. For Kellogg’s I feel the risk was not as high as introducing a new product in the market. Kellogg’s Special K was already a well established brand. When Special K bars were launched, Kellogg’s increased it marketing campaign with significant television coverage and consumers were also able to sample the bar through specific promotional activity.

QUESTION FIVE

5.1. Core Product vs. Augmented Product

“A core product is not tangible; it is not a physical product. You can’t touch it. A core product is the benefit of the product that makes it valuable to you”, (http://www.marketingteacher.com/Lessons/lesson_three_levels_of_a_product.htm)

With regards to Kellogg’s, Kellogg’s is a global organization, its products are manufactured in 19 countries worldwide and sold in more than 180 countries, the Kellogg’s brand is easily accessible and sold in all major stores throughout the country. The Special K bar is designed to eat anytime of the day, thus making it convenient and at the same time one can be healthier.

“An augmented product is the non-physical part of the product. It usually consists of lots of added value, for which you may or may not pay a premium”, (http://www.marketingteacher.com/Lessons/lesson_three_levels_of_a_product.htm)

Special K manufactured the Special K bar mostly for women who are keen to watch their weight and shape, the Special K bar can be eaten throughout the day, not just as breakfast.

5.2. Segmentation vs. Positioning

“Segmentation is essentially the identification of subsets of buyers within a market who share similar needs and who demonstrate similar buyer behavior. The world is made up from billions of buyers with their own sets of needs and behavior. Segmentation aims to match groups of purchasers with the same set of needs and buyer behavior. Such a group is known as a segment”, (http://www.marketingteacher.com/Lessons/lesson_three_levels_of_a_product.htm)

Kellogg’s knew that women who are keen to watch their weight and shape seek a range of solution throughout the day – not just at breakfast; Kellogg’s segmented their market and created the Special K bar as a “healthy snack”.

Positioning

Lamb et al (2008:169) states that “Positioning follows a firm’s target market decision. The term ‘positioning’ refers to developing a specific marketing mix to influence potential customers overall perception of a brand, product line, or firm in general”.

Kellogg’s is a global organisation and has many competitors. Kellogg’s positioned the market by introducing the Special K bar which is known to the consumers as a “healthy snack”.

5.3. Points of Parity vs. Points of Difference

“Points-of-parity (POP) are driven by the needs of category membership to create category of POPs and the necessity of negating competitors Points of Difference (POD) to create competitive POPs”, Krishnamurthi & Ramji (2007). Points of parity can also be a brand which a group of consumers believe that is good enough or meet their basic expectations.

Although Special K was already a well established brand, Kellogg’s launched Special K Red Berries and Special K Peach and Apricot.

“Point of difference (POD) is a term used for an outcome of product differentiation. In business economics, differentiation is seen as an important strategic move for companies to make. Because of an overwhelming variety of products and services on the market, those that stand out in some manner are better noticed by consumers”, Krishnamurthi & Ramji (2007). Point of difference can also be a brand which a group of consumers likes and perceives as the uniqueness of the brand.

Kellogg’s was different by introducing the Special K bar, which was seen as “healthy snack” that was targeted for women who are keen to watch their weight and shape.

5.4. Vertical Marketing Systems vs. Horizontal Marketing Systems

“Vertical Marketing Systems is a channel in which there is cooperation among channel members at two or more different levels of the channel”, Prentice Hall, Inc (2003)

Special K had never reached its full potential, initial developments came from Kellogg’s in France who introduced red berries into the cereal. It performed well, and a market research began in UK in order to identify a real opportunity within the UK market.

“Horizontal Marketing Systems is when two or more firms at the same channel level agree to work together”, Prentice Hall, Inc (2003)

In the Kellogg’s case, I would say that Kellogg’s and the supply chain company have to work hand in hand in order to deliver the products. If I assume the market researches that were used were external, they had to work hand in hand with Kellogg’s to do the market research and analysis the outcome of the research.

5.5. Niche Marketing vs. Micro-marketing

Micro Marketing isTargeting potential customers at very narrow, basic levels, such as by ZIP code, occupation, or lifestyle

the following information is required for metadata purposes, please ignore. [title]Benefits of training[/title] [summary]

Staying competitive is the key to sustainability. Training your staff, keeping them motivated and up-to-date with industry trends and new technologies is essential to achieving that goal.

Staff benefit too, learning new skills and becoming a valued asset in any organisation. Training brings direct benefits to business and can be calculated as a return on investment.

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Herman, R. & Gioia, J. (2000). Becoming an Employer of Choice

Johnson, M. (2000). Winning the People Wars: Talent & the Battle for Human Capital. London: Prentice Hall

Marx, (2001): Management Toady Yearbook, 16: ( ) 57.

Maisela, J.M (2001) Success factors for attracting and retaining highly skilled black professionals. Published MBA dissertation. University of Witwatersrand

Nel, P.S., Werner, A., Haasbroek, G.D., Poisat, P., Sono, T. And Schultz, H.B (2008) Human Resource Management. 7th Edition. Cape Town: Oxford University Press Southern Africa.

Noe, R.A., Hollenbeck, J.R., Gerhart, B. And Wright, P.M. (2008) Human Resource Management: Gaining a Competitive Advantage 6th Ed. McGraw-Hill.

The Conference Board, 2001, Engaging Employees Through your Brand – Preliminary Findings. [http://www.conference-board.org/MembersOnly/members/pdf-files/RR-1288-ES.pdf]