Innocent Drinks – annual revenue
2003 – £11m
2004 – £17m
2005 – £38m
2006 – £80m
2007 (projected) – £120m
( [09/03/2007])
The figures above illustrate the organisation has been very successful by sales growth and in 2006 the turnover has doubled.
2.0 Marketing Mix
“Marketing mix is where such ideas are turned into reality” (Brassington and Pettitt, 2005:20) Innocent has been operating on the information, in order to develop and implement marketing activities that actually deliver something of value to its customers. In the marketing mix there are four main parts, these are product, price, place and promotion, and three additional parts, process, people, and physical evidence added recently.
2.1 Product
According to Product and User classification Innocent products are non-durable, tangible and convenience goods, which are likely to be frequently purchased, and often for consumers take priority over brand loyalty. The Innocent product is well known brand for its ‘competitive advantage differences’ and helps its manufacturer to establish brand loyalty through these following factors:
- Quality - 100% natural, healthy, 100% crushed whole fruits and purées, avoiding chemicals and additives
- Packaging - eco-friendly, paper, first recycled PET plastic bottle, convenient
- Usefulness - helps to meet their ‘five-a-day, Plastic bottle weighs less than glass - meaning 40% less fuel is used in transporting products
- Design, - small and light, different colours
“From day one, the company has used only natural ingredients, run all operations on green electricity and committed 10% of profits to charity” () It shows the products simply meet customers’ needs through its quality, which is significantly known these days. “more people recognised the need to put water and fruit at the heart of their lifestyles and use juices to help meet their ‘five-a-day’” ()
However, it has been argued that Innocent drinks are not as innocent as has been advertised. According to BBC uses equally incredible pomegranates and blueberries to produce a recipe that contains even more antioxidants than the average five a day and Innocent ltd has apologised. (BBC NEWS Health-Smoothie ad claims 'broke rules'. mht [3 October 2007])
2.2 Price
The price elasticity of demand (PED) is an elasticity that measures the nature and degree of the relationship between the changes in quantity demanded of a good and changes in its price.
For example, if, in response to a 10% fall in the price of the goods, the quantity demanded increases by 20%, the price elasticity of demand would be 20%/(-10)=-2 (Case & Faire, 1999: 109).
The fixed cost of Innocent is high because in order to keep the products 100% natural, the company has to use expensive ingredients. This means innocent drinks are more expensive when compared to its competitors. For example, Innocent is selling a litre of Banana and Strawberry smooties for £3.12 while PJ is selling £2.79 today (03/01/08). However, Innocent uses price-skimming management as its pricing strategy – attempting not to attract price sensitive market segments.
Advantages:
- The Price-skimming strategy has established a quality Innocent brand image for Innocent
- It is easier to reduce the price than to raise it if the initial high price does not work the required response then it can slowly lowered until an appropriate level is found.
Disadvantages:
- According to Brassington and Pettitt, a high price helps to establish a quality portion. (Brassington and Pettitt, 2005:229) thus, the customers expect a high quality of products from Innocent, which may cause problems to its future, as if it does not meet the consumers’ expectations. However, Innocent has been very successful and doubled its profit within a few years and it owns 72% of the market share of the smoothie industry – almost a monopoly which every firm desires because it can set the price of the goods. It demonstrates that the high pricing strategy has affected their business defectively.
2.3 Promotion
Innocent use different advertising methods in order to reach its customers at certain times and, maintain a good-quality relationship with its customers. According to research they do not rely heavily upon the advertising media and some campaigns generated much controversy. It is clear that almost half of their advertising was done through newspapers, as TV advertising is becoming less popular and many people do not watch the adverts if they can avoid them. The most frequently used is “joint venture” that is a tool (go to bed together) enabling working together with other firms – this can be a useful tool to create brand loyalty amongst consumers. For example, Sainsbury (the supermarket chain), Innocent (the smoothie manufacturer), and Age Concern (a charity for the relief of poverty in the elderly).
Smoothie buyers tend to be young and wealthy - just the demographic that Sainsbury needs to attract as a company. The young also tend to give more to charity, so a link to a widely known charity is a positive affiliation.
On the other hand, Joint venture can be a high-risk strategy if there were to be a scandal about Trustees expenses at Age Concern or if the smoothie ingredients were found to be 'impure'. The carefully constructed affiliation would collapse and sales may fall. For example, in May 2007, Innocent was partnering up with McDonald's (fast, unhealthy food) and that reduced the value of the brand.
2.4 Place
Place is also known for distribution. It is seen that innocent use short channel distribution that is manufacturer to retailers and then the end consumers. The retailers, which are Tesco, Asda, Sainsbury’s, Morrisons, for examples, are the biggest and most successful companies in UK, and the coffee chain Starbucks. Also a vehicle (Dancing Grass Van) is used for selling their drinks all over the place. These help Innocent to distribute its goods on time, in the right place and right customers, which means it has a good access to the right target market.
2.5 People
People management lies at the heart of Innocent’s business strategy. Convinced that success relies on the happiness and well being of its employees, Innocent aims to invest in people and their environment to help them do the best possible job and have fun along the way. By using small touches (see appendix 2) to make every employee feel appreciated, Innocent has set out to create a working environment that people want to spend time in, and it seems to work. Employee turnover is extremely low “in the first five years, only one employee has left Innocent” (Source: goodpractice.net interview with Ailana Kamelmacher (Press Officer, Innocent) [8 December 2005]) and Innocent employees are positive, happy, motivated and proud of their employer. The organisation has approximately 200 employees, and the majority of employees need to be truly skilled as Innocent drinks are expected to be the best in its industry. They would need to be trained on how to make purest products possible and customers would assume them to be knowledgeable about their job but some members of the company do not need to be truly skilled such as cleaners, crews and other staffs.
2.6 Process
The process of buying innocent drinks is from the manufacturer to retailers and then to the end customer. It is extremely easy for customers to get hold of the goods, as the retailers make purchasing them so simple. However, Innocent uses only a few big companies, so it is also not that convenient for some consumers to buy the goods, as some areas may not have the chain of retailers even though they sometimes use Dancing Grass Van.
-
Recommendations for the future
- Innocent
- Need to pay attention to their products and the advertisements because innocent brand is known as 100% natural and healthy drinks if it is proved the smoothie ingredients were found to be 'impure' then they may have loose the trust
- Innocent should aim to reduce the cost of the smoothies without reducing the quality of their products. Therefore, will then hopefully 'steal' customers from competitors if their price does reduce, which is unlikely, then their demand may increase, as there are a lot of substitutes available to customers in the smoothie industry
- TV advertising is expensive and becoming less popular and many people do not watch the adverts if they can avoid them
- They need to bear a mind ‘Joint venture’ is high-risk strategy if things go wrong
- It has also been seen that a good Internet site will boost the company’s sales. Innocent has to be considered to have the best Internet site when compared with others
- When considering other plans that the company could make in the future, the possibility of increasing their profits has to be regarded as an interesting opportunity. This could be achieved by extending their business over EU
- Keep motivating their employees as any business success is based on the skilled and happy staffs
- Using few big companies to sell their goods can be disadvantage as geographically some consumers can not get hold of the products
4.0 References and Further Reading
-
Brassington and Pettitt, 2005, Essentials of Marketing, Essex, Prentice Hall
-
Dibb, S., Simkin, L., M.Pride, W., O.C. Ferrell, Marketing Concepts and Strategies, 2006, Houghton Mifflin, USA
- Mintel Report: Innocent introduces first 100% PET product 05/12/2007
- Mintel Report: UK soft drinks market grew 3.6% in volume terms in 2006 21/06/2007
- Work-Life Balance – Good Practice.net interview with Ailana Kamelmacher (Press Officer, Innocent) 8 December 2005, accessed in 01/2008
- The Daily Telegraph, Innocent has lost its innocent 01/05/2007
- The Economist
- The Sunday Times, Best loved and Fastest growing businesses in UK, 2006
- BBC NEWS Health Smoothie ad claims 'broke rules'. mht [3 October 2007]
-
Human Resources: [01/08/2007] accessed on 12/2007
-
accessed on 12/2007
-
accessed on 12/2007
-
accessed on 12/2007
-
GB Magazine on Jan 2007 accessed on 01/2008
-
accessed on 20/2007
-
accessed on 20/2007
-
accessed on 25/12/07
According to marketing strategist Michael Porter (cited from Marketing Strategies and Concept, 2006), there are three generic strategies of competitive advantages.
- Cost Leadership – offer low price
- Differentiation – to be different from the competitors
- Focus – the example is focusing on the smaller group’s interest and benefit that the large groups are missing
Firstly, it's got a window at the side so you can pass drinks to people. Secondly, it's got some sort of hydraulic thing near the wheels that makes it dance about. And finally, it's covered in grass and daisies, so we can always spot it in a packed car park.