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Marketing plan project (final)

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A detailed business plan designed to analyse the prospects of successfully introducing a new consumer product to the UK market.

A detailed business plan designed to analyse the prospects of successfully introducing a new consumer product to the UK market.

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  • 1. HULT International Business School London CampusMarketing Plan Project “Karums” Prof. Agnes Nairn Prepared by Team2 (Greenwich): Ahmed Sadawi FarisJafar Francesca Mifsud Hubertus Lorenz Marta Uva Roberta Rudukaite Tagaris Cheikh Ali December 2011 London
  • 2. Table of ContentsExecutive Summary ........................................................................................................................................................... iii1. Background ...................................................................................................................................................................... 1 a. Parent Company ........................................................................................................................................................ 1 b. Product ......................................................................................................................................................................... 12. Secondary Market Research ....................................................................................................................................... 1 a. Current UK statistics ................................................................................................................................................. 2 b. Size, growth and trends of UK dairy product market .................................................................................... 2 c. Size, growth and trends of UK confectionery market .................................................................................... 2 d. Competition ................................................................................................................................................................ 33. Primary Research Insights ........................................................................................................................................... 4 a. Descriptive statistics .............................................................................................................................................. 4 b. Correlations ............................................................................................................................................................... 4 c. K-Means Cluster Analysis & Segmentation ................................................................................................... 54. SWOT Analysis................................................................................................................................................................. 5 a. Strengths ...................................................................................................................................................................... 5 b. Weaknesses................................................................................................................................................................. 5 c. Opportunities .............................................................................................................................................................. 5 d. Threats .......................................................................................................................................................................... 65. Marketing Strategy ........................................................................................................................................................ 6 a. Customer Value.......................................................................................................................................................... 6 b. Positioning ................................................................................................................................................................... 7 c. Target market ............................................................................................................................................................. 76. Marketing Mix ................................................................................................................................................................. 7 a. Product ......................................................................................................................................................................... 7 b. Price .............................................................................................................................................................................. 8 c. Place ............................................................................................................................................................................... 8 d. Promotion .................................................................................................................................................................... 87. Launch.............................................................................................................................................................................. 10 a. Launch Material ....................................................................................................................................................... 10 b. Launch Budget.......................................................................................................................................................... 10 c. Contingency plan.................................................................................................................................................... 10Appendices.......................................................................................................................................................................... 12Bibliography ........................................................................................................................................................................ 21 i
  • 3. List of ExhibitsExhibit 1: Eating habit trends 2008-2011 Base: Internet users aged 16+ .............................................. 12Exhibit 2: How UK retails sales of Fairtrade confectionery have grown (£m) ...................................... 12Exhibit 3: Main Competitors ....................................................................................................................................... 12Exhibit 4: Price positioning compared to competitors.................................................................................... 13Exhibit 5: Questionnaire .............................................................................................................................................. 14Exhibit 6: Descriptive Statistics ................................................................................................................................ 15Exhibit 7: Pearson Correlation table ....................................................................................................................... 16Exhibit 8: K-Means cluster analysis output .......................................................................................................... 16Exhibit 9: S.W.O.T. analysis ......................................................................................................................................... 17Exhibit 10: Budgets for the 5 year period ............................................................................................................. 17Exhibit 11: Karums Active campaign advertisement ....................................................................................... 18Exhibit 12: Advertisement costs break down ..................................................................................................... 18Exhibit 14: Karums informational advertisement ............................................................................................ 19Exhibit 13: Karums advertisement targeting parents ..................................................................................... 19Exhibit 16: Outdoor advertisement ......................................................................................................................... 20Exhibit 15: Karums advertisement .......................................................................................................................... 20 ii
  • 4. Executive SummaryThe aim of this marketing plan is to introduce the new product, Karums, into the UK market. The ideaof our business is to offer a healthy, guilt-free, tasty snack for the children and parents segments. Thefollowing paper includes an introduction to the company and the product in question. The product isnew for this market and has no direct competitors, whereas we base our initial assumption thatthere is a profitable niche in the dairy market. Therefore, in this marketing plan we analyse themarket situation in terms of demographics, needs, growth, and future trends. In order to identify ourtarget market we have used the survey method and analysed the data gathered in order todistinguish which of the market segments to target. The survey was also intended to gatherquantitative data to identify and capture needs of our target market. We have found that demandfor healthier snacks exist, which is replacing the classic ones that have negative effects. Based on thesecondary and primary market research we have developed a SWOT analysis to grasp a better look atwhere the product would stand in terms of the market and how we aim to use the strengths andopportunities to cast a shade on our threats and weaknesses. In our marketing strategy andmarketing mix we explain in detail the actions we wish to take in order to make this product asuccess. The marketing mix is also intended to explain the product and its unique selling pointsclearly. By being the first mover in the UK we will penetrate the market in building strong brandawareness and expect to break even in a five-year period. We plan to have a two phase operationalplan, phase one includes the simple importing of the product from Latvia and storing it in our specialrefrigerated warehouse and then distributing it using our own refrigerated trucks to authorizedretailers. The second phase is dependent on the success of phase one and it constitutes theproduction of Karums locally. Local production would allow for more capacity and a various selectionof products and flavours as opposed to the one flavour we wish to focus on in phase one. Towardsthe end of the report is a description of the product launch and all the strategic preparations we willtake before and during the actual launch of Karums in the market. Also included is a budgetarybreakdown of all the operational expenses and launch components including advertising materials.Last but not least is a contingency plan divided into two parts depending on the obstacles of eachphase. iii
  • 5. 1.Backgrounda. Parent CompanySIA RigasPiensaimnieks is a leading company in the dairy market in Latvia. It was founded in 1993 inRiga; however, the company originates from RigasPiena Central which was founded back in 19281.(Karums: 2011a) Company firstly produced only curd snacks, later started to produce other products.Now its products include ice lollies, curd snacks, dairy products, jam, cheese, mayonnaise, milk andother products. The company sells its products to retailers, restaurants, hotels, offices and cafeterias. In1994 SIA RigasPiensaimnieks introduced the Karums brand, which is now one of the most favouritecurd snacks in Latvia. (Karums: 2011a) Besides the Karums brand, the Company also has other brandssuch as Dzintars, Zilonitis, Fabio and others. The company was very successful in its local market (in2010 it covered 90% of local dairy product market (AAAOE: 2011)), thus in order to expand their marketshare it started to export products to other countries such as Baltic States, European Union countries,and North America. (William Reed Business Media SAS: 2004)b. ProductKarums is a curd snack which is approximately five centimetres long, made from milled and pressedcurd2, and glazed with chocolate. A standard curd snack has vanilla flavour; however, SIARigasPiensaimnieks has 15 different flavours such as strawberry, chocolate, apple jam, coconuts, etc. Curd snack is very rich in natural nutrients and calcium, which is useful and healthy for the individual. As it was mentioned before Karums was introduced to market in 1994. (Karums: 2011a)In 2005 this brand won three prizes at the Riga Food exhibition, which was a record since the beginning of the exhibition. In 2009 SIA RigasPiensaimnieks introduced the whole spectrum of products under the Karums brand. Product line included various curd desserts, curd snacks, milk, etc. (Karums: 2011a)Figure 1: Karums curd snack (Source:Karums: 2011b) In their local market, Latvia, the company advertise their product via TV ads and billboards. Nevertheless, while entering newmarkets the Company emphasises its marketing strategy at the selling points, meaning that customer’sattention is grabbed in the supermarkets during the shopping process. The customers taste the productat the supermarket and buy it right away; this was one of the most successful promotions. Due to thefact, that this product was locally known since the 1940’s the Company’s marketing strategy was morebased on word-of-mouth, than actually using lots of ads in the media. In addition to that, the Companyfirst of all entered the market only with the main curd snack product. Different flavours wereintroduced later when consumers already got to know the product.2. Secondary Market ResearchIn order to introduce the curd snack Karums in the United Kingdom we have analysed the market. Firstof all, we have analysed current UK population and break down by age groups. Further on, dairyindustry research showed that there is no such product in the UK market yet, meaning that we have a1Latviaexperienced milk consumption boom at that time (Karums: 2011a)2Curd is formed when sour milk clots. 1
  • 6. niche. We have also analysed confectionery market as we notify that main competitors are going to befrom this market and it is necessary to capture all the trends.a. Current UK statisticsBased on the recent data there are 63 million (July 2011 est.) people in the United Kingdom. (CentralIntelligence Agency: 2011) Population growth rate is estimated to be 0.557%.As to the break-down ofthe population into age groups we have 17.3% for children ages between 0-14 years old almost equallysplit between male and female, 66.2% of the population is between the ages of 15-64 years old againalmost equally split between male and female, finally there is the age bracket between 65 years andolder of 16.5 % split, males 4,564,375 and females 5,777,253. The UK is a highly urbanized country as80% of the population is living in the major cities. (Central Intelligence Agency: 2011)b. Size, growth and trends of UK dairy product marketOur product Karums should be placed in the dairy product market. The concept of a curd based productis new to the UK market which places us at an advantage as first movers. However, the lack of directsubstitutes, many other forms of diary product and glucose based snacks act as substitutes for theKarums.The dairy market in the UK mainly comprises of milk, yogurt, cheese, butter, whole milkpowder, condensed milk and skimmed milk powder products. Based on the latest data provided, the UKproduces approximately 13bn litres of milk each year, which is then made into a wide range of dairyproducts. 50% of the milk is processed into liquid milk, other 50% are basically used in cheese, milkpowders and butter production. (Dairy UK: 2011)Based on the research made in 2010 it was found thatyoghurt is the third most profitable in dairy industry and is the fastest growing sector, pushing milk andcheese sectors behind. The increase in value was approximately 7% in 2010, which was driven by pricerise and interest in healthy eating. (Nieburg: 2010)Research shows that dairy industry has a potentialfor growth in the future due to the constant increase in healthy eating trends. Moreover, in theresearch it is stated that health image has market potential among parents as 82% of the surveyedconsider dairy products good for children. (Nieburg: 2010)Analysis of the dairy industry shows that our product could have a huge potential in the market as curdis a healthy snack, which has natural nutrients and calcium. In addition to that, this product is madewithout any preservatives and has natural flavours. Nevertheless, it is alsoimportant to analyse theconfectionery market as our main competitors are going to be from this industry.c. Size, growth and trends of UK confectionery marketWhile analysing confectionery market, first and foremost, our research shows that in spite of the recenteconomic slowdown, the confectionery market has managed to keep a strong position. (Key Note:2011) Over the 5-year period spanning 2006 to 2010, the UK market for sugar and chocolateconfectionery grew by 14% to £5.03bn in value. Chocolate is still by far the largest sector of this market,having its sales rise by approximately 17% over the 2006-2010 period, while the sugar confectionerymarket only grew by a mere 6.3% over the same period of time. Additionally, the chocolate sweetsaccount for a 65% share of the overall confectionery market; sugar represents around 30%. (Key Note:2011) This effect can be attributed to the continued popularity of chocolate products and the fact thata chocolate treat is perceived as an affordable treat and displays a strong level of market penetrationdespite recession effects. In order to better illustrate customers’ perception and the level of marketpenetration, a line chart is provided in appendicesExhibit1. (Perkins: 2011) 2
  • 7. Recent years have also seen an increased public perception of a need to be ethical when sourcing andproducing confectionery products. This effectively resulted in a new trend and thus, companies in theUK have started using fair trade and organic ingredients more widely. Global fair trade cocoa doubled insales in 2010 to an estimated amount of 30,000 metric tonnes. In addition, in 2010 fair trade salesaccounted for 10% of the UK chocolate confectionery sales with an approximate value of £343m, asseen in appendicesExhibit2. (Fairtrade Foundation: 2011b) The fair trade trend has not been witnessedin this sector only, but rather in many others ranging from tea & coffee to cosmetic products thatinvolve fair trade ingredients. The Fairtrade Foundation announced that, “Fairtrade products soared by40% in 2010 to an estimated retail value of £1.17bn compared with £836m in 2009. UK shoppers arecontinuing to embrace Fairtrade, showing no downturn on ethical values despite the tough economictimes.”(2011a) Well-known brands, such as Nestle and Cadbury, have capitalized on this trend from itsearly stages: for instance, Nestle has promised to use only sustainable palm oil in its products by theyear 2015. Furthermore, due to the increased perception of a need for a healthier lifestyle,confectionery products are continuously being changed, with producers replacing artificial contents andflavourings with natural alternatives in an attempt to provide the market with a healthier profile.(Fletcher: 2006)According to Key Note (2011) statistics, almost 9 out of 10 adults buy chocolate or related products ona regular/semi-regular basis. This appears to work in the advantage of relevant businesses; howeveranalysts argue that the sheer size of the market, the dominant presence of world-famous brands (i.e.Nestle, Kraft-Foods, Mars Inc.) and the great diversity of products translate into a limited potential forgrowth. (Key Note: 2011)Confectionery market analysis shows us that the same trends are noticed as in dairy industry. Society ismoving to the healthier lifestyle and searches for healthy products. Even confectionery market shiftedto “fairtrade” products. Both of the markets, confectionery and dairy, are growing and has a potentialto grow in the future. This leads us to believe that our product would capture the trends both in themarket and societies perceptions. In order to capture customer needs we have performed primaryresearch.d. CompetitionThis product, for being so unique, does not have any direct competitors. By entering the UK, we are thepioneers in this market, although we do have indirect competitors. One can classify the maincompetitors into different segments. Our main competitors are from the dairy industry, whereasindirect competitors are from the confectionery and cereal markets (See appendices Exhibit 3).Firstly, we have dairy products, which are cheese snacks and yoghurts. These can be Karumscompetitors, although Karums has a competitive advantage over them(Karums is more practical to haveon “the go” and contains curd ingredient). Main competitors from the dairy industry are Muller,Ambrosia, and Laughing Cow. Secondly, there are sweet candies and cookies (which also include dairyingredients). In this section we identified mainly cookie snacks and chocolate snacks; these would beHappy Hippo, Caxton’s wafers, Fox’s cow biscuits.Thirdly, we can also consider cereal and protein bars.Although these are usually bigger, more consistent, more energetic, and usually not milky productsthey can still substitute as energetic snacks. Our product Karums is healthy, which is why we areconsidering this segment as well. Main competitors from this segment are Kellogs and Oh yeah! 3
  • 8. As for the price positioning among the competitors we have analysed where our product would lay interms of the competitors. Assuming that distributors would put a maximum mark up of 50%, price ofour product should be approximately £0.63. Thus for comparison with competitors we have estimatedproduct prices per 100gr.One can see from the appendicesExhibit 4 thatKarumscompared to the dairyproducts and cookies on the left side in the graph is twice or three times more expensive, whereascompared to the cereal bars our price is lower. This positioning is very important considering ourpromotional campaign, which is discussed in the further sections.3. Primary Research InsightsThe basis for this primary research is a comprehensive questionnaire (see Exhibit 5), which has beenfilled out by 134 respondents. Most of our respondents completed the survey online, while about 25%of them were surveyed in person. The questionnaire is intended to find out the respondents’ needs,preferences and opinions on current snacks and our new suggested product. Based on analysis ofconsumer needs and by applying K-Means Cluster Analysis with SPSS, the market will be segmentedinto different groups to get deeper insights about whom to target and how to position Karums on themarket. In addition, evaluating correlation results and descriptive statistics will help us to get a betterunderstanding of potential consumers. Besides nominal measurable data, e.g. gender, we used a scalewith a range from 1 – 4 for ordinal measurable data.a. Descriptive statisticsDescriptive statistics (see Exhibit 6) give clear evidence that the awareness of consuming healthy foodin general is quite high (mean: 3.04), but slightly lower in terms of consuming snacks, bars and similarproducts (mean: 2.61). Furthermore, the results show that on average parents are more concernedabout their children’s healthy diet in general (3.19) and about their children’s snack consumption (2.82)than about their own eating behaviour. It seems as if consumers are still tending to consume healthiersnacks, but compromising a bit by accepting the unhealthy nature of snacks. We state that the genericneed for snacks (almost 90% of all respondents consume snacks) is currently mostly satisfied by ratherunhealthy products (chocolate & crackers). This insight shows us that in contradiction to our resultsregarding the health awareness, consumers buy unhealthy snacks, although they actually would rathertend to buy healthier ones. This indicates that there is no product on the market, which can fulfilconsumer’s requirements at the moment. With our Karums product we want to attract exactly thosecustomers who feel a strong desire for both tasty and healthy snacks. One of the biggest issues to face,and which will be further discussed in following sections, is to sharpen the awareness for curd ingeneral: While only 17.2% of all respondents have ever tried curd, almost 60% do not even know whatcurd is. Nevertheless, 79.9% of all participants said they would try Karums, which points out the highpotential demand for such a product.b. CorrelationsThe results from executing a bivariate Pearson correlation (see Exhibit 7) clearly indicate a strongpositive correlation between both own and parental health awareness and type of snack consumptionat a significance level of 0.01. In addition, whether or not to try Karums correlates positively significantwith both health awareness and type of snack consumption. Having in mind the results from oursecondary research regarding the increasing health awareness, we are confident to meet consumerneeds with our healthy snack now and in the future. 4
  • 9. c. K-Means Cluster Analysis & SegmentationFollowing the needs-based market segmentation approach, we identified three segments after runninga K-Means Cluster Analysis with relevant variables (see Exhibit 8). As our target markets we selectedCluster 1, which represents the younger generation with a high health awareness and Cluster 2, whichrepresents middle-aged parents with a high health awareness and an even higher health-awareness fortheir children, while choosing a selective specialization strategy in line with suggested byKotler andKeller (2008). In addition, both segments rate favourably on the five key criteria for useful marketsegments as they are:1)Measurable: Please, see section 2 and above, 2)Substantial: Segments accountfor 43% and 41% of the total market, 3)Accessible: Distribution via supermarkets and grocery stores,4)Differentiable: Younger generation with no children on the one hand and middle-aged generationwith children on the other hand, 5)Actionable: Several different programs will be presented in followingsections.4. SWOT AnalysisOne of the ways to analyse the success of the product is to use the S.W.O.T. analysis approach. Thisanalysis looks into external and internal factors by analysing its strengths, weaknesses, opportunitiesand threats. It provides a good framework for reviewing strategy, position and direction of a product.Analysis is based on our secondary and primary researches. Nevertheless, one has to bear in mind thatour product is just in the stage of idea generation so the more proper analysis could be provided afterthe establishment of the Company (S.W.O.T. analysis summary is in appendices Exhibit 9).a. StrengthsCurrently in the UK there is no other snack or treat made from curd. The brand we are bringing inKarums is a snack made from the curd. The Karums brand that we will be importing iswell establishedand solid. We will be launching initially with only one of the product categories, however, as demandgrows we may consider launching new types of products (Karums has an extensive product portfolio).Since there is no other product made from curd we feel that we have a first mover’s advantage, whichwe can use to our benefit. Our product is going to be sold as a healthier snack. The UK market isadapting a health conscious trend, which is supported by the government. So as one can see from ourmarket analysis our product has strength in capturing most recent trends: healthy, no artificial flavours,and affordable tasty treat. In addition, Karums comes in small sizes which are easy to fit into bags andschool cases (ideal for children).Finally, since we are importing the product and not producing it locally(would require a high initial investment), we can invest more into advertising to develop the brand.b. WeaknessesUnfortunately for us, our product Karums has no brand name existence and no brand value in the UK.Also not everyone may know what the ingredient curd is, so we must explain this to the public andeducate them about curd’s health benefits. The market for healthy, organic, lactose snacks andproducts is highly competitive and brand dominated by companies and products such as Special K,Nestle, and Muller amongst others. In addition, the switching costs from buying one snack to anotherare very low, although presence in the market may be very relevant on this case.c. OpportunitiesThe UK government (NHS) encourages the population to live a healthy life (campaigns such as 5-a-day).Since our product is a healthy and tasty snack, the backing by the government for a healthy British 5
  • 10. population is certainly an opportunity. Furthermore, we are seeing this as an opportunity to create aposition in the market for our product to be a healthy, tasty snack made from curd.d. ThreatsAlthough there is no direct competition substitute and indirect competition is fierce and wellestablished in the market. Thus we need to develop a brand image for Karums; this requires high initialcapital to be spent on the market. Should the ingredient curd become popular and our well-knowncompetitors start using it we could be wiped out of the market, therefore, we need to spend capital onmarketing, branding and capitalizing on our first mover’s advantage. This market can also be consideredas not having high entry barriers in terms of customer loyalty. When a customer is choosing a snack ordairy product, the customer does not necessarily choose the product, the choice changes periodically.Customer choices for snacks are not very regular or long lasting. Moreover, Karums depends ondistribution channels to be able to make sales. In the UK, Karums does not have any other way ofselling, apart from the distribution channels we are going to utilizeBased on the S.W.O.T. we have noticed a few issues which will affect our success in the market:  Ensuring the target audience understands what curd is.  Targeting the right consumers.  Generating the right marketing position to ensure the consumers perception of the product is correct- healthier snack, which is also tasty (contains chocolate).  Creating a well-known brand name for the product and using the right marketing strategy to ensure the product stands out amongst the vast amount of the indirect competition.5. Marketing Strategya. Customer ValueCustomer value is being explained below using three elements, which are adapted from the Price-ValueCommunication Quadrants (Nagle and Hogan: 2005).Functional benefits: The product is relatively inexpensive. The packaging is very colourful and eye-catching. It must be noted that the brand is not well known, therefore, when we are building the brand,it is important to reassure customers that Karums has a long history (60 years of expertise) of highquality and standards.Psychological benefits: There are few curd products on the market which we feel will benefit us. Sincethe product is healthier and tastes good (contains small amount of chocolate) it allows us to call it aguilt-free snack. When targeting parents, psychologically they feel confident that their children areeating something that provides them with a healthy dose of calcium which growing children mostcertainly need (the best thing a mother wants is a happy child).Relative cost of search: As a consumer good that will be sold in the major supermarket chains the costof finding the product is relatively low.Based on all the benefits of the product (that we believe are relative to the target market) and the easeof searching for the product, we can deliver ‘customer value’ that matches our brand. 6
  • 11. b. PositioningCurrently the market is unaware of the brand Karums. It is up to us to ensure that the marketingcommunications we use to launch and promote the brand position in the way we want. We need todevelop a position for the brand to ensure the target audience have the right perception about theproduct.We need to create a position that will build our brand and also ensure successful introductionand education about the curd ingredient, “Deciding on a position requires (1) determining a frame ofreference, (2) identifying the optimal points of parity and points-of-difference brand associations, and(3) creating a brand mantra to summarize the positioning” (Kotler and Keller: 2008). 1) Competitive frame of reference: this would include brands that sell dairy products and dairy snacks (yoghurts from Muller and Alpro-Soya). We also compete with brands that sell crackers, cereal bars and chocolates, as these are also snack options. 2) Points of parity and Points-of-difference: Points of Parity: healthy, natural ingredients, calcium, snack size.Points of difference: curd, genuine healthy image that gives you and children energy, “healthy and tasty” a term not often seen together. 3) Brand mantra: the product line we are launching is targeted to children. It is our aim to ensure the children look at our product and know it is good for them and helps them grow (the calcium in the product is healthy for their bones) more importantly it is a colourful product that looks fun and is tasty since it includes chocolate. We must also ensure the parents understand the health benefits of the product made with natural ingredients.The above three points are used to help define the brand position. The position will be highlighted withthe use of one of Porters Generis Strategies, the differentiation strategy. Our marketing communicationwill be aimed to show the product is unique but speaks to our target audience. We want the product toinitially target children and parents; however, if the market grows successfully, Karums have otherproduct lines that can be used to target adults (curd desserts, curd, milk, etc.).c. Target marketWe believe that all those who are health conscious will see the attractiveness of our product. However,initially we are specifically targeting the market for children. We will communicate the product tochildren through fun and colourful marketing communications. Whilst children are usually theinfluencers in the purchasing decision, the parents are the deciders.Therefore, we must also targetthem. The parents need to be educated about the product and its health benefits.6. Marketing Mixa. ProductKarums is a 45-gram snack made of curd, a product of sour milk and lactic acid, natural vanillaflavouring and a glaze cover of chocolate. We have chosen to go with only one product of variousselections of flavours and different goods that the manufacturing company produces as part of our firstphase of market penetration. The product will be packed in its original orange packages as to not investany capital in changing the colouring or the packaging and focus more on the marketing strategies andtools we wish to implement to penetrate the market successfully. Once the product has shown itssuccess and the market is deemed fit for more flavours,Karums will introduce phase two of this projectwhich includes manufacturing of the curd snacks with different flavours in the UK. There have beendiscussions about customizing the product to better suit the trends of the UK market upon the local 7
  • 12. manufacturing, perhaps a different package colour and more targeted at other segments. Some ofthose segments include the health conscious, the flavour oriented, and the busy metropolitan cityinhabitants.However, as far the first phase of operations goes, the customization of the product will remain to aminimum, which is changing the writing on the package to English. Moreover, the real customizationoccurs in the promotional campaign (see promotion part) that we wish to execute. Each tool used hasbeen especially customized to fit the UK’s trends.b. PriceEntering a new market will require Karums to use a marketing-penetration pricing scheme. Karums willbe charged at a competitive price of£0.42 per unit to our distributors. We will limit the maximum priceour distributors can charge by allowing them to sell the product at a maximum premium of 50%. Thiswill be our MSRP (Manufacture Suggested Retail Price) price for our retailers to prevent over pricing ofthe product. We determined the price of our product by evaluating the unit cost of our product andprojecting a target price. We projected the target price of our product at a 40% return based on a 2,1million pound initial investment. In order for our product to succeed in the UK market we will need tofocus on higher volume of sales. We believe that our product is competitively priced in a way to achieveour projected sales volume of 5 million units in the first year of operations (we have considered targetmarket population). The price is considerably low because of the limited shelf life and the need toincrease turnover due to its perishable content.Our product compared to our competitors is unique, thusKarums does not have a direct competitor inthe UK market. However, Karums does have indirect competitors that sell products in the healthycategory. The price of Karums compared to competitors will be sold approx. 20% lower than any of ourindirect competitors (Kelloggs, etc.). As mentioned before, we are estimating high volume sales of ourproduct in the first year.c. PlaceIn first phase of our operations we plan to import the product straight from the manufacturing facilityin Latvia, a little less than a two-hour flight, to our 2.500 sq ft warehouse in the South East London,strategically chosen due to low cost and proximity to distributors. The warehouse is of courserefrigerated to suit our fragile product contents. From the warehouse the products are thentransported using our refrigerated trucks to our authorized retailers around the UK. Those distributorsinclude mainstream supermarkets such as Sainsbury’s, Waitrose, and Tesco. Distributors will alsoinclude school cafeterias and school catering companies to make the product available for our targetmarket easily and conveniently. We have chosen this distribution scheme to best suit our operationalplans, once the product is well established in the market this scheme is due to changes to cope with ourgrowth.Placing our product on the shelves of the above mentioned supermarkets and distribution centrescreates an easy access to our product whether the decision maker is the parent or the child.d. PromotionCommunicating our product value to the customers is essential to the success in the UK market.Karums has many benefits in addition to it being a tasty treat it also acts as a healthier substitute toother chocolate or glucose based snacks. Hence, our promotional campaign will constitute of two major 8
  • 13. parts: the first being an awareness campaign about what Karums is and what it represents the second isan educational introduction to curd.Firstly, to introduce the product we plan to set tasting stations placed in various supermarkets,shopping malls, and parks spread across the UK. This gives us a chance to see how the people react tothe product in terms of the quality, the brand, and the idea behind it. Simultaneously with our tastingstations we wish to target our clients by using print advertising in magazines targeted at mothers andhealth oriented people, examples of the print advertisements are included in Appendices (seeExhibits13 - 16). In addition to print advertising we plan to execute the use of outdoor advertising suchas mobile banners and billboards(see Exhibit 16). This would most definitely increase our coverage ofvarious areas and implement the “everywhere” strategy. Being a new product the public should beconstantly reminded of Karums. Thus we do not fear the disadvantages of using mass advertising todeliver our message. Another media vehicle we wish to use to communicate our message to ourcustomers would be radio advertising. Placing advertisements on the radio during peak hours, morningand late afternoon as those would be the times when children will be heading to school and headingback home, would allow us a massive range of coverage to reach the maximum amount of customerspossible within a short period of time. One of the radio advertisements is part of a series of songs byRock n’ Roll legends the Beatles, we have chosen to go with the Beatles to show our dedication tocustomizing our product and business to British terms. We have based our radio advertising on beingshort and concise.(Please listen to attached file)Moreover, we are suggesting using a brand ambassador to help launch our product. We suggest JamieOliver a British chef who is well known and certainly well loved. Jamie has launched Jamie Oliver’s FoodRevolution; a motion to go around schools in the UK and the US to promote healthier eating to childrenin schools. Jamie is a successful chef and also a public figure who is respected for his fight against childobesity as well as to encourage a healthier Britain. Since our product is a healthier snack, which istargeted to children and their parents, using a brand ambassador like Jamie would ensure that parentsassociate the product with a healthy life-style. Also Jamie is a responsible and respected chef and publicfigure with a stable family of his own. We feel confident about associating his image with our brandimage.The other part of our promotional campaign will include the same media tools but instead of the mereeducation of what curd and Karums are, this will focus more on the benefits of Karums, and thepossibility of it being a healthier substitute to other classic snacks. This campaign will be launched rightbefore the introduction of the product to the market and after the public has a better idea of whatKarums is. This campaign will concentrate more on active healthy words such as “health, happy, guiltfree, and tasty.” With such a campaign we believe that we will be able to penetrate the market in sucha way as to surely enter the market, create the demand, and create a new trend. The new trend oftreating oneself to guilt free, tasty, and fulfilling snack at the end of a long day or not worrying aboutone’s children munching on too many snacks, which could cause any dangerous health related illnesses(see appendices Exhibit 13and 15).As part of our launch campaign, we plan to start a new children’s junior football competition to be heldannually. This competition will be called “KarumsActive” (see appendices Exhibit 12) and it will be inassociation with the department of education and the ADCS (The Association of Directors of Children’sServices Ltd). KarumsActive is a chance for children of different ages to come together and have a faircompetition, we hope that this would teach the children lessons in teamwork, get them to be active in 9
  • 14. the society, and give them an incentive to lead a healthier life style. This campaign will alsoshowsKarums’s commitment to the UK market, the concern we have for the leaders of tomorrow, andhelp establish a health-centred image in the public’s eyes.7. Launcha. Launch MaterialThe launch of a product is an essential part in determining its success rate. By utilizing the promotionalcampaigns and tools mentioned above (Marketing Mix) we believe we can achieve great results bycreating a niche market, educating and generating awareness, and establishing a brand image in thepublic. Some of the magazine and print advertising material is included in the appendices please referto appendicesExhibits 11 - 16.Launch date is very important if one wants to capture large proportion of share at once. Thus we willlaunchKarumsat the time of the UK’s Children’s Day on the 20thof November 2012. The promotionalcampaign will begin in September, two months before, and this would generate the education andcuriosity that would aid in achieving the sales results and success of Karums.b. Launch BudgetAs mentioned earlier the promotional campaign, we are utilizing for the launch of Karums, is one that isessential for the product’s success by using a range of print, outdoor, and radio advertisements in abalanced accord to deliver Karums message out to the public. The budget is based on the initialinvestment of 2.1 million pounds. Forecast of the sales are based on population in the targetedsegments. Based on the budget we plan to break even in the Year 5 see appendices Exhibit 10.Afterdeducing the fixed and variable costs such as the warehouse, the purchase of the transportation trucks,office space etc. the remainder can be comfortably used to invest in advertising. Since we plan to startthe campaign two months before the launch all the expenses shown in Exhibit 11show the break downbetween the radio, magazine, and outdoor advertisements for the span of three months.c. Contingency planPhase One: As mentioned earlier, phase one constitutes the direct importing of Karums from Latvia tothe UK. This minimizes the initial capital investment and reduces many risks in case the product were tofail for any reason it would be easy to discontinue operations and cancel orders. In the case ofcampaign failure with a full warehouse the company will adopt a damage control policy where theproducts will be sold at a lower price (£0.27) and distributed at lower standard off license stores, inorderto minimize losses.Phase Two: Upon the success of phase one, the company plans on starting the production of Karumswith a various selection of flavours locally in the UK. The implementation of the second phase meansthat the product proved successful in phase one which also means that the brand has already beenestablished and Karums has a generous piece of the market share. In case of failure in phase two thecompany plans on pursuing a number of strategies. The first being focusing back on manufacturing theoriginal vanilla flavoured snack that has already proved successful and returning to make a moredetailed market research on what flavours would work best for the market. Another strategy to bestudied and put into action is the concentration on markets nearby such as Ireland or Scotland. There is 10
  • 15. great potential to be met in these markets given the close distance and the common language;transportation and labelling are not be unfeasible issues. 11
  • 16. AppendicesExhibit 1: Eating habit trends 2008-2011 Base: Internet users aged 16+Source:Perkins: 2011Exhibit 2: How UK retails sales of Fairtradeconfectionery have grown (£m)Source:Fairtrade Foundation: 2011bExhibit 3: Main Competitors Segment Brand Product Description Dairy Muller Yoghurt Yoghurt Dairy Ambrosia Devon Custard Custard dairy pot, similar to yoghurt Dairy Laughing Cow Triangle Cheese Cheese in a triangle format 12
  • 17. Snack with cracker stickers to dip in Dairy Laughing Cow Cheez Dippers the cheese Candy/cookie made of wafer biscuit Candy Kinder Happy Hippo outside with milk flavoured icing inside Candy/snack made of wafers with Cookie Caxton Pink and White pink and white marshmallow inside Cookie Foxs Biscuits Cow Malted milk biscuits Cereals Kellogs Mini Breaks Cereal Snack Cereals Kellogs Bars Cereal Bar Protein bars all natural with peanut Cereals Oh Yeah! Protein Bars butter, honey and nuts or peanut (protein) butter chocolate chipSource: made by authorsExhibit 4: Price positioning compared to competitors Comparison with competitors (price per 100gr) £2.35 Cereal bars £1.83 Candies/Cookies £1.39 £1.26 £0.91 £0.97 £0.66 £0.53 £0.44 £0.35 £0.33Source: made by authors 13
  • 18. Exhibit 5: Questionnaire Questionnaire Consent: I understand that the research I am taking part in is for an assignment completed by MIB Participants at Hult International Business School. I understand that I will not be personally identifiable in the research andthat any personal details I give will be shared only with the student project group and the academic staff at Hult International Business School for the purposes of assessment. I am happy to participate in this project and understand that I am free to leave at any point during the research. (compulsory question) Yes1 Which category below includes your age? (compulsory question) <18 18 - 25 26 - 35 36 - 50 >502 Please select your gender. (compulsory question) Male Female3 Do you have children? If you dont, please skip to question 6. (compulsory question) Yes No4 If you do have children, how strongly do you take care of a healthy, balanced diet of your children in general? (1=low; 4=high) 1 2 3 45 If you do have children, would you rather say that you accept your children’s snacks, bars etc. being unhealthy (tick 1) or do you feel a strong desire for buying healthier snacks, bars etc. (tick 4)? 1 2 3 46 How strongly do you take care of a healthy, balanced diet for yourself in general? (1=low; 4=high) (compulsory question) 1 2 3 47 Would you rather say that you accept snacks, bars etc. being unhealthy (tick 1) or do you feel a strong desire for buying healthier snacks, bars etc. (tick 4)? (compulsory question) 1 2 3 48 Do you often eat or buy snacks? (like crackers, chocolates, yoghurt, fruit, bars) (compulsory question) Not at all Yes, often (from 2 to 5 per week) Sometimes (up to 1 per week) Yes, very often (more than 5 per week)9 What kind of snacks do you prefer? (compulsory question) I do not eat/buy snacks Yoghurt Chocolates 14
  • 19. Crackers Fruit Cereal Bars10 Do you know what curd is? (compulsory question) Yes No11 Have you ever tried curd before? (compulsory question) Yes No I am not sure12 Our product is a curd snack which is approximately five centimeters long, made from milled and pressed curd, and glazed with chocolate. This curd snack is very rich in natural nutrients and calcium, which is useful and healthy for the individual. Would you be interested in our product? (compulsory question) Yes No Thank you for your participation!Source: made by authorsExhibit 6: Descriptive Statistics Descriptive Statistics N Minimum Maximum Mean Std. Deviation Age 134 1 5 2,73 1,287 Children 134 1 2 1,57 ,496 Health 134 1 4 3,04 ,779 Bars 134 1 4 2,61 ,900 ChildrenHealth 57 2 4 3,19 ,667 ChildrenBars 57 1 4 2,82 1,020 KnowCurd 134 1 2 1,59 ,494 TriedCurd 134 1 3 1,99 ,694 TryKarums 134 1 2 1,20 ,403 Valid N (listwise) 57Source: made by authors with SPSS WhichSnacks Frequency Percent Valid Percent Cumulative Percent Valid None 11 8,2 8,2 8,2 Crackers 26 19,4 19,4 27,6 Chocolate 51 38,1 38,1 65,7 Yoghurt 12 9,0 9,0 74,6 Fruit 12 9,0 9,0 83,6 Cereals 22 16,4 16,4 100,0 Total 134 100,0 100,0Source: made by authors with SPSS 15
  • 20. Exhibit 7: Pearson Correlation table Correlations Age Children ChildrenHealth ChildrenBars Health Bars TryKarums ** ** **Age Pearson Correlation 1 -,533 ,562 ,532 ,122 -,013 ,004 Sig. (2-tailed) ,000 ,000 ,000 ,159 ,883 ,966 N 134 134 134 134 134 134 134 ** ** **Children Pearson Correlation -,533 1 -,965 -,904 ,080 ,133 -,132 Sig. (2-tailed) ,000 ,000 ,000 ,357 ,127 ,128 N 134 134 134 134 134 134 134 ** ** **ChildrenHealth Pearson Correlation ,562 -,965 1 ,916 ,036 -,037 ,015 Sig. (2-tailed) ,000 ,000 ,000 ,676 ,667 ,862 N 134 134 134 134 134 134 134 ** ** **ChildrenBars Pearson Correlation ,532 -,904 ,916 1 ,100 ,008 -,066 Sig. (2-tailed) ,000 ,000 ,000 ,253 ,927 ,452 N 134 134 134 134 134 134 134 ** **Health Pearson Correlation ,122 ,080 ,036 ,100 1 ,792 -,623 Sig. (2-tailed) ,159 ,357 ,676 ,253 ,000 ,000 N 134 134 134 134 134 134 134 ** **Bars Pearson Correlation -,013 ,133 -,037 ,008 ,792 1 -,529 Sig. (2-tailed) ,883 ,127 ,667 ,927 ,000 ,000 N 134 134 134 134 134 134 134 ** **TryKarums Pearson Correlation ,004 -,132 ,015 -,066 -,623 -,529 1 Sig. (2-tailed) ,966 ,128 ,862 ,452 ,000 ,000 N 134 134 134 134 134 134 134**. Correlation is significant at the 0.01 level (2-tailed). Source: made by authors Exhibit 8: K-Means cluster analysis output Final Cluster Centers Cluster 1 2 3 Age 2 4 4 Number of Cases in each Cluster Children 2 1 2 Cluster 1 58,000 ChildrenHealth 0 3 0 2 55,000 ChildrenBars 0 3 0 Health 3 3 3 3 21,000 Bars 3 3 3 Valid 134,000 TryKarums 1 1 1 Missing 1,000 Source: made by authors with SPSS Source: made by authors with SPSS 16
  • 21. Exhibit 9: S.W.O.T. analysis Strengths Weaknesses no other snack or treat made from curd Karums has no brand name in the market well-established and solid company it may be difficult to explain the term ‘curd’ first mover advantage market is highly competitive launch a selective range of products low switching costs importing products are small and can easily fit healthy, snack with a difference- curd Opportunities Threats the government is constantly encouraging the lot of indirect competition UK population to eat healthily no customer loyalty develop a unique position in the market dependable on distributorsSource: made by authorsExhibit 10: Budgets for the 5 year period Budget Year 1* Year 2 Year 3 Year 4 Year 5 Revenues 1.050.000 4.200.000 8.400.000 10.080.000 12.096.000 CoS Import costs 500.000 2.000.000 4.000.000 4.800.000 5.760.000 Additional costs 125.000 500.000 1.000.000 1.200.000 1.440.000 Gross profit 425.000 1.700.000 3.400.000 4.080.000 4.896.000 40% 40% 40% 40% 40% Variable costs Advertising costs 112.000 95.000 120.000 120.000 120.000 Other variable costs 250.000 1.000.000 2.000.000 2.400.000 2.880.000 General expense 50.000 150.000 150.000 150.000 150.000 Salaries 133.333 430.000 430.000 430.000 430.000 Rent 4.000 12.000 12.000 12.000 12.000 Truck Expense (insurance, licenses) 12.000 12.000 12.000 12.000 12.000 Profit/Loss -136.333 1.000 676.000 956.000 1.292.000 Notes: Forecasted sales of units 2.500.000 10.000.000 20.000.000 24.000.000 28.800.000 Import cost/unit 0,20 0,20 0,20 0,20 0,20 Sales price to distributors 0,42 0,42 0,42 0,42 0,42 Sales price to end customers 0,63 0,63 0,63 0,63 0,63 *first year comprise only 4 months as launch is planned in NovemberSource: made by authors 17
  • 22. Exhibit 11: Karums Active campaign advertisementExhibit 12: Advertisement costs break down Period/Media Vehicle Price Type Price/month Frequency in Total months 30 second spaceRadio 200 24.000 3 72.000 played 4 times a dayMagazine 1.000 Full page with colour 1.000 15 15.000Mobile Billboards 2.000 Mobile Poster 2.000 25 50.000Billboards 7.000 Large Still Billboard 7.000 10 70.000Total 207.000Source: made by authors Source: made by authors 18
  • 23. Exhibit 14: Karums advertisement targeting parents Exhibit 13: Karums informational advertisementSource: made by authors Source: made by authors 19
  • 24. Exhibit 16: Karums advertisement Exhibit 15: Outdoor advertisementSource: made by authors Source: made by authors 20
  • 25. BibliographyAAAOE (2011) Sell Sweet Curd Snack Karums. [online] Available at:<http://www.aaaoe.com/sell/7/milk_products_6163/Sell_Sweet_Curd_Snack_Karums.html>[Accessed: 24 November, 2011]Central Intelligence Agency (2011) The World Fact Book. [online] Available at:<https://www.cia.gov/library/publications/the-world-factbook/geos/uk.html> [Accessed: 24November, 2011]Dairy UK (2011) Milk Utilisation. [online] Available at:< http://www.dairyuk.org/industry-data-mainmenu-277/milk-utilisation-mainmenu-289> [Accessed: 20 November, 2011]Fairtrade Foundation (2011a) Fairtrade Sales Soar to Well Over £1bn Showing the UK Still Cares inTough Times [online] Available at:<http://www.fairtrade.org.uk/press_office/press_releases_and_statements/february_2011/fairtrade_sales_soar_to_well_over_1bn_showing_the_uk_still_cares_in_tough_times.aspx> [Accessed: 17November, 2011].Fairtrade Foundation (2011b). Fairtrade Foundation Commodity Briefing: Cocoa Summary [online]Available at:<http://www.fairtrade.org.uk/includes/documents/cm_docs/2011/c/cs0004_cocoa_summary_download.pdf> [Accessed: 17 November, 2011].Fletcher A. (2006) UK Confectionery Market Outlook ‘Positive’ [online] Available at:<http://www.confectionerynews.com/Formulation/UK-confectionery-market-outlook-positive>[Accessed: 17 November, 2011].Karums (2011a).History of Karums. [online] Available at: <http://www.karums.eu/en/history/history-of-karums> [Accessed: 16 November, 2011]Karums (2011b).Products. [online] Available at: <http://www.karums.eu/en/products/curd-snacks>[Accessed: 16 November, 2011]Key Note (2011).Confectionery Market Report [online] Available at:<http://www.keynote.co.uk/market-intelligence/view/product/10421/confectionery> [Accessed: 17November, 2011]Kotler P. and Keller K.L. (2008) A Framework for Marketing Management (Fifth Edition ed.). UK:Pearson.Nagle T.T. and Hogan J. E. (2005) The Strategy and Tactics of Pricing - A guide to Growing MoreProfitably (Fourth Edition ed.).Pearson International Edition.Nieburg O. (2010) Yoghurt fastest growing dairy market – YouGov research. [online] Available at:<http://www.dairyreporter.com/Markets/Yoghurt-fastest-growing-dairy-market-YouGov-research>[Accessed: 20 November, 2011] 21
  • 26. Perkins B. (2011). Chocolate Confectionery [online] Available at: <http://www.mintel.com/>[Accessed: 17 November, 2011]William Reed Business Media SAS (2004).Latvian dairy goes multi-functional. [online] Available at:<http://www.foodnavigator.com/Financial-Industry/Latvian-dairy-goes-multi-functional> [Accessed:16 November, 2011]. 22