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Executive summary
Nestle is a leading multinational company in the fast-moving consumer goods (FCMG) industry. The company manufactures and sells baby foods, beverages, and snack bars. It has several products under its mainstream brands: Nescafe, Kit Kat, Cerelac, Nido, and Pure Water. This report provides promotional activities undertaken by Nestle in the FCMG sector.
They include prize giveaways and self-liquidating promotions. In addition, the report analyses and evaluates the strategies used by Nestle in relation to the industry and the company’s performance. Therefore, the report looks at the motivation behind the choice of promotional activities using the marketing mix strategy of price, place, promotion, product, and communication strategy and consumer behavior as they apply to the case of Nestle.
The report shows Nestle does not use a specific demographic for many of its products. Instead, it relies on psychographic consumer analysis to position its brand. The company’s marketing campaign budget is devoted to distribution and retail-sales promotion activities and explicit campaigns in some cases to take advantage of seasons, holidays, and events like the football World Cup.
Company description
Nestle is a multinational company serving more than 86 countries in the fast-moving consumer goods (FMCG) industry. The company began in Switzerland and today has more than 500 factories and 500 products suited for different manufacturing and consumer needs. Its main competitors are Colgate-Palmolive, Procter and Gamble, and Unilever. NestlĂ©’s global operations concentrate on producing milk products, as well as nutrition, chocolate, beverage, catering, and confectionary products for sale through its distribution network (NestlĂ© 2014).
FMCG sector background
The fast-moving consumer goods industry includes products that sell quickly and are relatively affordable for the average consumer in the market. Companies selling FMCG get small profit margins from individual product sales, but they sell large quantities and can earn substantial revenues and profits to sustain their operations and growth plans.
For consumers, FMCGs are products that need replacement after a short period; they are usually due for replacement in weeks or months. In any company, the main tasks are to produce, package, distribute, and market the goods and related services. A typical company will, therefore, have an advertising unit, marketing unit, finance, purchase, human resource, and operations department.
In the marketing programs of Nestle, the company considers the micro and macro environmental factors that promote or hinder success.âŻ
Overview of the activities in the portfolio
At Nestle, market activities happen as responses to crises or as planned ways of boosting the company’s performance to influence growth in its market share. NestlĂ©’s strategy is to cover a given city’s metropolitan areas where much of the retail purchasing takes place (Piercy & Rich 2009). At the same time, the company aims to reach all consumers in their daily activities, at home, school, work, and while they are commuting.
The products included in the marketing activities for the company comprise its entire product portfolio, which includes its lifestyle products, baby products, and beverage products. This report will look at the segmentation, targeting, and positioning of the various products, as well as other aspects concerning marketing techniques and rewards for Nestlé.
The company uses competitions, advertising, and sponsorships as its primary marketing initiatives. The most visible marketing campaigns by Nestle have been prize giveaways, whose impact has been the increase in sales for selected products involved or targeted in those campaigns. Besides that, the company maintains brand visibility through below-the-line advertising in several avenues, such as outdoor advertising on printed billboards.
Segmentation, targeting, positioning
The Nestle strategic plan gives the overall mission and target for various marketing activities. Under segmentation, targeting, and positioning, Nestle decides on the customers that it is going to provide for and the way it is going to carry out the exercise. This initial consideration determines other aspects of marketing that the company eventually uses. Here, the company can rely on an appropriate marketing mix design that analyses and evaluates pricing, product, place, and consumer buyer behavior.
In segmentation, Nestle divides consumers based on the following characteristics: Geographic area, demographics, psychographics, and behavioral characteristics. Under geographic area, the company relies on climate seasons and their associated weather, such as summer and warm temperatures or winter and cold temperatures. Here, Nestle will promote a given product, like its Nescafe Ice, when the weather is hot in the summer. The coffee product would be a solution for consumers looking for a way to feel refreshed, and Nestle suggests that they take its cold beverage through its marketing campaign.
Under demographics, Nestle comes up with products according to generations, such that it has specific products targeting toddlers and babies, which are usually promoted to their mothers and guardians. On the other hand, it has other products, like its coffee products, targeted at young people and adults of any age looking for cold or hot refreshments to make them feel upbeat during the day or at night.
NestlĂ© provides nutritious milk for children older than two years with Nido and Cerelac. The milk contains vitamin D, which is necessary for children’s growth. Meanwhile, Cerelac has both milk and rice to fulfill the same nutritional needs for growth. Nesquik and Koko Krunch are other products by Nestle that are for children who are at least walking and need proteins and minerals, in addition to vitamins, for their growth. The products are also sweet enough to entice children to like them. For mothers, NestlĂ© provides lactogen, a full milk power ideal for babies still within the breast-feeding age.
Nestle offers Nescafe Classic as a product that delivers the required caffeine to keep the consumer alert in targeting the adult consumer with a busy life and hard work. Under psychographic targeting, Nestle provides the lifestyle and personality segment with a range of candy and chocolate bars like the Kit Kat brand and the Nescafe 3 in 1 package that lets people enjoy the benefits of packaged snacks and beverages without having to take too much time in preparation. Consumers looking for instant gratification are the ones targeted by the two products. In the Nescafe 3 in 1, the company combines the three necessary ingredients to make up a beverage, and all the consumer needs to do is add water at the desired temperature. The 3 in 1 package contains sugar, milk, and coffee (Nestlé 2014).
Although particular products set out a type of demographic or psychographic target for Nestlé, in reality, the company generally lumps up all its consumers in a wide continuum that lacks a specific target audience (Sandhusen 2008). Apart from baby foods, many other products by Nestlé, such as its Pure Water product or Nescafe Classic, can be consumed by anybody.
Consumer buyer behaviour
Nestle considers consumer buying behavior in all its marketing activities. Consumers pick a particular FCMG brand based on its functional utility and emotional benefits. Differentiating products on functional utility alone is difficult among the various FCMG brands that serve as substitutes (Solomon & Bamossy 2002). Nestle relies a lot on the emotional benefits that consumers get when they pick its brands.
Through its brands, consumers can express their personality, desires, attitudes, social status, and affiliation. Typically, consumers will approach buying as a problem. In that case, the buyer will recognize the need to buy and then search for appropriate information to influence the buying decision, after which he or she will evaluate alternatives. The last steps are the actual purchase and post-purchase evaluation (Hayden 2006).
Nestle’s campaigns, whether prize giveaways or self-liquidating promotions and its advertising moves, aim to tackle consumer-buying resistance at different decision-making stages. The company gets consumers involved in several ways, such as participation in competitions. That way, it can attach its products’ economic, psychological, and social meanings to consumers (Jobber & Fahy 2006).
Promotional Activities
Companies like Nestle operating in the FMCG industry hold several promotional activities to help move their stock through the distribution channels used in their countries of operation. The marketing activities are distinct in their characteristic of including a call to action aspect that will convince consumers to view the promoted brand appropriately to remove their resistance and encourage them to purchase the branded products for use (Mullins 2010).
To market its products effectively, Nestle uses several channels, which include broadcast, print, direct marketing, in-store display and promotion, coupons, and advertising. This report will present promotional activities that include prize, price, self-liquidating, free, and cause-related promotions (Peter & Donnelly 2004).
The main options for promoting products that Nestle uses include giveaways and free samples or discount products when purchasing a particular quantity of its products. Prize giveaways help create the necessary buzz in special seasons to increase sales within the promotion period (Garretson & Scot 2003).
Other than the periodic campaigns with prize giveaways, the company runs advertising throughout the year on selected products to increase sales in the long term. The company uses the Internet, mainstream media, and posters or banners in retail outlets as its main forms of advertising. It also includes product placement within the media and strategic places, such as inside stores, sporting events, or corporate meetings.
Nestle uses self-liquidating promotions to enhance the visibility of its flagship brands, like Kit Kat and Nescafe. The company comes with trip events for its customers to win when they purchase the products. In 2010, the company put a budget of 10 million pounds for a football-themed giveaway for its Kit Kat product. Consumers had to purchase the products and stand a chance to win 1000 pounds daily. After purchasing, consumers would enter the code found on the wrapper to a website and wait for the daily draw. Previously, the company had a similar campaign for the football World Cup in 2006, where it was giving away replica shirts to lucky consumers (Barnes 2010).
Re-launching is another strategy helpful for Nestle whenever it changes the brand of its products and needs to reintroduce them as more fit for consumer needs. Re-launch also allows the company to correct discrepancies created by inflation, shortages, and other distribution challenges that let the competitors win.
Re-launching relies on several below-the-line methods, such as outdoor advertising and transit. In direct mail, Nestle uses flyers and folders from its salespeople. The outdoor advertising strategy for Nestle is the most visible (Haigh & Brubaker 2010). The company uses printed billboards, vinyl sheets, and banner stands in several strategy locations and other places where there are events that provide an opportunity for its marketing (Peter & Donnelly 2004).
For advertising Nescafe, Nestle uses the youth appeal by having a youthful boy or girl having coffee using a Nescafe branded mug. The company then offers the branded red Nescafé mugs as promotional items in its various in-store giveaway campaigns. In major retail stores, Nescafe has its own corner where all its related products are displayed for sale. Consumers get a personal interaction with the brand and the staff assigned to promote it at the corner shop. Attractive display works as an attraction for consumers in the retail store.
In 2006, Nestle introduced a range of products as part of a giveaway promotion to consumers in several self-liquidating promotions for Kit Kat. One of them was a bright red computer mouse. It also lets consumers win branded computer compact disks that contain free computer games and mouse pads for desktop and laptop users. In other BOGOF promotions, Nestle uses several packages of Kit Kat to reward customers. It has Kit Kat variety packs and mega packs that give customers more bars for the same price or for a marginal price increase (Chang, 2009).
Communication strategy
Nestle communicates the same corporate message through its different distribution and marketing channels. The company has a unique logo that is embedded in all product packages. The Nestle logo accompanies every brand, and its essence is to tell and show consumers that the product is of high quality and ideal for fulfilling their needs (Haigh & Brubaker 2010).
Nestle has salespeople positioned in retail outlet points, and their work is to influence the buyer’s final decision when he or she is in the store next to the products (Kardes et al. 2014). The salespeople also serve as customer awareness and service persons, and they help distill and demystify any consumer conceptions of the brand. The salespeople grab attention with their outfits and arouse interest by how they deliver their sales information about the products they promote.
Their particular strategy to different consumers is to arouse the desire for ownership and to spur action, which in this case is to pick the product. In many cases, salespeople work within the context of other promotional campaigns and help to make them effective (Blythe 2003). For example, they can promote a self-liquidating promotion where consumers are asked to buy a Nescafe product and get the Nesquik sachet pack as a discount. Nestle introduces new products as giveaways to communicate brand prominence and visibility for its products.âŻ
Pricing
Different pricing strategies are ideal for Nestle in different situations. First, the pricing depends on the product being sold. Secondly, it must relate to the brand association that the company aims to achieve. Thirdly, it has to correspond to the ongoing marketing campaign for the particular product or product range (Darke & Chung 2005). Pricing for Nestlé products changes gradually to reflect inflationary changes in the economy, and the company does not actively use price as a marketing strategy (Chang 2009).
Nestle relies on price promotions to make its products more affordable than the competitors. With price promotions such as buy-one-get-one-free, the company can offer consumers more of its product at an equivalent retail price to the competitors without appearing anti-competitive.
Product
Nestle products come in different sizes, and anyone can buy the size they see fit for their consumption needs. Nestle provides different product sizes because some consumers buy on behalf of their households, while others buy as individuals. Each group has its individual preferences and rate of consumption, as well as buying power. With different product sizes, people can get appropriate packages according to their needs and ability (Hulbert et al. 2005). There are also cases where product usage is in corporate settings, such as company meetings or served to employees.
In such cases, bulk buying is often the case. However, Nestle does not provide bulk packages, but those wishing to buy more have to buy multiple smaller packages. Moving the bulk products would be costly for the company (Meek & Meek 2003). They would require storage space and specialized cargo transport facilities. On the other hand, the small and medium-sized packages for particular products fit into conventional distribution and display facilities in warehouses and retail outlets such as supermarkets (Klopper et al. 2006).
Nestle relies on product differentiation to offer substitutes and lock in customers to its available range of products. The company provides alternatives targeted to the same group as Cerelac and Nido, with a slight product variation. The same applies to Nesquik, Nescafe Classic, and Nescafe 3 in 1 drinks. Products like Maggi and Pure Water contain minerals and vitamins that would appeal to different needs of consumers spread across the demographic targets.
Nestle recognizes unique features of each product that it does not tamper with because they are the selling points. When alternation occurs, then it is only for a limited period to be used as a learning experience for the company. The company brings out alterations as special editions of its mainstream products. Looking back, the intrinsic characteristics of Nescafe, Kit Kat, Cerelac, and other Nestle products have changed minimally in the past decades.
Place
Exclusivity comes from the number of options consumers have to get the product and its availability. Although FMCG rarely fit the exclusive product category because they are found in almost any retail outlet that consumers can access, there are ways that companies like Nestle still manage to give their products exclusivity. For Nestlé, there is the buying of shelf space in notable retail outlets like supermarkets. Here, an exclusive shelf space allows the company to brand a part of the outlet and stock it with its products to differentiate them significantly from other products.
For its baby products, the company does its product marketing through institutions and professionals who are in positions of recommending the products to consumers. For example, Nestle works with practicing doctors so that they can recommend its Cerelac and Nido products as viable foods for babies. The doctors attending to mothers or appearing in adverts will give the products the required credibility that influences consumers to buy. Having its products associated with health institutions and professionals in the health industry helps Nestle to emerge as a health-conscious brand conducive to daily consumption (Smith & Taylor 2006).
Widespread distribution is the strategy that Nestle uses. It ensures that its products, especially ready-to-consume products such as Kit Kat and Nescafe, are available anywhere a consumer wants to purchase, such as schools, supermarkets, airports, and institutions.
Review of returns on investment
The marketing strategies for Nestlé have been quite successful in the past. The main reason has been the adequate planning and study of the market before launching campaigns. Using holidays, cultural events, and seasons also helps increase the relevance of campaigns and their impact. The 2006 World Cup campaign for Kit Kat led to a 16% sales hike for Four-finger and a 38% sales hike for Chunky, which has all categories of Kit Kat (Barnes 2010).
At the time, the company spent about 5 million pounds on the prize giveaway campaign. Many of the campaigns run by the company increase sales when they directly involve consumer participation. The below-the-line advertising models create interest in the company, but their impact is hard to quantify in terms of sales increase (Pride et al. 2012). However, the company relies on strategies to keep out its rivals from the same space and, therefore, reduce consumer exposure to alternative products and their marketing messages.
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