MARKETING STRATEGY ANALYSIS for YEO'S HOT ICE TEA
EXECUTIVE SUMMARY
The following marketing strategy analysis is about to introduce and analysis the new innovative product by Yeo Hiap Seng (M) Sdn. Bhd. which is named as Yeo's Hot Ice Tea. This will be a convenient product which will be readily available to quench the thirst of our customers and will also give the nutritional benefits of Tea. The main characteristics of this product will be the hot and cool nature of the product i.e. it can be served as a hot drink as well as a cold drink. In both ways it will give the same satisfaction to the customer and there will be no weather constraint for this product and it can be used through out the year. So the Hot Ice Tea will not be a seasonal drink and this will be the main advantage of the product. The product will be introduced to capture the 20% market share in the category of functional drinks market. The market is still discovered for this segment and company will be going to introduce a new a market trend as well as going to challenge its competitors. This product will lead the company in functional drink market and will carry the company on the top spot. The target market for the product will be the health conscious and energetic customers. Our product will broadly describe the main benefits of tea. Studies continue to show the beneficial properties of teas, with health benefits ranging from lower cholesterol levels to improve arterial health and decreasing chance of cancer. This positive press has definitely increased the demand for tea. In the first year of operation the Hot Ice Tea will be introduced in Malaysia only because we have very strong local networks. The Company will increase its market share through targeted advertising to increase the number customers who want convenience and are looking to have a drink of unique nature which will give them taste, energy and the nutritional benefits of tea.
MARKETING ORGANIZATION ENVIRONMENT
In 1993, Concentrate Producers earned 29% pretax profits on their sales, while bottlers earned 9% profits on their sales, for a total industry profitability of 14%. While the functional drinks sector only accounts for 3.7% of the total soft drinks sales in 2004, estimates are forecasting a growth of 7.3% in sales and 11.0% in volume consumption by 2009. (Source: Wikipedia) Top competitors for the soft drinks industry are F & N Coca Cola (43.6% of market) and Permanis Sdn. Bhd. (35% of market), Yeo Hiap Seng (15.8% of market) and others (5.6% of market) which combined, represent about 100% of the total market. In the functional drinks sector, PepsiCo is the current market leader with 60.5% of the market shares in 2007. Coca-Cola Co is second with 32.8%. Hot Ice Tea will launch into a currently undiscovered subset of that market (RTD "Ready-To-Drink" Hot Ice Tea). It is anticipated that the following brands could potentially compete with Hot Ice Tea in the functional drinks market: Brisk, Lipton Iced Tea, Sobe (owned by PepsiCo), as well as Snapple's and Hawaiian Punch. There are two major target markets for ready-to-drink hot ice tea. One group is the consumers on the go. These are the employees, students, and other consumers who lead a busy lifestyle. Malaysian lifestyle demands for optimize productivity with lesser time- consumption. Thus, there is a need for products that are accessible and readily available. Convenience has dominated the market, particularly the food and beverage industry. The other group is made up of health conscious consumers, specifically the younger who demand anything healthy. The positive reviews as well as the studies on the benefits of tea drinking have stirred an interest in tea drinking.
SWOT ANALYSIS
STRENGTHS
Yeo Hiap Seng has a broader product line and outstanding reputation. Beside Hot Ice Tea, Yeo Hiap Send still produced other products which are recognizable in market. The strong brand is one of the basic for the company's competitive advantages on several of its core markets. Yeo Hiap Seng has partnered with several companies (such as PepsiCo) in order to increase the ability to react to demands and changes in the markets of iced tea. Yeo Hiap Send is well established in its distribution channels (such as retailers or vending machines). Therefore, a new product launch can typically rely on the existing distribution system in order to reach the majority of its target market while requiring no major supply/ delivery development.
WEAKNESSES
Hot Ice Tea is relying on brand extensions (Yeo's) increase sales in specific lines, particularly its long-time concentrate drink products (i.e. Japanese Green Tea, Oolong Tea and etc). However, there is a strong risk of cannibalizing existing sales in the long term, for example Hot Ice Tea will be competed each other with existing products likes Ice Green Tea, Ice Lemon Tea and etc. Another weakness is brand dilution. The tremendous amount of existing products and new product being introduced by the company could diminish the value and differentiating strength of each product that is being ...
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WEAKNESSES
Hot Ice Tea is relying on brand extensions (Yeo's) increase sales in specific lines, particularly its long-time concentrate drink products (i.e. Japanese Green Tea, Oolong Tea and etc). However, there is a strong risk of cannibalizing existing sales in the long term, for example Hot Ice Tea will be competed each other with existing products likes Ice Green Tea, Ice Lemon Tea and etc. Another weakness is brand dilution. The tremendous amount of existing products and new product being introduced by the company could diminish the value and differentiating strength of each product that is being manufactured.
OPPORTUNITIES
The functional drinks market is one that particularly allows more innovation opportunities and gives greater freedom for creativity in the design, production, manufacturing, distribution, promotion and retailing choices and processes. Because of the company's size (including value, brand name and operating revenues) and wide portfolio base, Yeo Hiap Send enjoys a strong purchasing power over its suppliers, and also large partnership with various levels of consumer reach (e.g. movie studio promotions, sponsorship agreements, etc). Existing brand awareness also provides an international playing field for powerful marketing strategies.
THREATS
Yeo Hiap Seng is competing with F & N Coca Cola, Permanis Pepsi Cola and other competitors which have broader product line, well-run and financially strong. The fight for market shares and sales in crowded markets becomes a complex one. As younger generation move towards a healthier lifestyle, companies needs to do careful planning and decision-making in new product developments. Large companies can also easily become the target of consumer's apprehension. In an era of globalization, large international competitor likes Coca Cola and Pepsi Cola can come out with comparative advantages (the constant fight to remain the first mover and market leader in a long-term spectrum). Yeo Hiap Send as regional market player needs to do proper market planning in order not to fall in price war with these international competitors.
PRODUCT MIX
Hot Ice Tea industry can be attributed to two major factors: a) consumers need for convenience and time-saving services and b) the positive press given to tea. Trends For the last decade, the health benefits of tea have gained wide coverage in the media. Studies continue to show the beneficial properties of teas, with health benefits ranging from lower cholesterol levels to improve arterial health and decreasing chance of cancer. This positive press has definitely catapulted the demand for tea. Both the need for convenience and positive press on tea have spurred an increase in sales of tea products, specifically ready-to-drink (RTD) teas sold in single-serve containers. Recognizing this trend, various companies in the tea industry have come up with innovative products to take advantage of the booming market for ready-to-drink teas. Lipton tea, one of the global leaders in refreshment brands, launched new products to meet the growing the need for ready-to drink teas and introduced innovative product line to capture the health-conscious market. Today, while the soft drink industry's value has increased , the volume sales of carbonated soft drinks has declined due to a large proportion of consumers who are opting for the trend towards healthier alternatives in the functional drink segment (energy drinks, smoothies, milk & juice drinks, sports drinks) as well as bottled juices and water. Companies have been actively engaged in new product developments in order to counter the growing concerns about negative health impacts of high-fructose drinks, but also to increase the demand in a market where product offerings are quickly maturing. New flavor introductions and health-conscious formulations have been launched in an attempt to offset the decline in carbonated soft drink sales. The functional market is expected to show sustained growth and consumer interest in the future years as consumption shifts to trendier, healthier and more sophisticated product.
PRODUCT STRATEGY
Hot Ice Tea is a low-learning product. With a strong marketing campaign, "sales [will] begin immediately and the benefits of the purchase are readily understood" Since Hot Ice Tea is prone to product imitation, Yeo's strategy is to broaden distribution quickly, which is currently feasible thanks to the company's high manufacturing capacity. Hot Ice Tea follows the practice of product modification. Yeo's is introducing an existing beverage (Ice Tea) but redefines the drink with a new, more convenient package. Hot Ice Tea will now become a widely available drink in multiple retailing (distribution) channels. The selling point of Hot Ice Tea is the hot and cool function of product. Customer can take it as a hot drink by oven heating or can take it as cool drink by chilling it in deep freezer, it all depend on customers. The conformance quality of Hot Ice Tea will be that it will be free from any defects; it will deliver its targeted performance and quality.
PRICE STRATEGY
The price strategy that will be undertaken should consider the following aspects:
. Consumer demand
2. The product lifecycle
3. Potential substitutes
Customer demand
Customer demand is a crucial factor which is driven by tastes, income and availability of others similar products at a different price. For a lot of consumers, value and price are highly related: ''the higher the price, the higher the value''. Consequently, Yeo's intention to position Hot Ice Tea as a unique, innovative and attractive product gives it a certain control over Hot Ice Tea price. To be able to implement higher pricing though, the minimization of the non-monetary costs to customers should also be include along with awareness of the product (notably by advertising) and value (benefits).
The product lifecycle
The company should also take advantage to the fact that the newer the product and the earlier in its lifecycle, the higher the price can usually be. It ensures a high profit margin as the early adopters buy the product and the firm seeks to recoup development costs quickly and it also brings a certain prestige to the product. Product development period begins when the company finds and develops a new product idea. During product development, sales are zero and the company's investment costs mount. Introduction period is the period of slow sales growth as the product is introduced in the market. Profits are nonexistent in this stage because of the heavy expenses of product introduction. When product starts to growth, it is a period of rapid market acceptance and increasing profits. When product comes to maturity stage, it is a period of slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits level off or decline because of increased marketing outlays to defend the product against competition. Finally, decline stage is the period when sales fall off and profits drop.
Introduction Growth Maturity time Saturation Decline
Potential substitutes
Yeo's is constrained by the monopolistic market in which it competes. The main characteristic however is product differentiation.
The point here is that Yeo's can not set a price that is too high because competitors will be attracted by potential profits and will follow by a lower price. After having taken all the important factors into consideration, there are five price-level fixing approaches seem appropriate.
. Cost Based Pricing
One of the central objectives of this project being to become the market leader in functional drinks, Yeo's is willing to stay among the top competitors, if not becoming the greater, by achieving a certain target profit. This could be obtained by establish a price that will largely cover variable and fixed costs while bringing tremendous profits.
2. Value Added Pricing
Competitors and potential substitute's prices can also be part of the strategy. Having a higher price could make customers aware of the additional benefits and the higher quality of Hot Ice Tea.
3. Value based Pricing
The company sets its target price based on customer perceptions of the product's value. The targeted value and price then drive decisions about product design and what cost can be incurred. As a result pricing begins with analyzing consumer needs and value perceptions, and price is set to match consumer's perceived value.
4. Market Penetration Pricing
The company can set a low price for a new product in order to attract a large number of buyers and a large market share.
5. Break-even pricing
The company has to make some strategies for break-even prices, setting prices to break even on the costs of making and marketing a product; or setting prices to make a target profit.
DISTRIBUTION STRATEGY
The current market for Hot Ice Tea is fragmented, since the distribution is restricted to local outlets and selling points such as counters and small Hot Ice Tea shops in scattered locations. However, direct competition from these local players is not anticipated, since the marketing roll-out will initially emphasize on product awareness and both sales channels do not reach or serve the same market (retailing vs. counter/restoration). A strong distribution system already exists with previous products, since partnerships and channels are already in place. This will facilitate the product's reach into its target market: retailing and wholesaling.
MARKETING COMMUNICATION STRATEGY
Objectives of marketing communication strategy are to initiate strong awareness about the launch of Hot Ice Tea throughout Generation Y (10-29 years old) consumers as well as their parents and too win market shares over our top functional drinks competitors.
The promotional activities will convey the clear message that "Hot Ice Tea is a healthy drink for sporty and young people who simply enjoy taking care of their body and life." Concepts or slogan like "Think outside the bubble", "Be Bold, Be Original, Be Different, Be Yourself", "A good spirit in a good body", "For the out-of-the-ordinary individuals who like to challenge themselves" can be used to promote Yeo's Hot Ice Tea.
Media selection
Before choosing the appropriate Medias, it is important to note that Generation Y consumers only give partial attention to media. However, they can be reached through integrated programs. They are typically using more than one communication media at a time, a behavior that is often called "multitasking". This group of consumers doesn't give its full attention to one single message, but rather uses continuous partial attention to scan the media. Marketers can still communicate with Generation Y by using a variety of targeted promotional tools. Another important tactic to reach our target market is through "Hot Ice Tea" marketing campaign sponsorship, which marketers can sponsor campus contests for advertising purpose. Beside this, public media like television, radio, magazine, news paper or internet banners on selected websites (gaming, sports, Google, yahoo, etc.) can be used as advertising tools.
Other Consideration of Marketing Communication Strategy
When Yeo's Hot Ice Tea is at its Introduction stage, we thus must inform consumers in as effort to increase their level of awareness. Awareness is our primary promotional objective. Then the following months after the launch of Hot Ice Tea, in its Growth stage, the company will have to persuade the consumer to buy the product, to gain preference and to solidify the distribution.
Product Characteristics:
Complexity: Hot Ice Tea is more sophisticated than already existing functional and soft drinks. Consumers can drink it as hot drink or as cold drink. Understanding and familiarity is different when compared with other comparable drinks. We should thus use a little bit more of personal selling to retailers, give more example, and create advertising on how to drink Hot Ice Tea.
Risk: There is no financial, social or physical risk associated with Hot Ice Tea thus personal selling is less needed.
Ancillary Services: No support or service is required after the sale, refer customers to the website or free 1-800 number for any questions or comments.
COMPETITIVE POSITIONING
"Yeo's Hot Ice Tea" will be a bottled beverage that has a differential advantage that it can be drink as hot drink and can be taken as cold drink. It will bring an entirely unique drinking experience to its consumers. It will present itself as a funky and unusual alternative to traditional tea while providing the great taste of authentic fruit juice in an attractive and convenient packaging.
Yeo's Hot Ice Tea positioning strategy as the only Ready-to-Drink bottled Hot Ice Tea available in market. Eye-catching bottle, functional packaging, premium-priced, cool, new and unusual, unique drinking experience, aspects of play variety of flavors, sweet, refreshing, for hip & young people, healthier alternative to heavy-sugar drinks. To young active soft drink customers who have little time for sleep, Hot Ice Tea gives you the nutritional benefits of tea and keep you awaken. You can take it while on the go, now it's your choice that you can chill it and you can hot it. There is no boundary of season now because Hot Ice Tea can be taken from both aspects hot drink and cold drink.
CONCLUSION
Marketing a new product is not an easy project, management will need to monitor from time to time whether the marketing goals and objectives are going in right direction or not. If not, than we need to find out what went wrong and what are differences between actual and expected performance. This may require changing the action programs or even changing the goals. It involves checking ongoing performance against the annual plan and taking corrective action when necessary. It will ensure us that the company achieves the sales, profits and other goals set out in annual plan. It also involves determining the profitability of product and looking at whether the company's basic strategies are well matched to its opportunities. Marketing strategies and programs can quickly become out-dated and there will be the need of periodically reassess its over all approach to the market place.
REFERENCES
Kotler, P (2002), Marketing Management, 11th edition, Malaysia: Pearson Prentice Hall.
Theodore, Sarah (2005), Surprising suggestions from teens, Beverage Industry, Vol.96, No.7, pp.4.
Yeo Hiap Seng webpage, http://www.yeos.com.my
Coca Cola webpage, http://www.fn.com.my
