SLM-Unit-02-MB0046

Marketing Management Unit 2

Sikkim Manipal University Page No. 19

Unit 2 The Marketing Process

Structure:

2.1 Introduction

Learning Objectives

2.2 Marketing mix the traditional 4Ps

2.3 Modern components of the mix -additional 3Ps

2.4 Developing an effective marketing mix

2.5 Marketing Planning, Control and Implementation

Marketing Planning

Marketing Implementation and Control

2.6 Summary

2.7 Terminal Questions

2.8 Answers

2.9 Mini-case

2.1 Introduction

The earlier unit introduced you to the meaning of markets and marketing. In

the process you were also conversant with the evolution of the term

marketing. We will take it further to understand what constitutes marketing.

Considering marketing as process, what are the components of this

process? When you land up in a market, to buy something, you find there

are many ‗makes‘ of the same product. You examine several of them,

enquire of their prices, you may find out whether any discount or free item is

available and also how you can take delivery of the product you may finally

purchase. On the other hand had you been looking for a tourist services

provider, you would have been interested to know what facilities it provides

and whether the people involved are nice to you. In short you are

considering the marketing mix of product, price, promotion and place or to

go further, people and processes.

Learning Objectives

After studying this chapter you should be able to:

Understand marketing mix

Understand the implication of each component of the marketing mix.

Identify how these components are being applied in the marketplace

Judge the various marketing mix prevailing in the market



2.2 Marketing mix the traditional 4 Ps

The marketing mix has been engaging the minds of practitioners and

academicians alike for a very long period. The 4Ps as the mix was known

has been the bulk of marketing literature for a very long period. They still

occupy a major portion of any basic understanding of the subject with

several modifications and extensions. From 4 the mix has become 7now.

While each P can be understood individually at great depth, it can hardly

exist in isolation.

The 4 Ps are: The product, its price, promotion and distribution/place

We shall see each of these in brief detail.

1. Product: It is a good, service, idea that is offered to a customer to

satisfy his/her need. The attributes of a product are variety, quality,

warranty, design, packaging, after sale-service etc.

For example, Marico, a FMCG company offers hair oil in two brand

names i.e. Parachute and Nihar. The brand Nihar, offered in two types of

packaging i.e. Sachets and bottles and are also offered in two qualities

i.e. coconut oil and perfumed hair oil. Sita Traves offer tourism

packages. VLCC offers weight reduction services. Oglivy and Mather

offer ideas on advertising to clients. Competing firms or enterprises

making similar offer would like to differentiate the product on some basis

or the other. The differentiation may be small but they could register in

the mind of the consumer. Products also need to be modified over time

to retain the interest of the consumer. This is where innovation comes

into the picture. This is the reason why you are able to witness the

various models of cell phone from the same company. Have you noticed

how frequently new models are introduced in the market?

A lot of work goes behind the scene before a product is brought to the

market. We will come to it later.

2. Price: the value at which a marketer offers the product/service/idea to a

customer. The actual price at which the exchange may take place

between the offerer and the customer may be different than the initial

offer. The final exchange price may be determined by the interaction

between the supplier and the customer. The supplier may have

determined the offer price by a mechanism of cost determination and

adding a profit margin, there are several other ways by which costs are



determined. There are professional cost accountants who do this. Their

effort is also to find out ways by which costs can be reduced so that the

price offered can be competitive. Sometimes the same company may

offer one product at a price lower than the cost and compensate this

loss by pricing another product much than the cost.

You must have experienced how the Indian railways fixes the price for

sleeper class as compared to the A/C; similarly the Post and Telegraph

charges a low price for the post card but a higher price for the envelope.

You must also have noticed that there are customers who are willing to

quote their own price for paintings during an auction.

For example, BSNL offers prepaid service recharge coupons in

Rs. 110/-, Rs. 331/-, Rs. 551/-, etc. The Marketing Mix

Figure 2.4



3. Place: The term place in marketing has a specific meaning. It refers to

the distribution of goods from the point of production to the target

customer. It may include distributors/wholesalers, stockiest/C&F agents

and retailers who are together referred to as middlemen or as ‗channel

partners in modern parlance. There are others too like franchisees,

branches, depots etc. A most recent version made popular by Amway is

known as network marketing although a similar version was adopted by

chit funds. The aspect of distribution involves logistical support like

transportation, warehousing, loading unloading services etc. of the

product often determines the type of logistical support. While the

distribution of milk would require refrigerated vehicles, for the distribution

of liquefied petroleum would require pipelines.

Zenith computers uses authorized distributor to sell laptops and

desktops to the target customers.

4. Promotion: Communicating product features and its benefits to target

customers through different mediums is known as promotion.

Advertising, personal selling, public relations, sales promotion,

sponsorship are some of the promotional tools being used. How quickly

are products brought to the notice of the consumer or end-user, how

persistently and how the differentiations in the products are highlighted,

are some of the questions that the exercise of promotion answers.

Companies run promotional campaigns for a long duration which may

include various components of promotion. These are designed by

specialized agencies like Rediffusion, Everest, Oglivy and Mather,

Thomson, etc. you would be able to recall the famous campaign by

Vodafone in the electronic media where the ‗Zoozoos‘ were used or the

popular Hutch campaign with the dog Chika or Pug and the little girl

were involved. The mediums used in such campaigns are the electronic,

print, outdoors, graffiti etc. For example, Bharati group promotes its

cellular services (AIRTEL) through TV, Radio and news paper.

2.3 Modern Components of the Mix: Additional 3P’s

Modern authors on marketing have added few more Ps namely People,

Processes and Physical evidence to the traditional 4Ps. These have

assumed significance with the offering of ‗services‘ like hospitality, health etc



becoming more professional and specialized. A brief introduction of each of

them is given below-

People: The front office staffs of a hotel are the most important decision

making catalyst to the visitors stepping into the hotel. Similarly the staff in a

wellness care center would be crucial to the customer who walks in to have

a check up. For services such as these, people become the real

differentiator for the marketer. No doubt that services marketing has

emerged as a separate branch of study in management.

Processes: Many enterprises today are process driven. The term has been

commonly used for manufacturing concerns where the products would go

through processes. Today we talk about quality processes, office processes,

information processes and so on. Since the adoption of total quality

management, marketers are not merely satisfied with quality in the final

product but are deeply involved in the entire processes that an enterprise

puts into practice throughout the organization. Carpet vendors in Germany

were equally concerned with the processes that a carpet manufacturer

would follow in the organization as much as they were particular with the

quality of the carpets. The details in the processes would indicate the work

behind the end product. It has become easier to work out minute details as

these are monitored by computer systems and software solutions like SAP,

ERP etc. In many cases the line between the process and the product is so

thin that the words are being used interchangeably. Some fine examples are

the e-learning programs offered by institutes, the e-library solutions like

Proquest, or EBSCO. The features of these offerings are in the processes

inbuilt to navigate through the software easily.

Physical evidence: About a decade back, you would visit a hotel or a

restaurant on word of mouth evidence and order by the menu. Today many

of these eateries display photographs of their dishes on display boards.

Similarly marketers are offering experiential learning on their products as a

test use before a purchase decision is taken. Similarly a specifically attired

attendant is the evidence of the quality of the service that may be expected

from the service provider.



2.4 Developing an effective marketing mix:

Following example shows how Big Bazaar has worked out on its marketing

mix in India after doing a SWOT analysis:

SWOT analysis indicates the 4 specific and crucial areas by which an

organization can know its position in the market. SWOT analysis can be

done by any kind of organization, dealing with any kind of products or

services, at any point of time and whenever it feels the need to do so.

SWOT analysis is an analysis showing the Company‘s

a) Strengths – i.e. areas where it has got advantage, its core processes, its

unique or successful brands, key people etc. If the company has a good

reputation in the consumer market then it becomes strength of that

company.

b) Weaknesses – i.e. areas where the company is weak or having

drawbacks and which needs to be improvised or eliminated from the

existing system. If the company is feeling that its sales force has too

many inefficient people then it becomes the weakness of the company.

c) Opportunities – i.e. areas where company can establish itself and the

challenges that it can accept to its benefit as well as the consumers.

Suppose a company knows that there are consumers all over the world

who consume company‘s products then there presents opportunity of

expanding its activities globally.

d) Threats – i.e. areas where the company feels that it might be subject to

pressure situations or where it is unable to pull itself from a possible

crises or the threat may simply come from competitive forces or other

external factors such as Recession.



Exhibit 1

7P Analysis of Big Bazaar

7P Marketing Mix is more useful for services industries and knowledge

intensive industries. Successful marketing depends on number of key

issues. The seven keys issues are explained as: -

Product

Big Bazaar offers a wide range of products which range from apparels,

food, farm products, furniture, child care, toys, etc. Products of all the

major brands are available at Big Bazaar. Also, there are many in house

brands promoted by Big Bazaar. Big Bazaar sold over 300,000 pairs of

jeans, 50,000 DVD-players and 25,000 microwave-ovens. In all, the

fashion, electronics and travel segments made up about 70% of sales.

Last year, these categories made up only about 60%.

Big Bazaar offers the maximum variety for each category of product and

this is cited by the customers as one of the main reasons why they like

shopping at the hypermarket. The product is the same in every store in

the city but the brand options are more in Big Bazaar. Also, the quantity



for each product is not limited to large packs only. Observations also

revealed that local brands of popular commodities, like diapers, sugar,

wheat flour garments etc, are very popular in Big Bazaar stores. These

products are never advertised but offer huge margin on sales. In this way

lower middle class customers are targeted well. The commodities sold by

the retail chain also includes its ―own products‖ which get a ready

distribution network. The own products of Big Bazaar include My World

fashion magazine which is not available anywhere else. So costs are low

for such products.

Price

The tag-line is “Is se sasta aur accha aur kahin nahi”. They work on the

model of economics of scale. There pricing objective is to get ―Maximum

Market Share‖. The various techniques used at Big Bazaar are: -

Value Pricing (EDLP - Every Day Low Pricing): Big Bazaar

promises consumers the lowest available price without coupon

clipping, waiting for discount promotions, or comparison shopping.

Promotional Pricing: Big Bazaar offers financing at low interest

rate. The concept of psychological discounting (Rs. 99, Rs. 49, etc.)

is used as promotional tool. Big Bazaar also caters on Special Event

Pricing (Close to Diwali, Gudi Padva, and Durga Pooja).

Differentiated Pricing: Time pricing, i.e., difference in rate based on

peak and non-peak hours or days of shopping is also a pricing

technique used in Indian retail, which is aggressively used by Big

Bazaar.

Bundling: Selling combo-packs and offering discount to customers.

The combo-packs add value to customer.

Price is the critical point in a competitive industry. Big Bazaar works on a

low cost model. It considers its discounted price as its USP. There is an

average discount of 7-8% on all items in respect to their MRP. Prices of

products are low because it is able to secure stock directly from the

manufacturer. There are huge synergies in terms of bulk purchasing,

central warehousing and transportation. These all factors help the retailer

to keep low prices. Survey indicated that low prices were the biggest

factor in customers‘ mind while coming to Big Bazaar. It has never

focused on giving great services, but laid emphasis only on low prices to

attract crowd.



Place

Big Bazaar stores are located in 50 cities with 75 outlets. Big Bazaar has

presence in almost all the major Indian cities. They are aggressive on

their expansion plans.

Place means the location of the business. Big Bazaar has always worked

on low-cost locations. It targets semi-urban population with its placement.

Its strategy is to find a cheap location and it never goes for hot spots in

the city. The talk with the manager revealed that the Teghoria store was

opened when it was scarcely populated. Even in Gurgaon, Big Bazaar

chose Sahara Mall instead of Metropolitan or City Centre, which are more

popular than Sahara Mall. It relied on promotional activities to make up

for unattractive locations. The channel of place is company owned stores

to have complete control. Another strategy used by Big Bazaar to

overcome location disadvantage is use of internet. It has launched a

merchandise retailing website www.futurebazaar.com which targets high-

end customers ready to use credit cards. Therefore Big Bazaar has made

headway into a potentially high-yielding sector of online trade. Internet as

place has put them in a profitable position because there is minimal

expense of maintaining a website. The promotion of this website is done

through advertisement on Google.

Promotion

Big Bazaar started many new and innovative cross-sell and up-sell

strategies in Indian retail market. The various promotion techniques used

at Big Bazaar include “saal ke sabse saste teen din”, Future Card (the

cardoffers 3% discount), Shakti Card, Endorsement by M. S. Dhoni,

Exchange Offer - ‗Junk Swap Offer‘, Point-of-Purchase Promotions.

Advertising has played a crucial role in building of the brand. Big Bazaar

advertisements are seen in print media, TV, Radio (FM) and road-side

bill-boards. Big Bazaar has got celebrities like Cricketer MS Dhoni and

Film actress Asin to endorse its products as well.

Big Bazaar has huge promotion budgets. The biggest idea behind all

advertisements is to make people do bulk shopping. After talking to the

store manager it was found out that there are 2 types of promotional

strategies. One is the holistic advertisement which promotes the brand

and creates awareness among people. It is not targeted at promoting

each store but only creates an image of Big Bazaar as low-cost shopping

option. The store has advertised through TV, road shows and also



started reality show-typed promotional campaign ―The Big Bazaar

Challenge.‖ Promotions like ―Sabse Sasta Din‖ are a very successful

strategy to get footfall.

Other type of promotion is the particular store oriented promotion which

includes speaking on the loudspeaker in nearby blocks. Leaflets are

given in local newspaper. There are promotional efforts even inside the

store. During the survey, it was noticed that Buy 2 Get 1 Free type of

promotions are very common. Original prices are cut down and new

prices are shown, of which customer takes quick notice. There are loyalty

schemes which reward the regular clients. Promotion is also done

through co-branded credit cards with ICICI bank.

People

They are one of the key assets for any organization. The salient features

of staff of Big Bazaar are: -

Well-trained staff - the staff employed by Big-Bazaar are well-suited for

modern retail.

Well-dressed staff improves the overall appearance of store.

Employees are motivated to think out-of-the-box. Retail sector is in

growth stage, so staff is empowered to take innovative steps.

Employs close to 10,000 people and recruits nearly 500 people every

month.

Use of technology like scenario planning for decision making.

Multiple counters for payment, staff at store to keep baggage and

security guards at every gate, makes for a customer-friendly atmosphere.

Process

The goods‘ dispatch and purchasing area has certain salient features

which include: -

Multiple counters with trolleys to carry the items purchased.

Proper display / posters of the place like (DAL, SOAP, etc.).

Home delivery counters also started at many places.

Physical Evidence

It deals with the final deliverable or the display of written facts. This

includes the current system and available facilities. The billing system,

the storage or carry bags, the labels put across the products all display

the physical evidence of the Big Bazaar products.



For The Great Indian Middle Class

It is a unit of Pantaloon Retail (India) Ltd and caters to the Great Indian

Middle Class. It was started as a hypermarket format in Mumbai with

approx. 50,000 sqft of space. Its values and missions are to be the best

in Value Retailing by providing the cheapest prices and hence goes the

tag-line

―Is se sasta aur achcha kahin nahin‖

It sells variety of merchandise at affordable rates, the prices of which it

claims are lowest in the city but the level of services offered is also very

low. Usually the items are clubbed together for offers as on the lines of

Wal-mart and Carrefour and it also offers weekend discounts. It currently

operates out of 64 stores and top 15 stores register a cumulative footfall

of 27 lakhs a month on an average.

The retail life cycle: we can say that Big Bazaar is currently at the

Growth Stage.

(Source: www.managementarticles.info)

Self Assessment Questions

Are the following statements true or false?

1. Marketing of services is based only on the traditional 4 Ps

2. Cellophane wrapped glasses in hotel rooms are an example of physical

evidence in services

3. Services are people intensive

4. Logistics includes all the physical aspects of distribution

5. The final exchange price is usually the same as the initial offer price.

Activity 1:

Identify the promotion mix (i.e. 7 P‘s) of a fast food joint near your place

and list out the features associated with each of the 7 P‘s of modern

Marketing.

2.5 Marketing Planning, Implementation and Control

2.5.1 Marketing planning:

Though strategic plan exists in the organization but it is very essential to

have functional plans to coordinate departmental activities. For example, the

marketing plan guides the sales and distribution activities of the

http://www.managementarticles.info/



organization. Therefore it is essential to know what the contents of a

marketing plan are.

Contents of marketing plan

Executive summary: Brief summary of plan, which help busy executives to

go through the points very quickly.

a. Analyzing the current market situation: The following factors should be

answered in this section.

1. What is the intended market and market segment?

2. What is the consumer buying behavior process for particular

category of products?

3. How conducive is the marketing environment to do the business?

4. Whether company got right marketing mix for intended target

customer?

5. Who are major competitors and what are their marketing strategies?

b. PEST analysis: In this section, the external environment of the company

is analyzed to find opportunities and threats. (for detail see UNIT 3)

c. Objectives and issues: This part of the marketing plan should discuss

marketing objectives that company would like to achieve in particular

period and issues that may affect them.

d. Marketing strategy: This section should highlight on

1. Identifying the segmentation, target customer and positioning

strategy

2. 4P‘s of marketing

3. Planned activities: the following factors should be discussed in this

section

a) What are the programs that company plans to undertake?

b) Who are responsible to monitor these programs?

c) How much time it takes to complete the program?

d) How much will it cost?

e. Marketing Budget: a budget has to be prepared periodically to estimate

the funds and expenses to be incurred on the marketing activities such

as advertising, research, sales promotions etc. The budgets will act as

a reference point when actual figures are accounted.

f. Control: Any program implemented need to be controlled to check its

performance. Hence organization should take periodic auditing by a

review committee. The control process for the plan should be discussed

in this section.



2.5.2 Marketing Implementation and control

Marketing implementation: The process in which marketing strategies and

plans are converted in to proper marketing actions to achieve the objectives.

Marketing implementation depends on the following factors:

1. Organization structure

2. Organization culture

Marketing control: The process of evaluating marketing performance and

taking corrective actions.

Marketing control involves four steps. They are

a. Set specific marketing goals.

b. Measure the marketing performance

c. Evaluate the market performance against objectives

d. Take corrective actions

Marketing control is divided into two parts. They are operation control and

strategic control. Operation control involves assessing the current activities

against annual plan and taking corrective actions. Strategic control is used

to assess whether existing strategic plans of the company meets the

opportunities exist for it. Marketing audit is used as a strategic control tool.

According to Philip Kotler ―marketing audit is comprehensive, systematic,

independent and periodic examination of a company‘s environment,

objectives, strategies and activities to determine problem areas and

opportunities and to recommend a plan of action to improve the company‘s

marketing performance‖.

Characteristics of marketing audit:

1. Comprehensive.

2. Systematic

3. Independent

4. periodic

Components of marketing audit:

1. Marketing environment audit

2. Marketing strategy audit

3. Marketing organization audit

4. Marketing systems audit

5. Marketing productivity audit.

6. Marketing function audit



Self Assessment Questions

Fill in the blanks

6. A Marketing audit is used as a __________________ tool.

7. Marketing implementation depends on _____________________.

8. PEST analysis helps to identify a company‘s ________________ and

___________________

9. Segmentation, targeting and positioning is part of a _______________

10. A marketing audit is _____________________ because it examines

all aspects of a company‘s marketing performance.

2.6 Summary

Marketing mix or 4Ps of marketing comprises of product, place, price

and promotion.

The three additional P‘s of marketing include people, processes and the

physical evidence.

SWOT Analysis is basis for organizations to determine their strengths,

weaknesses, opportunities and threats.

Marketing planning, implementation and control is necessary in order to

estimate or determine future marketing strategies/activities, implement

them and then exercise control so as to meet the marketing/company

objectives.

Marketing Audit is used as a strategic control tool.

List of Key Terms

Marketing mix

Product

Price

Place

Promotion

People

Physical Evidence

Processes

Marketing plan

PEST analysis

Segmentation



Positioning

Marketing control

Marketing audit

2.7 Terminal Questions

1. Briefly explain the contents of a marketing plan.

2. Identify a consumer goods company of your choice and describe its

marketing mix.

3. Identify any organization in the service industry and describe its

marketing mix in terms of the 3 Ps of services marketing.

2.8 Answers

Answers to Self Assessment Questions:

1. F

2. T

3. T

4. T

5. F

6. Strategic control tool

7. Organizational structure/Organizational culture

8. Opportunities and threats

9. Marketing plan/Marketing strategy

10. Comprehensive

Answers to Terminal Questions:

1. Refer 2.5.1

2. Refer 2.4.3

3. Refer 2.4

2.9 Mini-Case

The Kellogg’s story

At Kellogg Company, we promote eating well and healthy living. Our legacy

is based on the philosophy that people can improve their health by eating a



balanced diet and engaging in regular physical activity. Living a healthy

lifestyle begins with a good understanding of nutrition. We believe in

providing high-quality, nutritious food and helping educate consumers about

the benefits of a healthy diet.

Kellogg‘s has in place a global marketing code and a longstanding

commitment to advertising in a responsible manner.

This means:

We don‘t encourage over-consumption of our foods when consumers

take part in promotions.

We always present Kellogg‘s breakfast cereals as part of a balanced

breakfast.

We run balanced promotional calendars featuring a good mix of fun,

education and wellbeing based activities. Two of our most successful

promotions involved offering consumer pedometers. (Pedometer is a

small device that records/counts the no. of steps a person takes)

The Kellogg’s story starts way back in Battle Creek Sanatorium, Michigan

USA, in the 1870s.

Set up by brothers Will Keith Kellogg and Dr John Harvey Kellogg, it was

founded on a deep belief that ‗you are what you eat…‘ Oh, and plenty of

fresh air, exercise and a strict ban on caffeine, alcohol, tobacco and meat.

In 1876, in pursuit of a breakfast food that was at once wholesome and half-

way pleasant to eat (a rarity in those days); Dr John had a ‗Eureka‘ moment!

While experimenting with different ways to cook and crush wheat to make it

more palatable without losing its goodness, he inadvertently ran a batch of

cooked wheat through the rollers that had been standing around for a day or

so.

And out of the other side came… Kellogg's Corn Flakes! (Or at least, a

prototype version)

Testing their new discovery on their patients confirmed that here indeed was

the delicious, nutritious breakfast the brothers had been seeking.

When orders starting coming for the new flakes from former patients, they

knew they were onto a good thing and set up a separate company to

manufacture their cereal under the name Sanitas.



But it wasn‘t until 1898 that Kellogg's Corn Flakes as we know them

appeared, and in 1902 Will Keith made the momentous decision to leave the

‗San‘ and set up full time in cereal production.

In 1906, W.K. decided to risk a portion of his hard earned capital on his first

advertising campaign, with spectacular results.

Among many innovations W.K. made that were later to be accepted

wholesale by the food industry was an insistence on consistency and quality

control.

Not just that, he also led a relentless campaign for improvement and

innovation in his products.

Drawing on previous experience as a nutritionist, he printed healthy eating

advice on his packs as well as recipe ideas and product information. Seems

nothing out of the ordinary now, but in its day it was revolutionary.

Going one step further in 1923, he hired a full time home economist to

develop recipes and spread the word about healthy eating to consumers

and schools - the start of a company tradition of providing the latest

information about diet, nutrition and health that persists to this today.

By 1930, almost 60 years after his initial, accidental discovery that led to

Kellogg's Corn Flakes, W.K. decided it was time to ‗put something back‘

and set up the W.K. Kellogg Foundation.

Dedicated to the principle of guidance and self-help, the foundation is still

going strong today. In fact, it is one of the world‘s largest philanthropic

institutions, funding projects in health, education, agriculture, leadership and

youth worldwide.

Kellogg’s in Indian market:

Kellogg‘s came to India with the promise that it will change the breakfast

habits of Indians. Till then, regional staples were the norm at the Indian

breakfast table – paranthas in the North, idli or dosa in the South, for

example. People would give up all the greasy and fatty stuff and eat healthy

cornflakes, Kellogg‘s had thought. It saw no reason why its global success

could not be replicated in India, especially with the growing awareness

amongst its large middle-class population.



Over the years, it would seem Kellogg‘s has covered all its flanks. It has

products in three distinct segments. There is the kids‘ category with

products like Chocos, Chocos Duet, Planet and Stars and Fruit Loops. Next

is the all-family segment which includes corn flakes and its six variants. And

finally, up the chronological ladder in the adult space are products like

Special K (for weight loss), wheat flakes, Extra muesli and oats.

The market for breakfast cereals is growing at a fast clip – 30 per cent per

annum. But Kellogg‘s is outgrowing it. Its share of the market stands at 48

per cent. Perfect?

Too small, too many

Not really. There is a fly in the ointment. The market for breakfast cereals is

still very small. While the packaged food market is valued at Rs 33,234

crore, the organised breakfast cereal market is just Rs 250 crore. ―The

unorganised breakfast market,‖ says Technopak Advisors Vice-president

(food and agriculture) Sanjay Sethi, ―is far bigger than the organised one.

Milk and fruit are the preferred choice.‖ The import is clear: Kellogg‘s will

have to work really hard to grow the market.

That the breakfast market holds great potential is beyond doubt. The

clearest indication is the growing interest of multinational food companies.

PepsiCo has already entered with its bestseller brand, Quaker Oates. Heinz

India, which has a hugely strong bond with households because of its

Complan health drinks, too has joined the bandwagon.

Even a value-for-money fast-food chain like McDonald‘s wants a share of

the pie. According to McDonald‘s, more and more people are grabbing a

quick bite on their way to work. A study carried out by the company threw up

some interesting numbers: 18 per cent people in cities prefer eating out of

home because of the convenience and variety it offers. Further details

reveal that out-of-home breakfast in Mumbai is high during the whole week

and in Delhi it peaks during weekends. So, it is carrying out pilots of its

breakfast menu across locations in Mumbai and Delhi. The initial response,

claims the company, are encouraging.

Clearly, it is not an easy market for Kellogg‘s. So, it has decided to take the

food safety and nutrition plank for growth. A cue that it perhaps took from its

1999 success story with Iron Shakti, which aimed to address iron

deficiencies in children and boosted sales by 17 per cent.



New initiatives

The Company recently conducted a study of breakfast habits on more than

1,000 people in Mumbai. The revelations were startling: One in three people

does not eat breakfast, young girls skip breakfast regularly (probably linked

to weight-control issues) and many children go to school without breakfast

or inadequate breakfast resulting in nutritional inadequacy.

Communicating this idea, Kellogg‘s hopes, will do the trick. ―It‘s important for

us because we are in the breakfast space and our food provides the

micronutrients that are deficient and that‘s the message we are going to

send out to consumers,‖ says Kellogg‘s India Managing Director Anupam

Dutta. The new initiative therefore doesn‘t require rolling out new products.

―All Kellogg‘s cereals are fortified with essential vitamins and minerals

according to the daily requirements of nutrients for Indians and therefore are

excellent breakfast choices,‖ adds Dutta. Not surprisingly, even its

communication has begun to highlight this with ads emphasising better

cognitive performance and academic performance.

Sethi of Technopak Advisors views this positively: ―Consumers are getting

more health conscious and there is an emerging market for cereals. Going

forward, even packed forms of breakfast will gain prominence as people

don‘t have the time in the morning.‖

The problem for Dutta is that rivals are likely to take the same route. Heinz

India in March launched its first breakfast cereal, Complan Nutri Bowl

Muesli. ―Health and wellness is a significant emerging trend and that is our

rationale for entering this segment. Breakfast time offers a huge opportunity

as the health-conscious consumer is looking for something healthy and

convenient,‖ says Heinz India General Manager (new business) Sundip

Shah.

Flavours and pricing

Breakfast cereal players may have a healthy strategy backing them, but

their battle with the palate rages on. Experts feel that Indians find it hard to

move away from their quintessential hot, cooked meals. During its launch,

Kellogg‘s emphasised on the crispiness of its flakes without considering

Indians‘ aversion to cold milk. When mixed with hot milk, Kellogg‘s corn

flakes were no different from local brands, while they were priced far above.



To tackle that, the company bet big on flavours. So, when the chocolate-

covered flakes, Chocos, became a huge success, the company was quick to

follow it up with ethnic flavours like coconut, mango and so on. In October

2008, Kellogg‘s Extra muesli was launched in four different variants — extra

nut delight, extra fruit magic, extra crunchy fruit and nut and extra tropical

bonanza. Dutta feels variety is a key need of the Indian consumers and

flavours are the best way to provide that.

The company experiments mainly with fruit tastes like mango, strawberry,

banana and universally favourite flavours like honey. ―Kellogg‘s got it right

when it started launching flavours,‖ Sethi points out. ―People have begun to

take a shine to our products,‖ smiles Dutta. Quick on the uptake, however, is

Heinz which has also come out with three variants of its cereal: Mixed fruit,

crunchy and crunchy with saffron.

Kellogg‘s may have made the right moves with flavours and variants. What

has played spoilsport is its premium pricing. For instance, 250 grams of

Kellogg‘s cornflakes is priced at Rs 75 while Mohan Meakin‘s 200 grams is

Rs-32 lighter on the purse. With heavy down trading visible across all

consumable categories, this could hurt the company in the current scenario.

Dutta on his part counters that Kellogg‘s has not taken a price increase in

any of its products since 2005. ―This is despite significant increase in all

input costs and inflationary pressure. We have so far absorbed the cost

increase and delivered the benefit to the consumer,‖ he says. Alternatively,

its Kpak initiative offers a range of Kellogg‘s products at Rs 10. ―Health and

convenience are the two things we offer. As long as consumers have these

two things in mind, we‘ll be a part of their breakfast choice,‖ Dutta says.

(Source: Company information; The Times100 companies)

After reading the above case, a very young marketing analyst is keen to

identify 7 P‘s of Kellogg‘s and the ways in which Kellogg‘s has replaced the

traditional breakfast in a typical Indian family household. He is also aware

that Kellogg‘s faced a big challenge in the Indian market.

Help the young marketing analyst and what according to you are the

challenges faced by Kellogg‘s in India?

SLM-Unit-02-MB0046

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