. Describe the nature of the 'exchange process' which marketing facilitates in up to 100 words.
The 'exchange process' is seen as the basic principle of marketing and involves the simple concept of needs and demands.
In the world of marketing this can be any organization offering a product, service or even an idea. The customer then agrees to pay an amount of money for these goods. The whole exchange process works under the important condition that both parties value the goods offered by the other party to that extent that they are willing to fulfil the demands of the other party in return.
The satisfaction gained from a transaction can lead to further purchases.
2. Explain how the pet food market is structured. Describe how a number of local outlets support this structure.
The pet food market is structured into three main sectors, which consists of Dog food, Cat food and other pet food. The market share of Dog food (50%) and Cat food (47%) is nearly the same, whereas other pet foods only contributes to 3 % of the total market of £ 1,684 million (Key Note Ltd 2003).
Furthermore Pet food can be categorized generally according to their functions, which are:
- Complete food: Provides all vitamins and minerals needed
- Complementary food: To be combined with other foods, for example meat or biscuits
- Snack, treat or training aid
Within the Dog and Cat Food sectors a further segmentation can be found:
The moist and semi-moist sector includes canned products, single serve trays and vacuum-sealed pouches.
The Dry foods covers biscuit, flaked food and mixers and are often packed in paper or cardboard. Dry food itself can be again segmented into flaked products, which contains a mixture of cooked meat and cereal products, and extruded products, consisting of combined ingredients to which water or gravy can be added.
Finally, the Treats category involves snack-type foods based meat, cereal or biscuit. Though treats for dog food are more common, as there's a greater variation of products.
Other Pet food market can also be segmented into three sections, as for small animals, ornamental fish and food for birds.
In our local area there is actually one large supplier of pet food, namely the supermarket Asda. It provides different types of pet food, ranging from food for dogs, cats, birds, rabbits, hamster and fishes. The variety includes dry, semi-moist and moist types and also treats. Asda is situated next to the town centre, and has a quite monopolistic position as pet food retailer, offering convenience and efficiency to local pet owners.
Other minor supplier include vets providing specialist pet foods, there is one located at the town centre and other ones at the outer border. Their product range is limited as capacity is small and their main function is the medical treatment of pets, not selling products.
3. Explain how the market has been segmented referencing all information sources both academic and personally researched. Approx. 250 words
According to Keynote (2003), 44% of all adults own a pet, and the average age of the owner is about 35-54. This reflects the fact, that pet owners are very likely to be parents with school-age children. A reason for that might be that kids like to have a pet at home as a friend to play with. Also when both parents are in full-time employment, a pet will prevent the children from getting lonely. Single people are less likely to own a pet, as they might don't have the time to take care of the pet, or they just prefer to live on their own. When looking at the social status and income of the average pet owner, the statistic shows that people of the Lower Middle Class, C1 and Skilled Working Class (C2) are most likely to have pets, with 53% of all owners belonging to either one of these groups. To explain this phenomenon, we can assume that people with low income cannot afford to keep a pet, and on the other hand, upper class people might not have enough free time to take care of an animal, as most of them are in a high position with great responsibility and a lot of workload. Typically pet owners can be found quite often in the Midlands and North than in the South, although the difference isn't that great with a deviation of only 5%.
Recent trends show that men and women are equally likely to own a dog, but women have a greater preference for cats than men do. Furthermore according to Mintel (2002), amongst people in middle age (35-54), dog ownership is more popular, whereas with increasing age, cat ownership becomes more popular.
Bibliography:
Mintel (2002) Cat and Dog Food. Mintel International Group Limited. April 21-29
Taylor, S. (2003) The pet market. Keynote. May 6 - 11.
4. Draw a perceptual map for the pet food market as a whole to be included as an appendix of ...
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Recent trends show that men and women are equally likely to own a dog, but women have a greater preference for cats than men do. Furthermore according to Mintel (2002), amongst people in middle age (35-54), dog ownership is more popular, whereas with increasing age, cat ownership becomes more popular.
Bibliography:
Mintel (2002) Cat and Dog Food. Mintel International Group Limited. April 21-29
Taylor, S. (2003) The pet market. Keynote. May 6 - 11.
4. Draw a perceptual map for the pet food market as a whole to be included as an appendix of the final report.
5. Produce a fully referenced macro-environmental analysis for the national pet food market. Approx. 250 words
On the political side, the UK has a great number of legislation governing the pet food market. Though the pet food market is subject to the same legislation as human food, there are a number of individual parts of legislation for that particular market as well:
The Animal By-Products has guidelines on what ingredients are permitted for the production of pet food, as well as the processing procedures of these products. (Great Britain. Statutory Instruments, 2001)
The Feeding Stuffs Regulations 2000 include regulations about appropriate labelling of the advertised product and criteria for the use of additives and contaminants. (Great Britain. Statutory Instruments, 2000)
To ensure that the customer is properly informed about the product, the Packaging Goods Regulations requires that the net weight of pre-packed foods is displayed properly on each pack.
There's the problem with the VAT on pet food varying widely across Europe. Some countries apply the same tax rate on pet food as on human food, whereas others impose a higher rate on pet food.
As for the UK, human food is zero-rated, but pet food is charged at the standard rate of 17.5%. This causes discontent amongst people in the industry, seeing themselves in a competitive disadvantage. (PFMA)
Economic factors don't have a large impact on the pet food market, because it is a necessity rather than a luxury. A decline in the economy would probably enable owners to move away from premium brands to low-cost supermarket pet food.
Social benefits are explained thoroughly in the "pets are good for you" report by the petcare trust (2003). According to the statistics pets make their owners feel happier and reduce health problems like reducing stress and lowering blood pressure.
Technology has enabled firms to improve their products through NPD. Plastic packaging allows the dry food to keep its freshness and pouches and foil trays supported the development of single-serve trays.
Bibliography:
GREAT BRITAIN. STATUTORY INSTRUMENTS, (2001) Animal Health: The Animal By-Products. London : HMSO (S.I. No. 1704)
GREAT BRITAIN. STATUTORY INSTRUMENTS, (2000) Agriculture: The Feeding Stuffs. London : HMSO (S.I. No. 2481)
PFMA (No date) Legislation [Online], Pet Food Manufacturer's Association. Available: http://www.pfma.com/legislation.htm [Accessed: 6th March 2004]
Petcare Trust (2003) Pets are good for you.... [Online] Available: http://www.petcare.org.uk/news/pdf/goodforyou.pdf [Accessed: 6th March 2004]
6. Choose one of the identified pet food types and write a brief description giving outlet(s), and marketing activities. Approx. 150 words
We conducted research on treats and snacks for pets. Among the dog treats there are brands like Asda, Bonio, HiLife, Nestlè, PAL, Pedigree, Winalot, Webbox.
Felix, Thomas and Whiskas are offering treatments for cats as well. (Asda)(Sainsbury)
It is noticeable that there's a wider supply for dogs, which can be explained by dogs being trained more often and owners might have the need for such training aids, not as a luxury but rather a necessity.
Treats are often available in supermarkets and especially in pet shops, where the shop owner is able to give valuable advice to customers seeking to purchase training aids for their dogs.
In Hatfield the only serious pet food outlet is Asda, which offers a great variety of different treats. The supermarket tries to promote the goods by introducing low prices and special offers, such as 'Any 3 for 2', especially when it comes to their own brand.
Advertising for treats are mainly broadcasted on Television, where firms try to enhance the image of their products by showing satisfied owners training with their dogs.
Bibliography:
Asda (No date) [Online] Available: http://www.asda.co.uk [Accessed: 22nd March 2004]
Sainsbury (No date) [Online] Available: http://www.sainsburystoyou.com [Accessed: 22nd March 2004]
7. Carry out a SWOT analysis for this market with all inclusions referenced to the information source.
STRENGTH:
The increasing consciousness of people regarding the health of their pets leads to a focus on nutritious food which helps increasing the life span of their beloved animals. This benefits the pet food industry greatly as it leads to increased demand and allows manufacturers to set their prices for selected products at a high level. (PFMA)
Increased competition has lead to greater effort for developing new products in order to meet customers demand. Therefore a lot of money has been put into Research and Development strategies, stimulating technical progress in this industry. (Mars, 2003)
Scientific evidence about the increased life of pets eating healthy and high quality food is well known amongst the people.
Supermarkets offering own-brand pet foods, thus contributing to competition. (Ciao, 2004)
Owner of pets gain health benefits, encouraging people to hold a pet
WEAKNESS:
Large, established companies such as Masterfoods, Nestlè and P&G may impede competition and prevent smaller firms from entrance.
Some companies are reluctant to improve packaging and introducing more environmental-friendly production processes for financial reasons.
Limited advertisement on high street, where pet owners are likely to notice it and get known to the benefits of the product
Limited product range, not enough variation satisfying the customer and its pet's demand
Opportunities:
Growing number of pet owners leads to an increase in demand
More types of "pets" are becoming popular, especially exotic animals.
Expansion into developing countries, especially in the Asian region
Advertising and retailing over the internet, simplifying the buying and selection process, also targeting a larger audience. (Mars, 2001)
THREATS:
Different regions may require further development and research to adapt to customers with different cultural background.
Restriction of pet ownership in flats and apartments due to hygiene reasons reduces overall pet ownership. (Faulkner Property)
Smaller pets may be outpacing cats and dogs, thus reducing the amount of food being consumed.
Electronic pets such as 'Aibo' created by Sony might replace traditional pets, as they are improving and becoming more realistic. Also due to hygienic and easy-care reasons they might be preferred by the public. (Sony, 2003)
Bibliography:
Mars (2001) MyPetstop.co.uk [Online] Mars Incorporated. Available: http://www.mypetstop.co.uk [Accessed: 11th March 2004]
Mars (2003) Whiskas Tray Adult [Online] Mars Incorporated. Available: http://www.whiskas.co.uk/whiskas/en-gb/Products/Adult/Tray [Accessed: 11th March 2004]
Ciao (2004) Asda Hero [Online] Ciao AG. Available: http://www.ciao.co.uk/Asda_Hero__5113463 [Accessed: 10th March 2004]
Faulkner Property (No date) One Bedroom Properties. [Online] Faulkner Residential Lettings & Management. Available: http://www.faulknerproperty.co.uk/searchresults.php?t=1u [Accessed: 10th March 2004]
PFMA (No date) [Online] Pet Food Manufacturers Association. Available: http://www.pfma.com/nutrition.htm [Accessed: 11th March 2004]
Sony (2003) Aibo Entertainment Robot. [Online] Sony Electronics. Available: http://www.us.aibo.com [Accessed: 11th March 2004]
8. Drawing on all this information, produce a fully referenced written report to a marketing manager thinking of entering the market with a niche product. Approx 500 words
To the Marketing Manager
Introduction
The pet food market has experienced steady growth for years and despite a slight decline in pet ownership, pet food sales have increased. This is especially true for cat food sales, which reflects the fact that cats are outpacing dogs slowly but steady.
As the trend is going towards pets being treated as a part of the family, they deserve food that is equal in the way to human dishes. These and other factors are the foundation of our report on entering the promising cat food market.
Main
The current cat food market is dominated by 2 multinational players, namely Mars (Masterfoods) with a share of 40% of the market and Nestlè (Friskies UK) with 41 %. (Mintel, 2002). As these firms have established their position on a solid basis, it is recommended to avoid direct competition with these brands. Therefore a strategy based on pure specialisation seems to be the best way to enter the market, therefore introducing a niche product.
We would suggest entering with a highly-specialised, super-premium product for the cat food market, as cats are generally fussy eaters and their owners are willing to spend a great amount of money in order to satisfy their pet's needs. (Keynote, 2003)
Recent statistics have revealed that the trend is going towards focusing on health issues and functionality. The product should include a certain amount of vitamins and minerals, as well as special medical ingredients to strengthen the cat's immune system. Furthermore the product should contain purely of organic ingredients. (PFMA)
Concerning the product design, there's recently the trend of 'humanisation' even when it comes to the recipe. Culinary choices should be made available to the consumer, such as pasta and rice dishes and consideration should be taken to suit different expectations of pet owners living in different countries, thus having a different attitude due to their culture.
Additionally different age types should be targeted separately, as young kittens have different needs and desires than older cats. Kittens may need less food, resulting in smaller portions, whereas old cats need special nutrition to stay healthy and live longer. This should be a further element of our specialisation process. (Mars, 2003)
Great emphasis has been placed on the convenience of the product package and design, for example single serve trays have proven to be widely accepted amongst pet owners, as they are easy to store and can provide the right amount for one meal. Re-sealable package, such as foil sachets, are also very popular, as they provide the owner with control and keeps the freshness of the food.
In order to underline the natural and organic ingredients of the product, recyclable packaging should be used and made obvious to the consumer.
Distribution should mainly occur through leading supermarkets, as 79% of cat food is distributed through grocery stores, but attention should be paid on pet superstores and vets as well, as their share should be growing dramatically in a few years with pet superstores having experienced a 200% growth in sales from 1997-2001 (Mintel, 2002).
Conclusion
Innovation is the key to this industry, as it's the only way to compete with long established brands such as Masterfoods and Nestlè. Advertising shouldn't be neglected though, if a life-long brand has to be created and be remembered in people's minds. The cat food market looks promising so far, and with the right approach and recognition and implementation of upcoming trends, a survival in the competitive market should be guaranteed.
Bibliography:
Mars (2003) Whiskas - default - [Online] Mars Incorporated. Available: http://www.whiskas.co.uk/whiskas/en-gb/Products [Accessed: 26th March 2004]
Mintel (2002) Cat and Dog Food. Mintel International Group Limited. April 31
Mintel (2002) Cat and Dog Food. Mintel International Group Limited. April 48
PFMA (No date) [Online] Pet Food Manufacturers Association. Available: http://www.pfma.com/nutritioncatsdogs.htm [Accessed: 27th March 2004]
Taylor, S. (2003) The pet market. Keynote. May 6
Taylor, S. (2003) The pet market. Keynote. May 39
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