Creating new products or making changes to existing brands can be expensive. It will involve making investment decisions now, in the expectation of making a return later. Weighing up future returns against an investment is a crucial part of any manager's job.
It always entails an component of risk, because the near future is never certain. Professionals' past experience, together with market research information helps these to predict future incidents and benefits. However, all business activities involve some aspect of risk. You can find often said to be a link between risk and come back. A lot more you risk, the bigger the likely returns (or profits). However, a balance must be struck.
It follows from this that decisions in regards to a brand, (e. g. whether to develop it, maintain it, allow it to decrease, or even kill it off) entail much discourse. In deciding to build up a brand, professionals have to decide how much investment to make and forecast the probability of a successful outcome.
Brand managers try to develop a long-term strategy to meet a variety of targets such as:
growing market share
developing a unique market position
creating consumer or brand loyalty
generating a targeted level of profit.
This research study describes a significant investment in Kellogg's Special K. It illustrates the way the company's investment in new product development served to strengthen a global brand.
2. Kellogg's and the marketing mix
With total annual sales greater than 4. 5 billion, Kellogg's is the world's leading developer of cereal products and convenience foods, such as cookies, crackers and iced waffles. Its brands include Corn Flakes, Nutri-Grain and Grain Krispies.
Kellogg's is a worldwide company. Its products are created in 19 countries worldwide and sold in more than 180 countries. Within an uncertain world where the organisation's strategy is to focus on products and brands that are either the market head or in a strong second position the business believes that focus upon central and successful products permits it to provide steady and reliable dividends and rewards for its stakeholders.
The dependence on change
When a corporation like Kellogg's is looking into an alteration in its marketing it can consider four elements. These are known as the marketing blend or 4Ps:
Product
This element pertains to how the company offers fits the changing needs and wishes of customers. The growth in healthier standards of living creates opportunities for Kellogg's to increase the amount of products for this segment.
Price
The amount a firm charges for its product is important in deciding sales. Superbrands like Kellogg's can charge a premium because of the power of the brand and product quality.
Place
Where customers can purchase the merchandise is also a key point in identifying sales. In case a brand like Special K is not stocked in supermarkets where most buys are made, sales will be lost.
Promotion
Communicating the availability of a product is essential for sales to be produced. Kellogg's uses above the series promotion like TV advertising as well as below the range campaign like on-pack promotions and sampling.
In considering Special K, the business focused on changing the merchandise through new variations. Although Special K was already a well-established brand, its full potential possessed never been reached. It was viewed as a stand-alone product, and Kellogg's had not created any variants or brand extensions to build up the center product.
Managers can make a decision when to make key changes to a main product by analysing its position within the merchandise life-cycle. Life-cycle analysis accepts that products have a finite life, and analysts graph a product's performance through several phases, from its launch through various stages of growth until it gets to maturity and eventually decline.
A product's life routine may last only a few weeks (e. g. with a trend, or craze) or, as with Special K, for quite some time. Although it was a successful product, Kellogg's recognized the opportunity to extend the brand by assets that could:
revitalise it
extend and additional develop its progress phase
help to delay the onset of the maturity phase.
Kellogg's was confident that such investment would help keep up with the brand's durability in a rapidly changing market.
3. The merchandise life-cycle
Diagram
The traditional product life-cycle shows what sort of product goes through 4 stages during its life on the market place. At each level in the merchandise life-cycle, there is a close marriage between sales and earnings so whenever a product switches into decline, profits cut down.
When something is created to the marketplace, growth is gradual credited to limited awareness. As the product is establishing itself, sales will learn to increase over growth. As the product reaches maturity, the business must inject new life into the product, either by creating brand extensions or variations otherwise the product will reach maturity and start to decline.
Before taking any investment decisions, Kellogg's undertook general market trends. It wished to answer these questions:
What changes taking place in society are likely to affect the merchandise?
How might new technologies affect our business?
What will tend to be the near future market movements?
Where are the opportunities within the market place?
What new categories would appeal to the mark market?
How far do consumers think the brand could expand in to the market for different product categories?
Kellogg's had to comprehend how the product could be lengthened into some variations which would keep carefully the main product strong, but grow the brand all together.
Manufacturing capabilities is another key concern. If launches of services are successful in global markets, Kellogg's must have the processing capacity to meet consumer demand as well as the resource chain necessary to reach those consumers.
4. Special K - cereal
Initial developments originated from Kellogg's in France, who launched red berries in to the cereal. This new product performed well. General market trends in the UK, including consumer tests, also identified a real opportunity within the united kingdom market. In Oct 1999, Kellogg's launched Special K Red Berries in the united kingdom. From the outset it performed well, with hardly any damage to the central brand: most sales were additional and above targets; consumers didn't swap the 'old' product for the new variant.
Evaluating the launch revealed further range for product development. It had been, however, important to ensure that any new products tasted not the same as the initial Special K and the Special K Red Berries, in order not to harm their sales. Extensive product development research was carried out by food technologists. Kellogg's then tested the product with quantitative research. Kellogg's launched Special K Peach & Apricot in Feb 2003.
5. Special K - bars
Kellogg's already understood that girls who are keen to watch their weight and shape seek a range of solutions throughout the day - not just at breakfast. By using both users and non-users of existing Special K products, market research workers undertook further quantitative assessments of product ideas across a variety of food categories.
The research identified that cereal pubs offered the most powerful possibility to develop Special K as a healthy snack. The simple was then developed and the Special K club was launched in July 2001, with significant tv set coverage. Consumers were also in a position to sample the pub through specific promotional activity. The Peach & Apricot variant was added to the portfolio in Feb 2003.
6. Growing the brand
Kellogg's soon arrived to realize that the variations were accountable for a huge expansion in the Special K brand, with out a drop in sales of the center cereal product. New product development got altered the brand within the UK. Therefore gave a great opportunity to roll-out other trends in other marketplaces, including the USA, Australia and Canada. Product research confirmed that the united kingdom products could be designed to meet up with the individual preferences of consumers within those market segments.
The Kellogg's strategy was truly global; it developed a concept in European countries which after that it adapted and applied worldwide. Within the area of
2 years the extensions to the brand possessed achieved global coverage, and were providing not only significant advancements in sales value and volume of Special K products, but also a huge boost to the brand's collateral.
Supporting such growth was not always possible for Kellogg's UK. Originally it produced all the Special K variants sold within Europe. THE UNITED KINGDOM company needed to increase its production capacity and also refine source chain management processes to ensure that the merchandise would be accessible at the point of purchase. It got opened a lightweight foods herb at Wrexham, to produce pubs. Other capacity was made by commissioning the creation of Special K cereal in Spain.
7. Making a stronger position
When contemplating long-term investment decisions, brand professionals face two key questions.
1. In what assignments should the company invest?
2. What level of investment should be approved?
For the Kellogg company, market research recommended that using money to develop variations on Special K looked like a relatively low risk job that offered the prospect of your good rate of go back. This was essentially because it involved developing and extending a brand that already appreciated huge consumer support with techniques that may be adapted to the marketplace place worldwide. The judgement has proved to be appropriate, to the benefit of the company and its own many stakeholders.
