In this report we are trying to investigate and analyze the Marketing Mix Activities of NESTLE. Most of the marketing practitioners regard marketing mix as a tool for transaction marketing and the archetype for operational marketing planning. (Gronroos, 1994:347)
Elements of Marketing Mix (Armstrong and Kotler, 2001).
MANAGING THE MARKETING MIX
Customer Wants Marketing Mix Variables
Managing the Marketing Mix (Baker, 1999:302)
The above figure describes how a company could by research and successful adaptation can understand and develop products to match the customer’s requirements. According to Baker (1999: 303), by understanding and matching the needs of the customers efficient management of marketing mix is possible.
COMPONENTS OF MARKETING MIX – Impact – Positive and Negative
Kotler and Armstrong (2001) define a product as any entity that can be offered to a market by a company for attention, acquisition, consumption or use that might satisfy the needs of their customers.
Product mix is the total range of products that are manufactured by a company. The major aspects to be considered in product mix are explained below.
Variety: Nestle offers a wide product mix that comprises of food, health and nutrition products to meet the customer needs. Nestle offers its products in the following categories: Bottled water, Baby foods, Breakfast cereals, Chocolate and confectionery, Coffee, Dairy products, Drinks, Ice cream, In the Kitchen, Nestle Professional, Nutrition and Health, Pet care.
Quality: Nestle is well known for the quality and taste of its products. Nestle Believes that “Success is built on Quality”.
Design: As its variety range, Nestle also has a greater range of design. Nestle make sure all their new products look different and attractive.
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Features: Nestle have made sure that all their products have special features to make it more attractive to the customers. For example: In case of their ice creams, they have tried to include the special feature that is the low fat and sugar content.
Brand name: A strong brand name is important for both the company and the consumers as it adds to the value of the company, differentiates the products from those of its competitors and affects the consumer discernment of the company (Jobber 2007:328). A strong brand name also acts as a source of quality certification and can influence consumer preferences of products. Nestle, through its strong brand name and market presence has captured the heart of the customers worldwide. In the present health- conscious society, Nestle has captivated a loyal customer base through its focus on nutrition and health requirements and consumer preferences at a competitive price and it has enhanced the reputation of the company.
“A Nestle brand name on a product is a promise to the customer that it is safe to consume, that it complies with all regulations and that it meets high standards of quality”
Packaging: Packaging involves designing and developing a cover for a product in order to make it attractive to the consumers. Packaging was just a means for protecting the product in the past, but today increase in competition has resulted in the need to differentiate the product from those of its competitors to attract the customers and to describe the features of the product in order to gain consumer recognition. Poor designs can be one of the reasons for reduction in sales of a product due to less customer satisfaction. Nestle uses very attractive packaging as one of their main marketing strategies.
For its efforts, Nestle has won several accolades such as the Silver Star and “Best in category” as “Best Packaging Innovation leading to a significant reduction in household waste” by the British Institute of Packaging for the Dairy Box biodegradable tray which is manufactured by using renewable resources.
Stanton and Futrell (1987:418), describe promotion as an important element of marketing mix which aims in informing and persuading the market about the products and services of the company.
According to Baker (1999, 310) the method of communicating the product offer which is made by a company to match the needs of the customers and to persuade them to try the product is Promotion. They feel that the significance of promotion increases when the distance between the producers and customers increase and as the number of customers increase. Promotion activity does not depend on the demand; even if the demand is high promotional activities should go on in order to keep the manufacturers name before the customers.
Nestle uses promotion as one of the major source to reach their customers to make them aware of the value of different products introduced in the market.
Nestle adopts a promotion mix with a perfect blend of several different promotion tools to promote the value of its product and make the customers aware of their products.
According to Stanton and Futrell (1987: 418), personal selling is mainly used when the market is geographically concentrated (Few customers) and when the products are custom made. It is defined as a face to face communication with buyers in the aim of pursuing the customers to purchase by Simon(). It’s a one to one marketing. Tele marketing, door drops inserts, Door to door selling are all techniques used in personal selling.
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Nestle uses personal selling for specialized and sophisticated products.
Advertising according to Groucutt (2005:215) is to communicate to a specific audience to stimulate action and its success is in the way the right information reaches the right person at the right time. Majaro (1993) says that advertising is any paid form non-personal communication of products, services or ideas through a commercial media. (Stanton and Futrell, 1987) Promotion through advertising is mainly done when the market is geographically dispersed or when the product is standardized.
Nestlé’s advertisements are well known in the market and they have made sure that the advertisements are attractive through all the possible media. Nestle also uses internet to promote their products, where they have different websites hosted for different products. Different strategies for each product like online competitions and distributions.
HOW ADVERTISING WORKS
Tim Ambler and Demetrios Vakratsas have formulated a framework for studying how advertising works for a company.
How Advertising Works (Ambler, Vakratsas 1999:26)
They have considered the input to be advertising own and competitive brands. Scheduling the media and message contents are the motivation factors or triggers the consumer’s response. “Cognition, the ‘thinking’ dimension of a person’s response, and affect, the ‘feeling’ dimension, are portrayed as two major intermediate advertising effects” (Ambler, Vakratsas, 1999:26)
Sales promotion represents non- media campaigns such as sampling displays, shows, exhibitions and contests (Majaro, 1993:35). Stanton and Futrell (1987:418) believes that sales promotions one of the fastest growing promotional methods these days. Free samples, Money off coupons, extra value offers buy one get one free, bundling, privilege points are all different methods used in sales promotion. Nestle also uses sales promotion as one of their promotion tools by offering programmes like every day eating coupon codes and discounts and offers for online shopping on nestle products.
Publicity is a promotional method where the organization is not paying for the communication about its products and is benefiting from it (Stanton and Futrell 1987:419). This occurs either through a non-personal news story appearing in a mass medium or is delivered by a person in an interview or a speech. Publicity is achieved mainly through public relations activities. According to Jobber (2007) sponsorship provides more opportunities for publicity in the media.
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Nestle is a well known brand in the market and its fame describes its publicity and the further publicity occurs during various interviews of officials of Nestle. Publicity for Nestle also occurs during the launch of every new product and when the annual sale reports are published. This publicity obtained by Nestle is not by paying any of the media.
Nestle, public relation activities is evident from how they try to communicate with government organizations as well as the customers about the different issues that they face. Through public relations Nestle try to bring to the attention of all the customers and organizations concerned about various issues and the current approach they are taking towards these issues.
Price is defined as the value of a product that we get in return for all the effort that was taken for its production and also for marketing of the same product. Price is the revenue earner so it is considered as the odd one in the marketing mix. It is also considered as an important market tool which is visible to both customers and competitors (Baker 1985). The price of a product depends on a number of factors like, changes in technology, effect of suppliers, competitive pressure and the increasing price sensitivity of the customers. Price is also directly dependent on the demand of the product. If the demands increase the price will also increase and vice versa.
Consumers generally show a keen interest in tracking the prices of the products which they usually purchase. This enables them to analyze the attractiveness of the product and be vigilant about the changes in price of the product, thus enabling them to compare the prices of the product in various stores (Vanhuele and Dreze 2002:72).
Pricing of the Product
“Companies usually do not set a single price, but rather develop a pricing structure that reflects variations in geographical demand and costs, market-segment requirements, purchasing timing, order levels, delivery frequency, guarantees, service contract, and other factors” (Kotler, Keller, Brady, Goodman and Hansen: 2009). According to David Jobber, pricing of a product mainly depends on 3 factors: cost, competitor and the market.
COST ORIENTED PRICING
The most common method of pricing of a product is cost oriented pricing, in which it is divided into full cost pricing which involves the calculating of cost of all labour and materials and direct cost pricing which involves the calculation of only those costs that are likely to rise as output increases.
COMPETITOR ORIENTED PRICING
The approach to pricing which only depends on the competitor rather than costs when framing a business is called competitor oriented pricing. Every consumer will judge the price of a product by comparing it with a similar product in the same range which is produced by their competitor (Kotler, Armstrong, Saunders and Wong 2001).
MARKET ORIENTED PRICING
Market oriented pricing is one of the important area which depends on competiveness of a product in the market. For a new product the positioning strategy controls the pricing and for an existing product price will depend on the strategic objectives.
Price is directly dependent on the quality of the product. As the quality of a product increases the price also goes up. Nestle is a quality focused company and hence to compete with current market it need to carry out the pricing process of the product very carefully. Nestle is a very successful company and all its products are at affordable prices.
PRODUCT LINE PRICING
Most of the companies usually develop product lines rather than single products. In product line pricing the management must decide on the pricing steps to set between various products in a line (Kotler, Armstrong, Saunders and Wong 2001). In product line pricing, cost difference between the product in the line, evaluation of customers and also the competitor’s products with small price difference is also taken into account.
Explicability is defined as the capability of sales people to explain a high price to customer. In market customer demands the economic justification of product prices. If the sales people fail to give a clear idea of the product development stages, it will reduce the value of product. As Nestle is very innovative it needs a high financial support for its R&D and it is not easy to give idea about the product development costs to an ordinary customer.
Competition plays an important role in the cost consideration of a product in a business. The main competitors of Nestle are Heinz, Kraft, ConAgra, Mars Incorporated, Hershey, Cadbury, General mills etc. Since all their main competitors are also well branded, they cannot price a product without analyzing the competitors pricing. But the main advantages behind their successful pricing are that they are very superior in its market position.
In certain market customer expects a price reduction in some products. Competitive discounts, fast payment discounts an annual volume bonus and other promotional allowances come under this category. Nestle and its negotiations with its suppliers made them to gain a good reasonable margin in all its goods.
EFFECT OF DISTRIBUTORS/RETAILERS
Well qualified suppliers and efficient retailers is also a factor which affects the price of a product. If a distributor supplies a product with high price or a retailer sells a product in high margin it will cause the variations in price of the products. Nestle itself agreed that their distributors are well developed and hence the company can control the price of its products.
Nestle sometimes blames the policies of governments for its poor reflection on the exports. Some of the government policies which results in increase in packaging cost makes the product less competitive in the global exporting market.
Armstrong and Kotler (2001) describes place as the activity of a company to make the products available to the customers.
The major factors to be considered while formulating a place strategy are Channels, Coverage, Assortments, Locations, Inventory, Transportation, and Logistics.
Channel distribution strategies deal with the decisions on making the products available to the target customers in usable condition. “A channel of distribution is the combination of institutions through which a seller markets the products to the user or ultimate consumer” (Peter, Donnelly 2004:145). As the time and finances required for setting up a channel of distribution are comparatively high, the place strategies are often critical for the success of a firm.
The channels of distribution can be of two different types on the basis of the targeted consumer. It may differ when the end user of the product is a consumer or an organization, the Consumer Marketing Channel and the Business Marketing Channel.
Consumer Marketing Channel: Armstrong and Kotler (2001)
Nestle adopts the consumer marketing channel where the products from the producer reaches the consumer through the wholesalers or retailers. Nestle has e-marketing for some of its products where the products reach the consumers directly from the producer.
Business Marketing Channel (Armstrong and Kotler, 2001)
According to Donnelly (2004:150),the channel of distribution strategic decisions are determined on the basis of the following factors:
Distribution coverage required
Degree of control desired
Total distribution cost
Distribution coverage may vary based on the features of the product, the market and the target customers. The company may opt for intensive distribution, selective distribution or exclusive distribution.
In the case of intensive distribution, the company tries to sell the product through the maximum number of retailers and wholesalers. In selective distribution, the company may limit the number of wholesalers and retailers which are the best in that market while in the case of exclusive distribution; the manufacturing company may provide exclusive rights for distributing the product to only one or a few distributors.
Nestle has adopted intensive distribution strategy in order to make its products available to a large customer base. Nestle products are available through a large number of retail outlets. Besides this, Nestle has also launched an e-shop for promoting its confectionary in Japan which allows the consumers to buy Kit Kat chocolates online.
The coverage of Nestle is world-wide as it has a wide distribution channel and several manufacturing units at different places around the world.
“Marketing logistics involves the planning, implementing and controlling of physical flow of goods, services and related information from points of origin to points of consumption to meet customer requirements at a profit” (Armstrong and Kotler 2001:342).
Nestle underwent a complete re-engineering of its supply chain which was aided by Total Logistics which has benefitted both Nestle and its consumers. “Nestle has been able to operate composite pallet loads for entire UK, combining beverages and confectionery through two vehicle fleets and two distribution hubs” (http://www.total-logistics.eu.com/logistics-clients/logistics-consultants-case-studies/nestle.html). Through this, Nestle has been able to decrease its fleet size and satisfy smaller delivery volumes without any increase in the costs.
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