A PEST analysis for Cadbury Dairy Milk.

The Product Lifecycle 

Like living organisms, products are born, evolve, reach maturity and eventually die. Some products have a revenue earning potential longer than others, but generally product life cycles are shortening.

The most appropriate marketing strategies based on life-cycle theory are those which correctly anticipate products reaching market maturity and release new products or modify existing ones as sales of others decline. Cash flows and profit are related to the product life-cycle.

This is the product lifecycle for the Cadbury dairy milk bar:

Cadburys dairy milk bar is an established product which is regularly injected with new life. The Cadbury Dairy milk bar is advertised regularly, mainly through TV advertising but also on billboards and papers and magazines.

Boston Matrix.

The Boston matrix was developed by the Boston Consulting Group and is a useful analysing tool to understand the product portfolio in multi-product firms. The Boston matrix classifies products on the basis of their 1, expected growth rate measured by expected growth and 2, market share relative to rival products.

· Stars - have both a high market share and high growth potential. However, they will require significant cash investments to do this through product redevelopment and promotions..

· Question marks - have a low market share compared with other firms in the same industry but have good growth potential. They are currently at a competitive disadvantage and need investment to correct any weaknesses they have. 

· Cash cows - earn a business significant revenues and profits. They have a strong market position in markets that have reached maturity. These products can be "milked" for profit because they require very little investment to keep them going.

· Dogs - have low expected growth rates and low relative market shares. A business should stop producing or sell off its "dogs".

This is the Boston matrix for the Cadbury:

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I think Cadbury dairy milk bar is a cash cow because it has the largest market share (22.3%) in the moulded block chocolate sector but the growth of the market is now slower.

 I think Cadbury Fruit and Nut bar is a cash cow because it has the second largest market share (7.7%) in the moulded block chocolate sector but the growth of the market is now slowing down.

I think Cadbury Boost Bar is a star because it is successful and has a large market share; also the market is growing so it will get a bigger share. For the Cadbury boast bar to stay a star and above its competitors it still needs some advertising.

The Ansoff Matrix

The Ansoff matrix is one of the most popular ways that businesses can look at the different strategies that are available to them 

The different sections of the Ansoff matrix are:

· Market penetration - is increasing sales of existing products within existing markets.

I don't think this would be the best strategy for Cadbury at the moment because they already have high sales with their existing products.

· Market development - is selling existing products to new markets.

 This strategy wouldn't really affect Cadbury as they already sell their products worldwide to all different age groups.

· Diversification - is producing new products for new markets.

I don't suggest Cadbury use this strategy because they have high sales and growing profits with the products they've got in the markets there in now.

· Product development - is producing new products for sale in existing markets.

This is the strategy that I'd advise Cadbury to use. I think Cadbury should develop the original dairy milk bar and produce a new strawberry flavoured, low fat bar. I think this because I found out from my questionnaire (see graph on page four) that 60% of people would buy the new low fat bar and 50% of people said they would buy it more than the original bar.

My questionnaire also suggests that a new strawberry flavoured bar would do well (see graph on page four) with 40% of people saying they would like Cadbury to produce a strawberry flavoured bar.

Because of this primary data I decided to put the two results together and develop a strawberry flavoured, low fat dairy milk bar..

The Marketing Mix

In order to be successful a firm needs to do the following:

· Provide a product that meets customer needs

· Charge the right price

· Get the goods to the right place for sale

· Promote the goods in such a way that the target consumers are informed of the product and persuaded to buy it

1. New Product Development 

This sections contains some quotes from my class notes:

'The consumer demand for 'something different' has been increasing over the last decade as foreign travel and other changes in lifestyle have made the British people more adventurous in their food choice. Therefore manufacturers have to respond to these demands by introducing a wide variety of new products to tempt the consumer. This means that a company can not afford to stand still, it must grow to survive in the highly competitive market of confectionary. Successful companies monitor their customer's needs then move quickly to respond to their demands. New product development is one way of trying to keep ahead of the market and its competition.'

Developing a successful new product that will stand the test of time and gain a permanent place in a company's portfolio is not easy. Because of the large investment needed for new products it is essential that the whole project is researched carefully. This usually starts of with directly asking their customers what they want.

Cadbury 

From the very early days of Cadbury, new product development has always been an important part of the business, as the company prided itself on the wide range of chocolates included in its portfolio. Throughout the company's history, Cadbury have launched some very successful products. The first major success was the launch in 1905 of Cadbury Dairy Milk which made an immediate impact on the market sustained to this day, as the brand value now stands at £76 million per year.

New product development is an on-going, never-ending process and at any one time, Cadbury will have a large number of products at different stages of development. Confectionary is half-way between food and fashion so innovation is the key to success, providing excitement and variety for consumers.

I would advise Cadbury to produce a new strawberry flavoured, low fat Cadbury Dairy Milk Bar because my primary research shows that 60% of males and females would buy the new bar. My primary research also shows that a new strawberry favoured bar would also do well as 40% of males and females said they would like Cadbury to produce this flavour out of six different flavours I gave them.

Cadburys also have a number of cash cows which are generating a lot of profit so this money could be used to invest in this new product development.

Because the consumer demand for 'something different' is high I think a strawberry flavoured, low fat diary milk bar is what the consumers want, so therefore, I think it would stand the test of time and have a permanent place in Cadbury portfolio.

2. Price 

The pricing of a product is very important when introducing a new product. There are many different types of pricing available:

Ø Penetration pricing - set the price low to gain a foothold in the market.

Ø Skimming - set the price high to take advantage of demand for a new product.

Ø Positioning pricing - reflects a view of the product where an expensive product=good quality, a cheap product=poor quality.

Ø Demand-based pricing - what the customer is prepared to pay.

Ø Competitive pricing - prices set roughly in line with competitors.

Ø Cost-based pricing - cost of materials, labour, overheads and mark-up.

Ø Discount pricing - e.g. trade discount, student discount.

Ø Differential pricing - e.g. time of year, time of day, geographical area.

Cadbury

I would advise Cadbury to start at penetration pricing; this will give their new product a foothold in the market and encourage people to try their new product. After a few months when the new product is established they can put the price up to a competitive rate.

3. Promotion 

There are five main techniques for marketing communications:

Advertising

Advertising enables you to reach a large, widely distributed audience at relatively low cost per exposure but costs can be high and it's impersonal.

Ø Press

Ø TV

Ø Radio

Ø Transport

Ø Outdoor

Ø Cinema

Public Relations (PR)

PR covers all the communication activities that you do not have to pay for; it is often more credible than advertising. 

Ø Press releases

Ø Events

Ø Sponsorship

Ø Exhibitions

Sales Promotion

Sales promotion attracts buyer's attention and provides incentives for immediate purchase.

Ø Money off coupons

Ø Free samples

Ø 2 for 1 promotions

Ø Incentives/gifts

Personal Selling

Personal selling engages customers in a personal interaction which may develop into a relationship; however, sales visits are expensive and the sales force requires longer term commitment than other forms of communication.

Ø Sales calls

Ø Telemarketing

Direct marketing 

Direct marketing enables you to target and tailor messages to individual customers rather than broadcasting; it is also interactive, allowing you to conduct a dialogue with customers.

Ø Database marketing

Ø Internet marketing

Cadbury 

I would advise that Cadbury main promotion for this new product should be TV advertising. This is because my primary research shows that males and females of all ages would buy the suggested new products and TV advertising enables you to reach a large, widely distributed audience at a relatively low price.

I also think that sales promotion would be affective because free samples of the new product would make people aware and if they liked it they would buy it in the future.

Sponsorship would be another good way of making people aware of the new product because if you sponsor a very well known programme that a lot of people watch then all those people will be aware of your product.

Cadbury has a lot of cash cows that are generating enough money to support whatever promotion they think would be most effective.

Advertising Standards 

The British Code of Advertising Practice set out the rules which advertisers agree to follow and ensure that any advertisements are truthful and can be trusted. All advertisements should be legal, decent, honest and truthful.

Legality of Advertisements

All adverts must not contain anything that is in breach of the law, must not omit anything which the law requires or encourage defiance of the law.

Decency 

Anything which is against the standards of decency of correct conduct or likely to cause widespread offence must not be included in an advert.

Honesty 

The customers trust or exploitation of their lack of experience should not be abused in the frame of the advert.

Truthful Representation

The contents of the advert must not contain visual presentations or statements which are likely to cause customers to be mislead with regard to the product in the advert wither directly or by implication by failing to omit certain information, adverts having more than one meaning or by exaggeration..

Prices

Generally prices do not have to be shown in your advert but in the case of goods and they must be in a clear position so that they cannot be missed, also the price of any extra none-optional extras must also be shown.

The use of the word free 

This may only be used in the advert if there is no additional cost to the customer excluding any payments on the delivery i.e. postage, packaging, transport. Where there is a direct cost to the customer, it must be stated clearly.

Advertisement Indication 

Persons viewing an advert should be able to tell that it is an advert without having to look closely at the information given. Warranties and guaranties should be indicated clearly and carefully in the advert to avoid any confusion by the customers. Any advert must be prepared with a sense of responsibility to society and to the customer.

Fear

Adverts should not play on fear without a justified reason.

Superstition

Superstition must not be used in adverts by suggesting that by buying the product you will have good fortune for example.

 4. Place - Distribution

Place is trying to get the right level of distribution in the right types of outlets. This is one of the most difficult, yet important marketing activities.

In simple terms physical distribution involves getting a product from A to B

Logistics has a very important role to play in the process of distribution. This is because they start off the process and plan it from beginning to end. If they don't do their job probably then they could end up with no sweets in the shops, which loses sales and therefore profit. Logistics monitor demand for goods and co-ordinate the process from ordering raw materials through to the timely delivery to the warehouse

Physical distribution must balance the need for customer service against the need to minimise costs. It is necessary to plan a physical distribution system carefully taking into account the need for warehouse space, stock, staff etc in order to maximise efficiency. On the other hand it is necessary to keep down costs and get the correct balance between these inputs and outputs and therefore provide an efficient but profitable service.

Cadbury

This is the distribution channel that I would advise Cadbury to use:

This is the distribution channel that Cadbury already uses, so I think they should also use it for the new product. I think this because it is already set up and working well for their other products and is already in a good area, with experienced staff and known by their existing suppliers. They would need to incorporate this new product into their existing set-up, therefore keeping costs down as their will be no initial start up expense. Because it is already an up and running distribution channel the experienced staff should be able to get it up and running quickly, efficiently and cost effectively. If the product becomes a big success then they might have to build an extension to their already existing warehouse, but if this is necessary it should finance itself.

The only slight disadvantage to this type of distribution channel would be that the distribution centre is a middle stage and extra staff would be needed but I think that this is necessary in a large company.

I would advise Cadbury to sell this new product in a number of different retail outlets:

· Supermarkets

· Corner shops

· Petrol stations

· Cafes

· Ice cream vans

· Trolleys/stands (e.g. Meadowhall)

The Principles of Marketing There are five main principles of marketing, which I have included throughout my assignment:

 1. Understanding customer needs - All companies have to anticipate change within the buying population. Market research is the main way of doing this, because it is the ability to satisfy customers that makes the difference between a successful and unsuccessful organisation. All customers are different, but only a select few organisations can be that specialist to provide products for individuals e.g. a tailor, so many organisations concentrate on groups of people. The marketing mix is the first thing an organisation should do in order to find out there customer needs.

Throughout my assignment I have been trying to accomplish this by, carrying out a survey to see what my customers want or will be wanting in the near future (see appendix one) and producing a detailed marketing mix to identify a set of customers and find out their needs so that the appropriate goods and services can be developed

2. Understanding and keeping ahead of competition - One of the key factors in any market is the existence and strength of competition. In a competitive environment organisations are forced to be on their toes. They cannot afford to allow rivals to gain advantages over them or they will lose customers. To be a successful organisation they have to make sure that they are being better than their competition and are keeping up with any improvements their competition make. Marketing in any organisation must constantly seek to enable the organisation to manage the affects of change and competition. Good marketing is the key factor to organisations today, so organisations have to make sure they meet their customers needs from the start right up to the after sale service.

I have identified my competition and took them into consideration throughout my assignment, finding out about them. I have also thought deeply about my marketing techniques e.g. promotion, price etc. (see my marketing mix on page 12-18).

3. Communicating effectively with customers - An effective network of communication is essential for any form of promotional activity. It enables an organisation not only to communicate with their customers but also to build an image with the world. An organisation needs a clear communication process and must know what a message should be, to whom it must be sent and the expected outcome of sending it.

I didn't need to produce these myself as Cadbury already has a good communication line, but I did need to think about it for my developed product, how should I promote it and who its aimed at

4. Co-ordinating marketing functions to achieve marketing aims - Business strategy is concerned with the big decisions that organisations have to make. This may change the whole organisation and influence the future of a business for a long time to come. An organisation with a strategy knows where it is going because it is planning ahead. Marketing strategies require detailed research in order for them to be successful. Planning is a big part of marketing; it enables decision makers within an organisation to plan for the present for the future and to learn from the past.

I have produced an Ansoff matrix and chosen product development as my strategy I have then gone into more detail in my marketing mix (see pages 12-18).

5. Constraints on marketing activities - Every organisation involved in marketing activity is faced with a number of constraints that may limit their activity. They need to work within internal constraints and external constraints. The well established companies would look at these constraints in great detail and try to minimise them.