Apply the seven Ps to explain how marketing-mix choices work together for customers, positioning and business objectives in IB Business Management SL.
Accord's Enrich brand is built around natural ingredients, ethical objectives, corporate social responsibility and customer loyalty, but sales have been below forecasts. New customers are confused about whether Enrich is fruit juice or an energy drink, think its health benefits are exaggerated and consider it too expensive. Enrich averages $3.00 per bottle compared with $2.20 for similar MNC products. The MNCs have stronger brands, larger promotional budgets and economies of scale. Aran favours expanding production to reduce unit costs, while Kayla is concerned about research, positioning and the brand. Kayla's snack-bar proposal uses Enrich flavours and recipes and would require $100000 investment with forecast net returns of $80000 for four years. The healthy snack-bar market is highly competitive, dominated by large companies with substantial advertising budgets, but it is growing by an estimated 34% per year and small businesses have entered successfully on a small scale.
Aran and Kayla decided to launch Detox using batch production. It has now been on the market for six months. Detox is showing strong growth, although sales for the first six months were less than a quarter of Kayla's target of 160000 bottles for the first year. The price of Detox is per bottle. The cost of goods sold is and the operating costs before interest and tax are per year.
Enrich sales have not grown much and Aran is very disappointed. Customers, mainly athletes, do not use the product frequently and it is difficult to find new customers. However, research into customer perceptions indicates a very strong brand, resulting largely from Accord's corporate social responsibility (CSR) and strong customer loyalty.
Aran does not like the way the business is organized by product and wants to change it so that it is organized by function instead.
Following the success of Detox, Kayla wants to produce a range of snack bars based on Enrich flavours and recipes. Accord would use the Enrich brand name for the snack bars. The market for healthy snack bars is very competitive and dominated by a few large companies who spend large amounts of money on advertising. The market is growing rapidly - some market researchers estimate by 34 % per annum. There are many examples of small businesses entering the market successfully on a small scale. Kayla estimates the proposal would involve an investment of , with forecast net returns of for four years. Aran thinks that the money could be better spent on marketing Enrich drinks.
Discuss Kayla's plan to produce a range of snack bars.
Red Squirrel Apple Juice (RS)
Red Squirrel Apple Juice ( RS) is a cooperative of apple farmers. RS was named after the red squirrel, whose population is declining because of growing numbers of grey squirrels. Originally from North America, grey squirrels are aggressive and take over red squirrels' habitats. RS's founders thought that the red squirrel would be a good symbol to reverse the declining popularity of traditional apple juice due to consumer preference for high-sugar American-style beverages. With the symbol, R S aimed to appeal
to environmentally aware and health-conscious consumers.
Originally, R S only sold apple juice in bulk to beverage companies. These companies bottle the juice and sell it under their own labels. R S requires these companies to place R S 's logo of a red squirrel on their labels. Although R S only sells to a small number of beverage companies, its logo is on juice bottles in stores across the country.
Awareness of the R S brand grew. The cooperative's managers recently opened another channel of distribution: direct sales of bottled juice to consumers at the cooperative's processing plant. R S charges lower prices than stores. The new channel of distribution required capital expenditure for bottling equipment and additional revenue expenditure. R S experienced increased labour and promotion costs, which some farmers complained about.
In recent decades, R S 's home country has experienced rising anti-immigrant sentiment. Some politically motivated organizations have begun to use images of red squirrels to symbolize this sentiment, so some beverage companies no longer want to use R S's logo on their labels.
Some of RS's stakeholders are concerned.
With reference to R S, explain the importance of branding.
Secco Vineyards (SV)
Secco Vineyards (SV) is a family-owned business producing wine in Sonoma, California. In 1947, SV opened using cost-plus (mark-up) pricing. For SV's customers, the wines were medium priced and available in local grocery stores.
In 1977, Joe Secco, grandson of the founder, created a new strategy. He re-branded SV's wine for a niche premium market.
- SV began to sell directly to customers at its winery instead of in local grocery stores.
- SV stopped using cost-plus (mark-up) pricing and began to sells its wines at much higher prices than before.
- Regular wine tastings and promotional events were held at its winery. At these events, wine experts would promote SV's wines by creating an elegant experience based on a luxurious culture of wine consumption: stylish wine glasses, classical music and food that complements the wine.
However, SV has recently faced intense competition and sales have fallen. Local wine producers and overseas competitors have entered the market with similar market positioning. In order to maintain its brand image, S V has not changed its pricing strategies.
SV conducted secondary market research about other possible markets in the US for its premium wines. The research suggested that other possible markets for high-quality wines, such as those of S V, exist. As a result, S V is considering two options to increase sales in addition to its current distribution channel:
- Option 1: open a business-to-consumer (B2C) e-commerce store
- Option 2: sell SV wines to wholesalers serving the whole of the US market for premium wines.
Given the intense competition, explain two pricing strategies SV might consider.
Recommend which of Option 1 and Option 2 SV should consider in order to increase sales.