Module Number: MK4037
Module Name:
Delivering Customer Value
through Marketing
Module Tutor:
Robert Harris
Submission:
Individual Assignment
Report - 8th January 2010
Student Name:
Colin Hopson
Student Number: 0482647
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Contents
1 Case Study – The Fruit Juice Revolution .............................................................. 1 1.1 Report Brief ................................................................................................... 1 1.2 Task One ........................................................................................................ 1 1.3 Task Two ....................................................................................................... 1 1.4 Task Three ..................................................................................................... 1 2 Introduction – Company Profile ............................................................................ 2 3 Task Analysis ......................................................................................................... 2 4 5 6 3.1 Task 1 – Marketing Communications Analysis and Plan .............................. 3 3.2 Task 2 – Future Channel Management Strategy ............................................ 9 3.3 Task 3 – Product Management, Market Share and Profitability.................. 10 Summary and Conclusion .................................................................................... 12 4.1 Summary ...................................................................................................... 12 4.2 Conclusion ................................................................................................... 12 References and Bibliography ............................................................................... 13 5.1 References .................................................................................................... 13 5.2 Bibliography ................................................................................................ 13 Appendices........................................................................................................... 14 6.1 Pricing Comparison ..................................................................................... 14 6.2 Marketing Communications Planning Framework ...................................... 14 6.3 Auditing the Market Environment Levels ................................................... 15 6.4 PESTEL and MC Chart ............................................................................... 15 6.5 Product Life Cycle Chart ............................................................................. 16 6.6 SWOT Analysis ........................................................................................... 16 6.7 BCG Matrix ................................................................................................. 17 6.8 GE Matrix .................................................................................................... 17 ii
1 Case Study – The Fruit Juice Revolution
1.1 Report Brief
You work as a Marketing Consultant and have a specialist interest in the fruit juice
and soft drinks sector. You have been asked by the Board of Innocent Drinks to
prepare a 6000 word report addressing the following tasks.
1.2 Task One
Develop a communications strategy and plan that will enable Innocent to maintain its
dominant market position in the UK. Your strategy and plan should demonstrate how
Innocent will build and maintain its competitive advantage in its chosen markets.
1.3 Task Two
Evaluate the key factors which will influence Innocent’s future channel management
strategy.
1.4 Task Three
Analyse, using appropriate marketing tools and models, the value that product
management can add to Innocent in its bid to grow market share and profitability.
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2 Introduction – Company Profile
Since Innocent was founded some ten years ago by Jon Wright, Adam Balon and
Richard Reed, its production of smoothie drinks from natural fruit has been recently
exploited by other competitors. From when the three Cambridge University students
first launched their idea from a music festival stall in London, the business has grown
considerably and now sells more than two million smoothie drinks a week. Whilst the
organisation continues to be innovative and creative, it also focuses on environmental
aspects as well as endorsing sponsorships and donations to charities. The company
maintains high standards of corporate social responsibility by using ingredients from
environmentally and socially aware organisations as well as endorsing sustainability
and recycling product packaging. However, its triumphant market share of over 70%
(August 2007) has recently been threatened by increasing competition and the
consumer downturn. Although Innocent continue to uphold their ethical standards in a
“promise that everything innocent ever make will always be natural, delicious,
healthy and sustainable.” (Innocent Drinks, 2009); the question remains of how
Innocent can continue to devise marketing strategies that keep them market leaders.
“growing up brings its usual share of challenges as it faces the dual
threat of a consumer downturn and the efforts of a bigger rival to force it
out of business.” (Jonathan Sibun in Case Study, 2009, Appendix Six)
3 Task Analysis
In order to research the Innocent Drinks organisation and their product range, I firstly
read The Fruit Juice Revolution Case Study (Case Study, 2009) after which I
examined Innocent’s website (http://www.innocentdrinks.co.uk/). Other research
regarding the company came primarily from the internet; links from the Google
search engine plus online reports and journals. However, to inspect their product from
a practical perspective, I purchased two smoothie drinks of which were arranged close
together in a local store. After noticing that the Innocent drink was relatively more
expensive (Appendix 6.1 Pricing Comparison) for the same bottle size (250ml), I
noticed that its appearance was plain and less appealing. Although the taste was not
dramatically different, it was not until I read the labelling that I noticed that the
innocent pure fruit smoothie was made from a blend of crushed fruit & pure juices,
and not with concentrate or purée as shown on the co-operative summer fruits
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smoothie. The innocent drink also contained two of your 5 a day, whereas the cooperative explained 1 bottle = 1 portion. Moving on from this practical comparison, I
continued to analyse Innocent as an organisation, looking at their brand, market,
competitors and their customers.
Each of the three tasks that follow in this report, concentrate on certain aspects
concerning Innocent. The first task analyses the company using different context and
briefly proposes a marketing communications strategy by referring to the SOSTAC
process (Situation, Objectives, Strategy, Tactics, Action and Control). This process is
referred too again in the closing summary and conclusion. The second task focuses on
channel management strategies whilst task three analyses product management and
how Innocent can increase their market share for profitable future.
3.1 Task 1 – Marketing Communications Analysis and Plan
To help formulate a communications strategy that will be successful for Innocent over
the next few years, I reflect on the stages in the Marketing Communications Planning
Framework of Chris Fill (Appendix 6.2 Marketing Communications Planning
Framework), as this relates more appropriately to currently marketed products. It is
not only important to investigate contemporary issues through market research
(Telegraph.co.uk, 2009), but to analyse the context of the business as a whole. To
effectively conduct a marketing environment audit, it is best to divide environments
into sections (Donnelly, 2009, Chapter 5). Firstly, I will reflect on the external
environment; such as political, technical or environmental issues, secondly the market
and Innocent’s competition, thirdly the internal environment (or business context) and
finally the value to the consumer (Appendix 6.3 Auditing the Market Environment
Levels). This analysis will help generate strategic options.
“Information on both external forces and internal capabilities are
required if an organisation is going to develop effective marketing
plans.” (Donnelly, 2009, p.59)
The Context Analysis
After accumulating the necessary market research regarding Innocent, the first
analysis (The Environmental Context) reflects on the external issues affecting the
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organisation. This macro-environment, as it is sometimes described, is investigated by
the PESTEL (Political, Economic, Social, Technological, Environmental and Legal)
analysis, of which examines the broad range of factors that affect Innocent. Included
in these ‘non-controllable’ factors, but which are more closely related to Innocent, is
its market and competitors (Appendix 6.4 PESTEL and MC Chart). After
investigating the business context, with help from the SWOT analysis tool, I will
briefly reflect on the customer context, before attempting to generate a marketing
communications plan with SMART (Specific, Measurable, Achievable, Realistic,
Targeted and Timed) objectives.
The Environmental Context
Due to the fact that the environment in which Innocent operate is constantly changing,
they must match these demands with the capabilities of their organisation, especially
when entering European or global markets, where cultures diverge. By using the
PESTEL model, Innocent can develop a more systematic approach in analysing their
external environment. This analysis segments key environmental factors into
relational categories and helps the organisation to plan for and control changes to
resources, market position, conditions and competitors. After reflecting on the
PESTEL model, analysis is directed to Innocent’s market and its competitors.
Political
With the enlargement of the European Union and opportunities to Innocent being
more global, Corporate Social Responsibility (CSR) is increasingly becoming a
lawful requirement and not just an advantageous ingredient for business. As Innocent
have already penetrated the European market by their £30m investment with CocaCola, they must keep a close eye on political developments around the world. One
European law which raises argument for Innocent recently are the tax rules set on
food starting 1st January 2010 as stated by Jonathan de Wilton “the problem for the
Government is that many of these tax rules on food are set under European law and
cannot be tinkered with individually” (Telegraph.co.uk, 2009). However, the
Government message to the public to consume more healthy food has been largely
communicated by Innocent and so they must find this political issue somewhat
disturbing. Conversely, the Government’s concern, especially toward the eating habits
of our young generations, is directed to the long term costs in health care.
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Economic
Although the increase in VAT set for 2010 is one that may affect Innocent
economically, the most recent and influential concern must be the affect of the
downturn in the global economy. The direction of this issue must be addressed
frequently and plans must be incorporated into the marketing communications
strategy that will help Innocent combat a fall in revenue. As depicted by my personal
comparison earlier (Appendix 6.1 Pricing Comparison), Innocent are priced higher
than most brands, but deliver quality and reassurance for the health conscious public.
Although Innocent’s brand is well established and has adequate labelling to
implement healthy advantages, the disposable income, especially for the public in
lower wage groups, has become less and less. People of these lower incomes probably
either spend more wisely or purchase other cheaper brands, such as fruit juice
concentrates. “Consumption tends to be lower among children and people on low
incomes” (Case Study, 2009). However, it is important that Innocent continue to
deliver the message about their healthy product(s), as shoppers can be influenced
especially by pro-active advertising, promotions and in-store ‘touch-points’.
Social
Before the current recession took a firm grip on the UK economy in 2009, the public
and media interest into environmental concerns had grown significantly and with
healthy promotions proving successful for Innocent; such as their trial promotion of
smoothies for kids at a subsidised price into 550 schools (Case Study, 2009), their
social responsibility would have been glamorised. From the accomplishment of this
promotion, Innocent has increased flavours for kids’ smoothies and now stock many
more schools. However, Innocent soon learned a lesson from the public when
messages posted to their website blog (Case Study, 2009, Appendix Four) stated how
loyal customers did not like their trial run selling smoothies in McDonald restaurants.
From their experience, Innocent must incorporate the central essence of any
marketing strategy and expand on the value and services that meet the needs of their
customers. Recently, a lot more corporate advertising has been engaged in making the
public aware of business sponsorship or charity donation. Throughout 2009, Innocent
has used a smart promotional mix (the big knit 2009) that supports Age Concern and
Help the Aged, whilst elaborating on the healthy aspect of their product. Although
endorsements like these socially promote Innocent, this is only communicated
through their website. However, Innocent must have reason to be proud this year as
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although their social recognition could be greater, they won the Cause Related
Marketing Award at the Business in the Community Awards and the finance team
scooped the award as Finance Team of the Year.
Technological
People may think of technological aspects being concerned with computers and the
internet, but one big advantage that Innocent has over competitors that use juice
concentrates, is that science proves that smoothies are more healthier for the
consumer “Nutritionists believe that concentrated juice drinks are not as healthy as
those made from pure fruit ingredients” (Case Study, 2009). Some of the additives
that extend a products shelf life, or make it more tasteful, may make a person more
susceptible to obesity, mental illness, stroke, heart disease, or even cancer and yet
many consumers ignore what ingredients are integrated in their diet. Obviously, with
the increasing accessibility to the internet and the popularity of mobile phones,
technology is affecting consumer habits more radically. In-store promotions giving
vouchers, tokens, special offers or store cards are now technologically improved to
retain customer purchase behaviour and to incite feedback “there has been a distinct
shift away from traditional promotional instruments to the use of digital media in
order to reflect consumers’ preferences and media behaviour” (Fill, 2005, p.675).
Even though Innocent have already used technological aspects, a promotional mix
with a good customer service backing, could be hugely advantageous. It is sometimes
the understanding of the mobile or internet technology given in promotions that
bewilders public interest and overwhelms the customer benefit. A recent promotion
for Pot Noodle, of which Innocent could make a healthy rival to, was to collect pot
lids in order to text codes to receive downloadable mobile games. This is an example
of the type of innovative promotion that could benefit Innocent technologically.
Environmental
With the increasing concern of environmental issues, such as global warming and the
responsibility for an organisation to reduce its pollution output, Innocent will find it
necessary to consistently address these issues. From its beginning in producing
healthy drinks, Innocent have always being concerned with environmental factors and
consistently review the sustainability of their packaging along with reducing their
carbon foot-print. As detailed in their annual report, Innocent only use fruit suppliers
which are signed up to the International Labour Organisation standards, and in
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Latin/South America, they work on high levels of sustainability with the Rainforest
Alliance. Lately they are diverting from using compostable bottles to the use of
recyclable plastic. However, as more political meetings, such as the G8 Summit (July
2009), address environmental factors such as climate change, the economic crisis,
development in poorer countries, international trade, and health; this will have a
cascading affect on many businesses such as Innocent.
Legal
Issues related to Innocent Drinks consist... high cost of fruit smoothie but tax man has
17.5% plus a lot of revenue goes toward sustainability, sponsorship and charity...
The Market
The market for Innocent Drinks consists mainly of smoothies, of which Innocent hold
70% of the current market? But also consumers buy concentrated juices but sacrifice
natural product by having additives to prolong shelf life...
The Competition
The competition for Innocent Drinks mainly comes from a number of competitors,
including...competitor analysis! *** paragraph to be cemented in ***
In devising strategies for Innocent’s expenditure on advertising I reflect on Figure
16.3 (Fill, 2005, p.461) where it is shown “that advertising spend should be varied
according to the spend of the company’s competitors in different markets.” As
Innocent’s major strength is with its natural product, extension to promote this aspect,
and the company, becomes justifiable. However, as the competitors share of voice
(SOV) increases, Innocent may find that their large share of market (SOM) maybe
decreased, especially if competitors advertise productively or actively price their
products more affordably. Therefore, Innocent must promote (or rebrand) their
product(s) whilst devising strategies that can make a range that is more competitive
and appealing to the consumer.
The Market/The Competition
All managers, wherever they work in their organisation, need to keep in touch
with their market. An organisation will have a view of its market and how it is
changing. Market analysis can of course be difficult, but among the important
questions are:
(a) what the market is
(b) how big is it
(c) how is it changing
(d) how fast
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The Business Context
As Innocent has enjoyed a decade of tremendous growth since being founded on 28th
April 1999, the simplistic idea of producing healthy drinks from combinations of fruit
has been exploited by new competitors... *** STARTS LIKE THIS ***
Some competition names (stats) and customer types plus current retailers...
Eg. The internal environment (analysis of business from SWOT)
Reflect on (i) Brand Situation with reference to PCL/BCG Matrix but more in Task 3,
(ii) Corporate situation and plans with reference to GE Matrix,
(iii) Market situation and market conditions with reference to internet stats,
(iv) Marketing plans to own thoughts but referenced to arguements/proof
The Customer Context
Eg. Value to the customer – product shelf life, what the customer’s perspective is at
mo (online stats)
Pricing ~ comparison to other competitors...
Generating Strategic Options
Eg. Incremental innovative + promotions of stretching brand (new product
promotions)
Big section here on promotional mix, in-store push advertising and personal sales
promotion, publicity of new product may PULL customers with new packaging and
direct marketing techniques (direct customers to website for online promotion off
packaging of product, therefore online direct marketing/e-marketing, sponsorship –
Delia Smith or Alan Titchmarsh ~ fresh fruit+veg (5-a-day) for growing and cookinggetting right vitamins/minerals...
Finished Text toward strategy...
Propose to raise the popularity of key accounts (Task 3.1) by placing trained sales
staff in-store in moderately sized kiosks to interact with the public to help to establish
new smoothie mixes. The original idea would be to promote British produce from
local farmers who are having difficult times whilst raising the awareness Innocent’s
bid to advertise while lowering the carbon footprint. The British brand (possibly
known as Innocent Own) would be made from British produce by the British public
and sold at a slightly cheaper pricing strategy to compete against competitors whilst
still retaining the health conscious ethos of the Innocent brand. As Mark Rae, director
of Brandhouse, states (Case Study, 2009, Appendix Two) “The challenge is to
manage the price cut so there is no change in the perception of quality or health
benefits.” In tasting customer-made recipes and promoting popular mixes through
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website links to social networking sites, Innocent receive popular feedback for future
product development in relation to popular flavours. This could become part of
Innocent’s 10th Birthday celebration (Case Study, 2009, Appendix 6) to reflect back to
the company’s origin.
Whilst promoting public made British smoothie recipes, a redesigned product range
with promotional packaging invigorates customer interactivity with the Innocent
website through social network links, text promotions, competitions, sponsorship and
games. Therefore, this British Own promotion not only stands out to the health
conscious British public (Differentiate) but actively involves them to purchase
(Remind, Inform, Persuade) Innocent products (Fill, 2005, p.183). Innocent could use
this new product range to sell at venues sponsored on their website through
competitions or prize draws. Not only would the cheaper drinks be popular at
festivals, concerts and community events, but fruit and vegetables which are abundant
to a particular time of year, could be capitalised upon; such as a Summer Fruits
smoothie at summer festivals, or a Winter Punch that contains natural spices for a
festive flavour.
The collated data from public interaction, such as surveys and customer feedback, can
be used for future product augmentation, such as stretching the brand to include fresh
sandwiches, wraps, soups or vegetable meals, or rebranding Innocent’s own water
product This Water to Innocent Mineral or Innocent Pure.
Future promotions such as the Innocent Break, Innocent Wake, Innocent Lunch,
Innocent Dine, Innocent Go, Innocent Brunch, could all include healthy made
meals. For example, the Innocent Wake (a breakfast meal combination) could
incorporate; a scrambled egg croissant, orange/mango smoothie, and an oats/raisin bar
for a reasonable price of £1.99. Promoting a combination of mixed products from the
Innocent range like this, could be advertised as meal deals.
3.2 Task 2 – Future Channel Management Strategy
25% of marks... Rebranding can stimulate public interest in store of key accounts so
store is obliged to authorise it. People can ask questions face-to-face about product(s)
so a higher service is perceived from the beginning. Customers become more
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involved and aware of process (or service). Production should be closely integrated
with marketing promotions in order to sell cheaper and more abundant produce,
which is strategically related to the time of year.
Key account management of large supermarket channels is important as gives
opportunity to open other doors (i.e. more future channels for in-store promotions).
Not so for other big names like Macdonalds, although Coke ok but for international
recognition – this is for national revision of product as it is important to update
managerial methods of fast moving consumer goods (FMCG). Necessary to monitor
interaction between data storage systems so Innocent products are compatible with
key account systems. This assists the management of product delivery against sales
(demand). Stores give feedback about suppliers products, maybe get involved with
development/promotion therefore become not just a client in relationship marketing
ladder but supporter or advocate. Interaction of product & company with customer
raises awareness with fun theme helps popularity of store. Need to control/monitor
processes and feed into product development. This assists logistics and quick
warehouse turn-around.
3.3 Task 3 – Product Management, Market Share and Profitability
25% of marks...
Diversification 8 already a different juice product to normal concentrates and do not
want to divert from strong ethical morals about health.
Market Development 8 expand by recognition of Coke (see what they do?)
Product Development 9 Product needs to be rebranded and stretched to fill health
conscious market but keep value of product as Lucozade (Donnelly, 2009, p.102)
found successful over a period of five years.
More of the same 9 Product needs to be revamped for recognition
Product has limited shelf life. Products usually have time restricted contracts so need
to analyse product popularity and promote most successful of in-store promotion.
Strategic consumer analysis from in-store promotions would help Innocent to device a
dominant advertising campaign as Kelloggs (Fill, 2005, p.133) did when they began
to lose market share after becoming the brand leader. It is also necessary to find out
what to do with the product and how it is perceived by the consumer (reflect more
strongly here towards PLC and BCG matrix). A process to implement most of the
product management techniques mentioned in Task 3.2 is to firstly promote the
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original idea with more customer interaction. Relate to task 3.1. Customer interaction
continues by using direct marketing technology to acquire and profile consumer
groups, which may assist the direction towards niche marketing. Finalise this area
with GE Matrix to support decision of my communications strategy.
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4 Summary and Conclusion
To close my analysis of Innocent Drinks and to give the company recommendations
for future innovation and strategy, I have finished with a brief Summary and
Conclusion.
4.1 Summary
More text here...
The control and management of product promotions, such as meal combinations,
could drive future innovation for Innocent, even if they need to merge with
experienced restaurant or food chains such as Subway. Unlike Innocent’s interest with
Coke, which sacrificed a stake between 10-20% (Lightmaker.com, 2009) of business
to attract international brand recognition, future arrangements should incite more
commitment to business recognised with Fair Trade, or like Innocent, show awareness
to health and environmental issues that the public are becoming increasingly aware
due to the increase in child obesity, mental illness, stroke and cancer.
4.2 Conclusion
Text... Refer to SOSTAC process...
After all, Richard Reed, a founder member of Innocent admitted; (Case Study, 2009,
Appendix Six) “We’ve got to find a way to make quality affordable.”
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5 References and Bibliography
5.1 References
Case Study (2009) The fruit juice revolution case study 2009. Wolverhampton:
University of Wolverhampton.
Donnelly, R. (2009) The marketing planning process: CIM coursebook 2009-10.
Oxford: Butterworth Heinemann.
Fill, C. (2005) Marketing communications; engagement, strategies and practice. 4th
ed., Harlow: Financial Times Prentice Hall.
Innocent Drinks. (2009) the first ever innocent annual report [online]. Innocent
Drinks [cited 9th December 2009] Available at:
<http://www.innocentdrinks.co.uk/AGM/innocent_annual_report_2007.pdf>
Lightmaker.com. (2009) innocent drinks : all about us [online]. Innocent Drinks
[cited 2nd December 2009] Available at:
<http://www.innocentdrinks.co.uk/us/our_story/2009-investment/>
Telegraph.co.uk. (2009) Innocent seeks VAT exemption for smoothies - Telegraph
[online]. Innocent Drinks [cited 10th Novermber 2009] Available at:
<http://www.telegraph.co.uk/finance/newsbysector/retailand
consumer/5141209/Innocent-seeks-VAT-exemption-for-smoothies.html/>
5.2 Bibliography
Donnelly, R. (2009) Delivering customer value through marketing: CIM coursebook
2009-10. Oxford: Butterworth Heinemann.
Fill, C. (2005) Marketing communications; engagement, strategies and practice. 4th
ed., Harlow: Financial Times Prentice Hall.
Jobber, D. (2007) Principles and practice of marketing.5th ed., Maidenhead:
McGraw-Hill.
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6 Appendices
6.1 Pricing Comparison
6.2 Marketing Communications Planning Framework
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6.3 Auditing the Market Environment Levels
6.4 PESTEL and MC Chart
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6.5 Product Life Cycle Chart
Source: R. Donnelly, The Marketing Planning Process, FIGURE 8.2, pg.100
6.6 SWOT Analysis
Major Strengths
Major Weakness
Promotes healthy lifestyle and natural
Short shelf life compared with
product
concentrates/fruit juices
Majority share in UK smoothie market
Simplistic appearance maybe unattractive
Taste and quality with natural ingredients
Expensive compared to other products
Coca-Cola investment raised
Difficult task in continuing the concept of
international sales
healthy eating and living
Major Opportunities
Major Threats
Appealing by ethical standards and
Competitors (such as Pepsi) delisting
continues to maintain ethics/charities
Innocent products in major supermarkets
Promoting natural product(s) to reduce
Coca-Cola cost £30m for minority
obesity, heart disease, stroke and cancer
investment to stake 10-20%
Coca-Cola investment is giving more
Economic downturn may direct
advertising distribution/expenditure
consumers to purchase cheaper products
Strong key accounts of supermarkets may
Increasing number of competitors in
open new distribution channels
market are stretching their brands
Using market research (such as the short list in the chart above) the SWOT analysis
assists the formulation of objectives and strategies
Opportunities
Threats
Strengths
S/O strategies
S/T strategies
Weakness
W/O strategies
W/T strategies
Analysis helps with tactical decision making and what marketing mix to implement
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6.7 BCG Matrix
Source: R. Donnelly, The Marketing Planning Process, FIGURE 8.3, pg.103
6.8 GE Matrix
Source: R. Donnelly, The Marketing Planning Process, FIGURE 8.4, pg.106
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