CONSUMER BEHAVIOUR XIBMS EXAM CASE STUDY ANSWER
CONSUMER BEHAVIOUR
CASE STUDY 1
Kellogg India ltd.
Question
Question 1:- How effectively Kellogg
has met conditions of marketing concept?
When marketing their
products Kellogg need to met a successful mix of:
- the
right product
- sold
at the right price
- in
the right place
- using
the most suitable promotion.
To create the right marketing mix, businesses have to meet the
following conditions:
- The
product has to have the right features - for example, it must look good
and work well.
- The
price must be right. Consumer will need to buy in large numbers to produce
a healthy profit.
- The
goods must be in the right place at the right time. Making sure that the
goods arrive when and where they are wanted is an important operation.
- The
target group needs to be made aware of the existence and availability of
the product through promotion. Successful promotion helps a firm to spread
costs over a larger output.
For example, a company like Kellogg's is constantly developing new
breakfast cereals - the product element is the new product itself, getting the
price right involves examining customer perceptions and rival products as well
as costs of manufacture, promotion involves engaging in a range of promotional
activities e.g. competitions, product tasting etc, and place involves using the
best possible channels of distribution such as leading supermarket chains. The
product is the central point on which marketing energy must focus. Finding out
how to make the product, setting up the production line, providing the finance
and manufacturing the product are not the responsibility of the marketing
function. However, it is concerned with what the product means to the customer.
Marketing therefore plays a key role in determining such aspects as:
- the
appearance of the product - in line with the requirements of the market
- the
function of the product - products must address the needs of customers as
identified through market research.
The product range and how it is used is a function of the
marketing mix. The range may be broadened or a brand may be extended for
tactical reasons, such as matching competition or catering for seasonal
fluctuations. Alternatively, a product may be repositioned to make it more
acceptable for a new group of consumers as part of a long-term plan.
The price
Of all the aspects of the marketing mix, price is the one, which
creates sales revenue - all the others are costs. The price of an item is
clearly an important determinant of the value of sales made. In theory, price
is really determined by the discovery of what customers perceive is the value
of the item on sale. Researching consumers' opinions about pricing is important
as it indicates how they value what they are looking for as well as what they
want to pay. An organisation's pricing policy will vary according to time and
circumstances. Crudely speaking, the value of water in the Lake District will
be considerably different from the value of water in the desert.
The place
Although figures vary widely from product to product, roughly a
fifth of the cost of a product goes on getting it to the customer. 'Place' is
concerned with various methods of transporting and storing goods, and then
making them available for the customer. Getting the right product to the right
place at the right time involves the distribution system. The choice of
distribution method will depend on a variety of circumstances. It will be more
convenient for some manufacturers to sell to wholesalers who then sell to
retailers, while others will prefer to sell directly to retailers or customers.
The promotion
Promotion is the business of communicating with customers. It will
provide information that will assist them in making a decision to purchase a
product or service. The razzmatazz, pace and creativity of some promotional
activities are almost alien to normal business activities.
The cost associated with promotion or advertising goods and
services often represents a sizeable proportion of the overall cost of
producing an item. However, successful promotion increases sales so that
advertising and other costs are spread over a larger output. Though increased
promotional activity is often a sign of a response to a problem such as
competitive activity, it enables an organisation to develop and build up a
succession of messages and can be extremely cost-effective.
Question 2:- Suggest ways how Kellogg can have more influence on consumption behavior of Indian consumer?
Kellog can have more influence
on consumption behavior of Indian consumer by black box model. The black box
model shows the interaction of stimuli, consumer characteristics, decision
process and consumer responses. It can be distinguished between interpersonal stimuli (between people) or intrapersonal
stimuli (within people). The black box model is related to the black
box theory of behaviourism, where the focus is not set on the processes
inside a consumer, but the relation between the stimuli and the
response of the consumer. The marketing stimuli are planned and processed by the
companies, whereas the environmental stimulus are given by social factors,
based on the economical, political and cultural circumstances of a society. The
buyer's black box contains the buyer characteristics and the decision process,
which determines the buyer's response.
|
Environmental factors
|
Buyer's black box
|
Buyer's response
|
||
|
Marketing Stimuli
|
Environmental Stimuli
|
Buyer Characteristics
|
Decision Process
|
|
|
Product
Price Place Promotion |
Economic
Technological Political Cultural Demographic Natural |
Problem
recognition
Information search Alternative evaluation Purchase decision Post-purchase behaviour |
Product
choice
Brand choice Dealer choice Purchase timing Purchase amount |
|
The black box model considers
the buyer's response as a result of a conscious, rational
decision process, in which it is assumed that the buyer has recognized the
problem. However, in reality many decisions are not made in awareness of a
determined problem by the consumer.
Question 3:- SWOT Analysis of
Kellogg?
Strengths:
·
Solid Revenue Growth: In 2006, Kellogg reported revenue of $10.907 billion; in 2011,
the company reported revenue of $13.198 billion, representing year over year
annual growth of 3.89%, a stable and secure rate that is projected to sustain
into the future
·
Brand Loyalty: Kellogg’s iconic red logo can be found on the majority of the
cereal boxes in your local supermarket, and drives customers back again and
again
·
Geographic Diversity: The company’s products are marketed and sold in more than 180
countries around the world; the company will not be seriously hurt by economic
problems exclusive to one market or country
·
Dividend: Kellogg currently
pays out quarterly dividends of $0.44, which when annualized puts the dividend
yield at 3.29%, which is significantly north of any rate that can be found in a
CD or treasury bond
·
Institutional Vote of Confidence: 78% of shares outstanding are held by institutional investors,
displaying the confidence long-term and big-money investors have in the company
and its future
Weaknesses:
·
Saturation of Market: Kellogg’s products are already in nearly every market around the
world, so there is little room left for geographical expansion
·
Debt: The company
currently possesses around $7.366 billion of debt on its balance sheets, and
until they pay down this debt it will weigh heavily on their core business
·
Massive Valuation: Kellogg is relatively average when one looks at the company’s
price to earnings ratio (16.20) and price to sale ratio (1.39); however, the
price to book ratio (10.86) is massive when considering the company’s sluggish
growth rate
·
Reliance on One Product: The company derives the wide majority of their revenue from a
wide array of cereal brands, and even while these brands are different, they
are all the same thing: cereal, and if cereal was to lose popularity, Kellogg
would be in some deep trouble
Opportunities:
·
Acquisitions: On June 1, Kellogg acquired the Pringles brand from Procter
& Gamble, and further acquisitions in the future are a strong possibility
and could help fuel Kellogg’s growth prospects
·
Product Innovation: Kellogg has for years innovated and created new brands and
products, and further product innovation is probable and should fuel sales
growth
·
Selling Brands For Cash: Just as Kellogg can purchase brands from other companies, other
companies can purchase brands from Kellogg, which can help Kellogg raise cash
to reinvest in their own company or to pay down their debt
Threats:
·
Rising Food Prices: This year's historic drought has already caused food prices to
drastically rise, and further pain caused by this occurrence could leave
Kellogg to face a decision where they either pass the extra costs on to their
customers or swallow the pain in their margins
·
Competition: Fierce competition to offer the best product to the customer for
the lowest price leads to margin contraction; and the food industry is one of
the most crowded industries in the world
·
Shifts in the Market: When cereal was invented it was a revolutionary product that was
interesting and new, and nothing is stopping another trailblazer from thinking up
the breakfast of tomorrow
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