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Nestle 4 Full

Nestle 4 Full

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Published by: Preeth Kumar on Mar 06, 2012
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Long Term Maintenance of a Classic Brand Name

Kit Kat was launched in 1937. Since then, it has consistently been one of the best selling chocolate bars on the market and has acquired an instantly recognisable brand name and identity. In 1997, British sales of Kit Kat amounted to some £227 million, which made it easily the most popular confectionery product on the market. Forty four Kit Kats are consumed every second in the UK! The UK confectionery market is worth over £5 billion per annum and is highly competitive. It continues to be dominated by large, wellestablished names - highlighting the importance to firms of creating brand identities for their products. Once created, however, a brand name needs constant maintenance. Kit Kat’s ability to remain a brand leader over sixty years is no accident. The long term maintenance of a brand name requires continuous monitoring and investment. Brand image must be seen as a dynamic, not a static factor; the same consumer perceptions that create brand loyalty can also turn against a product that fails to adjust and adapt to changing attitudes. This case study focuses on Nestlé’s Kit Kat and the long term brand name maintenance strategies which have sustained Kit Kat’s position as a market leader for over sixty years.

What is a brand name?
Branding is the collection of attributes that the consumer has come to expect from a product, which will strongly influence their buying patterns. Branding can be achieved using a company name - it can be applied generically or, as in the case of Kit Kat, on an individual basis. The brand name promises the consumer particular benefits, such as quality and value for money, with these expectations being built up over many years. A brand name is often considered by a company to be its most important intangible asset. In a market where repeat purchases are the key to profitability, a brand name becomes paramount to a product’s success. A catchy name and distinctive packaging are vital ingredients in any brand image, but the true essence of a brand identity lies in the consumer’s mind i.e. the perceptions of the product. A company must be constantly aware of these perceptions and try to preserve and build on them through advertising and other promotions. Branding enables marketers to build extra value into products and to differentiate them from their competitors. The history of Kit Kat emphasises the importance of successfully managed brand names to the company that owns them. Nestlé was prepared to pay a

record price to acquire Rowntree in 1988 because of the prestigious brands in Rowntree’s product portfolio. Kit Kat was an important part of the portfolio. This acquisition prompted the City to look into the possibilities of including a financial valuation of a brand as an asset on a company’s balance sheet.

diversification through acquisition and divestment to achieve a more balanced structure to the business. Global brand names can achieve substantial production and purchasing economies of scale and, as world travel increases, so does the importance of instantly recognisable products. With a product portfolio which includes eight of the thirty top selling confectionery brands, such as Quality Street, Aero, Smarties, Polo and Rowntree’s Fruit Pastilles, Milky Bar and After Eight, it is extremely important that the marketing objectives for each product line are fully compatible with the overall objectives of the company as a whole. Like any group of individuals, each product has its own character, strengths and weaknesses and consequently, the marketing objectives of each product need to be specifically tailored. Objectives What is the company trying to achieve? In which direction are we headed? Strategy Tactics How can we get there? What specific actions need to be taken, by whom and when? How can we judge whether we are being successful in achieving our objectives? How do we measure our success or failure?

Product life-cycle
Business theory suggests that products follow a life-cycle, going through phases of development as follows: • the conception of an idea/product • research and development • introduction to the market. A period of growth then follows as consumers become increasingly aware of the product and, if successful, it becomes profitable. Eventually, the growth of sales will level off - this is the mature phase and is usually the result of increased competition. The theory predicts that sales will gradually decline as the market becomes saturated and consumer tastes change. However, it would be wrong to assume that after the uphill struggles of the development and growth phases, life becomes easier on the level. It is a considerable challenge to the marketers to prolong the profitable mature phase for as long as possible, using a range of extension strategies. A major drawback with the product life cycle theory is that it cannot be used as a predictor. Firms may be able to identify some of the stages of development from historical sales data, but they cannot know their exact position on the cycle, nor in which direction they might be heading. In addition, some products seem to enjoy very long maturity, if not immortality, with no signs of decline. Extending the product life span is the goal of many firms, but achieving this requires careful co-ordination of corporate and marketing objectives and strategies. expand into international markets. This in turn would affect the marketing tactics each company might employ. Confusion can often arise when attempting to reconcile marketing and corporate objectives. It could be argued that the success of any firm depends on its ability to satisfy a consumer need at a profit. This is, itself, the essence of marketing - so it could also be said that marketing and corporate objectives are the same thing. However, this would imply that marketing is more important than the other functional areas, when clearly they are all inter-dependent. Ultimately, any corporate strategy must both reflect and dictate to each of the different functional areas of the firm. Nevertheless, the information provided by the marketing department will be central to any corporate strategy formulation. This will include sales and market share, analysis of the competition, sales and profit forecasts for the future and analysis of changing consumer attitudes. Nestlé’s corporate objective is to be the world’s largest and best branded food manufacturer, whilst ensuring that the Nestlé name is synonymous with products of the highest quality. In recent years, the company has pursued a policy of expansion and

Nestlé’s corporate objectives
It is vital to any firm that its marketing objectives are compatible with the overall corporate objectives. In selecting corporate objectives and strategy, a firm might wish to refer to the Boston Matrix, Ansoff’s’ Matrix or use a simple SWOT analysis to establish where the company is and in which direction it wishes to head. For example, a company planning to consolidate its position within a national market might set very different objectives for the marketing of its products to a company wishing to



Injections of new life using extension strategies



Marketing objectives and strategy
Having decided its corporate objectives and strategy, Nestlé can set marketing objectives for each of its product lines and profit centres. The primary objective for Kit Kat is to maintain its position as the UK’s number one selling confectionery brand. In order to achieve this, Nestlé has to develop a





The product life-cycle




their prices and manufacturers. It is also predicted that confectionery. generic and individual brand names.’ http://www. it must be aware of and adapt to these changes. It is a common characteristic of imperfectly competitive markets for producers to concentrate on non-price competition. the brand has enjoyed continuous backing with investment in marketing to both the trade and consumer sectors. 3 A particular challenge for the advertisers is to appeal to both the consumers and the purchasers. India. it more than doubled total Kit Kat Sales. Sales of confectionery depend heavily on its availability. some special editions are Pricing strategy A key advantage of maintaining a strong brand image in a competitive market is a degree of flexibility in the pricing strategy. 9 q q q q q q q q q q Distribution strategy Nestlé has developed distribution channels which ensure the availability of Kit Kat to buy wherever and whenever the consumer wishes to purchase it. How will these two different objectives affect the marketing strategies and tactics? Define the following terms used in the case study: product life-cycle brand image corporate objectives marketing strategy control promotion imperfectly competitive markets unique selling points distribution channels product portfolio. TASKS & ACTIVITIES 1 chocolate fingers foil and band wrapping. Consumer attitudes constantly change over time. or strapline. a good way of injecting new life into the Kit Kat product life-cycle). For an established brand name.nestle. Nestlé tries to supply as many outlets as possible both wholesaler and retailer channels. Australia. Consequently. have recently been identified as having potential for confectionery sales owing to the large number of families that visit them. a firm will find it very difficult to market a product which fails to satisfy a consumer need. This will involve individual strategies for pricing. Marketing tactics the marketing mix Product strategy No matter how effective the promotion and packaging. THE TIMES 100. enabling Nestlé to assess growth and market share performance and compare its progress with that of its competitors.5p 15p 24p 25p 27p q television commercials . sold at corner shops and newsagents. Orange.. unique in the countlines market and seen as an important feature which encourages involvement and sharing by consumers well-known strapline Have a Break. it is also necessary to gain market research information on consumer perceptions. Visit a supermarket and a small independent retailer. a Kit Kat from the 1930s would be instantly recognisable to modern consumers today.000 cash and hundreds of other prizes.where the powerful colours of the pack and product are used to dramatise the message. for example. What is meant by the terms ‘acquisition’ and ‘divestment’? How has Nestlé used these to achieve a more balanced structure to its business? Draw up a Boston Matrix and Ansoff’s Matrix. South Africa and the United States. YEAR 1937 1941 1958 1962 1973 1983 1993 1995 1998 PRICE 2 old pence 2. In the third week that Kit Kat Mint was available. Why is it important to consider these when valuing a firm? Produce two corporate strategy statements. In the short run. one for a firm wishing to consolidate its position and fight off competition in a domestic market and one for a firm wishing to expand into European markets. with the chance to win £20. these strategies must be flexible and relevant to each new generation of consumers. This promotion. 7 8 List the intangible assets a firm might own. The market never forgives complacency.’ Tampering with the recognised core qualities could well damage the integrity of the brand. along with all foodstuffs. 2 q In spite of the risks of altering the product. While they are seen as novelties. (They are. subtle changes have been made in packaging. The Orange Kit Kat proved particularly popular with sales of 38 million bars in just three weeks. but has been the on-going Kit Kat slogan. When looking at the pricing strategy for Kit Kat. If Kit Kat is going to maintain its brand leadership. increased sales of Kit Kat by a staggering 41%. Shoe shops. they can also be used to provide reassurance and reinforcement of the core attributes of the original established brand name. videophones and the Internet. Market research has shown that consumers prefer special editions to be available for limited periods only and that consumers are likely to purchase the original Kit Kat at the same time or shortly after. Internationally. but a large proportion of these purchases are subsequently consumed by children. but also as a two-finger biscuit sold in supermarkets. or unique selling points include the: q q introduced more than once. Have a Kit Kat. Japan. Have a Kit Kat theme appeared briefly in 1939. With reference to these and using SWOT analysis. increased sales of Kit Kat by an estimated 30%. It would be irresponsible of a firm to commit itself to objectives and strategies without also setting in place the means to monitor and evaluate its success. since the mid 1950s. great care must be taken not to damage the perceptions of the product built up over decades of marketing. product development. In 1998.marketing strategy that will take into account all the elements of the marketing mix. neither the publisher nor the clients can be held responsible for errors of omission or commission. with spend approaching £114 million in 1996. the intrinsic characteristics of the Kit Kat product and packaging have changed very little during the last sixty years. China. Women account for two thirds of all confectionery sales.which follow the well-known Have a Break tradition posters . Kit Kat’s advertising is concentrated in two media: q The importance of evaluating the success of Nestlé’s brand strategy An important ingredient in the pursuit of any objective is control.NESTLÉ . Kit Kat is now also manufactured in Canada. Apart from these variants. Whilst every effort has been made to ensure accuracy of information. How does Kit Kat’s advertising target both the consumer and the purchaser? 6 Discuss the advantages and disadvantages of corporate. It provided very positive market research results. in the longer term. explain Kit Kat’s marketing strategy. Point of sale merchandising is also important when consumers are making instant. young in feel and big in stature. (known in the confectionery trade as a countline). Special editions are used primarily as promotional tools. Mint and Dark Chocolate Kit Kats have been available for limited periods. therefore. Although some minor. Kit Kat has a particularly broad consumer profile and is popular with all age groups. promotion and distribution. Depending on their popularity. the two-finger bar and multipacks were introduced in the 1960s to meet the increased needs of supermarket shopping and more recently. What evidence is there of price and nonprice competition? What is the best way of presenting these results? Select two special edition chocolate bars and devise a market research questionnaire to evaluate their success and discover to what extent they reinforce the brand image. The Have a Break. will become available through cable and interactive television. it can be seen from the figures that the real price has remained remarkably stable over the last sixty years.5 old pence 6 old pence 3. It is a product that has endured because of its wide appeal across the age ranges and to both sexes. Kit Kat’s sales figures are a key indicator of success. Promotional strategy Nestlé has used a wide range of promotional tactics with Kit Kat. with market research showing that well over 60% of all purchases are made on impulse. However. Germany.as a four-finger chocolate bar.. It is available in more than 100 countries throughout the World. Above all. The Kit Kat marketing strategy can be summarised by the line ‘Broad in appeal. Continuous reinforcement of the brand message through advertising and promotions has enabled Kit Kat to sustain its popularity over a long period of time in the face of rapidly changing consumer attitudes and tastes and consumption patterns. Advertising plays an extremely important part in the confectionery industry. an on-pack promotion featuring ‘The Simpsons. Instantly recognisable packaging also helps to tempt customers. The Orange Kit Kat has proved so popular that the two-finger multipacks are now permanently available. whilst allowing for minor changes to maintain a modern image. but at the same time. merchandising and sales promotions. Men eat as much as they purchase suggesting they are less generous! 4 5 Conclusion Kit Kat’s success can be attributed to consistency in its marketing. Malaysia. enabling it to compete successfully with both established and new products. List the different countlines available. For Kit Kat. these intrinsic elements of the brand. Promotion offers have included free bars in the multi-bar family packs and an instant win deal with Burger King in 1996. Kit Kat owes much of its success to a unique dual appeal . snap decisions from a wide range of products on view. Altering the actual product is potentially a very hazardous act for an established brand name as it risks altering the consumer perceptions of quality built up over decades.com The Times Newspaper Limited and ©MBA Publishing Ltd 1998.5 old pence 5. where over 75 million free burgers were on offer.

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