4.2 Four P’s of Marketing
Product
- Heineken produces beer, which won a gold medal award at the 1889 Paris World Fair, softdrinks, spirits and wine
- It is the largest selling beer in Netherlands in 1893 and second in the world in terms of sales of beer brewed in 1993.
- Heineken was the number 1 imported beer in US though it was not bottled here.
- Held a 24% volume share in Netherlands against its main competitor, Grolsch.
- Built in five core brand values: Taste, Premiumness, Tradition, Winning Spirit and Friendship
- Projected various brand image in different markets
- US and Hong Kong – beer = special occasion
- Latin America – beer = imported European beer
- Others – beer = lighter beer of superior quality
Place
- Distributed in Netherlands, America, Asia/Australasia, Africa, Italy, Germany and the rest of Europe (including France and Ireland).
Promotion
- Expresses the quality of taste and value of friendship in television and advertising.
- Unique and differentiated image depend on effective communication of 5 core brand values, nothing less.
- Made use of expressions of taste which “appealed to the head” and expressions of friend which “appealed to the heart”.
- Use of boards with visual and message stimuli depicting the expressions
- Run eight focus groups in each country. Four groups explored taste cues and four in friendship cues.
Price
- Heineken is priced as a premium product
V. THEORETICAL FRAMEWROKS
Deciding on the Marketing Program
Heineken should decide how to adapt their marketing strategy considering the global, regional, and even local conditions. Their option is to use a globally standardized marketing mix or a standardization of the product, advertising, and distribution channels that promises the lowest costs. At the other end is an adapted marketing mix, where the company could adjust the marketing-mix elements to each target market.
Five International Product and Promotion Strategies
Branding Decision
Heineken has successfully developed its brand name. The challenge for them is whether to use one brand and one brand image in all the countries that it has distribution.
Product Life Cycle
Steps in Developing Effective Communication
Developing Effective Communication
A. Identify the Target Audience
Heineken must start with a clear target audience in mind: potential buyers, current users, deciders, or influencers; individuals, groups, particular publics, or the general public. The target audience is a critical influence on the communicator’s decisions on what to say, how to say it, when to say it, where to say it, and whom to say it.
B. Determine the Communication Objectives
Heineken should seek a cognitive, affective, or behavioral response. That is, they should put something into the consumer’s mind, change an attitude, or get the consumer to act.
C. Design the Message
After Heineken defines the desired response, they will move to developing an effective message. Ideally, the message should gain attention, hold interest, arouse desire, and elicit action (AIDA model).
Formulating the message will require resolving four problems: what to say (message content), how to say it logically (message structure), how to say it symbolically (message format), and who should say it (message source).
D. Select the Communication Channels
Heinelen must select efficient channels to carry the message and should consider the following methods:
Personal Communication Channels Personal communication channels involve two or more persons communicating directly with each other face-to-face, person-to-audience, over the telephone, ot through e-mail. Personal communication channels derive their effectiveness through individualized presentation and feedback.
Nonpersonal Communication Channels Nonpersonal communication channels include media, atmospheres, and events.
Media consist of print media (newspapers, magazines, direct mail), broadcast media (radio, television), network media (telephone, cable, satellite, wireless), electronic media (audiotape, videotape, videodisc, CD-ROM, Web page), and display media (billboards, signs, posters). Most nonpersonal messages come through paid media.
E. Establish the Total Marketing Communications Budget
One of the most difficult marketing decisions that Heineken should consider is determining how much it should spend on promotion. Several methods can be considered:
Affordable Method Heineken can choose to set their promotion budget at what they can afford. This method completely ignores the role of promotion as an investment and the immediate impact of promotion on sales volume. It leads to an uncertain annual budget, which makes long-range planning difficult.
Percentage-of-Sales Method Heineken could also choose to set promotion expenditures at a specified percentage of sales (either current or anticipated) or of the sales price. This method has some advantages. First, promotion expenditures will vary with what the company can “afford.” This satisfies financial managers, who believe that expenses should be closely related to the movement of corporate sales over the business cycle. Second, it encourages management to think of the relationship among production cost, selling price, and profit per unit. Third, it encourages stability when competing firms spend approximately the same percentage of their sales on promotion.
Competitive-Parity Method Heineken could also set their promotion budget to achieve share-of-voice parity with competitors. Two arguments are made in support of the competitive-parity method. One is that competitors’ expenditures represent the collective wisdom of the industry. The other is that maintaining competitive parity prevents promotion wars.
Objective-and-Task Method Doing this, Heineken will develop promotion budgets by defining specific objectives, determining the tasks that must be performed to achieve these objectives, and estimating the costs of performing these tasks. The sum of these costs is the proposed promotion budget.
F. Deciding on the Marketing Communications Mix
Heineken will allocate their promotion budget over the five promotional tools – advertising, sales promotion, public relations and publicity, sales force, and direct marketing.
Promotional Tools
Advertising
- Public presentation
- Pervasiveness
- Amplified expressiveness
- Impersonality
Sales Promotion
Sales-promotion tools-coupons, contests, premiums, and the like- offer three distinctive benefits: 1) communication; 2) incentive; and 3) invitation.
Public Relations and Publicity
The appeal of public relations and publicity is based on three distinctive qualities: 1) high credibility; 2) ability to catch buyers off guard; and 3) dramatization.
Personal Selling
Personal selling is the most effective tool at later stages of the buying process, particularly in building up buyer preference, conviction, and action.
Direct Marketing
The many forms of direct marketing-direct mail, telemarketing, Internet marketing-share four distinctive characteristics: 1) non-public; 2) customized; 3) Up-to-date; and 4) Interactive.
G. Measure the Communications’ Results
Heineken will measue its communications’ impact on its target audience by asking them whether they recognize or recall the message, how many times they saw it, what points their recall, how they felt about the message, and their previous and current attitudes toward the product and company. Heineken could also collect behavioral measures of audience response, such as how many people bought the product, liked it, and talked to others about it.
H. Managing the Integrated Marketing Communications Process
Integrated marketing communications (IMC) is a concept of marketing communications planning that recognizes the added value of a comprehensive plan. Such a plan evaluates the strategic roles of a variety of communications disciplines-for example, general advertising, direct response, sales promotion and public relations- and combines these disciplines to provide clarity, consistency, and maximum impact through the seamless integration of discrete messages.
Market Evolution
The Product Life Cycle focuses more on what’s happening to a particular product or brand rather than what is happening to the overall market, it yields a product-oriented picture rather than a market-oriented picture.
There are four stages in the market evolution: emergence, growth, maturity and decline.
Heineken is in different stages of the market evolution depending on the country it is in as shown in Exhibit 1 in the case.
- ALTERNATIVE COURSES OF ACTION (ACAs)
Alternative Courses of Action
Recommendations
- Create a global image for the brand based on its core values
Heineken should be marketed globally based on its premium taste. Emphasis should be on its legacy of quality and premium taste.
- Decentralized implementation of global advertising strategy
This can be done by hiring a global agency with strong regional partnerships.
- Create regional strategies and improve marketing management by doing the following:
North America
- Advertisement should emphasize that Heineken is the number one premium imported beer brand in the US
South America
- Advertisement should emphasize that Heineken is the number one
Premium imported brand in South America
Asia
- Since local brands (e.g. San Miguel Pale Pilsen in the Philippines) are firmly established in the region, marketing campaign should focus to the next generation of drinkers i.e. 18 - 21 year olds
- Massive advertisement to inculcate its company core values to the next generation of drinkers
- Position the brand as a beer "for special occasions"
- Price, in the beginning, should be just a little higher than the leading non-premium beers
Europe
- Strengthen brand image
- Advertisement should emphasize that Heineken is the number one exported brand by the region
- Improve product distribution by establishing a production plant in the US. This will serve both the North and South Americas
- Establish partnership with local beer companies
- Enter new markets regions/countries (i.e. China, Korea, etc.)
VI. MARKETING PLAN
Current Marketing Situation
EXECUTIVE SUMMARY
Market Value
The global market grew by 1.7% in 2003 to reach a value of $266.1 billion.
Market Value Forecast
In 2008 the market is forecast to have a value of $289.9 billion, an increase of 8.9% since 2003.
Market Volume
The market grew by 2.9% in 2003 to reach a volume of 141.2 billion liters.
Market Volume Forecast
In 2008 the market is forecast to have a volume of 157.2 billion liters, an increase of 11.4% since 2003.
Market Segmentation I
The market is dominated by the non-premium beer segment, which accounts for 78.4% of global sales.
Market Segmentation II
In 2003 Europe remained the largest market, accounting for 39.7% of global beer sales. This is predicted to remain stable until the end of the forecast period 2003-2008.
Market Overview
- Market Definition
The global beer market includes premium beers, ales & stouts and specialty beers.
- Highlights
During the 1999 – 2003 period, the global beer market experienced declining growth rates.
The leading segment for the global beer market in 2003 was the non-premium beer sector, which accounted for 78% of the market’s value.
The European beer market held the largest share of the global market in 2003, while the US remained the largest individual market.
Few beer companies so far have significant global scale – most of the top ten brewers are in that position largely due to sales in domestic and close-to-home markets.
1.3 Market Analysis
During the 1999-2003 period, the global beer market experienced generally declining growth rates, with a market decrease in growth after 2000. The market increased in value by 10.8% over the period, with the European market holding the largest share of the market in 2003.
The global beer market reached a value of $266.1 billion in 2003, having grown with a compound annual growth rate (CAGR) of 2.6% in the 1999-2003 period. This growth was primarily driven by the strong expansion of the European market, but was held back by weaker growth of its Canadian counterpart.
The leading revenue source for the global beer market in 2003 was the non-premium beer sector, which accounted for 78% of the market’s value. In value terms this sector was worth $208.6 billion in 2003, an increase of 4.4% since 1999. Despite its leading position, premium beer was the real growth sector of the market, with total growth of 35.9% between 1999 and 2003.
During the next five years, the market is expected to experience steady growth rates. By 2008 the market is expected to experience steady growth rates. By 2008 the market is forecast to reach a value of $289.9 billion a CAGR of 1.7% in the 2003-2008 period. This slow growth is reflected fairly evenly around the globe. Although growth is forecast to be slightly higher in the Asia-Pacific region and slightly lower in Europe and the US, the picture is generally of maturity.
Competitive Analysis: Alcoholic Beverages
*Includes beverages with high alcohol content, such as brandy, rhum, vodka, gin, tequila, whiskey, etc.
**Includes wine-based “coolers,” “hard” fruit juices, alcopops (e.g. Smirnoff Ice, Cali Shandy, etc.) and other spirit-based beverages.***Includes alcoholic beverages made only with water, barley, hops, wheat, and (optional) yeast.+Includes other beer brews, such as “clear” beer, non-alcoholic beer, and “ice” beer
Positioning
“The World’s Leading Premium Beer”
As part of its centralized advertising objective and communication campaign, Heineken should position its beer as “The World’s Leading Premium Beer.” In a number of countries it is already recognized as such and the company’s five core values support this very ideal:
- Taste
- Premiumness
- Tradition
- Winning Spirit
- Friendship
The first three core values actually closely reflect the ideal of a “Premium” brand--- the product has superior quality because it tastes good (taste), there is a level of excellence in the production process (premiumness) and it has a long history that ensures a brewery technique and recipe that was cultivated over a period of time (tradition).
The last two objectives imparts the concept of quality living (winning spirit) and close relationships and kinship (friendship). This makes it more personal to consumers and allows them to view Heineken as a “long-time friend”.
Although Heineken is basically viewed differently throughout the various regions (i.e. in Latin America for instance, it is viewed as just one among many imported European beers), the one thing the brand is recognized the world over is its “superior quality”--- a truly “premium” brand. Therefore it seems only natural that all marketing efforts should be built on this position.
Target Market & Segmentation
Despite the increasing trend in globalization, there remains a substantial difference in “per-capita beer consumption, consumer preferences and behaviours, and the mix of competitors from one market to another.”
The group therefore suggests that the company adapt its marketing efforts to the culture, tastes and background of each local market (“Communication Adaptation”, Kotler, p. 397), but to ensure a consistent global image is portrayed, programs should pass the “Five Core Value” Test. This means that efforts should reflect the values of Taste, Premiumness, Tradition, Winning Spirit and Friendship that the brand stood for.
In order to better address the tastes of the different markets, the company should group the market per region:
- Asia Pacific Region & Australia
- North America
- South America
- Europe
Although not strictly the same, there are common philosophies, values and viewpoints common to the countries falling under each region. Learning about these commonalities and adapting marketing efforts to them would facilitate a better reception and acceptance of the Heineken brand.
In addition, the company might want to target the female population by encouraging the serving of chilled beer in beautiful wine glasses or goblets.
4 P’s of Marketing
Product
- Produce Heineken according to the original formula.
- The Strain of yeast which continued through the 1990s to give Heineken beer its special taste in 1886 should be maintained to ensure the premium quality of the brand. Control measures should be in place to ensure the quality of its products.
Price
- Inevitably, the price of a product reflects the perceived quality of a product. Therefore, Heineken should price its products higher than the regular, lesser quality brands but still affordable enough for the price-conscious market to want to buy.
Place (Distribution)
- As stated in the case, the ideal National brewer partner is one that did not have international ambitions for its domestic brands.
- To establish a breweries/production in some regions where there is great potential but no established breweries.
Promotion
- Promotional campaigns should be adapted to suit the tastes, culture and target of each region
- Still based on Heineken’s core values.
Marketing Strategies
Distribution
ASIA
Heineken in China
Leading the way for future growth potential is China. Because of this, Heineken should establish the goal of becoming a leading brewer in what is then the largest and fastest-growing beer market. This can be achieved by establishing a brewery operation in the country by acquiring a leading local brewer.
There are a number of reasons that China is one of the most important markets for Heineken outside Europe since its industry could potentially grow more than it can in Europe, North America and South America combined. Yet, current per capita consumption levels are only 20 percent of the levels of many developed countries, such as the United States, and 50 percent of the levels in Japan and Korea. This potential should push Heineken to be the first international brewer to expand into China.
Positioning and Brand Development
Heineken will be distributed nationally in China and will be positioned in the premium beer segment. Our brand development efforts in China will focus on the following areas:
The first is consistently producing high-quality beer that meets the company’s global standards. The local management and brewing, operations and technology teams will ensure that each Heineken bottle that will be produced locally will meet its global strict quality standards.
Second, Heineken will have a strong marketing platform, including innovative advertising, top-notch sports sponsorships and contemporary music promotions. We will also target the official sponsorship of the 2008 Olympic Games in Beijing and we’re also looking in making it the official beer of the China Olympic team. These sponsorships will enable Heineken to connect with adults in China who enjoy beer.
Third, the company will develop a strong wholesaler distribution network modeled after the company’s Europe distribution system and modified for the Chinese beer market.
NORTH AMERICA
Heineken in USA
Since Heineken is the leading exporter of premium beer in the US, the group plans to expand its portfolio here by introducing a new product subcategory. We will launch a new brand “Heineken Premium Light Beer” which idea is similar to San Miguel Beer’s San Miguel Light, except that Heineken’s is on the premium category.
- SPONSORSHIPS
Heineken could sponsor events, personalities, etc that reflect Heineken’s core values.
- Heineken-sponsored events (i.e. October fest)
- Sponsor TV shows (Friends maybe to enhance one of its core value - friendship)
Sponsor Hollywood movies. A sample promotional campaign could include a competition in which the winners will get the chance to ‘experience what it is like to be a real life Hollywood player.’ Competition winners from local promotions, for example, will win 5-star accommodation, entry into top restaurants and nightclubs, among other prizes.
FINANCIALS
Heineken is one of the ten largest brewers in the world, with production facilities in five continents. In 2002, the company had net revenues of $11.2 billion, an increase of 10% in the previous year.
The company sells its products in over 150 countries under a vast number of brand names inclusive of Amstel and Tiger. The company has more than 110 breweries in over 50 countries and export activities all over the world.
Five-Year Sales Value Forecast
- REFERENCES
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Jack Ewing, et al. “Heineken: Earnings are flat..Can the Dutch Brewer keep growing? Businessweek Online. September 2003. .http://www.beveragemarketing.com/news2pp.htm
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www.heinekeninternational.com
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Gary Hemphill. “US Beer Market sluggish in 2003.” Beverage Marketing Corporation. www.beveragemarketing.com
- www.researchandmarkets.com/ feats/download_pdf.asp?report_id=304454
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Marketing Management, 11th edition, by Philip Kotler
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Global Beer Report
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Beer in the Netherlands
- Heineken: Company Overview www.datamonitor.com
