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Marketing MixKatherine Mulhall

20041462

This assignment has been prepared with the highest standards of academic integrity

Katherine Mulhall BBS2 20041462

Table of ContentsTABLE OF CONTENTS.....................................................................................2

TABLES AND FIGURES....................................................................................3

COMPANY HISTORY/BACKGROUND..................................................................4

JOHN HARVEY KELLOGG-BROTHER..........................................................................................4THE ACCIDENTAL CREATION OF KELLOGG’S CORNFLAKES............................................................5CORPORATE IMAGE..............................................................................................................5

MARKET SEGMENTATION & TARGETING...........................................................6

MARKET SEGMENTATION.......................................................................................................6TARGET MARKETING............................................................................................................7

MARKET POSITIONING...................................................................................8

POSITIONING STRATEGIES.....................................................................................................8

PRODUCT......................................................................................................9

NEW PRODUCT DEVELOPMENT..............................................................................................9New Product- ‘Special K’..........................................................................................10

PRODUCT LIFE CYCLE........................................................................................................11Introductory Stage...................................................................................................11Growth Stage...........................................................................................................11Maturity Stage..........................................................................................................12Decline Stage...........................................................................................................13

PRICING......................................................................................................14

INTERNAL & EXTERNAL FACTORS.........................................................................................14Internal Factors Affecting Pricing Decisions.............................................................14External Factors Affecting Pricing Decisions.............................................................16

PLACE (DISTRIBUTION).................................................................................17

DISTRIBUTION STRATEGY....................................................................................................17ONLINE MARKETING..........................................................................................................18

What business benefits can the Internet provide?...................................................18Kellogg’s Online Marketing.......................................................................................18

PROMOTIONS..............................................................................................20

ADVERTISING...................................................................................................................20Institutional Advertising...........................................................................................20Product Advertising..................................................................................................20

CONCLUSIONS & RECOMMENDATIONS...........................................................22

CONCLUSIONS..................................................................................................................22RECOMMENDATIONS..........................................................................................................23

REFERENCES...............................................................................................24

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Tables and FigurFIGURE 1-WILLIAM KEITH KELLOGG............................................................................................4FIGURE 2-JOHN HARVEY KELLOGG.............................................................................................4FIGURE 3-SNAP, CRACKLE & POP..............................................................................................7FIGURE 4-KELLOGG'S SPECIAL K.............................................................................................10FIGURE 5-SPECIAL K BLISS.....................................................................................................10FIGURE 6-NUTRI-GRAIN.........................................................................................................13FIGURE 7-SPECIAL K LOGO....................................................................................................19FIGURE 8-DROP A JEAN SIZE..................................................................................................19FIGURE 9-CRUNCHY NUT.......................................................................................................21FIGURE 10-KELLOGG'S LOGO.................................................................................................25

YTABLE 1-THE SEGMENTATION PROCESS.......................................................................................6TABLE 2-NUTRI-GRAIN SALES FIGURES.....................................................................................13

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Company History/BackgroundKellogg’s began on February 19th 1906.

William Keith Kellogg was born April 7th, 1860, in Battle Creek, Michigan and he died inOctober 6th, 1951.William Kellogg was the person responsible for it all and was the personwho signed the papers that officially incorporated the Battle Creek Toasted Corn FlakesCompany which is now commonly known as Kellogg’s.

Will Kellogg started his business ventures by selling brooms, before helping his brother,John Harvey Kellogg, run the Battle CreekSanitarium. Now he is responsible for the W.KKellogg Co. Although William Keith Kelloggis the official founder of the cereal, it was hisbrother John who had first attempted todevelop the first breakfast cereal. John Kelloggfailed to invent the cereal as the taste was notappealing and then that is when Williamstepped in and took over and with the additionof a simple ingredient, sugar, it became a hugesuccess.

‘The popularity of his new ‘Corn Flakes’ cerealwas discovered by accident in 1876, whichencouraged William Kellogg to set up the

Kellogg company, now the most successful cereal manufacturer in the world’ (Kellogg's ).

John Harvey Kellogg-Brother

John Harvey Kellogg (February 26, 1852 - December 14,1943).

‘Kellogg was a dynamo of human energy, a personificationof the work ethic, who needed only 4 to 5 hours of sleep anight, went cycling or jogging every morning, dictated 25 to50 letters a day, adopted and reared 42 children, wrotenearly 50 books, edited a major magazine, performed morethan 22,000 operations, gave virtually all of his money tocharitable organizations, loved human service, generallyaccomplished the work of ten active people, and lived ingood health to age 91.’ (John H, 1999).

Whilst Dr. John Harvey Kellogg worked at the hospital andhealth spa in Michigan, his brother William workedalongside him as the business manager. The hospitalstressed healthy living and kept its patients on a diet thateliminated caffeine, meat, alcohol, and tobacco.

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Figure 1-William Keith Kellogg

Figure 2-John Harvey Kellogg


The Accidental Creation of Kellogg’s Cornflakes

The two brothers invented many foods that were made from grains, including a coffeesubstitute and a type of granola, which they forced through rollers and rolled into longsheets of dough. One day, after cooking some wheat, the men were called away. When theyeventually returned, the wheat had become stale. They decided to force the tempered grainthrough the rollers regardless of its condition.

Surprisingly, the grain did not come out in long sheets of dough as it previously had done.Instead each wheat berry was flattened and came out as a thin flake. The brothers bakedthe flakes and were delighted with their new invention. They had discovered a newdelicious cereal but they had no way of knowing they had accidently invented a whole newindustry. There was one problem, it didn’t taste very good, and it was dull and tasteless.John Kellogg gave up and decided he wanted out on the new discovery and left it up to hisbrother. By taking a cheap commodity and simply adding ‘value’ such as sugar, Williamcame up with a great business opportunity for success. Will Keith eventually opened hisown cereal business, and its most famous products are still sold today. ‘It wasn’t until 1906that Kellogg’s Corn Flakes were made available to the general public. (Kellogg's ).

‘It soon became a leading U.S. producer of these and other convenience foods. By theearly 21st century, its annual sales exceeded $9 billion.’ (Answers.com).

But Kellogg’s did not stop there. The company introduced a wide range of products suchas:

All-Bran Bran Flakes Coco Pops Crunchy Nut Elevenses Fibre Plus Frosties Fruit n Fibre Wheats

Corporate ImageKellogg’s portrays their corporate image with various advertising for each individual product.Advertising wasn’t their only campaigns to polish their corporate image, Kellogg’s alsocontributes back to the society and very generously. The W.K. Foundation was founded in1930 by William Kellogg. It all began when his grandson, Kenneth Williamson, was involvedin a tragic accident which left him paralysed. This, along with the cereal company’s fastgrowing capital and W.K.’s love of children, inspired him to form the foundation. Initially,the Foundation was meant to assist handicapped children in securing better health, confidenceand trust in the country and its institutions. Now the principle of the foundation is for thepromotion of the health, education and welfare of mankind, but principally for children andyouth. By 1934, W.K. Kellogg donated $66 million to the foundation.

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Fruit Winders Hot Oak Krumbly Krave Nature’s Pleasure Nutri-Grain Optivita Pop Tarts Rice Krispies Special K

Specify the marketSpecify the market

Describe who buys, what they buy, where they

buy, and how they buy

Describe who buys, what they buy, where they

buy, and how they buy

Build profile of individual segments, using any or

all of the possible segmentation bases

Build profile of individual segments, using any or

all of the possible segmentation bases

Determine the attractiveness of each

segment

Determine the attractiveness of each

segment

Determine firm's ability to serve the most attractive

segments

Determine firm's ability to serve the most attractive

segments


Market Segmentation & TargetingSegmentation and targeting are two key elements of marketing planning. Segmentationinvolves dividing the market of potential customers into homogenous groups. These groupsmay be distinguished in terms of their behaviour, attitudes, demographic characteristics, age,gender, work status, social class etc. Target marketing follows on from the initialsegmentation decision.

Market SegmentationWhy segment?

‘Market segmentation is the strategy of last resort.’ (Kotler, 2001)

An organisation would rather attract a large market than a specific part of that market andthen target to that market as a whole but based on the fact that most markets consists ofbuyers who have different needs and who cannot all be served with the same product offeringthis is why organisations segment their market.

Table 1-The Segmentation Process

Behavioural segmentation is based on buyers’ behavioural patterns. These patterns caninclude the occasion when the buyer uses the product, timing of use etc.

‘For instance, most consumers of Kellogg’s ate the product at breakfast, but the companymounted an advertising campaign to encourage consumers to use the product at other times of

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the day as a snack. Kellogg’s hoped this would open up a new segment for them.’ (Rogan,2007)

Target MarketingTargeting means selecting particular customers or customer groups at which to aim the firm’smarketing mix. It may involve the development of different marketing mixes for differentsegments.

‘Targeting is the decision about which segment(s) a business decides to prioritise for its salesand marketing efforts.’ (Dibb, Simkin, Pride, & Ferrell, 1997)

Kellogg’s targets its products at different segments depending on the product. For exampleSpecial K is targeted at women as Kellogg’s was aware of the increasing demand for healthproducts for women.

Another example would be Kellogg’s Rice Krispies: They target this product at children as afun cereal that ‘snap crackle & pops’ and they also associated the cereal with characters tocatch the kids’ interest.

Figure 3-Snap, Crackle & Pop

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Market PositioningMarketing positioning has been defined as ‘the place a product occupies in a given market, asperceived by the relevant group of customers’ (Blythe, 2001)

Product positioning is strongly related to perception and image. Marketers hope that thebuyer will perceive their product to be unique and that they will have a distinctive image ofthe product and its benefits.

‘Product positioning involves establishing a unique position for the product in the mind of theconsumer.’ (Rogan, 2007)

Buyers are being constantly bombarded with advertising and promotions which are allattempts to position products in the buyers’ minds. Marketers try to find a distinct positionand must compete for attention with other existing competitors. The product’s positioningwill be based on the value offered to the consumer. This value can be expressed in a numberof ways including:

Product benefits Features Style Value for money Uniqueness Sophistication

Positioning StrategiesThere are a number of product positioning strategies, and which one the marketer select willdepend on the nature of the buyer’s needs. The positioning strategies are:

Product features- emphasised by some marketers to differentiate their products. Benefit positioning- involves the marketer concentrating on the benefits of the

product. Usage occasion- depending on how the consumer uses a product. Type of user- Heavy users, medium users, and light users. Competitive users- differentiate their product offering to other competing

organisations.

‘The type of user- heavy users can be encouraged to continue using the product, whilemedium and light users can be encourages to increase their use.... Kellogg’s aim brands suchas Special K at female users, while Frosties and Coco Pops are aimed at children.’ (Rogan,2007)

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Product‘A product is anything that can be offered to a market for attention, acquisition, use orconsumption that might satisfy a want or a need’ (Kotler, Armstrong, Saunders, & Wong,2005)

Kellogg’s cereals and snack bars are non-durable products; they are consumed quickly on oneor a few occasions. Kellogg’s products would be classified as ‘convenience’. They are lowpriced, frequently purchased and can be found in most locations such as convenient storesand supermarkets.

New Product Development‘New product development is the development of original products, product improvements,product modifications and new brands through the firm’s own R&D efforts.’ (Kotler,Armstrong, Saunders, & Wong, 2005)

In a rapidly changing and competitive business environment it’s not easy to predict futuretrends in consumer tastes, competitor’s actions, and market conditions. Creating newproducts or adjusting and making changes to existing products can be expensive. It involvesmaking investment decisions now with the hope that it will make a return later on. Marketresearch helps to predict future events and effects. Whether an organisation decides todevelop the product, maintain it, allow it to decline or kill it off requires time and heavydecision making. New product development is extremely risky as most new products fail butit also important for organisations to have product-lines and also product mixes to continue asteady profit flow and to prevent their individual product to sink beneath the depths of thecurrent market.

‘Life blood of corporate success is bringing new products to the marketplace’ (Kotler,Armstrong, Saunders, & Wong, 2005)

Kellogg's is a global organisation. Its products are manufactured in 19 countries worldwide and sold in more than 180 countries. Kellogg’s produce over 70 products, a variety of cereals and snack bars. They have successfully succeeded in the development of new products since their first product, cornflakes, and this is down to the fact that they own most of the market for cereal as they were the first to establish it and competitors have only invaded a fraction of what Kellogg’s own. Kellogg’s also have a really good reputation of good quality produce so consumers purchase new products by Kellogg’s as they are familiar with their standard. Kellogg’s has been in the market for over a century and their existing products have been very sustainable and most of their products are now known as ‘cash-cows’ so they are able to generate the money from these cash-cows and pump it back into investment to help aid the development of new products so prices would not be extremely high as the investment from existing products covers the cost of resources and manufacturing.

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New Product- ‘Special K’

Kellogg’s kept up with current tastes and attitudes of is consumers. As thedesire for a healthier lifestyle became more demanding, Kellogg’s seen thisgrowth and acted on it when they extended their product mix by launching

‘Special K’ in October 1999.

Special K is the delicious crunchy multi-grain flakes made with rice and wheat that is less than 3% fat and it is also a great source of 6 essential B vitamins, vitamin C, D, and iron. Thisproved to be a huge success especially with the women. The Special K challenge encouraged women around the world to ‘Drop a Jean Size’. Kellogg has sustained healthy success, generating nearly $13 million in 2009 sales which is phenomenal. Most of the products in theSpecial K line build on the famous ‘Special K diet’ and provide versatile weight management solutions that are marketed toward a largely female consumer segment. Kellogg’s then

launched Special K Peach & Apricot in February 2003 to widen their flavoursand sustain interest in the product.

‘A line extension involves the development of individual offerings that appealto different market segments, but that remain closely related to the existing product line.’ (Boone & Kurtz, 1995)

Kellogg's already knew that women who are keen to watch their weight andshape seek a range of solutions throughout the day - not just at breakfast.They examined the accomplishment of Special K cereal and expanded its

product line by producing similar low fat, healthy snack bars and nibbles for women to enjoyon the go. Kellogg’s was aware that people would not eat a bowl of cereal at their desk duringthe day so this new product was perfect for them mid-day snacks. They brought out a widerange of Special K Snacks such as Special K Bar (original, apple & pear, chocolate, bliss),Special K Mini Breaks.

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Figure 4-Kellogg's Special K

Figure 5-Special K Bliss


Product Life CycleProducts are like people, they go through stages of life. A person’s life cycle progressesprogress from infancy to childhood to adulthood to retirement to death whereas successfulproducts progress through four basic stages: introduction, growth, maturity and decline, thisis known as a product life cycle.

Introductory Stage‘The firm’s objective in the early stages of the product life cycle is to stimulate demand forthe new market entry.’ (Boone & Kurtz, 1995)

Financial losses are common in the introductory stage due to high expensive to develop theproduct and heavy promotion costs and extensive research expenditure. Advertising is anextremely expensive component of marketing a new product as you have to let your potentialcustomers aware of this new product on the market. A negative profit is usually the outcomeas sales are low and expensive is high. Innovators would be the main type of consumers at thebeginning. Although introduction is a highly expensive and rocky stage there are ways toassist your product through the unpleasant stage;

I. Launch a basic product- start from the bottom and work your way up, test the watersfirst to make sure that there is an interest in it. Product complexity- makes sure theproduct is easy to understand and use.

II. Selective distribution- don’t distribute everywhere, begin in one place and see thereaction.

III. Use heavy sales promotions- such as 50% off next ‘buy or buy one get one free’ aregreat promotions to kick start your sales.

IV. Advertising- Build up consumer awareness, let people know about the product.

Some Kellogg’s products, like Kellogg’s cornflakes, have retained their market position for along time.

Many products do well when they are first brought out and Nutri-Grain was no exception. Itwas launched in 1997 and it was an immediate success as it was designed to meet the needsof busy people who had missed breakfast. Nutri-Grain gained more than 50% share of thecereal bar market in just two years which is a great introduction for a product of any kind.

Growth Stage‘During the growth stage, the pace of consumer acceptance and sales quickens.’ (Harrell,2002)

The growth stage of a product life cycle is crucial as this is when competitors notice theincrease in sales and will develop competitive products and aggressively pursue distributionchannels. Majority of firms in a particular industry enter the market at the growth stage asthey notice success and substantial profit which attract rivals.

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Nutri-Grain’s sales steadily increased as the product was promoted and became well known.It maintained growth in sales until 2002 through expanding the original product with newflavours and format. This was a good idea for the business as it does not have to spend moneyon new machinery or equipment for production. ‘The market position of Nutri-Grain alsosubtly changed from a ‘missed breakfast’ product to an ‘all-day’ healthy snack.’ (The Times100, 1995)

Maturity StageSales continue to grow during the early part of the maturity stage, but eventually they reachtheir potential peak as the backlog of potential customers dwindles. At this stage a largenumber of competitors have entered the market and the firm’s profits begin to decline as thecompetition intensifies. ‘As competition intensifies, competitors tend to cut prices in anattempt to attract new buyers. Although a price reduction may be the easiest method ofinducing additional purchases, it is also one of the simplest moves for competitors toduplicate.’ (Boone & Kurtz, 1995)

Gilbert Harrell indicates that ‘weaker competitors are likely to lower prices, while strongerrivals may sacrifice market share to maintain a satisfactory profit level.’ (Harrell, 2002)

Also a lot of companies drop out of the market as their profit margins are suffering too much.

Kellogg’s Nutri-Grain bars were faced with a competitor, Alpen bars, which offered the samebenefits as the Nutri-Grain bar. This slowed down sales and chipped away at Nutri-Grain’smarket position. Kellogg’s was one of the strong companies who fought for their product tosucceed and overcome this stage. Kellogg’s continued to support the development of thebrand but some products such as Mini’s and Twists struggles in the crowded market.Elevenses continued to succeed, this was not enough to offset the overall sales decline.

‘Not all products follow these stages precisely and time periods for each stage will varywidely. Growth, for example, may take place over a few months or, as in the case ofNutri-Grain, over several years.’ (The Times 100, 1995)

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1997 1998 1999 2000 2001 2002 2003 20040

1000

2000

3000

4000

5000

6000

7000

8000

Sales of Nutri-Grain Range

Chewy

Minis

Elevenses

Twists

Soft BakeTonnes

Table 2-Nutri-Grain Sales Figures

Decline StageIn the decline stage of the product life cycle, sales start to diminish. For some products, thedecrease of sales may be very quick, for other products, it may be slow and steady.Companies are likely to return to a much shallower product line at this stage, focusing alltheir time and money on the products that generate adequate cash flows. Profit is extremelylow at this stage as they had to reduce the price of the product to keep consumers purchasingit. The product life cycle implies that companies should have products in all stages at alltimes. Firms with only mature and declining products can expect dwindling profitability. Yetproduct development and the introductory stage are likely to absorb much of the profitgenerated from growing and mature products.

By mid 2004 Nutri-Grain found its sales declining whilst the market continued to grow at arate of 15%. Clearly, at this point, Kellogg’s had to make a key decision. Sales were falling;the product was in decline and losing its position. Should Kellogg’s let the product die orshould they extend its life? Kellogg’s decided to extend the life of Nutri-Grain rather thanwithdraw it from the market. This meant developing and extension strategy for the product.

Figure 6-Nutri-Grain

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Pricing‘Price is the amount of money charged for a product or service, or the sum of the values thatconsumers exchange for the benefits of having or using the product or service.’ (Kotler,Armstrong, Saunders, & Wong, 2005)

Price is the only marketing mix element that generates income. The other variables includemaking the product, telling consumers about it, and making it available to them, all theseother elements generate costs.

Internal & External FactorsPricing decisions affect profit, volume, share of the market and social stance. In turn, pricingpolicy takes account of internal and external factors.

‘Oscar Wilde once wrote that a cynic is ‘a man who knows the price of everything and thevalue of nothing.’ But the concepts of price and value are hard to separate.’ (Hill &O'Sullivan, 1999)

Internal Factors Affecting Pricing DecisionsAccording to Kotler ‘internal factors affecting pricing include the company’s marketingobjectives, marketing-mix strategy, costs and organisation.’ (Kotler, Armstrong, Saunders, &Wong, 2001)

Marketing ObjectivesBefore setting a price, the company must decide on its strategy for the product. Whether ornot the organisation has set its target market and positioning carefully will determine if itsmarketing mix strategy, including price, will be straightforward or not. For exampleKellogg’s Special K targeted towards women and carefully positioned themselves in thehealthy foods section, this allowed them to price Special K a little higher than their existingproducts such as Rice Krispies or Cornflakes. Company objectives are ‘general aspirationstoward which all activities in the firm, not only pricing, are directed’ (Nagle & Holden, 1995)

To be effective and efficient, the company’s pricing decisions must fit into the marketingstrategy, and be in line with decisions on other marketing-mix elements. ‘Reflections onappropriate prices should occur at the time the product, communication, and distribution areconceived, because the different instruments of the mix have a ‘synergic’ influence on themarket.’ (Blois, 2000)

The company may seek additional objectives, the clearer a firm is about its objectives, theeasier it is to set prices. ‘Examples of common objectives are survival, current profitmaximisation, market-share maximisation and product-quality leadership.’ (Kotler,Armstrong, Saunders, & Wong, 2001)

1) Survival- ‘Companies set survival as their fundamental objective if they are troubledby too much capacity, heavy competition or changing consumer wants.’ (Kotler,Armstrong, Saunders, & Wong, 2001). Kellogg’s deals with survival by producing

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new product mixes to meet consumers ever-changing wants such as All-Bran. Peoplebecame aware of their health and how much fibre they consumed and this is whyKellogg’s launched All-Bran to meet their consumer wants and needs. In some casesprofit is less important than survival, as long as their prices cover variable costs andsome fixed costs, they can stay in business. In Kellogg’s situation they make enoughprofit to cover all costs and this is because they are a well-known organisation withsuch a huge product line that customers consume their products on a daily basis.Kellogg’s also introduce promotional pricing such as; 50% off, buy 2 get 1 free etc.This encourages customers to purchase Kellogg’s products above other existingcompetitors.

2) Current profit maximisation- ‘Many companies use current profit maximisation astheir pricing goal. They estimate what demand and costs will be at different prices andchoose the price that will produce the maximum current profit, cash flow or return oninvestment.’ (Kotler, Armstrong, Saunders, & Wong, 2001). Kellogg’s Cornflakes isso well known that they do not have to promote it which means costs are low. Also ithas such a high demand because of its familiarity that Kellogg’s can keep the price ofCornflakes relatively low and still generate profit off the frequent sales.

3) Market-share leadership- ‘Other companies want to obtain market-share leadership.They believe that the company with the largest market share will enjoy the lowestcosts and highest long-run profit.’ (Kotler, Armstrong, Saunders, & Wong, 2001).Kellogg’s posses most of the market-share as they are the ones that invented cereal soyes their costs are low and profit is high.

4) Product-quality leadership- ‘A company might decide that it wants to achieveproduct-quality leadership. This normally calls for charging a high price to cover suchquality and the high cost of R&D.’ (Kotler, Armstrong, Saunders, & Wong, 2001)

CostsCosts can determine the price that a company can charge for its product. A company willwant to charge a price that will cover its costs for producing, distributing, and selling theproduct but also that will retrieve a fair rate of return for the effort that was put intoproducing it. According to Armstrong ‘many companies work to become the “low-costproducers” in their industries. Companies with lower costs can set lower prices that result ingreater sales and profits.’ (Armstrong & Kotler, 2000). As I have mentioned. Kellogg’sCornflakes is known as their “cash-cow” as it extremely well recognised so Kellogg’s doesnot have to pump much investment into the product so costs are low. With having low costsmeans that Kellogg’s can set low prices but still generate a substantial amount of profit.

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External Factors Affecting Pricing DecisionsAs well as factors internal to the firm, there are factors that are external to the firm that mustbe taken into account when prices are set. ‘External factors that affect pricing decisionsinclude the nature of the market and demand, competition, and other environmentalelements.’ (Armstrong & Kotler, 2000)

The Market and Demand‘Whereas costs set the lower limit of prices, the market and demand set the upper limit. Bothconsumer and industrial buyer balance the price of a product or service against the benefits ofowning it. Thus, before setting prices, the marketer must understand the relationship betweenprice and demand for its product.’ (Kotler, Armstrong, Saunders, & Wong, 2001).

The seller’s pricing freedom varies with different types of market. Economists recognise fourdifferent types of market, each presenting a different pricing challenge; pure competition,monopolistic competition, oligopolistic competition, and pure monopoly. I believe thatKellogg’s falls under oligopolistic competition which defines as ‘a market in which there afew sellers that are highly sensitive to each other’s pricing and marketing strategies.’ (Kotler,Armstrong, Saunders, & Wong, 2001). In the cereal industry there are not a lot ofcompetitors, the main competitors for Kellogg’s would be Nestle and own brands such asTesco and St. Bernard. With few competitors in the market each one can be aware and keepan eye on the other. If Kellogg’s lowered their price, competing companies will follow tosurvive.

Each price the company might charge will lead to a different level of demand. Kellogg’sproducts would be elastic as even the slightest change in price will affect the quantity ofdemand. If prices went up customers would just change to a substitute brand such as an ownbrands which would be cheaper. Their demand changes because they are aware of othercompetitors in the market and they become conscious that they do not have to pay this higherprice for Kellogg’s when they can get a similar product for less. If Kellogg’s had nocompetition then they would be inelastic as consumers would have no choice but to purchasetheir products.

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Place (Distribution)Products need to be available in adequate quantities, in convenient locations and at timeswhen customers want to buy them. ‘Producers need to consider not only the needs of theirultimate customer but also the requirement of channel intermediaries, those organisations thatfacilitate the distribution of products to customers.’ (Jobber, 2004)

Distribution StrategyEstablishing a supply chain that is efficient and meets customers’ need is vital to marketingsuccess. This supply chain is termed a channel of distribution, is the means by whichproducts are moved from producer to the ultimate customer. Gaining distribution outlets doesnot come easily. Choosing an effective channel of distribution is an important aspect of thestrategy. Supermarkets is a type of distribution and effectively shortens the distributionchannel between producer and consumer by eliminating the wholesaler, for example,Kellogg’s distributes to Tesco, Dunnes Stores, SuperValue etc.

The most basic question to ask when deciding distribution strategy is whether to sell directlyto the ultimate customer or to use channel intermediaries such as retailers and/or wholesalers.The company has to decide if they want to use a direct distribution channel, where a companyuse their own employees and physical assets to serve the market, which is economicallyfeasible for small markets, or if the company wants to use indirect distribution channelswhich are, as I have already mentioned, wholesalers, retailers, distributors and dealers,franchises and agents.

‘Many manufactures want to connect with customers in as many ways as possible. Multiplechannel systems make use of more than one channel to access markets for the same product.’(Harrell, 2002). For example, Kellogg’s distributes its products through company-ownedstores, wholesalers that resell to supermarkets and convenience stores, and franchised outlets.

‘Intensive distribution aims to achieve saturation coverage of the market by using allavailable outlets.’ (Jobber, 2004). Kellogg’s choice of distribution intensity was not selectivedistribution or exclusive distribution but intensive distribution. Kellogg’s has achievedsaturation coverage of the market and uses every available outlets ranging from local cornershops to huge supermarkets to college vending machines for their Special K and Nutri-Grainbars. Kellogg’s does not sell directly to its customers or use their website as a distributionchannel as who would want to buy a box of cereal online? Although selling online hasbecome a major source of distribution in this modern age it does not fit well for Kellogg’s astheir products are those that people would not purchase individually from the website butKellogg’s has intermediaries such as Tesco that have an online website that allows customerspurchase their wide range of products online and it is then delivered to their door andKellogg’s products are included in their range. This is more suitable as customers wouldpurchase a box of cereal as part of their weekly shopping. Kellogg’s has a fantasticdistribution strategy and its products are distributed nationwide.

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Online MarketingMore recently the Internet has been playing a key role in distribution. ‘Internet marketing canbe defined as the use of the Internet and related digital technologies to achieve marketingobjectives and support the modern marketing concept.’ (Chaffey, Mayer, Johnston, &Chadwick, 2000)

What business benefits can the Internet provide?According to Dave Chaffey, the Internet can be used to achieve each of the four strategicdirections as follows:

1) ‘Market penetration. The Internet can be used to sell more existing products intoexisting markets. This can be achieved by using the power of the Internet foradvertising products to increase awareness of products and the profile of a companyamongst potential customers in an existing market.

2) Market development. Here the Internet is used to sell into new markets, takingadvantage of the low cost of advertising internationally without the necessity for asupporting sales infrastructure in the customers’ country.

3) Product development. New products or services are developed which can be deliveredby the Internet. These are typically information products such as market reports whichcan be purchased using electronic commerce.

4) Diversification. New products are developed which are sold into new markets.’

(Chaffey, Mayer, Johnston, & Chadwick, 2000)

Kellogg’s, like most companies, takes advantage of the internet to advertise and market theirproducts due to the low cost of advertising, selling and distributing their products online.

‘E-commerce transactions are the trading of goods and services conducted using the internetand other digital media.’ (Chaffey, Mayer, Johnston, & Chadwick, 2000). The Internet hasgrown immensely in the past couple of years and nowadays people do everything onlineinclude shopping. Customers’ purchasing power has increased because since e-commerce hasbeen introduced as they can buy items that may not be in shops or from other countries.Companies have realised this and have opted to using e-commerce themselves and havefound it beneficial. ‘The reason for this is that many companies, having decided that e-commerce offers an opportunity for revising distribution management practices, perceivecyberspace as a way to regain control over transactions by cutting out intermediaries andselling directly to the end-user customers.’ (Chaston, 2001)

Disintermediation is the removal of intermediaries such as distributors or wholesalers thatformerly linked a company to its customers.

Kellogg’s Online MarketingAlthough Kellogg’s does not use the Internet for selling directly to its customers as I havealready explained, it does use the Internet effectively to promote and advertise its products,events they organise, charities, etc. Kellogg’s website, www.kellogg’s.com, consists of alltheir products with nutritional information about each one. It informs people about the

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company itself and also about job opportunities within Kellogg’s. Any recent events orcharity events are also advertised such as their new fundraiser for schools called ‘Kids4Fun’.Another popular aspect of the website that has been a success, especially with the women, istheir Special K ‘drop a jean size’ challenge where it allows women to record their weight andwhat they eat and watch their progress over the weeks. This is a huge encouragement forwomen to get fit and healthy whilst also promoting Special K.

Figure 7-Special K Logo

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Figure 8-Drop a Jean Size


Promotions Few goods or services, no matter how well developed, priced, or distributed, can survive inthe marketplace without effective promotion.

According to Charles W. Lamb, Jr. ‘Promotion is communication by marketers that informs,persuades, and reminds potential buyers of a product in order to influence their opinion orelicit a response.’ (Lamb, Hair, & McDaniel, 2000)

AdvertisingAdvertising can be defined as any paid form of non-personal promotion transmitted through amass medium. ‘The key difference between advertising and other forms of promotion is thatit is impersonal and communicates with large numbers of people through paid mediachannels.’ (Brassington & Pettitt, 1997)

There are different types of advertising. If the company’s aim is to build up the image of theindustry then institutional advertising may be used. In contrast, if the company wants toenhance the sales of a specific good or service then product advertising is used. There are alsoother forms product advertising such as pioneering advertising, competitive advertising, andcomparative advertising.

Institutional AdvertisingInstitutional advertising promotes the corporation as a whole and is designed to establish,change, or maintain the corporation’s identity. It usually does not ask the audience to doanything but maintain a favourable attitude toward the advertiser and its goods and services.‘A form of institutional advertising called advocacy advertising is typically used to safeguardagainst negative consumer attitudes and to enhance the company’s credibility amongconsumers who already favour its position.’ (Lamb, Hair, & McDaniel, 2000)

Kellogg’s does not use this style of advertising as it is a worldwide organisation that is wellknown to consumers for its loyalty and quality. Because Kellogg’s has such a big variety ofproducts of different types it is best to advertise these products individually. Kellogg’s doesnot feel the need to advertise the organisation as a whole as they have an extremelyimpressive corporate image.

Product AdvertisingUnlike institutional advertising, product advertising promotes the benefits of a specific goodor service. The product’s stage in the life cycle often determines which kind of productadvertising is used: pioneering advertising, competitive advertising, and comparativeadvertising. Kellogg’s uses product advertising frequently as they have so many productswhich are at different stage of their life cycle. I will give an example of a different product foreach type of product advertising to give you an idea of how Kellogg’s advertises its differentproducts.

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Pioneering Advertising‘Pioneering advertising is used in the early stages of the life cycle when it is necessary toexplain just what the product will do and the benefits it can offer.’ (Brassington & Pettitt,1997). Pioneering advertising also seeks to create interest.

Kellogg’s uses pioneering advertising when launching new products to creative interest to itsconsumers and let them know how good it is. When Kellogg’s launched Crunchy Nut theyhad to advertise it so as people would take an interest in it because after all it is just anothercereal and how would people know or want to know how good it tasted? Kellogg’s had topersuade consumers to try Crunchy Nut and they done this by advertising it as something thatpeople couldn’t get enough of. The common television advertisement that everyone is awareof consists of people being in love with Crunchy Nut and not being able to resist eating itanywhere, anytime. For example, one advertisement showed a man getting into his car afterbeing at the supermarket and just pouring the milk directly into the Crunchy Nut cereal box.The advertisement shows that he could not wait to eat the delicious cereal and they use theslogan “obviously another Kellogg’s Crunchy Nut”, this indicates that this man is not alonewhen it comes to be addicted to the cereal.

Competitive AdvertisingFirms use competitive advertising when a product enters thegrowth stage of the product life cycle and other companies beginto enter the marketplace. ‘Instead of building demand for theproduct category, the goal of competitive advertising is toinfluence the demand for a specific brand.’ (Lamb, Hair, &McDaniel, 2000). Kellogg’s Special K bars have been a hugesuccess, especially for the women. Kellogg’s was one of the firstcompanies to create a healthy snack bar. As this product started to grow competitors started toenter the market as they seen how well Special K bars were attracting customers. Competitorssuch as Go-Ahead bars promoted their product as a healthy snack. With competitionKellogg’s had to do something other than just promote Special K as just a healthy snack butto do something that will attract consumers to Special K instead of Go-Ahead. Kellogg’sdecided to direct Special K towards women and introduce a challenge to help keep themmotivated about maintaining a healthy life style, and if they maintained a healthy life stylethey would maintain consuming Special K as that was their initial motivator. Kellogg’sadvertised Special K as women taking the Special K challenge to ‘drop a jean size’ and theiradvertisements consisted of slim, healthy women wearing red as that is their trade mark and italso looks great. Everyone knows that Special K is associated with this image and that is whatgives Special K a competitive advantage over Go-Ahead bars.

Not all advertising activity is meant to have a direct effect on sales. ‘Corporate advertising isnot tied to any particular product.’ (Hill & O'Sullivan, 1999). Kellogg’s advertises eventssuch as charity sponsors (Fun4Kids) or promotions on back to school equipment. This type ofadvertising does advertise the corporation, Kellogg’s, but no specific product or even amention of their products in general.

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Figure 9-Crunchy Nut


Conclusions & Recommendations

ConclusionsOverall, Kellogg’s is such a massive successful organisation that has done extremely wellover the past decade. The company has grown from an accidental creation to the main brandin the cereal industry.

Although they still produce the first product that was invented, cornflakes, they also produceover 70 different products. This shows me how much they have grown as an organisationthroughout the years. As a result of William Keith Kellogg, people in Ireland eat morebreakfast cereal at 8kg per head than any other country in the world. This shows me the hugedemand the Ireland has for this market. An Irish survey states that ‘together we consume360,000 bowls of Kellogg’s Corn Flakes everyday in Ireland, that’s 130 million bowls everyyear!’ (Kellogg's ). Kellogg’s is the leading supplier of breakfast cereals in Ireland. Thereason for this success is due to the fact that Kellogg’s have consistently increased their rangeto meet the ever-changing needs of Irish consumers.

Alongside Kellogg’s successful breakfast cereal range, they have pioneered the developmentof a wide range of nutritious snacks and cereal bars. This was a response to today’s fastmoving society; people often skip breakfast as they are constantly on the go.

By Kellogg’s continually launching not only new products, but campaigns, has been one ofthe reasons why Kellogg’s is still such a huge success today and has not matured and declinedas most organisations and products do. Kellogg’s kept their customers interested by launchingpromotions such as Special K Drop a Jeans Size challenge which was launched in 2003 and itbecame one of the company’s most successful promotions.

In my opinion, the main cause of Kellogg’s still being a success is down to the fact that theyaltered their segmentation. Kellogg’s segmentation was targeted towards behaviouralsegmentation which was based on ‘time of use’. Different people consume the same productat different times. Kellogg’s targeted Corn Flakes as a breakfast cereal, to be eaten in themorning time. Kellogg’s then identified that a significant proportion of its customers ateCorn Flakes as a snack food later in the day. Kellogg’s decided to sustain sales and topromote Corn Flakes to late-night snackers and also during the day snacks by introducingcereal bars that can be consumed anywhere at any time.

Kellogg’s has a fantastic corporate image because of all the charity work they involvethemselves in and because it is such a familiar company with good quality products andnutritional foods. They are known for their good advertising and promoting and theirexceptional marketing mix which is important. If Kellogg’s continues to do what they arecurrently doing then they will remain successful in the future. Although, I do feel there aresome areas in which they could improve or alter as I have mentioned in my recommendationsbelow.

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RecommendationsAlthough Kellogg’s has been, and still is, a huge success due to their effective marketing mixstrategy, I feel there are some recommendations that would benefit the company in so manyways.

Targeting- From researching Kellogg’s I have learnt a lot about their products and

who they are aimed at. For example, Rice Krispies, Frosties, and Coco Pops aretargeted at children because of their delicious sugary taste and eye-catchingpackaging, Special K is targeted at women who are health conscious and want to loseweight. With Special K’s low fat and nutritious goodness it really attracts women whowant to be healthier. What about men? Kellogg’s has aimed its products at most of themarket but hasn’t yet succeeded in reeling in the male population. Some men mighthave a bowl of Corn Flakes but there is nothing specifically aimed at them or isunique to men in general. This is something I feel Kellogg’s can focus on and improveeven if it is just something simple like a sports bar.

New Product Development- Kellogg’s has accomplished launching new and great

products and now they have such a wide range of products available. Advice I wouldgive Kellogg’s would be to accomplish something completely new, to branch awayfrom the breakfast and cereal industry and maybe bring out something from anotherfood section such as minerals, confectionary, etc.

Distribution- Kellogg’s uses multiple channel distribution systems as they distribute to

supermarkets, local convenience stores, franchised outlets etc. The one type ofdistribution Kellogg’s does not use is online distribution. I can understand that abusiness to consumer (B2C) distribution would not be ideal as not many customerswould buy cereal online from Kellogg’s website. However, I do think that Kellogg’sshould consider using business to business (B2B) type of distribution as it would begreat for Kellogg’s to handle and keep track of their transactions and it will alsoreduce costs as it would cut out the wholesaler.

Promotion- I mentioned institutional advertising and how this type of advertising

promotes the corporation as a whole not just one individual product. Kellogg’s doesnot seem to do this as they advertise their products separately but I think institutionaladvertising could be beneficial for Kellogg’s as it helps maintain customers’ interestand loyalty. It reminds customers of what your company is and what it does not onlytrying to sell your products to them but trying to sell your business also.

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Lamb, J. C., Hair, J. J., & McDaniel, C. (2000). Marketing, 5th Edition. Ohio: South-WesternCollege Publishing.

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Figure 10-Kellogg's Logo

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