Strategic International

Marketing Review

307LON Regular Assignment One 6106506 Taupin 307LONCW1

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Abstract

Globalization has given companies the opportunity to grow at an international level. To succeed in that task they must adapt to the different markets they trying to tap. Including marketing on an international scale to their strategy has become a real challenge. They have to learn how to adapt to the different types of potential customers. Nestle, by being able to analyse the environment of the markets around the world has now become the world’s leading Nutrition, Health and Wellness company. What are the key concepts in Nestle strategy ? How do their marketing strategies at a local and at an international level help them keeping their market shares ?

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Table of content Abstract ......................................................................................................................2  Introduction................................................................................................................4  I. Nestle’s marketing strategy for Kit Kat.................................................................5  

1.1 Marketing at a local level - France .....................................................................5 1.2 Marketing at an international level - Japan ........................................................5

II. Segmentation - Targeting – Positionning............................................................6  2.1 Segmentation .....................................................................................................7 2.2 Targeting ............................................................................................................7 2.3 Positioning..........................................................................................................8

III. Customer Relationship activities ......................................................................10  3.1 Acquisition activities .........................................................................................10 3.2 Retention activities ...........................................................................................11

IV. Innovation and future trends.............................................................................11  4.1 Innovation impact on performance...................................................................11 4.2 Future trends impact on objectives and strategies...........................................12

V. Environmental analysis ......................................................................................12  Conclusion ...............................................................................................................15  References ……………………………………………………………………………….. 16

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Introduction Nestle is the world wide leader of nutrition, health and wellness (measured by

revenues). Created in 1866 in Switzerland, the company is today implanted in all the continents and has production sites in almost every country. Marketing has been a relevant aspect of their global strategy as it is based on that quote : « Think globally, act locally ». Kit Kat is one of their most popular brand and the most consumed chocolate bar in the world. It has also became a fascinating cultural good in Japan. Indeed the Kit Kat’ story in Japan can be seen as a « marketing fairy tale ».

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I. Nestle’s marketing strategy for Kit Kat

1.1 Marketing at a local level - France

According to Philip Kotler marketing can be defined as «satisfying needs and wants through an exange process» and for the Chartered Institute of marketing it involves «identifying, anticipating and satisfying customer requirment profitability». The main idea is : meeting needs and providing benefits. (Learn Marketing, 2010)

Domestic marketing involves being able to compete on a local market by being better than competitors at meeting the customer needs.

The french chocolate bar market is highly competitive as presented in the following figure.

Figure 1 : Chocolate bar market shares in France

(Letschner, Le Figaro, 2012)

1.2 Marketing at an international level - Japan

According to R.Bartels : «Experience in international markets has shown marketers the inadvisability of projecting domestically successful marketing

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strategies into foreign situations» (Bartels, 1968) This is why, at an international level Nestle uses a multi-domestic marketing strategy to adapt the segmentation, the targeting and the positioning of the product to aspects that differs from a country to another. The complexity of multi-domestic marketing is that operations in every countries have to be coordinated and consistent in relation to each other.

To be successfull, Nestle insinuated its product KIT KAT as much as possible into the local cultural context, into the daily life of people in its market destination, Japan. Otherwise, it would have kept its « exotic » nature, which makes it singularised and occasionaly purchased.

II. Segmentation - Targeting – Positionning

Segmentation, targeting and positioning (STP) is a marketing process that is composed of three interdependant stages. The main aim of the STP is to give the company a line to pursue, a guide for the development and implantation of an appropriate marketing mix.

Figure 2 : STP process schema

(Perner, 2010)

The following analysis of the STP process within Nestle’s group for its chocolat bar Kit Kat, highlights their marketing strategy at a local level (France) and at an international level (Japan).

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2.1 Segmentation

Properly segmenting the population means dividing poeple in homogeneous groups makes it easier to identify their needs and wants. The segmentation can be done in several ways. According to Vishwajeet Prasad : « In the concentrated strategy, one firm chooses to focus on one of several segments that exist while leaving other segments to competitors.» (Prasad, 2009)

The segmentation for Kit Kat is based on :

Demographic criterias :

Nestle segmented the market based on age.

• 35-54 years old with children of 18 years old and below. Those people are at the same time the providers and the consumers.

• 12-17 years old are people who have spending power and are able to make their own purchasing décisions

• 18-24 years old are students and Young professionals with very active lives.

Psychographic criterias :

Based on life style and personality Nestle is interested in a segment of active people, working a lot and in need for energy during the day.

Behaviorial criterias :

Based on benefits Neslte provides Kit Kat to people that are used to have snacks but who want to eat healthier and less calorical products than the ones of the competitors (Mars, Kinder Bueno …)

2.2 Targeting

The target of a company is based on the segmentation. The firm has to choose the segment that is the most likely to be interested in consuming a particular product. The aim of Nestle, conserning Kit Kat is to target a segment of poeple which are looking for a chocolate bar which is high in quality and moderetaly priced.

In France, nestle mainly tragets the 35 to 54 years old people and their children. Those poeple can be coming from lower, middle and upper class.

In Japan, the targeting of Kit Kat is more based on both the segments of the 12 to 17 years old and the 18 to 24 years old. Those young people are craving for new tendencies. As consuming Japanese products is highly important for most of Japanese poeple, they also target that part of the population by giving the brand a strong Japanese touch.

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2.3 Positioning

The positioning of a brand is its place on the market but also its place in the costumer’s minds. Making choices about the four aspects of the marketing mix is the final stage of the marketing process before taking action. «Broad in appeal, young in feel, big in stature» this quote encompasses the brand positioning of Kit Kat.

France

Japan

Product

Crisp wafer covered with milk chocolate spread in several fingers (2, 4 or 6) - Basic Kit Kat - Some original Kit Kat flavors available for limited periods (for instance, Kit Kat Mint) - Mini, ball and chunky versions Packed in aluminium

Crisp wafer covered with milk chocolate spread in several fingers (2, 4 or 6) About a hundred different flavors - Over 30 national flavors - Over 70 regional flavors (please refer to figure 3) And over 10 different shapes and sizes. Packed in boxes.

Price

1.58 $ Maintaining a strong brand image gives Kit Kat a degree of flexibility. However, the price remain stable.

Around 2.25 $ for the basic Kit Kat Making the product become a premium good based on exclusivity and rarity enables Nestle to practice a high skimming strategy.

Place

Strong distribution channel that enable consumers to buy Kit Kat wherever and whenever they need. - Supermarkets - corner shops - newsagents - cafes - movies concession counter

- Post offices - supermarkets - Kit Kat store « kit kat chocolatory » openned in 2014 that will allow to showcase new premium products. - Japanese Kit Kat are bought by poeple all around the world via internet.

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Figure 3 : Anexhaustive Japan Kit Kat map

(Kanpai, 2014)

Promotion

International strap line « have a break, have a Kit Kat ». - Social networks, -Commercials on television and internet, - Display - In-store advertising - Partnership with Android (global)

International strap line « have a break, have a Kit Kat ». - Social networks, - commercials on television and internet for every new flavor, - Display. - In-store advertising - Partnership with Android (global)

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III. Customer Relationship activities

Based on their place on the market and in the aim to reach their target,

marketers have to invest in communication/content marketing campaigns either for acquisition or for retention activities. According to the following figure in 2014, marketers prioritized acquisition activities over retention activities(Hetch, 2014). It’s also a must to determine the return on investment in order to justify the spends.

Figure 4 : Marketing investments

(Ratcliff, 2014)

3.1 Acquisition activities

To acquire new customers in Japan Kit Kat didn’t fight for more space on the shalve but decided to create a new way to rediscover the product. In Japan, by some happy coïncidence, the marketing team discovered that the japaneses poeple had

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difficulties prononcing KIT KAT, and because of that the brand became Kitto Katsu, which means « surely win ». Kit Kat made a partnercheap with the largest institution in japan, the japan Post and created the KIT KAT mail, to enable families to send KIT KAT to wish luck to students on their exams.

Over that period more than 10 million « wish you luck » boxes of KIT KAT have been sent. After that successfull marketing operation, Nestle decided to keep playing on the fact the japanese poeple identify KIT KAT as a cultural good more than a simple candy bar. Since that, they base their marketing and communication strategies on that which is successful to acquire new Japanese Kit Kat customers all around the world.

3.2 Retention activities

Efficient retention activities involve collecting datas on customers to be able to individualise the message and to set up a one-to-one relation. Building strong relationship whith the customer base, involves as well making extra effort in listening and talking to them regularly.

Furthermore, retaining customers permits to avoid acquisition costs which is way more expensive, being mostly medias advertising investment.

To keep people in touch with the product and make them become loyal, Kit Kat has setted up several tools, mainly on the Internet. The brand use e-mailing, social medias (12 million fans on Facebook) and affiliate marketing. They built a community around the chocolat bar. The brand and the Kit Kat customers can also communicate through the Nestle care center that remains a good tool to get feedbacks and solve problems in a positiv way.

IV. Innovation and future trends

4.1 Innovation impact on performance

According to Joseph shumpeter : «innovation is at the heart of the growing process». To remain competitive Nestle must keep on innovating for its Kit Kat brand. They have to make their customers rediscover the product by innovating on the product itself and on the brand image. Recently, they have been chosen by Android to be the name of their last open source Platform. That reinforce the brand image.

At a local level the limited period flavors are a factor of success for Kit Kat. Indeed, in the third week that Kit Kat Mint was available, it more than double total Kit Kat sales. Moreover, the orange Kit Kat have had great results with sales of 38 million barrs in just three weeks. Those ponctual products are usefull to renforce the place of the brand on the market but also in the consumer’s minds. They permit to swing the spotlight back onto the brand.

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When it comes to Kit Kat in Japan, this is their innonvation capabilities that made their success. They have been able to exploite regional food specialities to make limited edition flavours of the chocolate bar. Now, people all around the world are craving for those new flavors. Some of them are even made in collaboration with the famous chocolatier Takagi.

4.2 Future trends impact on objectives and strategies

To remain competitive Nestle must, almost every day, anticipate and keep in mind that the environment analysis might be good to rely on today but won’t be anymore tomorow and the day after. Uppsala Model by Johanson and Vahlne shows that it is a must for a company that is expending to rely on market knowledge at every step of the strategy. (Coventry University, 2014). More than that, the company also have to keep focused on the new trends in marketing practices.

Marketing department and public relation departement are working hard to find and follow new trends in customers behaviour and respond towards their products. Nestle has also openned in 2010 a research unit in Japan that enables the company to provide products with more health benefits as people care more about it nowadays.

As people are paying more attention to where their products come from and becoming more ethically conscious, Nestle setted up the Cocoa Plan. They work with UTZ Certified to give their suppliers better living conditions and better quality to their products.

V. Environmental analysis

To enjoy opportunities and avoid threats a company has to understand its environment. As an international firm, Nestle has to jungle with the local and the international environment by using the Pestle strategic tool.

(Nestle, 2013)

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Social

One of the most densely populated countries in the world Opportunity High pressure for success Opportunity Seeker for new tendencies and trends, expérimental tastes and sens of style Opportunity People in Japan are very proud of their country Opportunity Complex society Threat

Political

Member state of the United Nations Opportunity Robust democracy but instable politic environment (plenty of political disagrements between the two parties ruling the country) Threat

Economic

Free market economy Opportunity High educated and skilled work force Opportunity Aggressive retail market Threat

Legal

Legal system compatible with that of the Western world Opportunity Starting a business remains legally complicated Opportunity (reduce the power of new entrants) Slow legal procedures Threat Total tax rate is of 49,6% Threat

Ecological

High investment in renewable energy Opportunity 26th country in the 2014 Environmental Performace index (over 178 countrie) Opportunity High radioactive pollution due to the explosion of the Fukushima nuclear power plant Threat

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Overall Japan is a strong country which is at the forefront of many new ideas.

Japaneses people are striving to fullfil their dreams and materialism desires. Furthermore, the government is making real efforts to better the country.

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Conclusion

Becoming a cultural object of satisfaction and fascination, Kit Kat succeded in meeting the japaneses special needs. Pushing the concept at its extrem level meant for Nestle to offer more and more diferent flavors of the chocolate bar as the japaneses were craving for them to do it. In Nestle’s strategy, the costumer becomes an actor of the marketing as they include them in the process of inventing new concepts and new flavors. Thanks to the marketing strategy Kit Kat is in Japan a real business success, indeed, every second 650 kit kat bars are eaten.

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References

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Hammond, M. (2014). Global marketing vs. multi-domestic marketing. Retrived from http://smallbusiness.chron.com/global-marketing-vs-multidomestic-marketing-23528.html

Hetch, O. (2014, July 20). Retention vs. Acqusition. Retrived from ClickZ: http://www.clickz.com/author/profile/2896/ohad-hecht

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