Description
The report is to examine the nature of sales promotions activities in Mumbai, understand consumer attitude toward these promotions and how it can benefit Kellogg as an organization to achieve its business objective.
Modern Trade Project on Consumer Promotion Efficiency
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Table of Contents
Acknowledgement ........................................................................................................................................ 3 Abstract ......................................................................................................................................................... 4 Introduction .................................................................................................................................................. 5 Objectives ..................................................................................................................................................... 6 Methodology................................................................................................................................................. 7 Data Analysis and Interpretations ................................................................................................................ 9 1. Research Findings (Perceptual Maps) ................................................................................................... 9 2. Research Findings ( ratings on each promotions) ............................................................................... 11 3. Range of discounting of various categories ........................................................................................ 13 4. Promotions done so far....................................................................................................................... 17 4.1. Bundling Promotions.................................................................................................................... 18 4.2. Cross Company Promotions ......................................................................................................... 21 4.3. Value Offers: ................................................................................................................................ 22 4.4. Failed promotions: ....................................................................................................................... 24 4.5. KEY LEARNING FROM THIS ........................................................................................................... 28 5. Interaction with the customers .......................................................................................................... 29 Conclusion ................................................................................................................................................... 30 Appendix 1: ................................................................................................................................................. 31 Appendix 2: ................................................................................................................................................. 34
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Acknowledgement
A good start to the project report would be by acknowledging the contributions and help of those who made this project possible. Of all the people who have contributed to this study, I take the opportunity here to thank as many as possible.
I extend my heartiest and sincere thanks to my Project guide Mr. Sanjeev Khanna, Director- Sales, for his support and insights on the project.
I would like to thank my Mentor Mr. P.S.Venkat, National Key Accounts Manager, for enlightening me on the aspects of the project and providing continuous guidance and support throughout the project and helping me to complete this project in the best possible manner.
I would like to thank Mr. Yusuf Mohammed, Area Sales Manager(Mumbai-1) for his kind help on the project and all the officials in the sales department, who were always willing and enthusiastic to help me.
I would also like to extend a word of thanks to all the members of the Kelloggs India family and all the territory-sales-in-charge (T.S.I) who helped me out by providing various contacts and information regarding my project.
My sincere thanks to all the channel partners of Kelloggs India for sharing their market experience and all the store managers who supported me to conduct the research at their outlets.
Finally I would like to thank my institute Symbiosis Centre for Management and Human Resource Development (SCMHRD) that provided me this opportunity to interact so closely with this organization and understand intricacies of corporate world.
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Abstract
Kellogg is the leader in RTEC category within modern trade channel & has been growing the category with various initiatives within modern trade. In this report, an attempt has been made to examine the nature of sales promotions activities in Mumbai, understand consumer attitude toward these promotions and how it can benefit Kellogg as an organization to achieve its business objective. The project was carried out in three stages. Firstly, an exploratory research was carried out to understand the different types of promotions running in modern trade. This also gave an insight on the range of discounting done by various categories in the market during a sales promotion. Then the questionnaire was designed and research was conducted at different types of modern trade outlets(like Hyper?s, Super market?s, Daily formats, Express formats) This mainly aimed at understanding the attitude of the shopper towards the various types of promotions run on Kellogg?s SKU. The third stage involved analysis of the data obtained from research and the sales trend of all the Kelloggs SKU. My findings indicate that promotions like price-offs have a good impact in a highly competitive, undifferentiated product environment. But they do not create brand loyals and hence, are not affective in the long run. Hence,the organization should not at all look at price-off sales promotions until the category experiences strong competition. Bundling Promotions (where a slow moving SKU rides on a fast moving SKU) helps gain high penetration and thus increases the volume share. Gizmos pose a high attraction for children, especially the ones which make a fashion statement. But these do not guarantee repeat purchase. Hence, I recommend theme based gizmos, wherein a child is offered a collection of toys so that repeat purchase is ensured. Also, it was found that consumers believe that an advice from nutritionist would make them consume breakfast cereals. In this light, I suggest that Kellogg create a sales team focused to encourage doctors and nutrionists at high-end hospitals, gymnasiums to recommend the use of kelloggs products. Since the concept of breakfast cereals is still new to India, there is very little knowledge about the various brands of Kellogg even among the aisles salesmen. Many outlet managers expressed the need to have a promoter in the category bay. Hence, I recommend a 1- day training program to the aisles salesperson to educate him/her about the various brands of Kellogg and their differentiated benefits. This would also help enhance channel partner relationship.
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Introduction
Since 1906, people have come to know Kellogg as a company they can rely on for great-tasting, high-quality foods. With the 2006 sales of almost $11 billion, Kellogg Company is the world?s leading producer of cereal and a leading producer of convenience foods, including cookies, crackers, toaster pastries, cereal bars, frozen waffles and meat alternatives. W.K. Kellogg began worldwide expansion of the company in 1914. By 1938, Kellogg had build plants in England and Australia. After W.K. Kellogg's death in 1951, Kellogg continued to expand its operations, building plants in Latin America and Asia. In 1958 Tony the Tiger® won a contest over Katy the Kangaroo to become the sole spokescharacter for Kellogg's Frosted Flakes® and a mainstay in American culture. Kelloggs India started its operations in 1994 with the India Corporate head office at Mumbai. It set up its own food processing plant at Taloja, near Vashi. Currently. it has its Regional Set up at Mumbai, Delhi, Chennai & Kolkata [ Sales & Supply Chain]. Kellogg India has shown a fast paced growth story. It has been growing at higher double digits YOY for the last couple of years. In 2007, Kellogg India reported top most growth in Asia Pacific Region for Kelloggs. Modern trade value contribution to Kellogg?s as a company is close to 25%. Kellogg India has a 60% value share in breakfast cereal category within modern trade and is growing at a compounded growth rate of 60% + for the last 3 years. 50% of the above growth points are organic (Same store growth ) and the balance 50% is in organic growth ( From new stores) Kellogg is the leader in RTEC category within modern trade channel & has been growing the category with various initiatives within modern trade. Business objective is to drive growth faster by increasing the width (Getting new consumers) and increasing the depth of consumption within the current consumer base. These initiatives should deliver a sustained top line and bottom line category growth to the customer as well as Kellogg company These initiatives include different types of sales promotions like free food, bundling promotions, gizmos etc. While advertising presents a reason to buy a product, sales promotion offers a short-term incentive to purchase. Sales promotions often attract brand switchers (those who are not loyal to a specific brand) who are looking primarily for low price and good value. Thus, especially in markets where brands are highly similar, sales promotions can cause a short-term increase in sales but little permanent gain in market share. Alternatively, in markets where brands are quite dissimilar, sales promotions can alter market shares more permanently.
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Objectives
Primary Research Objective: Analyze and recommend an efficient Consumer/Shopper & at Customer level. Consumer promotion model at
Secondary Research Objectives: 1. Map various promotions run by like companies within modern trade ( Price Off „s. Product premiums, Cross promotions with other company products, Bundling offers, Gizmo?s, Sweep stakes, Theme based promotions, etc…) 2. Understand and analyze the promo performance pattern by promo type and in different format stores ( Cash & Carry, Hyper?s, Super market?s, Daily formats, Express formats, ) and by category & Sku 3. Map the project process 4. Understand impact of promotions on Consumer & Shopper /Customer within in modern trade – in terms of brand imagery, Price value perception, Category performance-Pre & Post promotion. Any cannibalization effect etc… 5. Recommend ways to improve the overall promotional efficiency from the consumer / Customer stand point.
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Methodology
The project was conducted in three stages. Once the objectives were defined, an exploratory research was conducted. The aim of this exploratory research was to observe and understand the following aspects: ? The different kind of promotion being run in the market ? The range of discounting done by various companies during a sales promotion. ? Consumer behavior while shopping ? Consumer behavior towards sales promotion in different categories. Then the questionnaire was designed. Two types of questionnaires were designed. First one was for the category consumer (see appendix 1) and the second one was for category non-consumer(appendix 2) The category consumer questionnaire was for those who consumed cornflakes, muesli or Oats for their breakfast. In this, the respondent was required to compare and rate different Kelloggs and its competitive brands for the above mentioned foods on factors like price, quality apart from taste, taste, availability and packaging. The second part of the questionnaire required the respondent to rate 12 different types of promotions on a likert scale of -3 to +3. The category non-consumer questionnaire first tried to find out the breakfast options for the family. The second part was similar i.e. the respondent had to rate the promotions on a kelloggs product depending on their likelihood to try a kelloggs product. The data collection was carried out at modern trade outlets of Big bazaar, Spinach at santacruz, Bandra, Ghatkopar in Mumbai. At these places, through random sampling the respondents were requested to fill the questionnaire. Depending on whether the respondent had cornflakes, muesli or oats for breakfast, the respective questionnaire was handed over to him. Data analysis consisted of two parts. Firstly the data obtained from the survey was analysed. Attribute based perceptual mapping using discriminant analysis was used to understand the perception of kelloggs with respect to its competitors in two categories i.e. cornflakes and mueslix. Also the ratings given by the respondents was averaged for each promotion and then analyzed.
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The second part consisted of an in-depth study of the Mumbai sales figures of past eight months i.e. from October 2007 to may 2008. Each promotion carried out by Kellogg India during this period was analyzed for the following aspects: ? ? ? ? ? ? Increase Depth of Consumption. Increase Width of Consumption Trial Generation Reduce Cannibalization Commercialize the Initiative ROI Approach ( Pay out Ratios )
The change in the width and depth of consumption was understood with a simultaneous analysis of the number of packs sold and the tonnage of food sold. Every fall in sales trend was associated with either a fall in demand or fall in supply with the help of a study of the trend in fill rates also. Thus the recommendations were compiled with the aid of findings from both the survey and the sales figure?s trends.
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Data Analysis and Interpretations:
1. Research Findings (Perceptual Maps):
The cornflakes category consumer was asked to rate kellogg?s cornflakes and Mohun?s cornflakes on a scale of 10 on the following parameters: ? ? ? ? ? Price Quality apart from taste Taste Availability Packaging From these ratings, two groups were formed, one of the kellogg?s consumer and the other consisting of Mohun?s consumer. Their ratings were evaluated separately and a perceptual map was obtained.
1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 parameters brands
pkg
-2
0.1 -0.5
t&a
0
price
0.5 1 Mohun's 1.5 2
kelloggs
-1.5
-1
qlty
0
The above chart represents the perceptual map for mohun?s consumer. A mohun?s consumer treat price as the major decision factor for purchase of cornflakes and then comes availability, taste, quality apart from taste and packaging in decreasing order. He is aware that Kelloggs is better than mohun?s in terms of packaging, quality but he is price-sensitive and hence, a mohun?s consumer. Now the perceptual map from a Kellogg?s consumer: 9|Page
The above chart mainly highlights that a kellogg?s consumer knows that kelloggs products is high on price as compared to Mohun?s. But he is more concerned with availability, taste, quality apart from taste and packaging in that order. It can be inferred that the target groups of both the brands are different and that though a price off promotion may be able to cannibalize on Mohun’s consumers, the growth would not be sustainable. The muesli category consumer was asked to rate three brands of muesli Kelloggs, Baggrrys and Good Earth on a scale of 10 on the same parameters as cornflakes users. Two discriminant functions were obtained. F1 = fn(availability, quality apart from taste, taste, price) ……differentiating factors F2 = fn( packaging)…………………………………..non-differentiating factor The perceptual map for these three brands with the attributes shown as arrows is:
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muesli chart
0.4 0.3
kelloggs
quality
0.2 0.1
taste
price baggrrys
Axis Title
0 -0.6 -0.4 -0.2 -0.1 0 0.2 0.4 0.6 brands attributes
-0.8
availability
-0.2 -0.3 -0.4 -0.5 Axis Title
packaging
good earth
As compared to Baggrrys, Kellogg?s Muesli scored a high only on packaging. Consumers prefer Baggrry?s for its taste, quality apart from taste and price. Also, Most of the Baggrrys muesli consumers were not at all aware that Kelloggs has a muesli product too. Hence, trial generation is quite low.
2. Research Findings ( ratings on each promotions):
The kellogg?s target consumer (SEC A and B) was separated from the responses depending on their mode of travel to place of work. Those who travel by their own vehicle were grouped and their ratings on each of the promotions was averaged. The average score is as shown:
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avg
2.5 2 1.5 1 0.5 0 -0.5 -1
avg
The highest average rating is for “A nutritionist advising you on how and which kellogg?s product is best for you” i.e. 2.1.This shows that though people know that kelloggs as a brand exists, there is no understanding of the differentiated benefits for each product. This gave rise to the recommendation that Kelloggs should develop a sales team who would visit the nutritionists and doctors at high-end hospitals, gymnasiums etc. Also, posters need to be put up that would explain the differentiated benefits for each of the brands of Kelloggs in India. A sample would be something like this:
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Here, care should be taken that the efforts does not result in positioning kelloggs as a food to be taken during illness. It should be positioned as a food for good health in times of hectic schedules and competitive work atmosphere.
3. Range of discounting of various categories:
The promotions currently being run in the market were divided into five types: ? ? ? ? ? Bundling Cross Gizmo Price-off Value A Bundling promotion is when a slow moving SKU is given free with a fast moving SKU. This kind of promotion usually carries a high strategic importance. It helps the slow moving SKU achieve the level of penetration that a fast moving SKU enjoys. The range of discounting in various categories is as follows:
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The red bars indicate the range of discounting as a % of MRP that each category operates in, during a promotion. As we observe that a high penetrated foods category inclusive of tea, coffee, biscuits etc has a lower range in bundling offer discounting as compared to relatively lower penetrated foods category including honey, jam, health foods etc. the main reason for this is that any new product in the tea, coffee etc category experiences trials faster than that in honey, jam, health foods category. Hence the number of bundling offers reduces. Personal care category experiences a upto 45% of mrp as discounting due to the use of a concept called loss leaders. Gillette sells its Rs. 325 worth mach 3 razor and gives a Rs. 225 shaving cream free. Thus, though it sells its razors at a loss, an equivalent profit is earned from the sale of mach 3 blades. A cross company promotion is wherein you give another company?s product which shares the same target group as your product, free with your product. For example, April 2008 saw dabur honey free with Kellogg?s wheat flakes 475gm pack. Such promotions normally help penetrate deeper into your target group base.
60 50 40 30 20 10 0 Sum of diff Sum of min
Here the range is highest in personal care products mainly due to one promotions being run by Hindustan Unilever. HUL has introduced its Anniversary
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offer on Dove shampoo by giving Estelle earrings free. The perceived value of Estelle Earrings is as high as Rs. 100. The second highest range of discounting is seen in detergent category which is again a highly penetrative one and has products with low differentiation. A gizmo is usually a toy or a game given free with any product as an attraction for children. The main characteristic of a gizmo is that it is not other wise available in the market.
As observed in the chart above, gizmo promotions are normally run in the kids category. The highest range of discounting is again seen in highly penetrated, high competitive category of foods including biscuits, chocolates, snacks etc.
One limitation of the above chart is that, the percentage of discounting is based on perceived value of the toy/game and hence, may not be 100% accurate.
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A price-off promotion generally aims at attracting price sensitive buyers and hence, creates brand switchers in the market.
Again the range of discounting in a price-off promotion is seen to be higher in undifferentiated categories like insect repellents, oral care, deodorants( these deodorants include those upto an MRP Rs. 150)
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A value promotion is usually a combination pack of two or more SKU at a lower price, or it can even offer some percent of the product free, for example 25 % free food on kellogg?s chocos.
The categories that touch a 50% of the MRP mark in discounting in a value promotion indicate liquidation offers (eg. Buy 1 get 1 free). Such offers are usually introduced when the product nears its expiry date or the SKU will soon be obsolete. On a concluding note, the range of discounting is very large in two cases: ? Highly penetrative category ? High competition in the category. Except for price-offs kelloggs has launched promotions discounting mainly in the range of 25 to 30% of the MRP which is quite a healthy figure. As per the findings from my survey, consumers perceive Kelloggs as a brand which delivers quality at a price.Hence, any increase in the range of discounting will not only tarnish this image but also will not really help in achieving sustainable results.
4. Promotions done so far:
The sales figures from October 2007 to May2008 were analyzed to examine the efficiency of the promotions done in this period. The promotion calendar of this period looks something like this:
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Diwali theme October promotions Corn flakes 475gm banana free k-paks – tattoo bowl free with wheat 600gm
November
December
muesli apple +muesli almond + 1l amul milk free
January
February
Corn flakes 475GM MUSELIX ALMOND 80 GM FREE 25% free on Chocos 375gm and Smack 390gm hotwheels and barbie sportswatch k-paks: 33%extra free 475gms wheat flakes honey free
March
As can be observed, the company had the following kind of promotions: 1. Bundling offers: Corn flakes 475gms + banana 125gms free and cornflakes 475gms + muesli 80gm free 2. Value offers: 25% free on Chocos 375gm and Smack 390gm and k-paks: 33%extra free 3. Cross Company offers: 475gms wheat flakes + dabur honey free 4. Gizmos: hotwheels and barbie sportswatch free with 650gm chocos.
4.1. Bundling Promotions:
Bundling promotions have a strong strategic importance to the organization. It helps a slow moving SKU to ride on fast moving SKU and thus gain high penetration. In such a case the main objective is then to increase the sales of the slow moving SKU post promotion. At the same time, the cannibalization effect should be minimum on other like SKUs. 18 | P a g e
The first bundling offer i.e. banana 125gms was given free with cornflakes 475gms in November 2007. The trends shown by sales figures is as shown:
As can be observed, the promotion saw a rise in sales of cornflakes 475gms by 10000 units. However, the post promotion figure settled at around 8600 units showing a 2000 units repeat purchase. ( 20% retention ratio) At the same time, the sales figures for any SKU of Banana does not show a dip in the promotion period. This shows that the peak obtained during the promotion is not an effect of cannibalization on banana sales. Thus it shows the entry of new consumers into the category. This promotion actually helped increase the width of the consumer base. The additional units retained showed additional value to the business in the short run ( the month post promotion i.e.december) and in the long run ( i.e. January)
Promo: corn 475gms +banana 125gms free m.r.p: 125 corn 475gms +banana 125gms free m.r.p: 125 Promo Projected Additional Avg Sale Cost per Cost per Sale in Business in pcs Sku unit pcs in pcs 6297 40.00 113.00 8,170 1,873 No.of units increased 2384 564
Promo Cost short run 326800
Additional Business in value 211649 Value added to business 298000 22560 320560
ROI 64.764%
long run
price 125 40
98.090%
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One main reason for this is, Kelloggs is perceived as a very expensive but aspirational brand. So any offer that gives more food at lower cost generates new trials. The survey shows that out of the 59 non-consumers interviewed, 57 of them had tried kelloggs products before. But they do not have it regularly. 27% of them feel that it becomes monotonous to have cornflakes daily for breakfast. 31% of them have cornflakes occasionally. So, bundling offers like this provides value for money to the consumer and thus, helps rope in new consumers. The other bundling offer had 80gm muesli free with cornflakes 475gms in February 2008. The trend lines for the same are as shown:
Here again the rise in sales during February (i.e 4500 units) shows no cannibalization on the sales of Muesli almond 275gm or 80gm. The 80 gm SKU was discontinued after February 2008. This promotion did not show any retention element either in cornflakes or in muesli. This is supported by the fall in cornflakes in april 2008.
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Though this promotion achieved a short term ROI of 196%, its long term ROI was -21%. This supports the claim that there was no retention element.
Promo: corn 475gms +muesli almond 80gm free m.r.p: 125 corn 475gms +muesli almond 80gm free m.r.p: 125 Promo Projected Additional Avg Sale Cost per Cost per Sale in Business in pcs Sku unit pcs in pcs 8425 35.00 113.00 13,504 5,079 No.of incremental units -224 -418 -178
Promo Cost short run 292180
Additional Business in value 573927
R.O.I 196.429%
long run
292180
price 125 35 110
value -28000 -14630 -19580 -62210
-21.291%
Muesli as a category shows low awareness and kelloggs muesli within the category consumers also shows very low awareness. Also, one observation made during the market visits was that kelloggs Muesli is cannibalizing on the shelf-space occupied by kelloggs cornflakes. Ideally, since muesli is a category by itself in the breakfast cereals category, additional shelf space needs to be obtained for kellogg’s muesli.
4.2. Cross Company Promotions:
One of the cross company promotions that was run by kelloggs india was dabur honey free with 475gm wheat flakes in april 2008. The sales trends for this promotion is as shown:
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In October 2007, wheat flakes 600gm was introuced with a melamine bowl free. Due to this promotion, there was cannibalization in sales of 475gm wheat flakes and 340 gms wheat flakes with honey. This cannibalization however delivered value to the organization. The peak in sales of these two SKU in november is mainly due to this reason.Post november, January saw a drop in the fill rates of 475gm wheat flake from 95% to 54% resulting in a drop in sales. This figure accounts for a loss in sales of 315 cases i.e. 4410 packs. In terms of value, the lost sales here accounts for Rs. 520380. Now during the promo period, the rise in 475gm and the fall in 340 gm packs can be misunderstood for cannibalization. But, the next month shows a consisitent retention of the higher sales for 475gm wheat flakes and also, a rise in the sales of 340 gm wheat flakes with raisins. A further probing into this matter highlighted a drop in the primary demand from an average of 100 cases for 340 gm wheat flakes with raisins to only 27 cases. Hence, it can be inferred that there isnt any cannibalization here too. This promotion saw an exceptionally high ROI in the short run. The long run ROi is not possible to measure here as the promotion was shipped in april 2008.
Promo: 475gms wheat flakes +dabur honey free 475gms wheat flakes +dabur honey free Promo Projected Additional Avg Sale Cost per Cost per Sale in Business in pcs Sku unit pcs in pcs 2700 32.50 118.00 3,396 696
Promo Cost short run 21600
Additional Business in value 82128 380.2222222
4.3. Value Offers: One of the value offers that kelloggs launched was 33% extra free food on k-paks chocos, chocos smacks and planet and stars in march 2008. K-paks is nutrition food positioned as 4pm food for kids. An excellent initiative by the company that has helped achieve high levels of penetration mainly due to its low cost(Rs.10) .The variants available in k-paks are: ? Chocos ? Chocos smacks ? Chocos planet and stars ? Corn flakes honey ? Cornflakes mango.
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The trend line for the sale of the promo- SKUs is as shown:
All the three SKUs show a similar trend february onwards, as compared to the total Kpaks sales. Hence, the total k-paks trend was analysed. The promotion saw an incremental peak of 46000 paks and then a drop of 36000 packs in april. The retention was a good 10000 packs i.e. 16% retention percentage was achieved. Though the additional business generated in value is not very high due the low cost of the packs, the penetration and retention achieved is very high.
Promo:
kpaks + 33% extra free kpaks + 33% extra free Promo Projected Cost per Cost per Sale in Sku unit pcs 3.00 9.09 23,134
Promo Cost short run long run 177555 177555
Avg Sale in pcs 20000
Additional Business in pcs 3,134
Additional Business in value 28488 16.04463969 73.27086255
9.09
14312
130096.08
One main reason for this is that an extra food promotion on k-paks increases the size of the pack making it comparable to that of a Rs. 10 pack of chips.Thus, it provides a greater value for money and parents are also ready to shell out that amount for the increased quantity.
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Since, k-paks is positioned as 4pm food. One way of achieving greater sales for k-paks is to reach where the consumer is. K-paks can be made a feature at school cafeterias especially at schools having afternoon shift schools. A counter can be set up to sell kpaks during school functions like sports meet, annual day etc. 4.4. Failed promotions: 1. Tattoo free on k-paks: This promotion was run in December 2008 and showed a short term fall in sales of 6000 units and a long term fall in sales of almost 20000 units. Tattoos from the point of view of Indian consumer is a sign of rebel. The past has seen various instances of skin allergies due to the application of tattoos obtained with chewing gums. Hence, Indian parents and their children likewise, are skeptical about free tattoos. This,I believe, is one of the greatest reason for the failure of this promotion. The trend for this promotion can be seen in the previous graph during the period from October 2007 to February 2008. The promotion also showed a negative long run ROI.
Promo: k-pak(chocos) + tattoo free k-pak(chocos) + tattoo free Promo Projected Cost per Cost per Sale in Sku unit pcs 0.08 9.09 27,793
Promo Cost short run long run 120000 120000
Avg Sale in pcs 26450
Additional Business in pcs 1,343
Additional Business in value 12208
ROI 10.173
price 10
no.of incremental packs -10000
value to business -100000 -100000
-83.333
2. Three promotions run together: March 2008 saw three promotion in the Chocos category together. 1. 25% extra free on chocos 375gms 2. 25% extra free on smacks 390gms 3. Hotwheels or barbie sportswatch free with 650gm Chocos.
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First lets discuss about the perceptions about gizmos given with the products.These are gifts that attract children to demand a purchase. Some of the various instances in the market would be ? Free sunglasses with Horlicks 500gm ? Prankster toys with ITC Sunfeast ? A board game with cadbury?s wowie. And many more. Though children ask for it, parents are quite skeptical in buying such products as they believe that the children wont consume the product. In such a case, a new shopper whose child demands a 650 gm pack chocos just for the gizmo with it, may not be ready to shell out Rs, 225 for a large pack. She might be ready to try a smaller pack first which is available at a lower cost. Hence in march, when the three promotions were launched together, there have been instances of downgrading of shoppers from 650 gm pack to a 375gm pack of chocos. The trends are as shown:
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First reason being, a watch is a high involvement product which is bought after a considerable amount of planning. Secondly, the per gram cost of these SKUs suggested a lower cost for the smaller pack. sku Chocos (sportswatch free) Chocos( 25% extra food free) gms 650 468.75 MRP 225 120 per gram cost 0.346153846 0.256
Also the same period saw a fall in the fill rates for 650 gm SKU from 65% to 44%. This also resulted in degradation of the purchase pattern of the consumers. I would still suggest a Gizmo promotion for the kids category, as the trendline for the total chocos consumption shows a consistent and steady increase. This shows that though gizmos aid in getting in new consumers, we need to figure out a way to ensure repeat purchase.
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Due to this, the free food promotion showed a very high ROI both in the short and the long run;
Promo:
25% free on chocos 375gms 25% free on chocos 375gms Promo Projected Cost per Cost per Sale in Sku unit pcs 30.00 109.00 3,833
Promo Cost short run 114990
Avg Sale in pcs 3450
Additional Business in pcs 383 no.of incremental units 3350
Additional Business in value 41747
ROI
36.30489608
cost long run 114990 109
value 365150
317.5493521
Promo:
25% free on chocos smacks 375gms 25% free on chocos smacks 375gms Promo Projected Additional Avg Sale Cost per Cost per Sale in Business in pcs Sku unit pcs in pcs 1345 32.50 118.00 2,063 718 no of incremental units 2517
Promo Cost short run 67048
Additional Business in value 84724
ROI
126.3641448
long run
67048
price 118.00
value 297006
442.9784854
4.5. KEY LEARNING FROM THIS:
1. Two promotions should not coincide in the same category. 2. A new shopper may be skeptical to buy a large pack worth Rs. 225 just for the toy. Hence I feel that gizmos should be offered on smaller packs worth Rs.42 or Rs. 80.However, this poses a threat for degradation of purchase pattern again due to the attratction of the toy. Another solution to this can be theme-based gizmos promotion. Wherein a collection of toys is offered in the promotion on all the pack sizes. Larger the pack size, the higher should be the perceived value of the toy. Also, since a collection of the toys will be on offer, the duration of the promotion should be longer than one month.For example, if collection of 4 toys is on the offer, 28 | P a g e
the promotion should be for atleast 5 months.This would also ensure repeat purchases. Also, care should be taken that the gizmos are such that possession is pride for the children. The timing of the launch of promotion is also crucial. If it is a theme based promotion, it should not only be launched when the theme is relevant in the market but also the children are not busy with their examinations. I suggest the time when the children are getting ready to go back to school. This is usually the time when children like to showcase their new possession obatined during the vacations. Hence according to me, an ideal time would be vacation end.
5. Interaction with the customers:
During my market visits, I have interacted with the distributors and the outlet managers.Some insights and my understanding of these interactions revealed that generally customers ask for deep price off promotions on lead brands & sku?s from Vendors just to draw shoppers to their stores. They will try and do this on 5% of their assortment and will generate traffic flow in to their stores. These promotions and initiatives they will also advertise to draw the shopper attention. Customers will try and avoid getting in to any kind of customization . Customers will approach vendors for deep cut promotions during store openings, anniversaries, Theme based concepts, Sometimes. Customers do promotions on their own on lead sku?s to draw shoppers to their stores. Most of the mordern trade outlets are positioned on the USP of „price lower than the MRP?. Hence,the outlet mangers heavily promoted price-offs as the best promotion. However, one interesting highlight was that out of the 10 store managers interviewed, atleast 6 of them asked for promoters for the category bay. They say that the category is new to the country and hence, even the aisles salesment are not very educated to be able to answer a shopper/consumer?s query. I feel, instead of a promoter in the category bay, we should conduct one-day training workshop for the aisles salesmen.The agenda of the workshop should be to explain the importance and benefits of having breakfast cereals instead of the traditional Indian Breakfast, which kelloggs brand is for which kind of consumer and hence, highlight the differentiated benefits for each brand. This would not only spread an understanding about the company’s offerings in the market place but also would improve trade relationship.
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Conclusion
1. The following table gives in brief my understanding of the promotions evaluated on different aspects:
promotions/benefits new consumer increase the depth highly competitive needs high marketing backup Needs high visibility ?
value offers
cross company
bundling offers
price off
gizmos
sweep stakes
? ?
?
A price-off promotion helps create volume in a highly competitive environment. Since, Kelloggs at present does not have any strong competition in the market, price-off is not recommended.Also, consumers that are attratced through a price off are usually brand-switchers. This promotion would not generate sustainable sales. Sweep stakes and gizmos have a negative inclination from adults and hence, require a high marketing backup. The higher the awarenes and recall of such promotions, the greater is the probability for the pomotion to be a success. A personal observation is that a category non-consumer usually does not even enter the breakfast cereals category bay.Hence, value offers, cross company offers and bundling offers need high off-shelf visibility. Especially the first few floor stacks encountered by the shopper as he enters the store. In case of gizmos, the following points are crucial: ? create a fashion statement [ possession should be pride] ? Form a collection of toys ? Timing of launch
2. Develop a sales team (like Medical representatives) • Places to focus: – High-end hospitals – Obesity clinics – Gymnasium Here, the positioning should be taken care of.This option would require an extensive training of the sales team developed.
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3. Make K-paks available in school cafeterias especially the ones having afternoon shifts, in school functions. 4. A one-day training workshop for the aisles saleperson.
Appendix 1:
Category Consumer Questionnaire Please take two minutes and fill up the questionnaire: 1. How many members are there in your family? _________________ 2. Where do you generally shop for your monthly grocery? ____________________________ 3. Three reasons why you like shopping here: 1. _____________________________________________________________________ 2.______________________________________________________________________ 3._______________________________________________________________________ 4. How do you/ your husband commute to office daily? ( Tick all that is applicable) 1. Own car / company’s car with chauffeur 2. Company’s sumo ( for a group of employees) 3. BEST/ Trains 4. Own Bike 5. Others, please specify _______________. 5. Please rank the following breakfast preferences for each member of the family: young kids ( below adults the age of in the 12 years) family
mother father
seniors of the house
parathas idli/dosas/wada poha/bread butter only milk/juice cornflakes Chocos Muesli Oats Please name the brand if you have ticked any of these: cornflakes 31 | P a g e
chocos muesli oats
For Corn Flakes user, please rate the following brands on a scale of 10 on each of the following parameters: Price Kelloggs cornflakes Mohun’s Cornflakes 6. For Muesli users, please rate the following brands on a scale of 10 on each of the following parameters: Price Kelloggs muesli Baggrry’s Muesli Good earth Muesli others 7. Do you remember any offer that you recently saw in the store that you have particularly liked? ________________________________________________________________________ _______________________________________________________________________ 8. Which kelloggs product(s) do you use? Sr Name of the product no. 1 2 3 4 9. Do you know that kelloggs cornflakes comes in various flavours? no Yes Quality Taste Availability Packaging Quality Taste Availability Packaging
Packet size
Number of packets /month
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If, yes which ones, a. b. c. d. 10. Do you know that kelloggs Chocos comes in various flavours? no If, yes which ones, a. b. c. d. Yes
11. Please rate the following offers on the Kelloggs product that you use: Do you think you will purchase this promo pack? 3: certainly, 2: quite certain, 1: maybe yes, 0: not at all
Promotions
How do you like this promotion?
A Price off on Kelloggs pack.( 1 advertised on television) same as above but no 2 advertisement A coupon on every purchase that can be redeemed for a discount on 3 the next purchase Scratch card with an assured gift 4 that will be given immediately scratch card with an assured gift 5 that will be given later Entry form for a contest, prize to 6 be lucky draw 33% extra free on a medium sized 7 pack of kelloggs Buy one pack and get another pack 8 of flavoured flakes free
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9 10 11
12
A game or a toy free with heavy advertisement on mass media A game or a toy free with no advertisement A combination family ( super saver) pack of Kelloggs products A nutritionist advising you on how and why and which kelloggs product is best for you
Appendix 2:
Category non-consumer questionnaire: Please take two minutes and fill up the questionnaire: 1. How many members are there in your family? _________________ 2. Where do you generally shop for your monthly grocery? ____________________________ 3. Three reasons why you like shopping here: 1. _____________________________________________________________________ 2.______________________________________________________________________ 3._______________________________________________________________________ 4. How do you/ your husband commute to office daily? ( Tick all that is applicable) 1. Own car / company’s car with chauffeur 2. Company’s sumo ( for a group of employees) 3. BEST/ Trains 4. Own Bike 5. Others, please specify _______________. 5. Studies show that healthy and filling breakfast makes people perform better. Comment? a. I know that. Hence I have home-made fresh breakfast daily b. I know that but I don’t get the time. c. I will surely make conscious efforts to have a healthy breakfast from tomorrow onwards. d. I don’t believe this. 6. Cereals and whole-grains ,prepared in low fat, are ideal for breakfast and good for overall health. Comment? a. I think Indian breakfast items fulfill this proposition. b. Agreed. But they are not that tasty. c. Agreed. But these cornflakes that you get in the market are too expensive.
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d. thanks for the information anyways. But I seriously don’t get any time to have breakfast at all. 7. Do you know of any company that provides ready to eat breakfast cereals? Yes No If yes, please name a few, 1. ____________________ 2. _____________________ 3.___________________ 8. Please rank the following breakfast preferences for each member of the family: young kids ( below adults the age of in the 12 years) family
mother father
seniors of the house
parathas idli/dosas/wada poha/bread butter only milk/juice cornflakes Chocos Muesli Oats 9. Do you remember any offer that you recently saw in the store that you have particularly liked? ________________________________________________________________________ _______________________________________________________________________ 10. Please evaluate the following promotions on Kelloggs products on your likelihood of purchase: Do you think you will purchase this promo pack? 3: certainly, 2: quite certain, 1: maybe yes, 0: not at all
Promotions
How do you like this promotion?
A Price off on Kelloggs pack.( 1 advertised on television) 2 same as above but no 35 | P a g e
3 4 5 6 7 8 9 10 11
12
advertisement A coupon on every purchase that can be redeemed for a discount on the next purchase Scratch card with an assured gift that will be given immediately scratch card with an assured gift that will be given later Entry form for a contest, prize to be lucky draw 33% extra free on a medium sized pack of kelloggs Buy one pack and get another pack of flavoured flakes free A game or a toy free with heavy advertisement on mass media A game or a toy free with no advertisement A combination family ( super saver) pack of Kelloggs products A nutritionist advising you on why and how to take Kelloggs for your health A free product like biscuits, honey with the kelloggs pack
13
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doc_827510947.docx
The report is to examine the nature of sales promotions activities in Mumbai, understand consumer attitude toward these promotions and how it can benefit Kellogg as an organization to achieve its business objective.
Modern Trade Project on Consumer Promotion Efficiency
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Table of Contents
Acknowledgement ........................................................................................................................................ 3 Abstract ......................................................................................................................................................... 4 Introduction .................................................................................................................................................. 5 Objectives ..................................................................................................................................................... 6 Methodology................................................................................................................................................. 7 Data Analysis and Interpretations ................................................................................................................ 9 1. Research Findings (Perceptual Maps) ................................................................................................... 9 2. Research Findings ( ratings on each promotions) ............................................................................... 11 3. Range of discounting of various categories ........................................................................................ 13 4. Promotions done so far....................................................................................................................... 17 4.1. Bundling Promotions.................................................................................................................... 18 4.2. Cross Company Promotions ......................................................................................................... 21 4.3. Value Offers: ................................................................................................................................ 22 4.4. Failed promotions: ....................................................................................................................... 24 4.5. KEY LEARNING FROM THIS ........................................................................................................... 28 5. Interaction with the customers .......................................................................................................... 29 Conclusion ................................................................................................................................................... 30 Appendix 1: ................................................................................................................................................. 31 Appendix 2: ................................................................................................................................................. 34
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Acknowledgement
A good start to the project report would be by acknowledging the contributions and help of those who made this project possible. Of all the people who have contributed to this study, I take the opportunity here to thank as many as possible.
I extend my heartiest and sincere thanks to my Project guide Mr. Sanjeev Khanna, Director- Sales, for his support and insights on the project.
I would like to thank my Mentor Mr. P.S.Venkat, National Key Accounts Manager, for enlightening me on the aspects of the project and providing continuous guidance and support throughout the project and helping me to complete this project in the best possible manner.
I would like to thank Mr. Yusuf Mohammed, Area Sales Manager(Mumbai-1) for his kind help on the project and all the officials in the sales department, who were always willing and enthusiastic to help me.
I would also like to extend a word of thanks to all the members of the Kelloggs India family and all the territory-sales-in-charge (T.S.I) who helped me out by providing various contacts and information regarding my project.
My sincere thanks to all the channel partners of Kelloggs India for sharing their market experience and all the store managers who supported me to conduct the research at their outlets.
Finally I would like to thank my institute Symbiosis Centre for Management and Human Resource Development (SCMHRD) that provided me this opportunity to interact so closely with this organization and understand intricacies of corporate world.
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Abstract
Kellogg is the leader in RTEC category within modern trade channel & has been growing the category with various initiatives within modern trade. In this report, an attempt has been made to examine the nature of sales promotions activities in Mumbai, understand consumer attitude toward these promotions and how it can benefit Kellogg as an organization to achieve its business objective. The project was carried out in three stages. Firstly, an exploratory research was carried out to understand the different types of promotions running in modern trade. This also gave an insight on the range of discounting done by various categories in the market during a sales promotion. Then the questionnaire was designed and research was conducted at different types of modern trade outlets(like Hyper?s, Super market?s, Daily formats, Express formats) This mainly aimed at understanding the attitude of the shopper towards the various types of promotions run on Kellogg?s SKU. The third stage involved analysis of the data obtained from research and the sales trend of all the Kelloggs SKU. My findings indicate that promotions like price-offs have a good impact in a highly competitive, undifferentiated product environment. But they do not create brand loyals and hence, are not affective in the long run. Hence,the organization should not at all look at price-off sales promotions until the category experiences strong competition. Bundling Promotions (where a slow moving SKU rides on a fast moving SKU) helps gain high penetration and thus increases the volume share. Gizmos pose a high attraction for children, especially the ones which make a fashion statement. But these do not guarantee repeat purchase. Hence, I recommend theme based gizmos, wherein a child is offered a collection of toys so that repeat purchase is ensured. Also, it was found that consumers believe that an advice from nutritionist would make them consume breakfast cereals. In this light, I suggest that Kellogg create a sales team focused to encourage doctors and nutrionists at high-end hospitals, gymnasiums to recommend the use of kelloggs products. Since the concept of breakfast cereals is still new to India, there is very little knowledge about the various brands of Kellogg even among the aisles salesmen. Many outlet managers expressed the need to have a promoter in the category bay. Hence, I recommend a 1- day training program to the aisles salesperson to educate him/her about the various brands of Kellogg and their differentiated benefits. This would also help enhance channel partner relationship.
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Introduction
Since 1906, people have come to know Kellogg as a company they can rely on for great-tasting, high-quality foods. With the 2006 sales of almost $11 billion, Kellogg Company is the world?s leading producer of cereal and a leading producer of convenience foods, including cookies, crackers, toaster pastries, cereal bars, frozen waffles and meat alternatives. W.K. Kellogg began worldwide expansion of the company in 1914. By 1938, Kellogg had build plants in England and Australia. After W.K. Kellogg's death in 1951, Kellogg continued to expand its operations, building plants in Latin America and Asia. In 1958 Tony the Tiger® won a contest over Katy the Kangaroo to become the sole spokescharacter for Kellogg's Frosted Flakes® and a mainstay in American culture. Kelloggs India started its operations in 1994 with the India Corporate head office at Mumbai. It set up its own food processing plant at Taloja, near Vashi. Currently. it has its Regional Set up at Mumbai, Delhi, Chennai & Kolkata [ Sales & Supply Chain]. Kellogg India has shown a fast paced growth story. It has been growing at higher double digits YOY for the last couple of years. In 2007, Kellogg India reported top most growth in Asia Pacific Region for Kelloggs. Modern trade value contribution to Kellogg?s as a company is close to 25%. Kellogg India has a 60% value share in breakfast cereal category within modern trade and is growing at a compounded growth rate of 60% + for the last 3 years. 50% of the above growth points are organic (Same store growth ) and the balance 50% is in organic growth ( From new stores) Kellogg is the leader in RTEC category within modern trade channel & has been growing the category with various initiatives within modern trade. Business objective is to drive growth faster by increasing the width (Getting new consumers) and increasing the depth of consumption within the current consumer base. These initiatives should deliver a sustained top line and bottom line category growth to the customer as well as Kellogg company These initiatives include different types of sales promotions like free food, bundling promotions, gizmos etc. While advertising presents a reason to buy a product, sales promotion offers a short-term incentive to purchase. Sales promotions often attract brand switchers (those who are not loyal to a specific brand) who are looking primarily for low price and good value. Thus, especially in markets where brands are highly similar, sales promotions can cause a short-term increase in sales but little permanent gain in market share. Alternatively, in markets where brands are quite dissimilar, sales promotions can alter market shares more permanently.
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Objectives
Primary Research Objective: Analyze and recommend an efficient Consumer/Shopper & at Customer level. Consumer promotion model at
Secondary Research Objectives: 1. Map various promotions run by like companies within modern trade ( Price Off „s. Product premiums, Cross promotions with other company products, Bundling offers, Gizmo?s, Sweep stakes, Theme based promotions, etc…) 2. Understand and analyze the promo performance pattern by promo type and in different format stores ( Cash & Carry, Hyper?s, Super market?s, Daily formats, Express formats, ) and by category & Sku 3. Map the project process 4. Understand impact of promotions on Consumer & Shopper /Customer within in modern trade – in terms of brand imagery, Price value perception, Category performance-Pre & Post promotion. Any cannibalization effect etc… 5. Recommend ways to improve the overall promotional efficiency from the consumer / Customer stand point.
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Methodology
The project was conducted in three stages. Once the objectives were defined, an exploratory research was conducted. The aim of this exploratory research was to observe and understand the following aspects: ? The different kind of promotion being run in the market ? The range of discounting done by various companies during a sales promotion. ? Consumer behavior while shopping ? Consumer behavior towards sales promotion in different categories. Then the questionnaire was designed. Two types of questionnaires were designed. First one was for the category consumer (see appendix 1) and the second one was for category non-consumer(appendix 2) The category consumer questionnaire was for those who consumed cornflakes, muesli or Oats for their breakfast. In this, the respondent was required to compare and rate different Kelloggs and its competitive brands for the above mentioned foods on factors like price, quality apart from taste, taste, availability and packaging. The second part of the questionnaire required the respondent to rate 12 different types of promotions on a likert scale of -3 to +3. The category non-consumer questionnaire first tried to find out the breakfast options for the family. The second part was similar i.e. the respondent had to rate the promotions on a kelloggs product depending on their likelihood to try a kelloggs product. The data collection was carried out at modern trade outlets of Big bazaar, Spinach at santacruz, Bandra, Ghatkopar in Mumbai. At these places, through random sampling the respondents were requested to fill the questionnaire. Depending on whether the respondent had cornflakes, muesli or oats for breakfast, the respective questionnaire was handed over to him. Data analysis consisted of two parts. Firstly the data obtained from the survey was analysed. Attribute based perceptual mapping using discriminant analysis was used to understand the perception of kelloggs with respect to its competitors in two categories i.e. cornflakes and mueslix. Also the ratings given by the respondents was averaged for each promotion and then analyzed.
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The second part consisted of an in-depth study of the Mumbai sales figures of past eight months i.e. from October 2007 to may 2008. Each promotion carried out by Kellogg India during this period was analyzed for the following aspects: ? ? ? ? ? ? Increase Depth of Consumption. Increase Width of Consumption Trial Generation Reduce Cannibalization Commercialize the Initiative ROI Approach ( Pay out Ratios )
The change in the width and depth of consumption was understood with a simultaneous analysis of the number of packs sold and the tonnage of food sold. Every fall in sales trend was associated with either a fall in demand or fall in supply with the help of a study of the trend in fill rates also. Thus the recommendations were compiled with the aid of findings from both the survey and the sales figure?s trends.
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Data Analysis and Interpretations:
1. Research Findings (Perceptual Maps):
The cornflakes category consumer was asked to rate kellogg?s cornflakes and Mohun?s cornflakes on a scale of 10 on the following parameters: ? ? ? ? ? Price Quality apart from taste Taste Availability Packaging From these ratings, two groups were formed, one of the kellogg?s consumer and the other consisting of Mohun?s consumer. Their ratings were evaluated separately and a perceptual map was obtained.
1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 parameters brands
pkg
-2
0.1 -0.5
t&a
0
price
0.5 1 Mohun's 1.5 2
kelloggs
-1.5
-1
qlty
0
The above chart represents the perceptual map for mohun?s consumer. A mohun?s consumer treat price as the major decision factor for purchase of cornflakes and then comes availability, taste, quality apart from taste and packaging in decreasing order. He is aware that Kelloggs is better than mohun?s in terms of packaging, quality but he is price-sensitive and hence, a mohun?s consumer. Now the perceptual map from a Kellogg?s consumer: 9|Page
The above chart mainly highlights that a kellogg?s consumer knows that kelloggs products is high on price as compared to Mohun?s. But he is more concerned with availability, taste, quality apart from taste and packaging in that order. It can be inferred that the target groups of both the brands are different and that though a price off promotion may be able to cannibalize on Mohun’s consumers, the growth would not be sustainable. The muesli category consumer was asked to rate three brands of muesli Kelloggs, Baggrrys and Good Earth on a scale of 10 on the same parameters as cornflakes users. Two discriminant functions were obtained. F1 = fn(availability, quality apart from taste, taste, price) ……differentiating factors F2 = fn( packaging)…………………………………..non-differentiating factor The perceptual map for these three brands with the attributes shown as arrows is:
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muesli chart
0.4 0.3
kelloggs
quality
0.2 0.1
taste
price baggrrys
Axis Title
0 -0.6 -0.4 -0.2 -0.1 0 0.2 0.4 0.6 brands attributes
-0.8
availability
-0.2 -0.3 -0.4 -0.5 Axis Title
packaging
good earth
As compared to Baggrrys, Kellogg?s Muesli scored a high only on packaging. Consumers prefer Baggrry?s for its taste, quality apart from taste and price. Also, Most of the Baggrrys muesli consumers were not at all aware that Kelloggs has a muesli product too. Hence, trial generation is quite low.
2. Research Findings ( ratings on each promotions):
The kellogg?s target consumer (SEC A and B) was separated from the responses depending on their mode of travel to place of work. Those who travel by their own vehicle were grouped and their ratings on each of the promotions was averaged. The average score is as shown:
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avg
2.5 2 1.5 1 0.5 0 -0.5 -1
avg
The highest average rating is for “A nutritionist advising you on how and which kellogg?s product is best for you” i.e. 2.1.This shows that though people know that kelloggs as a brand exists, there is no understanding of the differentiated benefits for each product. This gave rise to the recommendation that Kelloggs should develop a sales team who would visit the nutritionists and doctors at high-end hospitals, gymnasiums etc. Also, posters need to be put up that would explain the differentiated benefits for each of the brands of Kelloggs in India. A sample would be something like this:
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Here, care should be taken that the efforts does not result in positioning kelloggs as a food to be taken during illness. It should be positioned as a food for good health in times of hectic schedules and competitive work atmosphere.
3. Range of discounting of various categories:
The promotions currently being run in the market were divided into five types: ? ? ? ? ? Bundling Cross Gizmo Price-off Value A Bundling promotion is when a slow moving SKU is given free with a fast moving SKU. This kind of promotion usually carries a high strategic importance. It helps the slow moving SKU achieve the level of penetration that a fast moving SKU enjoys. The range of discounting in various categories is as follows:
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The red bars indicate the range of discounting as a % of MRP that each category operates in, during a promotion. As we observe that a high penetrated foods category inclusive of tea, coffee, biscuits etc has a lower range in bundling offer discounting as compared to relatively lower penetrated foods category including honey, jam, health foods etc. the main reason for this is that any new product in the tea, coffee etc category experiences trials faster than that in honey, jam, health foods category. Hence the number of bundling offers reduces. Personal care category experiences a upto 45% of mrp as discounting due to the use of a concept called loss leaders. Gillette sells its Rs. 325 worth mach 3 razor and gives a Rs. 225 shaving cream free. Thus, though it sells its razors at a loss, an equivalent profit is earned from the sale of mach 3 blades. A cross company promotion is wherein you give another company?s product which shares the same target group as your product, free with your product. For example, April 2008 saw dabur honey free with Kellogg?s wheat flakes 475gm pack. Such promotions normally help penetrate deeper into your target group base.
60 50 40 30 20 10 0 Sum of diff Sum of min
Here the range is highest in personal care products mainly due to one promotions being run by Hindustan Unilever. HUL has introduced its Anniversary
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offer on Dove shampoo by giving Estelle earrings free. The perceived value of Estelle Earrings is as high as Rs. 100. The second highest range of discounting is seen in detergent category which is again a highly penetrative one and has products with low differentiation. A gizmo is usually a toy or a game given free with any product as an attraction for children. The main characteristic of a gizmo is that it is not other wise available in the market.
As observed in the chart above, gizmo promotions are normally run in the kids category. The highest range of discounting is again seen in highly penetrated, high competitive category of foods including biscuits, chocolates, snacks etc.
One limitation of the above chart is that, the percentage of discounting is based on perceived value of the toy/game and hence, may not be 100% accurate.
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A price-off promotion generally aims at attracting price sensitive buyers and hence, creates brand switchers in the market.
Again the range of discounting in a price-off promotion is seen to be higher in undifferentiated categories like insect repellents, oral care, deodorants( these deodorants include those upto an MRP Rs. 150)
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A value promotion is usually a combination pack of two or more SKU at a lower price, or it can even offer some percent of the product free, for example 25 % free food on kellogg?s chocos.
The categories that touch a 50% of the MRP mark in discounting in a value promotion indicate liquidation offers (eg. Buy 1 get 1 free). Such offers are usually introduced when the product nears its expiry date or the SKU will soon be obsolete. On a concluding note, the range of discounting is very large in two cases: ? Highly penetrative category ? High competition in the category. Except for price-offs kelloggs has launched promotions discounting mainly in the range of 25 to 30% of the MRP which is quite a healthy figure. As per the findings from my survey, consumers perceive Kelloggs as a brand which delivers quality at a price.Hence, any increase in the range of discounting will not only tarnish this image but also will not really help in achieving sustainable results.
4. Promotions done so far:
The sales figures from October 2007 to May2008 were analyzed to examine the efficiency of the promotions done in this period. The promotion calendar of this period looks something like this:
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Diwali theme October promotions Corn flakes 475gm banana free k-paks – tattoo bowl free with wheat 600gm
November
December
muesli apple +muesli almond + 1l amul milk free
January
February
Corn flakes 475GM MUSELIX ALMOND 80 GM FREE 25% free on Chocos 375gm and Smack 390gm hotwheels and barbie sportswatch k-paks: 33%extra free 475gms wheat flakes honey free
March
As can be observed, the company had the following kind of promotions: 1. Bundling offers: Corn flakes 475gms + banana 125gms free and cornflakes 475gms + muesli 80gm free 2. Value offers: 25% free on Chocos 375gm and Smack 390gm and k-paks: 33%extra free 3. Cross Company offers: 475gms wheat flakes + dabur honey free 4. Gizmos: hotwheels and barbie sportswatch free with 650gm chocos.
4.1. Bundling Promotions:
Bundling promotions have a strong strategic importance to the organization. It helps a slow moving SKU to ride on fast moving SKU and thus gain high penetration. In such a case the main objective is then to increase the sales of the slow moving SKU post promotion. At the same time, the cannibalization effect should be minimum on other like SKUs. 18 | P a g e
The first bundling offer i.e. banana 125gms was given free with cornflakes 475gms in November 2007. The trends shown by sales figures is as shown:
As can be observed, the promotion saw a rise in sales of cornflakes 475gms by 10000 units. However, the post promotion figure settled at around 8600 units showing a 2000 units repeat purchase. ( 20% retention ratio) At the same time, the sales figures for any SKU of Banana does not show a dip in the promotion period. This shows that the peak obtained during the promotion is not an effect of cannibalization on banana sales. Thus it shows the entry of new consumers into the category. This promotion actually helped increase the width of the consumer base. The additional units retained showed additional value to the business in the short run ( the month post promotion i.e.december) and in the long run ( i.e. January)
Promo: corn 475gms +banana 125gms free m.r.p: 125 corn 475gms +banana 125gms free m.r.p: 125 Promo Projected Additional Avg Sale Cost per Cost per Sale in Business in pcs Sku unit pcs in pcs 6297 40.00 113.00 8,170 1,873 No.of units increased 2384 564
Promo Cost short run 326800
Additional Business in value 211649 Value added to business 298000 22560 320560
ROI 64.764%
long run
price 125 40
98.090%
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One main reason for this is, Kelloggs is perceived as a very expensive but aspirational brand. So any offer that gives more food at lower cost generates new trials. The survey shows that out of the 59 non-consumers interviewed, 57 of them had tried kelloggs products before. But they do not have it regularly. 27% of them feel that it becomes monotonous to have cornflakes daily for breakfast. 31% of them have cornflakes occasionally. So, bundling offers like this provides value for money to the consumer and thus, helps rope in new consumers. The other bundling offer had 80gm muesli free with cornflakes 475gms in February 2008. The trend lines for the same are as shown:
Here again the rise in sales during February (i.e 4500 units) shows no cannibalization on the sales of Muesli almond 275gm or 80gm. The 80 gm SKU was discontinued after February 2008. This promotion did not show any retention element either in cornflakes or in muesli. This is supported by the fall in cornflakes in april 2008.
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Though this promotion achieved a short term ROI of 196%, its long term ROI was -21%. This supports the claim that there was no retention element.
Promo: corn 475gms +muesli almond 80gm free m.r.p: 125 corn 475gms +muesli almond 80gm free m.r.p: 125 Promo Projected Additional Avg Sale Cost per Cost per Sale in Business in pcs Sku unit pcs in pcs 8425 35.00 113.00 13,504 5,079 No.of incremental units -224 -418 -178
Promo Cost short run 292180
Additional Business in value 573927
R.O.I 196.429%
long run
292180
price 125 35 110
value -28000 -14630 -19580 -62210
-21.291%
Muesli as a category shows low awareness and kelloggs muesli within the category consumers also shows very low awareness. Also, one observation made during the market visits was that kelloggs Muesli is cannibalizing on the shelf-space occupied by kelloggs cornflakes. Ideally, since muesli is a category by itself in the breakfast cereals category, additional shelf space needs to be obtained for kellogg’s muesli.
4.2. Cross Company Promotions:
One of the cross company promotions that was run by kelloggs india was dabur honey free with 475gm wheat flakes in april 2008. The sales trends for this promotion is as shown:
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In October 2007, wheat flakes 600gm was introuced with a melamine bowl free. Due to this promotion, there was cannibalization in sales of 475gm wheat flakes and 340 gms wheat flakes with honey. This cannibalization however delivered value to the organization. The peak in sales of these two SKU in november is mainly due to this reason.Post november, January saw a drop in the fill rates of 475gm wheat flake from 95% to 54% resulting in a drop in sales. This figure accounts for a loss in sales of 315 cases i.e. 4410 packs. In terms of value, the lost sales here accounts for Rs. 520380. Now during the promo period, the rise in 475gm and the fall in 340 gm packs can be misunderstood for cannibalization. But, the next month shows a consisitent retention of the higher sales for 475gm wheat flakes and also, a rise in the sales of 340 gm wheat flakes with raisins. A further probing into this matter highlighted a drop in the primary demand from an average of 100 cases for 340 gm wheat flakes with raisins to only 27 cases. Hence, it can be inferred that there isnt any cannibalization here too. This promotion saw an exceptionally high ROI in the short run. The long run ROi is not possible to measure here as the promotion was shipped in april 2008.
Promo: 475gms wheat flakes +dabur honey free 475gms wheat flakes +dabur honey free Promo Projected Additional Avg Sale Cost per Cost per Sale in Business in pcs Sku unit pcs in pcs 2700 32.50 118.00 3,396 696
Promo Cost short run 21600
Additional Business in value 82128 380.2222222
4.3. Value Offers: One of the value offers that kelloggs launched was 33% extra free food on k-paks chocos, chocos smacks and planet and stars in march 2008. K-paks is nutrition food positioned as 4pm food for kids. An excellent initiative by the company that has helped achieve high levels of penetration mainly due to its low cost(Rs.10) .The variants available in k-paks are: ? Chocos ? Chocos smacks ? Chocos planet and stars ? Corn flakes honey ? Cornflakes mango.
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The trend line for the sale of the promo- SKUs is as shown:
All the three SKUs show a similar trend february onwards, as compared to the total Kpaks sales. Hence, the total k-paks trend was analysed. The promotion saw an incremental peak of 46000 paks and then a drop of 36000 packs in april. The retention was a good 10000 packs i.e. 16% retention percentage was achieved. Though the additional business generated in value is not very high due the low cost of the packs, the penetration and retention achieved is very high.
Promo:
kpaks + 33% extra free kpaks + 33% extra free Promo Projected Cost per Cost per Sale in Sku unit pcs 3.00 9.09 23,134
Promo Cost short run long run 177555 177555
Avg Sale in pcs 20000
Additional Business in pcs 3,134
Additional Business in value 28488 16.04463969 73.27086255
9.09
14312
130096.08
One main reason for this is that an extra food promotion on k-paks increases the size of the pack making it comparable to that of a Rs. 10 pack of chips.Thus, it provides a greater value for money and parents are also ready to shell out that amount for the increased quantity.
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Since, k-paks is positioned as 4pm food. One way of achieving greater sales for k-paks is to reach where the consumer is. K-paks can be made a feature at school cafeterias especially at schools having afternoon shift schools. A counter can be set up to sell kpaks during school functions like sports meet, annual day etc. 4.4. Failed promotions: 1. Tattoo free on k-paks: This promotion was run in December 2008 and showed a short term fall in sales of 6000 units and a long term fall in sales of almost 20000 units. Tattoos from the point of view of Indian consumer is a sign of rebel. The past has seen various instances of skin allergies due to the application of tattoos obtained with chewing gums. Hence, Indian parents and their children likewise, are skeptical about free tattoos. This,I believe, is one of the greatest reason for the failure of this promotion. The trend for this promotion can be seen in the previous graph during the period from October 2007 to February 2008. The promotion also showed a negative long run ROI.
Promo: k-pak(chocos) + tattoo free k-pak(chocos) + tattoo free Promo Projected Cost per Cost per Sale in Sku unit pcs 0.08 9.09 27,793
Promo Cost short run long run 120000 120000
Avg Sale in pcs 26450
Additional Business in pcs 1,343
Additional Business in value 12208
ROI 10.173
price 10
no.of incremental packs -10000
value to business -100000 -100000
-83.333
2. Three promotions run together: March 2008 saw three promotion in the Chocos category together. 1. 25% extra free on chocos 375gms 2. 25% extra free on smacks 390gms 3. Hotwheels or barbie sportswatch free with 650gm Chocos.
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First lets discuss about the perceptions about gizmos given with the products.These are gifts that attract children to demand a purchase. Some of the various instances in the market would be ? Free sunglasses with Horlicks 500gm ? Prankster toys with ITC Sunfeast ? A board game with cadbury?s wowie. And many more. Though children ask for it, parents are quite skeptical in buying such products as they believe that the children wont consume the product. In such a case, a new shopper whose child demands a 650 gm pack chocos just for the gizmo with it, may not be ready to shell out Rs, 225 for a large pack. She might be ready to try a smaller pack first which is available at a lower cost. Hence in march, when the three promotions were launched together, there have been instances of downgrading of shoppers from 650 gm pack to a 375gm pack of chocos. The trends are as shown:
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First reason being, a watch is a high involvement product which is bought after a considerable amount of planning. Secondly, the per gram cost of these SKUs suggested a lower cost for the smaller pack. sku Chocos (sportswatch free) Chocos( 25% extra food free) gms 650 468.75 MRP 225 120 per gram cost 0.346153846 0.256
Also the same period saw a fall in the fill rates for 650 gm SKU from 65% to 44%. This also resulted in degradation of the purchase pattern of the consumers. I would still suggest a Gizmo promotion for the kids category, as the trendline for the total chocos consumption shows a consistent and steady increase. This shows that though gizmos aid in getting in new consumers, we need to figure out a way to ensure repeat purchase.
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Due to this, the free food promotion showed a very high ROI both in the short and the long run;
Promo:
25% free on chocos 375gms 25% free on chocos 375gms Promo Projected Cost per Cost per Sale in Sku unit pcs 30.00 109.00 3,833
Promo Cost short run 114990
Avg Sale in pcs 3450
Additional Business in pcs 383 no.of incremental units 3350
Additional Business in value 41747
ROI
36.30489608
cost long run 114990 109
value 365150
317.5493521
Promo:
25% free on chocos smacks 375gms 25% free on chocos smacks 375gms Promo Projected Additional Avg Sale Cost per Cost per Sale in Business in pcs Sku unit pcs in pcs 1345 32.50 118.00 2,063 718 no of incremental units 2517
Promo Cost short run 67048
Additional Business in value 84724
ROI
126.3641448
long run
67048
price 118.00
value 297006
442.9784854
4.5. KEY LEARNING FROM THIS:
1. Two promotions should not coincide in the same category. 2. A new shopper may be skeptical to buy a large pack worth Rs. 225 just for the toy. Hence I feel that gizmos should be offered on smaller packs worth Rs.42 or Rs. 80.However, this poses a threat for degradation of purchase pattern again due to the attratction of the toy. Another solution to this can be theme-based gizmos promotion. Wherein a collection of toys is offered in the promotion on all the pack sizes. Larger the pack size, the higher should be the perceived value of the toy. Also, since a collection of the toys will be on offer, the duration of the promotion should be longer than one month.For example, if collection of 4 toys is on the offer, 28 | P a g e
the promotion should be for atleast 5 months.This would also ensure repeat purchases. Also, care should be taken that the gizmos are such that possession is pride for the children. The timing of the launch of promotion is also crucial. If it is a theme based promotion, it should not only be launched when the theme is relevant in the market but also the children are not busy with their examinations. I suggest the time when the children are getting ready to go back to school. This is usually the time when children like to showcase their new possession obatined during the vacations. Hence according to me, an ideal time would be vacation end.
5. Interaction with the customers:
During my market visits, I have interacted with the distributors and the outlet managers.Some insights and my understanding of these interactions revealed that generally customers ask for deep price off promotions on lead brands & sku?s from Vendors just to draw shoppers to their stores. They will try and do this on 5% of their assortment and will generate traffic flow in to their stores. These promotions and initiatives they will also advertise to draw the shopper attention. Customers will try and avoid getting in to any kind of customization . Customers will approach vendors for deep cut promotions during store openings, anniversaries, Theme based concepts, Sometimes. Customers do promotions on their own on lead sku?s to draw shoppers to their stores. Most of the mordern trade outlets are positioned on the USP of „price lower than the MRP?. Hence,the outlet mangers heavily promoted price-offs as the best promotion. However, one interesting highlight was that out of the 10 store managers interviewed, atleast 6 of them asked for promoters for the category bay. They say that the category is new to the country and hence, even the aisles salesment are not very educated to be able to answer a shopper/consumer?s query. I feel, instead of a promoter in the category bay, we should conduct one-day training workshop for the aisles salesmen.The agenda of the workshop should be to explain the importance and benefits of having breakfast cereals instead of the traditional Indian Breakfast, which kelloggs brand is for which kind of consumer and hence, highlight the differentiated benefits for each brand. This would not only spread an understanding about the company’s offerings in the market place but also would improve trade relationship.
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Conclusion
1. The following table gives in brief my understanding of the promotions evaluated on different aspects:
promotions/benefits new consumer increase the depth highly competitive needs high marketing backup Needs high visibility ?
value offers
cross company
bundling offers
price off
gizmos
sweep stakes
? ?
?
A price-off promotion helps create volume in a highly competitive environment. Since, Kelloggs at present does not have any strong competition in the market, price-off is not recommended.Also, consumers that are attratced through a price off are usually brand-switchers. This promotion would not generate sustainable sales. Sweep stakes and gizmos have a negative inclination from adults and hence, require a high marketing backup. The higher the awarenes and recall of such promotions, the greater is the probability for the pomotion to be a success. A personal observation is that a category non-consumer usually does not even enter the breakfast cereals category bay.Hence, value offers, cross company offers and bundling offers need high off-shelf visibility. Especially the first few floor stacks encountered by the shopper as he enters the store. In case of gizmos, the following points are crucial: ? create a fashion statement [ possession should be pride] ? Form a collection of toys ? Timing of launch
2. Develop a sales team (like Medical representatives) • Places to focus: – High-end hospitals – Obesity clinics – Gymnasium Here, the positioning should be taken care of.This option would require an extensive training of the sales team developed.
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3. Make K-paks available in school cafeterias especially the ones having afternoon shifts, in school functions. 4. A one-day training workshop for the aisles saleperson.
Appendix 1:
Category Consumer Questionnaire Please take two minutes and fill up the questionnaire: 1. How many members are there in your family? _________________ 2. Where do you generally shop for your monthly grocery? ____________________________ 3. Three reasons why you like shopping here: 1. _____________________________________________________________________ 2.______________________________________________________________________ 3._______________________________________________________________________ 4. How do you/ your husband commute to office daily? ( Tick all that is applicable) 1. Own car / company’s car with chauffeur 2. Company’s sumo ( for a group of employees) 3. BEST/ Trains 4. Own Bike 5. Others, please specify _______________. 5. Please rank the following breakfast preferences for each member of the family: young kids ( below adults the age of in the 12 years) family
mother father
seniors of the house
parathas idli/dosas/wada poha/bread butter only milk/juice cornflakes Chocos Muesli Oats Please name the brand if you have ticked any of these: cornflakes 31 | P a g e
chocos muesli oats
For Corn Flakes user, please rate the following brands on a scale of 10 on each of the following parameters: Price Kelloggs cornflakes Mohun’s Cornflakes 6. For Muesli users, please rate the following brands on a scale of 10 on each of the following parameters: Price Kelloggs muesli Baggrry’s Muesli Good earth Muesli others 7. Do you remember any offer that you recently saw in the store that you have particularly liked? ________________________________________________________________________ _______________________________________________________________________ 8. Which kelloggs product(s) do you use? Sr Name of the product no. 1 2 3 4 9. Do you know that kelloggs cornflakes comes in various flavours? no Yes Quality Taste Availability Packaging Quality Taste Availability Packaging
Packet size
Number of packets /month
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If, yes which ones, a. b. c. d. 10. Do you know that kelloggs Chocos comes in various flavours? no If, yes which ones, a. b. c. d. Yes
11. Please rate the following offers on the Kelloggs product that you use: Do you think you will purchase this promo pack? 3: certainly, 2: quite certain, 1: maybe yes, 0: not at all
Promotions
How do you like this promotion?
A Price off on Kelloggs pack.( 1 advertised on television) same as above but no 2 advertisement A coupon on every purchase that can be redeemed for a discount on 3 the next purchase Scratch card with an assured gift 4 that will be given immediately scratch card with an assured gift 5 that will be given later Entry form for a contest, prize to 6 be lucky draw 33% extra free on a medium sized 7 pack of kelloggs Buy one pack and get another pack 8 of flavoured flakes free
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9 10 11
12
A game or a toy free with heavy advertisement on mass media A game or a toy free with no advertisement A combination family ( super saver) pack of Kelloggs products A nutritionist advising you on how and why and which kelloggs product is best for you
Appendix 2:
Category non-consumer questionnaire: Please take two minutes and fill up the questionnaire: 1. How many members are there in your family? _________________ 2. Where do you generally shop for your monthly grocery? ____________________________ 3. Three reasons why you like shopping here: 1. _____________________________________________________________________ 2.______________________________________________________________________ 3._______________________________________________________________________ 4. How do you/ your husband commute to office daily? ( Tick all that is applicable) 1. Own car / company’s car with chauffeur 2. Company’s sumo ( for a group of employees) 3. BEST/ Trains 4. Own Bike 5. Others, please specify _______________. 5. Studies show that healthy and filling breakfast makes people perform better. Comment? a. I know that. Hence I have home-made fresh breakfast daily b. I know that but I don’t get the time. c. I will surely make conscious efforts to have a healthy breakfast from tomorrow onwards. d. I don’t believe this. 6. Cereals and whole-grains ,prepared in low fat, are ideal for breakfast and good for overall health. Comment? a. I think Indian breakfast items fulfill this proposition. b. Agreed. But they are not that tasty. c. Agreed. But these cornflakes that you get in the market are too expensive.
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d. thanks for the information anyways. But I seriously don’t get any time to have breakfast at all. 7. Do you know of any company that provides ready to eat breakfast cereals? Yes No If yes, please name a few, 1. ____________________ 2. _____________________ 3.___________________ 8. Please rank the following breakfast preferences for each member of the family: young kids ( below adults the age of in the 12 years) family
mother father
seniors of the house
parathas idli/dosas/wada poha/bread butter only milk/juice cornflakes Chocos Muesli Oats 9. Do you remember any offer that you recently saw in the store that you have particularly liked? ________________________________________________________________________ _______________________________________________________________________ 10. Please evaluate the following promotions on Kelloggs products on your likelihood of purchase: Do you think you will purchase this promo pack? 3: certainly, 2: quite certain, 1: maybe yes, 0: not at all
Promotions
How do you like this promotion?
A Price off on Kelloggs pack.( 1 advertised on television) 2 same as above but no 35 | P a g e
3 4 5 6 7 8 9 10 11
12
advertisement A coupon on every purchase that can be redeemed for a discount on the next purchase Scratch card with an assured gift that will be given immediately scratch card with an assured gift that will be given later Entry form for a contest, prize to be lucky draw 33% extra free on a medium sized pack of kelloggs Buy one pack and get another pack of flavoured flakes free A game or a toy free with heavy advertisement on mass media A game or a toy free with no advertisement A combination family ( super saver) pack of Kelloggs products A nutritionist advising you on why and how to take Kelloggs for your health A free product like biscuits, honey with the kelloggs pack
13
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