Product life cycle

Have a break. Have a fish and chip flavoured chocolate bar…

Published on: 25 Aug 2014

Nestlé’s Kit Kat is one of the world’s best selling chocolate bars.

It is estimated that over 400 Kit Kat fingers are consumed every second worldwide and every 5 minutes enough Kit Kat fingers are produced to out stack the Eiffel Tower.

Whilst most people associate Kit Kat with its red wrapper alongside the classic wafer and chocolate taste, Nestlé actually segment the market rather nicely in a number of countries. They produce a range of flavours which are only available in certain countries according to local tastes. In simple terms they are dividing the market (segmenting) and then adjusting the marketing mix accordingly.

In Japan for example, Nestlé recently launched 19 new flavours. These flavours reflect the food specialities of certain districts and are only sold in these specific districts.

For example, you can buy a yubari melon flavour Kit Kat in the Hokkaido district, a strawberry cheesecake flavour in the Yokohama district and a cherry flavour one in the Yamagata district.

Different flavours are available in other countries (segments). For example, peanut butter flavour can be bought in Canada.

Now, originating from Scotland where my favourite dish was crispy cod and chips my obvious question to Nestlé is:

“When will a fish and chip flavoured Kit Kat be released in Scotland?”

I feel it’s only a matter of time so if any marketing executives from Nestlé are reading this then over to you…

Things will now be different for you if you eat chocolate…

Published on: 22 Mar 2014

Sometimes it’s the simple ideas in business that work.

24 years ago in April 1990, the retailer Poundland was set up. On the face of it their approach was pretty simple – all the items in their shops would retail at £1 (hence the name “Poundland”).

tobleroneThey now have over 500 stores and sell 3,000 different products which all retail at £1.

They have been incredibly successful and the company has just been floated on the London Stock Exchange with a value of £750 million.

Whilst the concept of everything in the shop being on sale for £1 has advantages such as creating a “value image” which has been successful in the recent economic downturn, there are clear challenges when it comes to what £1 can buy today compared to 24 years ago and importantly what £1 will be able to buy in 24 years time.

Looking at the 4Ps model then it’s clear that the Price has to remain at £1, Promotion is minimal with word of mouth being the preferred method and Place needs to be in the right location as people will not travel a long distance to buy something for £1.

That leaves Product.

People are attracted to Poundland because it sells recognised brands at a discount price so they can’t really switch to unknown brands. They have however identified an approach to maintaining their margins on well known products including the chocolate bar, the Toblerone (the chocolate bar with the hidden logo shown here).

Poundland have agreed with Kraft that a smaller Toblerone is produced. It is only slightly smaller than the standard bar – about one triangle shorter.

Importantly though, by reducing the size of the bar it enables the price to be held at £1.

It’s not just at Poundland where chocolate bars have been changing.

The chocolate industry as a whole is currently facing a number of challenges with Cocoa prices being very high.

So what do chocolate manufacturers do? Do they increase the prices to keep their margins or do they amend the product?

Well it seems that both Nestlé and Cadbury have been quietly shrinking the size of some of their chocolate bars on the market whilst at the same time pushing up some of their prices to maintain their profit margins.

A couple of years ago, some chunks of Cadbury’s famous Dairy Milk Bar were removed and the bar was reduced in size from 140g to 120g

Now whilst on the face of it some consumers may feel a bit cheated by this move it could arguably prove beneficial for waistlines.

Interestingly as well, will we see Poundland stocking a one chunk £1 Toblerone in a few years time?

24% of you may have to do things differently…

Published on: 04 Aug 2013

According to our IT guys, over the last 3 months 24% of you that visited our website used the Mozilla Firefox web browser.

The other main browsers used were Internet Explorer, Google Chrome and Apple Safari.

Personally I use the Firefox browser and am very happy with it (well, to be honest as happy with an internet browser as any normal person should be…)

However, things may be changing and there probably are some very worried people at Firefox.

Whilst nothing public has been said I’m sure the senior guys at Firefox are scratching their heads trying to find a solution to a potentially massive problem.

The problem isn’t because their browser is weak. In fact, far from it as apparently a lot of IT specialists love the Firefox browser due to its various add-ons.

No, the problem lies in the fact that it’s a single product company and there’s currently a move away from computers to Smartphones. In terms of the product lifecycle the Firefox product is arguably at the maturity stage and heading towards the decline.

In the UK the number of Smartphones now being sold is greater than the number of computers. Today’s average Smartphone is now more powerful than the typical computer found on your desk only a few years ago.

So, why is this switch to using Smartphones to access the internet a problem for Firefox?

Well, last week’s announcement by Nokia of their new Lumia 800 and the Lumia 710 Smartphones showed that they have dropped their own operating systems and will be using Microsoft’s new Windows Phone 7.5 system.

This system will use the mobile version of Internet Explorer to access web pages on the move.

The other browser big boys already have their Smartphone relationships. Google’s Android system is on HTC and Samsung phones whilst Apple iPhones use the safari browser.

So, in terms of Smartphone romances there are:

HTC/Samsung + Android (Google Chrome)

Apple iPhone + Safari

Nokia + Microsoft (internet explorer)

Unfortunately for Firefox that leaves them desperately looking for the Smartphone love of their life and there aren’t too many potential partners out there looking for a date…

You can’t sing like Lady Gaga but if you eat this will you have baby face looks?

Published on: 30 May 2011

Here’s a question to get the marketing part of your brain thinking.

How do you double sales of a product without changing the marketing mix (i.e. without changing the Product, Price, Promotion or Place)?

Well, if the product you are trying to sell is baby food then the answer seems to be courtesy of Lady Gaga.

The average reader of this blog is typically a young (or youngish!) professional and in case you’re not completely up to date with the latest music scene, one of the real stars of the moment is Lady Gaga.

She’s loved for her music and extrovert style and with songs such as Poker Face and Just Dance she is now one of the world’s leading female music artists.

As well as being a music and fashion icon she has reportedly developed a taste for baby food, or the “Goo diet” as it’s now known.

According to upmarket UK grocery website Ocado, since the trendy singer announced that she ate baby food to keep her figure trim, sales of Heinz Mum’s Own Creamed Porridge have increased by 100%, while those for pasta and spaghetti bolognese purees are also up by a healthy 87%.

The “Goo diet” involves having one main meal a day and then combining this with several jars of the baby food throughout the day to stop the hunger pangs.

It’s not just Lady Gaga that is reportedly using this diet. Other stars that have apparently used the diet include Jennifer Aniston, Reese Witherspoon and Cheryl Cole.

So, is the conclusion that an unofficial celebratory endorsement is more important than adjusting the marketing mix? In reality, this unofficial endorsement of baby food is in fact an unplanned element of “promotion”.

I have no strong views about this although I do wonder whether there will soon be a surprise rumour about Lady Gaga starting a training programme to become an accountant…

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At least it will make it easier for James Bond to park…

Published on: 26 Jan 2011

The supercar manufacturer Aston Martin is associated with top end cars such as the Aston Martin DBS (shown left) which retails at £179,000. James Bond is also regularly seen saving the world in one of their cars.

So it’s come as a bit of a surprise to some people that in May of this year they are launching a small city car or “bespoke luxury commuter car” as they refer to it.

The launch version of the new Aston Cygnet (shown below) will cost £39,995 and whilst this is significantly less than the £179,000 for the DBS it is £27,750 more than the Toyota IQ that the model is based on.

So, is this a clever move by Aston Martin to identify a niche segment of the market that will pay extra for the luxury add-ons that are on the car such as a bespoke five-piece luggage set comprising a glovebox bag, removable door pocket bag, holdall, garment bag and a collapsible tote bag?

Or are their other possible reasons?

Some would argue that it’s a nice use of segmentation whereby the brand is being extended to high net worth individuals that need a luxury city runabout that is easier to park than a traditional Aston Martin.

It could also be targeted at the traditional male executive purchasers of new full size Aston Martins who could be encouraged to buy an Aston Cygnet for their wife or girlfriend (or both).

There is also the EU Commission proposal that car manufacturers’ car fleets should average below a certain CO2 emission rate to avoid penalties.

Manufacturers such as Honda and Renault which typically produce smaller more fuel efficient cars can achieve these limits. Aston Martin however with their high performance, and as a result less fuel efficient cars, will not meet the limits.

Is this a sign of things to come?

Will we see the Rolls Royce Mini or the Ferrari Cinquecento on our streets soon…

The sound of the tills ringing was music to their ears even though there was no music in the shop…

Published on: 01 Dec 2010

Christmas shopping for me is normally a last minute rush before the shops close on 24 December.

This year though I was determined to be organised and last weekend headed off to hit the shops in London’s West End.

It was a pleasant surprise to find that arguably the two most famous shopping streets in London (Oxford Street and Regent Street) were car free as they had been shut to traffic to encourage early Christmas shopping.

Although the streets were closed to traffic the number of shoppers made up for it. It also seemed as though every other shopper walking along Oxford Street was carrying a Primark shopping bag.

For those of you that haven’t heard of Primark, they are a very successful budget clothing brand with 145 shops in the UK together with an additional 62 shops in 6 other countries.

They compete via a classic cost leadership strategy whereby they keep their costs low by way of a variety of business techniques including for example:

•    Purchasing  stock in huge quantities so as to benefit from economies of scale;

•    Only stocking items in popular sizes so as to avoid “using up” valuable shop space with items that don’t sell so well;

•    Minimising advertising spend (why pay models and magazines when they can let their prices do the advertising for them?);

•    Not playing any music in its stores (why pay licence or royalty fees to artists?).

As well as focusing on cost leadership they are masters at “fast fashion”. In other words, they manage the supply chain to get the fashionable styles into the shops as quickly as possible so that they match the very latest designs that are seen on the catwalks and in the fashion magazines.

Gone are the days of fashion having 4 distinct seasons as far as Primark is concerned.

With so many people carrying Primark bags last week then my suspicion was that they were doing very well with their sales.

Press reports yesterday did indeed indicate that Primark did very well at the weekend.

It was reported that they had their most successful one day single shop performance in their 41 year history on Saturday.

The tills at their Oxford Street branch rang up to the tune of £820,000 in the one day.

Whichever way you look at it that’s a pretty good figure for one day’s worth of sales at a single shop.

Their cost leadership approach to strategy seems to be working. As well as their success on Saturday, their reported profits for the 53 weeks to 18 September 2010 showed profits increasing by 35% to £341 million on sales up 18% to £2,730 million.

Marks & Spencer – the figures weren’t padded out but what about…

Published on: 08 Oct 2010

Marks & Spencer (M&S) are one of the best known retailers in the UK. First established back in 1884 they have been a mainstay of British fashion for as long as anyone can remember.

They have however had a turbulent journey over the last few years but yesterday they announced their results for the quarter ended 2 October and a number of things were quite impressive.

First of all, the ability to release their figures within 3 working days of the end of the quarter was in itself no mean feat.

The figures themselves were also very good with group sales up by 6.5% and all the major divisions showing impressive growth. So, how have they managed this? After all, although we’re coming to the end of the recession people are still being careful about money.

According to Marc Bolland, the Chief Executive of M&S, “Customers are returning to quality. In Food they are responding well to our better value and innovation, and in Clothing are increasingly choosing M&S’s great fashions and quality that lasts.”

They were also successful in introducing “innovative new products” (classic Ansoff’s Product Development). For example, they have just announced that they will be the first to launch men’s “enhancing underpants” on the UK high street.

On the ladies side of things the success of the “Wonderbra phenomenon” has been well documented since they were introduced in the 1990s but in the words of M&S the Bodymax enhancement pants for men have a number of advantages.

The “frontal enhancement pants” are “specifically designed to visibly enhance your shape” and the “bum lift pants” are said to “lift and shape your buttocks for a visibly sculpted look”.

Mr Bolland also said that there had been “a positive response to increased investment in marketing”. It will be interesting to see how they market the enhancement pants.

Now, you’re possibly thinking what sort of person would buy these enhancement pants? You may also be wondering how comfortable they are to wear.

In answer to this final point I’ll let you know as soon as my pair are delivered.

Forget the great Polish and Russian vodkas, the best vodka in the world is officially English. Now, go and open a packet of crisps to celebrate.

Published on: 10 Sep 2010

At this year’s San Francisco World Spirits Competition the best Vodka in the world award was won by a small distillery based in rural England in Herefordshire. Chase Vodka beat off 115 other entries to win.

This is a superb achievement by them.

I’ve been lucky enough to try some of the vodka. It’s certainly very nice and I have to say I think their award was thoroughly deserved. I hasten to add though that I haven’t tasted the other 115 vodkas so can’t really give an unbiased view!

Chase vodka has got a rather unusual background. It was founded by local potato farmer William Chase. Now William certainly knows a thing or two about potatos. He was the person that founded the upmarket potato crisp company Tyrrells.

Tyrrell’s crisps were only launched 8 years ago in 2002. In classic strategy terminology they were very much promoted on the differentiated manner as being of a better class of crisp, being hand crafted and a top quality product. His passion for potatos paid off and in 2008 he sold 75% of the crisp brand for a rather tasty £40 million.

Not content with sailing the world on his personal yacht or buying a private island to retire to he built on his core competencies and developed his love of potatos into another upmarket brand but this time to be enjoyed by adults only.

Again, using strategy speak the chase vodka business is nicely vertically integrated with the potatos being grown on the farm as well as the distillery and the bottling process being in the same location.

It’s not cheap – retailing at £32.95 it is over 3 times as expensive as the supermarket own brands but it’s hand crafted by a small team of workers and each bottle is reportedly made out of 250 top quality potatos. Comparing this with the mass market vodkas made out of left over grain then you can see why the pricing is different.

Using Ansoff’s matrix terminology they have also undertaken rather nice product development and launched a limited edition Marmalade Vodka.

Now, for me a lovely breakfast is a fresh pot of tea with some nice toast and marmalade. Should I be rethinking things though so that I opt for Marmalade Vodka instead?

The latest adventure of “Harry Potter and the case of the extending tail”.

Published on: 02 Apr 2010

Earlier this week Bloomsbury released their latest set of financial results. Bloomsbury are a publisher and their list of titles includes the ubiquitous Harry Potter books.

Their 2009 results showed a fall in pre-tax profits of 35% with earnings falling from £11.6 million to £7.7 million.

As keen muggles know (if you don’t know what a muggle is then ask somebody that has read a Harry Potter book!), there hasn’t been a new Harry Potter book for a while now and such was the success of them that without new ones coming into the pipeline there was bound to be an impact on the results.

Students will be aware of the product life cycle where products go through different stages ranging from introduction, growth, maturity and ultimately to decline. The decline stage of the product life cycle is often referred to as the “tail”.

Efforts are often made to extend the tail by use of the marketing mix (product, price, place and promotion).

Bloomsbury have announced that in November of this year they are planning on re-releasing all seven Harry Potter books.

Will the stories be different?

No they won’t but what will be different are the covers. Each book cover will be illustrated by artist Clare Melinsky. In other words, the product will remain largely the same (in terms of the story) but there will be small changes (the “collectors” covers).

This is a good example of amending the Product within the marketing mix to extend the tail.

Of course, the launch date of November 2010 is no accident as I’m sure there will be some happy people on Christmas day opening some new gift sets of Harry Potter books.

Avatar, 3D TV and the product lifecycle…

Published on: 27 Jan 2010

The science fiction film Avatar which was written and directed by James Cameron has been in the press a lot recently and has had some good write ups by some of the critics. It is an incredibly successful film and today it was announced that it has overtaken Titanic to become the highest grossing movie of all time with worldwide takings of nearly USD2 billion since its premier in London in mid December last year.

Last night I decided to go and see it to see what all the fuss was about. I must admit that I was impressed. The special effects were excellent and with the film being shown in 3D it certainly did create an impact.

3D films have been around for a number of years now and started back in the 1950s with early prototypes of 3D movies including such classics as the 1950s monster movie the “Creature from the Black Lagoon”! Technology has progressed a lot since then though and at last month’s Consumer Electronics Show in Las Vegas there were a number of firms presenting their latest 3D televisions.

This is a useful example of what we would find in the product lifecycle. If you go back over the history of televisions you will find a series of lifecycles. The timeline of televisions has gone from Black & White, through “traditional” colour, to plasma and LCD.

Although the product lifecycle will vary on a geographic region by region basis, in a lot of countries the lifecycle of the “traditional style colour TV” is in decline whilst the lifecycle of the LCD TV is in the growth or maturity stages. What about the new 3D TVs that are being launched this year? It’s safe to say that these are in the introduction stage. As a result the marketing mix of these TVs will be different from the other stages. “Place” for example will be at a limited number of locations and as for “Price” then it’s not rocket science to guess that they will be priced at a premium above the other types of TV that are at different stages of their lifecycles!

The ExP Group