Long Term Maintenance of a Classic Brand Name
The history of Kit Kat emphasises the
importance of successfully managed
brand names to the company that owns
them. Nestlé was prepared to pay a
SALES
Product life-cycle
Business theory suggests that products
follow a life-cycle, going through
phases of development as follows:
• the conception of an idea/product
• research and development
• introduction to the market.
A period of growth then follows as
consumers become increasingly aware
of the product and, if successful, it
becomes profitable. Eventually, the
growth of sales will level off - this is
the mature phase and is usually the
result of increased competition. The
theory predicts that sales will gradually
decline as the market becomes
saturated and consumer tastes change.
However, it would be wrong to assume
that after the uphill struggles of the
development and growth phases, life
becomes easier on the level. It is a
considerable challenge to the marketers
to prolong the profitable mature phase
for as long as possible, using a range of
extension strategies.
DECLINE
SATURATION
MATURITY
GROWTH
Injections of new life using extension strategies
The product life-cycle
diversification through acquisition and
divestment to achieve a more balanced
structure to the business.
record price to acquire Rowntree in
1988 because of the prestigious brands
in Rowntree’s product portfolio. Kit
Kat was an important part of the
portfolio. This acquisition prompted
the City to look into the possibilities of
including a financial valuation of a
brand as an asset on a company’s
balance sheet.
GROWTH
This case study focuses on Nestlé’s Kit Kat and the long term
brand name maintenance strategies which have sustained Kit
Kat’s position as a market leader for over sixty years.
A catchy name and distinctive
packaging are vital ingredients in any
brand image, but the true essence of a
brand identity lies in the consumer’s
mind i.e. the perceptions of the product.
A company must be constantly aware
of these perceptions and try to preserve
and build on them through advertising
and other promotions. Branding
enables marketers to build extra value
into products and to differentiate them
from their competitors.
GROWTH
The UK confectionery market is worth over £5 billion per annum and
is highly competitive. It continues to be dominated by large, wellestablished names - highlighting the importance to firms of creating
brand identities for their products. Once created, however, a brand
name needs constant maintenance. Kit Kat’s ability to remain a brand
leader over sixty years is no accident. The long term maintenance of a
brand name requires continuous monitoring and investment. Brand
image must be seen as a dynamic, not a static factor; the same
consumer perceptions that create brand loyalty can also turn against a
product that fails to adjust and adapt to changing attitudes.
Branding is the collection of attributes
that the consumer has come to expect
from a product, which will strongly
influence their buying patterns.
Branding can be achieved using a
company name - it can be applied
generically or, as in the case of Kit Kat,
on an individual basis. The brand name
promises the consumer particular
benefits, such as quality and value for
money, with these expectations being
built up over many years. A brand
name is often considered by a company
to be its most important intangible
asset. In a market where repeat
purchases are the key to profitability, a
brand name becomes paramount to a
product’s success.
GROWTH
Kit Kat was launched in 1937. Since then, it has consistently been one
of the best selling chocolate bars on the market and has acquired an
instantly recognisable brand name and identity. In 1997, British sales
of Kit Kat amounted to some £227 million, which made it easily the
most popular confectionery product on the market. Forty four Kit Kats
are consumed every second in the UK!
What is a brand
name?
DEVELOPMENT
Introduction
TIME
A major drawback with the product life
cycle theory is that it cannot be used as
a predictor. Firms may be able to
identify some of the stages of
development from historical sales data,
but they cannot know their exact
position on the cycle, nor in which
direction they might be heading. In
addition, some products seem to enjoy
very long maturity, if not immortality,
with no signs of decline. Extending the
product life span is the goal of many
firms, but achieving this requires
careful co-ordination of corporate and
marketing objectives and strategies.
Nestlé’s corporate
objectives
It is vital to any firm that its marketing
objectives are compatible with the
overall corporate objectives. In
selecting corporate objectives and
strategy, a firm might wish to refer to
the Boston Matrix, Ansoff’s’ Matrix or
use a simple SWOT analysis to
establish where the company is and in
which direction it wishes to head. For
example, a company planning to
consolidate its position within a
national market might set very
different objectives for the marketing
of its products to a company wishing to
expand into international markets. This
in turn would affect the marketing
tactics each company might employ.
Confusion can often arise when
attempting to reconcile marketing and
corporate objectives. It could be argued
that the success of any firm depends on
its ability to satisfy a consumer need at
a profit. This is, itself, the essence of
marketing - so it could also be said that
marketing and corporate objectives are
the same thing. However, this would
imply that marketing is more important
than the other functional areas, when
clearly they are all inter-dependent.
Ultimately, any corporate strategy must
both reflect and dictate to each of the
different functional areas of the firm.
Nevertheless, the information provided
by the marketing department will be
central to any corporate strategy
formulation. This will include sales and
market share, analysis of the
competition, sales and profit forecasts
for the future and analysis of changing
consumer attitudes.
Nestlé’s corporate objective is to be the
world’s largest and best branded food
manufacturer, whilst ensuring that the
Nestlé name is synonymous with
products of the highest quality. In
recent years, the company has pursued
a policy of expansion and
Global brand names can achieve
substantial production and purchasing
economies of scale and, as world travel
increases, so does the importance of
instantly recognisable products. With a
product portfolio which includes eight
of the thirty top selling confectionery
brands, such as Quality Street, Aero,
Smarties, Polo and Rowntree’s Fruit
Pastilles, Milky Bar and After Eight, it
is extremely important that the
marketing objectives for each product
line are fully compatible with the
overall objectives of the company as a
whole. Like any group of individuals,
each product has its own character,
strengths and weaknesses and
consequently, the marketing objectives
of each product need to be specifically
tailored.
Objectives What is the company
trying to achieve?
In which direction are
we headed?
Strategy
How can we get there?
Tactics
What specific actions
need to be taken, by
whom and when?
Control
How can we judge
whether we are being
successful in achieving
our objectives? How do
we measure our success
or failure?
Marketing objectives
and strategy
Having decided its corporate objectives
and strategy, Nestlé can set marketing
objectives for each of its product lines
and profit centres. The primary
objective for Kit Kat is to maintain its
position as the UK’s number one selling
confectionery brand. In order to
achieve this, Nestlé has to develop a
THE TIMES 100...NESTLÉ
marketing strategy that will take into
account all the elements of the
marketing mix. This will involve
individual strategies for pricing,
product development, promotion and
distribution. For an established brand
name, these strategies must be flexible
and relevant to each new generation of
consumers, but at the same time, great
care must be taken not to damage the
perceptions of the product built up over
decades of marketing.
Kit Kat has a particularly broad
consumer profile and is popular with
all age groups. The Kit Kat marketing
strategy can be summarised by the line
‘Broad in appeal, young in feel and big
in stature.’
Marketing tactics the marketing mix
Product strategy
No matter how effective the promotion
and packaging, a firm will find it very
difficult to market a product which fails
to satisfy a consumer need. Kit Kat
owes much of its success to a unique
dual appeal - as a four-finger chocolate
bar, (known in the confectionery trade
as a countline), sold at corner shops and
newsagents, but also as a two-finger
biscuit sold in supermarkets. It is a
product that has endured because of its
wide appeal across the age ranges and
to both sexes.
Altering the actual product is
potentially a very hazardous act for an
established brand name as it risks
altering the consumer perceptions of
quality built up over decades.
Tampering with the recognised core
qualities could well damage the
integrity of the brand. For Kit Kat, these
intrinsic elements of the brand, or
unique selling points include the:
●
chocolate fingers
●
foil and band wrapping, unique
in the countlines market and seen
as an important feature which
encourages involvement and
sharing by consumers
●
well-known strapline Have a Break, Have a Kit Kat.
In spite of the risks of altering the
product, the two-finger bar and
multipacks were introduced in the
1960s to meet the increased needs of
supermarket shopping and more
recently, Orange, Mint and Dark
Chocolate Kit Kats have been available
for limited periods. In the third week
that Kit Kat Mint was available, it more
than doubled total Kit Kat Sales. The
Orange Kit Kat proved particularly
popular with sales of 38 million bars in
just three weeks. It provided very
positive market research results. While
they are seen as novelties, they can also
be used to provide reassurance and
reinforcement of the core attributes of
the original established brand name.
Special editions are used primarily as
promotional tools. Market research
has shown that consumers prefer
special editions to be available for
limited periods only and that consumers
are likely to purchase the original Kit
Kat at the same time or shortly after.
(They are, therefore, a good way of
injecting new life into the Kit Kat
product life-cycle). Depending on their
popularity, some special editions are
introduced more than once. The Orange
Kit Kat has proved so popular that the
two-finger multipacks are now
permanently available.
Apart from these variants, the intrinsic
characteristics of the Kit Kat product
and packaging have changed very little
during the last sixty years. Although
some minor, subtle changes have been
made in packaging, merchandising and
sales promotions, a Kit Kat from the
1930s would be instantly recognisable
to modern consumers today.
with the chance to win £20,000 cash
and hundreds of other prizes, increased
sales of Kit Kat by a staggering 41%.
Advertising plays an extremely
important part in the confectionery
industry, with spend approaching £114
million in 1996. The Have a Break,
Have a Kit Kat theme appeared briefly
in 1939, but has been the on-going Kit
Kat slogan, or strapline, since the mid
1950s. Kit Kat’s advertising is
concentrated in two media:
●
television commercials - which
follow the well-known Have a
Break tradition
●
posters - where the powerful
colours of the pack and product
are used to dramatise the
message.
Pricing strategy
A key advantage of maintaining a
strong brand image in a competitive
market is a degree of flexibility in the
pricing strategy. It is a common
characteristic of imperfectly competitive
markets for producers to concentrate on
non-price competition. When looking
at the pricing strategy for Kit Kat, it can
be seen from the figures that the real
price has remained remarkably stable
over the last sixty years.
YEAR
PRICE
A particular challenge for the
advertisers is to appeal to both the
consumers and the purchasers. Women
account for two thirds of all
confectionery sales, but a large
proportion of these purchases are
subsequently consumed by children.
Men eat as much as they purchase
suggesting they are less generous!
1937
2 old pence
1941
2.5 old pence
Distribution strategy
1958
5.5 old pence
Nestlé has developed distribution
channels which ensure the availability
of Kit Kat to buy wherever and
whenever the consumer wishes to
purchase it. Sales of confectionery
depend heavily on its availability, with
market research showing that well over
60% of all purchases are made on
impulse. Consequently, Nestlé tries to
supply as many outlets as possible both wholesaler and retailer channels.
1962
6 old pence
1973
3.5p
1983
15p
1993
24p
1995
25p
1998
27p
Promotional strategy
Nestlé has used a wide range of
promotional tactics with Kit Kat.
Promotion offers have included free
bars in the multi-bar family packs and
an instant win deal with Burger King in
1996. This promotion, where over 75
million free burgers were on offer,
increased sales of Kit Kat by an
estimated 30%. In 1998, an on-pack
promotion featuring ‘The Simpsons,’
Point of sale merchandising is also
important when consumers are making
instant, snap decisions from a wide
range of products on view. Instantly
recognisable packaging also helps to
tempt customers. Shoe shops, for
example, have recently been identified
as having potential for confectionery
sales owing to the large number of
families that visit them. It is also
predicted that confectionery, along with
all foodstuffs, will become available
through cable and interactive television,
videophones and the Internet.
Internationally, Kit Kat is now also
manufactured in Canada, Germany,
India, Malaysia, China, Japan,
Australia, South Africa and the United
States. It is available in more than 100
countries throughout the World.
The importance of
evaluating the success
of Nestlé’s brand
strategy
An important ingredient in the pursuit
of any objective is control. It would be
irresponsible of a firm to commit itself
to objectives and strategies without also
setting in place the means to monitor
and evaluate its success. In the short
run, Kit Kat’s sales figures are a key
indicator of success, enabling Nestlé to
assess growth and market share
performance and compare its progress
with that of its competitors. However,
in the longer term, it is also necessary to
gain market research information on
consumer perceptions. Consumer
attitudes constantly change over time. If
Kit Kat is going to maintain its brand
leadership, it must be aware of and
adapt to these changes. The market
never forgives complacency.
Conclusion
Kit Kat’s success can be attributed to
consistency in its marketing, whilst
allowing for minor changes to maintain
a modern image. Above all, the brand
has enjoyed continuous backing with
investment in marketing to both the
trade and consumer sectors, enabling it
to compete successfully with both
established and new products.
Continuous reinforcement of the brand
message through advertising and
promotions has enabled Kit Kat to
sustain its popularity over a long period
of time in the face of rapidly changing
consumer attitudes and tastes and
consumption patterns.
TASKS & ACTIVITIES
1
How does Kit Kat’s advertising
target both the consumer and the
purchaser?
6
2
7
Visit a supermarket and a small
independent retailer. List the
different countlines available, their
prices and manufacturers. What
evidence is there of price and nonprice competition? What is the best
way of presenting these results?
3
Select two special edition
chocolate bars and devise a market
research questionnaire to evaluate their
success and discover to what extent
they reinforce the brand image.
4
What is meant by the terms
‘acquisition’ and ‘divestment’?
How has Nestlé used these to achieve
a more balanced structure to its
business?
5
Draw up a Boston Matrix and
Ansoff’s Matrix. With reference to
these and using SWOT analysis,
explain Kit Kat’s marketing strategy.
Discuss the advantages and
disadvantages of corporate, generic
and individual brand names.
List the intangible assets a firm
might own. Why is it important to
consider these when valuing a firm?
8
Produce two corporate strategy
statements, one for a firm wishing
to consolidate its position and fight off
competition in a domestic market and
one for a firm wishing to expand into
European markets. How will these two
different objectives affect the
marketing strategies and tactics?
9
Define the following terms used in
the case study:
●
product life-cycle
●
brand image
●
corporate objectives
●
marketing strategy
●
control
●
promotion
●
imperfectly competitive markets
●
unique selling points
●
distribution channels
●
product portfolio.
http://www.nestle.com
The Times Newspaper Limited and ©MBA Publishing Ltd 1998.
Whilst every effort has been made to ensure accuracy of information, neither the publisher
nor the clients can be held responsible for errors of omission or commission.
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