Changes In Product Quality And How Consumers Are Re-acting Towards It Submitted to :KamilYousuf Submitted by: Roydon D’mello Misbah Karim Rukhama Mujtuba Mirabel D’souza Saba Shiekh Maliha Naeem Date: 14- Aug-2011’
Pakistan Economic Survey 2010‐11• The inflation rate as measured by the changes in Consumer Price Index (CPI) stood at 14.1 percent during (July-April) of the current fiscal year 2010-11, as against 11.5 percent in the comparable period of last year.• The increase in inflation rate during the current year 2010-11 is attributable to the increase in food price inflation which has been mainly due to increase in prices of sugar, milk, poultry, meat, fresh vegetables and fruits owing to shortfall in production of these items and significant increase in world food stuff prices
Consumer behavior affected by recession• Many consumers who cut back on new clothes, out- of-home entertainment and take-away meals and switched to cheaper grocery to make ends meet plan to stick to these new habits even when economic conditions improve,• According to the Nielsen survey, nearly one in three global consumers will continue to economize on gas and electricity. In Pakistan consumers are forced to do so...• Savings : Consumers do not appear to have fully “come to grips” with what it would take to sustain a depressed economy
• Spending Time at Home, Reductions in eating out have resulted in sharp declines in restaurants’ performance—additional declines are imminent.• Delaying Substantial purchases on consumer durables.• Subconsciously reduce charitable spending
How to companies react to the recession• Companies can either cut on costs. This can be done by lowering their quality, cutting down their advertisement budget, reducing their staff. e-g Mr. Burger• Prices remain intact for their normal products or services but they introduce new products for the lower classes . e-g Olpers milk and airlines.• Increase prices and still the consumers pay e-g good restaurants in Karachi
Engro’s Olper’s• One litre Olper’s TetraPack = Rs 76, an increase of six rupees• 1.5 litre package, price went from Rs 98 to Rs 108. Effective May 2011• Government allowed companies selling packaged milk increase of 10% in price because of packaging and transportation costs. Increase in price was more.
Engro’s Dairy Omung• Dairy Omung = Rs 65/ litre• Fresh milk available for Rs 66, government set price of Rs 60• Dairy Omung, low cost UHT milk priced at Rs11/liter lower than Olper’s• Highly competitive with fresh milk• Margins are low, Engro targeting the huge loose milk market mainly SEC B
Airline Industry• Lack of employment, people saved as opposed to spending. Thus less air travel• Airlines merging. Air France-KLM merger, Lufthansa/Swiss merger• Airlines providing cheap tickets with different holiday packages• Southwest Airlines announced it will institute festival seating on all flights beginning in 2010. Southwest is committed to providing a festival like in-flight
Pakistan Telecommunication Authority (PTA)• Cell phones have become a necessity• Cellular phone subscribers witnessed more than 100 % growth in FY 2010-11• Addition of 9.7 million new connections despite unending competition and severe regulatory measures in the sector• Multiple subscription trend, call packages, SMS bundles and cheap SIMs have supported the growth of cellular phone connections in Pakistan• Cell phone users have increased in rural and urban areas with the increasing penetration of services, customer care facilitation, availability of SIM, scratch cards and easy-load
Nokia• Nokia has dominated the cell phone market in Pakistan over the years• Nokia vendors have lost 2% points of share this year• Chinese manufactured cell phones have flooded Pakistani markets• Nokia does not have the first mover advantage when it comes to Dual SIM phones• Other challenges for the year include a shortage of components because of the earthquake in Japan
Nokia Pakistan• Threatened by Apple’s iPhone, HTC, Samsung and Motorola• Invested billions of dollars in building up mobile internet services, effectively admitted defeat in its services strategy• N8 smart phones were introduced in an effort to recover the lost market share, they didn’t quite succeed at doing so
Complaints of Nokia Users• Gets heated while charging• Turns on and off by itself• The screen freezes• Small keys often result in typing errors• Difficult to hear conversations clearly even at maximum volume• Poor battery life for those who speak frequently• The small speaker holes frequently get covered with dust due to their small size, thus phone calls can not be heard.
Nokia - Internationally• Nokia has dominated the mobile phone business for almost two decades• The introduction of the iPhone in 2007, followed by the arrival of Googles Android operating system in 2008, has eroded its market share and profits substantially• New numbers from Gartner reveal that Nokia’s current market share is the lowest its been since 1997, nearly 14 years ago• While Nokia’s share was plummeting, worldwide mobile devices sales jumped 19% year-over-year. Google’s Android takes a 36% slice of the pie and Apple doubled the number of iPhones it sold last year• In the context of the broader Smartphone marketplace, Nokia now amounts to only a 31% share, which is a major dip relative to its 40% slice in Q4 2009 and 38% in Q3 2010.
NOKIA and MICROSOFT form partnership• Nokia has joined forces with Microsoft in an attempt to regain ground lost to theiPhone and Android-based devices• It will result in Nokia using the Windows phoneoperating system for its smartphones, and so,Nokias existing operating systems (Symbian and Meego)will eventually have to be sidelined•Symbian, which runs on most of the companys current devices will become a franchise platform, although the company expectsto sell approximately 150 million more Symbian devices in future• The MeeGo platform was expected to form the core of Nokias futureSmartphone strategy and Nokia still plans to ship one Meego device by the end of2011• Microsofts Bing will power Nokias search services, while Nokia Maps would be acore part of Microsofts mapping
NOKIA & Competition• Googles Android operating system and Apples iPhone are Nokia’s biggestcompetitors•The first iPhone was shipped in 2007 and ushered in an era of touch screen technology - Nokia still didn’t have a product that was close to the experience•Android came in 2008 and took Nokia’s leadershipposition in Smartphone volumes• While the phone market has recovered since a slump in 2009, Nokia has been slow to react to the growing Smartphone competition•Nokia has faced a new threat of cheap phones in Asia from companiesunheard of like Micromax, Carbon, Lava, etc.• The demand for Symbian and windows OS mobile phones have fallen downheavily. Googles Android has got a good acceptability in the public and Nokia hasnot been able to implement Android in their smart-phones
NOKIA’S Quality Decline• As Nokia’s quality goes down, it also slows down the production•Nokia E90’s faced defective microphone problems of background noiseduring phone calls, it raised customer complaints and scratches on the phonescreen caused by some keyboard keys touching the screen were also reported• Customers feel that while trying to upgrade their tools and features, Nokiaseems to be decreasing the quality of hardware and accessories
Market Share• In the last 27 years it has Market Share gained 30% market share with competition from EBM which now enjoys 40% market share after 40% 56 years. 30% 20% 10%• Prime emphasis on 0% quality products coupled EBM CBL with an excellent distribution network.
Competition• Company Market Share• Continental Biscuits Limited. 30.3%• English Biscuits Manufacturing Co. 43.0%• Ismail Industries, Bisconni. 10.5%• Asian Foods. 6.1%
LU becomes a Superbrand!• Continental Biscuits’ ads end with the statement, • ‘ A QUALITY PRODUCT OF CONTINENTAL BISCUITS’• CBL (LU) has been awarded the Superbrands Award 2011 for its quality
STRATEGY• CBLs strategy is to be a leader in the biscuit business driving long-term sustainability and delivering sustainable performance for the company, environment and the community.
Differentiation• CBL has successfully applied “differentiation” to its market positioning strategies by capitalizing on its existing brands, maintaining & improving their quality, advanced technology, individual brand advertising emphasizing together the complete range of biscuits by LU thus building the unique family name LU.
SALES• Sales Operations are Systemized i.e., Invoicing, Dispatches , Booking , Delivery, Sales Reporting• Strong Competitor Tracking• Sales team yet has to be given some valuable Training & Coaching Sessions to be fully equipped to face future challenges of Modernization
MARKETING• Marketing Department in the year 2009 and 2010 has floated some brilliant ideas to be roll out and company has turned around the sales with consecutive growths of 52% volume growth
COMPETITORS• The major competitors of CBL are Bisconni and EBM• English Biscuits Manufacturers which has about 53 brands under EB and about 44 brands under Coronet Foods Private Ltd. (CFL)
Characteristics Affecting Consumer Behavior in the Biscuit Market• Different characteristics of the consumers affect their buying patterns and the way they perceive various marketing offers. It is important for businesses to determine what types of characteristics affect the specific consumers of their products Social class of the consumer Family Age Lifestyles
• The market has been segmented primarily into adults and kids with further segmentations in terms of taste profiles/Lifestyles and hence: Soft & Sweet Plain Bakeri, Gala Cream Filling Prince Salty Snacks TUC Indulgent/Sweet Candi Plain Glucose Tiger Ingredient Based Zeera Plus Healthy Wheatables
Consumer Buying Roles• Consumers differ in buying behaviors in terms of involvement in the purchase of a product and perceiving brand differences.• In case of biscuits, the type of consumer buying behavior involved would be Variety-seeking buying behavior , low consumer involvement but significant perceived brand differences.• consumers are frequently engaged in brand switching and they would generally go for a new brand if it is initially successful and renowned.