In order to target it effectively, I would need to develop a unique selling point that would appeal to people who make up that segment. I would also need to invest much energy into promotion, and capital expenditure would be subject to a high level of risk.
Market research also found that in recent years, the consumption of health-orientated products is highest amongst professional and lower professional women over the age of 40, - these women have also perpetuated themselves as innovators in the purchase of health orientated products.
When segmenting the market, I aimed to choose a segment, in which my competition was reduced to a minimum, allowing my product to differentiate from well-established, mass-market brands that have dominated the functional energy drinks sector in recent years.
As our research has already suggested, the consumption of functional energy drinks has been dominated by young males and therefore in an attempt to differentiate from well established brands I will aim my product at professional and lower professional women over the age of 40. Research has substantiated the idea that these women are concerned about their health, and are becoming increasingly prepared to try new health orientated products that are brought onto the market.
An interest in healthier lifestyles has led to demand for functional energy drinks that are aimed at mature, health conscious individuals, who require an alternative to glucose-based energy drinks that have dominated the market in recent years.
I have segmented my target market on the basis of social stratification, age group, sex and lifestyle.
Primary Data
The gathering of fresh information, which could be tailored to my needs, may be referred to as primary research. This was a valuable part of market research as it allowed me to tailor my method of carrying out the research with regard to my research objectives. I aimed to gather valuable information about my target market in order to help me develop an effective marketing strategy.
There are a number of primary research methods available to anyone carrying out primary research; these include surveys, observation, telephone research and questionnaires.
I chose to carry my primary research out using questionnaires. This meant that I had to go out onto the street and deal face to face with respondents. Questionnaires are fast and can also be analysed promptly, however, as it meant dealing with different members of the public, questions needed to be kept simple.
Before carrying out my primary research I had to decide which method of sampling I was going to use. A sample is a selection of people, at which you aim a questionnaire or survey. There are a number of sampling methods available; they include random sampling, non-random sampling, quota sampling and stratified sampling. We had considered using random sampling, as it is easier to conduct, but decided that this would not allow us to retrieve data that was representative of our target market. Therefore we used quota sampling, which allowed to retrieve data specific to my target market and of course, relevant to the development of my marketing strategy. This was a pilot study and therefore we only received responses from 50 professional and lower professional women.
Again, as with the secondary data, I have only included the data which I believe could have proved indicative in the development of my marketing strategy.
Indicative primary data
This data was retrieved using results from my questionnaire. I used a method of quota sampling, which allowed me to focus on reaching those that are in my target market.
Do you purchase functional energy drinks?
Regularly: 30%, Occasionally: 49%, Never: 21%
This recognised that 79% of those in my target market purchase functional energy drinks either regularly or occasionally. Just 21% do not purchase functional energy drinks.
Do you require an energy boost whilst at work?
Yes: 84%, No: 12%, Don’t know: 4%
Well over two thirds of professional and lower professional women said they require an energy boost whilst at work.
Do you suffer from stress, exhaustion or tiredness whilst at work?
Yes: 79%, No: 16%, Don’t know: 5%
Nearly 80% of respondents admitted that they suffered from high levels of stress exhaustion or tiredness whilst at work.
How important is nutrition in an energy drink?
Very important: 24%, Important: 38%, Not sure: 16%, Not Important: 22%
Over 60% of respondents believed that nutrition in an energy drink was either important or very important. Just 22% believed it was not important.
Is price a defining factor in choosing an energy drink?
Yes: 37%, No: 54%, Not sure: 10%
Over half of our respondents admitted price is not a defining factor when choosing an energy drink.
How do you like soft drinks to be packaged?
Glass Bottles: 44%, Plastic Bottles: 23%, Cans: 13%, Pouches: 4%, Other: 6%
Glass bottles were the most favoured form of packaging with nearly 45% of responses; plastic bottles came second with 23% of responses.
How do you get to work?
Car/motorcycle: 23%, Public Transport: 62%, Taxi: 8%, walk: 11%
Well over half of those in my target market travel to work by public transport.
Do you read any health, fitness or lifestyle magazines?
Regularly: 63%, Occasionally: 26%, Never: 1%
Nearly 100% of those in my target audience admitted to reading health, fitness or lifestyle magazines regularly or occasionally.
Where do you spend most of your leisure time?
Health club/gym: 33%, Other: 77%
In an open question, I asked respondents where they spent most of their leisure time. Surprisingly an astonishing 33% said they spent their leisure time either at the gym or health club.
A copy of my questionnaire can be found as an appendix in this assignment.
C3, Checking validity: Primary research
It is important to recognise that this was a pilot study, and therefore only relied on responses from a small sample. Our sample was kept to just 50 respondents. This could affect the validity of the data received, as it may not be sufficiently representative of those in my target market. A larger sample would allow us to retrieve data that was more representative of those in my target market.
I used a method of quota sampling, which allowed me to aim my questionnaire at respondents who help to form our target market. This helped to increase the validity of primary data received.
Using questionnaires as a medium for primary research proved to be effective, although they are expensive to conduct and it proved to be time consuming. However, the majority of questions were closed which meant that they were relatively easy to analyse.
It is possible that some respondents were not entirely honest in their responses, but this should not be particularly applicable to the data I received, as there were no questions that appeared to be particularly offensive or intrusive towards the respondent.
E3/C2 A realistic rationale for a coherent marketing mix
The marketing mix provided me with a useful way of developing an effective marketing strategy that will allow me to effectively reach those who make up my target market. I needed to create an effective mix of the right product, sold in the right place, at the right price, using an effective form of promotion. Our marketing mix will be developed using analysis of our primary and secondary data and our analysis of the external environment.
Again, my product will be aimed at professional and lower professional women, particularly those who are concerned about their health.
Product
My product may be described as a health-orientated, functional energy drink, made with a combination of selected herbal ingredients and mineral water. It does not contain any additives, preservatives or colourings.
My product is unique in comparison with other functional energy drinks that exist within the energy drinks sector, as it aims to provide an energy boost without compromising the health of the consumer. A product such as this does not yet exist according to the analysis of my market research
It has potential to be promoted as a stress-relieving product as it contains herbal ingredients that can help bring a welcome relief from the worry and irritability often caused by the stresses and strains of modern day living.
As found by the analysis of my secondary research, consumption of functional energy drinks is strongly weighted towards males, under the age of 25. This would illustrate the most lucrative, yet competitive segment of the market. In order to effectively aim our product at this segment of the market, my product would need to go into direct competition with mass-market brands such as Red Bull, that clearly dominate the sale of functional energy brands. Therefore, when developing my target market, I aimed to reduce my products competition to a minimum, looking for evidence that might suggest the type of people that would benefit from a product such as mine. It was clear that they would be those that are particularly concerned about their health.
Professional and lower professional women over the age of 40 have dominated the consumption of health-orientated products, and have, in recent years, perpetuated themselves as innovators in the purchase of health orientated products. This substantiated the idea that these women are concerned about their health, and are becoming increasingly prepared to try new health-orientated products that are brought onto the market.
Therefore my product will be aimed at professional and lower professional women, particularly those that are concerned about their health.
Analysis of my primary data further reinforced the demand for a product such as mine amongst my target market. I carried out my primary research in the form of a questionnaire using a method of quota sampling, which allowed me to question only those who would help form my target market.
Around 80% of respondents admitted they purchase functional energy drinks on a regular basis or occasionally. Well over two-thirds of our respondents said they require an energy boost whilst at work, and just fewer than 80% admitted they suffered from stress exhaustion or tiredness whilst at work. Over 60% said nutrition in an energy drink was either very important or important. Just over 20% thought nutrition wasn’t important.
These results clearly express the demand for my product. Nutrition is a main factor in my product, a product that will aim to provide the consumer with an energy boost, reducing levels of exhaustion and stress. It is clear many respondents already purchase functional energy drinks.
By aiming at this segment of the market, I aim to differentiate from already well-established brands, aiming at a segment in which my product will be relatively unrivalled. This is known as niche marketing, reducing my products competition and increasing its chances of success in the marketplace. Differentiating from potential competitors will allow me to have leverage over my product in the marketplace.
In recent years, the functional energy drinks sector has pronounced a youth focus, and consumption has been dominated by young males, but an interest in healthier lifestyles has led to an increased demand for an energy drink aimed at mature, health conscious individuals, who require an alternative to glucose-based products that are high in additives and preservatives. This again, outlines the demand for my product.
The development of the ‘connoisseur consumer’ has provided us small firms the opportunity to exploit market niches, - which may result in the market share of leading brands gradually being eroded. Our product will aim to exploit niches that exist within the energy drinks and health food markets
If sales were to increase, I believe extensions and enhancements of the original product would be a vital consideration, if we were to provide consumers with a choice that was competitive. It is a possibility that once potential for sales is recognised, well-known energy drinks and health food brands may attempt to compete by offering a similar product that offers the consumer with a wider range of choice.
We must develop a brand image, or certain brand characteristics that will help us to differentiate from potential competitors in the future. This will help us to establish brand loyalty with our original customers. This will be an important consideration that was taken into account when developing an effective form of promotion.
The connoisseur consumer provides my product with an affordable opportunity, as it means that consumers are becoming increasingly prepared to try products, and brands that are new. In general, consumers are demonstrating a willingness to shy away from well-known brands and differentiate from their peers.
The development of the cellular household means that it is no longer necessary for an organisation such as mine to develop products that have mass-appeal. It may prove more rewarding if we aim our product at a market niche.
This is what I will intend to do by aiming at a small section of society in which I am unrivalled, rather than attempting to develop a functional energy drink that has mass-appeal.
Price
Price is clearly an important element of developing an effective marketing strategy. The price charged will affect whether or not a potential consumer decides to buy my product and whether my organisation will make a profit.
There are a number of different strategies for pricing a product; these include skimming, penetration pricing, loss leading, and premium pricing. The pricing strategy that I have chosen has been done in context of the state of the economy, what competitors are charging, the stage my product has reached in its product life cycle and above all else, what price the market can bear.
My product is relatively unique in the marketplace. Therefore, there is no ‘direct’ competition for my product and price should not be the definitive factor in whether a potential consumer decides to buy my product or not. However, price is also a part of promotion, and should convey the right message to the consumer.
Functional energy drinks in general constitute a highly branded market, and remain markedly trendy. They therefore command premium prices.
Store checks revealed almost unanimity of pricing across functional energy drinks brands, with 89p for a 250ml can a widespread price point. This allows me scope to further differentiate from functional energy drinks brands and develop a product that is completely unique.
Our product remains in its introductory stage, and therefore premium pricing would be vital in conveying the right message to the consumer. We would want our product to be perceived as ‘high quality’ and premium pricing would be one way of delivering that perception.
I will charge £1.25, for a 345ml bottle.
I had considered using a form of promotion pricing, which would of involved launching my product at a low price, and then raising it as customers increased. After careful consideration I decided that this would not be a good way of developing a prestige image and that it is possible consumers would not welcome an inconsistent method of pricing.
Our target market has a high social stratification and is in one of the more disposable income groups, and therefore we believe that they will not react negatively to premium pricing. In fact, we believe premium pricing may be one way of increasing sales, as it may increase desirability.
When asked, “is price a defining factor in choosing an energy drink?” well over 50% of respondents said “no”. This is another indication that those in my target segment are not particularly price-responsive.
Promotion
My product is still in its introductory stage and therefore, one of the main objectives of promotion is to increases awareness amongst those in my target market and to persuade potential customers to make the buying decision. The techniques that will be applicable to my product include branding, packaging, public relations and advertising.
Advertising involves us delivering the right selling message to the right prospects for our product at the lowest possible cost. As our product remains in its introductory stage we will be primarily aiming to increase awareness, - potential customers must be made aware of its existence. It will be used to help improve product performance in terms of sales and profitability.
I will be aiming my advertising campaign at those in my target market, professional and lower professional women over the age of 40, particularly those who are concerned about their health.
This is a pilot launch of my product and therefore advertising will only be carried out in and around Harrow town centre. Harrow town centre is a central business district and would provide an effective medium for reaching professional and lower professional women, in general.
The overall cost of advertising, and the nature of this pilot study, means that there are some mediums that have to be ruled out. Visual and sound media include the main forms that have to be ruled out due to possible expense, these include television advertising, radio advertising and cinema and video advertising.
I would want my advertising campaigns to reach our target market on a daily basis, and therefore asked respondents how they travel to work. Over 60% said they travel to work by public transport. Therefore I believe that by distributing posters on trains and buses in and around the area of Harrow, I will effectively increase awareness amongst those in my target market.
I could organize free-trials at local bus and train stations in the mornings, as this is a time when people would appreciate a functional energy drink. This would be an effective way of increasing awareness amongst professional and lower professional women in general, but could prove expensive.
Nearly 100% of our respondents said that they read health, fitness and lifestyle magazines either regularly or occasionally. Therefore we will implant full-page advertisements in magazines of this nature in and around Harrow. However, in an attempt to remain selective, we will only use those magazines sold on a mass-scale to middle-aged women. It is clear that from the nature of the magazines that these women are concerned about their health.
In an open question, I asked respondents where do they spend their leisure time. An astonishing 33% said at either their local gym and health club. If we were to distribute posters in these facilities, it would provide an effective medium for reaching those in my target segment, particularly those that are health conscious.
I believe that linking our product with lifestyle events could prove an effective way of increasing awareness. We could organize a free one-day car washing service in and around the central business district of harrow. Again it could prove expensive, and would be a more intensive, rather than selective promotional strategy.
I have decided to call my product ‘Active Nourishment’. This is because I will aim to provide nourishment for those who live active, busy lifestyles. Potential consumers will not recognise it as being a functional energy drink at first, but this will only help to reinforce their perception of it being a health-orientated product. It is clear from the name that it is made from healthy ingredients. This is a name that would not only appeal particularly to those in my target segment but would also have a wider appeal, generally with those that are health conscious.
I will package my product in recyclable plastic bottles. This form of packaging is environmentally friendly and will compete with the majority of functional energy drinks that are now sold in cans. Plastic bottles are practical, as they can be opened and closed when necessary. Across the energy drinks market as a whole, glass bottles accounted for some 47% of liquid volume, however its supremacy is greatly assisted by the fact that glass bottles are widely used for dominant brands in the refreshment energy drinks sector. Glass bottles arose as the most favoured form of packaging amongst my target market with 44% of responses, and were therefore an affordable consideration, - but in response to environmental pressure groups such as Greenpeace, who would like to see the banning of disposable glass bottles, I decided against it. It is important that I stay clear of environmental controversy, in order to develop and maintain a respectable brand image.
Plastic bottles arose as the second most favoured form of packaging amongst our target market.
The majority of energy drinks are sold in 30cl packs, with 44% of liquid volume, 1-litre packs came second with 19% of liquid volume.
I will package my product in 345ml bottles. This is an unprecedented pack size in the functional energy drinks sector and will allow me to further increase my products’ differentiation from other brands in the marketplace. It will allow me to develop a brand characteristic and maybe develop and maintain customer loyalty.
I will warn consumers about the dangers of consuming too much caffeine as part of my products packaging. This will help to develop our brand image and enhance our reputation as a ‘prestige’ organisation.
It is vital that my product is perceived as being prestige and of very high quality. The functional energy drinks sector remains highly branded, and therefore I must develop a respectable brand image is vital if I am to maximise potential for sales.
I had considered promoting my product as ‘stress-relieving’. But decided against it in response to consumer protection legislation, such as the Trade Descriptions Act, which states that it would be a criminal offence to apply a false description to any goods sold in this country. I felt that I might be liable to prove its stress-relieving benefits scientifically, before promoting it as a stress-relieving product.
Place
This involves deciding through which outlets I should sell my product and how far I would wish to distribute it.
It has been established that as this is a pilot launch of my product I will only be distributing my product in and around the local area of Harrow.
The sale of energy drinks, as a whole, through the on-trade, grew by 170% between 1998 and 1999. Functional energy drinks, particularly Red Bull have been heavily promoted in both pubs and clubs, aimed primarily at young people, with discounts offered when they are purchased in combination with spirits.
On-trade sales were heavily weighted towards functional energy drinks, which accounted for more than 90% of sales. Again, the popularity of functional energy as mixers drinks has undoubtedly underpinned this sector dominance.
My product is primarily a health-orientated, functional energy drink. It will not be promoted as a mixer with spirits, and will be aiming at a more mature audience than that of Red Bull, and most other dominant functional energy drinks. I do not believe the potential for sales through on-trade outlets should be applied to my product at this introductory stage – I must remain selective, rather than intensive with its distribution.
On-trade outlets may provide an effective medium for sales in the future.
In the off-trade, some 45% of sales were through multiple grocery and co-op outlets, with other grocery outlets taking 12%. Impulse sales through CTN’s accounted for 18%, with forecourts taking 16% and Off-licences 6%. Other outlets included vending machines. Growth in the off-trade continued to be high and sales through off-trade outlets accounted for two-thirds of market value in1999.
However, the off-trade has been criticised for being slow to maximise potential returns from energy drinks, by not stocking enough brands and not giving the drinks enough prominence on-shelf. Store checks revealed relatively few brands and little aggressive promotion in-store.
It appears clear that sales of energy drinks through the off-trade appeared to be highest amongst multiples and co-ops, forecourts and CTN’s. However, it would not be satisfactory, practical or viable to decide to distribute my product where sales appear to be high. These are likely to be the most competitive retail outlets for sales of energy drinks in the off-trade, and as already stated, it appears that outlets such as these are not prepared to stock many brands, engage in aggressive promotion, and have been criticised for not giving drinks enough prominence on-shelf.
Again, when deciding where to distribute my product, I must remain selective, - selecting outlets that would appeal primarily to those in my target market, avoiding outlets, such as those above that have a mass-appeal.
Therefore, as my product is health orientated, I decided to investigate the possible benefits of distributing my product where other health-orientated products are sold on a mass-scale. I believed this might provide an effective medium for reaching my target audience effectively.
Over 50% of health-orientated products are sold through specialist health shops and chemists. Therefore I have decided to distribute my product to large, established health shops and chemists in and around Harrow.
We will only choose established organisations that have a reputation for stocking high quality, health-orientated products. This will help to enhance our brand image. We will distribute to stores that are in and around harrow town centre, so that our product is easily available to professional and lower professional women. These stores would provide an effective medium for reaching health-conscious individuals.
E1, Principles of marketing
It is important I demonstrate how my marketing strategy is based on basic principles of marketing.
- Anticipating future wants
Young males dominate consumption of functional energy drinks, yet an interest in healthier lifestyles has led to an increased demand for a healthy functional energy drink, aimed at mature health-conscious individuals, who require an alternative to glucose-based functional energy drinks that dominate the market.
- Keeping ahead of competition
Keeping ahead of competition has allowed me to develop a product that I believe will satisfy changing consumer needs. I have developed a product that is unique, and have therefore reduced my competition to a minimum, (in fact there is no direct competition for my product). It has allowed me to exploit market niches to good effect and differentiate from mass-market, dominant brands.
- Satisfying consumer needs
Through analysis of my primary research it is clear that well over 50% of respondents purchase functional energy products and 60% of respondents said they thought nutrition was an important factor in a functional energy drink.
However, there is not a nutritious functional energy drink on the market and I believe the analysis of my primary data outlines the consumer need. My product will aim to satisfy that consumer need.
- Co-ordinating the marketing mix
I have used the marketing mix to develop a marketing strategy that I hope will influence and satisfy the consumer. This was done using data retrieved whilst carrying out market research. I have presented ample evidence of both the primary and secondary data used in effective co-ordination of the marketing mix as part of this portfolio.
E4/C1, The external environment: PEST analysis
The world is constantly changing, and as time goes by, the pace of change is accelerating. I am faced with developments that change the environment in which I operate.
Outside forces can have a fundamental affect on the way I am allowed to conduct business.
The outside influences may be neatly summarised by the acronym ‘PEST’.
They are:
- Political influences
- Economic influences
- Social influences
- Technological influences
Political Influences
My basic operating conditions are implemented by the political system in power.
The way I may operate in a western democracy is very different to the way I would need to behave in an autocratic nation, or even in an undeveloped third world country. Some political regimes make it impossible to make money at all.
There are three main aspects of the political environment that may have an affect on the way I conduct business; the attitude of the government towards business activity, legal controls on business activity and the influence of pressure groups.
1. Attitude of the government towards business activity
This could be a fundamental factor in our profitability.
It could be argued that the Thatcher government of the 1980’s created a more favourable environment for business activity; lower corporate taxation, fewer government controls, financial help with consultancy, new technology, and privatisation all opened up more opportunities.
In Britain, it would be fair to say that the government is more sympathetic towards western profit motives than in some other countries.
Political stability is also an important consideration. In Britain, we have a fairly stable political system, but generally if it could not be relied upon, it would be prudent not to continue with the proposed project.
2. Legal controls on business activity
Legislation affects life in business. Product liability laws can vary between countries, but in general, product liability laws are being tightened everywhere in the UK, for example, the Consumer Protection Act, 1987.
The Sale and Supply of Goods Act 1987 states that goods should be ‘as described’ and they should be of ‘satisfactory quality’. The Trade Descriptions Act states that it would be a criminal act to apply a false description to any goods or to give a false indication of price.
These factors were vital in the development of the marketing strategy; I applied thorough knowledge of the legal environment in which I operate, throughout the development of my marketing strategy.
3. The influence of pressure groups
There are cases in which the influence of pressure groups can lead to the type of legislation mentioned above.
Many try to persuade government policy on a number of issues. Pressure groups such as Greenpeace, try to curb any business activity that might have an adverse affect on the natural environment. They would like to prevent the sale of drinks in disposable glass bottles.
This had an affect on how I decided to pack my product. I decided to use plastic bottles instead of glass ones in an attempt to avoid environmental controversy.
I recognise that the monitoring the movement of pressure groups is an effective way of predicting future legal constraints.
The economic influences
The economic environment in the U.K. is also influenced by the attitude of the government. As a marketer, I must be aware of certain economic trends that affect the way I should conduct business.
1. Income levels.
Statistics expressing the state of a particular country are usually expressed in terms of GDP or GNP. GDP (Gross Domestic Product) refers to the value of goods produced in a particular country and GNP (Gross National Product) to the value of domestically produced goods plus the countries overseas earnings. GNP describes most closely the country’s national income.
In general, a higher amount of business opportunities can be expected in a country with a high GNP than that with a low GNP.
A more reliable method would be the ‘per capita income’, which expresses the country’s national income, in relation to the size of the population. Most western economies would expect a per capita income of between £10,000 and £20,000 per annum, with the US in the lead and Britain falling somewhat behind the wealthier European countries such as Switzerland, Germany, Austria and Sweden.
2. Growth Rates
Britain has demonstrated rapid growth in recent years. Other countries, such as Germany have demonstrated less rapid growth.
At any given level of national growth, it is preferable to operate in a high growth, rather than a low growth economy.
3. Inflation
Britain has had low inflation in recent years. However, inflation can erode buying power and can cause problems in areas such as pricing and estimating demand accurately. At times of high inflation, people generally feel worse off, and become more responsive to prices, which means that they are likely to trade down or spend less.
4. Purchasing power
I am particularly interested in the spending power of those in my target market. Wage levels, the rates of taxation and inflation can have a direct influence on the amount people are willing to spend.
My target market is in one of the more disposable income groups, and is of high social stratification. Therefore it is likely that they will not be responsive to prices.
5. Distribution of income
It is vital I recognise how the countries wealth is distributed, as it may have possible implications for the development of my marketing strategy.
Britain has a very unevenly distributed national income, in comparison with other leading European countries. Britain has a large amount of poor; a smaller middle class and a larger amount of rich people.
My product may be described as being high quality, and is therefore suited to a country such as Britain that has a large amount of people in high-income brackets.
Although a number of countries have a higher per capita income than that of Britain, it is the third best market for luxury goods after the US and Germany.
6. Consumption patterns
Although it may be possible to assess the spending power of a particular class, it may not be possible to assess whether there is demand for a particular product. We must not rely too much as past trends to the extent that they may are the only basis for developing a realistic rationale for a coherent marketing strategy. It is likely that sales patterns would deviate from expectations, and could cause us to go bankrupt. However, those in my target market have been neglected by the functional energy drinks sector and have perpetuated themselves as innovators in the purchase of health-orientated products through their spending patterns.
As already suggested, it would not be possible for me to assess the sales potential within a particular market straight from economics data. Other behavioural factors, often deeply engrained within a culture of a community, can distort seemingly clear economic indicators. Firstly, I will look at demographic trends, which are factual, often detailed and always informative. The social picture cannot be complete however, without looking at the behavioural aspects of society, which are often cultural and usually much less clear cut.
1. The social influences– demographic aspects
Demography is the study of population. This is of great interest to me, since people are at the end of my operations. I am interested in people buying my product. The demographic make-up of the population can help me to work out whether I am likely to achieve that objective.
There are five main demographic areas that may be of interest.
(i) Population size
The sheer size of the population is of more relevance to some products than others. For luxury goods consumed by only the wealthy-elite, total population size is of little relevance, but it is more indicative for basic goods that are sought by a large percentage of the population.
My product is potentially a luxury product, rather than a necessity, and therefore population size is not particularly relevant to the development of my marketing strategy.
(ii) Population growth
For basic products, strong population growth means an inevitability increasing potential market. Again this would not be of particular relevance, and would therefore not be very indicative with regard to the development of my marketing strategy.
(iii) Geographic distribution
I need to recognise where the people are and whether the market is densely or sparsely populated. I am conducting the pilot launch of my product in Harrow, a densely populated London Borough. This is likely to be an effective way of reaching those that make up my target segment.
A densely populated area such as Harrow is easier and less costly to penetrate than a sparsely populated area.
(iv) Age distribution
Since different age groups purchase various good and services, age distribution is of great relevance to marketing. I am particularly concerned with the distribution of those over the age of 40.
The generation of 25-50 year olds are known as baby boomers, since they were born in years of high birth rate after the Second World War. This is an especially large market, with rising income levels, resulting in a move up market, - especially evident in retailing.
This would identify a particular opportunity for a product such as mine, - it appears that those between 40 and 50 are in great numbers and are revelling in ever-increasing incomes. This means they are increasingly prepared to part with their cash and try new products, which are relatively unique.
(v) Changing family patterns
The huge growth in professional women has revolutionised many markets. We will hope that it revolutionises the functional energy drinks sector and the market for health-orientated products.
Our product will be pitched at the increasing number of professional and lower professional women, that are conscious about their health. It has been proved as part of my market research that these women suffer from high levels of exhaustion and stress.
2. The social influences – behavioural aspects
Marketing is a behavioural discipline. It is all about how people behave when purchasing goods and services. It is possible that some behavioural characteristics are common to large sections of a community. It is these cultural factors, which I must seek to consider. Many factors could be relevant; I will highlight some of them.
(i) Core cultural values
People grow up in a society that shapes their basic beliefs and values.
It does not seem that our product will make an infringement on any core cultural values; however, we must be sympathetic to the societies in which we operate, not only to increase sales but also to develop and maintain a respectable brand image.
It is important we take an appropriate stance.
(ii) Social trends
Most communities will have a large variety of secondary cultural or social values. These may be attitudes, beliefs or trends that are less adhered to than core cultural values, and they may only be accepted by certain sections of a community. An obvious example, that would be applicable to my product would be physical fitness and healthy eating, both clear national trends, both followed by some sections of society more than others, but both affording considerable marketing opportunities for a product such as mine.
(iii) Aesthetic values
I need to know what those in my target segment rate as being attractive and unattractive.
This has been substantiated using the analysis of my primary research.
The Technological Influences
Technology is changing continuously, at an ever-increasing rate. We must keep up with relevant technological advances, in order to help ensure survival.
There are four main factors an organisation should be concerned with.
a) New processes
New ways of doing things are constantly being fuelled by technological innovations. We must keep up with changes that may affect my product, if we did not then it is likely competitors would adopt them and the market would then become uncompetitive.
If an organisation does not keep up with technological innovations then it is possible that they may not be able to satisfy their consumers.
(b) New materials
There have not been any new materials developed in recent years that will affect my product.
c) Generic products
From time to time, a technologic innovation will make a generic product obsolete. People do not buy products; they buy the service it provides for them.
Therefore it is important I think about my product, in terms of the need which is satisfied.
d) Material culture
It is vital we keep up with technology, or our product could be made obsolete at any time. However, my product is not one that heavily relies on technological improvements and is not likely to be directly affected by changes in the technological environment.
There are organisations which specialise in the gathering and analysis of data, which is relevant to the external environment in which businesses operate. They produce reports and often make forecasts which can be interesting to marketer in general. One such centre is the Henley Centre for Forecasting. To illustrate the value of their external analysis, I have included two of the centres recent forecasts for future marketing trends, and included how these trends could have particular implications for the development of my marketing strategy. I have also outlined how they reinforce demand for my product. The ‘Connoisseur Consumer’ and the ‘Cellular Household’ are included below.
The Connoisseur Consumer
As markets have become increasingly competitive, consumers are faced with unprecedented choice. They now want to be able to buy the exact combination of features which they prefer. They like to be able to express their individuality, and be different. Some consumers take pride in shopping around, comparing different brands, and often selecting little known brands that they may think allows them to express their individuality, or perhaps their skill as a buyer.
This provides small firms such as mine the opportunity to exploit market niches, and gradually erode the market share of leading brands.
Our product will attempt to exploit niches that exist within the functional energy drinks sector and the market for health-orientated products.
The development of the connoisseur consumer means that potential customers are increasingly prepared to try products and brands that are new. They are also demonstrating a willingness to shy away from well-known brands and differentiate from their peers.
The Cellular Household
As family members, and individuals in general, become more independent, it is vital we develop products that specifically meet the needs of individuals. It is no longer vital to develop products that have ‘mass-appeal’; it can often prove more lucrative to aim products at market niches.
This is exactly what we intend to do with Active Nutrition. We will aim to satisfy a small section of society in which we are relatively unrivalled, Rather than trying to develop a brand that will have mass-appeal and go into direct competition with brands that dominate the functional energy drinks sector.
A1, Appropriate marketing models
There are several marketing models, which allow us to evaluate the likely success of the marketing strategy we have developed.
1. Boston Matrix
The Boston Matrix allows us to examine our products position in the marketplace. It takes into account our existing market share and the growth rate of the market in which we will operate.
Our product is relatively unique to other products in the functional energy drinks sector, and therefore it would be true to say that our product will operate in a market of its own, that of health-orientated functional energy drinks. However, as we will aim to erode the market share of existing functional energy drinks, we will examine our product in relation to others that operate in the functional energy drinks sector.
Note carefully how the diagram shows high values to the left of the horizontal axis. This is unusual, but this matrix has always been shown in this way.
It is featured on the following page.
Market
Growth
10 1.0 0.1
Relative Market Share
Our product will enter the market place as a ‘question mark’. This is a result of having a low market share in a growing market. The functional energy drinks sector has continued to be the fastest growing sector of all energy and sports drinks sectors and therefore provides me with an affordable opportunity to be successful in launching my product. It has demonstrated a tolerance to new products, as a result of having a diverse consumer base, which allows new products to be launched successfully, providing they benefit the potential consumers at which they are aimed.
Stars would have a large market share in a growing market. Sales are good, demonstrating potential for market leadership.
Cash cows have strong sales, in a market with relatively low growth. These products may provide appropriate revenue for the development of new products and providing shareholder dividends.
Dogs have a low market share in a market, which demonstrates low growth. This may be the result of falling appeal, or never having come up to expectations in the first place.
Once we have launched our product, continuous market research should allow us to constantly monitor our products position in the marketplace with regard to the Boston Matrix.
2. Ansoff’s Growth Matrix
This is a method of examining my product policies in relation to the market in which my product will operate. Again, our product will be analysed in relation to the functional energy drinks sector.
Present
MARKET
New
Present New
PRODUCT
According to Ansoff’s Growth Matrix, I should focus on product ‘diversification’. This involves developing new products, with which to attack markets that are new to the organisation.
Throughout the development of my marketing strategy, I aimed to diversify from other products that operate within the functional energy drinks sector. This allowed me to differentiate from established products, in an attempt to satisfy the needs of a specific market segment. It was important to diversify from other products in the marketplace throughout all aspects of my marketing mix, so that potential consumers recognise that the benefit my product will aim to provide is very different to that of mass-market brands, that dominate consumption within the functional energy drinks sector.
Diversification is the most risky of all product policies, especially as some of our in-direct competition is very well established. However, as my product is new, and relatively unique, it could demonstrate potential for long-term growth. ‘Market development’ is when you aim to search for new markets for existing products.
‘Product development’ means coming up with new ideas for new products in existing markets.
‘Market penetration’ is the basic growth area, i.e. continuing with existing products to gain a larger share of existing markets.
3. The product life cycle
The theory of the Product Life Cycle suggests that all products have a finite life. It is made up of six different stages that each require different strategies. The product life cycle is shown below, and the strategic implications it had for developing different aspects of my marketing mix have also been included.
Maturity
Sales
Diversification Decline
Introduction
Our products position in its life cycle was a vital part of developing my marketing strategy. It had certain implications for developing different aspects of my marketing mix.
My product will enter the marketplace in its introductory stage. Therefore, sales are likely to start off low, with growth also starting off slowly, partly due to limited awareness of my product.
This means that promotion needed to be aggressive, in order to increase awareness of my product amongst those in my target market. Targeting innovators is vital, and will allow me to emphasise my differential advantage over mass-market competitors.
When entering the marketplace, it is vital that I promote my differential advantage, whilst remaining with the original, basic product, - a health orientated functional energy drink, made with selected herbal ingredients. This will help potential consumers to have a clear perception of the benefits, which my product aims to provide, and help us to have a clear perception of our products position in the market place in relation to other functional energy drinks.
Our product is unique, and therefore demanded premium prices. This will help to perpetuate a prestige brand image and increase desirability amongst potential consumers. It is not financially viable to compete with established brands on the sole basis of price, - this was recognised when developing the pricing aspect of our marketing mix.
At this stage in the product life cycle, I must be selective, rather than intensive with our distribution. This meant that I should avoid outlets that have mass-market appeal, and sell functional energy drinks on a large scale. I should focus on distributing my product amongst outlets that sell health-orientated products on a large-scale in order to differentiate from competitors and reach those that specifically make up my target market.
As my product begins to move onto the growth stage in its product life cycle, it would be normal to expect a rapid rise in sales revenue, resulting in an improved level of cash flow. I will aim to increase sales by targeting new segments, particularly ‘early adopters’.
It is possible that once potential for sales of products such as mine is established, I will see a growing number of competitors and therefore whilst continuing to differentiate, I would need to develop a brand image. This would widen the scope for differentiation, as I will no longer be focusing on promoting the products performance. A brand image will allow customer loyalty to be established, and could save on future advertising and promotion costs.
As competition increases, I may decide to develop extensions and enhancement of the original product, whilst remaining with the same, original idea. This could involve developing a range of health-orientated functional energy drinks that differ on flavour or benefit. For example, I could manufacture a similar functional energy drink that is promoted as having stress relieving benefits, alongside my original health-orientated functional energy drink. This would be a good way of establishing and developing brand recognition amongst potential consumers.
Promotion would need to continue at a high level, and investment should always be increased in line with profits. It would be primarily aimed at reinforcing the products performance and enhancing its brand image.
As consumers increase, it will become vital that I become more intensive with distribution of my product, making it readily available to those who wish to buy it. This will involve distributing it where other functional energy drinks are sold on a mass-scale. It is likely that outlets will become more prepared to engage in aggressive promotion, and allow my product prominence on-shelf, once my products brand name is established.
In order to respond to a rapidly changing consumer base, it is vital that I am always fully familiar with the dynamic environments in which I operate.
4. SWOT Analysis
A SWOT analysis provides us with an effective way of analysing the relationship between our product and it marketing environment. A SWOT analysis allowed me to examine the Strengths, Weaknesses, Opportunities and Threats facing my product. It takes into account both internal and external factors. The internal factors are the Strengths and Weaknesses facing my product. The external factors take into account the Opportunities and Threats present in the environment in which the product is operating.
For ease of presentation, the SWOT analysis of my product has been continued on the following pages.
A2, The reliability of the models used
1. Boston Matrix
The Boston Matrix provides me with an effective way of analysing my products position, with regard to market share and overall market growth. However, there are flaws that affect the reliability of the Boston Matrix. A good example of this is that different marketers may have different views on where a product fits in the matrix, resulting in a possibly detrimental effect on developing specific aspects of an effective marketing mix. It is vital that I have a good understanding of my products position with regard to the Boston Matrix.
In addition, when using the Boston Matrix to analyse the possible success of a new, unique product such as mine, it is important to recognise that it would operate in a market of its own, and therefore it is important not to rely on the results to the extent that they are the only basis for evaluating a possibly coherent marketing strategy. For the purpose of using the Boston Matrix to evaluate the possible success of my marketing strategy, I analysed my product in relation to other products in the functional energy drinks sector, although I recognize that as my product is relatively unique, and will operate in a market of its own, that of health-orientated functional energy drinks.
It may also be said that the Boston Matrix can over simplify a products position in the marketplace, in relation to its competition. It may also be misinterpreted, which could also lead to a negative affect on the development of a marketing strategy.
2. Ansoff’s Growth Matrix
The Ansoff’s Growth Matrix allowed me to analyse my product policies, in relation to the market in which I will operate. However again, as my product is unique, it would be true to say that it will operate in a market of its own, but for the purpose of using the Ansoff Growth Matrix to analyse my product policies, it was completed with regard to the functional energy drinks sector. As with the Boston Matrix, it may be true to say that some may disagree on where a product fits into the matrix, - any misunderstanding could have a negative affect on the development of a marketing strategy.
The Ansoff Growth Matrix allowed me to decide on certain marketing policies, for example, it was clear from our analysis that we should aim to diversify from other products in the marketplace as much as possible. However, this is only a general indication and does not give any guarantee of success.
The Ansoff Matrix did not take into account the possible competition facing my product, which would be a defining factor in the success of my product launch. This has a further affect on the reliability of the Ansoff Growth Matrix.
3. PEST analysis
The PEST analysis provided me with an effective way of analysing certain factors, which could create fundamental changes in the external environment in which my product will operate. Marketing may be described as the management of change.
I believe it was carried out in an adequate manor, and therefore the PEST analysis provided me with a reliable method of analysing and managing possible changes in the external environment. The PEST analysis can only be effective if it is taken seriously by an organisation, which must research the four defining external factors in great detail.
4. SWOT analysis
The SWOT analysis allowed me to analyse the strengths, weaknesses, opportunities and threats that face my product. However, it could be argued that this method is too simple and is therefore not a reliable way of analysing the marketplace in which my product will operate.
A3, Possible changes to the external environment
1. Changes in the political environment.
Political stability
If Britain continues to be a target for large terrorist organisations across the world, the political system on which its business climate is determined could be put under enormous pressure.
It would not be naive to suggest that Britain’s political regime could become increasingly unstable if terrorist activity continues on such a large scale, as it has done in recent years. As suggested as part of my political analysis, if political instability could not be relied upon, it would be prudent to discontinue my project.
Changes in regime
If Britain were subject to a sudden change of regime; it would have an enormous affect on business activity.
If it were the victims of an invasion by let’s say, a communist country, then attitude towards business activity would be somewhat different. It is likely that the new communist government would be much less sympathetic towards western profit motives and would reshape business motives that exist within Britain. This would be unfavourable for products such as mine that will rely heavily on successful marketing and economic freedom in order to increase both sales and market share, within a relatively competitive market.
Changes on legal constraints
If legislation such as the Trade Description Act 1979 were relaxed, then it may be possible to promote my product as having stress-relieving benefits. This would undoubtedly increase sales’ as we would provide the consumer with a stress-relieving product that comes in the form of a health-orientated functional energy drink. This would also help us to further differentiate from products that already exist in the market for functional energy dinks, and help us to enhance our brand image.
An increase in high profile, health promoting charities
If there were an increase in the number of charities that aim to promote awareness of potentially fatal diseases that can occur as a result of unhealthy eating, there could be potential for an increase in sales.
We would aim capitalise on the ever-increasing awareness of healthy eating amongst those that live in the UK.
2. Changes in the economic environment.
Changes to inflation and interest rates
Increases in inflation would severely have an affect on the spending power of those in my target market. It can cause problems in areas such as pricing and estimating demand accurately. Problems are caused when inflation rises, as a result of raised interest rates, and demand for products such as mine is likely to be reduced, as it is potentially a luxury product. Marketing and production costs may rise, resulting in a reduced profit margin. Overall reduction in demand alongside increasing marketing and production costs may result in the launch of my product being discontinued, as it would no longer be financially viable.
3. Changes to the social environment – behavioural aspects
Social trends
It could be possible that as a result of unsuccessful healthy eating and fitness regimes, people in general, could demonstrate a willingness to shy away from health-orientated products such as mine. This could result in me having to discontinue my project due to lack of sales and affordable opportunities for my product being eroded, due to an ever-changing perception amongst potential consumers.
4. Changes in the technological environment.
Generic replacements
It is possible that a generic product could be developed in order replace functional energy drinks in general. I believe that this could be developed in the form of a pill that aims provide the consumer with an all-day energy boost and therefore, eroding the need amongst potential consumers for functional energy drinks.
References
1. Advanced Business, Michael Fardon & others, Osborne Books
2. Marketing principles and practice, Adcock & others, Pitman Publishing, 1993
3. AVCE Business, Janet Rodgers, Heinemann, 2001
4. Retail Intelligence, November 2000, September 2001
Appendix 1: Questionnaire
Below is an example of a questionnaire, which was used in order to gain primary data relevant to my product.
Market Research: Health-orientated functional energy drink
1. How old are you?
10-20 years old
21-30 years old
31-40 years old
40+
2. What is your gender?
Male
Female
3. Do you purchase functional energy drinks?
Occasionally
Regularly
Never
4. Do you require an energy boost whilst at work?
Yes
No
Don’t Know
4. Do you suffer from stress at work?
Yes
No
Don’t know
5. Do you suffer from exhaustion or tiredness whilst at work?
Yes
No
Don’t Know
6. How important is nutrition in an energy drink?
Very Important
Important
Not sure
Not important
7. Is price a defining factor when choosing an energy drink?
Yes
No
Don’t know
8. How do you like soft drinks to be packaged?
Glass bottles
Plastic bottles
Cans
Other
9. How do you get to work?
Car/motorcycle
Public transport
Taxi
Walk
Other (please state)
10. Do you read health, fitness, or lifestyle magazines?
Regularly
Occasionally
Never
11. Where do you spend the majority of your leisure time?
(Please state)
Thank you for taking the time to complete this questionnaire. Your help has been thoroughly appreciated.
E6, Appendix: Presentation
On the following pages, I have included the slides, which were used in order to help me present one aspect of my marketing strategy.
Introduction
My product health orientated functional energy drink, made using herbal ingredients.
For my assignment, I must present one aspect of my marketing strategy developed for my product.
I have chosen to present the ‘product’ aspect of my marketing mix, explaining how it will satisfy consumer needs.
What is my product and how will it satisfy consumer needs?
My product health orientated functional energy drink.
It aims to provide an energy boost, without compromising the health of the consumer.
According to my market research, it is the first of its kind to be launched in the UK.
Consumption of functional energy drinks dominated by young males.
This would illustrate the most competitive, lucrative segment of the functional energy drinks sector.
In order to target this segment we would need to directly to compete with mass-market, dominant brands.
This would be much too risky for a product still in its introductory stage.
When developing my target market, I aimed to recognize a particular segment that would benefit from a product such as mine.
Research suggested that professional and lower professional women have dominated the consumption of health-orientated products.
They have also perpetuated themselves as ‘innovators’ in the purchase of health-orientated products.
This substantiated the idea that these women are becoming increasingly concerned about their health, and are becoming increasingly prepared to try new health-orientated products that are brought onto the market.
This was therefore decided as an appropriate target market.
Primary data also further recognized the need for a product such as mine amongst those in target market.
I used quota sampling allowing me to gain responses from specifically those in my target market.
Around 80% of respondent admitted they purchase functional energy drinks.
A further 80% said that they suffer from exhaustion or stress whilst at work
Well over two thirds said they would welcome an energy boost whilst at work.
Over 60% said that nutrition in a functional energy drink was either very important or important.
These responses clearly express demand amongst my target market for a product such as mine.
Aiming at this segment of the market, allows me to further differentiated from mass- market brands that dominate the functional energy drinks sector.
We are aiming at a segment in which we will be relatively unrivalled.
This may be referred to as ‘niche marketing’, reducing competition and increasing chances of success.
Differentiating from competitors allows me to have leverage over my product in the marketplace.
In recent years the functional energy drinks sector has pronounced a youth focus, consumption dominated by young males.
Yet an interest in healthier lifestyles has led to an increased demand for functional energy drinks, aimed at mature, health conscious individuals.