2.1 The Forecast Is Sunny for the Weather Channel When The Weather Channel, the first 24-hour all-weather network, began broadcasting in 1982, it quickly became the object of mockery. “Many in thé industry ridiculed us, sug- gesting that the only type of advertiser we would attract would be a raincoat company or a galoshes company.” remembers Michael Eckert, The Weather Channe!’s-CEO. Besides pondering where advertising support would come from. crities questioned what kind of audience was going to tune in to a channel that boasts wall-to-wall weather, atopic that sounds as interesting as staring at wallpaper. So far, the answers to these questions have been quite surprising. In its about 25 years of broadcasting, the channel has gained support from a cadre of deep-pocket advertisers which included Buick, Motorola, and Campbell's Soup. In 2006, The Weather Channel reached more than 80 percent of U.S. households and covered more than 95 percent of cable , homes. In addition, their exposure went beyond U.S, shores to reach several foreign countries. According to The Weather Channel's former vice president of marketing, Steven Clapp, “There might have been a time when people weren't willing to admit that they were ‘viewers. Now peopie are proud to say they watch us. Rescarch F shows that we are [gaining ratings), although it's difficult to | isolate why.” A major event linked tothe increase in popularity of the network is the extensive brand building effort that 4 Started in the spring of 1995. Although some viewers will } always see the weather as just a commodity, promise for mak- ing the presentation of weather forecasts into something | beandable lies ina growing segment of "weatherengaged” { viewers, viewers who tune in regularly and ones that the net~ work wants to reach, “Viewers know that they can turn to us F for quality forecasts and weather expertise. What we're tying { to do is take it one step further and emotionally bond with the | viewer says Clapp. Hayes Roth a branding exper, agrees that branding the channel helps build stronger ties to viewers ¥ and advertisers. The company’s efforts have spanned imiprov- 4 ing the network's products, extending The Weather Channel name to related produets, and a pramotional blitz. ‘The network, whose slogan declares that “no piace on | Barth has better weather.” went beyond providing just expert | forecasts to create lines of programming tailored to retain- | ing viewer interest. The network uses a staff of more than 100 meteorologists to analyze National Weather Service dat: and prepare 4,000 localized forecasts. Although these loca reports are the channel's mainstays, new features have crept it that have had the effect of stretching the average viewing time from 11 minutes to approximately 14 mjnutes, with some fanatical individuals watching for hours ata time. These fiew features act to expand what constitutes the channel's weather nformation and-spark the interest of the average viewer beyond the routine weather topics. For example, “The Skiers Forecast” spotlights conditions on ski slopes. ‘The Weather ‘Channel has worked with the National Football League to prepare specialized game day forecasts. Playing off a recent ‘upsurge in interest in the weather among audiences, the net- work has presented features such as The Chase, a program bout people who chase tornadoes, and Forecast for Victory. ‘one-hour show that looked at the role of weather in deciding significant battles of World War If. These features keep cer- tain segments of the market glued to the station for more than just the weather forecast. In order to create more brand awareness and to keep weather foredasts and weather updates as accurate as possi- ble, The Weather Channel and the U.S. Navy teamed up to share information in 2001. The Weather Channel now has access to the Navy's sophisticated technology to assist in pre- dicting and presenting the weather. Also, in January 2002, ‘The Weather Channel became the weather forecaster for USA Today's domestic and international issues as well as for USAToday.com. The two companies shared the weather cov- ‘erage for the 2002 Winter"Olympics in Salt Lake Ci ‘One of the most widely popular line extensions is the company's Web site, wwwweather.com, which enables users to create a personalized weather page. In only 40 minutes after its launch, 1,000 users had already created a customized Web ‘page. In late 2000, Weather.com relaunched its site in an effort to refresh the look, feel, and organization of content. The goal is also to enable the site to accommodate more traffic and content, as well as incorporate database functions. Now, Weather.com is delivering even more highly personalized ‘weather content. The relaunch is part of the site's ongoing strategy to make the weather relevant. Itis also a continuation of Weather.com’s positioning of itself as a lifestyfe site. The ‘company is going to lunch new country-specific sites to draw : 391more of an audience. The company is hoping the new sites, tar Reting the U.K., France, and Germany, will help (0 boost There has also been a report about jortfolio of subscription-based e estimates online revenu weather.com inchiding a" services" on is site bot the company declined to gi of how this would affect revenue ~ In an effort to transform itself into a lifestyle destination Web site, winweathercom launched a four-city test-marketing campaign that featured its first offline advertisement. The test cities included Houston, Nashville, Philadelphia, and Columbus, OH. This campaign was expected to cost between ‘$2 million and $10 million depending on the results from the test cities. Weathercom felt the need to explore advertising in different media, therefore their promotional test included offline advertisements from a variety of television, radio, and ‘outdoor sources. Additionally, weather.com tested unconven- tional ad schemes on dry-cleaner bags and packages of airline peanuts. Weathercom's nontraditional campaigns featured such taglines ag, “Forget about what they are wearing in Pars, think Anchorage” and “Don't you have your own Doppler?” Vice President of Marketing Alan Kaminsky said, “The test ‘campaigns were a part of a lager strategy t0 give weather fore- ccastsa higher profile” Beginning as a 24-hour, 7-¢ay television network devoted entirely to weather, by 2005 The Weather Channel hhad expanded across several mediums to bring the break ing weather to its viewers and users. The Web-site, www weathercom, was consistently rated in the top five news, entertainment, and information Web sites by Media Metrix. This Internet Web site featured current conditions and fore- casts for over 77,000 locations worldwide, along with local and regional radars. The company also used cable networks, and its WEATHER STAR® service, the immediate real-time relay of severe weather watches and warnings, became a vital service provided by The Weather Channel. In over 250 radio markets across the United States, The Weather Channel Radio Network provides immediate information on severe weather and local forecasts for radiq affiliates. The Weather Channel ‘Newspaper Service provides customized weather packages to newspapers across the United States with’ national and regional maps, a5 well as international and special features, in addition to local forecasts. ‘The Weather Channel also offered wircless weather delivered to handheld devices. This project is in conjunction with Verizon, AT&T, Sprint, and Palm Pilot. “If a consumer sees The Weather Channel name, that just reinforces the brand,” says Hayes Roth, In addition to these partnerships, The Weather Chnnl as worked to package west a ie ative ways, including baoks, home videos, calendars, educa? ional material for elementary sciools. and 2 CD-ROM tiled! Exerything Weather. In fact, after & hugely positive response fon a test mailing, the network started ¢ mail-order catalog of ‘compagy-themed merchandise ven though weather.com’s promotional campaign con. twibuted to their overall sirategy, the network still had a fow problems to overcome despite their potential, according to branding expert Hayes Roth. He said, “They have a great bbrand name but it’s boring as toast. They're doing a mediocre job of on-air branding. If you're surfing channels. it's so dull that you tend to flick by it” Roth also sees thatthe brand lacks cool or hip image. He said, “People wear clothes with MTV's logo because they've decided that its a coo! logo. 1 don't know if peopte want to see The Weather Channel on. their jacket.” Despite some gray clouds, weather.com does have a very sunny spot. The network has a large loyal audi- ence, something of which other networks are envious. Furthermore, weather.com really knows what they're talking about, and thatis a very marketable commodity. thas the vast potential of owning the weather and could become the official brand of weather. So watch out, gray clouds, it is clearing up and the forecast is sunny for the Weather Channel! Questions 1, Visit the Web ste of the Weather Channel (www: weather.com) Write report about the type of information available at this site 2 Identify other potential sources of information about the weather, 3. Discuss the role of qualitative esearch i identifying consumers needs for weather-related information, Which qualitative ‘esearch techniques should be used? 4. If « survey were to be conducted to determine consuther prefer fences for weather-related information, which interviewiny ‘method would you recommend? Why? 5. Can observation methods be used to determine consumer profer ences for weather elated information? Ifs0, which observationa ‘methods would you use? Why? References 1. woenweathercom, accessed Janvary 18, 2006. 2. “E-Business: The Weather Channel, Ine." Internetweek (877 (September 10, 2001): 48. 3. Anonymous, “The Weather Channel Gets Navy Data, Broadcasting ond Cable 131 (25) Qune 11, 2001):67. 4. Kim McAvoy, “Changing with the Weathe:com” Broadcasting « Cable 131 (7) February 12, 2001): 38-39. 2.2 Who Is the Host with the Most? ‘The once treditionally complacent hotel industry had to lear to market its services due to the increase in the number of hotels and the accompanying drop in occupancy rates. After navigating through some dismal 9/1 and recession-induced 392 doldrums, the U.S. hotel industry posted record revenue for 2004. According to Hendersonville, TN-basod Smit Travel Research, the U.S. hotel industry generated profit of $16.7 billion on room revenues of $86 billion. Tot:te. hit $113.7 billion—an all-time high ta than in 2003, when the sd pros of $12.8 billion. y hotel chain is continually trying to segment to gain a bigger share of the market. Perhaps the most troublesome problem the industry faces isthe Wek "Of Customer loyalty Most hotels provide similar facilites, and most custome! not travel enough to recognize distinctions between them. For + this reason, many companies opt to differentiate their hotels through multiple branding oF moving into different market Segments. The major chains continue to use broad market- reach techniques, because many feel that future success can be gained in targeting certain segments of the market and ex ring to their needs better than the competitor, Three important segments that have gained emphasis for hotel chains inthe 2000s are business wavelers, senior citizens, and extended-stay travelers. revenues. mean hi do BUSINESS TRAVELERS ‘The importance of business travelers to luxury hotel chains has ‘not gone unnoticed, Marketing research showed that 75 percent of stays at these types of facilities is business related. It is, therefore, no wonder why certain chains have gone out of their way to court business travelers. In early 1990, Marriott (nimemarrion.com) began to offer hotel rooms designed to ‘mect the needs of business travelers. Marriott felt that it could center the moderately priced market by targeting business travelers with the Courtyard Hotel concept, To better meet the “heeds of business travelers, Marriott began installing high speed Internet access in their hotels during October 2000, Marriot also has an ExecuStay Division designed for extended-stay business travelers. The division has 6,500 fully furnished aparment-style units across the United States Finally, Marrioit provides conference centers for business travelers. These centers have state-of-the-art audiovisual communication: equipment to give business travelers a mect- ing area away from the home office.-As of 2005, Marriott International. Inc.. was a leading worldwide hospitality com- pany with nearly 2,800 operating units in the United States and 69 other countries and territories. Marriott Lodging operated and franchised hotels under the following brands: Marriott Hotels & Resorts, JW Marriott Hotels & Resorts, Renaissance Hotels & Resorts, Courtyard by Marriott, Residence Inn by Mariott, Fairfield Inn by Marriott, Marriott Conference Centers, TownePiace Suites by Mariott, SpringHill Suites bby Marriott, Marriott Vacation Club International, Horizons by Marriott, The Ritz-Carlton Hotel Company, The Ritz-Carlton Club, Marriott ExecuStay, Marriott Executive Apartments, and ‘Marriott Grand Residence Club. Some chains, like Holiday Inn, have made attempts at direct business-to-business marketing. Holiday Inn uses trade shows, direct marketing, and traditional media with a special narrow emphasis to penetrate members of the business sector. “Twenty-five percent of our corporate marketing budget is earmarked for business-to-business, S98 CEO. Bryan Langton. Holiday Innis a80-adaping ours cog ae sore oriented to bustesstavelers, Between 1994 an ton the cin spent more than $1.5 billion on hae renovations IntexContinental Hotels Group (wiw.ichotelsgroup con) Embassy Suites chains to appeal tothe upscale business ae eler and t0 compete with Courtyard Hotels. The compacy used the name Holiday tnn for its middle-class innane Roache and the name Holiday Inn Express to compete with such econoiny chains as Motel 6;Red Roof, Days Ian, Super 8, and Econo Lodge. Hosever, Holiday lin still expevieneed aiffe culties in differentiating its various brands, especially when ‘more than one was located in the same city. In order to kee? customers coming back to its hotels, InterContinental Hotels Group started “Priority Clob Worldwide” whic the company calls the “world’s first and largest multi-brand hotel loyalty brogram” Members of the elo recive special promtions s well as points any time they stay in one of the inerCominental hws aroand the word The pine ca be redeemed for free hotel stays, airline miles, biand-name goods, and vacation packages. Periodically, Holiday Inn holds promotions giving away free hotcl stays’ For example, its “Next Night Free” promotion gave guests a chance to earn one free night for every night they paid for, up to five free nights = AS of 2006, InterContinental Hotels Group was a lead- ing global hospitality group, with more than 3,600 hotels sero neatly 100 counties and terior, Different brands under its umberella (and their inten fionings) included InerConinenal® Hock & Revo (rene na Crowne Piaza® Hotels & Resorts (business meetings), Hotel Indigo (changing with the seasons), Holiday Inn (full-service hotel for businesses and individuals), Holiday Inn Select (business hotel offering value), Holiday Inn. SunSpree® Resorts (family vacationers), Holiday Inn Express (value priced for individuals), Holiday Inn Garden Court (Europe and South Africa), Nickelodeon Family Suites by Holiday Inn (kids), Staybridge Suites (extended-stay facility), and Candlewood Suites (suites combining business ean home environment). However, meny businesses and consumers did ‘ot perceive these intended differences and were confused about the different brands. Hyat’s (www hyatt.com) esearch showed that 58 percent of business travelers were spending moe tine workiog in {heir rooms, and 72 percent stated that they felt pressure 10 ‘work while onthe road. Asa result, Hyatt began marketingits Business Plan program, which includes office-style come- aiences in the rooms such as complimentary local, toll-free, and credit-card telephone access; and 24-hour printer, copict, and fax availability. Hyatt also offers its business travelers cutting-edge technology such as high-speed Ethernet access and videoconferencing equipment. In addition, a complimen- tary breakfast is provided to help business travelers slay productive on the road. In 2005, Hyatt was at the fdretront of developing faster, more efficient check-in options, which included 1-800-CHECKIN, allowing guests to check in sozto their hoiel rooms in the US. and Canada by tetephon Taking advantage of this propensity, hotels have tailored their Web sites, facilitating online reservations and developing special advertising for this media. Firms are also attempting to address other needs of the traveler beyond just the lated ones. When Hilton Hotels found that approxi- ‘mately 50 percent of business travelers suffer from some form of insomnia, the chain, in conjunction with the National Sleep Foundation, designed special rooms. The Sleep-Tight Rooms project is claimed to provide the “ultimate sleep environment and features top-quality mattresses, synthetic down pillows ‘a music system with a CD player to soothe the weary business traveler to sleep, and a clock and special amp that gently awaken the traveler 30 minutes before commute time. SENIOR CITIZENS ‘Another segment of the market that hotel chains are courting are senior citizens. A study by NOP World (www::tapworld.com) shows that fhe number of Americans over 50 will increase by 47.3 million in the next 25 years. In the United States alone, someone turns 50-every seven seconds. Marketing research also shows that men and women over 50 travel mote and stay longer in hotels than do their younger counterparts, spending more than $30 billion in travel in 2004 alone. Choice Hotels, adapted accommodations for this segment in 1995 and con- tinues to be successful today. Select Choice chains feature the Senior Room package in 10 percent of the rooms, which fea tures comforts seniors indicated are similar to those in their ‘own homes, Brighter lighting, large-button phones, and standard TV remote controls are amenities that are intrinsic to these special rooms. Bathrooms were given special attention, fegtur ing special lever door handles and grab bars. With these rooms generating $5 million in annual revenues, other chains are looking into addressing concems of this segment. One aspect of catering to seniors that is gaining importance by hotel chains is assisted living. Assisted living facilities, which are in the middle of the spectrum of independent living. and nurs- ing homes, allow seniors to live as they wish while providing certain extra services such as meals and housékeeping, Hyatt, which operates Classic Residence facilites, isa leader in this segment. EXTENDED-STAY TRAVELERS The fastest growing segment of the market, extended-stay travelers, has traditionally been the most ‘neglected. In 2005, extended-stay hotels comprised roughly 30 percent to 35 percent of the entire hotel market. Extended-stay urgvelers are guests who wish to stay five days or longer and require special facilities, such as 24-hour staffed front desks and sometimes kitchen amenities. Unfortu- nately, demand for this type of hotel room far exceeds supply. 10 2005, on cnt of the lodging supply—or just more than 100,000 rooms—were dedicated to extended-stay facilities while the demand was much greater A study conducted: by Price WaterhouseCoopers for Extended StayAmerica indicated that approximately 300,000 new rooms-eould-be supported by the demand that existed. Hotel chains realized the missed opportunity and began pour- ing resources into developing and marketing these Facilites. Marriott's Residence Inn dominates the market, but newer entrants to this segment are trying to capitalize on the wide- spread interest in extended-stay rooms. Holiday Inn launched 4 new extension, Staybridge Suites by Holiday Inn, specifi- cally designed for this market. These suites feature such amenities as 24-hour self-serve laundry facilities, a 24-hour convenience store, high-speed Imernet access, and a personal telephone number and voice-mailbox for each suite, Holiday Inn's extension proved to he « success Hotels are attempting to segment the market and offer ‘enhanced services to attract customers. For a hotel to be suc- cessful in attracting customers, it must be the “host with the rmiost:” Marketing research will be a key driver for success in this industry. Questions 1. Identity some possible sources of secondary data for the hotel Industry. What types of data are available on the llecnet? 2. The hotel industry hus faced the troublesome problem of differ- entiation, Holiday Inn would like to undertake marketing research to determine how it can differentiate itself from its competitors. What research design would you recommend? 3. Whot information is needed for Holiday Inn to develop a program to differentiate itself from its competition? 4, Design a questionnaire to obtain the relevant information. 5. What researeh design would be appropriate for monitoring consumers’ changing needs and preferences for hotels? 6, Marriot would like 1o know the best way to segment the hotel ‘market. What type of research design would you recommend and why? References 1. wnemarriott.com, wwvsichotelsgroup.com, cessed January 17, 2006. 2, Edward R. DeLome, “Hotel Industry Slowly Sees Light at the End of a Recession Tunnel,” The Real Estate Finance Journal 17 (8) (Winer 2002): 36-37. 3. Julie Forster, Andrew and Christopher Palmeri, "Making Hay While tt Reins,” Business Week (January 14, 2002); 32-33. 4. Eryn Brown, “Heartbreak Hotel” Fortune 144 (11) (November 26, 2001): 161-65. . Paul Davidson and Doug Carroll, “Marriott Chief Says Travel Industry Is in Recession; Occupancy Rate Down, but It Has Risen Since Sept. 11," USA Today (November 20, 2001): BIO. 6. Daniel Northington and Sheridan Peasso, “Holiday Inn Has Just the Ticket," Business Week (3720) (February 19, 2001146. warndyatcom,2.3 Candy Is Dandy for Hershey The battle was on! Hershey and Mars, the two candy giants, dueling over the number one spot in the $73-billion-a-year -eandy industey. Hershey (wwwehersheys.coin) lost its throne in the early 1970s, and it took the company time to get back into the competitive arena. By 1985, however, Mars and Hershey were the manufacturers ofthe top ten candy bars, and together they shared 70 percent of the U.S. candy market. Cadbury held about 9 pereent of the market and Nestle only 6 percemt. Then in 1988, Hershey acquired Cadbury and its share jumped from 36 percent to 44 percent of the eandy market. The addition of brands such as Cadbury Dairy Milk Chocolate, Peter Paul Mounds, Almond Joy, and York Peppermint Pattie enabled Hershey to regain its throne in the candy market. ‘The late eighties and early nineties produced the introduc tion of such products as Hershey's Kisses with Almonds, Hugs, Hugs with Almonds, Amazin’ Fruit gummy bears, and, the Cookies ‘n’ Mint Chocolate bar. In 1994, Hershey Food Corp. celebrate its 100th year in business. In 1996, Hershey addressed its lack of strong showing products inthe nonchoco late sector of the industry by acquiring Leaf North American brand, whieh produces such strong sellers as Jolly Rancher and Good & Plenty. Also in 1996, Hershey unveiled its low-fat Sweet Escapes line, which brought in over $100 million in 1997. ‘After problems in implementing a new distribution system in 1999, Hershey restored sales, market share, and earnings ‘growth in 2000, marking its best year volume-wise since 1996. In 2003, Hershey's Swoops Candy Slices were introduced and were listed by Produetscan as one of 2003 New Product Innovations of the Year. In 2005, Hershey acquired Joseph Schmidt Confections and completed the purchase of Scharfien Berges. For the fiscal year ending 2004, total sales were $4.64 billion. As of 2005, Hershey was dominating the global candy market with a 30.3 percent market share. Its products were sold in over 60 countries. The number two player, M&M/Mars, Inc's market share was 16.8 percent, while the number three competitor, Nestle, had 6.3 percent of the market, ‘The decisions over the past one hundred years have been both diverse and profitable. (See Tables 1 and 2.) ‘One factor that helped Hershey in their battle with Mé& M/Mars was its excellent marketing research department, Hershey's research showed that the typical consumer viewed candy as a luxury good or as a self-indulgence. Because of these attitudes and beliefs, 70 percent of all eandy sales were attributed to impulse buying. In 1999, Hershey introduced Hershey Bite, which are miniature bite-size versions of their ‘candy bars. AS of 2002, the bite-size candy flavors included seven of their most popular regular-sized candy bars. The success of the Hershey Bites line was great, increasing the unwrapped packaged candy segment by 33.4 percent. Consumers were obviously ready for the bite-sized candies. ‘Candy customers also tended to be fickle, rarely purchasing, the same candy bar twice in a row. A consumer's s also shown (o influence buying habits, Market research also informed Hershey that the popu- Jation was getting older. dn the 1970s and early 1980s, young — people from age 13 to the late 20s were the dominant age ‘group. In the 1990s, it was becoming the 35 to 50 age group. For this reason, the candy industry decided to move upscale to attract the baby-boom adults. For the year 2000, the median age for Americans was 40. The National Confectioners Association believes that as Americans get older. they tend to, favor the better things in life. Among these beter things are quality confections. & multiple cross-sectional analysis of, consumption patterns revealed that adults were consuming, ‘an ever-increasing percentage of candy (Table 3). The adult, ‘market has therefore proven to be increasingly lucrative. ‘Additionally, to gain market share, Hershey decided to become a fearless product innovator. For example, in 1998, Reese's NutRageous candy bar was initially tested under the name Accaim. Unfortunately, when Hershey's marketing staff showed consumers the name Acclaim typed on a plain, white piece of paper and asked them what came to mind, their biggest association was with the Acclaim automobile, made by Plymouth. This showed marketers they needed to create a new name, so they tested the name NutRageous. “The name fit the product's description perfectly! Introduced in February 1998, ReeseSticks combines three ingredients consumers love: Reese’s peanut butter, crispy wafers, and rnilk chocolate. ReeseSticks proved to be so successful that demand initially exceeded Hershey's ability to produce all the usual packtypes. To appeal to adults with larger appetites, Hershey introduced the Kit Kat Big Kat in ‘May 2000. This bigger version of an old favorite is two times as wide and three times as thick as one section of the. traditional Kit Kat. To appeal to children, Hershey intro- duced s new candy creation product called the Hershey's Candy Bar Factory. The product entered the market in June 2000, and allowed kids to use their ereativity and imagin tion to create their own, ulhique chocolate candy. For many reasons, Hershey, like its competitors, has been looking toward the snack industry with the insight that sweets don’t just consist of candy. Today's more sophisti- cated consumers look at ice cream bars, cookies, and chocolate-covered granola bars when they erave something sweet. In 1999, Hershey and Breyers Ice Cream teamed up to:launch a two-item candy flavors line: Breyers Hershey's, Milk Chocolate with Almonds Chocolate Ice Cream, and. Breyers Reese's Peanut Butter Cup Ice Cream with Fudge Swirls. Hershey has already entered the granola market with New Trail granola bars. Hershey also produces other noncandy items such as baking chocolate and candy, choco- late syrup, chocolate drinks, ice cream toppings, hot cocoa mix, and peanut butter. They have also entered the non- chocolate candy market with their acquisition of Y&S Candies, which produces Twizzlers and Nibs. In an effort to 596,1895 1907 1908 19tt 1925 1938 1939 1945 1963 1966 1968, 1977 1986 1988 1990 1991 1992 1993 1994 1996 197 1998. 1999 2000 2001 2003 Hershey's Timeline Fst Hessiey’s Chocolate Barf S010 Hershey's Kisses ae introduced. Hershey's Mik Chocolate Bar with Almonds is introduced, Sales reach $5 milton. — ~| ‘Mr. Goodbar chocolate bar is introduced. “The Hershey's Krakel bar is introduced, Hershey's Miniatures are introduced. Miton Hesbey dies atahe age of 88. Reese Candy Co, producer of Reese's peanut butter cups, is prchased Hershey purchases San Giorgio Macaroni Co. Hershey Chocolate Corp. changes its name ro Hershey Foods Corp. YY & $ Candies Ine., manufacturer of Ticorie and licorie-ype products such as Twizzcts and Nits. is purchased, Ldens and Sth Avenue trademarks are added through sequisiin of the Dietrich Corpor operations. ~ Hershey Foods Corp. acquites Peter Pau/Cadbury US. confectionery operations. Brands acquired include Pete Paul “Mounds and Almond Joy bars and York Peppermint Pats, etsey’s Kisses with Almonds ae introduced "laid milk plant used to produce a chocolate drink is purchased. ershey’s Cookies ‘n° Mint bar and Amazin’ Fruit gummy bears ae introduced ‘Hershey's Hugs and Hershey's Hugs with Almonds are troduced. Hershey's Nuggets chocolates and Reese's Peanut Ber Pus brand cereal are introduced eso ames the Sweet Eeapes low-fat chocolat ne Hehe acquires Leaf North Amtican brand to swengthen itsnonchocolate Kine ‘Reese's Crunchy Cookie Cups are introduced, Reese Sucks are launched. Hershey's Bites are introduced in avors such as Almond Joy, Reese's Pean with Almonds. nd Hershey's Cookies and Créme, Hershey acqites the breath mint and chewing, gum busines of Nabisco for $135 million Hershey's Bites secures the number 10 spot on 2004's Top 10 list of best new product introductions. Hershey's Swoops Candy Slices are introduced and ae listed by Productscan as one of 2003 New Product Innovatio ofthe Yea. confectionery Butter Cups, Hershey's Milk Chocolate 2005 ~ + Hershey acquires Joseph Schmid Confections and completes purchase of Scharffen Berger. SE ATS «Jone 2000, also emphasized Twizzler’s playful qualit “Top 10 Chosdlate Brands in the US. The candy combines flavors and is available in two combi oS Sa RRaaca] ations, watermelon/cherry and raspberry/tropical. j Sree oe Inlate 2000, Hershey acquired the breath mint and chew- : Sicko 33 ing gum business of Nabisco for $135 million. The brands 3 Nee eet a affected by the acquisition include Ice Breakers, Breath i er oS Savers Cool Blasts intense mints, Care*free, Stick*free, : hed 38 Bubble Yum and Fruit Stripe gums, and Nabisco's gum 3 i i“ factory in Puerto Rico. ; § adie ied su When marketing research indicated thatthe premium j Hote a chocolate segment was growing at a fast rate, in 2005 4 na we 3 Hershey acquired Joseph Schmidt Confections and com- a dally Vig Ss pleted the Scharffen Berger acquisition, extending its reach ii into the premium chdcolate segment. “The Scharffen Berger reemphasize the Twizzler brand’s playful qual campaign was launched during the spring of 2001. man, president, and chief executive offic: and Joseph Schmidt acquisitions are great strategic opportu- nities for Hershey to capitalize on the high-growth, on-tend . a new premium chocolate segment” ssid Richard H. Lenny, clair- , The Hershey Commercials featured a 30-second, live-action spot, which Company. “These companies provide two distinct platforms marked a departure from 15 years of animated executions. to broadén our presence in the $1.7 billion premium segment. The new Twizzler’s TWIST-n-FILL candy, intcoduced in Scharffen Berger is a leader in the high-cacao-content, 3962 Group (percent) ‘Ae GRour 1980, 190 72000 ‘2005 (esr) O17 yes 46 percent percent — 33 percent_ 30 percent ‘ 18-34 yes -Bpercent —-Bpereent 24 percent —_-25 percent 35-45 yrs percent MA percent 2K percent —_27 poreeat |. — 464 yes [2 percent 1S percent 18 percent distinctive dark cho’olate arena, while Joseph Schmidt spe- Cializes in fine, handcrafted chocolate gifts. We look forward to capturing the immense growth potential of Scharffen Berger and Joseph Schmidt as we further extend Hershey's leadership postion inthe U.S. confectionery market.” "While cendy is dandy for Hershey, there is the shrewd realization that candy bars alone may not give the company its ‘sweetest bottom line Questions T. Seach aera and compile formation related to thecal oma. 2. Deter thd of marke esearch tha could have ed othe inuodvcon of Kt Kat Big Kat. Discuss the kindof eteuch design that wold be appropiate 4, Det he are audonce for Kit Kat Big Kat, What kind of ifematon sow er preferences, purchase intentions, bas ior fete, pyehopraphic. end demographics had tbe obi 4. tncany simpy candy 6r do contomers view someting more forenmgle «reward? How ean quaiatve research lp dtcrmine an rower] Which qualia research teeignt) ‘should be used and why? 5. Dineus te sealing techniques that should be wed to esse preferences. purchase Knowledge about candy. What is the nature (nominal, oedinal, interval, of ratio) of the information obtained from each of these scales? 6, Design part of a questionnaire that could be used to obtain this information. What would be the best way to administer the questionnaire? Which interviewing method sould be used? Why? Recommend an appropriate sampling technique for this survey. How should the sample size be determined? ‘Could the observation method be used to determine consumer preferences for different kinds of eandy bars? If so, which ‘observation method would you use? Why? 1 References 1. John S. Gordon, “The Sweet Taste of Success" The Wall Seer Joursal Ganvary 17, 2006) DB 2. Press Release, “The Hershey Company Aogutes Joseph Schice Confections ‘and Completes Scharfen Berger Acquistion, Extending Reach into Premium Chocolate Segment" Monday. August 15, 2005, online at biz ohoo.com/prews/0S08157 phn039-hinl?.0= i 3. Bill Sulon, “Hershey Foods Tops Candy Sling Rivas, Ridder Tribune Business News Janaay 1.200251 4. Stephanie Thompson, “Hershey to lncese Ad Budgets for Key Brands” Advertising Age (72) 14 (Octaher 29,2001) 1, 40 Knight 2.4 Fragrances Are Sweet, But Competition Is Bitter “The mature fragrance industry has become a marketing war zone. Every manufacturer is battling for its picce of market share. In the 1970s, fragrances ranked in the top 20s emong items with the highest dollar expenditures. However, by the mid 1990s they had dropped to the top 50s. As a result, manufacturers relied heavily on new product introductions {o stimulate consumer interest, sometimes at the price of ‘older brands. The number of new product introductions shot tup from 20-25 per year in the early 1980s to 30-40 in the mid 1990s. However, new product introductions failed to increase total bottle sales. Since 1981, purchases of women’s fragrances in the United States tumbled by about 34 percent in total bottle sales. In the 21st century, the fragrance industry contindes to face rising price competition, price transparency, and fund: ‘mental changes in distribution. For the 52 weeks ended Oct. 3, 2004, women's fragrance declined almost 6 percent, while * men’s shaving lotion and fragrance fell 0.7 percent. However, 397Prestige market sales totals indicate all is not lst, industry ‘exccutives insist. Total prestige fragrances were $1 bitlion forthe January-June 2004 period, up 1 percent from the previ- ‘ous year's comparable period, according to NPDBeauty, a division of The NPD Group twwwnped.com). Women’s scents fared a litte better than men’s at $678 million, a 2 percent —increase over the prior year. The men’s category slipped | percent, earning $345 million for the period. The fragrance market is heavily influenced by prevailing fashion tends and is characterized by a low level of brand loyalty. All of these factors contribute to the limited growth prospects for the fragrance industry in the future: however, competi fragrance companies still continues. Fragrance companies have to attempt to portray their brand as a“dceam ina bottle” {In 2004, fragrance companies spent over $50 million on advertising in an atempi to portray the “dreamlike” quality of ther fragrance. ‘A major theme in perfume advertising is sex. The reduced sales suggest that the sex angle did not have as much appeal as some fragrance makers had hoped. A report bby Euromonitor. the London-based marketing research con- sultancy, said that despite the fragrance industry's emphasi ‘on unisex products, the market has peaked and more tradi- tional, gender-specific fragrances are back in vogue. The competitive nature of the industry forced several manufac turers to explore ew distribution outlets. One of these was the drugstore market (see Table 1). Consolidation among department stores reduced the number of distribution out lets for fragrances. Marketing reseurch indicated that drug store consumers were purchasing more nondrug items, such as makeup and fragrances. Pharmacy and drugstore (ra- ‘grance sales accounted for less than 50) percent of value share in 2005. Moreover, this was expected to decrease as competition from grocery chains becomes heated. Consumers between the ages of 30 and 60 were found to g0 to the drugstore for prescriptions more often than younger consumers. Women in their twenties and thirties who had Sales Through Drugstores Top Fine Fragrances Calvin Klein Yves Saint Laurent Estee Lauder Chanel Hugo Boss © Christian Dior Top Mass Fragrances: = Lynx & Gillewe Series, Cory @ Yves Rocher 1 Revlon 1 Old Spice smail children also made frequent trips to drugstores, Wonen under 25, who accounted for 8 to 9 percent of fr grance purchases, preferred shopping for fragrances drugstores to department stores. On the other hand. women who were 45 and over, had high incomes, and discretionary buying power purchased 33 percent of fragrances. These women generally bought from department stores. Apparel specialty stores had also gained attention, since their total overall sales increased at twice the rate compared to the increase in department and discount department store sales. The move to drugstore and discount markets has allowed fine fragrances to be available to more consumers who are price conscious. However, it has also ted (0 a lessening of the image of the fine Fragrance. Since many brands are now available in multiple types of retail outlets, a gap has been created for exclusive brands sold at a higher price in a limited number of stores. Table 2 lists the major brands in terms of market share, Minorities represented another potential market segment. The spending of African Americans, Hispanics, and Asian Americans on perfumes is expected to grow at a much faster rate than the rest of the population. Due to a decline in the U.S. fragrance market, marketers have chosen to tap into new markets such as the Latin American coun- tries, Since Latin American countries continue to integrate with the global economy and the fise of Latin culture has increased worldwide. marketers thought these countries would be a great growth opportunity. This attitude has been generated by overall market success posted by Peru, Venezuela, Argentina, and Chile, Datamonitor anticipated that through a decrease in inflation, an increase in privatiz: tion, and lower existing trade barriers through bilateral and comprehensive agreements, Latin American countries would continue to improve their economic stature and serve as a strong marketplace for fragrance in the future. In addi- tion, the male segment is predicted 10 gain a stronger focus. Since the 1990s was the era of developing a positive image for the female, it is believed that the next decades will be the era of developing a positive image for the male. As of 2005. the men's market for fragrances was approximately . half the size of the women’s market. There was an upswing in men’s fragrance use when men’s lifestyle and fashion magazines first emerged. but this area of the market has been stagnant in 2004-2005. It has been reported that around 30 percent of men receive cologne, aftershave, oF Market Share of the Major Brands’ L-LVMH Moet Hennessy Louis Vuitton SA. 2. LOreal Sa 3. Estee Lauder Company Ine 4. Unilever Group 5. Avon Products Inc. 6.Coyy Ine 398other fragrance as a gift, and that 39 percent of men stick to one brand when purchasing a fragrance. In addition, 36 percent of men are reported to have one brand of fra grance that they wear all the time. Another segment that perfume manufacturers cannot afford to overlook is the older American. By the year 2005, more than one-thied of the population was over 50. In 2005, e-commerce in the fragrance industry tamed out to be very promising and profitable for already existing brands and new brands that were otherwise unobtainable. Experts suggest that fragrance marketers te in e-commerce 10 boost brand recognition. However, fragrance marketers must realize the rise of the Internet has increased price trans- parency, which makes it easier to shop around online for the best bargain : Marketers must also increasingly learn the importance of marketing research, The keys to success have been in defining the market, truly understanding the consumers* preferences, creating & brand that consistently meets these expectations, and communicating these brand attributes to the consumer. Beyond discerning the popular trends, important to match the brand image to the fragrance. Even the most brilliant fragrance will not sell if it does not meet the perceptions of the brands’ traits. Consumer testing is used to make sure that the product meets its image and has been increasingly vital o the industry ‘A survey by the NPD Group found thal women buy per: fume instead of waiting far someone else to buy i For them, Among those who do use fragrances, 49 percent have pur chased three or more bottles for themseles within the past year. Likewise, the sinall boom in sales of perfurne gift sets is largely due w women buying these gifts for themselves Due to these purchases, “most women who wear a fragrance ‘own six bottles 0; scent or more.” A recent study found that big names are in.s-«singly important. To reinforce this idea, 63 percent of fragrance users admitted that designer and, celebrity names influenced their brand decisions. That was, more true of women age 15 to 34 than their elders, who. remain “more loyal to classic scents.” In 2005. inthe fra- grance industry. NPD reported that “categories in the pres~ lige channel have shown an increasing focus on the affluent consumer. This is a market segment that has received a lot of attention recently, with many beauly manufacturers looking, to understand what appeals to the high-end consumer” /s consumers have a diverse lifestyle and the goal for fragrance marketers is to meet these very different needs. One important trend is consumer interest in the inner- directed search for peace and relief from siress. There has, been a distinct move away from the heavy scents of the early 1990s toward fresher. lighter fragrances in the 2000s. Comforting home cents such a8 vanilla, chocolate, and ice b3coming, popular. The healthy lifestyle trend i still popular and scents such as Nlowers and fruits, which connate health and vitality, ate popular. Quest, a leading fragrance supplier, is using the most up-to-date techniques 10 ccaptune.the Scents in nature and turn them into invigorating body fragrances. Meanwhile, consumers are showing renewed interest in glamour and dressing up for a night or the evening. To accommodate these differing lifestyles, con- sumers are looking for fragrances that can accommodate the look or feel of a particular day or evening. Brands that can offer a genile attitude combined with an elegant luxury and can successfully communicate and deliver on 2 popular image will be successful. It is up to marketers to meet con- sumer expectations if they wish to revitalize sales in the new millennium and mask the bitter tate of competition with the ‘sweet fragrance of success. Questions 1. Identify some possible sources of secondary data for the fe: _arance industry, What sources ean be located on the Internet, ‘and how shoul an Internet search be conducted”? 2 Discuss the kind of market research fragrance manufacturers {could conduct to determine if there is a demand for a new fra- grance 3. Once an audicnee for a new fragrance has been targeted, wlilt kind of information is needed about their atitudes, preferences, purchase imientions. behaviors, motivations, psychographics and demographics? 4. Which techniques would you recommend for collecting the formation needed above? Discuss. 5. Discuss the role of qualitative research in determining’ the ‘emotions that consumers attach to perfumes. Which qualitative research technique should be used and why? 6. Design appropriate seales for obtaining the information identi- fied above, 7. For a marketing research project simed at asesting the demand for 8 new fragrance, a junior analyst designed the enclosed ques- tionnaire (Exhibit 1). Is this 2 welldesigned questionnaire? 1F not, how could it be improved? References 1. “Fine Fragrance: Holiday 2008” online at wwnehapp.converrent/ Now047. accessed August 16,3005, “2004: The Year That Was." online at hnpvewvenpdinsights.comm/ corplenewsteuerfirnlarchivesdnovember2004Veover story, secessed August 16, 2005, 3. Bill Schmitt, "Making Scents of Demand and Technology Trends.” Chemical Week (163) 43 (November 21-28, 2001): 36. 4. Glenn Koser. "Retail Seents.” Glabal Cosmetic Industry (169) 6 (November 2001): 50.EXHIBIT 1 New Fragrance Survey Pen flo te allowing sary. anaes he Pett a —oe femal 2. Wangs epson? ete Tat 268 ES and over au 5. Wha eaegoy oficome do you fins? aS osis00 i ss. 00 TE sisoor soon '$15.000andsune ss 35000 “4 Whatcom te? Mai ‘Shale 5 yon are mari many tiles do yo hav our oF more 7. yw spat eprint wore which oe Wo yu eqn? ueys ey oe . 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