Product Modification Strategies Used by Food Companies - Case Study Example

Table of Conten Market Analysis 2 i.Introduction 2 1.0.Part I: Current Situation Analysis 3 1.1.Macro and Micro Environments 3 1.2.SWOT Analysis 7 2.0.Part II: Segmentation, Targeting and Positioning 8 2.1.Segmentation 8 2.2.Targeting 9 2.3.Positioning 9 3.0.Part III: Marketing Mix 10 3.1.Three Level Model of Product 10 3.2.Pricing Strategy and Product Mix Strategy 10 3.3.Distribution Channels 11 3.4.Integrated Marketing Communication 11 Table 1: Burger Hut Market Analysis 3 Figure 1: Burger Hut Market Analysis 4 Figure 2: Burger Hut Market Niche in the third month of operation 5 Figure 3: Burger Hut Market Niche in the third month of operation 6 Figure 4: Per Capita Expenditure 8 Figure 1: Burger Hut Market Analysis 4 Figure 2: Burger Hut Market Niche in the third month of operation 6 Figure 3: Burger Hut Market Niche in the third month of operation 6 Figure 4: Per Capita Expenditure 8 Market Analysis i. Introduction This report presents Burger Hut as the product for analysis. In light of this, the report presents marketing strategy Burger Hut can do to reach its target market. Owing to the recent decline in market share, launching of the products has to take consideration of decision making. Burger Hut resembles the burgers that we have used in one of our fast food outlets but comes with a different taste and consideration of health related issues to promote a stable, even emotional, connection with the customer to the product. Burger Hut has been designed to meet specific needs as will be elaborated in the subsequent sections. The product does recognize the long-term value of the relationships with the customers and extends the potential for shared value exchange. It offers a shift towards marketing approach that is more personal due to the rise in demand of consumers who are interested in knowing that the brands they work with do not just offer services or products of quality but also do care about them. Given the growing ambitions and market penetration strategy, the product helps in moving from functional model to a product design model. That is, it has been designed to help continue serving as a competitive edge in an increasingly competitive market. Indeed, Burger Hut will be having a substantial chance to dominate the market. However, to maintain or improve its market niche the company will seek to improve on its superior customer service and competitive pricing models so as to benefit from the economies of scales and the strong relationships with suppliers, which will in turn place it in a strong bargaining position and allow leveraging the costs. 1.0. Part I: Current Situation Analysis 1.1. Macro and Micro Environments Burger Hut is close to entering its fifth month of operation since its inception. This report notes that the product has been received well in the market and marketing processes is now critical to the continued success of the product and future profitability. Furthermore, it possesses good information regarding the market and understands a great deal concerning common attributes of the most loyal and priced customers. The product seeks to leverage this position by understanding its customer base and their specific needs to address the constantly changing business environment in a more flexible and responsible way, as the product design model concentrates decision-making authority in a “product cell” and thus enables faster response to customer needs. With regard to market analysis, the product is currently enjoying sales from the following categories of customers; individuals, families, take away(s). The information is represented in a table as shown below: Table 1: Burger Hut Market Analysis Market Analysis/Categories of Customers Growth First Month Second Month Third Month Fourth Month Fifth Month Individuals 34% 1,200 Volumes sold 2,300Volumes sold 2,800Volumes sold 3,100Volumes sold 3,290Volumes sold Families 31% 2,100Volumes sold 2,302Volumes sold 3,024Volumes sold 3,403Volumes sold 3,928Volumes sold Take away(s) by families 35% 1,824Volumes sold 2623Volumes sold 2672Volumes sold 3028Volumes sold 3293Volumes sold From the table above, the product is currently enjoying market shares from three sources (individual buyers, family visits to make orders and take away(s)). Representing the data above, the growth of the product sales from the product is as shown below: Figure 1: Burger Hut Market Analysis On market demographics, the Burger Hut market base consists of the following behavior, demographic and geographic factors: i. Behavior Factors The product is enjoying ‘high quality’ recommendations from customers When preparing, the customers’ need for health concerns are taken into considerations There is value attributed to the presentation or appearance of the product ii. Demographics Factors Children, Male and Female Age 12-50, this is the age segment that gives the product at least 60 percent of the market Young professional working close to the location of the product Income under $10,000 annually Remain cognizant about their health iii. Geographic The product’s immediate target in terms of geography is the nearby cities and towns A 20 mile geographic area is ideal for the product The total targeted population within a given area is about 30,000 In terms of market growth, in 2012, the market growth for burger reached about $12 billion (Henderson, 2016). Burger sales are therefore estimated to grow by at least 10 percent especially in identified markets where Burger Hut will be operating. This growth is attributed to different factors. First, the scope of the market where the product has operated is made of customers who appreciate the product due to its health consciousness. Burger Hut is seen to be health due to its high percentage of carbohydrates when compared to fat. Another fact that contributes to growth of market is the increase in the number of hours the demographic of the product is working. For the last 5 months that the product has been in operation, we have realized that the number of hours spent at work by our archetype customers has really increased therefore creating high correlation of customers we receive for the product. The figure below represents archetype of customers whose spare type have become lesser meaning they are the group we will be targeting for the proposed 10% increase in sales. Figure 3 shows percentage of time they had after finishing their errands and figure 4 shows time they have as months progresses. From the figure, we can see that the three categories of customers find little and little time to prepare meals at home and would prefer a stopover for our product. The highest affected category is individuals working. Figure 2: Burger Hut Market Niche in the third month of operation Figure 3: Burger Hut Market Niche in the third month of operation 1.2. SWOT Analysis An insight into the internal organizational capabilities and the needed marketing framework can be done with the application of the extended Strengths, Weaknesses, Opportunities and Threats (SWOT) framework. Strengths Weaknesses S1: Authenticity of the brand by loyal customers S2: Brand promotion training programme S3: Strong supplier relationship S4: Engaging marketing strategies S5: Position of products and retail services S6: Leveraging its reputation from experts into value-added service (such as Mobile Techxperts in-home service W1: Changing store locations without prior notifications W2: Uncertainty of product loyalty from customers W3: Laxity in continuous rebranding W5: Consumer confusion over competition Opportunities Threats O1: Interests in complex electrical products from customers O2: Presence of value added products for future demands O3: Reduction in cost price of technologically advanced devices T1: Unpredictable profit margins which is sensitive to fluctuations in currency rate of exchange T2: Economic fluctuations and consumer confidence directly impacts retail activity T3: Subsidy of larger retail group-can be rebranded or absorbed 2.0. Part II: Segmentation, Targeting and Positioning 2.1. Segmentation Beginning with segmentation, Burger Hut has identified the primary target market to the specialty of current needs and trends in the market. Research currently shows that purchasing power of people around the market identified (key cities and towns) has improved by about 25-35 percent in the last two years (Fern, 2015). Secondly, figure 4 below indicates that towns and cities, the region where Burger Hut will be targeting the market is having higher monthly per capita expenditure more than any other (Jariel, 2013). The figure below exemplifies the situation as far as market segment is concerned. Figure 4: Per Capita Expenditure The regions around urban seems to be one of the richest areas studies showing that it has about 8 percent share when it comes to purchasing power (Crippen and Oates, 2015). Specifically, towns and cities lead the case with the a total purchasing power of $20,728 annually which is about 43 per cent share of the country's total purchasing power. 2.2. Targeting With regard to targeting, the research conducted regarding the market suitability shows that there is considerable market for the product. Demography and market mix of clients/customers expected to purchase the products continue to grow therefore the targeted customer base widens by the day. The product aims to achieve its goals by focusing on innovation, customer affiliation and expanding its presence in the existing market. Furthermore the product intends to cater for these needs by using informative sales personnel as well as deploying a strong return-customer base. This threat will be leveraged by further customer-relationship focus and loyalty creation, as well as investment in research and technical development (R&D) to reduce the costs of services to compete with niche competitors. 2.3. Positioning On positioning, studies have identified that some products/companies have low pricing but poor taste while other have good taste but their pricing is not friendly. Based on this mix, Burger Hut will be positioned at the centre of the two mixes so that its approach is to offer best test of Burger but at relatively fair prices. To be positioned within the market the competitiveness will be attained through the following: Health conscious Burger Unique and culturally tailored hot sauce High quality Burger 3.0. Part III: Marketing Mix 3.1. Three Level Model of Product The first aspect of the marketing mix is the three level model of the product (Burger Hut). Just like Kong (2016) noted, our product has the CORE value as the first level because Burger Hut is part of that product that makes it valuable to all our customers. We value the intangibles such as taste and health. Then the product represents the ACTUAL or the tangible Burger Hut which offers our customers the touch and delicacy. Burger Hut is further made to realize the aspect of AUGMENTED which is the non-physical part of the burger but will added values that take care of customers’ health and taste. 3.2. Pricing Strategy and Product Mix Strategy Pricing strategy and product mix strategies is two-fold. First, the company engages in reduction of its price to meet every customer’s budget thus enabling Burger Hut wade off competitions from rival companies. Despite some of the threats and weaknesses that have been noted, it is apparent that Burger Hut is enjoying the floated economies of scales. On the other hand, economic fluctuations and consumer confidence directly impacting on buyer activity show that the fast food market is uncertain making pricing model difficult to predict. On product mix the company has recognized that product assortment (product mix) is essential especially in a bid to compete favourably in the market. As a result of this there is one unique product line that the company has designed to offer to its targeted market. Recently, the company introduced medium normal sized Nasi Lemak Burger meeting specific needs of its customers. The company has modified their brand by transforming what looks like pizza to Nasi Lemak Burger to attract the attention of their customers. As a matter of fact, Nasi Lemak Burger is already attracting customers by offering prices as low as $5 and free burger for two or more. 3.3. Distribution Channels According to recent observation and performance analysis of Burger Hut, distribution channels remains to be two areas: targeting working class with little or no time to prepare food and family outings and events and or festivities. Again, there is need to reiterate that fast food industry has a number of uncertainties for Burger Hut to operate in. This includes changing pricing and introduction of cheaper alternative fast food (Finkelstein et al., 2011). Secondly, eating habit has greatly affected distribution channels for Burger Hut thus affecting on its pricing and marketing and sales promotion. 3.4. Integrated Marketing Communication Studies have found that commercial advertisers use psychological approaches to design products and send certain messages to the targeted market (Kong, 2016). The report therefore draws from developmental psychology principles by building campaigns that can persuade customers that they need Burger Hut. This approach will create awareness among customers regarding self-worth and satisfaction. Furthermore, the integrated marketing communication will entail the relationship the company will be having with targeted customers. Furthermore, the company will have direct marketing in which there will be messages, texts, emails and other form of direct communications to the targeted niche of customers. References Crippen, K., & Oates, C. (2015). Product Modification Strategies Used by Food Companies for Fast Entry into New Geographic Segments. In Proceedings of the 1993 World Marketing Congress (pp. 3-3). Springer International Publishing. Fern, O. S. (2015, March 13). World Sleep Day: 6 things to know about sleep. Retrieved from Ong Sor Fern: http://www.straitstimes.com/singapore/world-sleep-day-6-things-to-know-about-sleep Finkelstein, E. A., Strombotne, K. L., Chan, N. L., & Krieger, J. (2011). Mandatory menu labeling in one fast-food chain in King County, Washington. American journal of preventive medicine, 40(2), 122-127. Henderson, J. C. (2016). Local and traditional or global and modern? Food and tourism in Singapore. Journal of Gastronomy and Tourism, 2(1), 55-68. Jariel, C. (2013, July 5). This infographic reveals Singaporeans' dining habits. Retrieved from sbr.com.sg/: http://sbr.com.sg/food-beverage/exclusive/infographic-reveals-singaporeans-dining-habits Kong, L. (2016). From Sushi in Singapore to Laksa in London: Globalising Foodways and the Production of Economy and Identity. In FOOD, FOODWAYS AND FOODSCAPES: Culture, Community and Consumption in Post-Colonial Singapore (pp. 207-241). Read More