Tag Archives: target marketing

Choose a Marketing Strategy

28 Monday May 2012

Posted by in Marketing Strategy

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All too often, organizations struggle to choose a marketing strategy that best fits their overall goals and objectives. Sometimes the strategy for a given product or service will be in complete contrast to other marketing strategies within an organization. It is perfectly acceptible to use different strategies–across the product portfolio–to help springboard a particular product into the spotlight. Remember, speed to market is crutial. The cost-leader strategy, differentiation strategy, and focus strategy each offer unique advantages.

Cost-Leader Strategy

The Cost-Leader Strategy is the strategy a firm follows to become a leader in market share. Basically the strategy focuses providing the product to the market at the lowest cost. Every action the firm takes is designed to lower the cost of delivering the product to the consumer ensuring the firm maintains the high volume turnover require in this strategy. As a result this strategy also requires the firm to constantly monitor competitive challenges and quickly responding to these challenges by anticipating them and using its cost advantage to dominate its competitors. New technologies and innovations are quickly adopted to lower production costs and increase its advantage in the marketplace.

This aggressive approach to remaining the market leader requires the firm to constantly expand the total market by seeking new users, new uses for the product and encouraging current users to use more of the product. All of these focuses will serve to increase quantity demanded resulting in still lower costs through economies of scale allow the firm to reinforce its dominance in the industry. Wal-Mart is the classic example of this strategy in action.

Differentiation strategy

The Differentiation Strategy is based on exploiting identified weakness in the position of the cost-leader or other firms in the marketplace. These might be consumer dissatisfaction with the choices available, customer services or quality of the product offered by the Cost-Leader. The firm that is following the Differentiation Strategy than develops an aggressive strategy designed to exploit this weakness and gain market share at the cost of either the Cost-Leader or other weaker firms. Target is an excellent example of this strategy countering with smaller, friendlier stores easier for the customer to navigate when in a hurry.

Focus strategy

The Focus Strategy is a strategy based on avoiding competition with the major firms in the industry by focusing on serving niche markets too small for the large firms to exploit economically. Usually these are specialty markets that are too dispersed or fragmented for a large firm to serve profitably. Often they are isolated geographically or require a special knowledge of products and market demographics. The firm then focuses on making itself master of this niche but building a value chain based on its unique needs. The Gap succeeds with improved quality and selection in the clothing field it specializes in.

Choose the marketing strategy that will bring the most success to your organization. Considering there is only one cost-leader in each industry, most companies choose a differentiation strategy. This means, of course, that you will be going toe-to-toe with the competitor with the lowest price. In this scenario, do not compete on price. Prove why your products and services are better–and enjoy the success.

Vitamin Enhanced Water Could Make a Bigger Splash

28 Tuesday Jun 2011

Posted by in Marketing Strategy

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There is a global opportunity for companies producing vitamin enhanced water, but do the marketing executives see it? China is the second largest market for energy drinks in the world. According to research by Zenith International (2009), the United States and Canada combined to consume 37% of the overall volume of energy drinks in 2008 (Just-Drinks.com). The Asia Pacific region boasts 30% of the global volume.

With a strong distribution channel, competitive pricing, smart positioning, and aggressive advertising Glaceau VITAMINWATER® enhanced water can become the number one energy drink in China.

Overall sales of energy drinks worldwide have doubled in the last five years (Roethenbaugh, 2009). Clever marketing and product positioning has blurred the line between energy drinks and the six categories of water that struggles to compete in the same market. Flavored waters muddy the market with nothing more that bottled water with a twist. Clustered water, the latest version of ultra purified H2O, has yet to take hold. Fitness and oxygenated waters appeal to athletes and casual gym patrons. Premium waters are typically enjoyed at fine restaurants as an alternative to tap water. Vitamin enhanced waters are targeted to health conscious individuals.

The market leader in energy drinks manufactures and distributes a product containing high levels of caffeine. The public perception is that caffeine is the most effective stimulant for energizing your mind and body. However, other energy drink companies have made attempts to make a splash in the market by using energy boosting ingredients such as green tea and ginkgo biloba (AllBusiness.com, 2005). These particular products find themselves competing with soft drinks, smoothies, and iced teas for market share—and as a result, barely providing competition for the caffeine based products.

The most compelling statistic that would encourage Glaceau to re-position their VITAMINWATER® enhanced water in the energy drink market is the 12% annual growth prediction taking sales to over $9 billion dollars in the U.S. (ReportBuyer.com, 2007). Based on this prediction, and the knowledge that the Asia Pacific market enjoys similar sales forecasts, the timing is perfect for Glaceau VITAMINWATER® enhanced water to enter this new market. The industry for bottle waters, fitness drinks, and enriched waters is flourishing. PepsiCo cites the declining popularity on carbonated soft drinks is partly responsible for the increase in sales of their sports drink, Gatorade (Farrell & Rappeport, 2010).

The largest segment for the VITAMINWATER® enhanced water product in the Asia Pacific market is in China. The most recent census data shows the average total consumption expenditure for a Chinese family is 7142 Yuan, or approximately $1,053 U.S. dollars (Coutsoukis, 2004). Nearly 38% of the total expenditure is on food. Based on this information alone, Glaceau should be skeptical when deciding whether or not the market can sustain the energy drink business. One existing company has a proven track record in the Asia Pacific market.

Red Bull, the world’s leading manufacturer of energy drinks, has enjoyed several years of success in China. However, their flagship product is targeted specifically to males between the ages of 18 and 24 (Yates, 2008). Glaceau VITAMINWATER® enhanced water, with a slight product repositioning, can cast a wider net and attract a strong target audience comprised of males and females between the ages of 18 and 49. China has approximately 700 million people that fall within this demographic model. Many, of course, do not have the income to justify purchases outside of the bare essentials. However, companies currently with market saturation have isolated the target audience.

Constant adjustments to the U.S. – China trade agreements need to be considered when planning a manufacturing and distribution strategy. There have been several talks within the last few months regarding trade barriers (Lawder, 2010). Depending on the outcome of the trade agreements between the United States and China, Glaceau may need to establish production and distribution within China as opposed to exporting the VITAMINWATER® enhanced water product from the United States.

A few trade sectors in China are suffering from overcapacity (Gunn, 2010). The overcapacity is mostly within the industrial and commercial sectors. Environmental issues and increasing social tension are a few current weaknesses that should be monitored, but not distract from the plan to introduce VITAMINWATER® enhanced water to the Asia Pacific market. China’s overall economic position is strong—boasting a $53 billion dollar surplus in the first quarter of 2010.

The China Food & Drink Report (2010) exposes one of China’s weaknesses as their under-developed agriculture and distribution system (Business Monitor International). Moreover, the health scares with products produced in their own country has opened a door for imports. The timing could not be better for Glaceau VITAMINWATER® enhanced water to spring into the spotlight, and begin an aggressive campaign to dominate the energy drink market.

The Chinese government is overwhelmed with issues regarding the environment. While the 8% average growth has enhanced the standard of living for the population, it has also contributed to their environmental challenges. Any company, regardless of origin, with the intent to develop a manufacturing facility in China will find most of the opposition coming from special interest groups. Glaceau must continue to monitor and assess political risks. Coca-Cola Company has been conducting business in the Asia Pacific market for many years. Their experience in this area will help foster the necessary relations with key government officials and organization for success.

Glaceau is a privately owned subsidiary of Coca-Cola Company. The company began manufacturing enhanced waters in 1998. The Smartwater product, an electrolyte enhanced water, is the foundation for the VITAMINWATER® enhanced water product. Glaceau VITAMINWATER® enhanced water is produced in eleven flavors and enriched with energy enhancing natural ingredients and vitamins. VITAMINWATER® enhanced water is positioned to compete with traditional bottled water, sports drinks, and flavored waters. The brand is recognized world wide as simply another variation of enhanced bottled water.

Glaceau has positioned its VITAMINWATER® enhanced water product as a healthy alternative to soda. However, the Asia Pacific market currently perceives VITAMINWATER® enhanced water as a product for the affluent. VITAMINWATER® enhanced water in the Asia Pacific market is available in upscale restaurants and high-end retail outlets. This is in complete contrast to the public perception of the same product in North America. The company acknowledges the need to tap into a market with the potential to dwarf sales in other global markets.

What if, and at the same time, VITAMINWATER® enhanced water is re-positioned as an energy drink?

The competition for energy drinks in China is far less crowded than with specialty waters. This is unexpected considering that caffeine-based energy drinks originated in Japan and Thailand (AllBusiness.com). The Austrian-distributed drink, Red Bull, has dominated this category for several years. Glaceau can make a strong impact and at the same time broaden the definition of energy drink to include healthy alternatives. Health conscious consumers, regardless of location, would cross over to create a new market.

All mind and body stimulating energy drinks that would compete with VITAMINWATER® enhanced water in the Asia Pacific market contain caffeine. Glaceau boasts no artificial flavors, colors, are any chemical stimulants as contained in the products of the competitors. Glaceau can leverage their all-natural approach as the differentiator that will eliminate the caffeine-based products from the competition. The current VITAMINWATER® enhanced water product line will not be adjusted or altered for the Asia Pacific market, but rather re-positioned as a healthy alternative energy drink.

There are over 500 energy drink products worldwide. Five producers dominate the market share.  Red Bull is the leader with 42.7% overall sales. Hanson Natural, the manufacturer of Monster brands has 16% of the market. PepsiCo has pushed their SoBe and Amp products to an impressive 13.2%. Rockstar International enjoys 12% and Full Throttle by Coca-Cola has 10% of the market (Simon & Mosher, 2007).

Each of these producers of energy drinks leverage caffeine as their main ingredient. Glaceau VITAMINWATER® enhanced water, repositioned to compete in the energy drink market, would enjoy immediate success by attracting health conscious energy drink consumers. The assumption is that many consumers remain leery of the chemical-based energy drink, and because there are no alternatives choose to consume the caffeine riddled energy drinks. There is little competition in the energy drink market for products that bring a healthy natural alternative to the mix.

Glaceau VITAMINWATER® enhanced water has a strong global presence, with the exception of the Asia Pacific market. This is due mostly to the fact that the product was perceived by the Asian population as an upscale water only available to the affluent. In all fairness to the consumers, without a marketing plan to properly position the product—there would be no reason to think otherwise. The strategy is to create a drink category that attracts consumers from both the energy drink category and the fitness water category.

Better positioned as an energy drink, Glaceau VITAMINWATER® enhanced water can make an immediate impact to the Asia Pacific market by advertising the differentiator. VITAMINWATER® enhanced water is an all-natural alternative to the chemical laden products in a can. Unlike other energy drinks, VITAMINWATER® enhanced water is safer for a broader age group. Energy should be replaced naturally. With Glaceau VITAMINWATER® enhanced water, you can reenergize and “harness your energy—naturally.”

References

AllBusiness.com (2005). In the energy drinks market by 2009 the United States is expected to have the largest market. Business Wire. [Electronic version] Retrieved July 21, 2010, from http://www.allbusiness.com/consumer-products/food-beverage-products-nonalcoholics/5178192-1.html

China Food & Drink Report – Q3 2010. (2010). Business Monitor International. [Electronic version]  Retrieved July 26, 2010, from ProQuest: http://proquest.umi.com/pqdweb?index=7&did=2062171471&SrchMode=1&sid=4&Fmt=2&VInst=PROD&Type=PQD&RQT=309&VName=PQD&TS=1280177041&clientId=74379.

Cateora, P. & Graham, J. (2007). International marketing. New York: McGraw-Hill Irwin.

Coutsoukis, P. (2004). Per capita annual living expenditure of urban households (2004) – China statistics census. Retrieved July 24, 2010, from http://www.allcountries.org/china_statistics/10_7_per_capita_annual_living_expenditure.html

Farrell, G. & Rappeport, A. (2010). PepsiCo net income falls 3%. Financial Times. [Electronic version]  Retrieved July 26, 2010, from ProQuest: http://proquest.umi.com/pqdweb?did=2087426421&sid=1&Fmt=3&clientId=74379&RQT=309&VName=PQD

Gunn, N. (2010). Coface’s China country rating and business climate rating. Retrieved July 21, 2010, from http://import-export.suite101.com/article.cfm/cofaces-china-country-rating-and-business-climate-rating

Just-Drinks.com (2009). Energy drink sales hindered by Thai decline – research. Retrieved July 20, 2010, from http://www.justdrinks.com/analysis/energy-drink-sales-  hindered-by-thai-decline-research_id98736.aspx

Lawder, D. (2010). US-China talks to focus on trade barriers—Geithner. Retrieved July 26, 2010, from http://www.reuters.com/article/idUSNLLIGE64020100518

ReportBuyer.com (2007). New report predicts energy drink sales in the U.S. to exceed $9 billion by 2011. Retrieved July 20, 2010, from             http://www.reportbuyer.com/press/new-report-predicts-energy-drink-sales-in-the-us-to-exceed-9-billion-by-2011/

Roethenbaugh, G. (2009). Global energy drinks market 2003-2008. Retrieved July 25, 2010, from http://www.researchandmarkets.com/reports/c29596

Simon, M. & Mosher, J. (2007). Alcohol, energy drinks, and youth: A dangerous mix. Retrieved July 20, 2010, from http://www.marininstitute.org/alcopops/energy_drink_report.htm

Yates, D. (2008). Is coffee an old man’s beverage? Retrieved July 21, 2010, from http://www.energydrinkreviewer.com/

Advertising – Then and Now

09 Tuesday Mar 2010

Posted by in Marketing Philosophy

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Arens, Schaefer, & Weigold (2009) developed a timeline indicating the first known advertising message was created in 3000 BC. Although the actual message bore a closer resemblance to a classified advertisement, the evolution of advertising had begun. The nonpersonal, persuasive, structured communications we recognize today are a progeny of advertising efforts spanning the past few centuries. Early advertising and distribution was limited to a small geographic area surrounding a vendor. Everyday advertising, such as a merchant’s signage, used symbols instead of words to indicate the type of business and product or services offered.

During the preindustrial age, advertising was reaching far beyond the simple signage and word of mouth of local merchants. Handbill, posters, and signs became popular formats for advertising. The printing press was one of the most important developments in the history and evolution of advertising.  By the middle of the 1600s, the printing press was enjoying the bicentennial of its introduction by Johannes Gutenberg. Gutenberg’s invention was one of three major developments that can be attributed to the birth of modern advertising (Arens, Schaefer, & Weigold, 2009).

The first newspaper advertisement appeared in 1650. While a large percentage of the population could not read, the local newspapers were becoming recognized as a medium for delivering advertising to the masses. Merchants, vendors, and manufacturers used newspapers to extend their marketing boundaries beyond the small concentrated areas surrounding their physical locations. Print advertising first appeared in America within the pages of the Boston Newsletter–published in 1704. Ben Franklin is responsible for creating the structure and format of print ads. His techniques for making print ads more legible and easier to understand continue to be used in modern print advertising. Ben Franklin was the first in America to recognize the need to large headlines, white space, and illustrations in advertisements.

England had enjoyed several hundred years of advertising before the American colonies were born. English author, Samuel Johnson, recognized the oversaturation of advertising. In 1758, Johnson insisted that in order to stand out, advertisers needed to embellish their messages. Puffery, as recommended by Johnson, is the exaggeration of the benefits or capabilities of a product or service in an advertisement. While an accepted practice of the industrializing age, puffery is not tolerated in modern advertising.

The industrializing age began in America in the early 1800s—nearly half a century behind the Industrial Revolution in England—introducing machines to mass-produce goods. The sudden surplus of goods and products exposed a need for aggressive marketing and broad saturation advertising. Retailers assumed the responsibility of advertising to the consumers. The industrialization age was followed by the industrial age and once again the face of advertising changed. Advertising during the industrial age—recognized as the first seventy-five years of the twentieth century—focused on the promotion of consumer-packaged goods.

The postindustrial age of the 1980s through 1990s faced the challenges of marketing to an environmentally sensitive society. Demarketing techniques were used in advertising in an attempt to make consumers aware of a company’s environmentally responsible manufacturing and supply-chain methods. Consumers today are not only better informed about products and services, but also the companies that produce them. The modern consumer will research a company and absorb feedback from word-of-mouse channels such as blogs and forums to offset the positive-only hype from advertising. The green movement is represents a marketing potential of 500 billion dollars (Hopkins, 2009).

Modern advertising trends are constantly changing. Mostly driven by advances in technology, advertising media is becoming broader reaching and less expensive to leverage. The Internet has evolved into an advertisers low-cost playground. Email campaigns are less expensive to produce than traditional print campaigns. The Internet also allows a more strategic direct and targeted approach to advertising. Email is a less formal and more personalized alternative to traditional direct mail campaigns.

Regardless of the message and media, advertisers are spending more time identifying their target audience. The recent economic downturn has caused consumers to tighten their belts. Recovery takes longer than downturn (Libey, 2004). During the recovery, consumers strive to become better educated about the products they purchase. Advertising, using every popular medium, to a target audience in the only way a business can stand out on the very crowded playing field with their competitors. In modern advertising, every marketing dollar counts. A savvy marketer will use several techniques, such as predictive modeling, to select a target audience for a specific product or service. The marketing message, advertisement, and call to action will be written specifically for the target audience. Identifying a target market and creating an advertising campaign with relevant content and a compelling message positions a marketing manager for the highest likelihood for success.

The advertising industry has been redefined several times. The types of advertising agencies within the industry have grown. While there have always been local, regional, and international specialists within the industry, niche or creative boutique type agencies are beginning to become prevalent. Many companies are using in-house departments for concept, design, and creative while relying on traditional agencies for media placement. The purpose and definition of advertising has remained consistent across each ring of growth.

References

Arens, W., Schaefer, D., & Weigold, M. (2009). Essentials of contemporary advertising. McGraw-Hill Irwin. Boston.

Hopkins, D. (2009). Riches in niches: Connecting to true browns. Retrieved February 8, 2010, from http://www.targetmarketingmag.com/article/riches-niches- connecting-true-browns-403940/1

Libey, D. (2004). Signs of real economic recovery. Retrieved February 6, 2010, from http://www.targetmarketingmag.com/article/signs-real-economic-recovery- 28914/1