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  1. 2. Kellogg Company Mission Statement <ul><li>“ Kellogg is a Global Company Committed to Building Long-Term Growth In Volume and Profit and to Enhancing its Worldwide Leadership Position by Providing Nutritious Food Products of Superior Value” </li></ul><ul><li>W. K. Kellogg </li></ul>
  2. 3. Idea generation Idea screening Concept develop-ment Marketing strategy Business analysis Product development Market testing Commerc- ialization Send the idea back for product development Modify the product or marketing programmer Drop Lay future plans Yes No No No No No No No No No No Yes Yes New Product Development Process
  3. 4. Budgeting for New Product Development 13984000 5721000 Total 10000000 5000000 1:2 2 National Launch 2000000 500000 1:2 4 Test Marketing 1600000 200000 1:2 8 Product Development 320000 20000 1:2 16 Concept Testing 64000 1000 1:4 64 Idea Screening Total Cost $ Cost per Product Idea $ Pass Ratio Number of Ideas Stage
  4. 5. Idea Generation <ul><li>Kellogg's recognized the opportunity to stretch the brand by investments that would: </li></ul><ul><li>Revitalize it. </li></ul><ul><li>Extend and further develop its growth phase. </li></ul><ul><li>Help to delay the onset of the maturity phase. </li></ul><ul><li>International expansion is the biggest area for growth for Kellogg’s. </li></ul><ul><li>If they can develop a better pricing strategy and guarantee lower prices, they can reduce costs while increasing their market share. </li></ul><ul><li>Kellogg’s wanted to launched Special K Red Berries in the UK. </li></ul>
  5. 6. Continue….. <ul><li>In considering Special K, the company concentrated on changing the product through new variants. </li></ul><ul><li>Although Special K was already a well established brand, its full potential had never been reached. It was viewed as a stand-alone product, and Kellogg’s had not created any variants or brand extensions to develop the core product. </li></ul><ul><li>Kellogg’s already knew that women who are keen to watch their weight and shape seek a range of solutions throughout the day - not just at breakfast. </li></ul><ul><li>Develop Special K as a healthy snack. </li></ul>
  6. 7. Idea Screening <ul><li>Sorting the proposed ideas into three groups: </li></ul><ul><li>Promising Idea </li></ul><ul><li>Marginal Idea </li></ul><ul><li>Rejects </li></ul>
  7. 8. Product Success Requirements aRating Scale: 00-0.30 Poor, 0.31-0.60 Fair, 0.61-0.80 Good, Minimum Acceptance rate: 0.61 0.69a 1.00 Total 0.05 0.50 0.10 Lack of Strong Competition 0.14 0.70 0.20 High Marketing Dollar support 0.18 0.60 0.30 High performance to Cost Ratio 0.32 0.80 0.40 Unique or Superior product Product Ratings Product Score Relative Weight Particulars
  8. 9. Probability of Success Overall Probability of Success Probability Of technical Completion = X Probability of Commercialization given technical X Probability of economic Success given
  9. 10. Concept Development And Testing <ul><li>A product idea can be turned into several concepts: </li></ul><ul><li>Who will use this Product? </li></ul><ul><li>Product can be aimed at children, teenagers, Young or Middle-aged adults or Older adults </li></ul>
  10. 11. Benefits of the Product <ul><li>What primary benefit should this product provide? </li></ul><ul><li>Taste </li></ul><ul><li>Nutrition </li></ul><ul><li>Refreshment </li></ul><ul><li>Energy etc. </li></ul>
  11. 12. Consumption <ul><li>When will people will consume the product? </li></ul><ul><li>Breakfast </li></ul><ul><li>Mid-morning </li></ul><ul><li>Lunch </li></ul><ul><li>Mid-afternoon </li></ul><ul><li>Dinner </li></ul><ul><li>Late Evening etc </li></ul>
  12. 13. Formation of Concepts <ul><li>Concept 1: An instant breakfast catering all segments (age) who wants a nutrition breakfast without preparation. </li></ul><ul><li>Concept 2: A tasty Snack for children to have twice in a day i.e., in morning and evening. </li></ul><ul><li>Concept 3: A healthy and lite supplement for older adults to consume in the late evening before they go to bed. </li></ul>
  13. 14. Product Positioning Map Bread & Toast, Butter & Eggs Tea Cold Milk Idli Dosa Upma Instant Breakfast Expensive Inexpensive Slow Quick
  14. 15. Concept Testing <ul><li>Today firms can use: </li></ul><ul><li>Rapid Prototyping </li></ul><ul><li>Virtual Reality </li></ul>
  15. 16. Marketing Strategy <ul><li>The plan consist of three parts: </li></ul><ul><li>1 st part describes: </li></ul><ul><li>Target Market Size </li></ul><ul><li>Structure </li></ul><ul><li>Behaviour </li></ul><ul><li>The Sales </li></ul><ul><li>Market Share </li></ul><ul><li>Profit Goals in the first few years etc. </li></ul>
  16. 17. Kellogg’s Customer Analysis <ul><li>Who Are the Buyers? </li></ul><ul><li>Parents, Older Adults </li></ul><ul><li>How Often Do They Purchase? </li></ul><ul><li>Kids cereal are purchased roughly 18 times a year </li></ul><ul><li>10th fastest-moving product in the supermarket </li></ul><ul><li>Where Do they Want to Buy? </li></ul><ul><li>Grocery Stores responsible for 99% of cereal sales </li></ul><ul><li>Who Are the Influencers? </li></ul><ul><li>Kids </li></ul><ul><li>Who consumes the goods? </li></ul><ul><li>Kids under 18 </li></ul><ul><li>Who are Kellogg’s Target Market? </li></ul><ul><li>Kids 8-11 years old </li></ul>
  17. 18. 2 nd Part Describes <ul><li>The planned price </li></ul><ul><li>Distribution Strategy </li></ul><ul><li>Marketing Budget for the first year </li></ul>
  18. 19. Kellogg’s Distribution Channels Kellogg’s Retailer Kellogg’s Wholesaler Retailers Kellogg’s Computer system Kroger, Target, distrib. centers Distrib. In stores
  19. 20. Distribution <ul><li>Penetration - Chain stores, Independent wholesalers </li></ul><ul><li>Sales Channel - Brand equity helps </li></ul><ul><li>Logistics - Finished goods warehouse / rail / truck / centers or independent warehouses </li></ul><ul><li>Relationships - Conflict or harmony? </li></ul>
  20. 21. Positioning Map Nutrition Taste Special K Cheerios Cocoa Krisp Raisin Bran Corn Flakes Fruit Loops
  21. 22. 3 rd Part Describes <ul><li>Long term sales </li></ul><ul><li>Profit Goals </li></ul><ul><li>Marketing Mix Strategy over Time </li></ul>
  22. 23. Market Analysis <ul><li>Market size: Sales of nearly $9.7 billion in the Ready-To-Eat Market in 2001 </li></ul><ul><li>Product segments: The best-selling kids’ cereal brands--GM Lucky Charms, GM Count Chocula, Post Marshmallow Alphabits, Q Marshmallow Safari, Rice Krispy. </li></ul><ul><li>Market share: Competition is heating up in this market as flat sales and low-priced clones have eroded the market shares of Kellogg and General Mills </li></ul><ul><li>Market Forecasts: The kid’s & Women market was been growing at a rate of more than 15% a year, for the 5 to 7 years and shows no sign of slowing through the end of the decade. Growth in the overall kid’s food market was driven, to the largest extent, by gains in cereals. </li></ul>
  23. 24. <ul><li>Marketing/promotion: Seven breakfast cereal marketers allocated almost $775 million to purchases of space and time mass media in 2001. </li></ul><ul><li>Industry structure: Three food giants--Kellogg, General Mills, and Philip Morris--responsible for 70% of kid’s foods in 2001. </li></ul>Continued….
  24. 25. High Low PRICE/ QUALITY /IMAGE PRODUCT LINE/MANUFACTURING MIX Strategic Group Map of Competitors in the Presweeter Cereal Industry Brand Cereals Kellogg General Mills General Food Quaker Oats Private Label
  25. 26. Bagged Value-Priced Cereal Cap’n Crunch Snack Bars Rice Cakes Oatmeal Cereal Bars Fruit Cereal Bars Cap’n Crunch Quaker Oats General Foods Honey Nut Shredded Cranberry Almond Crunch Honey Nut Cheerios Private Label Cocoa Krispies KELLOGG General Mills Lucky Charm Cheerios Honey Nut Cheerios Other Cereals
  26. 27. Business Analysis <ul><li>Estimating Total Sales: </li></ul><ul><li>Estimate First time purchases </li></ul><ul><li>Estimate Repeat Sales </li></ul><ul><li>Estimate Replacement Sales </li></ul><ul><li>Survival age Distribution etc </li></ul>
  27. 28. Estimating Cost and Profits <ul><li>Sales revenue </li></ul><ul><li>Cost of goods sold </li></ul><ul><li>Gross margin </li></ul><ul><li>Development cost </li></ul><ul><li>Marketing cost </li></ul><ul><li>Allocated overheads </li></ul><ul><li>Gross contributions </li></ul><ul><li>Supplementary contributions </li></ul><ul><li>Net contribution </li></ul><ul><li>Discounted contribution </li></ul><ul><li>Cumulative discounted cash flow </li></ul>
  28. 29. Other Financial measures <ul><li>Breakeven Analysis </li></ul><ul><li>Risk Analysis </li></ul>
  29. 30. Product Development Quality Function Development Customer Attributes Engineering Attributes
  30. 31. Customer Test <ul><li>Functional Tests are: </li></ul><ul><li>Alpha Testing </li></ul><ul><li>Beta Testing </li></ul>
  31. 32. Market Testing <ul><li>Consumer Goods Market Testing: </li></ul><ul><li>Sales – Wave Research </li></ul><ul><li>Simulated Test Marketing </li></ul><ul><li>Controlled Test Marketing </li></ul>
  32. 33. Test Markets <ul><li>How many Test Cities? </li></ul><ul><li>Which Cities: USA, UK, France, Australia and Canada </li></ul><ul><li>Length of Test? </li></ul><ul><li>What Information? </li></ul><ul><li>What Action to Take? </li></ul>
  33. 34. Continue…. <ul><li>Before taking any investment decisions, Kellogg’s undertook market research. It wanted to answer these questions: </li></ul><ul><li>What changes taking place in society are likely to affect the product? </li></ul><ul><li>How might new technologies affect our business? </li></ul><ul><li>What are likely to be the future market trends? </li></ul><ul><li>Where are the opportunities within the market place? </li></ul><ul><li>What new categories would appeal to the target market? </li></ul><ul><li>How far do consumers think the brand could stretch into the market for different product categories? </li></ul>
  34. 35. Commercialization <ul><li>In the introduction of the product, marketing expenditures typically represent 57% of the first year sale. </li></ul><ul><li>The brief was then developed and the Special K bar was </li></ul><ul><li>launched in July 2001, with significant television coverage. </li></ul><ul><li>Consumers were also able to sample the bar through specific </li></ul><ul><li>promotional activity. The Peach & Apricot variant was </li></ul><ul><li>added to the portfolio in February 2003. </li></ul>
  35. 36. Questions <ul><li>When (Timing) </li></ul><ul><li>First Entry </li></ul><ul><li>Parallel Entry </li></ul><ul><li>Late Entry </li></ul><ul><li>Where </li></ul><ul><li>Single Locality </li></ul><ul><li>Several Regions </li></ul><ul><li>National Market </li></ul><ul><li>International Market </li></ul>
  36. 37. Continue…. <ul><li>To Whom (Target Market Prospects) </li></ul><ul><li>How (Introductory Market Strategy) </li></ul>
  37. 38. Sources <ul><li>Kellogg - Mike Culverson / Customer Service </li></ul><ul><li>Farmer Jack’s - Ron Van Este / Cereal buyer </li></ul><ul><li>Media Week - May‘98 / ‘ Something New Under My Nose” </li></ul><ul><li>Business Week - Wednesday, May 29, 2002 “Kellogg Co.” </li></ul><ul><li> - “Food Industry Focus” </li></ul><ul><li>Field Visits - Kroger, Farmer Jack’s, Target, Rite-Aid. </li></ul><ul><li>Florida Sun Sentinel - Feb. 7, 1998 / Robin Fields / “ Get That One Mommy” </li></ul><ul><li>The NPD Group - March, 2001/ “The Twelfth Annual Report on Eating Patterns in America” </li></ul><ul><li>Kellogg - www.Kellogg' </li></ul><ul><li> </li></ul>
  38. 39. <ul><li>Thank You </li></ul><ul><li>“ Dhanyawad” </li></ul>