Description
In marketing, positioning is the process by which marketers try to create an image or identity in the minds of their target market for its product, brand, or organization.
Linköping University Autumn Term 2001 Master Thesis
Bread and Entertainment – A Case Study of Positioning for Growth in the Food Industry
Authors:
Haralampos Karatzas Jens Löfflath
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- Positioning for Growth -
Avdelning, Institution Division, Department
Datum Date 2002-01-11
Ekonomiska Institutionen 581 83 LINKÖPING
Språk Language Svenska/Swedish X Engelska/English Rapporttyp Report category Licentiatavhandling Examensarbete C-uppsats X D-uppsats Övrig rapport ____ ISBN ISRN Internationella ekonomprogrammet 2002/27 Serietitel och serienummer Title of series, numbering ISSN
URL för elektronisk versionhttp://www.ep.liu.se/exjobb/eki/2002/iep/027/ Titel Title Bröd och skådespel – En fallstudie om tillväxtspositionering inom livsmedelsbranschen Bread and Entertainment – A Case Study of Positioning for Growth in the Food Industry Författare Author Haralampos Karatzas and Jens Löfflath
Sammanfattning/Abstract Bakgrund: Tillväxt är ofta ett nödvändigt ändamål för en organisation när marginalerna krymper, konkurrensen hårdnar och aktiemarknadens krav ständigt höjs. För att kunna överleva är org. tvunget att söka vägar för att nå sina tillväxtmål. Översatt till ett praktiskt plan, måste företaget syna sina marknader och produkter för att ta kunna formulera strategier i syfte att växa. Positionering och varumärken är användbara verktyg i strävan för att uppnå tillväxt. I denna uppsats har vi undersökt dessa tillväxtmöjligheter med hjälp av ett fall taget ur verkligheten. Syfte: Uppsatsens syfte är att beskriva och undersöka positionering och användningen av varumärken när ett företag strävar efter tillväxt. Avgränsningar: Vi kommer inte att behandla de juridiska konsekvenserna av tillväxt. Genomförande: För att uppnå en täckande bild av hur strategi, perception och varumärken interagerar i relation till företag och konsumenter, har vi genomfört intervjuer bland annat. Resultat: I vår undersökning fann vi att konsumenternas perception och preferenser är av betydelse för aktörer inom livsmedelsbranschen. Däremot balanseras konsumenternas önskemål mot företagets krav på hög kostnadseffektivitet och gynnsam produktutveckling. Balansen mellan konsumenternas önskemål och företagens krav påverkar hur tillväxtstrategier formuleras. Nyckelord/Keyword Jörgen Ljung, perception, strategi, positionering, varumärke, tillväxt, livsmedelsbranschen
- Positioning for Growth -
Avdelning, Institution Division, Department
Datum Date 2002-01-11
Ekonomiska Institutionen 581 83 LINKÖPING
Språk Language Svenska/Swedish X Engelska/English Rapporttyp Report category Licentiatavhandling Examensarbete C-uppsats X D-uppsats Övrig rapport ____ ISBN ISRN Internationella ekonomprogrammet 2002/27 Serietitel och serienummer Title of series, numbering ISSN
URL för elektronisk versionhttp://www.ep.liu.se/exjobb/eki/2002/iep/027/ Titel Title Bread and Entertainment – A Case Study of Positioning for Growth in the Food Industry
Författare Author
Haralampos Karatzas and Jens Löfflath
Abstract Background: In the face of toughening competition, diminishing profitability and increasing shareholder demands, growth is often seen as a necessary means for an organisation if it wishes to survive. In order to do so, the company is often forced to seek out novel ways by which it may achieve the ambition of growing. If put on a practical level, a company has, among other things, to look at its markets and products in order to find out possible strategies of growing. In this thesis, we have investigated these aforementioned concerns on a real case. Purpose: Our purpose is to describe and to explore positioning and branding when a company takes into consideration to enter a market with a new product. Scope: We will not investigate the legal implications of growing. Realisation: In order to achieve a comprehensive picture and understanding of how strategy, perception and branding interact in relation to a company and its consumers, we conducted interviews with 22 consumers and 4 managers. Conclusion: From our inquiry we found out that the preferences and perceptions of the consumers are significant for actors in the food ind. These are balanced with a company’s concerns regarding product development and cost efficiency. The balance betw. the consumer’s wishes and the company’s options influence the way growth strategies are formulated. Keyword Jörgen Ljung, perception, strategi, positionering, varumärke, tillväxt, livsmedelsbranschen
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Foreword
Ernest Hemingway once spoke of ‘grace under pressure’ as a defining quality of humanity during times of duress and panic. Sometimes one might wonder, maybe he should have spoken of ‘restraint under pressure’ instead. During the ten weeks which produced this bundle of papers, there have been many occasions in which it has been tempting to cross that invisible line that separates hopeful humanity and inhuman despair: uncooperative computers, absentee books and articles, freak turns of fate and an ever-closing deadline have all contributed in accentuating the pressure under which we, the humble authors, have laboured under. The stern exercise of restraint is what has saved this paper and what has held us back to our humanity. All our efforts towards restraint and regiment would have been exhausted and to no avail, were it not for the support and encouragement we have met along the path towards the completion of this thesis. We would like to extend our deep and sincere gratitude to Jörgen Ljung, our supervisor who saw us through and helped us reach answers to our many questions. Furthermore, we would like to thank the people at EKI: all are remembered, none is forgotten. Moreover, we would like to display our appreciation to the Key-house Crew – you know who you are! – for being there. Last, but certainly not least, we would to thank Patrick Camele and Joost Otterloo at Knorr/ Bestfoods, for giving us the opportunity to apply our knowledge in a case, and to all the respondents at Unilever, Leif Nilsson, Henrik Blach, Niklas Andersson, who contributed with their valuable time. Taken together, these random acts of kindness have alleviated our burden. They have re-fuelled our ambition and have performed small miracles on our motivation. In times of pressure, they have bestowed us with grace. For this, we are eternally in debt, Haralampos Karatzas Jens Löfflath Linköping University, 2 January 2002
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Table of Contents 1 Introduction………………………………………………………………
1.1 Background……………………………………………………….. 1.2 Discussion of Problem……………………………………………. 1.3 Purpose……………………………………………………………. 1.4 Scope……………………………………………………………… 1.5. Target Audience.…………………………………………………. 1.6 Disposition………………………………………………………… 1 1 4 8 8 8 9
2 Method……………………………………………………………………...
2.1 Science, What Is It?………………………………………………… 2.2 From which Room Do We View Reality?…………………………. 2.3 View on Method……………………………………………………. 2.4 Our Methodological Approach and Working Paradigm…………… 2.5 Interview Methods…………………………………………………. 2.6 Course of Action…………………………………………………… 2.6.1 Pre-Study………………………………………………… 2.6.2 Literature Study…………………………………………. 2.6.3 Empirical Study………………………………………….. 2.6.4 Analysis………………………………………………….. 2.7 Problems, Criticism, and Reflections Related to the Chosen Course of Action……………………………………………………
10 10 12 16 18 22 25 25 26 27 28 29
3 Frame of Reference…………………………………………………………
3.1 Introduction, why read this chapter…………………………………. 3.2 Perspectives on Strategy……………………………………………. 3.2.1 Strategy and Position…………………………………….. 3.4 Perceptional Positioning……………………………………………. 3.4.1. Why Perception Matters…………………………………
33 33 34 36 47 48
3.3 From Strategic Positioning to Perceptional Positioning via Marketing 41
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3.4.2. Creating a Position in the Mind of the Consumer………... 3.4.2.1. Five Dimensions of Positioning a Product in the Mind of the Consumer…….…..………….. 3.4.3. Brand Image and Perceptional Maps…………………….. 3.5 Branding……………………………………………………………... 3.5.1 Branding as a Means to Connect Strategic Positioning with Perceptional Positioning……………………………… 3.5.2 The Brand and its Context………………………………… 3.5.3 Brand Extension…………………………………………… 3.5.4 Risks Involved with Brand Extension………………………
49 50 52 55 56 56 60 65
4 Empirical Study…………………………………………………………….
4.1 The Empirical Context……………………………………………… 4.2 Presentation of Primary Data……………………………………….. 4.2.1 Food Industry and Trends in Consumption………………. 4.2.2 Unilever and Its Knorr Brand……………………………. 4.2.3 Product Level and Soup lollipop…………………………. 4.2.4 Interplay Between Brand (Knorr) and Product (Soup lollipop) Level………………………………………
68 68 71 72 78 91 103
5 Analysis……………………………………………………………………..
5.1 Strategy and Positioning……………………………………………. 5.1.1 New Industry Trends in the Light of Porter’s Five Forces of Competition………………………………. 5.1.2 SWOT-Analysis……………………………………………. 5.2 From Strategy to Perception via Bonds and Relationships………….. 5.3 Perception and Positioning…………………………………………... 5.3.1 Positioning Map…………………………………………… 5.4 Branding………………………………………………………………
107 108 108 111 115 118 118 122
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5.4.1 Branding and Its Associated Risks in its Context………….. 5.4.2 Putting Branding into the Context of Our Case…………… 5.4.2.1 Establishing and Maintaining Brand Loyalty at an Early Age…..……………………………….. 5.4.2.2 Using New Product Concepts to Actively Change Trends in Consumption………………….
122 123 126 127
6 Conclusions…………………………………………………………………..
129
6.1 Question One.………………………………………………………… 129 6.2 Question Two: Type of Branding…………………………………….. 132 6.3 Question Three: Options of Growth…….……………………………. 136 6.4 Suggestions for Further Research.…………………………………….. 141 6.5 Concluding Reflections………………………………………………… 142
7 List of References
Appendix A) Frågeformulär till konsumenter B) Questionnaire Unilever
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1
Introduction
The first chapter puts forward our background of our study. Furthermore, this chapter brings also forth the connected problem questions of the study, which in turn lead us on to our formulated purpose, and to our minute items of concern as well.
1.1 Background
“Every act of creation is first of all an act of destruction” (Pablo Picasso, 1881-1973, Spanish artist) In the face of toughening competition, diminishing profitability and increasing shareholder demands, growth is often seen as a necessary means or goal for an organisation if it wishes to survive. In order to do so, and in order to defend and increase, for instance, the vital items of position and share of market, the company is often forced to seek out novel ways by which it may achieve the ambition of growing. In other words, it needs to mentally break down and analyse the activities it does today, so that it may track, keep, drop, co-ordinate and/or create the activities it wishes to pursue, so as to remain competitive and viable tomorrow. Basically, when things are broken down, there are two main courses of action a company may follow in its desire to grow, namely the mechanistic path and the organic path (Bengtsson, L. & Skärvad, P-H., 1991). The mechanistic path, on
Introduction
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the one hand, involves all kinds of integration activities in which a company associates itself with actors from the outside, either on a vertical, horizontal or a lateral level, in the value chain or outside it. The organic path, on the other hand, is based on a company leveraging its own resources, assets and capabilities, whereby the company grows from the inside. Most often, innovation - the development of new products or services - and/or internationalisation - the movement into other markets - are two options the company often considers when choosing to employ its own internal strengths for growth (Whittington, 2001). The situation that we described above is a strategic one, since it is related to the long-term viability of a firm. If put on a practical level, a company has, among other things, to look at its markets and products in order to find out possible strategies of growing. In this sense, the situation is also related to marketing, since it typically brings up aspects of positioning products in markets and industries. Related to the previous discussion, Ansoff (1965) has developed a useful matrix, reproduced as Figure 1.1, for identifying the basic alternative strategies that are open to the firm in its quest for growth. The alternative strategies are defined as follows:
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Product Present New
Present Market New
1
3
2
4
1. Market penetration: the company seeks increased sales for its
present products
2. Market development: the company seeks increased sales by taking its present products into new markets. 3. Product development: the company seeks increased sales by developing improved products for its present markets. 4. Diversification: the company seeks increased sales by developing new products for entering new markets. Figure 1.1: Ansoff (1964) Product-Market
The strategic possibilities and the marketing practices available for growth, illustrated through for example Ansoff (1965), do not come without their inherent risks. As Aaker & Keller (1990) point out, the risks of for example, entering new markets or developing new products have become formidable, in part because of the dramatic increase in media costs, the more extensive and aggressive use of promotions by established firms, and the cost and difficulty of obtaining distribution. As a result, firms are using established brands to facilitate and reduce the costs of entering/developing (new) markets and/or launching/developing (new) products. The logic goes that it might be easier for the consumer to accept a new product if it is somehow associated with a well-
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Introduction
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known brand, to which the company has the access to and through which the company communicates what it has to offer the customer (Melin, 1999). As indicated, the use of a brand in this context is a question of positioning, both in the strategic sense and in the eyes of the consumer. A brand can, so to speak, be used as a means of positioning products in markets (Kotler, 1996). Additionally, as Porter reminds us (1990), a brand can be used as a barrier of entry but also as a way of gaining entry to a market. In this respect, a brand may be used by a company to establish a position relative to its competitors and their offerings. Hence, the bond and the communication to the customer - through the use of a brand - may prove to be crucial in this competitive strive, since it frequently is the consumer who determines the survival of the company in the end.
1.2 Discussion of Problem
Several aspects need to be considered in the situation of entering/developing a (new) market with a new/developed product, in the pursuit for growth. It is not merely a marketing decision but also a strategic one, since the effects of the entrance reverberate to the company as a whole, in the form of for instance a tarnished brand name or a weakened position relative to its competitors. Thus, when developing a new concept for positioning a new/developed product in a new/existing market, the company needs to consider how it positions itself in that market. It needs somehow to balance its own position with the position of its product(s). In other words, the company needs to take into account both the strategic aspects of positioning and the aspects of positioning the product in the mind of the
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customer. In the following, we refer to the former as strategic positioning and to the latter as perceptional positioning. Hence, it might seem as a balancing act between a macro-level view and a micro-level one. To find this balance is the predicament of Knorr, a brand within Unilever, by which we will illustrate the problem of growth, positioning, and branding. In the summer of 2000, the consumer goods giant Unilever bought and integrated for $ 27 billion Bestfoods, a consumer foods company with a portfolio of attractive brands, which included the already mentioned Knorr, but also Skippy and Hellmann’s, among others. This huge investment is now expected to yield fruit, which is why the financial market puts extreme pressure on Unilever to grow. In other words, the financial market expects after the external growth phase through the acquisition of Bestfoods a phase of internal growth: ”Det företag som Knorr tillhörde – Bestfoods – köptes upp av Unilever för ett halvår sen för extremt mycket pengar – 27 miljarder dollar! De pengarna… ska ge resultat… Finansmarkanden ställer väldigt höga krav på oss som företag att växa […] för att kunna växa så måste vi lansera nya produkter. Det finns väldigt höga krav på företaget som sådant att växa och där spelar Knorr en väldigt stor roll.” (Niklas Andersson, Nordic Brand Manager Knorr)
This emphasis on growing is further accentuated due to the fact of Unilever being forced to sell or divest local food companies it already owned or had a stake in, as for instance Blå Band in Sweden, due to competitive restrictions imposed by the EU. However, in order to grow from the inside it is necessary, as argued through Ansoff, to develop existing products or innovate and launch new ones in new or existing markets. Unilever tries to meet this challenge with its
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“Path to Growth” strategy, which the CEO(s) of the company made publicly known to the investors in March 2001.
“Our products are bought by consumers 150 million times a day currently spread over nearly 1000 brands. However, part of our 'Path to Growth' strategy, by which we aim to achieve an annual top line growth of 5-6% and operating margins of over 16%, is to reduce this number to 400 leading brands.” (Antony Burgmans, 2001, CEO Unilever NV)
The CEO of Unilever PLC, Nial FitzGerald (2001), mentions that Unilever currently attempts to focus on a smaller number of powerful brands. This will implies that, instead of trying to pursue growth through four or five brands in a particular category, Unilever will focus on one or two - the ones that already have strong consumer appeal and real potential for future growth. Instead of fragmenting resources they are able to invest in significant brand development and innovation with a fewer number of brands. The consequences at Unilever can already be seen:
“In 2000, we began the transformation of our Foods business in line with the “Path to Growth” strategy. Bestfood brought us leadership in the culinary category.” (Antony Burgmans, 2001, CEO Unilever NV).
The “Path to Growth” strategy has implications on all Unilever brands, including Knorr. Therefore, all of the 400 selected brands have to push new product concepts but at the same time the brands have to be careful not to weaken its position they hold in the minds of its consumers. In doing so, Knorr
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is faced with the problem of taking into consideration both its strategic perspective and the customer’s perspective. Moreover, it needs to bring into this equation the use of its own brands in its ambition to extend into new markets and thus grow. More specific, Knorr needs to find a balance between strategy and perception in one of the products it is considering to launch, as it tries to meet the demands of the “Path to Growth”-strategy. The product concept is called the “Soup lollipop”, which is considered to be launched under Unilever’s Knorr brand. If briefly described, the Soup lollipop is a dehydrated and decompressed soup attached to a stick. The stick is put into a boiling cup of water, after which the soup releases from the stick; the soup will be available in several varieties, fitting the needs of every day life and new trends of consumption; the product is aimed at children and as a test market Sweden has been chosen. At this juncture we, the authors, came in touch with Knorr in order to explore the possibilities of this concept. Our role at Knorr was to investigate the views of the consumers concerning the concept. However, for our own purpose in the thesis, we wished to link the results of this investigation with an inquiry of the company, trying to make an argument of how to combine the company and consumer views when trying to grow as a business. We will thus investigate issues of strategy in the interplay with positioning, and branding as a means to combine these two. Derived from this problem and predicament there are several related questions for research that may be applied: · What does strategic and perceptional positioning imply? · Which strategy on brand extension is most appropriate when launching a new product under the premise that the new product evokes and stands partly for other perceptions than the already existing (mother) brand?
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· Which options of internal growth does Knorr have and what are the general implications on growth for an actor in the food industry? These listed questions form the foundation of our essay. Moreover, they will feature as a red line binding the various parts of the essay together.
1.3 Purpose
Our purpose is to describe and to explore positioning and branding when a company takes into consideration to enter a market with a new product.
1.4 Scope
Our outlined research questions coequally define the focus of interest as well the limits of our study. Hence, we will, for example, not investigate the legal implications of growing. Nor will we address the technological issues for growth.
1.5 Target Audience
The reader to which this essay is directed to ought to have acquired some previous knowledge of business administration. In other words, scholars, students and practitioners working within the fields of business administration are the readers to which this essay primarily is directed. Although preferable, this level of knowledge is however not essential and, thus, should not deter anyone interested in taking part of this paper.
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1.6 Disposition
This chapter – Chapter 1 – made known the background of this study as well as the associated problem, research question and purpose. In the next chapter – Chapter 2 – we will present the methodological base from which we have started from when conducting our study. We will disclose our views on science and reality and how this has affected our study in the way we have approached our problem and research questions. After the methodological chapter follows our frame of reference – Chapter 3. Although it could be seen as three distinct parts, we have incorporated these under one single chapter, since the connections and relations between these parts deserve to be jointly high-lighted, in our opinion. In Chapter 4, we will present our empirical material, which is constituted both by secondary and primary data, consisting both by publicised material as well as of our interviews. Following the presented empirical material, we have devoted a chapter in applying our frame of reference on the empirical findings. We will also convey our own opinions and reflections concerning the findings, which can be found in the analysis, in other words in Chapter 5. The last chapter wraps up our study. Hence, in Chapter 6, we will sum up our findings and answer our research questions and purpose. Out of our answers, we will also point towards some areas that, in our opinion, deserve to be studied in the future.
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Introduction
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2
Method
In the previous chapter, we addressed the issue of what this essay will set out to investigate. As a necessary consequence, the question of how the problem will be investigated gains increased importance, in that it lays down conditions for the study of the problem. Thus, in this chapter, the aim will be to grant the reader an insight into the perspectives from which we, the authors, view and deal with the problem. To begin with, we will explain the concept of science, because it lays down demands for the knowledge we hope to develop out of the problem. We will then move on to explain our view on reality and our view on method. This will result in a course of action regarding method, by which we will approach the problem from a technical point of view. In the end, we will round off this chapter by bringing into light some critical remarks and reflections concerning our chosen methods.
2.1 Science, what is it?
Countless people have over the years offered answers to this question. Even the ancient Greeks and Romans have tried to fathom the depths of this question. In continuation of a century-long discourse, the Princeton University Thesaurus defines science nowadays as:
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”... a domain of knowledge accumulated by systematic study and organised by general principles” (Princeton University Thesaurus, keyword: science) This definition highlights what is commonly perceived as the characteristics of science, namely that science refers to methods for generating knowledge. Note furthermore that the definition brings also into light that only findings that are organised by some generally agreed principles should be considered as scientific. In other words, the methods we use to generate scientific knowledge must meet a set of agreed-upon demands. Wiedersheim-Paul & Ericsson (1994), but also Lundahl & Skärvad (1994), argue that scientific knowledge must meet the demands of creatively and critically reassessing established truths, notions and methods, as well as openly disclosing how results have been produced, so that others may control the accounted results. Apart from the demands laid upon appropriate choice of method for generating knowledge, there are some general demands stated on scientific research. According to Wiedersheim-Paul & Ericsson (1994) the research produced should be interesting, credible and comprehensible. With interesting it is understood that the results produced by the research should be interesting for an audience other than the researcher himself. Credible, or rather credibility is achieved when the research is presented in a logical and systematic order, so that the reader may believe in the results generated. Lastly, comprehensible refers to the level of language in the presented study, where the formulation of the text should convey and communicate in a feasible manner the results of the researcher concerning the study. Hence, the language chosen in the essay ought to be on par with the reader’s, so that he or she may in a convenient way comprehend the research (Wiedersheim-Paul & Ericsson, 1994).
Method
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In all these aforementioned aspects, our sole ambition has been to meet the demands postulated by Wiedersheim-Paul & Ericsson and Lundahl & Skärvad. In the remainder of this chapter, we will account for the dimensions of method that we considered for this research paper and, in extension, for generating knowledge that may be regarded as scientific. Furthermore, we will in an open and clear manner reveal our sources, so that the reader may distinguish our own interpretations from those of others. This will hopefully facilitate the control of the results from our scientific research. Moreover, we hold the view that our study is interesting, since it deals with the perennially fascinating topic of growth, but also because it attempts to build a bridge between the domains of strategy and marketing. We believe that we have reached credibility by presenting our methods, interpretations and sources in a transparent, logical and systematic order. Finally, we have strived to present our research in an accessible language, so that a majority of readers may comprehend and benefit from the results of our study.
2.2 From Which Room Do We View Reality?
Scholars who discuss the concept of science sooner or later end up arguing on the relation between man and reality, or to put in another way, the relation between the researcher and the world that he (or she) studies. This argument has a critical implication for our study because our view on reality influences the way we approach it, the way we study it, and the way we generate scientific knowledge out of it. In this particular situation, scholars often ask themselves whether there is an objective reality, or, if reality is constructed by man – i.e. if reality is subjective (Arbnor & Bjerke, 1994). The discussion on reality, whether it is objective or subjective, is an old one. Its oldest roots trace, as usual, back to the ancient Greeks. The debate between these two positions has over the years
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resulted in two different scientific ideals on how we may generate knowledge out of reality, namely the positivist position and the hermeneutic one (Patel & Davidson, 1994). The positivist position, on the one hand, is based on the assumption that science should be exact, verifiable and free from subjectivity. One of its fundaments is the notion of an objective reality, i.e. that there is a reality out there which looks the same no matter when, where and who is viewing it (Lundahl & Skärvad, 1993, Arbnor & Bjerke, 1994). The positivist position, or positivism as this ism is more commonly known, is the traditional ideal followed in the domains of science that study nature. In for instance the fields of physics, chemistry and biology, to name a few, the positivistic ideal has brought with it a focus on researching cause-and-effect laws and relationships that are universally applicable and, furthermore, independent of the individual who studies these relationships (Patel & Davidson, 1994). In other words, the positivist ideal is striving to formulate independent descriptions of what causes and affects a phenomenon appearing in reality. An important tenet within this ism is the notion that results produced by one party should be able to be reproduced by another party, in order to vouch for their positive and universal quality (Molander, 1988). The hermeneutic position is, on the other hand, based on the assumption that reality may only be understood by a human interpreting the actions and language of another human (Patel, & Davidson, 1994). It is in other words a social activity based on interaction; or as Wiedersheim-Paul & Ericsson (1994) state, ”reality is a social construction... it is created and is being created by humans and it is perceived by humans” (p. 39, our translation). The hermeneutic path takes as its starting point that an individual’s perception of reality is linked to his or her previous experiences, assumptions, identities and affiliations, as Arbnor
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Method
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& Bjerke (1994) put forward. All these listed factors help compose cognitive structures and schemes by which an individual creates meaning out of reality. These cognitive structures govern the way we interpret, think of, and negotiate with reality, which in this sense becomes subjective and thus dependent of when, where and who is viewing it (Lundahl & Skärvad, 1993, Arbnor & Bjerke, 1994). Though its historical origins lies in the interpretations of religious scriptures, legal documents and literary texts, the hermeneutic position has become the ideal traditionally adhered to in the social sciences. Psychology, sociology, law and business administration are some of the fields that are customary attributed to the social sciences. A scientist following the hermeneutic credo approaches the object of research from a subjective point of view with his/her own previous understanding (in Swedish: förförståelse) and attempts to attain a holistic perspective on the problem to be studied (Molander, 1988). In other words, he or she tries to explore and develop an understanding of the problem that he or she is faced with. In this study, we will be leaning more towards a hermeneutical position than towards a positivist one, for reasons that will be further disclosed under view of method. However, it could be contested whether or not the positivistic and the hermeneutic position exist in a pure form. It is difficult for a positivistic scientist to avoid making an interpretation of his observations, since the act of interpretation and representation of the accumulated objective results involves the human senses, in one form or the other. By the same token, it is difficult for a hermeneutic scientist to claim that his view on reality is completely subjective, and thus free from objectivity, because the results need to meet the scientific demand of being comprehensible for the reader who evaluates the results of the research; a certain “objective” standard need to be arrived at from which the results may be evaluated.
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Like Lundahl & Skärvad (1999) argue, we believe that it is perhaps more fruitful to speak of inter-subjectivity, instead of pure positivism or hermeneutics. Intersubjectivity refers to the idea of shared assumptions and ideas between people. and references, makes it easier to interact with one another but it also makes it easier to evaluate the results on a more neutral basis, and thus one may speak in a manner similar to an objective one. In effect, what Lundahl and Skärvad (1999) do through their argument of positivism and hermeneutics is that they touch upon the concept of a paradigm. Shared ideas, assumptions, schemes and cognitive structures, which have been discussed above, are frequently referred to as a paradigm. According to the philosopher and theoretician Thomas Kuhn, who coined the notion, a paradigm is an established system of thought and a set of shared collective assumptions that function as a norm when working within a scientific discipline (Kvale, 1993). The ruling paradigm influences the way a problem is viewed and approached. Hence, it serves us well to bring up that we, the authors, follow a paradigm by which we approach and view a problem that has been influenced by studies within the field of business administration. In other words, we will be prone to view the problem of this study from an economic point of view. We could have approached the problem according to, for example, a sociological or a technological paradigm and could have, furthermore, presented comprehensible results according to the ruling paradigm within these mentioned fields of research. This situation could, as Patel and Davidson (1994) illustrate, be likened to a scene where a doctor and a psychiatrist (the scientists) trying to study the problem of what troubles the patient (the reality) through their respective paradigm (diagnostic medicine and tests on the one hand and interpretative dialogue on the other). Each of these approaches towards the problem is acceptable to the fields that the doctor and the psychiatrist belong to.
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Method
Shared ideas and assumptions, furnished through for instance similar education
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In our case, we will try to formulate solutions from our study of reality that might be comprehensible, credible and interesting within the paradigm of economic thought and theory. A paradigm remains relatively stable over long periods of time and influences the way a problem is approached on a practical basis, i.e. it influences the method chosen when dealing with the actual problem (Kvale, 1993). In this respect, we agree with Arbnor & Bjerke (1994) who regard a paradigm as a bridge between the view on reality and the view on method. Thus, in the next heading, we will move on to link our discussion to our approach on method.
2.3 View on Method
Within the field of business administration, there are several scholars who have directed the issue of when different methods should be employed in order to either describe, understand or to explain the problem to be studied. These notions are referred as views on method and are distinguished from one another by the different assumptions they take on (Arbnor & Bjerke, 1994). Three different and discernible views on method within the field of business administration have been compiled by Arbnor & Bjerke (1994) namely: the analytic view, the system view and the actor view. The first view, the analytic one, argues for a reductive view on reality by maintaining that the whole may be reduced and explained by the sum of its parts. The view proposes, furthermore, that knowledge should be independent of the individual and that the parts may be explained by verified judgements. As may be noted, this view shares parallels with the positivist position in the way it proposes independence and objectivity. The second view, the system one, argues that reality diverges from the sum of its
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parts. The view argues, moreover, that the parts of the whole are explained and understood by the properties and interaction of the whole, and that knowledge is dependent on systems and the actors and institutions appearing in the systems. structures of meaning which are socially constructed. The whole is understood by the perceptions on reality of the actors, resulting in the stance that knowledge is dependent on the individual, thus subjective. As may be observed, this view shares parallels with the hermeneutic position, where the role of the individual is stressed. We are of the opinion that the system view on method matches our preferred view on reality. The system view accommodates an objective view on reality, but assumes that it is constructed in a different manner than the analytical view. Reality, in the system view, is constituted by parts and components that are mutually dependent by each other and thus the whole is not the merely reduced to the sum of its parts. In order to study reality it is necessary to implement a holistic perspective, by which it is possible to explore and understand the system between parts and whole (Arbnor & Bjerke, 1994). In this sense, the view takes also into consideration the individual who studies the system and his/her notions, ideas and use of established models of thought. In this respect, there is a parallel to our discussion in the previous heading: individuals study and interpret reality according to the paradigm - the system of shared ideas and assumptions that they have established. In our study, we will begin by observing the economic context which our study is related, and then move on to study the parts; the parts in this sense will be the case company and the interviewed consumers, and the whole will be the system context in which the parts interact. The analysis we will produce will not claim a definitive conclusion on the whole but will provide a possible interpretation of it, as seen from an economic paradigm.
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Method
The third and last view, the actor one, claims that the whole exist only as
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It could be argued that the system view accommodates both the positivist and hermeneutic position when studying a problem. For this reason, it ought to be mentioned, as Arbnor & Bjerke (1994) do, that scholars have criticised the system view for being inconclusive and for being an amalgamation of diverse positions on reality. However, what speaks in favour for the system view is that it allows flexibility when approaching a problem; several perspectives may be used to shed light on a problem: the system view provides room for the positivist’s emphasis on describing and the hermeneutics’ on understanding. This stance of the system view is particularly useful for our twofold purpose and for our methodological approach towards the problem, which will be elaborated upon under the next heading.
2.4 Our Methodological Approach and Working Paradigm
The methodological approach refers to the technical construction of a study. It is a consequence of the discussion on the theoretical aspects of a problem in that it formulates what dimensions and practices to consider when approaching the actual problem at hand. The first dimension to take into consideration is what method to pursue in order to acquire scientific knowledge: should one follow along the inductive path or the deductive one? The second dimension for the researcher to consider is whether the study should go deep in a specific case, in a cross-section of cases or if the study should investigate a development over time. A third dimension that needs to be addressed is whether the study should acquire information and empirical observations in a qualitative or in quantitative manner (Lekwall & Wahlbin, 1993).
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When considering the first dimension, things are traditionally straightforward. As Lekwall & Wahlbin (1993), but also Patel & Davidsson (1994) and Alvesson & Sköldberg (1994) point out, the path of induction and the path of deduction Induction, on the one hand, is the path of discovery and is characterised by the researcher starting out with a clean slate and trying to draw conclusions out of empirical observations (Lundahl & Skärvad, 1994). To be more specific, the inductive researcher starts out with a number of cases and aspires to find out relations among these cases that may be claimed to hold for a general level, forming in effect a universal theory (Alvesson & Sköldberg, 1994). The path of deduction is, on the other hand, the path of proving. When following this path, the researcher starts out from theory, formulates predictions on how relations between phenomena in reality should behave, and thereafter tests these predictions in reality, in order to prove the validity of the predictions (Lundahl & Skärvad, 1994). If comparing the two, the deductive path could be seen as the opposite of the inductive one; the deductive researcher lays claim that the universal theory or rule may explain the specific case. When applying this above reasoning onto our essay, it is difficult to state which path our study follows. Owing to our descriptive part of our purpose, where we start out from theory and move towards reality, the deductive path would indeed seem to math our needs. However, owing to our exploratory part of our purpose, where we set out to investigate reality and find relations existing in it, our study is effectively rendered into an inductive one. There is an interplay between the inductive and deductive path in our situation, as can be seen. For this reason, we believe that by following the hermeneutic spiral, as Alvesson & Sköldberg (1994) have put forward, we will hold on to a course that will serve our purpose. The hermeneutic purpose could be seen as a process whereby the researcher continually shifts between notion, observation and reflection. In our study, we
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Method
are the two traditional courses followed when generating scientific knowledge.
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will move from theory into reality and back into theory again. Indeed, we have begun our study by reading literature related to our problem area, which could be seen as a typical deductive approach. However, during the process of reading it became evident that there is no single theory fitting our area, despite the rich supply of scholarly work. Out of the theories we have read, we need to explore how to conceptualise positioning when growing, and in this manner it is possible to claim that we follow along the inductive path as well. The second dimension we need to consider in our approach towards our problem is how deep or lateral we should move with our study, in other words how we should cover the “reality” we wish to observe. Considering the fact that our problem aspires to increase the knowledge of positioning from a company and a customer perspective, we are of the opinion that an approach similar to a case study would be a suitable method. A case study is, as Robert Yin (1994) explains, a method where the interest of the researcher is directed towards studying one specific or a limited number of cases in depth and in detail. A case may for instance be an individual, a group, an organisation, an event, a development, or even an occurrence. What is considered as a relevant case in “reality”, and thus the subject of an analysis and interpretation, is to a large degree determined by the problem/research question(s) of the study (Lundahl & Skärvad, 1999). As Yin (1994) furthermore informs, a case study is often suitable when the formulation of the problem includes the aspects of how or why, since it is often geared towards generating insight, discovery and interpretation, in order to gain a holistic understanding of the case. The case study, furthermore, allows for the employment of several approaches and perspectives when studying a case (ibid). In this respect, the case study shares some parallels with the system view through the flexibility of method.
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We chose to conduct our study with an approach similar to a case study in part because the complexity of our purpose and in part because our research by studying a specific case thoroughly (Lundahl & Skärvad, 1999). The third dimension to consider is related to the second one. The case study and the qualitative method for collecting and interpreting information are often intimately connected: a case study is often directed towards insight, discovery and interpretation. Likewise, a qualitative study, too, stresses interpretation and understanding of a specific phenomenon on the basis of what is to be studied (Merriam, 1994). In a qualitative study, the researcher attempts to understand how individuals experience their selves and their environment (Lundahl & Skärvad, 1999). Considering our research questions and what we wish to achieve with our study, we are of the opinion that a qualitative study would be useful for the type of information we wish to acquire. A qualitative study is characterised, apart from what has been discussed above, that it collects data and information that cannot be quantified, as for instance attitudes and values, (Wiedersheim-Paul & Ericsson, 1995). The reason why we have chose to conduct this study with a qualitative method instead of a quantitative one is that it is the views of consumers and people within a company that we aim acquire. We need to acquire primary data from first hand, instead of solely basing our collection from other published information, (which constitutes secondary data), since we need to provide answer that matches our specific research questions. We believe that it would be awkward to meet this aim by using a quantitative method to collect and analyse the views and values of people.
Method
questions demand a deeper and detailed knowledge which may only be obtained
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In other words, we will use a qualitative study. In particular, we will use interviews in order to collect the views of the specified respondents. Since the use of interviews has the implications on the scientific demand of credibility considering how we arrived at our results - we will elaborated more upon this method of collecting data in the following section here below.
2.5 Interview methods
Interviews are the most usual means for collecting primary data when conducting a qualitative study. An interview is a dialogue between two, or more, humans (Kvale, 1997). However, the dialogue is not performed on equal terms. There is an asymmetry of power between the interviewer, who asks the question and directs the dialogue, and the respondent, who answers the questions (ibid). In our role as interviewers we were aware of this asymmetry and tried to respect the integrity of the respondent. This awareness was furthermore manifested in our own demands for ethical behaviour, by which we pursued our empirical study. As the results of the interviews are dependent on the interviewer, the preparations of the interviewer are of importance (Lundahl & Skärvad, 1999). The use of tone, gestures, and language of the interviewer are factors that need to be taken into consideration before the interview. Of equal importance is what happens during the interview. The interviewer must ensure that the respondent understands the questions, or guide him/her when necessary. Moreover, the interviewer must be aware of the influence that he/she exerts on the respondent during the interview (ibid). Not to be neglected is what happens after the interview. The process of interpreting the empirical results must be made in a neutral manner (ibid).
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There are various types of interviews available to choose from when gathering empirical information. The choice of interview is dependent upon the purpose, three common ones are standardised, semi-standardised and unstandardised interviews (Chisnall, 1992). If placed on a common scale, the level of openness and structure determines the difference between these three. A standardised interview, on the one end of the scale, follows the same structure from interview to interview with a closed set of available answers, whereas the unstandardised interview, on the other end of the scale, is almost unique from interview to interview, due to the fact that the interviewer gives the respondent a large degree of freedom by asking opening questions during the dialogue (ibid). The semistandardised interview is a blend of the two extremes. Each type of interview has its own merit. The standardised interview can be handled efficiently and is useful when needing to describe trends. The unstandardised interview may be more time-consuming due to its open nature, but it is useful for exploratory purposes, when knowledge of a phenomenon is scarce (ibid). Since the purpose of our study was to capture both a consumer and a company perspective on positioning, we prepared two types of interviews that would meet the requirements of our purpose. In order to acquire information of the consumer’s view, we leaned towards a standardised type of interview, due to the relatively large amount of interviews to be made in order to describe a trend of values and opinions. However, we included a limited number of semistandardised questions at selected parts, where the need to explore opinions was necessary. In specific, the respondents we targeted were parents with children in the age between 5-15. All in all, we conducted 22 interviews in various locations in the municipality of Linköping. We refrained from interviewing children alone, because the type of product the project was concerned with (soup) was
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Method
problem and frame of reference of the study. Of the many types of interviews,
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typically purchased and prepared by the parent, thus children would lack the overall view of which some of our questions sought to capture. However, in a few interviews parents together with their children answered the questionnaire, thus providing some insights from the children’s perspective as well. In order to capture the company view, we selected a semi-standardised type of interview, with a blend between open and close questions, the motive being a need for both descriptive and exploratory questions and answers. (The questionnaires used for the interviews are found in the appendix, should the desire to evaluate the interview protocol arise). In specific, we conducted 4 interviews with respondents at Knorr / Bestfood. The respondents were people at manager and director level that were specifically involved with the Soup lollipop project, or had stood outside the project but were responsible for the overall brand. Their names and positions are mentioned in the empirical chapter of this thesis. We conducted the interviews in Swedish, English and German, though we will use English to present our empirical results.
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2.6 Course of Action
Since the ambition with our study is to attain a desirable level of credibility and the course of action we chose when conducting our scientific study. Our study was divided into four different phases: the pre-study, which consisted of formulating our purpose and research problem; the literature study, which consisted the base for our frame of reference; the empirical study, in which we gathered our data and conducted our interviews; and, lastly, the analysis, where we processed the empirical information by using our frame of reference. The progression of the various phases of our study can be seen illustrated in the figure here 2.1 below.
Method
to facilitate a control of our results, we will in the following section account for
Pre-study
Literature study
Empirical study
Analysis
2.6.1 Pre-study
The pre-study was carried out in co-operation with our supervisor at Linköping University, Jörgen Ljung, and our case company Knorr/Bestfood, located at Helsingborg, Sweden. Along with the input from Staffan Hård af Segerstedt, Programme Director at Linköping University, the aim of the pre-study was to formulate a suitable purpose as well as useful research questions. During this process, the emphasis lay on constructing a problem for a study that would meet the demands of being interesting, credible and comprehensible.
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Pre-study
Literature study
Empirical study
Analysis
Problem Purpose
2.6.2 Literature Study
In order to answer the questions stated in the problem discussion of the prestudy, our course to obtain better understanding began by putting ourselves into the theoretical context of positioning. To achieve this aim, we sought to gather relevant literature in the fields of strategy, marketing, branding and psychology. This collection of secondary data was primarily carried out by a thorough examination of the catalogues of the Linköping University library, but also through the aid of search engines on the Internet, among them Swedish University catalogue of Libris. The process surrounding the collection of relevant theory on positioning has provided us with a pre-understanding that has been formulated in our frame of reference. For our study, the role of the frame of reference is dual: first, to provide an insight into the research area and, second, to act as a tool to provide meaning and knowledge out of the findings of the empirical study. Though the purpose of the frame of reference is to act as guideline during the phase of the empirical study, we have constructed the frame to allow us for some degrees of freedom concerning our presented assumptions. This is useful, in the case that our empirical findings should move in a different direction than we had anticipated.
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Hence, we do not regard the frame of reference as a prison of theory, but rather as an open point of departure for the course of our study.
Pre-study
Literature study
Empirical study
Analysis
Frame of reference
2.6.3 Empirical Study
Our empirical study is based on primary data collected through personal interviews. As previously mentioned, we used two different types of interviews to gather the empirical material; one leaned towards a standardised interview, the other constructed as a semi-standardised interview. We conducted 22 random interviews of the first type at different locations in the municipality of Linköping, where we sought to accumulate information concerning the consumer view. The respondents were, as previously mentioned, parents with children in the age between 5-15. Each interview took between about 10-15 minutes, a few even 20-25, to perform. At the beginning and the end of the interview, we informed the respondents about the purpose of the interview and reminded them of the anonymous treatment of the collected data. A tape recorder as well as written notes was used simultaneously in order to ensure that no information was lost.
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Method
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We used a different course of action for the collection of data regarding the company view. The respondents were people at manager level at Knorr/Bestfood. The shortest of the 4 interviews took approximately 45 minutes to perform, whereas the longest took approx. 75 minutes. We conducted the interviews via telephone, using a tape recorder and a computer to capture the answers given. Afterwards, we transcribed the answers and sent them back to the respective respondent, in order to offer the possibility of quote control and confidentiality.
Pre-study
Litteraturstudi Literature study
Empirical study
Analysis
Interviews & data
2.6.4 Analysis
During the analysis of the data from the empirical study, we used the frame of reference of the literature study. Through the combination of these two studies our aim will be to provide answers to the research questions we stated during the pre-study. The conclusion we will draw out of the analysis will hopefully shed some light on our research problem as well as inspire further research in suggested fields.
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Pre-study
Litteraturstudi Literature study
Empirical study
Analysis
Conclusions
2.7 Problems, Criticism and Reflections Related to the Chosen Course of Action
In this section, we would like to make the reader aware of the potential problems related to the presented course of action. It is our ambition that the reader after completing this section may be able to judge the validity and reliability of the conducted research (Wiedersheim-Paul & Eriksson, 1998). Validity refers to the scientist/researcher being aware of what is being studied is also what is intended to be studied (Merriam, 1994). During the research process, validity is closely linked with the notion of reliability, which refers to the trustworthiness of the study, meaning for example that the measurement instruments withstand random inference. The aim of reliability is to insure repeatability. In other words, the study should be able to repeated in the same manner and produce the same results (ibid). The demands of validity and reliability are primarily geared towards positivist and quantitative studies (Molander, 1994). However, there are some issues of concern in a qualitative case study as well (ibid). In a qualitative study, a problem arises when dealing with reliability, in that the same results are difficult to reproduce, because a qualitative case study
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develops, evolves and changes during the research process. The new results do not indicate that the old results are wrong, but rather, that there are several interpretations to the same information (ibid). However, validity and reliability in a qualitative context could be seen as a review and self-critical reflection of how the produced results and interpretations could have otherwise been arrived at. Hence, in the following, we will present a cursory review and reflection of our chosen course of action. Concerning, the pre-study, a differently stated research problem might have provided an opportunity for perhaps a richer overall study. Regarding the literature study, we believe that we have made a reasonable and relevant selection of the literature that we need for the scope of our problem. Concerning the empirical study, there are several issues we would like to discuss. First, an issue arises due to the used method for collecting empirical data. Some criticism might be directed against the use a qualitative case study, in that not enough information may have been acquired in order to provide a complete picture of the research problem to be studied. In other words, there might be a fear that the conclusions drawn out of the empirical study are built on a too fragile base to be generalized. However, we would like to view the method chosen for our study as Kvale (1996) and Yin (1994) do: a qualitative case study researches a problem in depth and in detail. Through such a thorough approach, the likelihood increases that the knowledge generated by the case study might be used in order to enlighten another similar study. Nonetheless, we refrain from making the claim of generalization, though we do argue that we have detected certain patterns that help to generate knowledge.
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Second, during the collection of empirical data through personal interviews some further problems may emerge, since it is an interaction between two humans. The interviewer, on the one hand, may interpret the answers of the Svensson (1994). The respondent, on the other hand, might feel a pressure by the question and thus may not answer as he or she would have done otherwise. Furthermore, the respondent may deliberately or unconsciously distort answers, lie or withhold information for different reasons (ibid). Or, the respondent may act in a quite different manner, and provide answers that are seen as favourable by the interviewer or by the superiors (ibid). As much as we have tried to be aware of such issues, it may prove to have been difficult to always be on the guard against them. Third, and last, follows the issue of responder selection. Concerning the consumer view, we have interviewed people who have been willing to respond. It is thus not a random sample in the strictest sense of the word. However, it is our impression that the data we have collected shows similar patterns irrespective of who, where and which situation the interview has been conducted. Concerning the consumer view, we have relied upon the selection made by of our supervisor at Knorr. It is thus not a direct selection but one made indirectly through our instructions. Regarding the analysis, we have already addressed the major implications of the analysis during the discussion on the possibility of generalisation through empirical results from qualitative case studies. In this passage, however, we would like to mention that a larger questionnaire or a greater selection of companies would have complemented our study and might furthermore have provided a richer analysis. It would indeed have been interesting to try out this option. However, under this section, we would like to add that we did not use all
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Method
respondent in a too favourable or negative light, as argued by Starrin &
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available empirical material for the analysis, mainly for three reasons. First, Unilever/Knorr desired some additional material for themselves that we could not use for our own thesis. Second, during our own study, we adapted our purpose to our thesis and the other way around. As a consequence of following our hermeneutical spiral, some questions seem not to be as relevant as we thought at the beginning. Third, and last, related to our hermeneutical spiral, we used some questions to increase our understanding and to supply us with some food for thought.
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3
Frame of Reference
3.1 Introduction – Why read this chapter?
This chapter will present the theoretical tools by which we will analyse our empirical data. It will begin by putting strategy, and its view on positioning, in its context. Thereafter, we will move on to perceptional positioning as influenced by marketing. The figure below shows the relation between these two views on positioning.
Theory
Macro level
Company
Litteraturstudi Customer
Micro level
Strategy
Perception
Figure 3.1 : Topics for review, Our own creation
As mentioned, positioning is a wide and complex matter, particularly when considering the different fields of theory, like strategy or marketing, which each has developed different definitions on positioning. Although diverse in direction, most of these definitions share the uniting feature of having to do with outlining paths for a successful operation of the firm. In this chapter, we will present and relate various aspects of positioning, namely strategic and perceptional positioning. We will thereafter extend and link this discussion into the concept and use of brands.
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3.2 Perspectives on Strategy
Strategy is derived from the ancient Greek word of strategos, which is usually translated as ‘leader of an army’ or even ‘the art of warfare’. When the military ideas of strategy began to be incorporated into the field of economics, strategy has in the economic sense of the word been seen as “the art to utilise the resources of a business enterprise in order to achieve its goals”, as Bengtsson & Skärvad (1991, p.14, our emphasis) argue. With the passing of time however, several interpretations and definitions on strategy have sprung up, thus making it difficult to arrive at an agreement of the essence of business strategy, as The Economist (1993, p.106) observes: “...the consultants and theorists jostling to advise businesses cannot even agree on the most basic of all questions: what, precisely, is a corporate strategy?” In the field of business administration, four general schools of thought have developed their own views and answers on the essence of strategy. The first, the classical view, is the oldest and still the most influential school. It has developed out of micro-economic theory and shares its approach on rational behaviour and planning, and of maximising profit and utility. Within the classical view, Igor Ansoff (1965) and Michael Porter (1990) are two of the scholars who have put forward analytical tools for developing business strategy. The evolutionary view, on the other hand, distances itself from the classical view of rational behaviour and instead embraces a more anarchistic one. It draws from the Darwinian idea of evolution and hence substitutes the discipline of the market for the law of the jungle. The processual view takes on a more political approach to strategy, where negotiations, bargaining and struggles between
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factions and between individuals influence the way business strategy is formulated. Lastly, the systematic view stresses that the means and ends of strategy is linked to the cultures and powers of the local social systems in which it takes place (Bengtsson & Skärvad, 1991). It could be argued that each of these presented views have something to offer for and anarchistic elements influence the way a company works with strategy. The operation of a business is not always a straightforward issue, thus keeping in mind several views on strategy might open up new ways of acting. However, as De Wit & Meyer argue (1999), even in the face of uncertain situations and conditions both within and without a company, most business attempt to pursue a rational path when formulating a strategy, for reasons of providing a direction for their actions, and for reasons of routine behaviour and legitimacy. In the following section, we will develop the notion of the rational school of company strategy, and thereafter link strategy with ways of acting and competing or, to put in another manner, positioning.
Theory
our framework. In real life, it could be assumed that rational, irrational, political
Figure 3.2: The current discussion focus
Company Company
Customer
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3.2.1 Strategy and Positioning
Strategy, as a means of competition, has been inspired by the neo-classic microeconomic theory, which is based on the assumption that buyers and sellers are rational and furthermore independent, thus forming the foundation for perfect competition on the market. In this ideal market situation, the sellers and buyers are many and the products homogenous. This theory however lacks explanations for the imperfections appearing on the market, which implies that companies diverge from the ideal micro-economic models. The neo-classic theory uses only one variable, namely price, in order to explain the imperfections. Because of this, scholars working in the fields of strategy and competition have sought after other variables, among these quality, in order to better explain the conditions on the market (Melin, 1999). Michael Porter (1990) is one of the scholars who have influenced the theory of competitive strategy, in the aftermath of the neo-classical one. In his view, the search for position is one of the two central factors that are included in a strategy for competing on the market: ”Two central concerns underlie the choice of a competitive strategy. The first is the industry structure in which the firm competes. Industries differ widely in the nature of competition, and not all industries offer equal opportunities for sustained profitability […] The second central concern in strategy is positioning [our emphasis] within an industry. Some positions are more profitable than others, regardless of what the average profitability may be. “ (Porter, 1990, p 34)
According to Porter’s (ibid.) reasoning, companies in an industry seek to gain the upper hand and a profitable position against other companies, if the
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opportunity arises. At the same time however, new entrants and manufacturers of substitution products continuously attempt to put existing companies out of the market. Porter (ibid.) maintains that the best strategy for a company is to try to position itself so as to obtain the market power that is necessary to negotiate favourable prices and quality, to thwart threats from competitors, and to reap the opportunities appearing in the market, by leading the development of it. The use this aim. All in all, the dealing of the five forces of competition in the shape of new entrants, powerful buyers and suppliers, rivalry from existing firms and the threats of substitution products should form the agenda of a company’s strategy and search for position, as illustrated in figure 3.3 here below.
Theory
of patents, brands and economies of scale are some of the tactics available for
Competitor
Supplier
Company
Customer
Substitutes & Entrants
Figure 3.3: The Five Forces of Competition, (Michael Porter, 1990, our adaptation)
There are, in Porter’s view, two basic strategies by which a company may acquire a sustainable position in an industry and thus manage the five forces of competition: cost leadership and differentiation. As their name implies, the one
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strategy involves leadership through lowest costs, while the other involves differentiation through, for instance, unique qualities that emanate from the company and help to distinguish it from its competitors. A variation of these two basic strategies is scope, by which a company limits its scope of competition into selected parts of the industry and focuses on one of the two outlined strategies (ibid). Taken together, these strategies are known as the three generic strategies, which are depicted in figure 3.4.
Competitive Advantage Lower Cost Differentiation
Broad Target Competitive Scope Narrow Target
1. Cost Leadership
2. Differentiation
3 A. Cost Focus
3 A. Differentiation Focus
Figure 3.4: Three Generic Strategies (Michael Porter, 1990 in de Wit & Meyer, 1999)
A different and sometimes complementary view on strategy and competition has been developed by Prahalad, Doz & Hamel (1989). Their view is often contrasted with Porter’s. If Porter takes industry structure as a starting point for company strategy, then Prahalad et al take company strengths as a starting point for a competitive strategy in an industry. Prahalad et al (ibid) have formulated the concept of core competencies, by which a company concentrates and specialises on its unique resources. This view argues for establishing a position
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out of unique resources that is protected by a barrier against imitation (Mahoney & Pandian, 1992). In this respect, the resource-based strategy does indeed seem as a parallel to Porter’s differentiation strategy, through which a company establishes a position by highlighting its different and unique qualities. As a natural consequence, one is beckoned to ask, how does the two presented static and based on the competitive conditions within an industry at a specific point in time. In comparison to the resource based one, Porter’s strategy does not consider the changing and dynamic process by which a competitive position is built up, established and defended (de Wit & Meyer, 1999). Furthermore, the resource based view takes on, as mentioned above, a long-term perspective on strategy, where the development of enduring comparative advantages are imperative; the innovation and cultivation of immaterial resources, qualities and dimensions are particularly favoured aspects within this view, because of the difficulty of copying these (Barney, 1991). In order to further accentuate the differences between the two general views on strategy, Melin (1999) proposes the use of the SWOT-analysis. The SWOT stands for Strengths, Weaknesses, Opportunities and Threats and has been used as a framework to identify a position for competing on the market/ industry that is based on a diagnosis of the condition of the industry and of the condition of the business. As has been indicated in the sections above, we believe that it could be argued that Prahalad et al’s resource-based strategy stresses the Strengths and Weaknesses of the framework when outlining a strategic position, whereas Porter’s strategies stress the Opportunities and Threats. The differences and similarities between these views on competition become more salient in relation to growth. Porter (1990) maintains that the company
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Theory
views differ? As Sjöström (1996) points out, Porter’s competitive strategy is
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preferably should focus on its competitive clout to improve its position, using among other things its own opportunities of innovation and developing products and so on, in order to grow. Porter (ibid) discourages external attempts to integrate or associate with other actors and companies, since this may decline the firm’s ability to innovate and thus may weaken the position of a firm in an industry, as well as diminishing its long-term viability. Like Porter, Prahalad et al (1989) emphasise the firm’s own internal strive for growth. However, they do see integration and cooperative initiatives as useful tools for improving the competitive capability of a firm. They argue that integrative actions, cooperative agreements and alliances may strengthen a company vis-à-vis other competitors through learning and coordination, if used with care and prudence. However, as Sjöström (1996) concludes, the attention of positioning in the context of strategy is primarily on the competitive position of a company in relation to its competitors, although the position in relation to suppliers and buyers is considered significant. Central to the task of positioning is to analyse the firm itself and its competitors, so as determine what kind of strategy to implement. As Sjöström (ibid.) furthermore adds, according to this view on positioning, “the customer is treated as a large mass” (p. 35, our translation). It could be questioned whether this view on positioning is adequate and enough when devising courses for growth, particularly when considering the role that has been assigned to the customer. In the next section of the frame of reference, we will discuss the role of positioning within a marketing view, in order to devise an overall context of positioning.
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3.3 From Strategic Positioning to Perceptional Positioning via Marketing
As argued above by Sjöström (1996), the attention of business strategy is primarily on establishing a position against its competitors. However, a business needs somehow to raise the necessary means or resources in order to achieve Hence, the relation to the customer becomes crucial, in that the necessary means are typically raised by the company’s interaction with this force in the industry. The exchange between the customer and the company, where the customer, on the one hand, is supplied with goods and/or services by the company, and the company, on the other hand, demands payment and/or other resources in return, becomes significant. However, as Sjöström (1996) also observes, the way strategic theory treats the customers in a industry as a large mass poses a predicament for a business. As Kotler (1996) argues, the customers in each industry tend to have their own requirements on what goods, products and/or services they wish to be supplied with. Hence, it becomes difficult, even inadequate, for a firm to treat the customers as a large mass, if it wishes to raise the means and resources to compete. A business needs to develop a concept on how to establish a position to the customer. For this aim, marketing has grown to become an important tool to establish a position, or rather, a relationship to the customer. In comparison to strategic theory, marketing theory is very much a customer driven field of research (Baker, 2000). Although the origins of marketing lay in a concern on how to distribute output of a firm to the market, nowadays most marketing theory focuses on satisfying
Theory
this (and other) strategic goal(s), as Bengtsson & Skärvad (1991) remind us.
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the needs and desires of the customer/consumer (ibid). Kotler (1996) has become a dominant scholar in this field of research, due to his contributions in developing marketing theory. In particular, his reference to the notions of segmentation, targeting and positioning has become useful tools for a company to approach the needs and desires of a customer. A segment refers to a group of customers within a market or industry that has common or similar needs and desires. The work to find these groups of customers with common needs and desires is denominated as segmentation. The segments are usually explored by surveys and then mapped and categorised by using the variables of geography, demography, psychography and behaviour (Dotevall, 1997). Targeting refers to the work done by a company to choose which segment(s) to approach. These target groups are chosen by the characteristics of needs and desires they show, to which the company has the potential to satisfy (Persson, 1997). There may be groups to which the company may attract, raise means, and thus grow stronger. Positioning, in the marketing sense of the word, refers to the work done by the company in its attempt to distinguish its offer of goods and services vis-à-vis its competitors, since other competitors may also be attracted to approach the customers with their own offers. The company needs somehow to profile its supply of goods and services by highlighting the traits that make the products attractive to the targeted segment. If the segment, for instance, desires qualitative products, the company may acquire a strong position relative the offers of competitors who only offer standard products and/or services (ibid). Marketing theory sometimes tangents on strategy, as can be seen above. The use of the idea of positioning in relation to competitors is one such common denominator. However, marketing theory is more concerned with more operational decisions in its quest to satisfy the needs and desires better than the
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competitors, and thus receive means and a stronger position in return. Positioning, in the marketing sense of the word, entails the operational strive to acquire a suitable position in its offer to the consumer, as for instance positioning by product attribute, by product class, or by product use, to name a few examples (Dotevall, 1997). Positioning, in the strategy sense of the word, entails more a macro-level approach towards the forces of suppliers, previously. Nonetheless, the marketing and strategy theories do sometimes coalign and converge. They both focus on what strengths and resources a business could possibly leverage in order to establish a favourable bond or position to the consumer, and thus may more easily raise resources in order to grow and compete on the market. The use of bonds is a topic on which it could be argued that there is an indirect consensus between strategy and marketing. As Hammarkvist et al (1982) argue, bonds could be used to establish a relation between a company and selected forces in an industry, as for instance suppliers or customers, in order to create a more favourable position. The bonds, as Håkansson et al (1993) argue may be of functional dependence, of power, knowledge or a time-based factor. The strength of the bond between two actors is dependent upon the degree of dependence of one another. In the following, we will present different kinds of bonds according to Hammarkvist et al (1982): Economical and legal bonds exist in many different forms. Long-running cooperation contracts or ownership influence are a few examples on these forms. The economical bonds are often co-ordinated with some kind of legal bonds and the legal bonds may often be seen as a complement to other types of bonds.
Theory
competitors, buyers, substitutes and new entrants, as Porter has indicated
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A technical (or functional) bond acts as an adjustment of a technical relation between two actors. It may be based, for example, on the supplier of a material to a product adjusting his product to the production equipment of the buyer. This implies that the supplier binds himself to a certain technical solution that, in the short run, may be difficult to change. A time-based bond is an agreement between companies to co-ordinate production in time. If, for example, the companies are situated after one another in the production chain, then it might be possible to reduce the costs of committed capital by synchronising the production. Knowledge bonds include the knowledge that companies develop over time regarding the strengths and weaknesses of one another. In a vertical relation, the buyer learns to use the capabilities of the supplier, whereas the seller learns how the customer uses the product. A social bond is the exchange that takes place between the actors of an industry in the form of personal relations. This social relation between the actors serves to complement other bonds, in the form of, for instance, accumulating a sense of trust or reliability. Directly as well as indirectly, the use of bonds could be seen as a tool for positioning, In the strategic context, it might strengthen the bond with selected, strategic actors in an industry, as Hammarkvist et al (1982) have argued. In the marketing context, bonds could be used to commit the various customers in the various segments to the company. As Gummesson (1995) furthermore adds, the bonds to the customer are strengthened by the use of relationships. The concept of relationship marketing is directed towards this ambition (ibid). In one sense, the relationship could be seen as a development of the social bonds, as
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Hammarkvist et al (1982) have put forward, though it could include other bonds that help to cultivate the relationship. The notion of relationship marketing could be seen as a development of Kotler’s contributions, in that it focuses more on the mutual communication and interaction between company and customer, so that the supply of the company is tailored to the demands of the consumer, by offering for instance service functions that go beyond the functional quality and consumer is in this manner strengthened through the relationship that evolves between the two sides; the interaction that takes place, between what the customer wishes and what the company may serve to satisfy this desire helps to create a bond, which is developed through the various types bonds available. For our purpose, marketing ought to perhaps be seen as a meta-level notion - as a mediating factor between the company side and the perceptional/customer side of positioning. Although marketing theory deals with the consumer in mind, it has based much of its findings of the theories of psychology, and in particular on the behaviour, cognition and perception of the individual. In order to put into operation what needs and wishes to be satisfied, a business needs to develop an understanding of the individual’s perception, so as to develop a position in the mind when behaving as a consumer, as Brooksbank (1992) argues: “Marketing is a totally intellectual war in which you try to outmanoeuvre your competitors on a battleground that no one has ever seen... it can only be imagined - in the mind.” (p.12) As may deduced by Brooksbank’s words, in order to develop a relationship or bond between company and consumer, it is necessary to understand what goes on in the mind of the customer. Thus, in order to develop an overall concept of
Theory
profile of a product. Indirectly, the position of the company relative the
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positioning, it becomes necessary to link our discussion to the consumer’s point of view, or, in other words, his/her perception. “We should never forget what is so often misunderstood: that a brand - unlike the product it contains - is created by, is valued by, and lives exclusively in the mind of its consumers”. (Niall FitzGerald, 2001, CEO Unilever)
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3.4 Perceptional Positioning
After having shed some light on the macro-level concepts of positioning, we will in the following link our discussion to the micro-level one of positioning, namely perceptional positioning, where we look upon the role of the customer.
Figure 3.5: The current discussion focus
Company
Customer
While the previous discussion about strategy and positioning corresponds to the managerial view - of how to, for instance, position a company in the market, the following discussion will illustrate the importance of positioning the company in the mind of the consumer. If briefly summarised, the goal of the perceptional positioning process is to form a particular brand image in the mind of the consumer, because this influences how the customer behaves when purchasing a product in the market. In other words, the consumer’s view needs to be taken into consideration as well, when striving to create an overall position. In doing so, we tangent the domain of cognitive psychology, or rather, the psychology of perception. Consequently, we are faced with the task of finding the right balance between the research fields of psychology and economy, when striving to create an overall position.
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3.4.1 Why Perception Matters
In order to explain the relevance of perceptional positioning, we will begin by utilising one of the classical models in psychology, which has also influenced business administration, namely Maslow’s pyramid (1954), or the hierarchy of needs, as the pyramid also is known. Maslow (ibid) ranks physiological, security, belonging, esteem and accomplishment as various needs that in one way or another are necessary to be satisfied for a human. While it is possible to see through Maslow’s hierarchy only the necessity of purchasing commodities like rice, milk, crop, and so on, to primarily satisfy the basic human need of survival, there is no apparent reason why individuals would prefer to buy some specific products (or even branded products) before others, as all food and drink products can satisfy the basic needs and allow survival. However, as Dotevall (1997) reminds us, as supply in developed countries exceeds by far demand on products that satisfy basic needs, it becomes significant to look in new ways on Maslow’s pyramid. As will be argued, it becomes significant to position products in the mind of the consumers, by providing the offerings of the product with some kind of stimuli. The following example, used in Dubois (2000), helps to exemplify this argument: “In Southern Europe, an unpublished study on packet soups carried out by Nestlé uncovered the principal reasons why some housewives were opposed to this type of product. All these reasons can be clearly linked to the Maslow model and relate to physiology (packet soup = a light food, not very nutritious), security (packet soup = mysterious, artificial, chemical food), belonging (packet soup = a dish for one, breaking up the unity of the family), esteem (packet soup = a dish which can be prepared instantly, which is not particularly praiseworthy) and
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accomplishment (packet soup = a processed and impersonal dish).” (p. 31) For this reason, it is possible to state “what consumers buy does not depend only upon their [basic] needs but also on the nature of the products and services available in their environment. The perceptional mechanism controls the information he or she has about this environment is necessarily acquired through perception. Consequently, perception [our emphasis] is an omnipresent factor in buying and consumption behaviour.” (Dubois, 2001, p.61)
Theory
relationship between the individual and the surrounding world, and all the
3.4.2 Creating a position in the mind of the customer
As in the case with strategic positioning, the key issue of perceptional positioning is how to defend or improve or even change the company’s position in the market. To achieve this aim, it is necessary either to reinforce or to modify people’s perceptions - to create a link somehow to the customer (Baker, 2000). One of the earliest writers in this area were Ries and Trout (1982) who were primarily concerned with the impact of communicating/advertising to the consumer in what they describe as ‘an over-communicated society’, which in their opinion has emerged due to the large supply of companies and competitors trying simultaneously to reach out and satisfy the demands of the same customer with their similar product offers. For this reason, Ries and Trout (1982) state in Baker (2000): “In the communication jungle out there, the only hope to score big is to be selective, to concentrate on narrow targets, to practise segmentation. In a word, ‘positioning’.” (p.292)
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Ries and Trout (1982) state that because of over-communication in developed societies, a company needs to limit its message to the consumer to a few simple product features, since the human mind and the human perception can only focus its attention on a few selected items at a time. Since humans tend to rank order associated features in their mind, with the preferred or most important on the top rung, Ries and Trout have provided examples to support their advice for successful perceptional positioning, in order to reach out to the customer. To become a market leader, a company needs to ‘be the firstest with the mostest’, on the principle that while people can usually recall who was number one to achieve something they usually have difficulty in recalling number two. For instance, Neil Armstrong is commonly remembered as the first man on the moon, but who was the second one?1. In the market place, Volvo was the first carmaker to highlight the safety of its products, but who was the second one? The real benefit of positioning lies in identifying the gap, need or hole in the marketplace, and then filling it first – thus helping to carve out a domain in the mind for the company. From this reasoning, it could be argued that one of the relevant implications of Ries and Trout’s statements is that the company needs to limit its scope of competition and focus its features, thus not trying “to be all things to all people”. As will be argued later on, this in turn has implications on overall positioning. 3.4.2.1 Five dimensions of positioning a product in the mind of the consumer Since human perception is limited according to Ries and Trout (1982), it becomes crucial to differentiate or profile a company’s offer or service, so that it might attract the attention of the consumer. In doing so, it becomes essential to find dimensions in the product (or service) offer itself that can be perceived by
1
Answer: Edwin Aldrin
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the consumer, and then communicate these to the consumer. Therefore, it becomes significant to identify what the relevant dimensions and benefits are, which prospective users will take into account when evaluating a product. Though we have brought up some of these dimensions and notions under a previous heading, at this point of the discussion our ambition here is to provide a deeper understanding of their relevance. The most commonly used dimension when positioning a product or a brand in the mind of the consumer is positioning by attribute. Attributes can be used by the company, e.g. in an advertisement, to position the product in the mind of the consumer according to the product's attributes or to change the perception the consumer currently holds of either the attributes of the product category or of a specific brand. It is important to note that perceptions that consumers hold of attributes often differ from the intended meaning conveyed by the company through his advertisements (Puth et al., 1999). It can be suggested that the company needs to determine which attributes (or factors) are perceived to be of value to the consumer for the product category, by carrying out a survey with the help of consumers. Once these attributes have been identified, the company may benefit by evaluating these criteria to determine its relative competitiveness. The identified attributes should, if present in the company's product, clearly be communicated through its advertisements (ibid). Besides advertising the identified attributes, the company needs to mention the product's differentiating attributes, since attributes that are explicitly referred in advertisements are perceived to be of greater importance to the consumer (ibid). Identifying the key attributes and choosing those where there is an advantage to be had – a bigger colour range, longer lasting, etc. – represents a good start to successful position a product in the mind of the consumer (ibid). According to
Theory
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Peter and Olson (1999), at least four other relevant dimensions can be identified; these are: - positioning by use or application: When and where is the product used? At what time and/or place is the product used? When and where are the moments of consumption? - positioning by product user: Who is using the product? How old are the users? It is a question of segmenting the market the company is serving. - positioning by product class: In which product class do you want to compete with your product or brand? How attractive is the product class you want to position your product? - positioning by competitor: Which are your competitors? What do they offer? What do they stand for? The major purpose of this type of positioning is to convince consumers that your product is better than the market leader on important attributes. However, this is first of all a question of which brands and products the company considers competing with.
3.4.3 Brand image and perceptional maps
The step from positioning a product to positioning a brand is not a big one, though it might seem so initially. A brand and its associated image have the power to influence the perception of a product. The importance of brands when positioning a product in the mind of the consumer has been shown by Allison and Uhl (1964). In their research, they have shown that an average American consumer, for example, is unable of detecting differences in taste between
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ordinary beers, even if his (or her) favourite beer is included in the selection. In contrast, when the lids and labels are put back on, the individual finds strong differences in flavour between the beers. These results, observed for many other products all over the world, clearly show that for most people, the support of the brand image and all the meanings associated with it (often related to its history, values, personality, etc.) is necessary. Such a conclusion underlines the perceptions of a given product or service - in short, how it is positioned in the mind of the consumers. Thus, positioning refers to the deliberate attempt made by a company to design its offering so that it occupies a meaningful and distinct position in consumers’ minds (Ries and Trout, 1982). While the positioning of a brand corresponds to a managerial decision, the brand image describes a perceptional outcome. Ideally, of course, the two should perfectly match but this is seldom the case and that is why it is necessary first to further explain the use of perceptional maps, in order to prepare positioning decisions (Peter and Olson, 1999). Such maps are, as previously discussed, a way to investigate how to position a product. A positioning map is a visual depiction of consumers’ perceptions of competitive products, brands, or models. It is constructed by surveying consumers about various product attributes and developing dimensions and a graph indicating the relative position of competitors. Positioning maps can give a company a sense of how their brands are perceived by consumers relative to competitors and suggest positioning strategies (ibid). In other words, a perceptional map is a tool adopted by a company and market research in order to visually depict consumer perceptions and “prioritising” of brands and their perceived attributes (Dibb and Simkin, 1991). The map reveals not only the various brand images but also which products are close to each other and therefore in direct competition, at least in the minds of consumers (Dubois, 2001). This implies that the product
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Theory
importance of branding, packaging and imagery in influencing consumers’
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offerings must be perceived by the selected target customers to have a distinct image and position vis-à-vis its competitors (Dibb and Simkin, 1991). In the figure below, 3.6, follows an example on how a perceptional map may be used.
Traditional Grand Hotel Wellington Hotel Hotell Diplomat
Low Price
Strand Hotel High Price Sheraton
Figure 3.6: Positioning for exclusive hotels in Stockholm, Dotevall (1997), p. 67
Modern
To sum things up, the perceptional aspects of positioning emphasise the view of the consumer. As has been indicated, there is a relationship with strategic positioning through the dimension of brand, which has been touched upon previously in the discussion of problem.
“What do these trends in perception imply for a company such as Unilever? How can we translate them into products? The answer to this question is actually quite simple. We can't directly translate them into products. We should ensure that the perceptions are radiated by brands and support this with our products. […]” (Antony Burgmans, 2001, CEO Unilever NV)
In the next section of our frame of reference, we will unite the strategic view of positioning with the perceptional view on positioning through the dimension of
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brand(ing) and brand image. It is at this point of our discussion that the role of the brand comes fully into play.
3.5 Branding
Branding is a fleeting concept with many interpretations available. However, for our purpose, a brand can be seen as a uniting feature between the supply of the company (tangible products) and the demand of the consumer (intangible preferences/purchasing habits). We will attempt to establish the relation between these two sides in the following discussion. In order to do so, we will try to put brand into its context of positioning.
Theory
Figure 3.7: The current discussion focus
Company
Customer
Above all, three notions of branding will help us to establish these relations, namely brand extension and its relation to brand image, and risks involved with brand extension. The first notion in this context is becoming more and more relevant due to financial (strategic side) and cognitive reasoning (perceptional side). The importance of the second notion - brand image - has already been pointed out in the previous heading. In this section, however, we will explore the implication of this notion on both the strategic and perceptional side through the brand and its context. To balance the discussion on branding, we will also take
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up its associated risks as these may influence overall positioning, but may also open the discussion of growth into other directions, leading to alternative options for growing.
3.5.1 Branding as a means to connect strategic positioning with perceptional positioning
Branding could be seen as a means to connect strategic positioning with perceptional positioning. On the one hand, according to the argument of source, (1996), the concept of branding has relevance for a company when positioning its products vis-à-vis its competitors. In this sense, the concept of branding can be used as a tool to position products in the market. As we argued above, the usage of tools is a common method when viewing strategy from a classical view, as we tend to see it. On the other hand, the concept of branding has relevance for a company when positioning its products in the mind of its consumers. In this sense, the immaterial nature of the concept of branding (Kapferer, 1994) comes into play. Taken together, branding can be seen as a means to connect strategic positioning with perceptional positioning. In doing so, both aspects of branding taken together serves the ground for our current discussion, as will become more apparent in the next section here below.
3.5.2 The Brand and Its Context
What is a brand? More importantly, how may a brand be used in the context of positioning? Since those two questions are related, we will first deal with the first question and then turn over to the second one. There are many interpretations and definitions available regarding the brand. For instance, in the
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strict legal sense, the brand has been defined as the following in 1§ VmL (varumärkeslagen) of the Swedish Intellectual Property Law. Translated into English, the law states: “A brand may consist of all signs which may be reproduced graphically, especially words, including personal names, as well as package provided that the signs can distinguish goods which are rendered available in one business operation from those which are rendered available in another.” (1§ VmL, our translation) The legal definition of a brand is not only one that is rendered available. Marketing scholar Kotler (1996), for instance, defines a brand as ”a name, a term, sign, symbol, or design, or a combination of those, aiming to identify a seller’s, or a group of seller’s, goods or services and to distinguish these from those of the competitors” (p. 444). Another scholar, Kapferer (1994), however, adds a difference in his definition of a brand, providing it with a meaning and value: ”a brand is not a product. It is the product’s essence, its meaning, and its direction and it defines its identity in time and space” (p. 4). This brief discussion serves to illustrate a few of the different views on brand that exist today. Taken together, they may provide us with an understanding of the possibilities of a brand. For example, the legal definition illustrates the vast range options from which a brand may be represented. Kotler’s definition emphasises the identity and distinguishing function of a brand, whereas Kapferer’s points towards the immaterial aspects of a brand, where meaning and value are attached to the brand. As Melin (1999) informs us, the historical origin of branding is in marking identity: the etymological origin of branding comes from burning and
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figures, letters, numbers and the shape or outfit of a goods or its
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brandishing specified marks on cattle, which in this manner distinguished them from other cattle, by identifying their possessor. From a positioning point of view, what is of concern for our interest is how branding has been used, besides marking identity. Bermitz et al, (1995) mention, for example, that in the 13th century, King Magnus Lagaboter of Norway declared that shields should be marked with the insignia of the producer, so that that he (or she) could be identified and held accountable, if the shield turned out to be of inferior quality. The aim was to reduce the risk of poor quality products and to single out skilled producers from lesser skilled ones, by giving the skilled ones admission to supply the king’s forces. In this argument, we note two of the general characteristics of a brand that, when taken together, have a uniting feature on positioning. First, as Hayek (1948) notes, the reputation that follows with the official mark of the producers can be used a mechanism to insure quality, or another notion, to the consumer and his perceptions. In other words, the brand can be used to reduce risk when purchasing a product; the brand attaches meaning and value as Kapferer (1999) has discussed. Second, as Bermitz et al (1948) have indicated, a producer may create a more favourable position strategically relative to other competitors, due to the positive associations that are linked to the reputation of the brand, as for instance through being a royally appointed and quality approved supplier. Hence, as has been argued previously, a brand can be seen as a means to connect strategic positioning with the perceptional one, or as Edward Tauber (1988) argues: “Brands have become the barrier to entry, but they are also the means to entry.” (Edward Tauber, p. 29)
Today, from a strategic as well as a perceptional point of view, all actions undertaken with a brand have to add somehow value to the company in order to facilitate its striving for growth. However, any attempt to measure the value of a
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brand meets with two problems. The first problem being that the value which the brand offers must be seen from both the company’s perspective and that of the consumer. While from the company’s perspective, different quantitative variables can be used (profits, market share, price differentials), with the consumer, the variables to be quantified are generally qualitative in nature, such as associations, preference and satisfaction. (Calderon et al, 1997). The economic literature has viewed brand reputation as a mechanism used by firms to insure quality to consumers (Hayek, 1948). This argument is made by Klein and Leffler (1981), who assume that consumers cannot observe quality prior to purchase and are forced to accept the company’s claims. The company might want to associate a known brand with a new product to insure its quality, as has been previously discussed. If the quality of the new product turns out to be low, the established brand’s reputation is diminished. The company forfeits its bond to the consumer through loss of future profits. Interpreted into our terms, the company weakens its overall position relative to the consumer in this manner. The use brand of as an agent for growth is, however, an option that is not available to all actors in an industry. According to Wernerfelt (1988), “brand extension will be used by high-quality producers but not by low-quality producers. Brand extension works because all products under the [company’s brand] contribute to the brand’s reputation. The joint estimate of quality is then used to evaluate each product. By selling a low-quality product under a highquality brand name, the reputation of the brand is tainted and sales of the highquality product are reduced.” (p. 463). Interpreted into our terms, the company loses both on its strategic and perceptional position if using the brand unwisely.
Theory
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Leaving now the strategic discussion on brand reputation or image, and shedding more light on how the consumer perceive an image of a brand, it could be argued that brand image refers to the organized set of perceptions consumers have formed about the brand, as has been previously discussed. If briefly reiterated, brand images are important because consumers use these mental representations to distinguish one the offers and associations of a brand from another; they are used as a basis for their purchasing behaviours. In marketing and consumer behaviour, perceptions are reality, so that brand images are of primary concern to marketers. Brand images are formed as consumers receive information from the media, from other consumers, and from personal experience with brands. In short, the perceptional positioning of a new product influences also the image of the whole brand. (Foxall and Goldsmith, 1994). This, in turn, has implications on the options available of growing with brand as an agent, which will be elaborated upon in detail here below.
3.5.3 Brand extension
Of the many options of growth available, firms are often tempted to use established brand names to facilitate entering new markets. In doing so, two slightly different but often not totally agreed upon terms are utilised by scholars: line extension and brand extension. The former means that a current brand name is used to enter a new market segment in its product class, whereby brand extension implies that a current brand name is used to enter a new product class (Aaker and Keller, 1990). In our thesis we focus on brand extension, as it has more implications on the overall brand from a strategic point of view than a simple line extension has. However, the boarder lines are often blurred. Irrespective of how you look at the two terms of brand and line extension, the most real and marketable assets of many firms are the brand names that they
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have developed. Turning back to our options of growth discussion, brand extension is a promising strategy for the firm looking to grow by exploiting its assets. Thus, one strategic growth option is to exploit that asset by using it to penetrate new product categories or segments. Another option is to acquire an independent firm with a brand name that can provide a platform for future growth via brand extensions (Aaker, 1991). Our focus is on the former option
Theory
for growth. Brand extensions, the use of a brand name established on one product class to enter another product class, have been the core of strategic options for growth for a variety of firms, especially during the past decade, as Aaker (1991) has argued. In mature markets, differentiated competing brands will tend to assume relatively stable market shares as consumers tend to purchase the same brand (or patronize the same store) time after time. This pattern of buying the same preferred brand each time a product is purchased is called brand loyalty (Busch and Houston, 1985, p.221). According to Tauber (1981), companies with products in mature markets, like for instance in our case, would be tempted to consider brand extensions as a way to enter more profitable markets. We can continue to advocate brand extension as a way to enter new markets primarily because of the following argumentation: Customers strive to reduce risks in their daily purchasing decisions, as argued previously. In order to do so, they preferably buy well-known brands with good reputation because they can be sure to get good quality. Other reasons include that they have already formed previous associations with the brand, they buy products from a specific brand due to old habits, due to name recognition, or because they can rely on the products offered under a specific brand. All in all, to launch a new product under an already well-established brand has undeniable advantages (cognitive/perceptional reasoning). On the other hand, to launch a
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new product under a new brand can be extremely costly. Studies made in some consumer markets mention introduction costs of approximately $ 50-150 millions (Tauber, 1981). In contrast, the use of an established brand name can substantially reduce the introduction investment and increase the success probability (financial/strategic reasoning). In specific, the practise of launching new products under an existing brand name, in other words brand extension, leads to a certain relationship between the products. The brand name and all its belonging associations to works here as the linking element. Thus, the result is called brand extension - the practice of labelling more than one product with a single brand name - and is commonly used by multi-product companies in a variety of markets. Most of the literature on umbrella branding is concerned with its initial effect on new-product introductions. An umbrella brand can help consumers decide whether to buy a new product when quality cannot be observed prior to purchase (Klein and Leffler, 1981, Wernerfelt, 1988). On the other hand, as already mentioned, when looking for reasons of umbrella branding for the company, umbrella branding reduces the cost of introducing new products (Karger, 1981, Tongberg, 1981, Tauber, 1988). Another advantage arising out of umbrella branding is linked to consumer desires and needs. More consumers than ever are switching brands and trying products they have never used before (Quelch and Kenny, 1994). Brand extensions try to satisfy the desire for “something different” by providing a wide variety of goods under a single umbrella brand (ibid). With such extensions, companies hope to fulfil consumers’ desires and needs while keeping them loyal to the brand franchise (ibid). To provide our discussion with a certain amount of delicacy, we should not deprive the fact that there are different degrees of brand extension / umbrella branding recognised in literature. Melin (1999), for example, has identified three strategies that are
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available for brand extension, namely mother branding, mother-daughter branding, and daughter-mother branding. Each of these strategies has its respective advantages and disadvantages, which make them more or less suitable depending on the context in which they are to be implemented in. In the decision of what strategy of brand extension to pursue, a company needs to make a judgement between flexibility and cost efficiency, which is illustrated in
Theory
Daughter and mother brand Individual brands Brand extension Low Cost Efficiency High Flexibility 63
figure 3.8 below.
Mother brand
Mother and daughter brand
High cost efficiency Low flexibility
Figure 3.8: Spectrum of Brand Extension, Melin & Urde (1991), p. 108
Since each of these strategies have their implications on positioning, we will in the following shortly characterise each of the three strategies available. Mother brand What characterises a mother brand strategy is that all the products of a company are sold under a common brand name. Hence, the notions of family and umbrella brands are often used synonymously with mother branding. The biggest advantage with a mother brand strategy is that it is simple and cost effective. By using only a single brand, all the products reap the effects of the
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investments made on market communication. Furthermore, as with umbrella branding, the mother brand strategy creates good conditions for introducing new products through brand extension. This possibility, however, includes a certain risk, since experience shows that a brand may be abused by the extension. The main disadvantage of the mother brand strategy is that it makes it hard to individualise each product. Thus, this strategy runs the risk of becoming rather rigid (Melin, 1999). Mother-daughter brand What characterises this strategy is that single products or product lines may be launched under a daughter brand, which paves the way for certain independence in relation to the mother brand. This independence is only allowed with the limits of the overall positioning of the mother brand. During the implementation of a mother- and daughter strategy, the mother brand serves a pushing or supervising role. Thanks to the solid reputation of the mother brand, the introduction of the daughter brand is facilitated. This possibility of launching new brands in a time- and cost efficient manner is perhaps the primary advantage of the mother- and daughter brand strategy. A disadvantage with the strategy may be the fact that two brands are used to characterise a product, which under unfortunate circumstances may give rise to confusion among the consumers (ibid). Daughter-mother brand What characterises this strategy is that the focus is on the daughter brand, whereas the mother brand generally speaking only has a supporting function and can be said to act as a guarantee. With the help of this strategy, a company may introduce a number of brands with different positioning, which are loosely held together by a mother brand. The primary advantage of the daughter - and mother strategy is that it allows a high degree of flexibility. Moreover, this strategy is
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relatively cost efficient, considering that the market communication builds up both the mother and the daughter brand. In order to ensure a success for the strategy, it is deemed necessary that the daughter and mother brand are not too differently positioned from one another. The obvious risk is that they otherwise are experienced as unrelated to another, which in the long run may create a confused image of both brands (ibid). Apart from using one of the three strategies for brand extension, there is another strategy available connected to branding but going beyond an extension of an already existing brand, namely the setting up of an individual brand. In doing so, however, the advantages of brand extension discussed earlier in this chapter are not any longer valid as it is much more resource intensive and cannot profit from previous associations connected to an existing brand. Each product is marketed under an own brand, without any links to a mother brand and each brand has an independent roll. On the other hand, the most significant advantage of using individual brands is its high degree of flexibility attached to this strategy (ibid.).
Theory
3.5.4 Risks involved with brand extensions
At the same time as brand extension – as one promising option for growth – implies positive opportunities to introduce a new product on a market to a relatively low cost and with less marketing efforts than what would be needed for a new product with a new brand name, it also brings along risks that we should bear in mind. As Aaker (1991) informs us, a brand name can fail to help an extension, or (worse) can even create subtle – and sometimes not so subtle – associations that can hurt the extension. Worse still, the extension can succeed, or at least survive, and damage the original brand equity by weakening existing
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associations or adding new, undesired ones. Because the extension can dramatically affect a key asset (the brand name), both in its original setting and in the new context, a wrong extension decision can be strategically damaging. Therefore, to balance the discussion on brand extension, major risks and protection alternatives against these risks are illustrated below. Effects on profitability of the entire portfolio When a new product is considered a candidate for extension, the firm needs to determine how the use of extension will affect the profitability of the brand’s entire portfolio of products. The brand name is a factor that enters the demand function (perceptional positioning). As such it can affect the perceived substitutability of the new product for the others. Using extension might lead consumers to believe that the new product is a substitute for another product in the brand’s line. A consumer’s propensity to try the new product will be affected by this perception. A firm will be reluctant to introduce a new product that will simply cannibalise its established products. This is particularly true when brand extensions diffuse rather than reinforce a brand’s image in the eyes of the consumers (Sullivan, 1990).
Brand dilution While a new product launched under an already well-known brand receives goodwill from the family brand, the new product will at the same time affect, and perhaps dilute the family brand. (Leong & Ang, 1997) A product is usually associated with certain attributes, and if these attributes are not found in the extension product, the core brand may lose it’s positioning. (Kotler, 1996) When a brand extension brings these kinds of consequences, called brand dilution, the brand name’s meaning to consumers changes. The effect may of course be
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positive in the case of a successful brand extension, and lead to increased sales for the core product, but often it has a negative effect Poor fit Sometimes the brand name does not succeed to transfer the associations that the core product is recognised for to the extended product. This may occur when the customers may not find the benefits in the new product that they normally associate the brand with, and thus, the brand name fails to help the extension (Aaker, 1991). Stagnant category demand Brand extensions rarely expand total category demand. People do not eat or drink more, wash their hair more, or brush their teeth more frequently simply because they have more products from which to choose. In fact, a review of several product categories shows no positive correlation between category growth and line extensions (Quelch and Kenny, 1994).
Theory
customers do not feel comfortable with the brand on the new product. The
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4
Empirical Study
The aim of this chapter is to present the reader the material and insights that we, the authors, acquired from our empirical study. Initially, we will briefly provide the context in which we conducted our study: we will outline the situation in the food industry and provide a historical background of Unilever and of Knorr. This will be done through collected secondary data, as for instance financial statements, homepages and articles. Thereon, we will account for the primary data that has been gathered, as based upon the interviews we conducted with key representatives at Unilever/Knorr and with the consumers. In order to provide a more vivid recapitulation of the answers given by the respondents, we have incorporated quotations in our text that illustrate thoughts and images held by the respondents.
4.1 The empirical context
The food industry is widely and fuzzily structured with many different actors appearing within its many and diverse fields. The customer may choose from differently processed products for consumption, depending on the willingness to process the food and on the time available for preparing it. In other words, the customer may choose from a wide array of food, ranging from unprepared, semi-prepared to fully prepared food to consume. Among these types, there are different categories of food, ranging for example from chilled, dry, liquid food and so on. Within the semi-prepared and fully prepared foods, there is a wide proliferation of actors appearing in the industry; some of them cater only to local
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taste preferences, while others serve on an international level, trying to adapt to local preferences. On an international level, the two main actors could be argued to be the Swiss Nestlé and the Anglo-Dutch Unilever. These actors appear also in the Nordic and Swedish market, our main area of interest, in which they have grown into mainly through internationalisation and/or integration. Local and regional actors in the Nordic and Swedish market appear in the form of for instance Norwegian Orkla Foods A.S., owner of Swedish Procordia Food AB, which in turn is owner of a portfolio of well-known Swedish brands, as for instance Felix, Bob, Ekströms, Önos and Findus. Among these, various niched with our case company, Unilever (www.afv.se, www.di.se, www.bbc.co.uk).
Empirical
players, no-name, and private labels owned by the retail co-exist simultaneously
Unilever, our case company, is an international business that was formed in 1930 following the merger of Dutch margarine company Unie and British soap maker Lever Brothers. The legal entities are Unilever PLC, based in London, and Unilever NV, based in Amsterdam. The twin parent companies have the same directors and operate mostly as single entities. Joint CEOs of the whole corporation are presently (December 2001) Anthony Burgmans and Niall FitzGerald. In the year 2000, the company reported a turnover of $ 44 254 million, an employee force of over 295 000 people, and a presence in over 150 countries. Unilever sees itself as a multi-local, multinational company, competing with the Swiss Nestlé and the American companies Procter & Gamble and Colgate-Palmolive on an international level, as well as a multitude
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of various regional and local actors. Unilever is divided into two divisions, Foods and Home and Personal Care. Moreover, the divisions are organised into regional business groups. Unilever focuses on 14 product categories within Foods and Home and Personal Care. Each category is composed of well-known brands like for instance Lipton tea, Dove soap, Magnum ice cream and Knorr (www.unilever.com, www.bbc.co.uk, www.di.se).
Knorr, our object of illustration, was founded in 1873 by the German Carl Heinrich Knorr. He recognised as early as 1873 the opportunities for convenience foods and began testing packaged soup mixes made of flour, dried vegetables and seasonings. By the early 20th century, the Knorr family business was expanding its presence in Europe. By 1957 Knorr was operating in eight countries. Today, Knorr products are sold in 87 countries around the world. In October 2000, Unilever became the new owner of the Knorr brand following the purchase of Bestfoods. Knorr is the largest brand of the Unilever company (www.knorr.com). It continues still in its original tracks, serving the market with dried soups, dried pasta meals, dried bouillons, spices and similar products. Today, the company is divided into Food Service (directed towards chefs and large-scale food servicing institutions) and Retail (directed towards retailers and consumers at supermarkets), where each of the divisions attempts to service various parts of the food industry. As part of the overall Unilever “Path to Growth”-strategy, Knorr has, among other things, examined the possibilities of the concept of “Soup lollipop”. We, the authors, were given the opportunity in contributing to the exploration of the possibilities of the concept.
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As part of our thesis, we were offered the opportunity to conduct interviews with Patrick Camele, Director Food Service, Leif Nilsson, Nordic Marketing Director, Niklas Andersson, Nordic Brand Manager Knorr, and Henrik Blach, Nordic Marketing Manager.
4.2 Presentation of Empirical Data
In the following, we will present and build our empirical findings around three (see figure 4.1 below). In specific, the three levels in question are food industry and trends in consumption; the company (Unilever) and the brand (Knorr); and product level (Soup lollipop). We believe that this spectrum of levels provides a good connection to the structure and discussion pursued in the frame of references: while issues of strategic positioning are most pronounced at the macro level of food industry, issues of perceptional positioning come mainly into play at a micro level of product concept. Thus, on a macro level our empirical findings are based more on the interviews with managers at Knorr/Unilever, while with increasing perceptional issues (micro level) the findings from our interviews with consumers come more into play. In other words, the findings from our interviews at Unilever and with the consumers are in a way intertwined, with only their stress and content being different. Additionally, our two final questions in the questionnaire were aimed to acquire an insight of the interplay between the second and the third level, in the aspect of how they influence the perceptions of the overall brand. This interplay forms section 4.2.4 of our empirical material.
Empirical
levels, starting from a macro level and moving gradually to a micro perspective
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Strategic Positioning Macro level 4.2.1 Food industry and trends in consumption 4.2.2 Unilever and its Knorr brand 4.2.3 Product level and Soup lollipop Micro level Perceptional Positioning Figure 4.1: Three levels of discussion, our own creation
4.2.1 Food industry and trends in consumption
To enlighten us concerning the general situation in the food industry, we asked among other things, the managers at Knorr/Unilever about how they would describe the situation today; how it will look like tomorrow; and what they are going to do to meet this challenge. The managers at Unilever’s Knorr brand put forth several aspects about the food industry from an overall perspective. The food market is, when looking at the value aspects, a growing market, as manufacturers have to build increasing value into the products due to changing trends in consumption. However, the volume is hardly changing, because people do not eat more. It is rather a question of how people are eating. The suggested answer is that preparing meals at home is decreasing at the same time people are buying more ready-to-eat products. Our respondents made the point that people prepare less food from
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scratch. Instead, they buy rather more semi-prepared food, more deep frozen one, more finished products, and so on: “…in 1950 the average time spent in preparing the food was 2½ hours a day. In 2005 the average time will be about 15 minutes” (Leif Nilsson, Nordic Marketing Director, our translation) There is a change towards ready-to-eat products and a transition from eating less at home to eating more out-of-home. Overall, the food industry and its products. The European food industry has gone through several changes during the last 45 years. Many factories have been closed and various mergers and acquisitions have taken place. This trend is not completed yet. The food industry, as seen from the production side, has still to go on to consolidate its assets in order to increase its margins due to an enormous cost pressure arising from the retail side. Retailers want and need increasing margins, whereas cost reductions can only take place along the supply chain or at the production side. With fewer locations, it is possible to produce much cheaper because of economies of scale and a higher degree of plant utilisation. That is why in the next ten years the food industry will undergo a continuing splitting and merging of companies. “Several mergers and acquisitions have taken place. This trend however is not over. In the food industry, more integrative activities must take place in order to increase the margins… the cost pressure is enormous, even from the retail side… Cost reductions can only be squeezed out of the supply-chain or the production side […] We will
Empirical
various markets can be characterised by an increasing value built into the
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in the next decade experience more mergers and so on…” (Patrick Camele, Director Food Service, our translation) However, companies cannot consolidate assets and businesses in accordance to how they want to because of the restrictive EU rules of competition. At this point, our interviewees saw, above all, opportunities still to merge with the local food industries, in order to generate synergies. On an international level, it is assumed that the process of integration is almost completed, but on a local level this process will probably go on. “[For example] Unilever bought Bestfoods… and in certain markets Knorr was in direct competition with a local Unilever producer, in Sweden for instance through the case of Blå Band... Unilever had to sell Blå Band… because in certain product segments it would have held a 100% market share in bouillon and soup…” (Patrick Camele, our translation) The managers we interviewed at Unilever’s Knorr brand made another significant point concerning the changing structure of the food industry. A decade ago, the manufacturers and suppliers of brand products in the food industry enjoyed a very strong position against the retail, with strong brands used both as door openers and as a means to reap premium prices from the various consumers. “Ten years ago, the deliverers of brands were kings. A strong brand opened the doors to everything…” (Niklas Andersson, Nordic Brand Manager Knorr, our translation)
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However, the situation today is quite different as the retail actors, as for instance ICA, KF and Axfood, enjoy a much stronger role than before, due to the launch of own private-label brands and products as for example ICA-handlarnas, Signum, and Diva, to name but a few. These private-label brands and products have taken market share away from suppliers of food related products. Moreover, they have raised the demands that brand producers have to meet towards the consumers, since the functional qualities have been raised almost to, or even equalled, the same level as the brand products. At the same time new trends in consumption arise, besides the one of using more prepared food, which is more convenient to cook. New and constantly increasing influences from abroad, as for instance Italian food in the 80s and Asian food in the 90s, have affected the preferences of the consumers. Products have been launched to meet these preferences, as well as the one of slimmer, healthier food. Overall, the respondents at Unilever/Knorr note a trend towards convenience and health. Moreover, the respondents noted there is an increasing interest for products that offer more than just functional dimensions, as for instance pleasure, fun or entertainment. “All together, the food industry is in a position right now where we have to consider all these things - and things are moving very fast: you can’t just keep on having the concept that you have today. Consumers are moving very fast and that’s what you have to think about when you are in the food industry.” (Henrik Blach, Nordic Marketing Manager) In order to meet the challenges of a changing food industry and new trends in consumption, the respondents answered that manufacturers have to produce and deliver more service solutions, more meal and snack solutions to the food
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service, which is consisting of for example restaurants, hotels, canteens, and fast-food businesses: “We meet the trend by working both on the food service and the retail side. Our way of meeting the trends is to increase the stakes in the food service side. We are counting on more growth on that side in the future than the other side, even if we count that it [the retail side] grows in value too” (Niklas Andersson, our translation)
“For our own part, it means a transfer of volume and value from the retail market to the food service market. This of course is a consequence of people eating more and more outside” (Leif Nilsson, our translation) Moreover, to meet the threat of retail’s own private-label products, suppliers of well-known brands have, according to the respondents, to be permanently more innovative and manufacture products at a better product quality than the retail with its own private-label brands. Companies like Unilever have to constantly develop their product range. They need to come up with new product concepts at a speed that the low priced brands and private-label products of retail cannot compete with: “Our role is to develop our product areas all the time, to constantly come up with news at a pace which the low-priced brands and the private-label brands of the retail cannot cope with” (Niklas Andersson, our translation) The fact that cost pressure from the side of retail is increasing in the future implies that manufacturers in the food industry also have to master their costs of
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production, according to the respondents. One way of cutting costs of production is, as previously mentioned, through achieving gains from economies of scale, which is done through mergers and acquisitions, i.e. buying and selling the product portfolio in a way that costs of production can be reduced due to large production quantities. The other way is to produce preferably only a few products at one production location so that the complexity can be kept low. “We must keep a firm grip on our production costs. One way of achieving this is through spin-offs and mergers and acquisitions, or to and… quantity” (Patrick Camele, our translation)
Empirical
pursue... a product portfolio… which combines a fit between costs
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4.2.2 Unilever and its Knorr brand
In order to acquire some empirical information on the status of the Knorr brand, we asked our respondents at Unilever what the brand Knorr stands for, in which segments it is represented, which the competitors are in the segments Knorr is present in, among several other questions. We also asked our respondents about the strengths and weaknesses of the Knorr brand and also the respective strengths and weaknesses of their competitor. We also requested information on what they think the opportunities and threats are in the markets Knorr is present in. Finally, we directed our questions towards the issue of brand extension. According to our respondents, the Knorr brand is represented in 14 different product segments, each of which contributes to the overall brand. This broad range makes it necessary that all products under the Knorr brand stand for similar perceptions and are perceived in accordance with the overall brand image. In Sweden, Knorr is mainly known through its bouillons, soups, and sauces. However, Knorr is also represented in for instance mixes for meals, dressing, dip and salad, in pasta-snacks, spices, and in other segments as well. Another aspect to be considered when positioning a brand and its products is, according to the respondents, the competition within market segments. In Sweden, Knorr faces competition from mainly Blå Band, due to the fact that Blå Band has in many segments, e.g. sauces and soups, a similar product range. Interesting, as well as significant, to notice here is that Blå Band was a former Unilever brand, as has been reported previously, but had to be sold because of EU rules of competition after Unilever bought Bestfoods with its brand Knorr. Otherwise, Unilever would have held almost a 100% market share in Sweden in some product segments. Other large competitors to Knorr in Sweden are, in a varying degree, the Findus brand, Arla, Uncle Ben’s, and all private-label
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products from the retail, depending on which segment we are looking on. In a broader sense, Knorr’s competitors are convenience food producers within the dry, liquid, chilled and deep frozen area. The fact that Knorr is a strong, worldwide-represented brand is at the same time both a strength and a weakness, according to our respondents. It is a strength because Knorr enjoys a high degree of brand recognition worldwide, strong core competencies, manpower, and financial possibilities. On the other hand, this is also a weakness, because Knorr cannot respond quickly enough to local overall presence. Each new product introduction has to take place within the overall brand strategy. This makes Knorr slower than local competitors and more inflexible in its actions. Local competitors can focus better to local customer and consumer wishes and preferences. Moreover, from our respondents we have acquired some further findings concerning the strengths and weaknesses of the Knorr brand. Beginning with the former, Knorr is considered to be very trustworthy and, furthermore, characterised by high quality. Its logo is well known all over the world. Its products offer a high degree of convenience for their consumer, which makes preparing meals easy. Knorr is represented in a broad range of product segments that makes Knorr an important assistant in the kitchen. “Knorr is very trustworthy… [it is] is a very strong brand, a quality brand people can believe in. We are seen as a brand, which can cover a lot of different issues. You can use Knorr from scratch-cooking to ready to eat… we have some strong colours that make it easy for consumers to identify us in the shops; all together it is a very strong brand and there are a lot of ways to build it even stronger in the future.” (Henrik Blach)
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competitors, because it has to take care not to weaken, dilute or damage its
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“The strength of Knorr is that it is well known… [producing] goods with a high quality image and with this it is understood value for money” (Niklas Andersson, our translation)
“The strength of Knorr is that it is a global brand. You can find Knorr in every corner of this world. Even in Asia you can find the Knorr logo…. with the same flag but with Asian characters on it. In other words, you can recognise Knorr [everywhere] and that is the main strength of Knorr: the worldwide presence… Another [strength] is that that there is no meal prepared in this world without Knorr is present somehow … A further strength is the high innovation rhythm.” (Patrick Camele, our translation) On the other side, a strong, worldwide brand like Knorr has also its weaknesses. Knorr is seen more as a functional brand with weaknesses on the emotional side. In the future, the brand managers of Knorr have reported that they need to ask themselves how they can make Knorr more of an emotional kind of brand, revolving more around the needs, desires and enjoyment of the consumers. Emotional perceptions have to be built into the communication somehow. This has to be incorporated into the building of the brand, too, affecting in particular the potential concepts Knorr considers launching in the future. In general, Knorr is seen as a very traditional brand, even a little bit boring, firmly stuck in the dry technology business. “Probably, Knorr is seen as a very functional brand… maybe a more functional than an emotional brand” (Henrik Blach)
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“The weak sides we have, as I see it, are two: first, that the brand carries with an association which might be perceived as very traditional, and maybe to some extent, even conservative. If you set a scale ranging from a modern brand to a traditional one, then maybe Knorr would end up in the traditional side… This might sometimes be a weakness when trying to reach younger consumers… Second, the brand might have strong ties to dry technologies, which is a restriction when developing technologies and so on…” (Leif Nilsson, our translation) As it is not enough to look only at strengths and weaknesses of the Knorr brand, we asked our respondents also to comment on the strengths and weaknesses of Knorr’s main competitors. Beginning with Blå Band, their key strengths are its Swedish approach and its perception as a strong Swedish brand. This gives them the possibility to focus completely on the Swedish market and on the Swedish habits of consumption. Like Knorr, Blå Band is seen as a very trustworthy quality producer. On the other hand, its weaknesses can be said that Blå Band is also seen as a very traditional brand, even as a little bit boring, not doing anything new for the consumer. Its product range is not very broad and its innovation potential is lower than for example Knorr’s, because less manpower and resources are available. Moreover, Blå Band is very much considered to be in the dehydrated business, which according to our respondents would cause them large difficulties when moving the brand into other areas, contrary to what Unilever could do with the Knorr brand. “Blå Band is really seen as a strong Swedish brand. This is a strength because Blå Band is also seen as trustworthy in Sweden. On the other hand, it is also seen as a very traditional brand. It is a little boring and really not doing anything new for the consumer. And I also think
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that Blå Band is very much considered to be a dehydrated brand or in this area. I think they would have very big difficulties of moving the brand into other areas which we think we can do with the Knorr brand.” (Henrik Blach)
”Blå Band has also a weakness because it is perceived as far too traditional. Knorr are perceived as a little more exciting, even though they are still a bit boring… but Blå Band are a bit further out on the scale because of the traditional product range and that it is a bit more Swedish. So this being Swedish is both an advantage and a disadvantage for Blå Band” (Niklas Andersson, our translation) Another competitor, Findus, is very strong in the deep frozen business and is considered as a more modern brand than Knorr. As the Norwegian giant Orkla Food owns it, it enjoys a high innovation potential and may launch new products at a frequent pace. Hence, according to our respondents, Findus seems as a bigger threat than Blå Band, because with the right strategy it could go into more competitive activities against Knorr in the future. Findus could build up a strong position in the convenience part within the chilled and frozen area. On the other hand, it is believed that Findus will probably not go into Knorr’s dehydrated business. Another weakness of Findus is its relatively weak brand, its lower brand recognition, and its markedly more blurred brand profile compared with for instance Knorr or Blå Band. “…in Sweden it is only the Findus brand that is within deep frozen and it is quite a strong brand and it is considered also as quite a modern brand. Findus is a bigger threat actually than Blå Band….” (Henrick Blach)
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Like Blå Band and Findus, Arla Foods is another large and well-known competitor to Knorr in Sweden. Its core competencies lie in chilled dairy products, where it has taken market share away from Knorr within the soup and sauce business. Arla’s key strength lies in is its dairy tradition, which always has been perceived as something fresh and healthy by the consumers. It is a company with a high innovation rate. On the other hand, Arla is limited due to its technological capabilities within the chilled foods business. ”… their weakness is that they are very limited in technology… they are restricted in the freezing room, which of course could be seen as both a weakness and a strength” (Niklas Andersson, our translation) Uncle Ben’s, another competitor of Knorr, particularly in the sauce business, is perceived to be a very modern brand with products that are following the trend towards exciting, exotic, foreign food like for instance Thai, Chinese, Indian, or other Asiatic tastes. Its weakness is the limitation to rice related products. “Uncle Ben’s is perceived as a very modern brand with very trendy products that are adapted to the present interest in Italian and Asian food. Their limits are that they are, on the other hand, very restricted in their offer. They have a very narrow portfolio of products” (Leif Nilsson, our translation) To a lesser extent, Santa Maria could be regarded as a competitor in the form of spices and similar food preparation products. They are perceived as a modern brand due to their focus on, for instance, Tex-Mex-food. They are however limited in product range.
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“They [Santa Maria] have a brand which has managed crossing over to a younger audience. They are perceived as very modern with the help of their Tex-Mex-food. They have a very young audience. This could be seen as their strength. Their weakness is… that they are not so much represented in that many product segments in the shop. Above all, they are tied to spices… and are perceived as a spice manufacturer” (Leif Nilsson, our translation)
Last, but not least, the managers at Unilever’s Knorr brand spoke of the strengths and weaknesses of the private-label products of retail. Their key strength is that they do not have to develop new concepts; they can just copy brand products, which implies that they have almost no developing costs at all. As a consequence, they can produce very cheaply and thus may offer a very low price towards the consumer. Furthermore, private-label products do not have to consider brand strategies and thus may move very rapidly. Their weakness is, however, that their quality is not always seen as very high and that they do not really have the brand power to use in the future. Their functional quality however has risen over the years.
In the next step, we asked our respondents what they think are the opportunities and threats in the markets Knorr are in. In their opinion, an opportunity in the future is undoubtedly that consumers want to use less time on preparing food and want to enjoy solutions instead. This trend is also reinforced by a decreasing knowledge of food preparation due to the fact that today often both men and women are working. This development gives enormous potential for convenience products and for putting more effort into the out-of-home business.
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“…the opportunity for us is to gain part of that because consumers want to use less time on preparing food and want to have solutions. That puts us in a very positive situation….” (Henrik Blach) Our respondents even include an opportunity of going into the chilled and deep frozen business with Knorr. However, this is seen also as a threat, as Knorr is very much perceived to be a producer of dry and dehydrated products, so far. A concepts due to its responsibility towards the overall brand strategy, which implies that local food manufacturers can concentrate solely on local consumer wishes and preferences without having to consider potential impact for the brand perception in other markets. Another threat may be that the markets Knorr are in, for example soup, sauce, bouillon, are not growing in volume or, even worse, in value. “The threat is if the soup market does not grow, or if it even is declining. The threat on the sauce side is the firmly rooted North European bread-and-potato culture... Influences from other cuisines… can in the long run pose a diminishing demand on sauce, as well” (Niklas Andersson, our translation)
Empirical
threat for Knorr can be that it is not fast enough with innovative product
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“A threat is that we are not fast enough in being innovative and that our competitors are able to build maybe more on Swedish way of living and thinking than we are, because we have to consider that we are a Nordic company, so we have to consider the Nordic trends. We cannot focus to a 100% only on Sweden. We also have to consider that there are three other countries in the Nordic[region]…” (Henrik Blach) Finally, we wanted to know from the interviewed managers which factors or thoughts could influence a decision to open the brand Knorr for all age segments. They told us that current socio-demographic changes could require thinking about repositioning, extending or opening the brand Knorr. For example, with increasing dual spousal participation in the work place, the consumer demands in the food industry might change towards more flexible solutions towards children. “It is so that often both parts, men and women, are working outside and coming home quite late, then there might arise an opportunity of coming in with some kind of snacking products that are quite easy for children to prepare” (Henrik Blach)
If children are coming home from school and their parent(s) are not at home, it could be a good idea to offer some kind of solution for them, something that children can easily and speedily prepare on their own. The only problem with this, according to the respondents, could be that parents tend to have a negative feeling towards products targeted to children, because they are not willing to buy something for their children that they consider not good enough for themselves. However, our respondents assume that the consumers would be willing to accept Knorr going into other types of products and using other
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technologies than only dry or dehydrated ones. Furthermore, earlier investigations have been conducted with the result being that of making soups for children, apparently, has not been motivated. The same has been done with making and preparing meals for children. From Knorr’s point of view, there was not a real market for making kind of foods for children, though to miss the children today might open up serious problems in the future. “For the time being, Unilever does not do anything in the children segment… Volume for the products plays a big part here… When producing for children, we have probably an age range of maybe 4-5 years. The mass of people who buy grown-up products is much bigger than for children. In other words, an investment in children products must first of all be motivated. On the other hand, if you neglect the children with the brand now, you will miss them later.” (Patrick Camele, our translation) According to our respondents, a brand extension or a launch of new products in a new segment has to be within the brand awareness or brand perception of its consumers. Before considering a brand as a candidate for extension, the company needs to assure if the extension fits into the brand strategy. In the extreme, this implies for example that Unilever cannot introduce a vanishing crème under its Knorr brand, whereas it should be no problem to introduce a soup, a soup for children, a liquid soup, a cooking apron, a spoon, and so on, because it takes place within the brand awareness and brand perception of its consumers.
Empirical
producing for grown ups, we have an age-range of 20-60 years. If
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“During the R&D-process for the product development, the product must lie within the brand awareness and perception of the people. You can stretch it a bit, even go to its boundaries, but you must never cross the boundaries.” (Patrick Camele, our translation)
Before launching new products under the Knorr brand, the manager needs to be aware what Knorr stands for and how it is positioned in the mind of the consumers, because launching products that do not fit into the brand awareness and brand perception of its consumers can damage and dilute the brand. Knorr does not exactly stand for the same attributes all over the world. There are some slight regional differences depending on which Knorr products are offered. In our test market Sweden, Knorr is seen as a trustworthy, convenient, family/household brand that is of high quality, has quite a wide assortment, good taste, good food, helps in the kitchen, gives ideas what to cook, is not a very experimental brand, and is within the dry food business. “Our vision is that Knorr will be a lot more of a broad cooking brand (”matlagningsvarumärke”) in the future, which emanates more emotional values than it does today…. emanating more of the joys of cooking” (Niklas Andersson, our translation)
Today, Knorr is actually seen as a really functional brand. What is still missing is to build emotional values and enjoyment of preparing meals into the brand perception of Knorr.
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The consumer’s views on Knorr In order to gain some views about Knorr from another perspective, we put forth some Knorr-related questions to consumers, in order to acquire an insight and understanding of how well known Knorr and its products are, and what consumers think about Knorr products and its prices. Most of our respondents perceive Knorr as a brand offering bouillons (all of our 22 respondents affirmed), sauces (almost all noted a recognition), spices (three (almost seven out of ten). Other Knorr products seem to have clearly less brand recognition among Swedish consumers. When asked which Knorr products they use the answers were above all bouillons (three out four), sauces (two out of three), and spices (less than half). Our respondents have predominantly very positive associations with Knorr. More than half associate Knorr with good/high quality products. This mainly applies to their bouillon. Knorr is often seen together with or slightly behind Blå Band as a quality leader in the market, which allows for a slightly higher price, compared with other players in the market. However, even though the respondents often say that they buy Knorr bouillon, they also state that they prepare most of the other products Knorr by themselves rather than using what Knorr offers. When asked about the price of Knorr’s products, our respondents answered either that they have never thought about the price of Knorr’s products (in less than four out of ten cases) or that they think the price is ok and you get value for money (one out of four respectively). The people we interviewed have been aware that Knorr’s products are not the cheapest ones available. However, the
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out of four noted a recognition), Knorr Koppen (seven out of ten) and soups
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perceived quality of Knorr’s products seems to offset and justify the price disadvantage. It is difficult to summarise the question concerning how the consumers perceive Knorr’s prices in comparison with their competitors, since almost three out of four consumer respondents have no view about this topic. One out of ten respondents perceive Knorr’s prices as ok and less than ten percent of the respondents stated that Knorr is more expensive than most of the other competitors.
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4.2.3 Product level and Soup lollipop
In order to acquire an insight into what factors are considered significant when developing an existing product or innovating a new one, we asked our respondents at Unilever about which product attributes they prioritise when developing new products or product concepts. Furthermore, we requested information on which factors influence the decision to set a price, and if and how they investigate customers’ wishes, preferences and attitudes toward an imaginary product concept before developing a new product. Thereafter, we competitors, advantages and disadvantages, age segment, price, impact on Knorr’s brand image and attributes). Putting some of these questions about the Soup lollipop also to a random sample of 22 consumers contributed to gain insight into our case from the perspective of the consumer and the perceptions they have in mind. A match between what managers think and consumers want is then necessary when successfully positioning a new product in the market. According to our respondents, when developing new products, it is important for a manufacturer in the food industry to investigate what the consumer wants and needs. Primarily, when focusing on food, the most important product attribute is taste, because this is the main reason why consumers buy a product. But at the same time, taste is an attribute that is focused on quite late in the process of developing a new product, due to the fact that it is relative easy to add to the product. ”…considering the product area which Knorr is in, then the taste of the product will be a very important aspect… however, during the process of developing a new product taste is brought in at a fairly late stage. Taste is something you can arrange relatively easy. That is not
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asked them more in detail about the Soup lollipop (concerning the ambitions,
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the great obstacle… rather… in the process of coming up with a new product, we always start from which gaps that appear in the market… from where we judge that there is a potential from the consumer’s perspective.” (Niklas Andersson, our translation)
“First of all, we need to look from the consumer’s point of view; what is really the questions from the consumer and what does he want, what is he looking for. So they [the potential products] have to be convenient; […] we have some quality standards objectively which we have to meet also [with the product]… and then we also have some pricing standards that we also have to meet” (Henrik Blach) The development of new products requires also an inquiry into and a scan of the current trends in consumption. In other words, the need of following current trends in consumption drives the product development in the food industry. This, in turn, requires an analysis of eating habits, of purchasing statistics from retail shops, and from all other information sources available. Besides the three previously mentioned main trends of convenience, health and entertainment/pleasure/fun, the consumer of Knorr products also expects some quality and pricing standards that he or she associates with all the products offered under the Knorr brand. “Leading a trend is something which does not pay, because there is always the risk that you arrive before the trend and thus do not receive the proper value for what you are doing. You don’t get any pay off that way on your investments. Instead, you have to time the trends when they are broad enough … to carry the volume and the costs of development… Timing is a very important dimension […]. We
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try to keep pace with the general trends and developments…Through various channels we receive information. There are a lot of channels which, when taken together, create a base for an evaluation [of what to do]” (Leif Nilsson, our translation)
For the company, the pricing decision strongly influences how a new product can be positioned in the market and in the mind of the consumer. However, more often, it is seen the other way around: first you define the segment you want to position the product in and thereafter you look at the price level of new product should of course be similar to the competitive products of the same segment. This implies, on the other hand, that production costs come later into play. “[The price is set according to] what the consumer is willing to pay; we would certainly go out and identify what the consumer would like to pay for this product; if it is a similar product to our competitors we also have to take this into account so that we are at a similar price level. For us it would be the consumer and not so much the customer, because it is not the customer who puts the price. We certainly would come up with a price towards the customer that we say ‘ok, take this product; our surveys showed that you should take 15 SEK for this product; so they will follow that’ ” (Henrik Blach)
Empirical
competitive products that are positioned in the same segment. The price for the
”[Price] is not necessarily the most important thing. If we launch a new product, which is only another version of one in an existing range, than the starting point is always that it shall have the same price as the existing products. If it is a totally new concept, then it does not necessarily imply that it shall be cheap… [for example when
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it is] a healthy [product] or tastes good and so on… You could have come up with a premium product that commands an equivalent price.” (Niklas Andersson, our translation)
According to our respondents, it is not always appropriate to investigate customers’ wishes, preferences and attitudes before launching a new product or product concept. We have to report a distinction here made by the respondents: if a company is going into a totally different new area, for instance if Knorr would go into chilled or deep frozen, it certainly would have to include the customer (retail, supermarkets). However, if a company is going into a business related to its already existing one, then it probably would have to consider not informing its customers beforehand, due to the risk of the retail could copy new product concepts with their own private-label brands and then going into the market with cheap me-too products that take market share away from companies like Unilever. “In many types of launches… where it is only a matter of introducing [products] that already exist in other countries, when it is not a matter of developing new products from scratch… but adapting them, then you could skip some of the [usual] steps.” (Niklas Andersson, our translation)
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After asking the managers at Unilever more in general terms what they take into account when developing a new product concept, we requested them to comment on how important they consider some given attributes/properties of soup to be. We asked the same question to the consumers, in order to compare their perceptions with the answers of the managers, which will be presented in a later stage of this chapter. From the managers at the Knorr brand of Unilever, we have experienced that the price is not always the most important aspect for products launched under the given the lowest cost price, because Knorr’s products stand above all, according to the managers, for quality and convenience, which allows for higher prices, even premium ones. In fact, attributes like taste, quality, and easiness to prepare are considered to be most important attributes of a soup. As our interest went on down the ladder from a macro to a micro perspective, we asked managers at Knorr, which ambitions they have with the Soup lollipop. Primarily, the ambition with the product is to find, to develop, and to come into a new market segment that is not existing or developed yet. It is about opening a new segment for products targeted to children, about increasing brand awareness at an early stage in life, and lastly about making money, as our respondents see a large market potential with portioned soups. “The ambition was to make a product that was more fun, more enjoyable which had the nutritional value that we have to have when we are talking about soups and to try to reach children that instead of taking a kind of meat loaf or bread loaf when they come home from school; they can consider this as a more positive way of having some energy, taking some carbohydrates than just having a piece of chocolate or bread […] The approach and the concept and the idea is
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Knorr brand, as has been previously reported. The products do not have to be
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interesting but on the other hand there is a difference between what the children want by themselves and what the parents think that the children should have.” (Henrik Blach)
“The ambition is actually to find, to enter and to develop a market that is still undeveloped in the form of the children segment. That is the whole key to the project: to open up a new segment.” (Niklas Andersson, our translation) “To make some money is of course one of the ambitions. The second one is to increase the brand recognition or brand awareness... We believe that the Soup lollipop competes in another field than the usual soups. With our usual soups, the natural alternative is Blå Band. However, with the Soup lollipop, the competitors are Kinder Surprise or Fruchtzwerge [a type of yoghurt], hamburgers or a pack of French fries, or some other kind of snack… In this case we can give the mother something she finds trustworthy and to the children we can give something they will remember Knorr by. This combination, to combine the needs of the children and the needs of mothers in the form one soup, is the uniqueness of this project.” (Patrick Camele, our translation)
However, portioned soups like the Soup lollipop have so far strong ties among elderly people, according to the respondents. A soup should be seen more as a drink that can be used everywhere. Thus, old perceptions of consumers that see a soup as an opener before the main course should be blurred, positioning it more as an alternative to other snacks or drinks like tea or coffee. From a psychological perspective, the ambition is to give the parents something they
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trust – a Knorr product – and the children something they consider to be funnier than any other snack, and in this manner building some positive perceptions and associations with the Knorr brand. “ …we see an enormous potential in this market with portion soups… we see that the soup portion consumption [in Sweden] is incredibly low in comparison with other European countries and there is an enormous possibility for the soup side to make soup more as a… beverage… to make it more accessible in other words, so that people any inconvenience. This need is satisfied by the portion soups to a pretty large extent…” (Leif Nilsson, our translation)
Empirical
may consume it during different occasions, without having to go to
Such a product, of course, is not aimed to compete with traditional soups, as this would not add value to Knorr but only lead to cannibalisation of existing Knorr products. Therefore, the Soup lollipop should, according to our respondents, be positioned as a snack or even as an alternative to a cup of tea of coffee. In this sense, competitive products are all snacks both, sweet and spicy. For reasons of improving the product concept before the launch we asked both, managers at Knorr and consumers about which advantages and disadvantages they see in the Soup lollipop. The company view is that the advantage of the Soup lollipop lies in a combination of being “funnier than any other kind of snacks with nutritious and not so heavy meal. This combination is unique” (Patrick Camele, our translation). Furthermore, children have the freedom to choose a taste and are excited during the time it takes the soup to release from the stick. Such an experience is seen to be an important element in children products. On the other hand, the interviewed managers see it as a disadvantage that the Soup lollipop has only a very limited amount of people as a specified
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target group, that in some countries, as in the Swedish test market, government legislation does not allow for advertisement of products that are aimed directly at children, and that products especially aimed at children do not have the best reputation among parents. Moreover, there is a risk that the Soup lollipop will not succeed in capturing sustainable attractiveness. It is seen to be very difficult to present and package the Soup lollipop in a way that both, parents and children accept the product. “It is a balancing act between having a selling look, a selling environment, a fun and appealing product that attracts children, at the same time as it shall convey a good nutritional value which will make the parents feel good about the product, so that they are willing to buy it for their children.” (Niklas Andersson, our translation)
Another important aspect to clarify when positioning a new product is the target group. In the case of the Soup lollipop, the interviewed managers anticipate 5-9year-old children as their main consumer segment, possibly even up to 12 or 13 years. Teenagers would almost certainly see the product as too childish
How consumers perceive the Soup lollipop One of the most important things before launching and trying to position a new product in the market and in the minds of the consumers is to figure out what they think about a new product concept, in order to have the chance to adapt the concept to better match with consumer needs. The aim in this section is to inquire if the new product concept evokes positive perceptions among consumers.
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After having presented the product concept to them, we asked the consumers if they could imagine themselves consuming the Soup lollipop in the future. Quite indicative and coherent answers were given to this question: more than three out of our disliked the product or were very sceptic and were only willing to test it maybe once. The main reason for this negative response was the combination of food with candies or chewing gum or such like items of fun or entertainment. Our respondents predominantly would refuse this concept. In their view, the smart idea of the dehydrated soup is destroyed by the inclusion of candies or chewing gums or suchlike products. It is seen as being inconsequent to have a lollipop, therefore, is not seen as a legitimate product. Only less than fifteen percent could imagine themselves buying the product more than only once. Subsequently, we asked if they could imagine their children using the product. Here, our respondents communicated more positive attitudes and only about one in five would refuse the product completely for their children. The other respondents would at least try it once if their children like it, but often only under the premise that things like candies or chewing gums are excluded. It was also regarded as positive that children could prepare the product by themselves; that it seems to be more fun than normal soups; and that it can be used as a snack when children come home from school. Furthermore, it was questioned whether the soup dissolves or not, that it is maybe too expensive compared with homemade soup, and that the usage of the microwave is less dangerous for children than to boil water on the oven. The consumers connect to the Soup lollipop only two significant advantages. First of all, the Soup lollipop can be a good way to motivate children to eat soup (seven out of ten), and secondly, it is perceived to be funnier than other soups and snacks (more than half). On the other hand, it became quite clear that our
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nutritious soup and unhealthy candies within the same product. The Soup
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interviewed consumers see mainly one serious disadvantage in the Soup lollipop: candies or chewing gums or other items of entertainment in the handle would reduce severely nutritious aspects and thus goodwill in form of parental endorsement (seven out of ten). “I am not sure, but I believe that it [the Soup lollipop] would be fun. He [the child] likes to cook food for himself. That part of the concept would be fun and would work.” (consumer respondent, our translation) “It would be smooth to have it [the Soup lollipop] as an in-between meal (mellanmål), that I would believe.” (consumer respondent, our translation)
“Children would definitely like to use this product … if they could only find a way of using for instance the micro [wave oven], so that they do no get in touch with the water.” (consumer respondent, our translation) “Children like to cook, so that is not that bad a target group. However, I believe more in the usual portion soup concept… No, I don’t like the candy part of it” (consumer respondent, our translation) “Maybe it would work, but associating candy with food is wrong, in my eyes at least.” (consumer respondent, our translation)
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“I do not think I would buy it if there were toys together in it. No, … my spontaneous reaction is that it seems to be too artificial. I could however think that my children would nag me into buying it for them.” (consumer respondent, our translation) When asked about the age segment for which the Soup lollipop could be an interesting product, the consumer respondents commonly agreed that the product loses its attractiveness for children that are older than 12-13 years. Furthermore, a quite clear perception exists among our respondents that a 4 or 5-year-old by its own. Within this range (approx. 5-13-year-old children) most respondents think that the product could be interesting for children at the age of 8-12 years when they come home from school in the afternoon and want to prepare a snack. Thus, the minimum level of age is limited by the ability/allowance to boil water and the upper limit of age is restricted by the fact that teenagers maybe perceive the product as being too childish and are able to prepare more sophisticated meals. “Mostly younger children under the teens, I guess, it is difficult to decide because I have little children myself.” (consumer respondent, our translation) “From children in the second level in the primary school (mellanstadiebarn) to the upper secondary school (gymnasiet). In other words, ten years of age and upward.” (consumer respondent, our translation) “9-10 years of age, when it [the child] is mature enough to prepare food by itself.” (consumer respondent, our translation)
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child would be too young to boil water and thus could not prepare the product
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In a final but crucial question, we asked if the Soup lollipop would influence their overall perception of the Knorr brand. About half of our respondents answered that the Soup lollipop would not influence their perception of Knorr, as Knorr stands for reliable products. However, about less than half consider that the Soup lollipop would exert a negative influence on Knorr’s image, because of the inclusion of candy or chewing gum, or something in the same spirit. In their view, food and candies/chewing gums and such like should be kept separate. “Knorr and non-serious products do not fit together.” (consumer respondent, our translation) “I would think less of Knorr if they used what is up there [points towards candy]… If 2-3 kids get burn injuries, then it will end up at Expressen [a Swedish daily newspaper] very, very quickly… How can you motivate that you are offering a healthy product when you have something that is unhealthy up there [points towards candy again]… You need to be consequent” (consumer respondent, our translation) ”They [Knorr] must keep a high quality in order not to lose their trustworthiness” (consumer respondent, our translation)
“I said previously that they [Knorr] were a brand to place ones trust in, now I do not know if I shall believe so anymore. It sounds like an airy-fairy thing…” (consumer respondent, our translation)
“If they [Knorr] included candy, then I would think less of them” (consumer respondent, our translation)
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Our respondents consider that it is a good idea to bring something on the market for children. However, the potential product has to be regarded as legitimate, as it is the parents who buy the product. Otherwise, there is an inherent risk that Knorr’s image, as standing for reliable, high quality products will suffer damage.
4.2.4 Interplay between brand (Knorr) level
Empirical
and product (Soup lollipop) level
After having scrutinised in depth all entity levels from macro (food industry) down to micro (product concept), we wanted to know if the interviewees at the company and our interviewed consumers think that the new product (Soup lollipop) could influence the image of Knorr, and in which way. Moreover, we wanted to know from the managers if the Soup lollipop would stand for the same attributes than Knorr does, or if they have to be different. The respondents at Knorr think that, if the consumers perceive the Soup lollipop as a product of high quality, then it could help and strengthen the overall view of Knorr. What they want Knorr to be in the future is that its products can be used in everyday life and help people to have a more enjoyable life in that they can use the time for other things than preparing food. “If you could make a product that really could meet some of the aspects that could help the children in their everyday life, then I think it could absolutely add to the brand image to Knorr.” (Henrik Blach)
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The insights from the consumer interviews were twofold: Some respondents said that the Soup lollipop would not influence their perception of Knorr and some articulated a more negative perception of Knorr if they would launch the Soup lollipop in the form we presented it. “I would end up with a more negative view on Knorr, I would get that now-they-try-to-fool-me-through-my-children kind of vibe.” (consumer respondent, our translation) “It probably would not affect my view on Knorr. It is probably an innovative touch – Knorr is you know a rather classical brand. Now they probably try to “pop” themselves up a bit, be more tough, change their image a bit, to act and turn more towards children, something they have not done before.” (consumer respondent, our translation) The image of Knorr as a brand can also be influenced by the Soup lollipop in terms of building associations about Knorr at an early stage in life and getting more attention among younger consumers. The company articulated another point of concern. So far, the consumers perceive Knorr as a quite grown up, mature, and legitimate brand, but if Knorr comes up with products targeted at children, a little bit of this grown up image could get lost. To minimise all risks of diluting, damaging, or negatively influencing the Knorr brand, it must be pointed out to introduce new products under the Knorr brand first in a not too large test market like for instance in Sweden. The managers at Knorr are of the opinion that the brand image of Knorr will neither benefit nor be harmed by a launch of the Soup lollipop. The only effect they see will be to catch and tie consumers earlier in life to the Knorr brand.
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Lastly, the interplay between a brand and its products can be seen at the attributes or properties a brand and its products stand for. We received insights from the interviewed managers that Knorr stands in fact for two different, albeit complementary areas. “On the one side, there are Knorr products like for example bouillon or spices, where it very much revolves around the cooking process. Then [on the other side] we have other products in which the Soup lollipop comes in, maybe many of our soups as well, products that are quickly and easily… The values that are about the joys of cooking and so on disappear, as a consequence. This product [the Soup lollipop] comes in more in the areas in which we today have products as Knorr Koppen, Spaghetteria, - that is quickly and easily” (Niklas Andersson, our translation) In the case of the Soup lollipop, Knorr is not used as the brand name but as endorser, i.e. the Knorr brand will be on the package of the Soup lollipop, but smaller. Additionally, a sub-brand will be introduced, like for example Soup lollipop. In other words, the new name will be on the package and the Knorr name will be printed smaller on the package as endorser. In doing so, it will be possible to address other attributes with the Soup lollipop than it is done under the Knorr brand. “With our conventional Knorr products we address the kitchen, [whereas] with the Soup lollipop the fun element stands in the foreground. On the backside [of the product] we can then address the parents with nutritional value”. (Patrick Camele, our translation)
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not about cooking, but instead are more about getting something
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Thus, Knorr is needed as an endorser. The Soup lollipop is more or less a conventional Knorr soup that is technically converted and attached to a stick. The difference to the conventional Knorr products lies in communication, where the fun element will be emphasised.
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5
Analysis
In order to enable us to answer our research questions in the end, and thus achieve the purpose of this study, we will in this chapter link our frame of reference with our empirical results. However, we would like to remind the reader that the empirical material is only to be regarded as an illustration of our chosen theories – we do not use the empirical material to either falsify or verify these theories. This chapter will also to some extent reflect our own interpretations on the subject. The analysis will be structured following the main structure of our frame of reference. Central to our frame of reference was the concept of looking from both the manufacturers’ and the consumers’ perspective when striving to understand a feasible positioning of a new product concept in a new market – as an organic option for growth. In this respect, we are now going to apply strategic and perceptional positioning to our case, of course, taking also the findings of the empirical part into consideration. As in the frame of reference, we will also bring up the significance of bonds and relations in the context of positioning. Furthermore, we will conclude our analysis with an inquiry of branding.
Analysis
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5.1 Strategy and Positioning
Under this section we will analyse our case from a classical strategic point of view on positining. This classical view allows us to use tools like for instance Porter’s Five Forces of Competition and the SWOT analysis, both of which concepts were outlined in our frame of reference.
5.1.1 New Industry Trends in the Light of Porter’s Five Forces of Competition
As the strategic impact on our case covers both external and internal aspects, we will begin analysing first the former and tighten it to the latter under the next heading, SWOT analysis. Using the framework of Porter (1990) together with our empirical findings, the following (external) factors or trends have affected the structure and the strategic positioning within the food industry. The Threat of Retail’s Private Labels Through the respective use and introduction of private label brands, the retail trade has over the decade grown from plausible new entrants to powerful competitive players among the existing competitors in the industry. Retail’s own private-label brands ICA-handlarnas, Signum and Diva have been used as tools to leverage the position of the respective retailer, ICA, KF, Axfood, relative to the existing competitors, including Unilever/Knorr. As the functional quality of the private-labels has increased, there has been an opposite incentive to decrease the strength of the position of, for example Unilever, as the relatively higher quality of brand producers cannot exclusively be used to motivate a higher or even a premium price. The private label brands can thus be seen as threats undermining the position of Unilever/Knorr, in that they can can offer an
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equivalent product at a lower price. In the long run, the private label could potentially cut off the position of brand players as mediators between suppliers and buyers.
Competitors
Blå Band, Arla, Findus, Uncle Ben’s, Santa Maria, Retail’s own products…
Supplier
Uni./Knorr
Customer
Figure 5.1: Porter’s Five Forces of Competition, ICA, KF, Axfood, … (adaptation to our case) Chilled, frozen, new trends of consumption, Retail’s Figure 5.1: The Five Forces of Competition, Sub / Entra private-label products, … (Michael Porter, 1990, our own adaptation to our case )
Difficulty to Differentiate – Learning from other actors The trend of learning and reproducing similar products from other actors gains more and more gravity, particularly in the mature markets of the food industry. In doing so, a great amount of development costs may be saved, which in turn can be used for pushing products through marketing efforts. Applied to our case, a manufacturer in the food industry can learn from existing competitors, from new entrants/substitutions, or even from its customers (consumers in our case). Among the existing competitors, the tendency to bring up new products as a response to the development of others, as for instance Knorr bringing up “Knorr Koppen” as an answer to Blå Band’s “Varma Koppen”, has diminished the
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possibility to differentiate through the uniqueness of feature. As new entrants often come up with innovative new product concepts or even slowly try to change existing trends in consumption, a manufacturer in the food industry also has to carefully sense these actors in its industry as has been indicated under the previous heading. From the interviews with consumers we learned that they are very sensitive in comparing the product concepts of the various manufacturers. Above all, they knew about and proposed the use of media tie-ins2, licensed characters 3or collection cards4. Changing Trends in Consumption Affect the Food Industry Structure The arising new preferences and trends in consumption leave marks on the structure of the food industry. The concern, the need and the desire for health, for convenience and for entertainment that are issued forth by consumers have been translated into demands that somehow have to be met by the actors in the food industry. The fact that the volume of consumed food does not increase (people are not eating more) but the pattern by which the food is consumed does, increases additionally the demands on the food industry actors to react. Furthermore, according to the interviews we conducted with managers at Unilever’s Knorr brand, consumers are eating more and more out of home, they spend less time in preparing the food (a decrease of over two hours as compared with the 1950s), they are moving towards prepared meal solutions, and have discovered other cuisines from around the world; thus the consumers desire products that meet these needs and demands. In other words, the changing and emerging trends, preferences, patterns and needs provide incentives for the actors to adapt to the prevailing conditions, in order not to end up with a weakened position in the food industry.
2 3
(using movie characters) (e.g. Asterix: Knorr could use for instance Asterix as a licensed character to position its Soup lollipop as a magic potion in the mind of children) 4 (e.g. coming Soccer World Cup, Hockey, animals, etc.). 110
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The Growing Role of Children Markets Deriving from what we said under the previous heading, the trend towards meal solutions or even food events or snacks becomes an essential part of modern life and affects in particular the younger generation. Thus, in the future, the actors in the food industry have to pay more explicitly attention to children’s needs and demands than ever before as they see the possibilities of creating, developing, and growing into these markets, at least according to what our respondents at Unilever/Knorr have put forth. This focus on children gains more importance in that future generations change and follow their own preferences and buy products according to these preferences. To put it in another way, actors in the industry who focus only on old preferences and neglect the changing patterns of consumption may find themselves weakening their position in the future. The generation can be explained by some key motivators – as we learned throughout our interviews. There is a growing spending power of children, a significant consumer base5, increasingly busy lives for parents, and the effect of establishing and positioning the brand early in the mind of children. Children who have become consumers are at a critical point in developing brand preferences that will endure to affect the market for decades. Actions undertaken today will thus influence the industry landmark of tomorrow.
Analysis
considerable market potential in the food industry concerning the younger
5.1.2 SWOT-Analysis
In our theoretical part about strategic positioning we explained and discussed among other things Porter’s (1990) and Prahalad et al.’s (1989) views on strategy. Whereas Porter (ibid) focuses more on external forces (Opportunities
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and Threats), Prahalad et al (ibid) focus more on internal forces (Strengths and Weaknesses). In order to further accentuate the differences between these two general views on strategy, Melin (1999) proposes the use of the SWOT-analysis. SWOT stands for Strengths, Weaknesses, Opportunities and Threats and has been used as a framework to identify a position for competing on the market/ industry that is based on a diagnosis of the condition of the industry (Porter) and of the condition of the business (Prahalad et al). Applied to Knorr, the brand of our case, the SWOT-analysis could be interpreted as in figure 5.2 here below.
STRENGTHS: · High brand recognition · Strong core competencies · Broad range of products · Good image (trustworthy and high quality)
OPPORTUNITIES: · Trend toward food solutions · Going into chilled and deep frozen business
Knorr
THREATS: · Food market not growing in volume and value · Retail’s own private-label products
WEAKNESSES: · Lack of emotional values · Traditional, ‘boring’ image · Slower and more inflexible than local competitors
Figure 5.2: SWOT analysis (adaptation to our case)
In order to strengthen its position in the market (strategy) and the minds of its consumers (perception), Knorr has to build on its internal strengths, has to overcome its weaknesses, has to utilise external opportunities in the industry and market and to find good strategies for defending itself against external threats.
5
children between four and fourteen represent a population of 18% across Western Europe and the US according to internal Unilever data. 112
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More to the point, Knorr’s already existing strengths of high, worldwide brand recognition, strong core competencies in dry and dehydrated product technology, a broad range of products with 14 segments ranging from dried soups, dried pasta meals, dried bouillons to spices and similar products, and an image of trustworthiness and of high quality, should be leveraged and build on. But most important is that the consumers become aware of Knorr’s superiority in these aspects compared with its competitors. This has to be built into the communication. No actions should be undertaken that weakens Knorr’s strengths. However, actions have to be undertaken to overcome its weaknesses. For Knorr this implies that it has to add emotional values into its communication as it is so on functional values. Somehow more difficult for Knorr is to overcome its weakness of being more slowly and inflexible in adapting to local circumstances than its local competitors – like for instance Blå Band in Sweden. This is directly linked to Knorr’s strengths of being a global brand because whatever Knorr is doing has to fit into its overall brand strategy. Hence, Knorr cannot adapt for instance to 100% to Swedish consumer’s needs and habits of consumption, what Blå Band easily can do. Analysing how the external factors of opportunities and threats can contribute to strengthen Knorr’s position in the market and the mind of the consumers is the next step when applying the SWOT-analysis on our empirical findings. To begin with the opportunities, we can see that there are trends in consumption that are favourable for producers of convenience food in general and Knorr in specific. People have less time to and a decreasing knowledge of how to prepare food. This situation opens up a market large in volume and value for convenient food
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far be seen as a very traditional and somewhat ‘boring’ brand focusing mainly
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solutions. Knorr has been offering for decades help in the kitchen with its products. What it has to do to utilise the new trends in consumption is to increase the degree of convenience of its products. One way is to launch products with a higher degree of convenience within its existing product range. Another way is to think about going also into the chilled and deep frozen business, as most convenience products come into these categories. However, this should happen within the brand awareness and perception of Knorr. Otherwise, options of mother-daughter branding, daughter-mother branding or even building up a new brand for this purpose should be taken into consideration. Lastly, Knorr should find good strategies for defending itself against external threats. This is however a difficult undertaking as Knorr can only to a limited extend influence external realities. What it can do is to face these threats and to build strategies that in the long run make the external threats appear less influential. For Knorr this implies that the food market is hardly growing in volume and only slightly in value. Hence, Knorr has to take market shares away from other players in the industry when striving for growth. This can be done through new product launches or re-launches of existing ones. However, to cannibalise market share of its own products should be avoided as this will not lead to growth but rather to shifting volume from one product to another. Another severe threat that Knorr and all the other manufacturers of branded products have to cope with is the growing business practice of the retail launching its own private-label products. Consumers’ perception about privatelabel products is becoming more and more favourable for the retail in the sense of decreasing functional differences in perception between branded and unbranded products. Consequently, a manufacturer of branded products should highlight other values than only functional ones. While private-label products of the retail can reach a good quality to a cheap price with similar product features
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than its branded rival products, they cannot compete on the emotional side. Private-label products have problems to build brand image and thus difficulties in building perceptions in the mind of the consumers. Following this argumentation, Knorr should utilise exactly this weakness of unbranded products. It should build its image less around functional aspects and more around emotional values like for instance ‘enjoyment and experience during cooking and food preparation’, and so on’. In other words, Knorr has to tighten its consumers emotionally to its brand and products. It has to position itself in the minds of its consumers as an essential part in daily life.
5.2 From Strategy to Perception via Bonds and Relationships
As the differences of functional quality between producers have decreased, one of the strategic advantages has lost out in significance. Or to put in another way, quality alone cannot be used to establish a position relative to other competitors. Therefore, other aspects need to be used to re-establish, re-affirm or create a position. The use of bonds is, as Hammarkvist (1994) has indicated, one option for strengthening a position relative to an actor in the industry. As Hammarkvist et al (1982) argue, bonds could be used to establish a relation between a company and selected forces in an industry, as for instance suppliers or customers, in order to create a more favourable position. The strength of the bond between two actors is dependent upon the degree of dependence of one another. In the following, we will present the different kinds of bonds in the context of our case:
Analysis
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Economical and legal bonds exist in many different forms. Between the consumer and the company there is no formal long-running economic bond or contract. In other words, the consumer may switch to another supplier at will. Tacitly, there is one contract between the company and the consumer, however. Through the brand image and reputation, the company promises to offer a certain quality to the consumer. The consumer, aware of this, knows where to turn in order to reduce the uncertainty and risk concerning the quality of the goods, as Hayek (1948) has previously argued. A certain amount of precision is necessary to add concerning the consumer. In our case, between the company and the consumer there is a middleman, in the form of retail, chefs, canteens and suchlike actors, who influence the economic bonds. Between the company and the retailer, who acts as the customer buying the goods of Knorr, there is a bond in the form of contracts of delivering a certain amount of goods during a specified period of time, to which the Retail Service caters. There are also customers in the form of chefs, to which the Knorr caters through its Food Service operation. In comparison with Food Service, the structure of the bonds in the Retail Service is different. The Retail Service is also in competition with the private-label brands of the retail. In other words, as has been discussed in conjunction with Porter (1990), the retail is today also a competitor, whose actions are of concern for the case company. These economic-legal bonds to the retail are of significance for our case company. Should for instance the functional quality of Knorr products decrease, or the preferences, perceptions and purchasing patterns vis-à-vis Knorr be adversely affected – in plain English, should the Knorr screw things up – the middleman ‘retail’ would no longer have the incentive of renewing the contracts with the Knorr, and thus, this would result in a weakened position. The adaptation for convenience in the form of easily prepared products could be argued to constitute a technical/functional bond between the company and the
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consumer. However, since this type of arrangement constitutes one of basic ideas through which Knorr has profiled itself throughout history, it is difficult to argue that it constitutes a development towards a new kind of technical bond. Nonetheless, this discussion of the technical bond has implications for the knowledge bonds. With the passing of time and experience, it could be argued that knowledge bonds have been developed. The knowledge of the increasing need for convenient solutions as a response to the decreasing amount of time spent in preparing is one example. This knowledge can be translated into developing technical/functional solutions that offers convenience. In this manner, the consumer may be bound to the company, thus strengthening the position of the case company. A social bond is, as Hammarkvist (1994) reminds us, the exchange that takes place between the actors of an industry in the form of personal relations. This bond is today missing for Knorr as it is perceived as a highly functional brand that offers functional products, though it offers a little emotional impact, as the manager respondents have reported. The respondents wished to boost the emotional side of the place. In order to do so, it needs to facilitate the interaction and relation between the consumer and the company somehow. Today, it offers trustworthiness in the product. One way is to increase both the trustworthiness and the emotion towards the Knorr brand, thus facilitating the communication with the consumer. Knorr offers a website for this aim, though a personal relation through telephone support for food related questions would constitute one way of adding an emotional element through the interpersonal relation. Indeed, as Gummesson (1995) argues, the use of relations is of interest and concern for a company that wishes to maintain or re-establish a position. By
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communicating to the consumer and listening to his needs directly, a company may tailor and profile its offer in a more attractive fashion. To this equation, we should add the variables that Unilever/Knorr already has an extensive R&Ddepartment for this aim and that the needs of a company in one country and region needs to be balanced with cost and resource of the corporation as a whole. However, the notion that a communication medium or support function or a similar relation channel is available would increase the value of the brand in the mind of the consumer, even if it is unclear if the consumer would use this available option.
5.3 Perception and Positioning
Under this section we will analyse our case from a perceptional point of view on positining. Following our classical approach, we will continue to analyse our case with the help of tools. Perceptional mapping will be used below, a tool, which enable us to visualise the abstract field of perception.
5.3.1 Positioning map
In the frame of reference we stated in accordance with Peter and Olson (1999) that a positioning map is a visual depiction of consumers’ perceptions of products, brands, or models and that it is constructed by surveying consumers about various product attributes and developing dimensions and a graph indicating the relative position. In this sense, positioning maps can give a company a sense of how their brands and its products are perceived by consumers. The map reveals not only the various brand images but also which products are close to each other and therefore in direct competition, at least in the minds of consumers (Dubois, 2001). Below, we created our own map –
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figure 5.3 –, which results from applying our empirical findings on a positioning map. We found out that especially two dimensions are important when depicting Knorr’s situation on a positioning map. It is the “traditional – modern” spectrum and the “broad segment – narrow segment” spectrum. With traditional we mean that a manufacturer in the food industry focuses on satisfying traditional eating habits (e.g. two-three meals a day at home) and highlighting functional aspect of its products and brands (e.g. nutritional value, health, quality, price, etc.). With modern we mean that new trends in consumption are accommodated (e.g. eating more out-of-home) and the focus lies not only on functional aspects but also on highlighting emotional values (e.g. fun, pleasure and entertainment). Being broad segmented implies in our positioning map that products and brands are targeted to a broad consumer base like for instance to all family members, whereas we mean with narrow segmented that a company have products and/or brands in its portfolio that are targeted to a specific consumer base like for instance to children. In a next step we adapted this positioning map to our case, thus taking the empirical findings about the Knorr brand and its new product concept Soup lollipop into consideration – we depicted this situation in figure 5.3 below. In doing so, we can see that the Knorr brand has a strong position in the minds of the consumers as a traditional brand for the whole family, offering solutions for cooking at home. However, Knorr launched in the past also a range of products that are less traditional, meeting new trends in consumption like for instance eating more out-of-home, eating more snacks, higher demand for convenience products, etc. We exemplified this situation with the Knorr Koppen, a product, which is seen quite modern – according to our definition – and meets the needs
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of all family members: Children can consume it at school, parents at work. In this sense, the Knorr Koppen is quite broad targeted. For Knorr’s new product concept, the Soup lollipop, a much more radical position could be identified. The Soup lollipop is definitely positioned in the minds of the consumers as a product for children between approximately 5-max.12 years old, which implies that it is designed for a much more narrow segment. Furthermore, as the Soup lollipop is a product for children, emotional values have to be added to the functional ones in order to capture children’s attention. Children want to be entertained, they want to have food which is fun, that gives them pleasure. In other words, that is not as boring as conventional products that their parents buy. On the other hand, a manufacturer in the food industry should not forget to take the parents into consideration. It is they who buy the products and also they who raise concern on the trustworthiness of the product. Where a parent knows that the child will be encouraged to take in the recommended daily allowance of nutrition and will enjoy the product at the same time, the manufacturer has succeeded in gaining parental endorsement. In addition, a premium price can be commanded for the additional health or convenience features that the product promotes. On the other hand, children are pleased of having food that is fun and interactive. If managing to gain parental endorsement and children’s attention at the same time, the company has succeeded in creating a win-win situation for both parents and children.
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narrow segment (e.g. individual solutions) Soup lollipop
traditional (eating at home; focus on functional values) Knorr’s heritage Figure 5.3: own creation e.g. Knorr Koppen
modern (meeting new trends; incl. functional and emotional values)
broad segment (e.g. family solutions)
In a more general sense, the consequence a company has to bear in mind is that new product into a new field of perception or at least moving into this direction – last but not least in the minds of its consumers. Hence, a company has to clarify beforehand if it wants to move with one of its brands to another position in the perceptual map. What impact does this have on the brand? Will parts of its traditional consumer base switch to another brand? Does such a move add value to the brand or is it just about shifting volumes to another consumer base? Will the brand perception be blurred when extending the brand? All these questions are important before launching a new product concept under a well-established brand like for instance Knorr.
Analysis
the whole brand with all its associations, image, etc. could possibly follow the
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5.4 Branding
Deriving from our frame of reference, we are now going to analyse the impacts of branding when striving for growth and apply it to our empirical data – which implies the situation of Unilever’s Knorr brand and its product concept “Soup lollipop”.
5.4.1 Brand extension and its associated risks
Although some scholars, like for instance Aaker (1991) and Tauber (1981), argue that brand extensions help maintain brand equity, others, like for instance Sullivan (1990), Kotler (1996), Leong & Ang (1997), but also Aaker (1991), argue that the growth of brand extensions and the marketing efforts backing them may ultimately undermine brand loyalty among consumers. Overextended brands may partly explain why consumers are switching as a group from brandname consumer products to cheaper generic and private-label products. It seems to be clear that if consumers try something new and do not like it, they are likely not to be interested in the other products under that brand name. In the long run, this can dilute and destroy the image and kill the brand equity built over the years. To minimize this risk, a company should make sure before placing new products under an existing brand that the new product shows similar features, is of the same high quality, and evokes the same perceptions as the brand under which it is placed. Thus, brand extensions may be profitable in some cases but can lead to a decrease in brand loyalty in others.
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However, an aspect that in any case has to be taken into consideration within the discussion of brand extension is substitutability or cannibalisation, what it is also called. As already discussed in our frame of reference, in order for brand extension to maximise profits from the firm’s entire portfolio of products, management needs to consider how the use of extension will affect the perceived substitutability of the new product with the other products under the mother brand (Sullivan, 1990). For our case this implies that children maybe consume less ‘normal’6 Knorr products if they have their own products. In the words of Sullivan (1990), this is cannibalisation of market share and would not lead to a higher overall turnover. In the words of a respondent at Knorr, “it would not add value to the market”. Market share would just be shifted from the ‘normal’ Knorr products to the new Knorr products positioned as products for children. Therefore, the Soup lollipop should not be positioned in the soup alternative to other savoury snacks like microwave snacks. In this respect, the Soup lollipop faces on the one hand direct competition from other soups within and outside the Knorr product range, like Knorr Koppen and soup powders (cannibalisation), as well as on the other hand indirect competition from products that are targeted at the same consumption moment, like all snacks or “mellanmåls” available on the market. In more general terms, as we learned from the interviews with managers at Unilever/Knorr, before going into a market with a new product or product concept a manufacturer in the food industry has always to consider if the thing that it is doing is really adding value to the market or if it is just a transformation of volume from one concept to the other. Purely shifting volumes do not add value to the market and the business and only leads to cannibalisation of market shares.
6
with normal we mean all the existing traditional Knorr products 123
Analysis
corner. Customers should see the Soup lollipop as a funnier and healthier
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5.4.2 Putting branding into the context of our case
A company from the size of Unilever can and should of course think about building up and dedicating a brand completely to children. However, if a company builds up a brand exclusively for children then it positions something only for a very limited age segment. When they get older and outgrow from consumption, possible positive perceptions associated with the brand can no longer be used and transmitted to other, not child-like products, as the brand exclusively offers products for children. A company would have to raise a lot of costly marketing effort in order to maintaining its consumers when they grow older, getting them to switch from the brand that is dedicated to children to another brand in the portfolio that offers ‘normal’, non-child-like products. In other words, a company positioning a brand specifically for children looses the effect of building lasting brand awareness and perceptions in the mind of its consumers due to the very limited time span the consumers stay within the brand range. Moreover, building up a new brand that is especially targeted to children is not coherent with Unilever’s strategy of reducing its portfolio to and focusing on 400 strong global brands instead of 1000 fragmented ones. If we now look at the Knorr brand, we can see that so far, all Knorr products were targeted at all customers, but – as Dibb and Simkin (1991) tell us – high growth companies succeed by identifying and meeting the needs of certain kinds of customers, for special kinds of products and service, not all products or all services. Porter (1990) calls this a (focused) differentiation strategy, other business academics call it market segmentation. In the case of Knorr, customer demographics (age) and the product benefits sought (pleasure/fun/entertainment) could be used as the basis for segmenting the market. We tried to depict this situation in figure 5.4 below, using Porter’s model of generic strategies and adapting it to our case. It is quite obvious that the cost leadership strategy –
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according to Porter (1990) – is not an option for Knorr to pursue, mainly due to its brand perception as a high quality producer. The cost leadership position is thus reserved for the unbranded private-label products of the retail, as we also show in figure 5.4.
Increasing pleasure/fun/entertainment element Differentiation / Segmentation by age Common features of all Knorr products, e.g. quality, convenience, image, health
premium Price low
e.g. Knorr Kids Field of private-label products No option for Knorr due to brand perception and brand awareness 0 Age 80
Figure 5.4: Segmenting the Knorr brand according to Porter’s generic strategies, our own creation
Consequently, other strategies have to be pursued when trying to find a strong position in the market and the minds of the consumers. At Knorr, thoughts were made that the consumer knowledge formed in childhood can influence people in later years. Some adults still use the same brands of products their parents purchased for them as children. Thus, some long-lived brands may be purchased and used throughout an adult’s life. According to Peter & Olson (1999), developing early brand awareness and loyalty is an important marketing strategy for many companies. We will develop on and fortify this thought in the next section, and thereafter we close the analysis with the idea of using new product concepts to actively change trends in consumption.
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5.4.2.1 Establishing and maintaining brand loyalty at an early age As already argued in the frame of reference, consumers develop repeat-buying patterns because they learn that particular brands are especially satisfying or because they come to form personal attachments to the brands. This may be because the brand uniquely provides the benefits they seek, fits well into their lifestyle, or its personality (image) matches that of the consumer. This so-called brand loyalty can also stem from the emotional impact the brand has on the consumer or from the way the brand makes the consumer feel about himself (Liesse, 1991; Schlueter, 1992). Sometimes, however, consumers repeatedly buy a brand out of habit or routine problem solving in order to save time and effort (Howard, 1989). Therefore, it is even more important to establish the brand early in life in the consumers mind. One way of achieving commitment to a brand at such an early stage in life is to have products in the portfolio that are specially targeted to children (Foxall and Goldsmith, 1994). These products for children – including the Soup lollipop – could be grouped around what we called exemplary “Knorr Kids” in figure 5.4. However, it has to be questioned whether the aim of capturing children’s attention and building brand awareness at an early stage in life can be reached with products targeted to children as it is normally the parents that are buying the products, often preparing them, and presenting them in a form that is maybe brandless for the children. Moreover, as we reasoned from the interviews with consumers, the food market is very price sensitive/vulnerable, is characterized by low customer commitment and low switching costs, because it is neither very expensive for the customer to change suppliers nor risky. In short, there is limited brand loyalty. One way to strengthen the brand loyalty at an early age can be to cooperate with or license another brand like Asterix, which has high brand recognition among children.
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The problem, which arises here, is to find a cooperation or licensing brand that is well known in whole Europe.
5.4.2.2 Using new product concepts to actively change trends in consumption “We like to have hot drinks and sometimes we have a taste for something spicy; this is a physiological need that we are all familiar with, but hasn't been identified as a habit before. This insight into consumer behaviour has led us to reposition Cup a Soup. Why not make Cup a Soup into a daily habit?” (Antony Burgmans, 2001, CEO Unilever NV)
Analysis
This insight stated by Burgmans (2001), CEO of Unilever NV, could also be adapted to children’s needs when positioning the Soup lollipop as a hot and spicy (daily) drink. However, this is not possible for all tastes, as for instance Swedish consumers quite often demand soups with fruit taste. Their demand could be met if Knorr – that is not in the sweet business – develops together with Unilever’s Lipton brand – that is in the hot and cold tea business – a product, which is perceived as something between a soup and a cup of tea. This would open up the field for Unilever to meet the trend of “cup a soup”. With the help of its brands Knorr and Lipton that together can be used as endorser, consumer habits could maybe more easily be changed in terms of helping consumers to perceive a soup, a cup of soup, or the soup lollipop for children as alternatives to a cup of tea or coffee, both of which are used all day long at home, at work, and at leisure activities. However, blurring the borderline between a soup and a cup of tea or coffee does not only hold great opportunities but can also lead to severe brand dilutions or confusion among consumers. Both, the opportunities inherent
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in the trend of “cup a soup” and the potential risks should be carefully investigated before moving with and positioning a soup business towards the snack or beverage business.
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6
Conclusions
In the conclusion we turn back to our purpose and argue for how we have answered its associated questions. In doing so, we will use and summarise the findings belonging to our three research questions. Moreover, we will put forth relevant suggestions for further research. Some final reflections will then close our thesis.
6.1. Question One
· What does strategic and perceptional positioning imply?
Conclusion
At a first glance, our initial research question seemed to be almost for wide in scope. However, at a second, closer glance the fog lifted and it became clear that this question cannot be answered if only looking from one perspective. This insight led us to use a case in order to be allowed to look from more than only one perspective. The interplay between strategic and perceptional positing can thus be transformed into the interplay between the company and its customers. In this respect, strategic and perceptional positioning implies not only to consider both the company view and the customer view, but also to include the interplay of both entities into the discussion. Earlier, we referred to combining a macro with a micro perspective. This situation is depicted in figure 6.1 below.
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Figure 6.1: our own creation
Macro Strategy Company
Micro
Positioning
Perception Customer
The arcs between both perspectives on positioning visualise that a company has continuously to test its strategies with the customers’ perceptions, adjust them, test them again, and so on. In this sense, parallels to our method, the use of the hermeneutic spiral, can be seen. Whereas in the case of the hermeneutic spiral there is an interplay between the inductive and deductive path, in the case of positioning there is an interplay between a strategic and a perceptional, between a macro and a micro, or between a company and a customer perspective. For a company intending to position a new product or brand in the market and the minds of its customers / consumers, this spiral is a continuous process of trial and error until the strategic thoughts of the company match with the perceptions of potential customers or consumers. It is moreover a spiral – the metaphor be allowed – with long term implications as both perceptions and strategic positions cannot be changed over night. This statement has however be limited for the former: Whereas it takes great efforts for a company to influence slowly the perceptions – and in our case eating habits – of customers or consumers in a desired and advantageous direction, a wrong step could severely damage a hard won position within a short time.
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A wrong step could be for example to launch a new product under an already existing brand when the perceptions of the existing brand do not fit at all with the perceptions the customers or consumers hold about the new product. Another wrong step could be to try to re-position a whole brand without taking into consideration the customer or consumer. Thus, a mere strategic decision without regarding the needs and wants of the customer or consumer can be a dead end in itself. A third wrong step a company could undertake is to position two of its brands or a new brand too close to each other so that the customer cannot see the differences and thus buys one for the other, which in turn is cannibalisation of volume and value. Other wrong steps could be added to this discussion. However, the point we would address here is that a company cannot merely create neat strategies for positioning its brands and products in the market but has always to consider not forgetting to position its brands and products at the same time in the mind of its customers or consumers. Adapted to our case, this problem became quite clear when we conducted when asked about the brand Knorr but communicated severe scepticism or even rejection when asked about how they perceive the Soup lollipop – a new product concept supposed to be launched under Knorr in order to facilitate growth. For Knorr this means that they have to pass through another loop in the hermeneutic trial-and-error spiral, until the ideas of the company match with the perceptions of the consumers. In more general terms, a company should always test and adapt its new product concepts with help of potential customers until their perceptions about the new product concept are as far positive as to be willing to buy and consume the new product. It is not before then a company should dare to launch its new product. Consequently, it is always the consumer who makes the final judge.
Conclusion
interviews with consumers. Generally, consumers hold very positive perceptions
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In order to balance our research questions and therewith also our conclusion, we considered it to be necessary to keep and discuss this first question on a more abstract level. However, the following two research questions were aimed to give not only abstract but also practical answers. Therefore, a tighter connection to our case is made.
6.2 Question Two: Type of Branding
· Which strategy on brand extension is most appropriate when launching a new product under the premise that the new product evokes and stands partly for other perceptions than the already existing (mother) brand? As we discussed in our frame of reference, of the many options of growth available, firms are often tempted to use established brand names to facilitate entering new markets (Aaker and Keller, 1990). Melin (1999) ties up to this discussion and makes a distinction between different kinds of strategies that are available for brand extension, depending on the context in which they are to be implemented in. Finally, at the end of our thesis, after having clarified this context for our case through collecting empirical material and carefully analysing it, we can make a proposition which kind of strategy for brand extension is most likely to be successful for Knorr and its product concept, the Soup lollipop. However, the predicament of Knorr to grow organically or from the inside by leveraging its own assets is not a unique one. Hence, companies and its respective brands that are in a similar position can learn from the way we approached our case and draw their own conclusions tailored to their own situation. However, our task was to have a closer look at Knorr and its product concept, the Soup lollipop. Therefore, we will in the following outline and
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connect Melin’s classification of strategies for brand extension to our case (see figure 6.2).
Mother brand
Mother-daughter brand
Daughter-mother brand
New brand
Not recommended: · Soup lollipop evokes not the same perceptions than other Knorr products · Would influence overall brand perception in a negative way
Knorr’s Soup lollipop: · Focus is on Knorr; Soup lollipop within the range of regular Knorr products
Soup lollipop by Knorr: · Focus is on the Soup lollipop and Knorr is used as an endorser
Options to be investigated in more detail!
Not recommended: · Does not build early brand awareness · Does not use existing brand advantages of Knorr · Too small age range · Very costly
Figure 6.2: Spectrum of Brand Extension , Melin & Urde (1991), p. 108, our own adaptation
From the four possible options Melin (1999) proposed for the launch of a new product, the two extreme ones on the spectrum, namely mother branding and the launch of a new brand seem not to be recommendable options in the case of Knorr and its Soup lollipop due to the following reasons: · The use of mother branding for the launch of the Soup lollipop – implying the positioning of the Soup lollipop as a ‘normal’7 Knorr product – does not really come into question, as the Soup lollipop is not a ‘normal’ Knorr product. In fact, it is a product targeted to a very limited age range (children between 5-12 years of age) with the aim of capturing the children’s attention with a funny product that entertains them, in order to create early brand
7
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awareness. In this sense, the Soup lollipop evokes not the same perceptions than other Knorr products as our empirical inquiry showed to us. Moreover, as the Soup lollipop is not considered to be as legitimate than the other traditional Knorr products, it would probably influence the overall brand perception negatively in the minds of a multitude of consumers, at least as far as we may deduce out of our conducted consumer interviews. · In the other extreme, the use of a new brand for the Soup lollipop is not a recommendable option to be pursued by Knorr either, mainly because of three reasons. First, the aim of building early brand awareness around Knorr among young consumers cannot be pursued at all. Second, and furthermore related to the first reason, the launch of the Soup lollipop under a new brand does not use the available array of advantages, which an already existing brand like for instance Knorr has built up during the years – e.g. brand recognition, image, position in the market and the minds of the consumers, material and immaterial assets, to name but a few. Third, the audience to which the Soup lollipop is directed to seems to be too small an age range to justify the costly introduction of a new brand in the market, above all after the audience will outgrow from the brand after a few years. After having narrowed down the range of recommended options for Knorr in its striving for growth with the help of a new product concept, the Soup lollipop, we will now discuss the remaining two options, namely mother-daughter branding and daughter-mother branding. · If pursuing the former – mother-daughter branding – the Soup lollipop would enjoy a certain independence in relation to the mother brand Knorr. However, as Melin (1999) informs us, this independence is only allowed within the limits of the overall positioning of the mother brand. As Knorr is currently
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positioned as a brand offering convenience products for the whole family, the Soup lollipop does not fall into the overall positioning of Knorr in the strictest sense of the word. However, as Melin (ibid) reminds us, during the implementation of a mother- and daughter strategy, the mother brand serves a pushing or supervising role. Thanks to the solid reputation of Knorr, the introduction of the Soup lollipop would be facilitated. This possibility of launching the Soup lollipop in a time- and cost efficient manner is perhaps the primary advantage of the mother- and daughter brand strategy. · If pursuing the latter – daughter-mother branding –, the focus of positioning would be on the Soup lollipop, whereas Knorr would only have a supporting function and could act as a guarantee or endorser. This would be a typical case of daughter-mother branding, when a company wants to minimise potential negative effects on the mother brand and instead aim to provide the consumer with the feeling that it is a safe product to use. According to Melin (ibid), with the help of this strategy, Knorr could introduce a number of mother brand Knorr. The primary advantage of the daughter-mother strategy is that it would allow a high degree of flexibility for Knorr in the future when considering launching other product concepts. Moreover, this strategy is relatively cost efficient, considering that the market communication builds up both Knorr and the Soup lollipop. However, this implies that Knorr and the Soup lollipop are not too differently positioned from one another. If Knorr succeeds in positioning the Soup lollipop in the minds of its consumers as standing for the same high quality, as being as trustworthy and as convenient as other Knorr products, then this option for growth could work out best as we, the authors, see it after reflecting on the problem of our thesis. Otherwise, the obvious risk is that Knorr and the Soup lollipop are experienced as
Conclusion
brands with different positioning, which are loosely held together by the
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unrelated to another, which in the long run may create a confused image of both brands. Taken together, the conclusions drawn from our case directed us towards an answer for our research question. The strategy of daughter-mother branding can be seen as ‘most appropriate’ – it may us be allowed to use the same words as in our research question – to pursue in the event of the new product evoking and standing partly for other perceptions than the already existing mother brand. However, we are well aware that this statement is mainly valid for our own case. We do not claim universal validity. In answering our third and last research question we will at the same time go back to the introduction of our thesis, in other words to the predicament of Knorr and to the basic problem of growth.
6.3 Question three: Options of growth – the Ansoff matrix
· Which options of internal growth does Knorr have and what are the general implications on growth for an actor in the food industry? In order to answer the twofold character of this question, we will first issue some concerns for Knorr, and thereafter the general implications for any actor in the food industry. We believe, the pun be forgiven, that we are now in a position to share some of the insights and answers, which we have accumulated during our long and arduous journey towards better understanding. If applying some of our thoughts on our case study, we have noted that the following trends have affected the actors of the food industry in their strive towards growth:
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· the threat of the private-label products of retail · the increasing demand for flexible intake of food events and of combining features of convenience, health and pleasure/fun, · the role of children as a group of consumers that needs special attention, and finally, · learning from industry actors has increased in significance. When utilising the Ansoff (1964) matrix of possible options to grow on Knorr, the implication of the trends on our insights concerning growth may look like the depiction in figure 6.3 below, as we have interpreted being the predicament of our case. We will account for our reasoning and the formulation of our answer in the following.
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Model
New
New product market Existing consumer base New product market New consumer base
Product
Knorr
Existing product market Existing consumer base Existing product market New consumer base
New
Soup in a cup Knorr Koppen Family members on the road
SOUP LOLLIPOP CHILDREN
Existing
Market
New
Product
Soup powder Family
?
Existing
Market
New
Figure 6.3: Ansoff (1964) Product-Market Matrix, adapted to our case
As our empirical material illustrated, Knorr holds a very traditional, strong position in the minds of its consumers as being a brand geared towards the needs of the family. Its products are used, utilised and applied in everyday cooking. If we now turn back to Ansoff’s product-market matrix and applying it on our empirical findings, we may draw the conclusion that Knorr has several options to penetrate the market and thus grow. For its soup segment, we outlined possible ways of growth in figure 6.3. Over the decades, Knorr has built up a strong perceptional position in the minds of families as aid in everyday cooking with products like its soup powder. After
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socio-demographical changes, like for instance the trend of both parents going to work, the daily family life has changed, which in turn has resulted in eating less at home and more out-of-home. One of Knorr’s answers and solutions to this change in the trend of consumption was Knorr Koppen, a soup that can easily be prepared and eaten out-of-home, like for instance at work, at school, during leisure activities, etc. If returning to Ansoff, Knorr launched a product that satisfies the changed needs of its existing market with a new product. To answer our question, a possible next step for Knorr would be to extend its soup range into the Ansoff quadrant “new market, new product”. The Soup lollipop would be suitable for this next step as it combines new trends of consumption with a market, thus offering possibilities for Knorr to grow. However, to prevent itself from pure cannibalisation, meaning shifting volume and value from one market to another, Knorr should not position the Soup lollipop as a mere soup. If Knorr wants to achieve a really gain in volume and value, it has to take market share away from other categories. This could be done in positioning the soup lollipop as a snack. At this point, we now turn over to the second dimension of the research question, namely what are the general implications on growth for an actor in the food industry? The aforementioned trends illustrate some concerns on the possibilities of growth. Beginning first with the changing consumption patterns, it might be argued that with moving for instance more towards convenience, alternative cuisines, it may be of importance to follow this move towards these patterns. In other words, if there is a shift among consumers towards more entertainment in conjunction with the meal, it might be of importance to follow the shift of the consumers. As has been previously noted, people are not eating more today. Instead, they are eating different. Actors who do not follow with the changing whims of the consumers may find themselves losing out, since the food industry is a business that does not grow in volume. On the other hand, it
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might be of importance to judge which trends to follow, if there are trends that validate or do not validate the costs of investments, in order to follow with the times. Furthermore, it might be of importance if the consumer’s accept mentally that an actor moves or grows into other quadrants of the Ansoff matrix. Moving on with our general discussion to the private-label brands of the retail, it could be said that the private-labels constitute a limiting influence on the possibilities of growing, if following the arrangement of Ansoff. Since the premises of retail are physically limited in terms of shelf space, there is a restriction on how much space that is available for new or existing products. The introduction of new or developed products is competing with existing and new ones for space in the shelves and market share. In this Darwinian environment, it is necessary to add the private-labels who compete under different conditions, since they are virtually guaranteed support, space and endorsement by the respective retailer. Since volume is not increasing, the incentives to learn and follow the ideas of other actors in the industry have been raised. An appealing idea for a new or developed product concept might quickly win the approval of the consumer, which in turn is translated into market share, before other actors dig in to the concept. The cultivation of the bonds of knowledge between consumer and manufacturers might provide the time frame to come up with the new product concept and reap the fruits of the concept investment. On the other hand, this needs to be balanced against the risk of the trend being too narrow or fragile in order to sustain the weight of the investments. It might be more prudent to follow what others are doing to meet the consumption patterns and preferences and then react to the successful concepts.
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Arrived at this point, our final contribution to the discussion about positioning, branding, and growth is to suggest the reader possible ways to continue with the journey where we ended. In this spirit, we created chapter 6.4.
6.4 Suggestions For Further Research
As our thesis is not a dead end in itself, we want to open the field of research we conducted and put forth some suggestions for further research for all readers that are interesting in digging deeper into areas of interest. These are in accordance with the main subjects of our own research questions – positioning, branding, and growth – in order to alleviate seeing the relatedness to them. Out of our research question one we can deduce a hypothesis for further research: · It is only when there is a match between strategic positioning and perceptional positioning that an effective, overall positioning may take place. Out of our research question two we can deduce following suggestion for further research: · How far can a brand be extended under the respective strategies of mother branding, mother-daughter branding, and daughter-mother branding without severely damaging, diluting or blurring the overall brand perception? Last but not least, the below formulated suggestion could need to shed some light on:
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· Can an actor in the food industry survive in the long run if not striving for growth?
6.5 Concluding Reflections
Finally, by closing our journey, we, the authors, would like to put forth a few reflections on our thesis in order to avoid misunderstandings or a mismatch between our ambition and self-conception and the readers’ appraisal on our thesis. We, the authors, are well aware that we have mainly used a case for illustrating our research questions. Moreover, we are aware that each case has its own particularities, oddities and virtues. Hence, neither all conclusions drawn from our case are universally valid nor do we claim this. However, what we did have in mind is to show a way at looking at our problem from a scientific point of view, using existing theories and adapting them to a case. In respect thereof, maybe the most valuable contribution we could make to scientific research is to provide scholars and practitioners with a kind of handbook in the case of being involved in similar situations, dedicated to related questions, and striving for answers like our case company. …and always have in mind when trying to build own thoughts on existing ground8: “Every act of creation is first of all an act of destruction” (Pablo Picasso, 1881-1973, Spanish artist)
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Afterword
Having concluded our formal discussion on growth, positioning and branding, it is appropriate that we now turned over to the practical implications of our thesis for the case company, and thus discuss some informal aspects of our work. Through our interviews, and the way we processed, analysed and commented on the views of the consumers, as well as through our own knowledge and experience, we put forward some items that our case company needed to respond to. Without damaging or corrupting the wishes of confidentiality, we can nonetheless state that the case company has taken measures to respect to the concerns of the consumers, as a part of its overall growth strategy. Our work has indeed provided some valuable input, according to our company respondents. Or to use a pun, our work has provided them with some refreshing food for thought.
8
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7
List of References
Primary Sources
Respondents at Unilever/Knorr interviewed between 2 December – 9 December Andersson, N., Nordic Brand Manager Knorr Blach, H., Nordic Marketing Manager Camele, P., Director Food Service, Nilsson, L., Nordic Marketing Director, 22 Consumer Respondents interviewed between 26 November – 10 December
Secondary Sources
Books Aaker, D.A. (1991), Managing Brand Equity – Capitalizing on the Value of a Brand Name, The Free Press, New York. Alvesson, M. & Sköldberg, K. (1994), Tolkning och reflektion, Studentlitteratur, Lund. Arbnor, I. & Bjerke, B. (1994), Företagsekonomisk metodlära, andra upplagan, Studentlitteratur, Lund. Baker, M. J. (2000), Marketing Strategy and Management, Macmillan Press Ltd, London. Bengtsson, L. & Skärvad, P.-H. (1991), Företagsstrategiska perspektiv, Studentlitteratur, Lund.
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Busch, P.S. and M.J. Houston (1985), Marketing Strategic Foundations, Homewood, IL, Richard D. Irwin. Chisnall, P.M. (1992), Marketing Research, Fourth Edition, McGraw-Hill, London. Dotevall, B. (1997), Modern marknadsföring, SNS Förlag, Stockholm. Dubois, Bernard (2000), Understanding the Consumer, Pearson Education Ltd, Essex. Eriksson, L. T. & Wiedersheim-Paul, F. (1997), Att utreda, forska och rapportera, Liber Ekonomi, Malmö. Foxall, G.R. & Goldsmith, R.E. (1994), Consumer Psychology for Marketing, Routledge, London. Howard, J.A. (1989), Consumer Behaviour in Marketing Strategy, Prentice-Hall, Englewood Cliffs. Gummesson, E. (1995), Relationsmarknadsföring: Från 4P till 30R, Liber Hermods, Malmö. Hammarkvist, K.O., Håkansson, H., & Mattsson, L.G. (1982), Marknadsföring för konkurrenskraft, Liber-Hermods, Malmö. Hayek, F.A. (1948), The Meaning of Competition: In This Individualism and Economic Order, Chicago, Chicago University Press. Håkansson, H., Laage-Hellman, J., Lundgren, A., & Waluszewski, A. (1993), Teknikutveckling i företaget – ett nätverksperspektiv, Studentlitteratur, Lund. Kapferer, J-N. (1994), Strategic Brand Management- New Approaches to Creating and Evaluating Brand Equity, The Free Press, New York. Kvale, S. (1997), Den kvalitativa forskningsintervjun, Studentlitteratur, Lund.
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Kotler, P. (1996), Principles of Marketing, The European edition. Prentice Hall Europe, Glasgow. Lekvall, P. & Wahlbin, C., (1993), Information för marknadsföringsbeslut, IHM, Göteborg. Lundahl, U. & Skärvad, P-H. (1982), Utredningsmetodik för samhällsvetare och ekonomer, Studentlitteratur, Lund. Maslow, A. (1954), Motivation and Personality, Harper, New York. Melin, F. (1999), Varumärkesstrategi – Om konsten att utveckla starka varumärken, Liber Ekonomi, Malmö. Melin, F. & Urde, M. (1990), Varumärket – en hotad tillgång, Liber Ekonomi, Malmö Merriam, S. (1994), Fallstudien som forskningsmetod, Josey-Bass, San Francisco. Molander, B. (1993), Vetenskapsfilosofi, Bokförlaget Thales, Falun. Patel, R. & Davidson, B. (1994), Förskningsmetodikens grunder, Studentlitteratur, Lund. Peter, P. & Olson, J.C. (1999), Consumer Behaviour and Marketing Strategy, Irwin, McGraw-Hill, New York. Porter, M.E. (1990), The Competitive Advantage of Nations, Free Press, New York Porter, M.E. (1990) ”Competitive Advantage: Creating and Sustaining Superior Performance” as featured in de Wit, B. & Meyer, R. (1999), Strategy: Process, Content, Context: An International Perspective, International Thompson Business Press, London Ries, A. & Trout, J. (1982), Positioning: The Battle for your Mind, McGraw-Hill, New York.
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Sjöström, R. (1996), Positionering under strategisk osäkerhet: en studie av positionering i en ny branch, Linköping Studies in Management and Economics; Dissertations No. 30, Ekonomiska Institutionen Linköpings Tekniska Högskola, Linköping. Starrin, B. & Svensson, P-G (1994), Kunskapsteori och vetenskapsteori, Studentlitteratur, Lund. Whittington, R. ( 2001), What is strategy - and does it matter?, Thomson Learning, London. De Wit, B. & Meyer, R (1999), Strategy: Process, Content, Context: An International Perspective, International Thompson Business Press, London. Yin, R.K. (1994), Case Study Research Design and Methods, Sage Publishing, Thousand Oaks.
Articles Aaker, D.A. & Keller, K.L. (1990), “Consumer Evaluations of Brand Extensions”, Journal of Marketing, Vol. 54, pp.27-41 Allison, R.I. & Uhl, K.P. (1964), “Influence of Beer Identification on Taste Perception”, Journal of Marketing Research, August 1964, pp. 36-9. Barney, J.B. (1991). “Firm Resources and Sustained Competitive Advantage”, Journal of Management (17): 99-120. Brooksbank, R. (1994), “The Anatomy of Marketing Positioning Strategy”, Marketing Intelligence & Planning, Vol. 12 No. 4, pp. 10-14. Calderon, H., Cervera, A. & Molla, A. (1997), “Brand assessment: a key element of marketing Strategy”, Journal of Product and Brand Management, Vol. 6 Number 5, pp. 293-304.
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Dibb, S. & Simkin, L. (1991) “Targeting, Segments and Positioning”, International Journal of Retail & Distribution Management, Vol. 19 No. 3, p. 4-10 Karger, T. (1981), “Analyze existing product’s values when researching brand extensions”, Marketing News, Vol. 23, p.1-4. Klein, B. & Leffler, K.B. (1981), “The role of market forces in assuring contractual Performance”, Journal of Political Economy, Vol. 89, p.615-41. Liesse, J. (1991), “Brands in trouble”, Advertising Age, December 2, 16.
Mahoney, J.T. & Pandian, J.R. (1992), “The Resource Based View within the Conversation of Strategic Management”, Strategic Management Journal, 13:363-380.
Prahalad, C.K., Doz, Y.L. & Hamel, G. (1989) ”Collaborate with Your Competitors and Win”, Harvard Business Review, Jan-Feb, Boston.
Prahalad, C.K., & Hamel, G. (1990)”The Core Competence of the Corporation”, Harvard Business Review, May June, Boston. Puth, G., Mostard, P. & Ewing, M. (1999), “Consumer perceptions of mentioned product and brand attributes in magazine advertising”, The Journal of Product and Brand Management, Vol. 8 Number 1, pp. 38-50. Quelch, J.A. & Kenny, D. (1994), “Extend Profits, Not Product Lines”, in Harvard Business Review on Brand Management, 1999, Harvard Business School Press, Boston. Schlueter, S. (1992), “Get to the ‘essence’ of a brand relationship”, Marketing News, January 20, 4. Sullivan, M. (1990), “Measuring Image Spillovers in Umbrella-branded Products”, Journal of Business, Vol. 63 No. 3.
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Tauber, E.M. (1981), “Brand franchise extension: New product benefits from existing brand Names”, Business Horizons, Vol. 24, p.36-51. Tauber, E.M. (1988), “Brand leverage: Strategy for growth in a cost-control world”, Journal of Advertising Research, Vol. 28, p.26-30. Tongberg, R. (1981), “Brand leveraging: One way to deal with diminishing marketing in the 1980s”, Marketing News, Vol. 9, p.4. Wernerfelt, B. (1988), “Umbrella branding as a signal of new product quality”, Rand Journal of Economics, Vol. 19, p.458-66.
Internet sources Affärsvärlden, www.afv.se, “van der Bergh Foods: EU godkänner sammanslagning“, (2000-09-28), 2000-12-19. British Broadcasting Corporation, www.bbc.co.uk, “Unilever: A company history”, (2000-02-22), found also under newssearch.bbc.co.uk/low/English, 2001-12-23. Dagens Industri, www.di.se, “Amerikanska Campbell Soup köper Blå Band” (2001-04-04), 2001-12-20 ”Unilever säger upp 8000” (2001-04-27), 2001-12-20 ”Unilever delar på livs och hygien” (2000-08-05), 2001-12-20 Knorr, www.knorr.com, 2001-11-10 Unilever, www.unilever.com, 2001-11-10
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Figures
Figure 1.1: Product-market Matrix, Ansoff, I. (1964) Figure 3.3: The Five Forces of Competition, Porter, M. (1990). Figure 3.4: Three Generic Strategies, Porter, M. (1990) in de Wit and Meyer (1999) Figure 3:6 Positioning for exclusive hotels in Stockholm, as featured in Dotevall (1997). Figure 3.8: Spectrum of Brand Extension, Melin, F. & Urde (1991).
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Appendix
Empirical
A) - Frågeformulär till konsumenter
Hej, vi är två studenter från Linköpings Universitet. Vi håller på en enkät om mat och matvanor. Vi tänkte ställa några frågor om livsmedel. Frågorna tar ungefär 5-10 minuter att svara på. Det hela kommer att behandlas anonymt. Vill ni ställa upp?
Del 1 – Allmänna frågor 1. Hur ofta köper ni färdiga måltider? Med färdiga måltider menar vi alltifrån t.ex. djupfrysta måltider som man kan värma upp i mikrovågsugnen, soppa och nudlar man kan koka upp vatten till, eller pizzor man kan köpa i affär? 2. Vilka av dessa typer av färdiga måltider använder ni? 3. Vi tänkte ställa lite fler frågor om soppa. Vi börjar med att fråga, ser ni soppan som alternativ till övriga färdiga måltider? 4. Vilka andra produkter ser ni soppa som alternativ? 5. Hur ofta äter ni soppa? (Precisering: 1-2 ggr i mån, 1-2 ggr i veckan, oftare) 6. När på dagen brukar ni då äta soppa? 7. Vilka smaker är mest populära i er familj? 8. Kan ni tänka er att äta soppa istället för annan mat? Varför? 9. Lagar ni soppan själv eller använder ni förpackningar?
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10. Vilka sopptillverkare känner ni till? (Bob, Bong, Blå Band, Campbell, Ekströms, Felix Findus, Semper, Knorr) 11. Vilka märken använder ni? 12. Varför köper ni just de märkena? (Billig, Bra kvalité, Lätt att tillaga, Vana) 13. Hur skulle ni rangordna följande egenskaper om soppa. Är det till exempel viktigt, mindre viktigt eller oviktig att soppan är nyttig…. smakar bra…. är lätt att tillaga… …är billig … ser aptitlig ut … att förpackningen är attraktiv?
Del 2 – Frågor om Knorr (behandlar perceptional positioning och brand) Inledning, Vår undersökning behandlar Knorr och dess produkter mer ingående. Vi tänkte ställa några frågor om detta. 1. Vilka produkter känner till från Knorr (lista upp, vi hjälper till vid tveksamhet) 2. Vilka av följande produkter från Knorr använder ni? 3. Vad anser ni om Knorrs produkter? 4. Vad tycker ni om priset på deras produkter? 5. Stämmer priset på produkterna med produkternas kvalité? 6. Hur är Knorrs priser jämfört med konkurrenternas? 7. Äter era barn produkter från Knorr?
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8. Är det några produkter som barnen hjälper till med att tillaga om de vill (Vilka?)
Del 3 – Knorr’s Soup lollipop Knorr tänker introducera en ny produkt på marknaden. Det är tänkt att tillagningen ska vara enkel med den nya produkten. Istället för samlad i en förpackning finns soppan försluten på toppen av en pinne, likt en klubba. För att tillaga soppan behöver man bara koka upp vatten och sedan doppa i pinnen. Till och med barn ska kunna använda sig av produkten med hjälp av föräldrar, eller ensamt om barnet är tillräckligt moget. 1. Tycker du att det är en intressant produkt? 2. Skulle ert/era barn tycka att det är en intressant produkt? 3. Skulle du kunna tänka dig använda denna produkt? 4. Skulle ert/era barn tänka sig att använda denna produkt? 5. För vilken åldersgrupp tror ni att produkten kan vara intressant? (Skulle till exempel en 13-åring tycka att produkten är barnslig?) 6. Vilka smaker skulle era barn tycka om? (tomatcremesoppa, kycklingsoppa, primörsoppa, ärtsoppa, blomkåls och broccolisoppa, potatis och purjolökssoppa) 7. Vad tycker du är ett lagom pris för en portion? Jämför gärna med andra produkter, till exempel snabbnudlar? 8. Kan ni tänka er att ert barn kan vara med och laga produkten? 9. Vilka fördelar ser ni i denna produkt? (nyttig, inte så tung mat, mindre fett/salt eller socker jämfört med annan mat, ett bra sätt att motivera barn till att äta soppa, roligare än andra soppor/kvällsmåltider, barn har valfrihet, …)
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10. Vilka nackdelar ser ni i denna produkt? (klumpar vid tillagning, godis/tuggumi till klubba minskar nyttighetsintrycket,…) 11. Skulle denna produkt påverka er uppfattning om Knorr?
Tack för ert samarbete. Vi kommer som sagt att behandla svaren anonymt.
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B) - Questionnaire Unilever
Hello, we are two students from Linköping University of Sweden. We are currently writing our Master Thesis in cooperation with Unilever Bestfoods Nordic/Helsingborg. Our contact person at Unilever is Patrick Camele, Director Food Service. Among other things, our thesis investigates the new product concept ”Soup lollipop”, which is supposed to be launched under the existing brand ”Knorr”. Our focus will be on positioning, both strategically and perceptionally, as well as relevant aspects of branding. For a better understanding of the view of the company we would like to ask you the following questions: Please answer the questions in short statements. The answers will be treated anonymously and confidential. Please send back the answers no later than Dec. 12 to the following addresses: [email protected] or [email protected] We will make follow up interviews either in person or via telephone. Thank you for answering
Part 1 – General Questions 1. How would you describe the situation in the food industry today? How will it look like tomorrow? 2. 3. 4. What are you planning to do to meet the situation of tomorrow? Why did you choose to grow into the children segment? What possibilities do you see as alternatives to enter the child segment? How realistic are these possibilities for Knorr? What are the most promising ones? 5. What is the role of the brand name Knorr when growing into the child food segment?
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6.
Which role does the consumer play when developing a new product? For example, do you investigate customers’ wishes, preferences and attitudes toward an imaginary product concept before developing a new product?
7.
Which (product-)attributes do you prioritise when developing a new product? And which ones did you prioritise when developing the Soup lollipop? Why?
8.
How would you rank following attitudes/properties of soup. Is it for example important, less important or unimportant that soup - is nutritious - tastes good - is easy to prepare - is cheap - looks appetizing/delicious - that packaging is attractive?
9.
Which factors influence your decision to set a price? (costs of production, customer surveys, price of competitors, positioning as premium brand allows higher prices,…) Which factor is the most important one?
Part 2 – Knorr level 1. What does the brand Knorr stand for? 2. In which segments is Knorr represented? 3. Which are your competitors in these segments? 4. What do you think are the strength and weaknesses of Knorr? 5. What do you think are the strength and weaknesses of your competitors? 6. What do you think are the opportunities and threats in the markets Knorr are in?
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7. Which factors/thoughts influenced your decision to open the brand Knorr for all age segments / to extend the brand Knorr into specific age segments?
Part 3 – Product concept level / Soup lollipop level Soup-lollipop is a dehydrated and compressed soup attached to a stick. The stick has a playing or a collection element. You boil water in a cup, put the stick into the water and the soup releases from the stick. The soup will be available in several varieties. On a soup day each member of the family can choose his taste. The compressed soup will have natural colours like tomato-red, broccoli-green etc. 1. Why did you come up with soup-lollipop to enter the children segment? Why not another product? Why not other options? 2. Which ambitions do you have with the Soup lollipop? 3. Which products do you want to compete with? 4. Which advantages do you see in the Soup lollipop? - nutritious - not so heavy meal - less fat, salt or sugar in comparison to other food / savoury snacks - a good way to motivate children to eat soup - funnier than other soups / savoury snacks - children have freedom to choose their own flavour... -… -… - ... 5. Which disadvantages do you see in the Soup lollipop? - Lumps when preparing - Candy/chewing gum in the handle reduces nutritious aspects
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-… -… 6. Does the new product stand for the same image as Knorr does? 7. Do you think that the new product will influence the consumer’s perception of Knorr as a brand? In which way?
Additional comments:
Thank you for answering these questions. You answers will be treated anonymously.
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doc_489355177.pdf
In marketing, positioning is the process by which marketers try to create an image or identity in the minds of their target market for its product, brand, or organization.
Linköping University Autumn Term 2001 Master Thesis
Bread and Entertainment – A Case Study of Positioning for Growth in the Food Industry
Authors:
Haralampos Karatzas Jens Löfflath
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Avdelning, Institution Division, Department
Datum Date 2002-01-11
Ekonomiska Institutionen 581 83 LINKÖPING
Språk Language Svenska/Swedish X Engelska/English Rapporttyp Report category Licentiatavhandling Examensarbete C-uppsats X D-uppsats Övrig rapport ____ ISBN ISRN Internationella ekonomprogrammet 2002/27 Serietitel och serienummer Title of series, numbering ISSN
URL för elektronisk versionhttp://www.ep.liu.se/exjobb/eki/2002/iep/027/ Titel Title Bröd och skådespel – En fallstudie om tillväxtspositionering inom livsmedelsbranschen Bread and Entertainment – A Case Study of Positioning for Growth in the Food Industry Författare Author Haralampos Karatzas and Jens Löfflath
Sammanfattning/Abstract Bakgrund: Tillväxt är ofta ett nödvändigt ändamål för en organisation när marginalerna krymper, konkurrensen hårdnar och aktiemarknadens krav ständigt höjs. För att kunna överleva är org. tvunget att söka vägar för att nå sina tillväxtmål. Översatt till ett praktiskt plan, måste företaget syna sina marknader och produkter för att ta kunna formulera strategier i syfte att växa. Positionering och varumärken är användbara verktyg i strävan för att uppnå tillväxt. I denna uppsats har vi undersökt dessa tillväxtmöjligheter med hjälp av ett fall taget ur verkligheten. Syfte: Uppsatsens syfte är att beskriva och undersöka positionering och användningen av varumärken när ett företag strävar efter tillväxt. Avgränsningar: Vi kommer inte att behandla de juridiska konsekvenserna av tillväxt. Genomförande: För att uppnå en täckande bild av hur strategi, perception och varumärken interagerar i relation till företag och konsumenter, har vi genomfört intervjuer bland annat. Resultat: I vår undersökning fann vi att konsumenternas perception och preferenser är av betydelse för aktörer inom livsmedelsbranschen. Däremot balanseras konsumenternas önskemål mot företagets krav på hög kostnadseffektivitet och gynnsam produktutveckling. Balansen mellan konsumenternas önskemål och företagens krav påverkar hur tillväxtstrategier formuleras. Nyckelord/Keyword Jörgen Ljung, perception, strategi, positionering, varumärke, tillväxt, livsmedelsbranschen
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Avdelning, Institution Division, Department
Datum Date 2002-01-11
Ekonomiska Institutionen 581 83 LINKÖPING
Språk Language Svenska/Swedish X Engelska/English Rapporttyp Report category Licentiatavhandling Examensarbete C-uppsats X D-uppsats Övrig rapport ____ ISBN ISRN Internationella ekonomprogrammet 2002/27 Serietitel och serienummer Title of series, numbering ISSN
URL för elektronisk versionhttp://www.ep.liu.se/exjobb/eki/2002/iep/027/ Titel Title Bread and Entertainment – A Case Study of Positioning for Growth in the Food Industry
Författare Author
Haralampos Karatzas and Jens Löfflath
Abstract Background: In the face of toughening competition, diminishing profitability and increasing shareholder demands, growth is often seen as a necessary means for an organisation if it wishes to survive. In order to do so, the company is often forced to seek out novel ways by which it may achieve the ambition of growing. If put on a practical level, a company has, among other things, to look at its markets and products in order to find out possible strategies of growing. In this thesis, we have investigated these aforementioned concerns on a real case. Purpose: Our purpose is to describe and to explore positioning and branding when a company takes into consideration to enter a market with a new product. Scope: We will not investigate the legal implications of growing. Realisation: In order to achieve a comprehensive picture and understanding of how strategy, perception and branding interact in relation to a company and its consumers, we conducted interviews with 22 consumers and 4 managers. Conclusion: From our inquiry we found out that the preferences and perceptions of the consumers are significant for actors in the food ind. These are balanced with a company’s concerns regarding product development and cost efficiency. The balance betw. the consumer’s wishes and the company’s options influence the way growth strategies are formulated. Keyword Jörgen Ljung, perception, strategi, positionering, varumärke, tillväxt, livsmedelsbranschen
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Foreword
Ernest Hemingway once spoke of ‘grace under pressure’ as a defining quality of humanity during times of duress and panic. Sometimes one might wonder, maybe he should have spoken of ‘restraint under pressure’ instead. During the ten weeks which produced this bundle of papers, there have been many occasions in which it has been tempting to cross that invisible line that separates hopeful humanity and inhuman despair: uncooperative computers, absentee books and articles, freak turns of fate and an ever-closing deadline have all contributed in accentuating the pressure under which we, the humble authors, have laboured under. The stern exercise of restraint is what has saved this paper and what has held us back to our humanity. All our efforts towards restraint and regiment would have been exhausted and to no avail, were it not for the support and encouragement we have met along the path towards the completion of this thesis. We would like to extend our deep and sincere gratitude to Jörgen Ljung, our supervisor who saw us through and helped us reach answers to our many questions. Furthermore, we would like to thank the people at EKI: all are remembered, none is forgotten. Moreover, we would like to display our appreciation to the Key-house Crew – you know who you are! – for being there. Last, but certainly not least, we would to thank Patrick Camele and Joost Otterloo at Knorr/ Bestfoods, for giving us the opportunity to apply our knowledge in a case, and to all the respondents at Unilever, Leif Nilsson, Henrik Blach, Niklas Andersson, who contributed with their valuable time. Taken together, these random acts of kindness have alleviated our burden. They have re-fuelled our ambition and have performed small miracles on our motivation. In times of pressure, they have bestowed us with grace. For this, we are eternally in debt, Haralampos Karatzas Jens Löfflath Linköping University, 2 January 2002
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Table of Contents 1 Introduction………………………………………………………………
1.1 Background……………………………………………………….. 1.2 Discussion of Problem……………………………………………. 1.3 Purpose……………………………………………………………. 1.4 Scope……………………………………………………………… 1.5. Target Audience.…………………………………………………. 1.6 Disposition………………………………………………………… 1 1 4 8 8 8 9
2 Method……………………………………………………………………...
2.1 Science, What Is It?………………………………………………… 2.2 From which Room Do We View Reality?…………………………. 2.3 View on Method……………………………………………………. 2.4 Our Methodological Approach and Working Paradigm…………… 2.5 Interview Methods…………………………………………………. 2.6 Course of Action…………………………………………………… 2.6.1 Pre-Study………………………………………………… 2.6.2 Literature Study…………………………………………. 2.6.3 Empirical Study………………………………………….. 2.6.4 Analysis………………………………………………….. 2.7 Problems, Criticism, and Reflections Related to the Chosen Course of Action……………………………………………………
10 10 12 16 18 22 25 25 26 27 28 29
3 Frame of Reference…………………………………………………………
3.1 Introduction, why read this chapter…………………………………. 3.2 Perspectives on Strategy……………………………………………. 3.2.1 Strategy and Position…………………………………….. 3.4 Perceptional Positioning……………………………………………. 3.4.1. Why Perception Matters…………………………………
33 33 34 36 47 48
3.3 From Strategic Positioning to Perceptional Positioning via Marketing 41
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3.4.2. Creating a Position in the Mind of the Consumer………... 3.4.2.1. Five Dimensions of Positioning a Product in the Mind of the Consumer…….…..………….. 3.4.3. Brand Image and Perceptional Maps…………………….. 3.5 Branding……………………………………………………………... 3.5.1 Branding as a Means to Connect Strategic Positioning with Perceptional Positioning……………………………… 3.5.2 The Brand and its Context………………………………… 3.5.3 Brand Extension…………………………………………… 3.5.4 Risks Involved with Brand Extension………………………
49 50 52 55 56 56 60 65
4 Empirical Study…………………………………………………………….
4.1 The Empirical Context……………………………………………… 4.2 Presentation of Primary Data……………………………………….. 4.2.1 Food Industry and Trends in Consumption………………. 4.2.2 Unilever and Its Knorr Brand……………………………. 4.2.3 Product Level and Soup lollipop…………………………. 4.2.4 Interplay Between Brand (Knorr) and Product (Soup lollipop) Level………………………………………
68 68 71 72 78 91 103
5 Analysis……………………………………………………………………..
5.1 Strategy and Positioning……………………………………………. 5.1.1 New Industry Trends in the Light of Porter’s Five Forces of Competition………………………………. 5.1.2 SWOT-Analysis……………………………………………. 5.2 From Strategy to Perception via Bonds and Relationships………….. 5.3 Perception and Positioning…………………………………………... 5.3.1 Positioning Map…………………………………………… 5.4 Branding………………………………………………………………
107 108 108 111 115 118 118 122
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5.4.1 Branding and Its Associated Risks in its Context………….. 5.4.2 Putting Branding into the Context of Our Case…………… 5.4.2.1 Establishing and Maintaining Brand Loyalty at an Early Age…..……………………………….. 5.4.2.2 Using New Product Concepts to Actively Change Trends in Consumption………………….
122 123 126 127
6 Conclusions…………………………………………………………………..
129
6.1 Question One.………………………………………………………… 129 6.2 Question Two: Type of Branding…………………………………….. 132 6.3 Question Three: Options of Growth…….……………………………. 136 6.4 Suggestions for Further Research.…………………………………….. 141 6.5 Concluding Reflections………………………………………………… 142
7 List of References
Appendix A) Frågeformulär till konsumenter B) Questionnaire Unilever
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1
Introduction
The first chapter puts forward our background of our study. Furthermore, this chapter brings also forth the connected problem questions of the study, which in turn lead us on to our formulated purpose, and to our minute items of concern as well.
1.1 Background
“Every act of creation is first of all an act of destruction” (Pablo Picasso, 1881-1973, Spanish artist) In the face of toughening competition, diminishing profitability and increasing shareholder demands, growth is often seen as a necessary means or goal for an organisation if it wishes to survive. In order to do so, and in order to defend and increase, for instance, the vital items of position and share of market, the company is often forced to seek out novel ways by which it may achieve the ambition of growing. In other words, it needs to mentally break down and analyse the activities it does today, so that it may track, keep, drop, co-ordinate and/or create the activities it wishes to pursue, so as to remain competitive and viable tomorrow. Basically, when things are broken down, there are two main courses of action a company may follow in its desire to grow, namely the mechanistic path and the organic path (Bengtsson, L. & Skärvad, P-H., 1991). The mechanistic path, on
Introduction
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the one hand, involves all kinds of integration activities in which a company associates itself with actors from the outside, either on a vertical, horizontal or a lateral level, in the value chain or outside it. The organic path, on the other hand, is based on a company leveraging its own resources, assets and capabilities, whereby the company grows from the inside. Most often, innovation - the development of new products or services - and/or internationalisation - the movement into other markets - are two options the company often considers when choosing to employ its own internal strengths for growth (Whittington, 2001). The situation that we described above is a strategic one, since it is related to the long-term viability of a firm. If put on a practical level, a company has, among other things, to look at its markets and products in order to find out possible strategies of growing. In this sense, the situation is also related to marketing, since it typically brings up aspects of positioning products in markets and industries. Related to the previous discussion, Ansoff (1965) has developed a useful matrix, reproduced as Figure 1.1, for identifying the basic alternative strategies that are open to the firm in its quest for growth. The alternative strategies are defined as follows:
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Product Present New
Present Market New
1
3
2
4
1. Market penetration: the company seeks increased sales for its
present products
2. Market development: the company seeks increased sales by taking its present products into new markets. 3. Product development: the company seeks increased sales by developing improved products for its present markets. 4. Diversification: the company seeks increased sales by developing new products for entering new markets. Figure 1.1: Ansoff (1964) Product-Market
The strategic possibilities and the marketing practices available for growth, illustrated through for example Ansoff (1965), do not come without their inherent risks. As Aaker & Keller (1990) point out, the risks of for example, entering new markets or developing new products have become formidable, in part because of the dramatic increase in media costs, the more extensive and aggressive use of promotions by established firms, and the cost and difficulty of obtaining distribution. As a result, firms are using established brands to facilitate and reduce the costs of entering/developing (new) markets and/or launching/developing (new) products. The logic goes that it might be easier for the consumer to accept a new product if it is somehow associated with a well-
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known brand, to which the company has the access to and through which the company communicates what it has to offer the customer (Melin, 1999). As indicated, the use of a brand in this context is a question of positioning, both in the strategic sense and in the eyes of the consumer. A brand can, so to speak, be used as a means of positioning products in markets (Kotler, 1996). Additionally, as Porter reminds us (1990), a brand can be used as a barrier of entry but also as a way of gaining entry to a market. In this respect, a brand may be used by a company to establish a position relative to its competitors and their offerings. Hence, the bond and the communication to the customer - through the use of a brand - may prove to be crucial in this competitive strive, since it frequently is the consumer who determines the survival of the company in the end.
1.2 Discussion of Problem
Several aspects need to be considered in the situation of entering/developing a (new) market with a new/developed product, in the pursuit for growth. It is not merely a marketing decision but also a strategic one, since the effects of the entrance reverberate to the company as a whole, in the form of for instance a tarnished brand name or a weakened position relative to its competitors. Thus, when developing a new concept for positioning a new/developed product in a new/existing market, the company needs to consider how it positions itself in that market. It needs somehow to balance its own position with the position of its product(s). In other words, the company needs to take into account both the strategic aspects of positioning and the aspects of positioning the product in the mind of the
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customer. In the following, we refer to the former as strategic positioning and to the latter as perceptional positioning. Hence, it might seem as a balancing act between a macro-level view and a micro-level one. To find this balance is the predicament of Knorr, a brand within Unilever, by which we will illustrate the problem of growth, positioning, and branding. In the summer of 2000, the consumer goods giant Unilever bought and integrated for $ 27 billion Bestfoods, a consumer foods company with a portfolio of attractive brands, which included the already mentioned Knorr, but also Skippy and Hellmann’s, among others. This huge investment is now expected to yield fruit, which is why the financial market puts extreme pressure on Unilever to grow. In other words, the financial market expects after the external growth phase through the acquisition of Bestfoods a phase of internal growth: ”Det företag som Knorr tillhörde – Bestfoods – köptes upp av Unilever för ett halvår sen för extremt mycket pengar – 27 miljarder dollar! De pengarna… ska ge resultat… Finansmarkanden ställer väldigt höga krav på oss som företag att växa […] för att kunna växa så måste vi lansera nya produkter. Det finns väldigt höga krav på företaget som sådant att växa och där spelar Knorr en väldigt stor roll.” (Niklas Andersson, Nordic Brand Manager Knorr)
This emphasis on growing is further accentuated due to the fact of Unilever being forced to sell or divest local food companies it already owned or had a stake in, as for instance Blå Band in Sweden, due to competitive restrictions imposed by the EU. However, in order to grow from the inside it is necessary, as argued through Ansoff, to develop existing products or innovate and launch new ones in new or existing markets. Unilever tries to meet this challenge with its
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“Path to Growth” strategy, which the CEO(s) of the company made publicly known to the investors in March 2001.
“Our products are bought by consumers 150 million times a day currently spread over nearly 1000 brands. However, part of our 'Path to Growth' strategy, by which we aim to achieve an annual top line growth of 5-6% and operating margins of over 16%, is to reduce this number to 400 leading brands.” (Antony Burgmans, 2001, CEO Unilever NV)
The CEO of Unilever PLC, Nial FitzGerald (2001), mentions that Unilever currently attempts to focus on a smaller number of powerful brands. This will implies that, instead of trying to pursue growth through four or five brands in a particular category, Unilever will focus on one or two - the ones that already have strong consumer appeal and real potential for future growth. Instead of fragmenting resources they are able to invest in significant brand development and innovation with a fewer number of brands. The consequences at Unilever can already be seen:
“In 2000, we began the transformation of our Foods business in line with the “Path to Growth” strategy. Bestfood brought us leadership in the culinary category.” (Antony Burgmans, 2001, CEO Unilever NV).
The “Path to Growth” strategy has implications on all Unilever brands, including Knorr. Therefore, all of the 400 selected brands have to push new product concepts but at the same time the brands have to be careful not to weaken its position they hold in the minds of its consumers. In doing so, Knorr
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is faced with the problem of taking into consideration both its strategic perspective and the customer’s perspective. Moreover, it needs to bring into this equation the use of its own brands in its ambition to extend into new markets and thus grow. More specific, Knorr needs to find a balance between strategy and perception in one of the products it is considering to launch, as it tries to meet the demands of the “Path to Growth”-strategy. The product concept is called the “Soup lollipop”, which is considered to be launched under Unilever’s Knorr brand. If briefly described, the Soup lollipop is a dehydrated and decompressed soup attached to a stick. The stick is put into a boiling cup of water, after which the soup releases from the stick; the soup will be available in several varieties, fitting the needs of every day life and new trends of consumption; the product is aimed at children and as a test market Sweden has been chosen. At this juncture we, the authors, came in touch with Knorr in order to explore the possibilities of this concept. Our role at Knorr was to investigate the views of the consumers concerning the concept. However, for our own purpose in the thesis, we wished to link the results of this investigation with an inquiry of the company, trying to make an argument of how to combine the company and consumer views when trying to grow as a business. We will thus investigate issues of strategy in the interplay with positioning, and branding as a means to combine these two. Derived from this problem and predicament there are several related questions for research that may be applied: · What does strategic and perceptional positioning imply? · Which strategy on brand extension is most appropriate when launching a new product under the premise that the new product evokes and stands partly for other perceptions than the already existing (mother) brand?
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· Which options of internal growth does Knorr have and what are the general implications on growth for an actor in the food industry? These listed questions form the foundation of our essay. Moreover, they will feature as a red line binding the various parts of the essay together.
1.3 Purpose
Our purpose is to describe and to explore positioning and branding when a company takes into consideration to enter a market with a new product.
1.4 Scope
Our outlined research questions coequally define the focus of interest as well the limits of our study. Hence, we will, for example, not investigate the legal implications of growing. Nor will we address the technological issues for growth.
1.5 Target Audience
The reader to which this essay is directed to ought to have acquired some previous knowledge of business administration. In other words, scholars, students and practitioners working within the fields of business administration are the readers to which this essay primarily is directed. Although preferable, this level of knowledge is however not essential and, thus, should not deter anyone interested in taking part of this paper.
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1.6 Disposition
This chapter – Chapter 1 – made known the background of this study as well as the associated problem, research question and purpose. In the next chapter – Chapter 2 – we will present the methodological base from which we have started from when conducting our study. We will disclose our views on science and reality and how this has affected our study in the way we have approached our problem and research questions. After the methodological chapter follows our frame of reference – Chapter 3. Although it could be seen as three distinct parts, we have incorporated these under one single chapter, since the connections and relations between these parts deserve to be jointly high-lighted, in our opinion. In Chapter 4, we will present our empirical material, which is constituted both by secondary and primary data, consisting both by publicised material as well as of our interviews. Following the presented empirical material, we have devoted a chapter in applying our frame of reference on the empirical findings. We will also convey our own opinions and reflections concerning the findings, which can be found in the analysis, in other words in Chapter 5. The last chapter wraps up our study. Hence, in Chapter 6, we will sum up our findings and answer our research questions and purpose. Out of our answers, we will also point towards some areas that, in our opinion, deserve to be studied in the future.
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2
Method
In the previous chapter, we addressed the issue of what this essay will set out to investigate. As a necessary consequence, the question of how the problem will be investigated gains increased importance, in that it lays down conditions for the study of the problem. Thus, in this chapter, the aim will be to grant the reader an insight into the perspectives from which we, the authors, view and deal with the problem. To begin with, we will explain the concept of science, because it lays down demands for the knowledge we hope to develop out of the problem. We will then move on to explain our view on reality and our view on method. This will result in a course of action regarding method, by which we will approach the problem from a technical point of view. In the end, we will round off this chapter by bringing into light some critical remarks and reflections concerning our chosen methods.
2.1 Science, what is it?
Countless people have over the years offered answers to this question. Even the ancient Greeks and Romans have tried to fathom the depths of this question. In continuation of a century-long discourse, the Princeton University Thesaurus defines science nowadays as:
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”... a domain of knowledge accumulated by systematic study and organised by general principles” (Princeton University Thesaurus, keyword: science) This definition highlights what is commonly perceived as the characteristics of science, namely that science refers to methods for generating knowledge. Note furthermore that the definition brings also into light that only findings that are organised by some generally agreed principles should be considered as scientific. In other words, the methods we use to generate scientific knowledge must meet a set of agreed-upon demands. Wiedersheim-Paul & Ericsson (1994), but also Lundahl & Skärvad (1994), argue that scientific knowledge must meet the demands of creatively and critically reassessing established truths, notions and methods, as well as openly disclosing how results have been produced, so that others may control the accounted results. Apart from the demands laid upon appropriate choice of method for generating knowledge, there are some general demands stated on scientific research. According to Wiedersheim-Paul & Ericsson (1994) the research produced should be interesting, credible and comprehensible. With interesting it is understood that the results produced by the research should be interesting for an audience other than the researcher himself. Credible, or rather credibility is achieved when the research is presented in a logical and systematic order, so that the reader may believe in the results generated. Lastly, comprehensible refers to the level of language in the presented study, where the formulation of the text should convey and communicate in a feasible manner the results of the researcher concerning the study. Hence, the language chosen in the essay ought to be on par with the reader’s, so that he or she may in a convenient way comprehend the research (Wiedersheim-Paul & Ericsson, 1994).
Method
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In all these aforementioned aspects, our sole ambition has been to meet the demands postulated by Wiedersheim-Paul & Ericsson and Lundahl & Skärvad. In the remainder of this chapter, we will account for the dimensions of method that we considered for this research paper and, in extension, for generating knowledge that may be regarded as scientific. Furthermore, we will in an open and clear manner reveal our sources, so that the reader may distinguish our own interpretations from those of others. This will hopefully facilitate the control of the results from our scientific research. Moreover, we hold the view that our study is interesting, since it deals with the perennially fascinating topic of growth, but also because it attempts to build a bridge between the domains of strategy and marketing. We believe that we have reached credibility by presenting our methods, interpretations and sources in a transparent, logical and systematic order. Finally, we have strived to present our research in an accessible language, so that a majority of readers may comprehend and benefit from the results of our study.
2.2 From Which Room Do We View Reality?
Scholars who discuss the concept of science sooner or later end up arguing on the relation between man and reality, or to put in another way, the relation between the researcher and the world that he (or she) studies. This argument has a critical implication for our study because our view on reality influences the way we approach it, the way we study it, and the way we generate scientific knowledge out of it. In this particular situation, scholars often ask themselves whether there is an objective reality, or, if reality is constructed by man – i.e. if reality is subjective (Arbnor & Bjerke, 1994). The discussion on reality, whether it is objective or subjective, is an old one. Its oldest roots trace, as usual, back to the ancient Greeks. The debate between these two positions has over the years
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resulted in two different scientific ideals on how we may generate knowledge out of reality, namely the positivist position and the hermeneutic one (Patel & Davidson, 1994). The positivist position, on the one hand, is based on the assumption that science should be exact, verifiable and free from subjectivity. One of its fundaments is the notion of an objective reality, i.e. that there is a reality out there which looks the same no matter when, where and who is viewing it (Lundahl & Skärvad, 1993, Arbnor & Bjerke, 1994). The positivist position, or positivism as this ism is more commonly known, is the traditional ideal followed in the domains of science that study nature. In for instance the fields of physics, chemistry and biology, to name a few, the positivistic ideal has brought with it a focus on researching cause-and-effect laws and relationships that are universally applicable and, furthermore, independent of the individual who studies these relationships (Patel & Davidson, 1994). In other words, the positivist ideal is striving to formulate independent descriptions of what causes and affects a phenomenon appearing in reality. An important tenet within this ism is the notion that results produced by one party should be able to be reproduced by another party, in order to vouch for their positive and universal quality (Molander, 1988). The hermeneutic position is, on the other hand, based on the assumption that reality may only be understood by a human interpreting the actions and language of another human (Patel, & Davidson, 1994). It is in other words a social activity based on interaction; or as Wiedersheim-Paul & Ericsson (1994) state, ”reality is a social construction... it is created and is being created by humans and it is perceived by humans” (p. 39, our translation). The hermeneutic path takes as its starting point that an individual’s perception of reality is linked to his or her previous experiences, assumptions, identities and affiliations, as Arbnor
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Method
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& Bjerke (1994) put forward. All these listed factors help compose cognitive structures and schemes by which an individual creates meaning out of reality. These cognitive structures govern the way we interpret, think of, and negotiate with reality, which in this sense becomes subjective and thus dependent of when, where and who is viewing it (Lundahl & Skärvad, 1993, Arbnor & Bjerke, 1994). Though its historical origins lies in the interpretations of religious scriptures, legal documents and literary texts, the hermeneutic position has become the ideal traditionally adhered to in the social sciences. Psychology, sociology, law and business administration are some of the fields that are customary attributed to the social sciences. A scientist following the hermeneutic credo approaches the object of research from a subjective point of view with his/her own previous understanding (in Swedish: förförståelse) and attempts to attain a holistic perspective on the problem to be studied (Molander, 1988). In other words, he or she tries to explore and develop an understanding of the problem that he or she is faced with. In this study, we will be leaning more towards a hermeneutical position than towards a positivist one, for reasons that will be further disclosed under view of method. However, it could be contested whether or not the positivistic and the hermeneutic position exist in a pure form. It is difficult for a positivistic scientist to avoid making an interpretation of his observations, since the act of interpretation and representation of the accumulated objective results involves the human senses, in one form or the other. By the same token, it is difficult for a hermeneutic scientist to claim that his view on reality is completely subjective, and thus free from objectivity, because the results need to meet the scientific demand of being comprehensible for the reader who evaluates the results of the research; a certain “objective” standard need to be arrived at from which the results may be evaluated.
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Like Lundahl & Skärvad (1999) argue, we believe that it is perhaps more fruitful to speak of inter-subjectivity, instead of pure positivism or hermeneutics. Intersubjectivity refers to the idea of shared assumptions and ideas between people. and references, makes it easier to interact with one another but it also makes it easier to evaluate the results on a more neutral basis, and thus one may speak in a manner similar to an objective one. In effect, what Lundahl and Skärvad (1999) do through their argument of positivism and hermeneutics is that they touch upon the concept of a paradigm. Shared ideas, assumptions, schemes and cognitive structures, which have been discussed above, are frequently referred to as a paradigm. According to the philosopher and theoretician Thomas Kuhn, who coined the notion, a paradigm is an established system of thought and a set of shared collective assumptions that function as a norm when working within a scientific discipline (Kvale, 1993). The ruling paradigm influences the way a problem is viewed and approached. Hence, it serves us well to bring up that we, the authors, follow a paradigm by which we approach and view a problem that has been influenced by studies within the field of business administration. In other words, we will be prone to view the problem of this study from an economic point of view. We could have approached the problem according to, for example, a sociological or a technological paradigm and could have, furthermore, presented comprehensible results according to the ruling paradigm within these mentioned fields of research. This situation could, as Patel and Davidson (1994) illustrate, be likened to a scene where a doctor and a psychiatrist (the scientists) trying to study the problem of what troubles the patient (the reality) through their respective paradigm (diagnostic medicine and tests on the one hand and interpretative dialogue on the other). Each of these approaches towards the problem is acceptable to the fields that the doctor and the psychiatrist belong to.
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Method
Shared ideas and assumptions, furnished through for instance similar education
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In our case, we will try to formulate solutions from our study of reality that might be comprehensible, credible and interesting within the paradigm of economic thought and theory. A paradigm remains relatively stable over long periods of time and influences the way a problem is approached on a practical basis, i.e. it influences the method chosen when dealing with the actual problem (Kvale, 1993). In this respect, we agree with Arbnor & Bjerke (1994) who regard a paradigm as a bridge between the view on reality and the view on method. Thus, in the next heading, we will move on to link our discussion to our approach on method.
2.3 View on Method
Within the field of business administration, there are several scholars who have directed the issue of when different methods should be employed in order to either describe, understand or to explain the problem to be studied. These notions are referred as views on method and are distinguished from one another by the different assumptions they take on (Arbnor & Bjerke, 1994). Three different and discernible views on method within the field of business administration have been compiled by Arbnor & Bjerke (1994) namely: the analytic view, the system view and the actor view. The first view, the analytic one, argues for a reductive view on reality by maintaining that the whole may be reduced and explained by the sum of its parts. The view proposes, furthermore, that knowledge should be independent of the individual and that the parts may be explained by verified judgements. As may be noted, this view shares parallels with the positivist position in the way it proposes independence and objectivity. The second view, the system one, argues that reality diverges from the sum of its
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parts. The view argues, moreover, that the parts of the whole are explained and understood by the properties and interaction of the whole, and that knowledge is dependent on systems and the actors and institutions appearing in the systems. structures of meaning which are socially constructed. The whole is understood by the perceptions on reality of the actors, resulting in the stance that knowledge is dependent on the individual, thus subjective. As may be observed, this view shares parallels with the hermeneutic position, where the role of the individual is stressed. We are of the opinion that the system view on method matches our preferred view on reality. The system view accommodates an objective view on reality, but assumes that it is constructed in a different manner than the analytical view. Reality, in the system view, is constituted by parts and components that are mutually dependent by each other and thus the whole is not the merely reduced to the sum of its parts. In order to study reality it is necessary to implement a holistic perspective, by which it is possible to explore and understand the system between parts and whole (Arbnor & Bjerke, 1994). In this sense, the view takes also into consideration the individual who studies the system and his/her notions, ideas and use of established models of thought. In this respect, there is a parallel to our discussion in the previous heading: individuals study and interpret reality according to the paradigm - the system of shared ideas and assumptions that they have established. In our study, we will begin by observing the economic context which our study is related, and then move on to study the parts; the parts in this sense will be the case company and the interviewed consumers, and the whole will be the system context in which the parts interact. The analysis we will produce will not claim a definitive conclusion on the whole but will provide a possible interpretation of it, as seen from an economic paradigm.
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Method
The third and last view, the actor one, claims that the whole exist only as
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It could be argued that the system view accommodates both the positivist and hermeneutic position when studying a problem. For this reason, it ought to be mentioned, as Arbnor & Bjerke (1994) do, that scholars have criticised the system view for being inconclusive and for being an amalgamation of diverse positions on reality. However, what speaks in favour for the system view is that it allows flexibility when approaching a problem; several perspectives may be used to shed light on a problem: the system view provides room for the positivist’s emphasis on describing and the hermeneutics’ on understanding. This stance of the system view is particularly useful for our twofold purpose and for our methodological approach towards the problem, which will be elaborated upon under the next heading.
2.4 Our Methodological Approach and Working Paradigm
The methodological approach refers to the technical construction of a study. It is a consequence of the discussion on the theoretical aspects of a problem in that it formulates what dimensions and practices to consider when approaching the actual problem at hand. The first dimension to take into consideration is what method to pursue in order to acquire scientific knowledge: should one follow along the inductive path or the deductive one? The second dimension for the researcher to consider is whether the study should go deep in a specific case, in a cross-section of cases or if the study should investigate a development over time. A third dimension that needs to be addressed is whether the study should acquire information and empirical observations in a qualitative or in quantitative manner (Lekwall & Wahlbin, 1993).
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When considering the first dimension, things are traditionally straightforward. As Lekwall & Wahlbin (1993), but also Patel & Davidsson (1994) and Alvesson & Sköldberg (1994) point out, the path of induction and the path of deduction Induction, on the one hand, is the path of discovery and is characterised by the researcher starting out with a clean slate and trying to draw conclusions out of empirical observations (Lundahl & Skärvad, 1994). To be more specific, the inductive researcher starts out with a number of cases and aspires to find out relations among these cases that may be claimed to hold for a general level, forming in effect a universal theory (Alvesson & Sköldberg, 1994). The path of deduction is, on the other hand, the path of proving. When following this path, the researcher starts out from theory, formulates predictions on how relations between phenomena in reality should behave, and thereafter tests these predictions in reality, in order to prove the validity of the predictions (Lundahl & Skärvad, 1994). If comparing the two, the deductive path could be seen as the opposite of the inductive one; the deductive researcher lays claim that the universal theory or rule may explain the specific case. When applying this above reasoning onto our essay, it is difficult to state which path our study follows. Owing to our descriptive part of our purpose, where we start out from theory and move towards reality, the deductive path would indeed seem to math our needs. However, owing to our exploratory part of our purpose, where we set out to investigate reality and find relations existing in it, our study is effectively rendered into an inductive one. There is an interplay between the inductive and deductive path in our situation, as can be seen. For this reason, we believe that by following the hermeneutic spiral, as Alvesson & Sköldberg (1994) have put forward, we will hold on to a course that will serve our purpose. The hermeneutic purpose could be seen as a process whereby the researcher continually shifts between notion, observation and reflection. In our study, we
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Method
are the two traditional courses followed when generating scientific knowledge.
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will move from theory into reality and back into theory again. Indeed, we have begun our study by reading literature related to our problem area, which could be seen as a typical deductive approach. However, during the process of reading it became evident that there is no single theory fitting our area, despite the rich supply of scholarly work. Out of the theories we have read, we need to explore how to conceptualise positioning when growing, and in this manner it is possible to claim that we follow along the inductive path as well. The second dimension we need to consider in our approach towards our problem is how deep or lateral we should move with our study, in other words how we should cover the “reality” we wish to observe. Considering the fact that our problem aspires to increase the knowledge of positioning from a company and a customer perspective, we are of the opinion that an approach similar to a case study would be a suitable method. A case study is, as Robert Yin (1994) explains, a method where the interest of the researcher is directed towards studying one specific or a limited number of cases in depth and in detail. A case may for instance be an individual, a group, an organisation, an event, a development, or even an occurrence. What is considered as a relevant case in “reality”, and thus the subject of an analysis and interpretation, is to a large degree determined by the problem/research question(s) of the study (Lundahl & Skärvad, 1999). As Yin (1994) furthermore informs, a case study is often suitable when the formulation of the problem includes the aspects of how or why, since it is often geared towards generating insight, discovery and interpretation, in order to gain a holistic understanding of the case. The case study, furthermore, allows for the employment of several approaches and perspectives when studying a case (ibid). In this respect, the case study shares some parallels with the system view through the flexibility of method.
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We chose to conduct our study with an approach similar to a case study in part because the complexity of our purpose and in part because our research by studying a specific case thoroughly (Lundahl & Skärvad, 1999). The third dimension to consider is related to the second one. The case study and the qualitative method for collecting and interpreting information are often intimately connected: a case study is often directed towards insight, discovery and interpretation. Likewise, a qualitative study, too, stresses interpretation and understanding of a specific phenomenon on the basis of what is to be studied (Merriam, 1994). In a qualitative study, the researcher attempts to understand how individuals experience their selves and their environment (Lundahl & Skärvad, 1999). Considering our research questions and what we wish to achieve with our study, we are of the opinion that a qualitative study would be useful for the type of information we wish to acquire. A qualitative study is characterised, apart from what has been discussed above, that it collects data and information that cannot be quantified, as for instance attitudes and values, (Wiedersheim-Paul & Ericsson, 1995). The reason why we have chose to conduct this study with a qualitative method instead of a quantitative one is that it is the views of consumers and people within a company that we aim acquire. We need to acquire primary data from first hand, instead of solely basing our collection from other published information, (which constitutes secondary data), since we need to provide answer that matches our specific research questions. We believe that it would be awkward to meet this aim by using a quantitative method to collect and analyse the views and values of people.
Method
questions demand a deeper and detailed knowledge which may only be obtained
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In other words, we will use a qualitative study. In particular, we will use interviews in order to collect the views of the specified respondents. Since the use of interviews has the implications on the scientific demand of credibility considering how we arrived at our results - we will elaborated more upon this method of collecting data in the following section here below.
2.5 Interview methods
Interviews are the most usual means for collecting primary data when conducting a qualitative study. An interview is a dialogue between two, or more, humans (Kvale, 1997). However, the dialogue is not performed on equal terms. There is an asymmetry of power between the interviewer, who asks the question and directs the dialogue, and the respondent, who answers the questions (ibid). In our role as interviewers we were aware of this asymmetry and tried to respect the integrity of the respondent. This awareness was furthermore manifested in our own demands for ethical behaviour, by which we pursued our empirical study. As the results of the interviews are dependent on the interviewer, the preparations of the interviewer are of importance (Lundahl & Skärvad, 1999). The use of tone, gestures, and language of the interviewer are factors that need to be taken into consideration before the interview. Of equal importance is what happens during the interview. The interviewer must ensure that the respondent understands the questions, or guide him/her when necessary. Moreover, the interviewer must be aware of the influence that he/she exerts on the respondent during the interview (ibid). Not to be neglected is what happens after the interview. The process of interpreting the empirical results must be made in a neutral manner (ibid).
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There are various types of interviews available to choose from when gathering empirical information. The choice of interview is dependent upon the purpose, three common ones are standardised, semi-standardised and unstandardised interviews (Chisnall, 1992). If placed on a common scale, the level of openness and structure determines the difference between these three. A standardised interview, on the one end of the scale, follows the same structure from interview to interview with a closed set of available answers, whereas the unstandardised interview, on the other end of the scale, is almost unique from interview to interview, due to the fact that the interviewer gives the respondent a large degree of freedom by asking opening questions during the dialogue (ibid). The semistandardised interview is a blend of the two extremes. Each type of interview has its own merit. The standardised interview can be handled efficiently and is useful when needing to describe trends. The unstandardised interview may be more time-consuming due to its open nature, but it is useful for exploratory purposes, when knowledge of a phenomenon is scarce (ibid). Since the purpose of our study was to capture both a consumer and a company perspective on positioning, we prepared two types of interviews that would meet the requirements of our purpose. In order to acquire information of the consumer’s view, we leaned towards a standardised type of interview, due to the relatively large amount of interviews to be made in order to describe a trend of values and opinions. However, we included a limited number of semistandardised questions at selected parts, where the need to explore opinions was necessary. In specific, the respondents we targeted were parents with children in the age between 5-15. All in all, we conducted 22 interviews in various locations in the municipality of Linköping. We refrained from interviewing children alone, because the type of product the project was concerned with (soup) was
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Method
problem and frame of reference of the study. Of the many types of interviews,
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typically purchased and prepared by the parent, thus children would lack the overall view of which some of our questions sought to capture. However, in a few interviews parents together with their children answered the questionnaire, thus providing some insights from the children’s perspective as well. In order to capture the company view, we selected a semi-standardised type of interview, with a blend between open and close questions, the motive being a need for both descriptive and exploratory questions and answers. (The questionnaires used for the interviews are found in the appendix, should the desire to evaluate the interview protocol arise). In specific, we conducted 4 interviews with respondents at Knorr / Bestfood. The respondents were people at manager and director level that were specifically involved with the Soup lollipop project, or had stood outside the project but were responsible for the overall brand. Their names and positions are mentioned in the empirical chapter of this thesis. We conducted the interviews in Swedish, English and German, though we will use English to present our empirical results.
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2.6 Course of Action
Since the ambition with our study is to attain a desirable level of credibility and the course of action we chose when conducting our scientific study. Our study was divided into four different phases: the pre-study, which consisted of formulating our purpose and research problem; the literature study, which consisted the base for our frame of reference; the empirical study, in which we gathered our data and conducted our interviews; and, lastly, the analysis, where we processed the empirical information by using our frame of reference. The progression of the various phases of our study can be seen illustrated in the figure here 2.1 below.
Method
to facilitate a control of our results, we will in the following section account for
Pre-study
Literature study
Empirical study
Analysis
2.6.1 Pre-study
The pre-study was carried out in co-operation with our supervisor at Linköping University, Jörgen Ljung, and our case company Knorr/Bestfood, located at Helsingborg, Sweden. Along with the input from Staffan Hård af Segerstedt, Programme Director at Linköping University, the aim of the pre-study was to formulate a suitable purpose as well as useful research questions. During this process, the emphasis lay on constructing a problem for a study that would meet the demands of being interesting, credible and comprehensible.
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Pre-study
Literature study
Empirical study
Analysis
Problem Purpose
2.6.2 Literature Study
In order to answer the questions stated in the problem discussion of the prestudy, our course to obtain better understanding began by putting ourselves into the theoretical context of positioning. To achieve this aim, we sought to gather relevant literature in the fields of strategy, marketing, branding and psychology. This collection of secondary data was primarily carried out by a thorough examination of the catalogues of the Linköping University library, but also through the aid of search engines on the Internet, among them Swedish University catalogue of Libris. The process surrounding the collection of relevant theory on positioning has provided us with a pre-understanding that has been formulated in our frame of reference. For our study, the role of the frame of reference is dual: first, to provide an insight into the research area and, second, to act as a tool to provide meaning and knowledge out of the findings of the empirical study. Though the purpose of the frame of reference is to act as guideline during the phase of the empirical study, we have constructed the frame to allow us for some degrees of freedom concerning our presented assumptions. This is useful, in the case that our empirical findings should move in a different direction than we had anticipated.
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Hence, we do not regard the frame of reference as a prison of theory, but rather as an open point of departure for the course of our study.
Pre-study
Literature study
Empirical study
Analysis
Frame of reference
2.6.3 Empirical Study
Our empirical study is based on primary data collected through personal interviews. As previously mentioned, we used two different types of interviews to gather the empirical material; one leaned towards a standardised interview, the other constructed as a semi-standardised interview. We conducted 22 random interviews of the first type at different locations in the municipality of Linköping, where we sought to accumulate information concerning the consumer view. The respondents were, as previously mentioned, parents with children in the age between 5-15. Each interview took between about 10-15 minutes, a few even 20-25, to perform. At the beginning and the end of the interview, we informed the respondents about the purpose of the interview and reminded them of the anonymous treatment of the collected data. A tape recorder as well as written notes was used simultaneously in order to ensure that no information was lost.
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Method
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We used a different course of action for the collection of data regarding the company view. The respondents were people at manager level at Knorr/Bestfood. The shortest of the 4 interviews took approximately 45 minutes to perform, whereas the longest took approx. 75 minutes. We conducted the interviews via telephone, using a tape recorder and a computer to capture the answers given. Afterwards, we transcribed the answers and sent them back to the respective respondent, in order to offer the possibility of quote control and confidentiality.
Pre-study
Litteraturstudi Literature study
Empirical study
Analysis
Interviews & data
2.6.4 Analysis
During the analysis of the data from the empirical study, we used the frame of reference of the literature study. Through the combination of these two studies our aim will be to provide answers to the research questions we stated during the pre-study. The conclusion we will draw out of the analysis will hopefully shed some light on our research problem as well as inspire further research in suggested fields.
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Pre-study
Litteraturstudi Literature study
Empirical study
Analysis
Conclusions
2.7 Problems, Criticism and Reflections Related to the Chosen Course of Action
In this section, we would like to make the reader aware of the potential problems related to the presented course of action. It is our ambition that the reader after completing this section may be able to judge the validity and reliability of the conducted research (Wiedersheim-Paul & Eriksson, 1998). Validity refers to the scientist/researcher being aware of what is being studied is also what is intended to be studied (Merriam, 1994). During the research process, validity is closely linked with the notion of reliability, which refers to the trustworthiness of the study, meaning for example that the measurement instruments withstand random inference. The aim of reliability is to insure repeatability. In other words, the study should be able to repeated in the same manner and produce the same results (ibid). The demands of validity and reliability are primarily geared towards positivist and quantitative studies (Molander, 1994). However, there are some issues of concern in a qualitative case study as well (ibid). In a qualitative study, a problem arises when dealing with reliability, in that the same results are difficult to reproduce, because a qualitative case study
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develops, evolves and changes during the research process. The new results do not indicate that the old results are wrong, but rather, that there are several interpretations to the same information (ibid). However, validity and reliability in a qualitative context could be seen as a review and self-critical reflection of how the produced results and interpretations could have otherwise been arrived at. Hence, in the following, we will present a cursory review and reflection of our chosen course of action. Concerning, the pre-study, a differently stated research problem might have provided an opportunity for perhaps a richer overall study. Regarding the literature study, we believe that we have made a reasonable and relevant selection of the literature that we need for the scope of our problem. Concerning the empirical study, there are several issues we would like to discuss. First, an issue arises due to the used method for collecting empirical data. Some criticism might be directed against the use a qualitative case study, in that not enough information may have been acquired in order to provide a complete picture of the research problem to be studied. In other words, there might be a fear that the conclusions drawn out of the empirical study are built on a too fragile base to be generalized. However, we would like to view the method chosen for our study as Kvale (1996) and Yin (1994) do: a qualitative case study researches a problem in depth and in detail. Through such a thorough approach, the likelihood increases that the knowledge generated by the case study might be used in order to enlighten another similar study. Nonetheless, we refrain from making the claim of generalization, though we do argue that we have detected certain patterns that help to generate knowledge.
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Second, during the collection of empirical data through personal interviews some further problems may emerge, since it is an interaction between two humans. The interviewer, on the one hand, may interpret the answers of the Svensson (1994). The respondent, on the other hand, might feel a pressure by the question and thus may not answer as he or she would have done otherwise. Furthermore, the respondent may deliberately or unconsciously distort answers, lie or withhold information for different reasons (ibid). Or, the respondent may act in a quite different manner, and provide answers that are seen as favourable by the interviewer or by the superiors (ibid). As much as we have tried to be aware of such issues, it may prove to have been difficult to always be on the guard against them. Third, and last, follows the issue of responder selection. Concerning the consumer view, we have interviewed people who have been willing to respond. It is thus not a random sample in the strictest sense of the word. However, it is our impression that the data we have collected shows similar patterns irrespective of who, where and which situation the interview has been conducted. Concerning the consumer view, we have relied upon the selection made by of our supervisor at Knorr. It is thus not a direct selection but one made indirectly through our instructions. Regarding the analysis, we have already addressed the major implications of the analysis during the discussion on the possibility of generalisation through empirical results from qualitative case studies. In this passage, however, we would like to mention that a larger questionnaire or a greater selection of companies would have complemented our study and might furthermore have provided a richer analysis. It would indeed have been interesting to try out this option. However, under this section, we would like to add that we did not use all
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Method
respondent in a too favourable or negative light, as argued by Starrin &
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available empirical material for the analysis, mainly for three reasons. First, Unilever/Knorr desired some additional material for themselves that we could not use for our own thesis. Second, during our own study, we adapted our purpose to our thesis and the other way around. As a consequence of following our hermeneutical spiral, some questions seem not to be as relevant as we thought at the beginning. Third, and last, related to our hermeneutical spiral, we used some questions to increase our understanding and to supply us with some food for thought.
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3
Frame of Reference
3.1 Introduction – Why read this chapter?
This chapter will present the theoretical tools by which we will analyse our empirical data. It will begin by putting strategy, and its view on positioning, in its context. Thereafter, we will move on to perceptional positioning as influenced by marketing. The figure below shows the relation between these two views on positioning.
Theory
Macro level
Company
Litteraturstudi Customer
Micro level
Strategy
Perception
Figure 3.1 : Topics for review, Our own creation
As mentioned, positioning is a wide and complex matter, particularly when considering the different fields of theory, like strategy or marketing, which each has developed different definitions on positioning. Although diverse in direction, most of these definitions share the uniting feature of having to do with outlining paths for a successful operation of the firm. In this chapter, we will present and relate various aspects of positioning, namely strategic and perceptional positioning. We will thereafter extend and link this discussion into the concept and use of brands.
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3.2 Perspectives on Strategy
Strategy is derived from the ancient Greek word of strategos, which is usually translated as ‘leader of an army’ or even ‘the art of warfare’. When the military ideas of strategy began to be incorporated into the field of economics, strategy has in the economic sense of the word been seen as “the art to utilise the resources of a business enterprise in order to achieve its goals”, as Bengtsson & Skärvad (1991, p.14, our emphasis) argue. With the passing of time however, several interpretations and definitions on strategy have sprung up, thus making it difficult to arrive at an agreement of the essence of business strategy, as The Economist (1993, p.106) observes: “...the consultants and theorists jostling to advise businesses cannot even agree on the most basic of all questions: what, precisely, is a corporate strategy?” In the field of business administration, four general schools of thought have developed their own views and answers on the essence of strategy. The first, the classical view, is the oldest and still the most influential school. It has developed out of micro-economic theory and shares its approach on rational behaviour and planning, and of maximising profit and utility. Within the classical view, Igor Ansoff (1965) and Michael Porter (1990) are two of the scholars who have put forward analytical tools for developing business strategy. The evolutionary view, on the other hand, distances itself from the classical view of rational behaviour and instead embraces a more anarchistic one. It draws from the Darwinian idea of evolution and hence substitutes the discipline of the market for the law of the jungle. The processual view takes on a more political approach to strategy, where negotiations, bargaining and struggles between
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factions and between individuals influence the way business strategy is formulated. Lastly, the systematic view stresses that the means and ends of strategy is linked to the cultures and powers of the local social systems in which it takes place (Bengtsson & Skärvad, 1991). It could be argued that each of these presented views have something to offer for and anarchistic elements influence the way a company works with strategy. The operation of a business is not always a straightforward issue, thus keeping in mind several views on strategy might open up new ways of acting. However, as De Wit & Meyer argue (1999), even in the face of uncertain situations and conditions both within and without a company, most business attempt to pursue a rational path when formulating a strategy, for reasons of providing a direction for their actions, and for reasons of routine behaviour and legitimacy. In the following section, we will develop the notion of the rational school of company strategy, and thereafter link strategy with ways of acting and competing or, to put in another manner, positioning.
Theory
our framework. In real life, it could be assumed that rational, irrational, political
Figure 3.2: The current discussion focus
Company Company
Customer
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3.2.1 Strategy and Positioning
Strategy, as a means of competition, has been inspired by the neo-classic microeconomic theory, which is based on the assumption that buyers and sellers are rational and furthermore independent, thus forming the foundation for perfect competition on the market. In this ideal market situation, the sellers and buyers are many and the products homogenous. This theory however lacks explanations for the imperfections appearing on the market, which implies that companies diverge from the ideal micro-economic models. The neo-classic theory uses only one variable, namely price, in order to explain the imperfections. Because of this, scholars working in the fields of strategy and competition have sought after other variables, among these quality, in order to better explain the conditions on the market (Melin, 1999). Michael Porter (1990) is one of the scholars who have influenced the theory of competitive strategy, in the aftermath of the neo-classical one. In his view, the search for position is one of the two central factors that are included in a strategy for competing on the market: ”Two central concerns underlie the choice of a competitive strategy. The first is the industry structure in which the firm competes. Industries differ widely in the nature of competition, and not all industries offer equal opportunities for sustained profitability […] The second central concern in strategy is positioning [our emphasis] within an industry. Some positions are more profitable than others, regardless of what the average profitability may be. “ (Porter, 1990, p 34)
According to Porter’s (ibid.) reasoning, companies in an industry seek to gain the upper hand and a profitable position against other companies, if the
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opportunity arises. At the same time however, new entrants and manufacturers of substitution products continuously attempt to put existing companies out of the market. Porter (ibid.) maintains that the best strategy for a company is to try to position itself so as to obtain the market power that is necessary to negotiate favourable prices and quality, to thwart threats from competitors, and to reap the opportunities appearing in the market, by leading the development of it. The use this aim. All in all, the dealing of the five forces of competition in the shape of new entrants, powerful buyers and suppliers, rivalry from existing firms and the threats of substitution products should form the agenda of a company’s strategy and search for position, as illustrated in figure 3.3 here below.
Theory
of patents, brands and economies of scale are some of the tactics available for
Competitor
Supplier
Company
Customer
Substitutes & Entrants
Figure 3.3: The Five Forces of Competition, (Michael Porter, 1990, our adaptation)
There are, in Porter’s view, two basic strategies by which a company may acquire a sustainable position in an industry and thus manage the five forces of competition: cost leadership and differentiation. As their name implies, the one
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strategy involves leadership through lowest costs, while the other involves differentiation through, for instance, unique qualities that emanate from the company and help to distinguish it from its competitors. A variation of these two basic strategies is scope, by which a company limits its scope of competition into selected parts of the industry and focuses on one of the two outlined strategies (ibid). Taken together, these strategies are known as the three generic strategies, which are depicted in figure 3.4.
Competitive Advantage Lower Cost Differentiation
Broad Target Competitive Scope Narrow Target
1. Cost Leadership
2. Differentiation
3 A. Cost Focus
3 A. Differentiation Focus
Figure 3.4: Three Generic Strategies (Michael Porter, 1990 in de Wit & Meyer, 1999)
A different and sometimes complementary view on strategy and competition has been developed by Prahalad, Doz & Hamel (1989). Their view is often contrasted with Porter’s. If Porter takes industry structure as a starting point for company strategy, then Prahalad et al take company strengths as a starting point for a competitive strategy in an industry. Prahalad et al (ibid) have formulated the concept of core competencies, by which a company concentrates and specialises on its unique resources. This view argues for establishing a position
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out of unique resources that is protected by a barrier against imitation (Mahoney & Pandian, 1992). In this respect, the resource-based strategy does indeed seem as a parallel to Porter’s differentiation strategy, through which a company establishes a position by highlighting its different and unique qualities. As a natural consequence, one is beckoned to ask, how does the two presented static and based on the competitive conditions within an industry at a specific point in time. In comparison to the resource based one, Porter’s strategy does not consider the changing and dynamic process by which a competitive position is built up, established and defended (de Wit & Meyer, 1999). Furthermore, the resource based view takes on, as mentioned above, a long-term perspective on strategy, where the development of enduring comparative advantages are imperative; the innovation and cultivation of immaterial resources, qualities and dimensions are particularly favoured aspects within this view, because of the difficulty of copying these (Barney, 1991). In order to further accentuate the differences between the two general views on strategy, Melin (1999) proposes the use of the SWOT-analysis. The SWOT stands for Strengths, Weaknesses, Opportunities and Threats and has been used as a framework to identify a position for competing on the market/ industry that is based on a diagnosis of the condition of the industry and of the condition of the business. As has been indicated in the sections above, we believe that it could be argued that Prahalad et al’s resource-based strategy stresses the Strengths and Weaknesses of the framework when outlining a strategic position, whereas Porter’s strategies stress the Opportunities and Threats. The differences and similarities between these views on competition become more salient in relation to growth. Porter (1990) maintains that the company
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views differ? As Sjöström (1996) points out, Porter’s competitive strategy is
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preferably should focus on its competitive clout to improve its position, using among other things its own opportunities of innovation and developing products and so on, in order to grow. Porter (ibid) discourages external attempts to integrate or associate with other actors and companies, since this may decline the firm’s ability to innovate and thus may weaken the position of a firm in an industry, as well as diminishing its long-term viability. Like Porter, Prahalad et al (1989) emphasise the firm’s own internal strive for growth. However, they do see integration and cooperative initiatives as useful tools for improving the competitive capability of a firm. They argue that integrative actions, cooperative agreements and alliances may strengthen a company vis-à-vis other competitors through learning and coordination, if used with care and prudence. However, as Sjöström (1996) concludes, the attention of positioning in the context of strategy is primarily on the competitive position of a company in relation to its competitors, although the position in relation to suppliers and buyers is considered significant. Central to the task of positioning is to analyse the firm itself and its competitors, so as determine what kind of strategy to implement. As Sjöström (ibid.) furthermore adds, according to this view on positioning, “the customer is treated as a large mass” (p. 35, our translation). It could be questioned whether this view on positioning is adequate and enough when devising courses for growth, particularly when considering the role that has been assigned to the customer. In the next section of the frame of reference, we will discuss the role of positioning within a marketing view, in order to devise an overall context of positioning.
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3.3 From Strategic Positioning to Perceptional Positioning via Marketing
As argued above by Sjöström (1996), the attention of business strategy is primarily on establishing a position against its competitors. However, a business needs somehow to raise the necessary means or resources in order to achieve Hence, the relation to the customer becomes crucial, in that the necessary means are typically raised by the company’s interaction with this force in the industry. The exchange between the customer and the company, where the customer, on the one hand, is supplied with goods and/or services by the company, and the company, on the other hand, demands payment and/or other resources in return, becomes significant. However, as Sjöström (1996) also observes, the way strategic theory treats the customers in a industry as a large mass poses a predicament for a business. As Kotler (1996) argues, the customers in each industry tend to have their own requirements on what goods, products and/or services they wish to be supplied with. Hence, it becomes difficult, even inadequate, for a firm to treat the customers as a large mass, if it wishes to raise the means and resources to compete. A business needs to develop a concept on how to establish a position to the customer. For this aim, marketing has grown to become an important tool to establish a position, or rather, a relationship to the customer. In comparison to strategic theory, marketing theory is very much a customer driven field of research (Baker, 2000). Although the origins of marketing lay in a concern on how to distribute output of a firm to the market, nowadays most marketing theory focuses on satisfying
Theory
this (and other) strategic goal(s), as Bengtsson & Skärvad (1991) remind us.
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the needs and desires of the customer/consumer (ibid). Kotler (1996) has become a dominant scholar in this field of research, due to his contributions in developing marketing theory. In particular, his reference to the notions of segmentation, targeting and positioning has become useful tools for a company to approach the needs and desires of a customer. A segment refers to a group of customers within a market or industry that has common or similar needs and desires. The work to find these groups of customers with common needs and desires is denominated as segmentation. The segments are usually explored by surveys and then mapped and categorised by using the variables of geography, demography, psychography and behaviour (Dotevall, 1997). Targeting refers to the work done by a company to choose which segment(s) to approach. These target groups are chosen by the characteristics of needs and desires they show, to which the company has the potential to satisfy (Persson, 1997). There may be groups to which the company may attract, raise means, and thus grow stronger. Positioning, in the marketing sense of the word, refers to the work done by the company in its attempt to distinguish its offer of goods and services vis-à-vis its competitors, since other competitors may also be attracted to approach the customers with their own offers. The company needs somehow to profile its supply of goods and services by highlighting the traits that make the products attractive to the targeted segment. If the segment, for instance, desires qualitative products, the company may acquire a strong position relative the offers of competitors who only offer standard products and/or services (ibid). Marketing theory sometimes tangents on strategy, as can be seen above. The use of the idea of positioning in relation to competitors is one such common denominator. However, marketing theory is more concerned with more operational decisions in its quest to satisfy the needs and desires better than the
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competitors, and thus receive means and a stronger position in return. Positioning, in the marketing sense of the word, entails the operational strive to acquire a suitable position in its offer to the consumer, as for instance positioning by product attribute, by product class, or by product use, to name a few examples (Dotevall, 1997). Positioning, in the strategy sense of the word, entails more a macro-level approach towards the forces of suppliers, previously. Nonetheless, the marketing and strategy theories do sometimes coalign and converge. They both focus on what strengths and resources a business could possibly leverage in order to establish a favourable bond or position to the consumer, and thus may more easily raise resources in order to grow and compete on the market. The use of bonds is a topic on which it could be argued that there is an indirect consensus between strategy and marketing. As Hammarkvist et al (1982) argue, bonds could be used to establish a relation between a company and selected forces in an industry, as for instance suppliers or customers, in order to create a more favourable position. The bonds, as Håkansson et al (1993) argue may be of functional dependence, of power, knowledge or a time-based factor. The strength of the bond between two actors is dependent upon the degree of dependence of one another. In the following, we will present different kinds of bonds according to Hammarkvist et al (1982): Economical and legal bonds exist in many different forms. Long-running cooperation contracts or ownership influence are a few examples on these forms. The economical bonds are often co-ordinated with some kind of legal bonds and the legal bonds may often be seen as a complement to other types of bonds.
Theory
competitors, buyers, substitutes and new entrants, as Porter has indicated
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A technical (or functional) bond acts as an adjustment of a technical relation between two actors. It may be based, for example, on the supplier of a material to a product adjusting his product to the production equipment of the buyer. This implies that the supplier binds himself to a certain technical solution that, in the short run, may be difficult to change. A time-based bond is an agreement between companies to co-ordinate production in time. If, for example, the companies are situated after one another in the production chain, then it might be possible to reduce the costs of committed capital by synchronising the production. Knowledge bonds include the knowledge that companies develop over time regarding the strengths and weaknesses of one another. In a vertical relation, the buyer learns to use the capabilities of the supplier, whereas the seller learns how the customer uses the product. A social bond is the exchange that takes place between the actors of an industry in the form of personal relations. This social relation between the actors serves to complement other bonds, in the form of, for instance, accumulating a sense of trust or reliability. Directly as well as indirectly, the use of bonds could be seen as a tool for positioning, In the strategic context, it might strengthen the bond with selected, strategic actors in an industry, as Hammarkvist et al (1982) have argued. In the marketing context, bonds could be used to commit the various customers in the various segments to the company. As Gummesson (1995) furthermore adds, the bonds to the customer are strengthened by the use of relationships. The concept of relationship marketing is directed towards this ambition (ibid). In one sense, the relationship could be seen as a development of the social bonds, as
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Hammarkvist et al (1982) have put forward, though it could include other bonds that help to cultivate the relationship. The notion of relationship marketing could be seen as a development of Kotler’s contributions, in that it focuses more on the mutual communication and interaction between company and customer, so that the supply of the company is tailored to the demands of the consumer, by offering for instance service functions that go beyond the functional quality and consumer is in this manner strengthened through the relationship that evolves between the two sides; the interaction that takes place, between what the customer wishes and what the company may serve to satisfy this desire helps to create a bond, which is developed through the various types bonds available. For our purpose, marketing ought to perhaps be seen as a meta-level notion - as a mediating factor between the company side and the perceptional/customer side of positioning. Although marketing theory deals with the consumer in mind, it has based much of its findings of the theories of psychology, and in particular on the behaviour, cognition and perception of the individual. In order to put into operation what needs and wishes to be satisfied, a business needs to develop an understanding of the individual’s perception, so as to develop a position in the mind when behaving as a consumer, as Brooksbank (1992) argues: “Marketing is a totally intellectual war in which you try to outmanoeuvre your competitors on a battleground that no one has ever seen... it can only be imagined - in the mind.” (p.12) As may deduced by Brooksbank’s words, in order to develop a relationship or bond between company and consumer, it is necessary to understand what goes on in the mind of the customer. Thus, in order to develop an overall concept of
Theory
profile of a product. Indirectly, the position of the company relative the
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positioning, it becomes necessary to link our discussion to the consumer’s point of view, or, in other words, his/her perception. “We should never forget what is so often misunderstood: that a brand - unlike the product it contains - is created by, is valued by, and lives exclusively in the mind of its consumers”. (Niall FitzGerald, 2001, CEO Unilever)
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3.4 Perceptional Positioning
After having shed some light on the macro-level concepts of positioning, we will in the following link our discussion to the micro-level one of positioning, namely perceptional positioning, where we look upon the role of the customer.
Figure 3.5: The current discussion focus
Company
Customer
While the previous discussion about strategy and positioning corresponds to the managerial view - of how to, for instance, position a company in the market, the following discussion will illustrate the importance of positioning the company in the mind of the consumer. If briefly summarised, the goal of the perceptional positioning process is to form a particular brand image in the mind of the consumer, because this influences how the customer behaves when purchasing a product in the market. In other words, the consumer’s view needs to be taken into consideration as well, when striving to create an overall position. In doing so, we tangent the domain of cognitive psychology, or rather, the psychology of perception. Consequently, we are faced with the task of finding the right balance between the research fields of psychology and economy, when striving to create an overall position.
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3.4.1 Why Perception Matters
In order to explain the relevance of perceptional positioning, we will begin by utilising one of the classical models in psychology, which has also influenced business administration, namely Maslow’s pyramid (1954), or the hierarchy of needs, as the pyramid also is known. Maslow (ibid) ranks physiological, security, belonging, esteem and accomplishment as various needs that in one way or another are necessary to be satisfied for a human. While it is possible to see through Maslow’s hierarchy only the necessity of purchasing commodities like rice, milk, crop, and so on, to primarily satisfy the basic human need of survival, there is no apparent reason why individuals would prefer to buy some specific products (or even branded products) before others, as all food and drink products can satisfy the basic needs and allow survival. However, as Dotevall (1997) reminds us, as supply in developed countries exceeds by far demand on products that satisfy basic needs, it becomes significant to look in new ways on Maslow’s pyramid. As will be argued, it becomes significant to position products in the mind of the consumers, by providing the offerings of the product with some kind of stimuli. The following example, used in Dubois (2000), helps to exemplify this argument: “In Southern Europe, an unpublished study on packet soups carried out by Nestlé uncovered the principal reasons why some housewives were opposed to this type of product. All these reasons can be clearly linked to the Maslow model and relate to physiology (packet soup = a light food, not very nutritious), security (packet soup = mysterious, artificial, chemical food), belonging (packet soup = a dish for one, breaking up the unity of the family), esteem (packet soup = a dish which can be prepared instantly, which is not particularly praiseworthy) and
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accomplishment (packet soup = a processed and impersonal dish).” (p. 31) For this reason, it is possible to state “what consumers buy does not depend only upon their [basic] needs but also on the nature of the products and services available in their environment. The perceptional mechanism controls the information he or she has about this environment is necessarily acquired through perception. Consequently, perception [our emphasis] is an omnipresent factor in buying and consumption behaviour.” (Dubois, 2001, p.61)
Theory
relationship between the individual and the surrounding world, and all the
3.4.2 Creating a position in the mind of the customer
As in the case with strategic positioning, the key issue of perceptional positioning is how to defend or improve or even change the company’s position in the market. To achieve this aim, it is necessary either to reinforce or to modify people’s perceptions - to create a link somehow to the customer (Baker, 2000). One of the earliest writers in this area were Ries and Trout (1982) who were primarily concerned with the impact of communicating/advertising to the consumer in what they describe as ‘an over-communicated society’, which in their opinion has emerged due to the large supply of companies and competitors trying simultaneously to reach out and satisfy the demands of the same customer with their similar product offers. For this reason, Ries and Trout (1982) state in Baker (2000): “In the communication jungle out there, the only hope to score big is to be selective, to concentrate on narrow targets, to practise segmentation. In a word, ‘positioning’.” (p.292)
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Ries and Trout (1982) state that because of over-communication in developed societies, a company needs to limit its message to the consumer to a few simple product features, since the human mind and the human perception can only focus its attention on a few selected items at a time. Since humans tend to rank order associated features in their mind, with the preferred or most important on the top rung, Ries and Trout have provided examples to support their advice for successful perceptional positioning, in order to reach out to the customer. To become a market leader, a company needs to ‘be the firstest with the mostest’, on the principle that while people can usually recall who was number one to achieve something they usually have difficulty in recalling number two. For instance, Neil Armstrong is commonly remembered as the first man on the moon, but who was the second one?1. In the market place, Volvo was the first carmaker to highlight the safety of its products, but who was the second one? The real benefit of positioning lies in identifying the gap, need or hole in the marketplace, and then filling it first – thus helping to carve out a domain in the mind for the company. From this reasoning, it could be argued that one of the relevant implications of Ries and Trout’s statements is that the company needs to limit its scope of competition and focus its features, thus not trying “to be all things to all people”. As will be argued later on, this in turn has implications on overall positioning. 3.4.2.1 Five dimensions of positioning a product in the mind of the consumer Since human perception is limited according to Ries and Trout (1982), it becomes crucial to differentiate or profile a company’s offer or service, so that it might attract the attention of the consumer. In doing so, it becomes essential to find dimensions in the product (or service) offer itself that can be perceived by
1
Answer: Edwin Aldrin
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the consumer, and then communicate these to the consumer. Therefore, it becomes significant to identify what the relevant dimensions and benefits are, which prospective users will take into account when evaluating a product. Though we have brought up some of these dimensions and notions under a previous heading, at this point of the discussion our ambition here is to provide a deeper understanding of their relevance. The most commonly used dimension when positioning a product or a brand in the mind of the consumer is positioning by attribute. Attributes can be used by the company, e.g. in an advertisement, to position the product in the mind of the consumer according to the product's attributes or to change the perception the consumer currently holds of either the attributes of the product category or of a specific brand. It is important to note that perceptions that consumers hold of attributes often differ from the intended meaning conveyed by the company through his advertisements (Puth et al., 1999). It can be suggested that the company needs to determine which attributes (or factors) are perceived to be of value to the consumer for the product category, by carrying out a survey with the help of consumers. Once these attributes have been identified, the company may benefit by evaluating these criteria to determine its relative competitiveness. The identified attributes should, if present in the company's product, clearly be communicated through its advertisements (ibid). Besides advertising the identified attributes, the company needs to mention the product's differentiating attributes, since attributes that are explicitly referred in advertisements are perceived to be of greater importance to the consumer (ibid). Identifying the key attributes and choosing those where there is an advantage to be had – a bigger colour range, longer lasting, etc. – represents a good start to successful position a product in the mind of the consumer (ibid). According to
Theory
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Peter and Olson (1999), at least four other relevant dimensions can be identified; these are: - positioning by use or application: When and where is the product used? At what time and/or place is the product used? When and where are the moments of consumption? - positioning by product user: Who is using the product? How old are the users? It is a question of segmenting the market the company is serving. - positioning by product class: In which product class do you want to compete with your product or brand? How attractive is the product class you want to position your product? - positioning by competitor: Which are your competitors? What do they offer? What do they stand for? The major purpose of this type of positioning is to convince consumers that your product is better than the market leader on important attributes. However, this is first of all a question of which brands and products the company considers competing with.
3.4.3 Brand image and perceptional maps
The step from positioning a product to positioning a brand is not a big one, though it might seem so initially. A brand and its associated image have the power to influence the perception of a product. The importance of brands when positioning a product in the mind of the consumer has been shown by Allison and Uhl (1964). In their research, they have shown that an average American consumer, for example, is unable of detecting differences in taste between
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ordinary beers, even if his (or her) favourite beer is included in the selection. In contrast, when the lids and labels are put back on, the individual finds strong differences in flavour between the beers. These results, observed for many other products all over the world, clearly show that for most people, the support of the brand image and all the meanings associated with it (often related to its history, values, personality, etc.) is necessary. Such a conclusion underlines the perceptions of a given product or service - in short, how it is positioned in the mind of the consumers. Thus, positioning refers to the deliberate attempt made by a company to design its offering so that it occupies a meaningful and distinct position in consumers’ minds (Ries and Trout, 1982). While the positioning of a brand corresponds to a managerial decision, the brand image describes a perceptional outcome. Ideally, of course, the two should perfectly match but this is seldom the case and that is why it is necessary first to further explain the use of perceptional maps, in order to prepare positioning decisions (Peter and Olson, 1999). Such maps are, as previously discussed, a way to investigate how to position a product. A positioning map is a visual depiction of consumers’ perceptions of competitive products, brands, or models. It is constructed by surveying consumers about various product attributes and developing dimensions and a graph indicating the relative position of competitors. Positioning maps can give a company a sense of how their brands are perceived by consumers relative to competitors and suggest positioning strategies (ibid). In other words, a perceptional map is a tool adopted by a company and market research in order to visually depict consumer perceptions and “prioritising” of brands and their perceived attributes (Dibb and Simkin, 1991). The map reveals not only the various brand images but also which products are close to each other and therefore in direct competition, at least in the minds of consumers (Dubois, 2001). This implies that the product
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importance of branding, packaging and imagery in influencing consumers’
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offerings must be perceived by the selected target customers to have a distinct image and position vis-à-vis its competitors (Dibb and Simkin, 1991). In the figure below, 3.6, follows an example on how a perceptional map may be used.
Traditional Grand Hotel Wellington Hotel Hotell Diplomat
Low Price
Strand Hotel High Price Sheraton
Figure 3.6: Positioning for exclusive hotels in Stockholm, Dotevall (1997), p. 67
Modern
To sum things up, the perceptional aspects of positioning emphasise the view of the consumer. As has been indicated, there is a relationship with strategic positioning through the dimension of brand, which has been touched upon previously in the discussion of problem.
“What do these trends in perception imply for a company such as Unilever? How can we translate them into products? The answer to this question is actually quite simple. We can't directly translate them into products. We should ensure that the perceptions are radiated by brands and support this with our products. […]” (Antony Burgmans, 2001, CEO Unilever NV)
In the next section of our frame of reference, we will unite the strategic view of positioning with the perceptional view on positioning through the dimension of
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brand(ing) and brand image. It is at this point of our discussion that the role of the brand comes fully into play.
3.5 Branding
Branding is a fleeting concept with many interpretations available. However, for our purpose, a brand can be seen as a uniting feature between the supply of the company (tangible products) and the demand of the consumer (intangible preferences/purchasing habits). We will attempt to establish the relation between these two sides in the following discussion. In order to do so, we will try to put brand into its context of positioning.
Theory
Figure 3.7: The current discussion focus
Company
Customer
Above all, three notions of branding will help us to establish these relations, namely brand extension and its relation to brand image, and risks involved with brand extension. The first notion in this context is becoming more and more relevant due to financial (strategic side) and cognitive reasoning (perceptional side). The importance of the second notion - brand image - has already been pointed out in the previous heading. In this section, however, we will explore the implication of this notion on both the strategic and perceptional side through the brand and its context. To balance the discussion on branding, we will also take
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up its associated risks as these may influence overall positioning, but may also open the discussion of growth into other directions, leading to alternative options for growing.
3.5.1 Branding as a means to connect strategic positioning with perceptional positioning
Branding could be seen as a means to connect strategic positioning with perceptional positioning. On the one hand, according to the argument of source, (1996), the concept of branding has relevance for a company when positioning its products vis-à-vis its competitors. In this sense, the concept of branding can be used as a tool to position products in the market. As we argued above, the usage of tools is a common method when viewing strategy from a classical view, as we tend to see it. On the other hand, the concept of branding has relevance for a company when positioning its products in the mind of its consumers. In this sense, the immaterial nature of the concept of branding (Kapferer, 1994) comes into play. Taken together, branding can be seen as a means to connect strategic positioning with perceptional positioning. In doing so, both aspects of branding taken together serves the ground for our current discussion, as will become more apparent in the next section here below.
3.5.2 The Brand and Its Context
What is a brand? More importantly, how may a brand be used in the context of positioning? Since those two questions are related, we will first deal with the first question and then turn over to the second one. There are many interpretations and definitions available regarding the brand. For instance, in the
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strict legal sense, the brand has been defined as the following in 1§ VmL (varumärkeslagen) of the Swedish Intellectual Property Law. Translated into English, the law states: “A brand may consist of all signs which may be reproduced graphically, especially words, including personal names, as well as package provided that the signs can distinguish goods which are rendered available in one business operation from those which are rendered available in another.” (1§ VmL, our translation) The legal definition of a brand is not only one that is rendered available. Marketing scholar Kotler (1996), for instance, defines a brand as ”a name, a term, sign, symbol, or design, or a combination of those, aiming to identify a seller’s, or a group of seller’s, goods or services and to distinguish these from those of the competitors” (p. 444). Another scholar, Kapferer (1994), however, adds a difference in his definition of a brand, providing it with a meaning and value: ”a brand is not a product. It is the product’s essence, its meaning, and its direction and it defines its identity in time and space” (p. 4). This brief discussion serves to illustrate a few of the different views on brand that exist today. Taken together, they may provide us with an understanding of the possibilities of a brand. For example, the legal definition illustrates the vast range options from which a brand may be represented. Kotler’s definition emphasises the identity and distinguishing function of a brand, whereas Kapferer’s points towards the immaterial aspects of a brand, where meaning and value are attached to the brand. As Melin (1999) informs us, the historical origin of branding is in marking identity: the etymological origin of branding comes from burning and
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figures, letters, numbers and the shape or outfit of a goods or its
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brandishing specified marks on cattle, which in this manner distinguished them from other cattle, by identifying their possessor. From a positioning point of view, what is of concern for our interest is how branding has been used, besides marking identity. Bermitz et al, (1995) mention, for example, that in the 13th century, King Magnus Lagaboter of Norway declared that shields should be marked with the insignia of the producer, so that that he (or she) could be identified and held accountable, if the shield turned out to be of inferior quality. The aim was to reduce the risk of poor quality products and to single out skilled producers from lesser skilled ones, by giving the skilled ones admission to supply the king’s forces. In this argument, we note two of the general characteristics of a brand that, when taken together, have a uniting feature on positioning. First, as Hayek (1948) notes, the reputation that follows with the official mark of the producers can be used a mechanism to insure quality, or another notion, to the consumer and his perceptions. In other words, the brand can be used to reduce risk when purchasing a product; the brand attaches meaning and value as Kapferer (1999) has discussed. Second, as Bermitz et al (1948) have indicated, a producer may create a more favourable position strategically relative to other competitors, due to the positive associations that are linked to the reputation of the brand, as for instance through being a royally appointed and quality approved supplier. Hence, as has been argued previously, a brand can be seen as a means to connect strategic positioning with the perceptional one, or as Edward Tauber (1988) argues: “Brands have become the barrier to entry, but they are also the means to entry.” (Edward Tauber, p. 29)
Today, from a strategic as well as a perceptional point of view, all actions undertaken with a brand have to add somehow value to the company in order to facilitate its striving for growth. However, any attempt to measure the value of a
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brand meets with two problems. The first problem being that the value which the brand offers must be seen from both the company’s perspective and that of the consumer. While from the company’s perspective, different quantitative variables can be used (profits, market share, price differentials), with the consumer, the variables to be quantified are generally qualitative in nature, such as associations, preference and satisfaction. (Calderon et al, 1997). The economic literature has viewed brand reputation as a mechanism used by firms to insure quality to consumers (Hayek, 1948). This argument is made by Klein and Leffler (1981), who assume that consumers cannot observe quality prior to purchase and are forced to accept the company’s claims. The company might want to associate a known brand with a new product to insure its quality, as has been previously discussed. If the quality of the new product turns out to be low, the established brand’s reputation is diminished. The company forfeits its bond to the consumer through loss of future profits. Interpreted into our terms, the company weakens its overall position relative to the consumer in this manner. The use brand of as an agent for growth is, however, an option that is not available to all actors in an industry. According to Wernerfelt (1988), “brand extension will be used by high-quality producers but not by low-quality producers. Brand extension works because all products under the [company’s brand] contribute to the brand’s reputation. The joint estimate of quality is then used to evaluate each product. By selling a low-quality product under a highquality brand name, the reputation of the brand is tainted and sales of the highquality product are reduced.” (p. 463). Interpreted into our terms, the company loses both on its strategic and perceptional position if using the brand unwisely.
Theory
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Leaving now the strategic discussion on brand reputation or image, and shedding more light on how the consumer perceive an image of a brand, it could be argued that brand image refers to the organized set of perceptions consumers have formed about the brand, as has been previously discussed. If briefly reiterated, brand images are important because consumers use these mental representations to distinguish one the offers and associations of a brand from another; they are used as a basis for their purchasing behaviours. In marketing and consumer behaviour, perceptions are reality, so that brand images are of primary concern to marketers. Brand images are formed as consumers receive information from the media, from other consumers, and from personal experience with brands. In short, the perceptional positioning of a new product influences also the image of the whole brand. (Foxall and Goldsmith, 1994). This, in turn, has implications on the options available of growing with brand as an agent, which will be elaborated upon in detail here below.
3.5.3 Brand extension
Of the many options of growth available, firms are often tempted to use established brand names to facilitate entering new markets. In doing so, two slightly different but often not totally agreed upon terms are utilised by scholars: line extension and brand extension. The former means that a current brand name is used to enter a new market segment in its product class, whereby brand extension implies that a current brand name is used to enter a new product class (Aaker and Keller, 1990). In our thesis we focus on brand extension, as it has more implications on the overall brand from a strategic point of view than a simple line extension has. However, the boarder lines are often blurred. Irrespective of how you look at the two terms of brand and line extension, the most real and marketable assets of many firms are the brand names that they
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have developed. Turning back to our options of growth discussion, brand extension is a promising strategy for the firm looking to grow by exploiting its assets. Thus, one strategic growth option is to exploit that asset by using it to penetrate new product categories or segments. Another option is to acquire an independent firm with a brand name that can provide a platform for future growth via brand extensions (Aaker, 1991). Our focus is on the former option
Theory
for growth. Brand extensions, the use of a brand name established on one product class to enter another product class, have been the core of strategic options for growth for a variety of firms, especially during the past decade, as Aaker (1991) has argued. In mature markets, differentiated competing brands will tend to assume relatively stable market shares as consumers tend to purchase the same brand (or patronize the same store) time after time. This pattern of buying the same preferred brand each time a product is purchased is called brand loyalty (Busch and Houston, 1985, p.221). According to Tauber (1981), companies with products in mature markets, like for instance in our case, would be tempted to consider brand extensions as a way to enter more profitable markets. We can continue to advocate brand extension as a way to enter new markets primarily because of the following argumentation: Customers strive to reduce risks in their daily purchasing decisions, as argued previously. In order to do so, they preferably buy well-known brands with good reputation because they can be sure to get good quality. Other reasons include that they have already formed previous associations with the brand, they buy products from a specific brand due to old habits, due to name recognition, or because they can rely on the products offered under a specific brand. All in all, to launch a new product under an already well-established brand has undeniable advantages (cognitive/perceptional reasoning). On the other hand, to launch a
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new product under a new brand can be extremely costly. Studies made in some consumer markets mention introduction costs of approximately $ 50-150 millions (Tauber, 1981). In contrast, the use of an established brand name can substantially reduce the introduction investment and increase the success probability (financial/strategic reasoning). In specific, the practise of launching new products under an existing brand name, in other words brand extension, leads to a certain relationship between the products. The brand name and all its belonging associations to works here as the linking element. Thus, the result is called brand extension - the practice of labelling more than one product with a single brand name - and is commonly used by multi-product companies in a variety of markets. Most of the literature on umbrella branding is concerned with its initial effect on new-product introductions. An umbrella brand can help consumers decide whether to buy a new product when quality cannot be observed prior to purchase (Klein and Leffler, 1981, Wernerfelt, 1988). On the other hand, as already mentioned, when looking for reasons of umbrella branding for the company, umbrella branding reduces the cost of introducing new products (Karger, 1981, Tongberg, 1981, Tauber, 1988). Another advantage arising out of umbrella branding is linked to consumer desires and needs. More consumers than ever are switching brands and trying products they have never used before (Quelch and Kenny, 1994). Brand extensions try to satisfy the desire for “something different” by providing a wide variety of goods under a single umbrella brand (ibid). With such extensions, companies hope to fulfil consumers’ desires and needs while keeping them loyal to the brand franchise (ibid). To provide our discussion with a certain amount of delicacy, we should not deprive the fact that there are different degrees of brand extension / umbrella branding recognised in literature. Melin (1999), for example, has identified three strategies that are
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available for brand extension, namely mother branding, mother-daughter branding, and daughter-mother branding. Each of these strategies has its respective advantages and disadvantages, which make them more or less suitable depending on the context in which they are to be implemented in. In the decision of what strategy of brand extension to pursue, a company needs to make a judgement between flexibility and cost efficiency, which is illustrated in
Theory
Daughter and mother brand Individual brands Brand extension Low Cost Efficiency High Flexibility 63
figure 3.8 below.
Mother brand
Mother and daughter brand
High cost efficiency Low flexibility
Figure 3.8: Spectrum of Brand Extension, Melin & Urde (1991), p. 108
Since each of these strategies have their implications on positioning, we will in the following shortly characterise each of the three strategies available. Mother brand What characterises a mother brand strategy is that all the products of a company are sold under a common brand name. Hence, the notions of family and umbrella brands are often used synonymously with mother branding. The biggest advantage with a mother brand strategy is that it is simple and cost effective. By using only a single brand, all the products reap the effects of the
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investments made on market communication. Furthermore, as with umbrella branding, the mother brand strategy creates good conditions for introducing new products through brand extension. This possibility, however, includes a certain risk, since experience shows that a brand may be abused by the extension. The main disadvantage of the mother brand strategy is that it makes it hard to individualise each product. Thus, this strategy runs the risk of becoming rather rigid (Melin, 1999). Mother-daughter brand What characterises this strategy is that single products or product lines may be launched under a daughter brand, which paves the way for certain independence in relation to the mother brand. This independence is only allowed with the limits of the overall positioning of the mother brand. During the implementation of a mother- and daughter strategy, the mother brand serves a pushing or supervising role. Thanks to the solid reputation of the mother brand, the introduction of the daughter brand is facilitated. This possibility of launching new brands in a time- and cost efficient manner is perhaps the primary advantage of the mother- and daughter brand strategy. A disadvantage with the strategy may be the fact that two brands are used to characterise a product, which under unfortunate circumstances may give rise to confusion among the consumers (ibid). Daughter-mother brand What characterises this strategy is that the focus is on the daughter brand, whereas the mother brand generally speaking only has a supporting function and can be said to act as a guarantee. With the help of this strategy, a company may introduce a number of brands with different positioning, which are loosely held together by a mother brand. The primary advantage of the daughter - and mother strategy is that it allows a high degree of flexibility. Moreover, this strategy is
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relatively cost efficient, considering that the market communication builds up both the mother and the daughter brand. In order to ensure a success for the strategy, it is deemed necessary that the daughter and mother brand are not too differently positioned from one another. The obvious risk is that they otherwise are experienced as unrelated to another, which in the long run may create a confused image of both brands (ibid). Apart from using one of the three strategies for brand extension, there is another strategy available connected to branding but going beyond an extension of an already existing brand, namely the setting up of an individual brand. In doing so, however, the advantages of brand extension discussed earlier in this chapter are not any longer valid as it is much more resource intensive and cannot profit from previous associations connected to an existing brand. Each product is marketed under an own brand, without any links to a mother brand and each brand has an independent roll. On the other hand, the most significant advantage of using individual brands is its high degree of flexibility attached to this strategy (ibid.).
Theory
3.5.4 Risks involved with brand extensions
At the same time as brand extension – as one promising option for growth – implies positive opportunities to introduce a new product on a market to a relatively low cost and with less marketing efforts than what would be needed for a new product with a new brand name, it also brings along risks that we should bear in mind. As Aaker (1991) informs us, a brand name can fail to help an extension, or (worse) can even create subtle – and sometimes not so subtle – associations that can hurt the extension. Worse still, the extension can succeed, or at least survive, and damage the original brand equity by weakening existing
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associations or adding new, undesired ones. Because the extension can dramatically affect a key asset (the brand name), both in its original setting and in the new context, a wrong extension decision can be strategically damaging. Therefore, to balance the discussion on brand extension, major risks and protection alternatives against these risks are illustrated below. Effects on profitability of the entire portfolio When a new product is considered a candidate for extension, the firm needs to determine how the use of extension will affect the profitability of the brand’s entire portfolio of products. The brand name is a factor that enters the demand function (perceptional positioning). As such it can affect the perceived substitutability of the new product for the others. Using extension might lead consumers to believe that the new product is a substitute for another product in the brand’s line. A consumer’s propensity to try the new product will be affected by this perception. A firm will be reluctant to introduce a new product that will simply cannibalise its established products. This is particularly true when brand extensions diffuse rather than reinforce a brand’s image in the eyes of the consumers (Sullivan, 1990).
Brand dilution While a new product launched under an already well-known brand receives goodwill from the family brand, the new product will at the same time affect, and perhaps dilute the family brand. (Leong & Ang, 1997) A product is usually associated with certain attributes, and if these attributes are not found in the extension product, the core brand may lose it’s positioning. (Kotler, 1996) When a brand extension brings these kinds of consequences, called brand dilution, the brand name’s meaning to consumers changes. The effect may of course be
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positive in the case of a successful brand extension, and lead to increased sales for the core product, but often it has a negative effect Poor fit Sometimes the brand name does not succeed to transfer the associations that the core product is recognised for to the extended product. This may occur when the customers may not find the benefits in the new product that they normally associate the brand with, and thus, the brand name fails to help the extension (Aaker, 1991). Stagnant category demand Brand extensions rarely expand total category demand. People do not eat or drink more, wash their hair more, or brush their teeth more frequently simply because they have more products from which to choose. In fact, a review of several product categories shows no positive correlation between category growth and line extensions (Quelch and Kenny, 1994).
Theory
customers do not feel comfortable with the brand on the new product. The
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4
Empirical Study
The aim of this chapter is to present the reader the material and insights that we, the authors, acquired from our empirical study. Initially, we will briefly provide the context in which we conducted our study: we will outline the situation in the food industry and provide a historical background of Unilever and of Knorr. This will be done through collected secondary data, as for instance financial statements, homepages and articles. Thereon, we will account for the primary data that has been gathered, as based upon the interviews we conducted with key representatives at Unilever/Knorr and with the consumers. In order to provide a more vivid recapitulation of the answers given by the respondents, we have incorporated quotations in our text that illustrate thoughts and images held by the respondents.
4.1 The empirical context
The food industry is widely and fuzzily structured with many different actors appearing within its many and diverse fields. The customer may choose from differently processed products for consumption, depending on the willingness to process the food and on the time available for preparing it. In other words, the customer may choose from a wide array of food, ranging from unprepared, semi-prepared to fully prepared food to consume. Among these types, there are different categories of food, ranging for example from chilled, dry, liquid food and so on. Within the semi-prepared and fully prepared foods, there is a wide proliferation of actors appearing in the industry; some of them cater only to local
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taste preferences, while others serve on an international level, trying to adapt to local preferences. On an international level, the two main actors could be argued to be the Swiss Nestlé and the Anglo-Dutch Unilever. These actors appear also in the Nordic and Swedish market, our main area of interest, in which they have grown into mainly through internationalisation and/or integration. Local and regional actors in the Nordic and Swedish market appear in the form of for instance Norwegian Orkla Foods A.S., owner of Swedish Procordia Food AB, which in turn is owner of a portfolio of well-known Swedish brands, as for instance Felix, Bob, Ekströms, Önos and Findus. Among these, various niched with our case company, Unilever (www.afv.se, www.di.se, www.bbc.co.uk).
Empirical
players, no-name, and private labels owned by the retail co-exist simultaneously
Unilever, our case company, is an international business that was formed in 1930 following the merger of Dutch margarine company Unie and British soap maker Lever Brothers. The legal entities are Unilever PLC, based in London, and Unilever NV, based in Amsterdam. The twin parent companies have the same directors and operate mostly as single entities. Joint CEOs of the whole corporation are presently (December 2001) Anthony Burgmans and Niall FitzGerald. In the year 2000, the company reported a turnover of $ 44 254 million, an employee force of over 295 000 people, and a presence in over 150 countries. Unilever sees itself as a multi-local, multinational company, competing with the Swiss Nestlé and the American companies Procter & Gamble and Colgate-Palmolive on an international level, as well as a multitude
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of various regional and local actors. Unilever is divided into two divisions, Foods and Home and Personal Care. Moreover, the divisions are organised into regional business groups. Unilever focuses on 14 product categories within Foods and Home and Personal Care. Each category is composed of well-known brands like for instance Lipton tea, Dove soap, Magnum ice cream and Knorr (www.unilever.com, www.bbc.co.uk, www.di.se).
Knorr, our object of illustration, was founded in 1873 by the German Carl Heinrich Knorr. He recognised as early as 1873 the opportunities for convenience foods and began testing packaged soup mixes made of flour, dried vegetables and seasonings. By the early 20th century, the Knorr family business was expanding its presence in Europe. By 1957 Knorr was operating in eight countries. Today, Knorr products are sold in 87 countries around the world. In October 2000, Unilever became the new owner of the Knorr brand following the purchase of Bestfoods. Knorr is the largest brand of the Unilever company (www.knorr.com). It continues still in its original tracks, serving the market with dried soups, dried pasta meals, dried bouillons, spices and similar products. Today, the company is divided into Food Service (directed towards chefs and large-scale food servicing institutions) and Retail (directed towards retailers and consumers at supermarkets), where each of the divisions attempts to service various parts of the food industry. As part of the overall Unilever “Path to Growth”-strategy, Knorr has, among other things, examined the possibilities of the concept of “Soup lollipop”. We, the authors, were given the opportunity in contributing to the exploration of the possibilities of the concept.
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As part of our thesis, we were offered the opportunity to conduct interviews with Patrick Camele, Director Food Service, Leif Nilsson, Nordic Marketing Director, Niklas Andersson, Nordic Brand Manager Knorr, and Henrik Blach, Nordic Marketing Manager.
4.2 Presentation of Empirical Data
In the following, we will present and build our empirical findings around three (see figure 4.1 below). In specific, the three levels in question are food industry and trends in consumption; the company (Unilever) and the brand (Knorr); and product level (Soup lollipop). We believe that this spectrum of levels provides a good connection to the structure and discussion pursued in the frame of references: while issues of strategic positioning are most pronounced at the macro level of food industry, issues of perceptional positioning come mainly into play at a micro level of product concept. Thus, on a macro level our empirical findings are based more on the interviews with managers at Knorr/Unilever, while with increasing perceptional issues (micro level) the findings from our interviews with consumers come more into play. In other words, the findings from our interviews at Unilever and with the consumers are in a way intertwined, with only their stress and content being different. Additionally, our two final questions in the questionnaire were aimed to acquire an insight of the interplay between the second and the third level, in the aspect of how they influence the perceptions of the overall brand. This interplay forms section 4.2.4 of our empirical material.
Empirical
levels, starting from a macro level and moving gradually to a micro perspective
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Strategic Positioning Macro level 4.2.1 Food industry and trends in consumption 4.2.2 Unilever and its Knorr brand 4.2.3 Product level and Soup lollipop Micro level Perceptional Positioning Figure 4.1: Three levels of discussion, our own creation
4.2.1 Food industry and trends in consumption
To enlighten us concerning the general situation in the food industry, we asked among other things, the managers at Knorr/Unilever about how they would describe the situation today; how it will look like tomorrow; and what they are going to do to meet this challenge. The managers at Unilever’s Knorr brand put forth several aspects about the food industry from an overall perspective. The food market is, when looking at the value aspects, a growing market, as manufacturers have to build increasing value into the products due to changing trends in consumption. However, the volume is hardly changing, because people do not eat more. It is rather a question of how people are eating. The suggested answer is that preparing meals at home is decreasing at the same time people are buying more ready-to-eat products. Our respondents made the point that people prepare less food from
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scratch. Instead, they buy rather more semi-prepared food, more deep frozen one, more finished products, and so on: “…in 1950 the average time spent in preparing the food was 2½ hours a day. In 2005 the average time will be about 15 minutes” (Leif Nilsson, Nordic Marketing Director, our translation) There is a change towards ready-to-eat products and a transition from eating less at home to eating more out-of-home. Overall, the food industry and its products. The European food industry has gone through several changes during the last 45 years. Many factories have been closed and various mergers and acquisitions have taken place. This trend is not completed yet. The food industry, as seen from the production side, has still to go on to consolidate its assets in order to increase its margins due to an enormous cost pressure arising from the retail side. Retailers want and need increasing margins, whereas cost reductions can only take place along the supply chain or at the production side. With fewer locations, it is possible to produce much cheaper because of economies of scale and a higher degree of plant utilisation. That is why in the next ten years the food industry will undergo a continuing splitting and merging of companies. “Several mergers and acquisitions have taken place. This trend however is not over. In the food industry, more integrative activities must take place in order to increase the margins… the cost pressure is enormous, even from the retail side… Cost reductions can only be squeezed out of the supply-chain or the production side […] We will
Empirical
various markets can be characterised by an increasing value built into the
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in the next decade experience more mergers and so on…” (Patrick Camele, Director Food Service, our translation) However, companies cannot consolidate assets and businesses in accordance to how they want to because of the restrictive EU rules of competition. At this point, our interviewees saw, above all, opportunities still to merge with the local food industries, in order to generate synergies. On an international level, it is assumed that the process of integration is almost completed, but on a local level this process will probably go on. “[For example] Unilever bought Bestfoods… and in certain markets Knorr was in direct competition with a local Unilever producer, in Sweden for instance through the case of Blå Band... Unilever had to sell Blå Band… because in certain product segments it would have held a 100% market share in bouillon and soup…” (Patrick Camele, our translation) The managers we interviewed at Unilever’s Knorr brand made another significant point concerning the changing structure of the food industry. A decade ago, the manufacturers and suppliers of brand products in the food industry enjoyed a very strong position against the retail, with strong brands used both as door openers and as a means to reap premium prices from the various consumers. “Ten years ago, the deliverers of brands were kings. A strong brand opened the doors to everything…” (Niklas Andersson, Nordic Brand Manager Knorr, our translation)
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However, the situation today is quite different as the retail actors, as for instance ICA, KF and Axfood, enjoy a much stronger role than before, due to the launch of own private-label brands and products as for example ICA-handlarnas, Signum, and Diva, to name but a few. These private-label brands and products have taken market share away from suppliers of food related products. Moreover, they have raised the demands that brand producers have to meet towards the consumers, since the functional qualities have been raised almost to, or even equalled, the same level as the brand products. At the same time new trends in consumption arise, besides the one of using more prepared food, which is more convenient to cook. New and constantly increasing influences from abroad, as for instance Italian food in the 80s and Asian food in the 90s, have affected the preferences of the consumers. Products have been launched to meet these preferences, as well as the one of slimmer, healthier food. Overall, the respondents at Unilever/Knorr note a trend towards convenience and health. Moreover, the respondents noted there is an increasing interest for products that offer more than just functional dimensions, as for instance pleasure, fun or entertainment. “All together, the food industry is in a position right now where we have to consider all these things - and things are moving very fast: you can’t just keep on having the concept that you have today. Consumers are moving very fast and that’s what you have to think about when you are in the food industry.” (Henrik Blach, Nordic Marketing Manager) In order to meet the challenges of a changing food industry and new trends in consumption, the respondents answered that manufacturers have to produce and deliver more service solutions, more meal and snack solutions to the food
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service, which is consisting of for example restaurants, hotels, canteens, and fast-food businesses: “We meet the trend by working both on the food service and the retail side. Our way of meeting the trends is to increase the stakes in the food service side. We are counting on more growth on that side in the future than the other side, even if we count that it [the retail side] grows in value too” (Niklas Andersson, our translation)
“For our own part, it means a transfer of volume and value from the retail market to the food service market. This of course is a consequence of people eating more and more outside” (Leif Nilsson, our translation) Moreover, to meet the threat of retail’s own private-label products, suppliers of well-known brands have, according to the respondents, to be permanently more innovative and manufacture products at a better product quality than the retail with its own private-label brands. Companies like Unilever have to constantly develop their product range. They need to come up with new product concepts at a speed that the low priced brands and private-label products of retail cannot compete with: “Our role is to develop our product areas all the time, to constantly come up with news at a pace which the low-priced brands and the private-label brands of the retail cannot cope with” (Niklas Andersson, our translation) The fact that cost pressure from the side of retail is increasing in the future implies that manufacturers in the food industry also have to master their costs of
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production, according to the respondents. One way of cutting costs of production is, as previously mentioned, through achieving gains from economies of scale, which is done through mergers and acquisitions, i.e. buying and selling the product portfolio in a way that costs of production can be reduced due to large production quantities. The other way is to produce preferably only a few products at one production location so that the complexity can be kept low. “We must keep a firm grip on our production costs. One way of achieving this is through spin-offs and mergers and acquisitions, or to and… quantity” (Patrick Camele, our translation)
Empirical
pursue... a product portfolio… which combines a fit between costs
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4.2.2 Unilever and its Knorr brand
In order to acquire some empirical information on the status of the Knorr brand, we asked our respondents at Unilever what the brand Knorr stands for, in which segments it is represented, which the competitors are in the segments Knorr is present in, among several other questions. We also asked our respondents about the strengths and weaknesses of the Knorr brand and also the respective strengths and weaknesses of their competitor. We also requested information on what they think the opportunities and threats are in the markets Knorr is present in. Finally, we directed our questions towards the issue of brand extension. According to our respondents, the Knorr brand is represented in 14 different product segments, each of which contributes to the overall brand. This broad range makes it necessary that all products under the Knorr brand stand for similar perceptions and are perceived in accordance with the overall brand image. In Sweden, Knorr is mainly known through its bouillons, soups, and sauces. However, Knorr is also represented in for instance mixes for meals, dressing, dip and salad, in pasta-snacks, spices, and in other segments as well. Another aspect to be considered when positioning a brand and its products is, according to the respondents, the competition within market segments. In Sweden, Knorr faces competition from mainly Blå Band, due to the fact that Blå Band has in many segments, e.g. sauces and soups, a similar product range. Interesting, as well as significant, to notice here is that Blå Band was a former Unilever brand, as has been reported previously, but had to be sold because of EU rules of competition after Unilever bought Bestfoods with its brand Knorr. Otherwise, Unilever would have held almost a 100% market share in Sweden in some product segments. Other large competitors to Knorr in Sweden are, in a varying degree, the Findus brand, Arla, Uncle Ben’s, and all private-label
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products from the retail, depending on which segment we are looking on. In a broader sense, Knorr’s competitors are convenience food producers within the dry, liquid, chilled and deep frozen area. The fact that Knorr is a strong, worldwide-represented brand is at the same time both a strength and a weakness, according to our respondents. It is a strength because Knorr enjoys a high degree of brand recognition worldwide, strong core competencies, manpower, and financial possibilities. On the other hand, this is also a weakness, because Knorr cannot respond quickly enough to local overall presence. Each new product introduction has to take place within the overall brand strategy. This makes Knorr slower than local competitors and more inflexible in its actions. Local competitors can focus better to local customer and consumer wishes and preferences. Moreover, from our respondents we have acquired some further findings concerning the strengths and weaknesses of the Knorr brand. Beginning with the former, Knorr is considered to be very trustworthy and, furthermore, characterised by high quality. Its logo is well known all over the world. Its products offer a high degree of convenience for their consumer, which makes preparing meals easy. Knorr is represented in a broad range of product segments that makes Knorr an important assistant in the kitchen. “Knorr is very trustworthy… [it is] is a very strong brand, a quality brand people can believe in. We are seen as a brand, which can cover a lot of different issues. You can use Knorr from scratch-cooking to ready to eat… we have some strong colours that make it easy for consumers to identify us in the shops; all together it is a very strong brand and there are a lot of ways to build it even stronger in the future.” (Henrik Blach)
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competitors, because it has to take care not to weaken, dilute or damage its
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“The strength of Knorr is that it is well known… [producing] goods with a high quality image and with this it is understood value for money” (Niklas Andersson, our translation)
“The strength of Knorr is that it is a global brand. You can find Knorr in every corner of this world. Even in Asia you can find the Knorr logo…. with the same flag but with Asian characters on it. In other words, you can recognise Knorr [everywhere] and that is the main strength of Knorr: the worldwide presence… Another [strength] is that that there is no meal prepared in this world without Knorr is present somehow … A further strength is the high innovation rhythm.” (Patrick Camele, our translation) On the other side, a strong, worldwide brand like Knorr has also its weaknesses. Knorr is seen more as a functional brand with weaknesses on the emotional side. In the future, the brand managers of Knorr have reported that they need to ask themselves how they can make Knorr more of an emotional kind of brand, revolving more around the needs, desires and enjoyment of the consumers. Emotional perceptions have to be built into the communication somehow. This has to be incorporated into the building of the brand, too, affecting in particular the potential concepts Knorr considers launching in the future. In general, Knorr is seen as a very traditional brand, even a little bit boring, firmly stuck in the dry technology business. “Probably, Knorr is seen as a very functional brand… maybe a more functional than an emotional brand” (Henrik Blach)
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“The weak sides we have, as I see it, are two: first, that the brand carries with an association which might be perceived as very traditional, and maybe to some extent, even conservative. If you set a scale ranging from a modern brand to a traditional one, then maybe Knorr would end up in the traditional side… This might sometimes be a weakness when trying to reach younger consumers… Second, the brand might have strong ties to dry technologies, which is a restriction when developing technologies and so on…” (Leif Nilsson, our translation) As it is not enough to look only at strengths and weaknesses of the Knorr brand, we asked our respondents also to comment on the strengths and weaknesses of Knorr’s main competitors. Beginning with Blå Band, their key strengths are its Swedish approach and its perception as a strong Swedish brand. This gives them the possibility to focus completely on the Swedish market and on the Swedish habits of consumption. Like Knorr, Blå Band is seen as a very trustworthy quality producer. On the other hand, its weaknesses can be said that Blå Band is also seen as a very traditional brand, even as a little bit boring, not doing anything new for the consumer. Its product range is not very broad and its innovation potential is lower than for example Knorr’s, because less manpower and resources are available. Moreover, Blå Band is very much considered to be in the dehydrated business, which according to our respondents would cause them large difficulties when moving the brand into other areas, contrary to what Unilever could do with the Knorr brand. “Blå Band is really seen as a strong Swedish brand. This is a strength because Blå Band is also seen as trustworthy in Sweden. On the other hand, it is also seen as a very traditional brand. It is a little boring and really not doing anything new for the consumer. And I also think
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that Blå Band is very much considered to be a dehydrated brand or in this area. I think they would have very big difficulties of moving the brand into other areas which we think we can do with the Knorr brand.” (Henrik Blach)
”Blå Band has also a weakness because it is perceived as far too traditional. Knorr are perceived as a little more exciting, even though they are still a bit boring… but Blå Band are a bit further out on the scale because of the traditional product range and that it is a bit more Swedish. So this being Swedish is both an advantage and a disadvantage for Blå Band” (Niklas Andersson, our translation) Another competitor, Findus, is very strong in the deep frozen business and is considered as a more modern brand than Knorr. As the Norwegian giant Orkla Food owns it, it enjoys a high innovation potential and may launch new products at a frequent pace. Hence, according to our respondents, Findus seems as a bigger threat than Blå Band, because with the right strategy it could go into more competitive activities against Knorr in the future. Findus could build up a strong position in the convenience part within the chilled and frozen area. On the other hand, it is believed that Findus will probably not go into Knorr’s dehydrated business. Another weakness of Findus is its relatively weak brand, its lower brand recognition, and its markedly more blurred brand profile compared with for instance Knorr or Blå Band. “…in Sweden it is only the Findus brand that is within deep frozen and it is quite a strong brand and it is considered also as quite a modern brand. Findus is a bigger threat actually than Blå Band….” (Henrick Blach)
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Like Blå Band and Findus, Arla Foods is another large and well-known competitor to Knorr in Sweden. Its core competencies lie in chilled dairy products, where it has taken market share away from Knorr within the soup and sauce business. Arla’s key strength lies in is its dairy tradition, which always has been perceived as something fresh and healthy by the consumers. It is a company with a high innovation rate. On the other hand, Arla is limited due to its technological capabilities within the chilled foods business. ”… their weakness is that they are very limited in technology… they are restricted in the freezing room, which of course could be seen as both a weakness and a strength” (Niklas Andersson, our translation) Uncle Ben’s, another competitor of Knorr, particularly in the sauce business, is perceived to be a very modern brand with products that are following the trend towards exciting, exotic, foreign food like for instance Thai, Chinese, Indian, or other Asiatic tastes. Its weakness is the limitation to rice related products. “Uncle Ben’s is perceived as a very modern brand with very trendy products that are adapted to the present interest in Italian and Asian food. Their limits are that they are, on the other hand, very restricted in their offer. They have a very narrow portfolio of products” (Leif Nilsson, our translation) To a lesser extent, Santa Maria could be regarded as a competitor in the form of spices and similar food preparation products. They are perceived as a modern brand due to their focus on, for instance, Tex-Mex-food. They are however limited in product range.
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“They [Santa Maria] have a brand which has managed crossing over to a younger audience. They are perceived as very modern with the help of their Tex-Mex-food. They have a very young audience. This could be seen as their strength. Their weakness is… that they are not so much represented in that many product segments in the shop. Above all, they are tied to spices… and are perceived as a spice manufacturer” (Leif Nilsson, our translation)
Last, but not least, the managers at Unilever’s Knorr brand spoke of the strengths and weaknesses of the private-label products of retail. Their key strength is that they do not have to develop new concepts; they can just copy brand products, which implies that they have almost no developing costs at all. As a consequence, they can produce very cheaply and thus may offer a very low price towards the consumer. Furthermore, private-label products do not have to consider brand strategies and thus may move very rapidly. Their weakness is, however, that their quality is not always seen as very high and that they do not really have the brand power to use in the future. Their functional quality however has risen over the years.
In the next step, we asked our respondents what they think are the opportunities and threats in the markets Knorr are in. In their opinion, an opportunity in the future is undoubtedly that consumers want to use less time on preparing food and want to enjoy solutions instead. This trend is also reinforced by a decreasing knowledge of food preparation due to the fact that today often both men and women are working. This development gives enormous potential for convenience products and for putting more effort into the out-of-home business.
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“…the opportunity for us is to gain part of that because consumers want to use less time on preparing food and want to have solutions. That puts us in a very positive situation….” (Henrik Blach) Our respondents even include an opportunity of going into the chilled and deep frozen business with Knorr. However, this is seen also as a threat, as Knorr is very much perceived to be a producer of dry and dehydrated products, so far. A concepts due to its responsibility towards the overall brand strategy, which implies that local food manufacturers can concentrate solely on local consumer wishes and preferences without having to consider potential impact for the brand perception in other markets. Another threat may be that the markets Knorr are in, for example soup, sauce, bouillon, are not growing in volume or, even worse, in value. “The threat is if the soup market does not grow, or if it even is declining. The threat on the sauce side is the firmly rooted North European bread-and-potato culture... Influences from other cuisines… can in the long run pose a diminishing demand on sauce, as well” (Niklas Andersson, our translation)
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threat for Knorr can be that it is not fast enough with innovative product
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“A threat is that we are not fast enough in being innovative and that our competitors are able to build maybe more on Swedish way of living and thinking than we are, because we have to consider that we are a Nordic company, so we have to consider the Nordic trends. We cannot focus to a 100% only on Sweden. We also have to consider that there are three other countries in the Nordic[region]…” (Henrik Blach) Finally, we wanted to know from the interviewed managers which factors or thoughts could influence a decision to open the brand Knorr for all age segments. They told us that current socio-demographic changes could require thinking about repositioning, extending or opening the brand Knorr. For example, with increasing dual spousal participation in the work place, the consumer demands in the food industry might change towards more flexible solutions towards children. “It is so that often both parts, men and women, are working outside and coming home quite late, then there might arise an opportunity of coming in with some kind of snacking products that are quite easy for children to prepare” (Henrik Blach)
If children are coming home from school and their parent(s) are not at home, it could be a good idea to offer some kind of solution for them, something that children can easily and speedily prepare on their own. The only problem with this, according to the respondents, could be that parents tend to have a negative feeling towards products targeted to children, because they are not willing to buy something for their children that they consider not good enough for themselves. However, our respondents assume that the consumers would be willing to accept Knorr going into other types of products and using other
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technologies than only dry or dehydrated ones. Furthermore, earlier investigations have been conducted with the result being that of making soups for children, apparently, has not been motivated. The same has been done with making and preparing meals for children. From Knorr’s point of view, there was not a real market for making kind of foods for children, though to miss the children today might open up serious problems in the future. “For the time being, Unilever does not do anything in the children segment… Volume for the products plays a big part here… When producing for children, we have probably an age range of maybe 4-5 years. The mass of people who buy grown-up products is much bigger than for children. In other words, an investment in children products must first of all be motivated. On the other hand, if you neglect the children with the brand now, you will miss them later.” (Patrick Camele, our translation) According to our respondents, a brand extension or a launch of new products in a new segment has to be within the brand awareness or brand perception of its consumers. Before considering a brand as a candidate for extension, the company needs to assure if the extension fits into the brand strategy. In the extreme, this implies for example that Unilever cannot introduce a vanishing crème under its Knorr brand, whereas it should be no problem to introduce a soup, a soup for children, a liquid soup, a cooking apron, a spoon, and so on, because it takes place within the brand awareness and brand perception of its consumers.
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producing for grown ups, we have an age-range of 20-60 years. If
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“During the R&D-process for the product development, the product must lie within the brand awareness and perception of the people. You can stretch it a bit, even go to its boundaries, but you must never cross the boundaries.” (Patrick Camele, our translation)
Before launching new products under the Knorr brand, the manager needs to be aware what Knorr stands for and how it is positioned in the mind of the consumers, because launching products that do not fit into the brand awareness and brand perception of its consumers can damage and dilute the brand. Knorr does not exactly stand for the same attributes all over the world. There are some slight regional differences depending on which Knorr products are offered. In our test market Sweden, Knorr is seen as a trustworthy, convenient, family/household brand that is of high quality, has quite a wide assortment, good taste, good food, helps in the kitchen, gives ideas what to cook, is not a very experimental brand, and is within the dry food business. “Our vision is that Knorr will be a lot more of a broad cooking brand (”matlagningsvarumärke”) in the future, which emanates more emotional values than it does today…. emanating more of the joys of cooking” (Niklas Andersson, our translation)
Today, Knorr is actually seen as a really functional brand. What is still missing is to build emotional values and enjoyment of preparing meals into the brand perception of Knorr.
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The consumer’s views on Knorr In order to gain some views about Knorr from another perspective, we put forth some Knorr-related questions to consumers, in order to acquire an insight and understanding of how well known Knorr and its products are, and what consumers think about Knorr products and its prices. Most of our respondents perceive Knorr as a brand offering bouillons (all of our 22 respondents affirmed), sauces (almost all noted a recognition), spices (three (almost seven out of ten). Other Knorr products seem to have clearly less brand recognition among Swedish consumers. When asked which Knorr products they use the answers were above all bouillons (three out four), sauces (two out of three), and spices (less than half). Our respondents have predominantly very positive associations with Knorr. More than half associate Knorr with good/high quality products. This mainly applies to their bouillon. Knorr is often seen together with or slightly behind Blå Band as a quality leader in the market, which allows for a slightly higher price, compared with other players in the market. However, even though the respondents often say that they buy Knorr bouillon, they also state that they prepare most of the other products Knorr by themselves rather than using what Knorr offers. When asked about the price of Knorr’s products, our respondents answered either that they have never thought about the price of Knorr’s products (in less than four out of ten cases) or that they think the price is ok and you get value for money (one out of four respectively). The people we interviewed have been aware that Knorr’s products are not the cheapest ones available. However, the
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out of four noted a recognition), Knorr Koppen (seven out of ten) and soups
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perceived quality of Knorr’s products seems to offset and justify the price disadvantage. It is difficult to summarise the question concerning how the consumers perceive Knorr’s prices in comparison with their competitors, since almost three out of four consumer respondents have no view about this topic. One out of ten respondents perceive Knorr’s prices as ok and less than ten percent of the respondents stated that Knorr is more expensive than most of the other competitors.
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4.2.3 Product level and Soup lollipop
In order to acquire an insight into what factors are considered significant when developing an existing product or innovating a new one, we asked our respondents at Unilever about which product attributes they prioritise when developing new products or product concepts. Furthermore, we requested information on which factors influence the decision to set a price, and if and how they investigate customers’ wishes, preferences and attitudes toward an imaginary product concept before developing a new product. Thereafter, we competitors, advantages and disadvantages, age segment, price, impact on Knorr’s brand image and attributes). Putting some of these questions about the Soup lollipop also to a random sample of 22 consumers contributed to gain insight into our case from the perspective of the consumer and the perceptions they have in mind. A match between what managers think and consumers want is then necessary when successfully positioning a new product in the market. According to our respondents, when developing new products, it is important for a manufacturer in the food industry to investigate what the consumer wants and needs. Primarily, when focusing on food, the most important product attribute is taste, because this is the main reason why consumers buy a product. But at the same time, taste is an attribute that is focused on quite late in the process of developing a new product, due to the fact that it is relative easy to add to the product. ”…considering the product area which Knorr is in, then the taste of the product will be a very important aspect… however, during the process of developing a new product taste is brought in at a fairly late stage. Taste is something you can arrange relatively easy. That is not
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asked them more in detail about the Soup lollipop (concerning the ambitions,
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the great obstacle… rather… in the process of coming up with a new product, we always start from which gaps that appear in the market… from where we judge that there is a potential from the consumer’s perspective.” (Niklas Andersson, our translation)
“First of all, we need to look from the consumer’s point of view; what is really the questions from the consumer and what does he want, what is he looking for. So they [the potential products] have to be convenient; […] we have some quality standards objectively which we have to meet also [with the product]… and then we also have some pricing standards that we also have to meet” (Henrik Blach) The development of new products requires also an inquiry into and a scan of the current trends in consumption. In other words, the need of following current trends in consumption drives the product development in the food industry. This, in turn, requires an analysis of eating habits, of purchasing statistics from retail shops, and from all other information sources available. Besides the three previously mentioned main trends of convenience, health and entertainment/pleasure/fun, the consumer of Knorr products also expects some quality and pricing standards that he or she associates with all the products offered under the Knorr brand. “Leading a trend is something which does not pay, because there is always the risk that you arrive before the trend and thus do not receive the proper value for what you are doing. You don’t get any pay off that way on your investments. Instead, you have to time the trends when they are broad enough … to carry the volume and the costs of development… Timing is a very important dimension […]. We
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try to keep pace with the general trends and developments…Through various channels we receive information. There are a lot of channels which, when taken together, create a base for an evaluation [of what to do]” (Leif Nilsson, our translation)
For the company, the pricing decision strongly influences how a new product can be positioned in the market and in the mind of the consumer. However, more often, it is seen the other way around: first you define the segment you want to position the product in and thereafter you look at the price level of new product should of course be similar to the competitive products of the same segment. This implies, on the other hand, that production costs come later into play. “[The price is set according to] what the consumer is willing to pay; we would certainly go out and identify what the consumer would like to pay for this product; if it is a similar product to our competitors we also have to take this into account so that we are at a similar price level. For us it would be the consumer and not so much the customer, because it is not the customer who puts the price. We certainly would come up with a price towards the customer that we say ‘ok, take this product; our surveys showed that you should take 15 SEK for this product; so they will follow that’ ” (Henrik Blach)
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competitive products that are positioned in the same segment. The price for the
”[Price] is not necessarily the most important thing. If we launch a new product, which is only another version of one in an existing range, than the starting point is always that it shall have the same price as the existing products. If it is a totally new concept, then it does not necessarily imply that it shall be cheap… [for example when
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it is] a healthy [product] or tastes good and so on… You could have come up with a premium product that commands an equivalent price.” (Niklas Andersson, our translation)
According to our respondents, it is not always appropriate to investigate customers’ wishes, preferences and attitudes before launching a new product or product concept. We have to report a distinction here made by the respondents: if a company is going into a totally different new area, for instance if Knorr would go into chilled or deep frozen, it certainly would have to include the customer (retail, supermarkets). However, if a company is going into a business related to its already existing one, then it probably would have to consider not informing its customers beforehand, due to the risk of the retail could copy new product concepts with their own private-label brands and then going into the market with cheap me-too products that take market share away from companies like Unilever. “In many types of launches… where it is only a matter of introducing [products] that already exist in other countries, when it is not a matter of developing new products from scratch… but adapting them, then you could skip some of the [usual] steps.” (Niklas Andersson, our translation)
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After asking the managers at Unilever more in general terms what they take into account when developing a new product concept, we requested them to comment on how important they consider some given attributes/properties of soup to be. We asked the same question to the consumers, in order to compare their perceptions with the answers of the managers, which will be presented in a later stage of this chapter. From the managers at the Knorr brand of Unilever, we have experienced that the price is not always the most important aspect for products launched under the given the lowest cost price, because Knorr’s products stand above all, according to the managers, for quality and convenience, which allows for higher prices, even premium ones. In fact, attributes like taste, quality, and easiness to prepare are considered to be most important attributes of a soup. As our interest went on down the ladder from a macro to a micro perspective, we asked managers at Knorr, which ambitions they have with the Soup lollipop. Primarily, the ambition with the product is to find, to develop, and to come into a new market segment that is not existing or developed yet. It is about opening a new segment for products targeted to children, about increasing brand awareness at an early stage in life, and lastly about making money, as our respondents see a large market potential with portioned soups. “The ambition was to make a product that was more fun, more enjoyable which had the nutritional value that we have to have when we are talking about soups and to try to reach children that instead of taking a kind of meat loaf or bread loaf when they come home from school; they can consider this as a more positive way of having some energy, taking some carbohydrates than just having a piece of chocolate or bread […] The approach and the concept and the idea is
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Knorr brand, as has been previously reported. The products do not have to be
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interesting but on the other hand there is a difference between what the children want by themselves and what the parents think that the children should have.” (Henrik Blach)
“The ambition is actually to find, to enter and to develop a market that is still undeveloped in the form of the children segment. That is the whole key to the project: to open up a new segment.” (Niklas Andersson, our translation) “To make some money is of course one of the ambitions. The second one is to increase the brand recognition or brand awareness... We believe that the Soup lollipop competes in another field than the usual soups. With our usual soups, the natural alternative is Blå Band. However, with the Soup lollipop, the competitors are Kinder Surprise or Fruchtzwerge [a type of yoghurt], hamburgers or a pack of French fries, or some other kind of snack… In this case we can give the mother something she finds trustworthy and to the children we can give something they will remember Knorr by. This combination, to combine the needs of the children and the needs of mothers in the form one soup, is the uniqueness of this project.” (Patrick Camele, our translation)
However, portioned soups like the Soup lollipop have so far strong ties among elderly people, according to the respondents. A soup should be seen more as a drink that can be used everywhere. Thus, old perceptions of consumers that see a soup as an opener before the main course should be blurred, positioning it more as an alternative to other snacks or drinks like tea or coffee. From a psychological perspective, the ambition is to give the parents something they
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trust – a Knorr product – and the children something they consider to be funnier than any other snack, and in this manner building some positive perceptions and associations with the Knorr brand. “ …we see an enormous potential in this market with portion soups… we see that the soup portion consumption [in Sweden] is incredibly low in comparison with other European countries and there is an enormous possibility for the soup side to make soup more as a… beverage… to make it more accessible in other words, so that people any inconvenience. This need is satisfied by the portion soups to a pretty large extent…” (Leif Nilsson, our translation)
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may consume it during different occasions, without having to go to
Such a product, of course, is not aimed to compete with traditional soups, as this would not add value to Knorr but only lead to cannibalisation of existing Knorr products. Therefore, the Soup lollipop should, according to our respondents, be positioned as a snack or even as an alternative to a cup of tea of coffee. In this sense, competitive products are all snacks both, sweet and spicy. For reasons of improving the product concept before the launch we asked both, managers at Knorr and consumers about which advantages and disadvantages they see in the Soup lollipop. The company view is that the advantage of the Soup lollipop lies in a combination of being “funnier than any other kind of snacks with nutritious and not so heavy meal. This combination is unique” (Patrick Camele, our translation). Furthermore, children have the freedom to choose a taste and are excited during the time it takes the soup to release from the stick. Such an experience is seen to be an important element in children products. On the other hand, the interviewed managers see it as a disadvantage that the Soup lollipop has only a very limited amount of people as a specified
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target group, that in some countries, as in the Swedish test market, government legislation does not allow for advertisement of products that are aimed directly at children, and that products especially aimed at children do not have the best reputation among parents. Moreover, there is a risk that the Soup lollipop will not succeed in capturing sustainable attractiveness. It is seen to be very difficult to present and package the Soup lollipop in a way that both, parents and children accept the product. “It is a balancing act between having a selling look, a selling environment, a fun and appealing product that attracts children, at the same time as it shall convey a good nutritional value which will make the parents feel good about the product, so that they are willing to buy it for their children.” (Niklas Andersson, our translation)
Another important aspect to clarify when positioning a new product is the target group. In the case of the Soup lollipop, the interviewed managers anticipate 5-9year-old children as their main consumer segment, possibly even up to 12 or 13 years. Teenagers would almost certainly see the product as too childish
How consumers perceive the Soup lollipop One of the most important things before launching and trying to position a new product in the market and in the minds of the consumers is to figure out what they think about a new product concept, in order to have the chance to adapt the concept to better match with consumer needs. The aim in this section is to inquire if the new product concept evokes positive perceptions among consumers.
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After having presented the product concept to them, we asked the consumers if they could imagine themselves consuming the Soup lollipop in the future. Quite indicative and coherent answers were given to this question: more than three out of our disliked the product or were very sceptic and were only willing to test it maybe once. The main reason for this negative response was the combination of food with candies or chewing gum or such like items of fun or entertainment. Our respondents predominantly would refuse this concept. In their view, the smart idea of the dehydrated soup is destroyed by the inclusion of candies or chewing gums or suchlike products. It is seen as being inconsequent to have a lollipop, therefore, is not seen as a legitimate product. Only less than fifteen percent could imagine themselves buying the product more than only once. Subsequently, we asked if they could imagine their children using the product. Here, our respondents communicated more positive attitudes and only about one in five would refuse the product completely for their children. The other respondents would at least try it once if their children like it, but often only under the premise that things like candies or chewing gums are excluded. It was also regarded as positive that children could prepare the product by themselves; that it seems to be more fun than normal soups; and that it can be used as a snack when children come home from school. Furthermore, it was questioned whether the soup dissolves or not, that it is maybe too expensive compared with homemade soup, and that the usage of the microwave is less dangerous for children than to boil water on the oven. The consumers connect to the Soup lollipop only two significant advantages. First of all, the Soup lollipop can be a good way to motivate children to eat soup (seven out of ten), and secondly, it is perceived to be funnier than other soups and snacks (more than half). On the other hand, it became quite clear that our
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nutritious soup and unhealthy candies within the same product. The Soup
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interviewed consumers see mainly one serious disadvantage in the Soup lollipop: candies or chewing gums or other items of entertainment in the handle would reduce severely nutritious aspects and thus goodwill in form of parental endorsement (seven out of ten). “I am not sure, but I believe that it [the Soup lollipop] would be fun. He [the child] likes to cook food for himself. That part of the concept would be fun and would work.” (consumer respondent, our translation) “It would be smooth to have it [the Soup lollipop] as an in-between meal (mellanmål), that I would believe.” (consumer respondent, our translation)
“Children would definitely like to use this product … if they could only find a way of using for instance the micro [wave oven], so that they do no get in touch with the water.” (consumer respondent, our translation) “Children like to cook, so that is not that bad a target group. However, I believe more in the usual portion soup concept… No, I don’t like the candy part of it” (consumer respondent, our translation) “Maybe it would work, but associating candy with food is wrong, in my eyes at least.” (consumer respondent, our translation)
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“I do not think I would buy it if there were toys together in it. No, … my spontaneous reaction is that it seems to be too artificial. I could however think that my children would nag me into buying it for them.” (consumer respondent, our translation) When asked about the age segment for which the Soup lollipop could be an interesting product, the consumer respondents commonly agreed that the product loses its attractiveness for children that are older than 12-13 years. Furthermore, a quite clear perception exists among our respondents that a 4 or 5-year-old by its own. Within this range (approx. 5-13-year-old children) most respondents think that the product could be interesting for children at the age of 8-12 years when they come home from school in the afternoon and want to prepare a snack. Thus, the minimum level of age is limited by the ability/allowance to boil water and the upper limit of age is restricted by the fact that teenagers maybe perceive the product as being too childish and are able to prepare more sophisticated meals. “Mostly younger children under the teens, I guess, it is difficult to decide because I have little children myself.” (consumer respondent, our translation) “From children in the second level in the primary school (mellanstadiebarn) to the upper secondary school (gymnasiet). In other words, ten years of age and upward.” (consumer respondent, our translation) “9-10 years of age, when it [the child] is mature enough to prepare food by itself.” (consumer respondent, our translation)
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child would be too young to boil water and thus could not prepare the product
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In a final but crucial question, we asked if the Soup lollipop would influence their overall perception of the Knorr brand. About half of our respondents answered that the Soup lollipop would not influence their perception of Knorr, as Knorr stands for reliable products. However, about less than half consider that the Soup lollipop would exert a negative influence on Knorr’s image, because of the inclusion of candy or chewing gum, or something in the same spirit. In their view, food and candies/chewing gums and such like should be kept separate. “Knorr and non-serious products do not fit together.” (consumer respondent, our translation) “I would think less of Knorr if they used what is up there [points towards candy]… If 2-3 kids get burn injuries, then it will end up at Expressen [a Swedish daily newspaper] very, very quickly… How can you motivate that you are offering a healthy product when you have something that is unhealthy up there [points towards candy again]… You need to be consequent” (consumer respondent, our translation) ”They [Knorr] must keep a high quality in order not to lose their trustworthiness” (consumer respondent, our translation)
“I said previously that they [Knorr] were a brand to place ones trust in, now I do not know if I shall believe so anymore. It sounds like an airy-fairy thing…” (consumer respondent, our translation)
“If they [Knorr] included candy, then I would think less of them” (consumer respondent, our translation)
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Our respondents consider that it is a good idea to bring something on the market for children. However, the potential product has to be regarded as legitimate, as it is the parents who buy the product. Otherwise, there is an inherent risk that Knorr’s image, as standing for reliable, high quality products will suffer damage.
4.2.4 Interplay between brand (Knorr) level
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and product (Soup lollipop) level
After having scrutinised in depth all entity levels from macro (food industry) down to micro (product concept), we wanted to know if the interviewees at the company and our interviewed consumers think that the new product (Soup lollipop) could influence the image of Knorr, and in which way. Moreover, we wanted to know from the managers if the Soup lollipop would stand for the same attributes than Knorr does, or if they have to be different. The respondents at Knorr think that, if the consumers perceive the Soup lollipop as a product of high quality, then it could help and strengthen the overall view of Knorr. What they want Knorr to be in the future is that its products can be used in everyday life and help people to have a more enjoyable life in that they can use the time for other things than preparing food. “If you could make a product that really could meet some of the aspects that could help the children in their everyday life, then I think it could absolutely add to the brand image to Knorr.” (Henrik Blach)
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The insights from the consumer interviews were twofold: Some respondents said that the Soup lollipop would not influence their perception of Knorr and some articulated a more negative perception of Knorr if they would launch the Soup lollipop in the form we presented it. “I would end up with a more negative view on Knorr, I would get that now-they-try-to-fool-me-through-my-children kind of vibe.” (consumer respondent, our translation) “It probably would not affect my view on Knorr. It is probably an innovative touch – Knorr is you know a rather classical brand. Now they probably try to “pop” themselves up a bit, be more tough, change their image a bit, to act and turn more towards children, something they have not done before.” (consumer respondent, our translation) The image of Knorr as a brand can also be influenced by the Soup lollipop in terms of building associations about Knorr at an early stage in life and getting more attention among younger consumers. The company articulated another point of concern. So far, the consumers perceive Knorr as a quite grown up, mature, and legitimate brand, but if Knorr comes up with products targeted at children, a little bit of this grown up image could get lost. To minimise all risks of diluting, damaging, or negatively influencing the Knorr brand, it must be pointed out to introduce new products under the Knorr brand first in a not too large test market like for instance in Sweden. The managers at Knorr are of the opinion that the brand image of Knorr will neither benefit nor be harmed by a launch of the Soup lollipop. The only effect they see will be to catch and tie consumers earlier in life to the Knorr brand.
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Lastly, the interplay between a brand and its products can be seen at the attributes or properties a brand and its products stand for. We received insights from the interviewed managers that Knorr stands in fact for two different, albeit complementary areas. “On the one side, there are Knorr products like for example bouillon or spices, where it very much revolves around the cooking process. Then [on the other side] we have other products in which the Soup lollipop comes in, maybe many of our soups as well, products that are quickly and easily… The values that are about the joys of cooking and so on disappear, as a consequence. This product [the Soup lollipop] comes in more in the areas in which we today have products as Knorr Koppen, Spaghetteria, - that is quickly and easily” (Niklas Andersson, our translation) In the case of the Soup lollipop, Knorr is not used as the brand name but as endorser, i.e. the Knorr brand will be on the package of the Soup lollipop, but smaller. Additionally, a sub-brand will be introduced, like for example Soup lollipop. In other words, the new name will be on the package and the Knorr name will be printed smaller on the package as endorser. In doing so, it will be possible to address other attributes with the Soup lollipop than it is done under the Knorr brand. “With our conventional Knorr products we address the kitchen, [whereas] with the Soup lollipop the fun element stands in the foreground. On the backside [of the product] we can then address the parents with nutritional value”. (Patrick Camele, our translation)
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not about cooking, but instead are more about getting something
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Thus, Knorr is needed as an endorser. The Soup lollipop is more or less a conventional Knorr soup that is technically converted and attached to a stick. The difference to the conventional Knorr products lies in communication, where the fun element will be emphasised.
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5
Analysis
In order to enable us to answer our research questions in the end, and thus achieve the purpose of this study, we will in this chapter link our frame of reference with our empirical results. However, we would like to remind the reader that the empirical material is only to be regarded as an illustration of our chosen theories – we do not use the empirical material to either falsify or verify these theories. This chapter will also to some extent reflect our own interpretations on the subject. The analysis will be structured following the main structure of our frame of reference. Central to our frame of reference was the concept of looking from both the manufacturers’ and the consumers’ perspective when striving to understand a feasible positioning of a new product concept in a new market – as an organic option for growth. In this respect, we are now going to apply strategic and perceptional positioning to our case, of course, taking also the findings of the empirical part into consideration. As in the frame of reference, we will also bring up the significance of bonds and relations in the context of positioning. Furthermore, we will conclude our analysis with an inquiry of branding.
Analysis
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5.1 Strategy and Positioning
Under this section we will analyse our case from a classical strategic point of view on positining. This classical view allows us to use tools like for instance Porter’s Five Forces of Competition and the SWOT analysis, both of which concepts were outlined in our frame of reference.
5.1.1 New Industry Trends in the Light of Porter’s Five Forces of Competition
As the strategic impact on our case covers both external and internal aspects, we will begin analysing first the former and tighten it to the latter under the next heading, SWOT analysis. Using the framework of Porter (1990) together with our empirical findings, the following (external) factors or trends have affected the structure and the strategic positioning within the food industry. The Threat of Retail’s Private Labels Through the respective use and introduction of private label brands, the retail trade has over the decade grown from plausible new entrants to powerful competitive players among the existing competitors in the industry. Retail’s own private-label brands ICA-handlarnas, Signum and Diva have been used as tools to leverage the position of the respective retailer, ICA, KF, Axfood, relative to the existing competitors, including Unilever/Knorr. As the functional quality of the private-labels has increased, there has been an opposite incentive to decrease the strength of the position of, for example Unilever, as the relatively higher quality of brand producers cannot exclusively be used to motivate a higher or even a premium price. The private label brands can thus be seen as threats undermining the position of Unilever/Knorr, in that they can can offer an
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equivalent product at a lower price. In the long run, the private label could potentially cut off the position of brand players as mediators between suppliers and buyers.
Competitors
Blå Band, Arla, Findus, Uncle Ben’s, Santa Maria, Retail’s own products…
Supplier
Uni./Knorr
Customer
Figure 5.1: Porter’s Five Forces of Competition, ICA, KF, Axfood, … (adaptation to our case) Chilled, frozen, new trends of consumption, Retail’s Figure 5.1: The Five Forces of Competition, Sub / Entra private-label products, … (Michael Porter, 1990, our own adaptation to our case )
Difficulty to Differentiate – Learning from other actors The trend of learning and reproducing similar products from other actors gains more and more gravity, particularly in the mature markets of the food industry. In doing so, a great amount of development costs may be saved, which in turn can be used for pushing products through marketing efforts. Applied to our case, a manufacturer in the food industry can learn from existing competitors, from new entrants/substitutions, or even from its customers (consumers in our case). Among the existing competitors, the tendency to bring up new products as a response to the development of others, as for instance Knorr bringing up “Knorr Koppen” as an answer to Blå Band’s “Varma Koppen”, has diminished the
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possibility to differentiate through the uniqueness of feature. As new entrants often come up with innovative new product concepts or even slowly try to change existing trends in consumption, a manufacturer in the food industry also has to carefully sense these actors in its industry as has been indicated under the previous heading. From the interviews with consumers we learned that they are very sensitive in comparing the product concepts of the various manufacturers. Above all, they knew about and proposed the use of media tie-ins2, licensed characters 3or collection cards4. Changing Trends in Consumption Affect the Food Industry Structure The arising new preferences and trends in consumption leave marks on the structure of the food industry. The concern, the need and the desire for health, for convenience and for entertainment that are issued forth by consumers have been translated into demands that somehow have to be met by the actors in the food industry. The fact that the volume of consumed food does not increase (people are not eating more) but the pattern by which the food is consumed does, increases additionally the demands on the food industry actors to react. Furthermore, according to the interviews we conducted with managers at Unilever’s Knorr brand, consumers are eating more and more out of home, they spend less time in preparing the food (a decrease of over two hours as compared with the 1950s), they are moving towards prepared meal solutions, and have discovered other cuisines from around the world; thus the consumers desire products that meet these needs and demands. In other words, the changing and emerging trends, preferences, patterns and needs provide incentives for the actors to adapt to the prevailing conditions, in order not to end up with a weakened position in the food industry.
2 3
(using movie characters) (e.g. Asterix: Knorr could use for instance Asterix as a licensed character to position its Soup lollipop as a magic potion in the mind of children) 4 (e.g. coming Soccer World Cup, Hockey, animals, etc.). 110
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The Growing Role of Children Markets Deriving from what we said under the previous heading, the trend towards meal solutions or even food events or snacks becomes an essential part of modern life and affects in particular the younger generation. Thus, in the future, the actors in the food industry have to pay more explicitly attention to children’s needs and demands than ever before as they see the possibilities of creating, developing, and growing into these markets, at least according to what our respondents at Unilever/Knorr have put forth. This focus on children gains more importance in that future generations change and follow their own preferences and buy products according to these preferences. To put it in another way, actors in the industry who focus only on old preferences and neglect the changing patterns of consumption may find themselves weakening their position in the future. The generation can be explained by some key motivators – as we learned throughout our interviews. There is a growing spending power of children, a significant consumer base5, increasingly busy lives for parents, and the effect of establishing and positioning the brand early in the mind of children. Children who have become consumers are at a critical point in developing brand preferences that will endure to affect the market for decades. Actions undertaken today will thus influence the industry landmark of tomorrow.
Analysis
considerable market potential in the food industry concerning the younger
5.1.2 SWOT-Analysis
In our theoretical part about strategic positioning we explained and discussed among other things Porter’s (1990) and Prahalad et al.’s (1989) views on strategy. Whereas Porter (ibid) focuses more on external forces (Opportunities
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and Threats), Prahalad et al (ibid) focus more on internal forces (Strengths and Weaknesses). In order to further accentuate the differences between these two general views on strategy, Melin (1999) proposes the use of the SWOT-analysis. SWOT stands for Strengths, Weaknesses, Opportunities and Threats and has been used as a framework to identify a position for competing on the market/ industry that is based on a diagnosis of the condition of the industry (Porter) and of the condition of the business (Prahalad et al). Applied to Knorr, the brand of our case, the SWOT-analysis could be interpreted as in figure 5.2 here below.
STRENGTHS: · High brand recognition · Strong core competencies · Broad range of products · Good image (trustworthy and high quality)
OPPORTUNITIES: · Trend toward food solutions · Going into chilled and deep frozen business
Knorr
THREATS: · Food market not growing in volume and value · Retail’s own private-label products
WEAKNESSES: · Lack of emotional values · Traditional, ‘boring’ image · Slower and more inflexible than local competitors
Figure 5.2: SWOT analysis (adaptation to our case)
In order to strengthen its position in the market (strategy) and the minds of its consumers (perception), Knorr has to build on its internal strengths, has to overcome its weaknesses, has to utilise external opportunities in the industry and market and to find good strategies for defending itself against external threats.
5
children between four and fourteen represent a population of 18% across Western Europe and the US according to internal Unilever data. 112
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More to the point, Knorr’s already existing strengths of high, worldwide brand recognition, strong core competencies in dry and dehydrated product technology, a broad range of products with 14 segments ranging from dried soups, dried pasta meals, dried bouillons to spices and similar products, and an image of trustworthiness and of high quality, should be leveraged and build on. But most important is that the consumers become aware of Knorr’s superiority in these aspects compared with its competitors. This has to be built into the communication. No actions should be undertaken that weakens Knorr’s strengths. However, actions have to be undertaken to overcome its weaknesses. For Knorr this implies that it has to add emotional values into its communication as it is so on functional values. Somehow more difficult for Knorr is to overcome its weakness of being more slowly and inflexible in adapting to local circumstances than its local competitors – like for instance Blå Band in Sweden. This is directly linked to Knorr’s strengths of being a global brand because whatever Knorr is doing has to fit into its overall brand strategy. Hence, Knorr cannot adapt for instance to 100% to Swedish consumer’s needs and habits of consumption, what Blå Band easily can do. Analysing how the external factors of opportunities and threats can contribute to strengthen Knorr’s position in the market and the mind of the consumers is the next step when applying the SWOT-analysis on our empirical findings. To begin with the opportunities, we can see that there are trends in consumption that are favourable for producers of convenience food in general and Knorr in specific. People have less time to and a decreasing knowledge of how to prepare food. This situation opens up a market large in volume and value for convenient food
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far be seen as a very traditional and somewhat ‘boring’ brand focusing mainly
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solutions. Knorr has been offering for decades help in the kitchen with its products. What it has to do to utilise the new trends in consumption is to increase the degree of convenience of its products. One way is to launch products with a higher degree of convenience within its existing product range. Another way is to think about going also into the chilled and deep frozen business, as most convenience products come into these categories. However, this should happen within the brand awareness and perception of Knorr. Otherwise, options of mother-daughter branding, daughter-mother branding or even building up a new brand for this purpose should be taken into consideration. Lastly, Knorr should find good strategies for defending itself against external threats. This is however a difficult undertaking as Knorr can only to a limited extend influence external realities. What it can do is to face these threats and to build strategies that in the long run make the external threats appear less influential. For Knorr this implies that the food market is hardly growing in volume and only slightly in value. Hence, Knorr has to take market shares away from other players in the industry when striving for growth. This can be done through new product launches or re-launches of existing ones. However, to cannibalise market share of its own products should be avoided as this will not lead to growth but rather to shifting volume from one product to another. Another severe threat that Knorr and all the other manufacturers of branded products have to cope with is the growing business practice of the retail launching its own private-label products. Consumers’ perception about privatelabel products is becoming more and more favourable for the retail in the sense of decreasing functional differences in perception between branded and unbranded products. Consequently, a manufacturer of branded products should highlight other values than only functional ones. While private-label products of the retail can reach a good quality to a cheap price with similar product features
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than its branded rival products, they cannot compete on the emotional side. Private-label products have problems to build brand image and thus difficulties in building perceptions in the mind of the consumers. Following this argumentation, Knorr should utilise exactly this weakness of unbranded products. It should build its image less around functional aspects and more around emotional values like for instance ‘enjoyment and experience during cooking and food preparation’, and so on’. In other words, Knorr has to tighten its consumers emotionally to its brand and products. It has to position itself in the minds of its consumers as an essential part in daily life.
5.2 From Strategy to Perception via Bonds and Relationships
As the differences of functional quality between producers have decreased, one of the strategic advantages has lost out in significance. Or to put in another way, quality alone cannot be used to establish a position relative to other competitors. Therefore, other aspects need to be used to re-establish, re-affirm or create a position. The use of bonds is, as Hammarkvist (1994) has indicated, one option for strengthening a position relative to an actor in the industry. As Hammarkvist et al (1982) argue, bonds could be used to establish a relation between a company and selected forces in an industry, as for instance suppliers or customers, in order to create a more favourable position. The strength of the bond between two actors is dependent upon the degree of dependence of one another. In the following, we will present the different kinds of bonds in the context of our case:
Analysis
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Economical and legal bonds exist in many different forms. Between the consumer and the company there is no formal long-running economic bond or contract. In other words, the consumer may switch to another supplier at will. Tacitly, there is one contract between the company and the consumer, however. Through the brand image and reputation, the company promises to offer a certain quality to the consumer. The consumer, aware of this, knows where to turn in order to reduce the uncertainty and risk concerning the quality of the goods, as Hayek (1948) has previously argued. A certain amount of precision is necessary to add concerning the consumer. In our case, between the company and the consumer there is a middleman, in the form of retail, chefs, canteens and suchlike actors, who influence the economic bonds. Between the company and the retailer, who acts as the customer buying the goods of Knorr, there is a bond in the form of contracts of delivering a certain amount of goods during a specified period of time, to which the Retail Service caters. There are also customers in the form of chefs, to which the Knorr caters through its Food Service operation. In comparison with Food Service, the structure of the bonds in the Retail Service is different. The Retail Service is also in competition with the private-label brands of the retail. In other words, as has been discussed in conjunction with Porter (1990), the retail is today also a competitor, whose actions are of concern for the case company. These economic-legal bonds to the retail are of significance for our case company. Should for instance the functional quality of Knorr products decrease, or the preferences, perceptions and purchasing patterns vis-à-vis Knorr be adversely affected – in plain English, should the Knorr screw things up – the middleman ‘retail’ would no longer have the incentive of renewing the contracts with the Knorr, and thus, this would result in a weakened position. The adaptation for convenience in the form of easily prepared products could be argued to constitute a technical/functional bond between the company and the
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consumer. However, since this type of arrangement constitutes one of basic ideas through which Knorr has profiled itself throughout history, it is difficult to argue that it constitutes a development towards a new kind of technical bond. Nonetheless, this discussion of the technical bond has implications for the knowledge bonds. With the passing of time and experience, it could be argued that knowledge bonds have been developed. The knowledge of the increasing need for convenient solutions as a response to the decreasing amount of time spent in preparing is one example. This knowledge can be translated into developing technical/functional solutions that offers convenience. In this manner, the consumer may be bound to the company, thus strengthening the position of the case company. A social bond is, as Hammarkvist (1994) reminds us, the exchange that takes place between the actors of an industry in the form of personal relations. This bond is today missing for Knorr as it is perceived as a highly functional brand that offers functional products, though it offers a little emotional impact, as the manager respondents have reported. The respondents wished to boost the emotional side of the place. In order to do so, it needs to facilitate the interaction and relation between the consumer and the company somehow. Today, it offers trustworthiness in the product. One way is to increase both the trustworthiness and the emotion towards the Knorr brand, thus facilitating the communication with the consumer. Knorr offers a website for this aim, though a personal relation through telephone support for food related questions would constitute one way of adding an emotional element through the interpersonal relation. Indeed, as Gummesson (1995) argues, the use of relations is of interest and concern for a company that wishes to maintain or re-establish a position. By
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communicating to the consumer and listening to his needs directly, a company may tailor and profile its offer in a more attractive fashion. To this equation, we should add the variables that Unilever/Knorr already has an extensive R&Ddepartment for this aim and that the needs of a company in one country and region needs to be balanced with cost and resource of the corporation as a whole. However, the notion that a communication medium or support function or a similar relation channel is available would increase the value of the brand in the mind of the consumer, even if it is unclear if the consumer would use this available option.
5.3 Perception and Positioning
Under this section we will analyse our case from a perceptional point of view on positining. Following our classical approach, we will continue to analyse our case with the help of tools. Perceptional mapping will be used below, a tool, which enable us to visualise the abstract field of perception.
5.3.1 Positioning map
In the frame of reference we stated in accordance with Peter and Olson (1999) that a positioning map is a visual depiction of consumers’ perceptions of products, brands, or models and that it is constructed by surveying consumers about various product attributes and developing dimensions and a graph indicating the relative position. In this sense, positioning maps can give a company a sense of how their brands and its products are perceived by consumers. The map reveals not only the various brand images but also which products are close to each other and therefore in direct competition, at least in the minds of consumers (Dubois, 2001). Below, we created our own map –
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figure 5.3 –, which results from applying our empirical findings on a positioning map. We found out that especially two dimensions are important when depicting Knorr’s situation on a positioning map. It is the “traditional – modern” spectrum and the “broad segment – narrow segment” spectrum. With traditional we mean that a manufacturer in the food industry focuses on satisfying traditional eating habits (e.g. two-three meals a day at home) and highlighting functional aspect of its products and brands (e.g. nutritional value, health, quality, price, etc.). With modern we mean that new trends in consumption are accommodated (e.g. eating more out-of-home) and the focus lies not only on functional aspects but also on highlighting emotional values (e.g. fun, pleasure and entertainment). Being broad segmented implies in our positioning map that products and brands are targeted to a broad consumer base like for instance to all family members, whereas we mean with narrow segmented that a company have products and/or brands in its portfolio that are targeted to a specific consumer base like for instance to children. In a next step we adapted this positioning map to our case, thus taking the empirical findings about the Knorr brand and its new product concept Soup lollipop into consideration – we depicted this situation in figure 5.3 below. In doing so, we can see that the Knorr brand has a strong position in the minds of the consumers as a traditional brand for the whole family, offering solutions for cooking at home. However, Knorr launched in the past also a range of products that are less traditional, meeting new trends in consumption like for instance eating more out-of-home, eating more snacks, higher demand for convenience products, etc. We exemplified this situation with the Knorr Koppen, a product, which is seen quite modern – according to our definition – and meets the needs
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of all family members: Children can consume it at school, parents at work. In this sense, the Knorr Koppen is quite broad targeted. For Knorr’s new product concept, the Soup lollipop, a much more radical position could be identified. The Soup lollipop is definitely positioned in the minds of the consumers as a product for children between approximately 5-max.12 years old, which implies that it is designed for a much more narrow segment. Furthermore, as the Soup lollipop is a product for children, emotional values have to be added to the functional ones in order to capture children’s attention. Children want to be entertained, they want to have food which is fun, that gives them pleasure. In other words, that is not as boring as conventional products that their parents buy. On the other hand, a manufacturer in the food industry should not forget to take the parents into consideration. It is they who buy the products and also they who raise concern on the trustworthiness of the product. Where a parent knows that the child will be encouraged to take in the recommended daily allowance of nutrition and will enjoy the product at the same time, the manufacturer has succeeded in gaining parental endorsement. In addition, a premium price can be commanded for the additional health or convenience features that the product promotes. On the other hand, children are pleased of having food that is fun and interactive. If managing to gain parental endorsement and children’s attention at the same time, the company has succeeded in creating a win-win situation for both parents and children.
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narrow segment (e.g. individual solutions) Soup lollipop
traditional (eating at home; focus on functional values) Knorr’s heritage Figure 5.3: own creation e.g. Knorr Koppen
modern (meeting new trends; incl. functional and emotional values)
broad segment (e.g. family solutions)
In a more general sense, the consequence a company has to bear in mind is that new product into a new field of perception or at least moving into this direction – last but not least in the minds of its consumers. Hence, a company has to clarify beforehand if it wants to move with one of its brands to another position in the perceptual map. What impact does this have on the brand? Will parts of its traditional consumer base switch to another brand? Does such a move add value to the brand or is it just about shifting volumes to another consumer base? Will the brand perception be blurred when extending the brand? All these questions are important before launching a new product concept under a well-established brand like for instance Knorr.
Analysis
the whole brand with all its associations, image, etc. could possibly follow the
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5.4 Branding
Deriving from our frame of reference, we are now going to analyse the impacts of branding when striving for growth and apply it to our empirical data – which implies the situation of Unilever’s Knorr brand and its product concept “Soup lollipop”.
5.4.1 Brand extension and its associated risks
Although some scholars, like for instance Aaker (1991) and Tauber (1981), argue that brand extensions help maintain brand equity, others, like for instance Sullivan (1990), Kotler (1996), Leong & Ang (1997), but also Aaker (1991), argue that the growth of brand extensions and the marketing efforts backing them may ultimately undermine brand loyalty among consumers. Overextended brands may partly explain why consumers are switching as a group from brandname consumer products to cheaper generic and private-label products. It seems to be clear that if consumers try something new and do not like it, they are likely not to be interested in the other products under that brand name. In the long run, this can dilute and destroy the image and kill the brand equity built over the years. To minimize this risk, a company should make sure before placing new products under an existing brand that the new product shows similar features, is of the same high quality, and evokes the same perceptions as the brand under which it is placed. Thus, brand extensions may be profitable in some cases but can lead to a decrease in brand loyalty in others.
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However, an aspect that in any case has to be taken into consideration within the discussion of brand extension is substitutability or cannibalisation, what it is also called. As already discussed in our frame of reference, in order for brand extension to maximise profits from the firm’s entire portfolio of products, management needs to consider how the use of extension will affect the perceived substitutability of the new product with the other products under the mother brand (Sullivan, 1990). For our case this implies that children maybe consume less ‘normal’6 Knorr products if they have their own products. In the words of Sullivan (1990), this is cannibalisation of market share and would not lead to a higher overall turnover. In the words of a respondent at Knorr, “it would not add value to the market”. Market share would just be shifted from the ‘normal’ Knorr products to the new Knorr products positioned as products for children. Therefore, the Soup lollipop should not be positioned in the soup alternative to other savoury snacks like microwave snacks. In this respect, the Soup lollipop faces on the one hand direct competition from other soups within and outside the Knorr product range, like Knorr Koppen and soup powders (cannibalisation), as well as on the other hand indirect competition from products that are targeted at the same consumption moment, like all snacks or “mellanmåls” available on the market. In more general terms, as we learned from the interviews with managers at Unilever/Knorr, before going into a market with a new product or product concept a manufacturer in the food industry has always to consider if the thing that it is doing is really adding value to the market or if it is just a transformation of volume from one concept to the other. Purely shifting volumes do not add value to the market and the business and only leads to cannibalisation of market shares.
6
with normal we mean all the existing traditional Knorr products 123
Analysis
corner. Customers should see the Soup lollipop as a funnier and healthier
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5.4.2 Putting branding into the context of our case
A company from the size of Unilever can and should of course think about building up and dedicating a brand completely to children. However, if a company builds up a brand exclusively for children then it positions something only for a very limited age segment. When they get older and outgrow from consumption, possible positive perceptions associated with the brand can no longer be used and transmitted to other, not child-like products, as the brand exclusively offers products for children. A company would have to raise a lot of costly marketing effort in order to maintaining its consumers when they grow older, getting them to switch from the brand that is dedicated to children to another brand in the portfolio that offers ‘normal’, non-child-like products. In other words, a company positioning a brand specifically for children looses the effect of building lasting brand awareness and perceptions in the mind of its consumers due to the very limited time span the consumers stay within the brand range. Moreover, building up a new brand that is especially targeted to children is not coherent with Unilever’s strategy of reducing its portfolio to and focusing on 400 strong global brands instead of 1000 fragmented ones. If we now look at the Knorr brand, we can see that so far, all Knorr products were targeted at all customers, but – as Dibb and Simkin (1991) tell us – high growth companies succeed by identifying and meeting the needs of certain kinds of customers, for special kinds of products and service, not all products or all services. Porter (1990) calls this a (focused) differentiation strategy, other business academics call it market segmentation. In the case of Knorr, customer demographics (age) and the product benefits sought (pleasure/fun/entertainment) could be used as the basis for segmenting the market. We tried to depict this situation in figure 5.4 below, using Porter’s model of generic strategies and adapting it to our case. It is quite obvious that the cost leadership strategy –
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according to Porter (1990) – is not an option for Knorr to pursue, mainly due to its brand perception as a high quality producer. The cost leadership position is thus reserved for the unbranded private-label products of the retail, as we also show in figure 5.4.
Increasing pleasure/fun/entertainment element Differentiation / Segmentation by age Common features of all Knorr products, e.g. quality, convenience, image, health
premium Price low
e.g. Knorr Kids Field of private-label products No option for Knorr due to brand perception and brand awareness 0 Age 80
Figure 5.4: Segmenting the Knorr brand according to Porter’s generic strategies, our own creation
Consequently, other strategies have to be pursued when trying to find a strong position in the market and the minds of the consumers. At Knorr, thoughts were made that the consumer knowledge formed in childhood can influence people in later years. Some adults still use the same brands of products their parents purchased for them as children. Thus, some long-lived brands may be purchased and used throughout an adult’s life. According to Peter & Olson (1999), developing early brand awareness and loyalty is an important marketing strategy for many companies. We will develop on and fortify this thought in the next section, and thereafter we close the analysis with the idea of using new product concepts to actively change trends in consumption.
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5.4.2.1 Establishing and maintaining brand loyalty at an early age As already argued in the frame of reference, consumers develop repeat-buying patterns because they learn that particular brands are especially satisfying or because they come to form personal attachments to the brands. This may be because the brand uniquely provides the benefits they seek, fits well into their lifestyle, or its personality (image) matches that of the consumer. This so-called brand loyalty can also stem from the emotional impact the brand has on the consumer or from the way the brand makes the consumer feel about himself (Liesse, 1991; Schlueter, 1992). Sometimes, however, consumers repeatedly buy a brand out of habit or routine problem solving in order to save time and effort (Howard, 1989). Therefore, it is even more important to establish the brand early in life in the consumers mind. One way of achieving commitment to a brand at such an early stage in life is to have products in the portfolio that are specially targeted to children (Foxall and Goldsmith, 1994). These products for children – including the Soup lollipop – could be grouped around what we called exemplary “Knorr Kids” in figure 5.4. However, it has to be questioned whether the aim of capturing children’s attention and building brand awareness at an early stage in life can be reached with products targeted to children as it is normally the parents that are buying the products, often preparing them, and presenting them in a form that is maybe brandless for the children. Moreover, as we reasoned from the interviews with consumers, the food market is very price sensitive/vulnerable, is characterized by low customer commitment and low switching costs, because it is neither very expensive for the customer to change suppliers nor risky. In short, there is limited brand loyalty. One way to strengthen the brand loyalty at an early age can be to cooperate with or license another brand like Asterix, which has high brand recognition among children.
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The problem, which arises here, is to find a cooperation or licensing brand that is well known in whole Europe.
5.4.2.2 Using new product concepts to actively change trends in consumption “We like to have hot drinks and sometimes we have a taste for something spicy; this is a physiological need that we are all familiar with, but hasn't been identified as a habit before. This insight into consumer behaviour has led us to reposition Cup a Soup. Why not make Cup a Soup into a daily habit?” (Antony Burgmans, 2001, CEO Unilever NV)
Analysis
This insight stated by Burgmans (2001), CEO of Unilever NV, could also be adapted to children’s needs when positioning the Soup lollipop as a hot and spicy (daily) drink. However, this is not possible for all tastes, as for instance Swedish consumers quite often demand soups with fruit taste. Their demand could be met if Knorr – that is not in the sweet business – develops together with Unilever’s Lipton brand – that is in the hot and cold tea business – a product, which is perceived as something between a soup and a cup of tea. This would open up the field for Unilever to meet the trend of “cup a soup”. With the help of its brands Knorr and Lipton that together can be used as endorser, consumer habits could maybe more easily be changed in terms of helping consumers to perceive a soup, a cup of soup, or the soup lollipop for children as alternatives to a cup of tea or coffee, both of which are used all day long at home, at work, and at leisure activities. However, blurring the borderline between a soup and a cup of tea or coffee does not only hold great opportunities but can also lead to severe brand dilutions or confusion among consumers. Both, the opportunities inherent
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in the trend of “cup a soup” and the potential risks should be carefully investigated before moving with and positioning a soup business towards the snack or beverage business.
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6
Conclusions
In the conclusion we turn back to our purpose and argue for how we have answered its associated questions. In doing so, we will use and summarise the findings belonging to our three research questions. Moreover, we will put forth relevant suggestions for further research. Some final reflections will then close our thesis.
6.1. Question One
· What does strategic and perceptional positioning imply?
Conclusion
At a first glance, our initial research question seemed to be almost for wide in scope. However, at a second, closer glance the fog lifted and it became clear that this question cannot be answered if only looking from one perspective. This insight led us to use a case in order to be allowed to look from more than only one perspective. The interplay between strategic and perceptional positing can thus be transformed into the interplay between the company and its customers. In this respect, strategic and perceptional positioning implies not only to consider both the company view and the customer view, but also to include the interplay of both entities into the discussion. Earlier, we referred to combining a macro with a micro perspective. This situation is depicted in figure 6.1 below.
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Figure 6.1: our own creation
Macro Strategy Company
Micro
Positioning
Perception Customer
The arcs between both perspectives on positioning visualise that a company has continuously to test its strategies with the customers’ perceptions, adjust them, test them again, and so on. In this sense, parallels to our method, the use of the hermeneutic spiral, can be seen. Whereas in the case of the hermeneutic spiral there is an interplay between the inductive and deductive path, in the case of positioning there is an interplay between a strategic and a perceptional, between a macro and a micro, or between a company and a customer perspective. For a company intending to position a new product or brand in the market and the minds of its customers / consumers, this spiral is a continuous process of trial and error until the strategic thoughts of the company match with the perceptions of potential customers or consumers. It is moreover a spiral – the metaphor be allowed – with long term implications as both perceptions and strategic positions cannot be changed over night. This statement has however be limited for the former: Whereas it takes great efforts for a company to influence slowly the perceptions – and in our case eating habits – of customers or consumers in a desired and advantageous direction, a wrong step could severely damage a hard won position within a short time.
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A wrong step could be for example to launch a new product under an already existing brand when the perceptions of the existing brand do not fit at all with the perceptions the customers or consumers hold about the new product. Another wrong step could be to try to re-position a whole brand without taking into consideration the customer or consumer. Thus, a mere strategic decision without regarding the needs and wants of the customer or consumer can be a dead end in itself. A third wrong step a company could undertake is to position two of its brands or a new brand too close to each other so that the customer cannot see the differences and thus buys one for the other, which in turn is cannibalisation of volume and value. Other wrong steps could be added to this discussion. However, the point we would address here is that a company cannot merely create neat strategies for positioning its brands and products in the market but has always to consider not forgetting to position its brands and products at the same time in the mind of its customers or consumers. Adapted to our case, this problem became quite clear when we conducted when asked about the brand Knorr but communicated severe scepticism or even rejection when asked about how they perceive the Soup lollipop – a new product concept supposed to be launched under Knorr in order to facilitate growth. For Knorr this means that they have to pass through another loop in the hermeneutic trial-and-error spiral, until the ideas of the company match with the perceptions of the consumers. In more general terms, a company should always test and adapt its new product concepts with help of potential customers until their perceptions about the new product concept are as far positive as to be willing to buy and consume the new product. It is not before then a company should dare to launch its new product. Consequently, it is always the consumer who makes the final judge.
Conclusion
interviews with consumers. Generally, consumers hold very positive perceptions
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In order to balance our research questions and therewith also our conclusion, we considered it to be necessary to keep and discuss this first question on a more abstract level. However, the following two research questions were aimed to give not only abstract but also practical answers. Therefore, a tighter connection to our case is made.
6.2 Question Two: Type of Branding
· Which strategy on brand extension is most appropriate when launching a new product under the premise that the new product evokes and stands partly for other perceptions than the already existing (mother) brand? As we discussed in our frame of reference, of the many options of growth available, firms are often tempted to use established brand names to facilitate entering new markets (Aaker and Keller, 1990). Melin (1999) ties up to this discussion and makes a distinction between different kinds of strategies that are available for brand extension, depending on the context in which they are to be implemented in. Finally, at the end of our thesis, after having clarified this context for our case through collecting empirical material and carefully analysing it, we can make a proposition which kind of strategy for brand extension is most likely to be successful for Knorr and its product concept, the Soup lollipop. However, the predicament of Knorr to grow organically or from the inside by leveraging its own assets is not a unique one. Hence, companies and its respective brands that are in a similar position can learn from the way we approached our case and draw their own conclusions tailored to their own situation. However, our task was to have a closer look at Knorr and its product concept, the Soup lollipop. Therefore, we will in the following outline and
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connect Melin’s classification of strategies for brand extension to our case (see figure 6.2).
Mother brand
Mother-daughter brand
Daughter-mother brand
New brand
Not recommended: · Soup lollipop evokes not the same perceptions than other Knorr products · Would influence overall brand perception in a negative way
Knorr’s Soup lollipop: · Focus is on Knorr; Soup lollipop within the range of regular Knorr products
Soup lollipop by Knorr: · Focus is on the Soup lollipop and Knorr is used as an endorser
Options to be investigated in more detail!
Not recommended: · Does not build early brand awareness · Does not use existing brand advantages of Knorr · Too small age range · Very costly
Figure 6.2: Spectrum of Brand Extension , Melin & Urde (1991), p. 108, our own adaptation
From the four possible options Melin (1999) proposed for the launch of a new product, the two extreme ones on the spectrum, namely mother branding and the launch of a new brand seem not to be recommendable options in the case of Knorr and its Soup lollipop due to the following reasons: · The use of mother branding for the launch of the Soup lollipop – implying the positioning of the Soup lollipop as a ‘normal’7 Knorr product – does not really come into question, as the Soup lollipop is not a ‘normal’ Knorr product. In fact, it is a product targeted to a very limited age range (children between 5-12 years of age) with the aim of capturing the children’s attention with a funny product that entertains them, in order to create early brand
7
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awareness. In this sense, the Soup lollipop evokes not the same perceptions than other Knorr products as our empirical inquiry showed to us. Moreover, as the Soup lollipop is not considered to be as legitimate than the other traditional Knorr products, it would probably influence the overall brand perception negatively in the minds of a multitude of consumers, at least as far as we may deduce out of our conducted consumer interviews. · In the other extreme, the use of a new brand for the Soup lollipop is not a recommendable option to be pursued by Knorr either, mainly because of three reasons. First, the aim of building early brand awareness around Knorr among young consumers cannot be pursued at all. Second, and furthermore related to the first reason, the launch of the Soup lollipop under a new brand does not use the available array of advantages, which an already existing brand like for instance Knorr has built up during the years – e.g. brand recognition, image, position in the market and the minds of the consumers, material and immaterial assets, to name but a few. Third, the audience to which the Soup lollipop is directed to seems to be too small an age range to justify the costly introduction of a new brand in the market, above all after the audience will outgrow from the brand after a few years. After having narrowed down the range of recommended options for Knorr in its striving for growth with the help of a new product concept, the Soup lollipop, we will now discuss the remaining two options, namely mother-daughter branding and daughter-mother branding. · If pursuing the former – mother-daughter branding – the Soup lollipop would enjoy a certain independence in relation to the mother brand Knorr. However, as Melin (1999) informs us, this independence is only allowed within the limits of the overall positioning of the mother brand. As Knorr is currently
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positioned as a brand offering convenience products for the whole family, the Soup lollipop does not fall into the overall positioning of Knorr in the strictest sense of the word. However, as Melin (ibid) reminds us, during the implementation of a mother- and daughter strategy, the mother brand serves a pushing or supervising role. Thanks to the solid reputation of Knorr, the introduction of the Soup lollipop would be facilitated. This possibility of launching the Soup lollipop in a time- and cost efficient manner is perhaps the primary advantage of the mother- and daughter brand strategy. · If pursuing the latter – daughter-mother branding –, the focus of positioning would be on the Soup lollipop, whereas Knorr would only have a supporting function and could act as a guarantee or endorser. This would be a typical case of daughter-mother branding, when a company wants to minimise potential negative effects on the mother brand and instead aim to provide the consumer with the feeling that it is a safe product to use. According to Melin (ibid), with the help of this strategy, Knorr could introduce a number of mother brand Knorr. The primary advantage of the daughter-mother strategy is that it would allow a high degree of flexibility for Knorr in the future when considering launching other product concepts. Moreover, this strategy is relatively cost efficient, considering that the market communication builds up both Knorr and the Soup lollipop. However, this implies that Knorr and the Soup lollipop are not too differently positioned from one another. If Knorr succeeds in positioning the Soup lollipop in the minds of its consumers as standing for the same high quality, as being as trustworthy and as convenient as other Knorr products, then this option for growth could work out best as we, the authors, see it after reflecting on the problem of our thesis. Otherwise, the obvious risk is that Knorr and the Soup lollipop are experienced as
Conclusion
brands with different positioning, which are loosely held together by the
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unrelated to another, which in the long run may create a confused image of both brands. Taken together, the conclusions drawn from our case directed us towards an answer for our research question. The strategy of daughter-mother branding can be seen as ‘most appropriate’ – it may us be allowed to use the same words as in our research question – to pursue in the event of the new product evoking and standing partly for other perceptions than the already existing mother brand. However, we are well aware that this statement is mainly valid for our own case. We do not claim universal validity. In answering our third and last research question we will at the same time go back to the introduction of our thesis, in other words to the predicament of Knorr and to the basic problem of growth.
6.3 Question three: Options of growth – the Ansoff matrix
· Which options of internal growth does Knorr have and what are the general implications on growth for an actor in the food industry? In order to answer the twofold character of this question, we will first issue some concerns for Knorr, and thereafter the general implications for any actor in the food industry. We believe, the pun be forgiven, that we are now in a position to share some of the insights and answers, which we have accumulated during our long and arduous journey towards better understanding. If applying some of our thoughts on our case study, we have noted that the following trends have affected the actors of the food industry in their strive towards growth:
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· the threat of the private-label products of retail · the increasing demand for flexible intake of food events and of combining features of convenience, health and pleasure/fun, · the role of children as a group of consumers that needs special attention, and finally, · learning from industry actors has increased in significance. When utilising the Ansoff (1964) matrix of possible options to grow on Knorr, the implication of the trends on our insights concerning growth may look like the depiction in figure 6.3 below, as we have interpreted being the predicament of our case. We will account for our reasoning and the formulation of our answer in the following.
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Model
New
New product market Existing consumer base New product market New consumer base
Product
Knorr
Existing product market Existing consumer base Existing product market New consumer base
New
Soup in a cup Knorr Koppen Family members on the road
SOUP LOLLIPOP CHILDREN
Existing
Market
New
Product
Soup powder Family
?
Existing
Market
New
Figure 6.3: Ansoff (1964) Product-Market Matrix, adapted to our case
As our empirical material illustrated, Knorr holds a very traditional, strong position in the minds of its consumers as being a brand geared towards the needs of the family. Its products are used, utilised and applied in everyday cooking. If we now turn back to Ansoff’s product-market matrix and applying it on our empirical findings, we may draw the conclusion that Knorr has several options to penetrate the market and thus grow. For its soup segment, we outlined possible ways of growth in figure 6.3. Over the decades, Knorr has built up a strong perceptional position in the minds of families as aid in everyday cooking with products like its soup powder. After
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socio-demographical changes, like for instance the trend of both parents going to work, the daily family life has changed, which in turn has resulted in eating less at home and more out-of-home. One of Knorr’s answers and solutions to this change in the trend of consumption was Knorr Koppen, a soup that can easily be prepared and eaten out-of-home, like for instance at work, at school, during leisure activities, etc. If returning to Ansoff, Knorr launched a product that satisfies the changed needs of its existing market with a new product. To answer our question, a possible next step for Knorr would be to extend its soup range into the Ansoff quadrant “new market, new product”. The Soup lollipop would be suitable for this next step as it combines new trends of consumption with a market, thus offering possibilities for Knorr to grow. However, to prevent itself from pure cannibalisation, meaning shifting volume and value from one market to another, Knorr should not position the Soup lollipop as a mere soup. If Knorr wants to achieve a really gain in volume and value, it has to take market share away from other categories. This could be done in positioning the soup lollipop as a snack. At this point, we now turn over to the second dimension of the research question, namely what are the general implications on growth for an actor in the food industry? The aforementioned trends illustrate some concerns on the possibilities of growth. Beginning first with the changing consumption patterns, it might be argued that with moving for instance more towards convenience, alternative cuisines, it may be of importance to follow this move towards these patterns. In other words, if there is a shift among consumers towards more entertainment in conjunction with the meal, it might be of importance to follow the shift of the consumers. As has been previously noted, people are not eating more today. Instead, they are eating different. Actors who do not follow with the changing whims of the consumers may find themselves losing out, since the food industry is a business that does not grow in volume. On the other hand, it
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might be of importance to judge which trends to follow, if there are trends that validate or do not validate the costs of investments, in order to follow with the times. Furthermore, it might be of importance if the consumer’s accept mentally that an actor moves or grows into other quadrants of the Ansoff matrix. Moving on with our general discussion to the private-label brands of the retail, it could be said that the private-labels constitute a limiting influence on the possibilities of growing, if following the arrangement of Ansoff. Since the premises of retail are physically limited in terms of shelf space, there is a restriction on how much space that is available for new or existing products. The introduction of new or developed products is competing with existing and new ones for space in the shelves and market share. In this Darwinian environment, it is necessary to add the private-labels who compete under different conditions, since they are virtually guaranteed support, space and endorsement by the respective retailer. Since volume is not increasing, the incentives to learn and follow the ideas of other actors in the industry have been raised. An appealing idea for a new or developed product concept might quickly win the approval of the consumer, which in turn is translated into market share, before other actors dig in to the concept. The cultivation of the bonds of knowledge between consumer and manufacturers might provide the time frame to come up with the new product concept and reap the fruits of the concept investment. On the other hand, this needs to be balanced against the risk of the trend being too narrow or fragile in order to sustain the weight of the investments. It might be more prudent to follow what others are doing to meet the consumption patterns and preferences and then react to the successful concepts.
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Arrived at this point, our final contribution to the discussion about positioning, branding, and growth is to suggest the reader possible ways to continue with the journey where we ended. In this spirit, we created chapter 6.4.
6.4 Suggestions For Further Research
As our thesis is not a dead end in itself, we want to open the field of research we conducted and put forth some suggestions for further research for all readers that are interesting in digging deeper into areas of interest. These are in accordance with the main subjects of our own research questions – positioning, branding, and growth – in order to alleviate seeing the relatedness to them. Out of our research question one we can deduce a hypothesis for further research: · It is only when there is a match between strategic positioning and perceptional positioning that an effective, overall positioning may take place. Out of our research question two we can deduce following suggestion for further research: · How far can a brand be extended under the respective strategies of mother branding, mother-daughter branding, and daughter-mother branding without severely damaging, diluting or blurring the overall brand perception? Last but not least, the below formulated suggestion could need to shed some light on:
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· Can an actor in the food industry survive in the long run if not striving for growth?
6.5 Concluding Reflections
Finally, by closing our journey, we, the authors, would like to put forth a few reflections on our thesis in order to avoid misunderstandings or a mismatch between our ambition and self-conception and the readers’ appraisal on our thesis. We, the authors, are well aware that we have mainly used a case for illustrating our research questions. Moreover, we are aware that each case has its own particularities, oddities and virtues. Hence, neither all conclusions drawn from our case are universally valid nor do we claim this. However, what we did have in mind is to show a way at looking at our problem from a scientific point of view, using existing theories and adapting them to a case. In respect thereof, maybe the most valuable contribution we could make to scientific research is to provide scholars and practitioners with a kind of handbook in the case of being involved in similar situations, dedicated to related questions, and striving for answers like our case company. …and always have in mind when trying to build own thoughts on existing ground8: “Every act of creation is first of all an act of destruction” (Pablo Picasso, 1881-1973, Spanish artist)
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Afterword
Having concluded our formal discussion on growth, positioning and branding, it is appropriate that we now turned over to the practical implications of our thesis for the case company, and thus discuss some informal aspects of our work. Through our interviews, and the way we processed, analysed and commented on the views of the consumers, as well as through our own knowledge and experience, we put forward some items that our case company needed to respond to. Without damaging or corrupting the wishes of confidentiality, we can nonetheless state that the case company has taken measures to respect to the concerns of the consumers, as a part of its overall growth strategy. Our work has indeed provided some valuable input, according to our company respondents. Or to use a pun, our work has provided them with some refreshing food for thought.
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7
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Primary Sources
Respondents at Unilever/Knorr interviewed between 2 December – 9 December Andersson, N., Nordic Brand Manager Knorr Blach, H., Nordic Marketing Manager Camele, P., Director Food Service, Nilsson, L., Nordic Marketing Director, 22 Consumer Respondents interviewed between 26 November – 10 December
Secondary Sources
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Dibb, S. & Simkin, L. (1991) “Targeting, Segments and Positioning”, International Journal of Retail & Distribution Management, Vol. 19 No. 3, p. 4-10 Karger, T. (1981), “Analyze existing product’s values when researching brand extensions”, Marketing News, Vol. 23, p.1-4. Klein, B. & Leffler, K.B. (1981), “The role of market forces in assuring contractual Performance”, Journal of Political Economy, Vol. 89, p.615-41. Liesse, J. (1991), “Brands in trouble”, Advertising Age, December 2, 16.
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Tauber, E.M. (1981), “Brand franchise extension: New product benefits from existing brand Names”, Business Horizons, Vol. 24, p.36-51. Tauber, E.M. (1988), “Brand leverage: Strategy for growth in a cost-control world”, Journal of Advertising Research, Vol. 28, p.26-30. Tongberg, R. (1981), “Brand leveraging: One way to deal with diminishing marketing in the 1980s”, Marketing News, Vol. 9, p.4. Wernerfelt, B. (1988), “Umbrella branding as a signal of new product quality”, Rand Journal of Economics, Vol. 19, p.458-66.
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Figures
Figure 1.1: Product-market Matrix, Ansoff, I. (1964) Figure 3.3: The Five Forces of Competition, Porter, M. (1990). Figure 3.4: Three Generic Strategies, Porter, M. (1990) in de Wit and Meyer (1999) Figure 3:6 Positioning for exclusive hotels in Stockholm, as featured in Dotevall (1997). Figure 3.8: Spectrum of Brand Extension, Melin, F. & Urde (1991).
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Appendix
Empirical
A) - Frågeformulär till konsumenter
Hej, vi är två studenter från Linköpings Universitet. Vi håller på en enkät om mat och matvanor. Vi tänkte ställa några frågor om livsmedel. Frågorna tar ungefär 5-10 minuter att svara på. Det hela kommer att behandlas anonymt. Vill ni ställa upp?
Del 1 – Allmänna frågor 1. Hur ofta köper ni färdiga måltider? Med färdiga måltider menar vi alltifrån t.ex. djupfrysta måltider som man kan värma upp i mikrovågsugnen, soppa och nudlar man kan koka upp vatten till, eller pizzor man kan köpa i affär? 2. Vilka av dessa typer av färdiga måltider använder ni? 3. Vi tänkte ställa lite fler frågor om soppa. Vi börjar med att fråga, ser ni soppan som alternativ till övriga färdiga måltider? 4. Vilka andra produkter ser ni soppa som alternativ? 5. Hur ofta äter ni soppa? (Precisering: 1-2 ggr i mån, 1-2 ggr i veckan, oftare) 6. När på dagen brukar ni då äta soppa? 7. Vilka smaker är mest populära i er familj? 8. Kan ni tänka er att äta soppa istället för annan mat? Varför? 9. Lagar ni soppan själv eller använder ni förpackningar?
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10. Vilka sopptillverkare känner ni till? (Bob, Bong, Blå Band, Campbell, Ekströms, Felix Findus, Semper, Knorr) 11. Vilka märken använder ni? 12. Varför köper ni just de märkena? (Billig, Bra kvalité, Lätt att tillaga, Vana) 13. Hur skulle ni rangordna följande egenskaper om soppa. Är det till exempel viktigt, mindre viktigt eller oviktig att soppan är nyttig…. smakar bra…. är lätt att tillaga… …är billig … ser aptitlig ut … att förpackningen är attraktiv?
Del 2 – Frågor om Knorr (behandlar perceptional positioning och brand) Inledning, Vår undersökning behandlar Knorr och dess produkter mer ingående. Vi tänkte ställa några frågor om detta. 1. Vilka produkter känner till från Knorr (lista upp, vi hjälper till vid tveksamhet) 2. Vilka av följande produkter från Knorr använder ni? 3. Vad anser ni om Knorrs produkter? 4. Vad tycker ni om priset på deras produkter? 5. Stämmer priset på produkterna med produkternas kvalité? 6. Hur är Knorrs priser jämfört med konkurrenternas? 7. Äter era barn produkter från Knorr?
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8. Är det några produkter som barnen hjälper till med att tillaga om de vill (Vilka?)
Del 3 – Knorr’s Soup lollipop Knorr tänker introducera en ny produkt på marknaden. Det är tänkt att tillagningen ska vara enkel med den nya produkten. Istället för samlad i en förpackning finns soppan försluten på toppen av en pinne, likt en klubba. För att tillaga soppan behöver man bara koka upp vatten och sedan doppa i pinnen. Till och med barn ska kunna använda sig av produkten med hjälp av föräldrar, eller ensamt om barnet är tillräckligt moget. 1. Tycker du att det är en intressant produkt? 2. Skulle ert/era barn tycka att det är en intressant produkt? 3. Skulle du kunna tänka dig använda denna produkt? 4. Skulle ert/era barn tänka sig att använda denna produkt? 5. För vilken åldersgrupp tror ni att produkten kan vara intressant? (Skulle till exempel en 13-åring tycka att produkten är barnslig?) 6. Vilka smaker skulle era barn tycka om? (tomatcremesoppa, kycklingsoppa, primörsoppa, ärtsoppa, blomkåls och broccolisoppa, potatis och purjolökssoppa) 7. Vad tycker du är ett lagom pris för en portion? Jämför gärna med andra produkter, till exempel snabbnudlar? 8. Kan ni tänka er att ert barn kan vara med och laga produkten? 9. Vilka fördelar ser ni i denna produkt? (nyttig, inte så tung mat, mindre fett/salt eller socker jämfört med annan mat, ett bra sätt att motivera barn till att äta soppa, roligare än andra soppor/kvällsmåltider, barn har valfrihet, …)
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10. Vilka nackdelar ser ni i denna produkt? (klumpar vid tillagning, godis/tuggumi till klubba minskar nyttighetsintrycket,…) 11. Skulle denna produkt påverka er uppfattning om Knorr?
Tack för ert samarbete. Vi kommer som sagt att behandla svaren anonymt.
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B) - Questionnaire Unilever
Hello, we are two students from Linköping University of Sweden. We are currently writing our Master Thesis in cooperation with Unilever Bestfoods Nordic/Helsingborg. Our contact person at Unilever is Patrick Camele, Director Food Service. Among other things, our thesis investigates the new product concept ”Soup lollipop”, which is supposed to be launched under the existing brand ”Knorr”. Our focus will be on positioning, both strategically and perceptionally, as well as relevant aspects of branding. For a better understanding of the view of the company we would like to ask you the following questions: Please answer the questions in short statements. The answers will be treated anonymously and confidential. Please send back the answers no later than Dec. 12 to the following addresses: [email protected] or [email protected] We will make follow up interviews either in person or via telephone. Thank you for answering
Part 1 – General Questions 1. How would you describe the situation in the food industry today? How will it look like tomorrow? 2. 3. 4. What are you planning to do to meet the situation of tomorrow? Why did you choose to grow into the children segment? What possibilities do you see as alternatives to enter the child segment? How realistic are these possibilities for Knorr? What are the most promising ones? 5. What is the role of the brand name Knorr when growing into the child food segment?
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6.
Which role does the consumer play when developing a new product? For example, do you investigate customers’ wishes, preferences and attitudes toward an imaginary product concept before developing a new product?
7.
Which (product-)attributes do you prioritise when developing a new product? And which ones did you prioritise when developing the Soup lollipop? Why?
8.
How would you rank following attitudes/properties of soup. Is it for example important, less important or unimportant that soup - is nutritious - tastes good - is easy to prepare - is cheap - looks appetizing/delicious - that packaging is attractive?
9.
Which factors influence your decision to set a price? (costs of production, customer surveys, price of competitors, positioning as premium brand allows higher prices,…) Which factor is the most important one?
Part 2 – Knorr level 1. What does the brand Knorr stand for? 2. In which segments is Knorr represented? 3. Which are your competitors in these segments? 4. What do you think are the strength and weaknesses of Knorr? 5. What do you think are the strength and weaknesses of your competitors? 6. What do you think are the opportunities and threats in the markets Knorr are in?
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7. Which factors/thoughts influenced your decision to open the brand Knorr for all age segments / to extend the brand Knorr into specific age segments?
Part 3 – Product concept level / Soup lollipop level Soup-lollipop is a dehydrated and compressed soup attached to a stick. The stick has a playing or a collection element. You boil water in a cup, put the stick into the water and the soup releases from the stick. The soup will be available in several varieties. On a soup day each member of the family can choose his taste. The compressed soup will have natural colours like tomato-red, broccoli-green etc. 1. Why did you come up with soup-lollipop to enter the children segment? Why not another product? Why not other options? 2. Which ambitions do you have with the Soup lollipop? 3. Which products do you want to compete with? 4. Which advantages do you see in the Soup lollipop? - nutritious - not so heavy meal - less fat, salt or sugar in comparison to other food / savoury snacks - a good way to motivate children to eat soup - funnier than other soups / savoury snacks - children have freedom to choose their own flavour... -… -… - ... 5. Which disadvantages do you see in the Soup lollipop? - Lumps when preparing - Candy/chewing gum in the handle reduces nutritious aspects
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-… -… 6. Does the new product stand for the same image as Knorr does? 7. Do you think that the new product will influence the consumer’s perception of Knorr as a brand? In which way?
Additional comments:
Thank you for answering these questions. You answers will be treated anonymously.
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