MARKETING AUDIT FOR NESTLE CRUNCH (USA)
Nestle Crunch Marketing Audit
From time to time, just like in financial audit, an organisation has to audit its marketing strategies to ensure that they conform to the existing marketing dynamics. This is where a firm analyses, examines, evaluates or reviews its marketing activities to ensure that they are in line with its needs and also inform future course of action (Houston 1986). A comprehensive market audit involves both the external as well as the internal factors that affect the competitiveness of an organisation product. The following is a marketing audit for Nestle Crunch (USA).
Every brand manager has to understand the environment in which an organisation product is competing in. There are forces, both internal as well as external, that affect the competitiveness of a product. The external factors comprise the prevailing economic environment, the market environment and the competitive environment. The internal environment involves an understanding of the business including the sale and the profit margin of the brand, the costs involved and the effectiveness of the marketing mix. There are several frameworks of understanding a business environment key among them being the Porters five forces, Pestel analysis and SWOT analysis.
In the USA, Nestle Crunch competes under the chocolate confectionery segment. The market segment is very competitive with various forces playing out. These forces can be best understood using the Porters five forces. According to Porter (1997), there are five forces that shape a business strategy: Supplier power, Buyer power, Competitive rivalry, Threat of substitution and the Threat of new entrants. Awareness of these forces, as Porter advised, “can help a company stake out a position in its industry that is less vulnerable to attack” (1997, p.1).
Nestle Crunch is just one of hundreds of Nestle products. As such, the brand benefits from the good relationship that the company has established with suppliers who are mainly cocoa farmers. Under the Nestle Cocoa Plan, Nestle has embarked on plan that will ensure sustainable quality supply of cocoa to the company. This arrangement has seen Nestle USA purchase enough certified Nestle Cocoa Plan beans to produce the entire line of everyday NESTLE CRUNCH bars (Nestle USA, 2014). In this case, Nestle has ensured that it has a constant supplier of cocoa and has also made sure that it has huge control of the cocoa production areas, mainly in West Africa. In this strategy, Nestle is also leveraging on its bargaining power to check the bargaining power of the suppliers.
The bargaining power of customers for Nestle Crunch is very high. Currently, the brand is differentiated by its low price. Any change in price that would affect this differentiation, and thus reduce the volume of sales. Even though mass merchandisers, supermarkets and convenience stores distribute less than one-half of total chocolate confectionery products, increasing the price will not be an effective marketing strategy. If there was to be a price change, distributors may demand the company to make up for the changes by investing heavily in advertising the brand to compensate the lost differentiation, or delist the brand from their stores all together. A change in price can only be possible if the increase in revenue can compensate for the lost sales.
In the chocolate confectionery segment, the customer has a wide array of choices (Datamonitor 2010). There are varieties of the confectionery both within the company and from the company’s competitor. If customers were to be dissatisfied with Nestle Crunch, they can settle on brands such as Snikers, M&M’s, Twik, 3 Musketeers, Hershey Chocolate, Reese’s PB Cups or Butterfinger. Dissatisfied customers may still not choose any of the chocolate confectionery but may decide to go for others like cereal bar, sugar confectionery or even settle in the gum segments.
In the chocolate confectionery segment, Nestle is faced with several and capable competitors. Although Nestle is an established food company, there are many competitors who offer equally attractive chocolates just like Crunch. In such a case, Nestle has little power in marketing the Crunch.
The threat for crunch may not come from new entrants as such, but may come from other established food processing companies. Producing chocolate confectionery is a quite lucrative business. There is not much to stop other food companies from launching products which are equally attractive like Crunch. As the three established candy companies – Hershey, Mars, and Nestle, continue to battle for the market share, it is difficult for other producers to make inroads into the competitive candy market (Michman and Mazze, 1998).
After being the least performing brand in the chocolate confectionery segment, there is every need to evaluate the current brand positioning of Crunch to understand if the problem is with the current brand position, and if it is, reposition the brand to compete favourably. The most recognised tool for such an evaluation is the 4Ps marketing mix analysis (Borden 1964; Ravald and Gronroos 1996; Goi 2009). The 4Ps marketing mix analysis involves the review of how the competitive strengths of the four components of the marketing mix (Product, price, place and promotion) can be traded off with each other to achieve the maximum benefit for the company (Goi 2009: Gummesson, 2012).
Nestle Crunch is a chocolate confectionery. The product is made of a perfect combination of creamy milk chocolate and airy crispies making it perfect for giveaways, birthdays and Halloween parties. Just like other Nestle products, Crunch is manufactured along the company mission of producing nutritious, tasty and healthy foods. Besides offering great taste for chocolate consumers, Nestle Crunch contains fewer calories. The brand benefits from the company’s policy of processing foods made with “responsibly-sourced ingredients”.
The brand competes on price differentiation. The company’s sells its chocolate confectionery at low prices compared to its main rivals- Hershey and Mars. The customers in this segment are price sensitive. Increasing the price for the brand may course a backlash (Codini, Saccani and Sicco 2012).
Nestle Crunch is distributed in all channels (Barton, 2014). Mass merchandisers, supermarkets and convenience stores are significant distributors of Nestle Crunch. Other notable distributors are drug stores, warehouse club and vending machines. The wide channels of distribution means that the company can reach its customers at the right place, at the right time, and in the right quantities (Dickison, 2013).
Nestle Crunch still has a large number of untapped market in USA. The brand records underdeveloped sales in some of the regions in USA. The company needs to aggressively promote the product in regions that is experiencing undeveloped sales and also grab the opportunity to promote Crunch in West region where chocolate confectionery is not popular. To reach out to these regions, a combination of TV, prints and online media is the best media mix to increase sales.
Potential Nestle Crunch buyers can be broadly grouped using geographical regions, demographic characteristics or psychographic/behavioural characteristics (Michman and Mazze 1998; Tkaczynski and Runde-Thiele 2011). In terms of geographical, the U.S market can be segmented into the South, Midwest, West and Northeast regions (Barton, 2014). According to Barton, Nestle Crunch had underdeveloped sales in Midwest region while chocolate confectionary is least popular in the west region.
Nestle Crunch has product for all consumers. Some of the products include Nestle Crunch Crisp, Nestle Crunch Fun Size, Nestle Crunch Bars, the Original Nestle Crunch, Nestle Crunch Mianiatures, Buncha Crunch as well as Nestle Crunch Dibs. All customers, irrespective of their age or gender, can choose a product that best suits them. In 2013, the company reintroduced the Nestle crunch girl Scout Candy bars targeting young ladies. Research has shown that children under the age of 25 consumed a smaller percentage of chocolate confectionery compared to adults aged between 25-54 year old (Barton, 2014).
As Michman and Mazze (1998) observes, consumers have different motivations and receive varied benefits and types of satisfaction from products, depending on the occasion. Company have to position their products to meets these needs. The main competitor, Hershey, has positioned its candy products to appease to a large segment of consumers. It has products that appease consumers depending on their gender, age, ethnic origin, geographical location as well as their attitudes, motives, opinions and interest (Venkatesakumar, Ramakumar andThillalirajan 2008). The other avenues for increasing sale include occasion segmentation where food industry can increase their sales.
As Nestle Crunch look forward to increase its sales, geographical targeting will be a key marketing strategy to increase crunch sales in region with underdeveloped sales as well as increase awareness of the product in regions that the popularity of chocolate confectionery is low. There will be also a need to target under the age of 25 to increase their consumption of the product. As the baby boomers come of age, nestle Crunch has also to develop strategies to target the old who comprise a significant percentage of the US population (Bowman and Gatignon 2010).
In the current competitive markets, the role of a brand cannot be underestimated. As Keller has rightfully observed, building a strong brand has a host of benefits to an organisation. Some of the benefits of strong brands include greater customer loyalty, less vulnerability to competitive marketing actions as well as more favourable customer response to price changes (Keller 2001, p.3; Keller 2009). Strong brands are developed through effective market positioning.
In the US, Hershey, Mars and Nestle are the three established brands in the candy industry. Although Nestle is an equal competitor in this industry, it has continued to face stiff competition from the other two brands. To win customers, Nestle Company has positioned itself as company that sells healthy and tasty products at low price. Nestle Crunch can ride on this well Nestle brand to increase sales. However, almost all food processing companies are increasingly being concerned of the health of their products. This leaves out price a strong competitive advantage.
Ø Strong Nestle brand
Ø Established shelves space
Ø Good relation with suppliers/farmers
Ø Wider distribution channels
Ø Strong R&D capabilities
Ø Competency in mergers and acquisitions
Ø Large scale production
Ø Limited promotion budget
Ø Challenges in processing healthy products at low prices.
Ø Increased customer awareness for healthy products
Ø Untapped markets and undeveloped sales
Ø Opportunities for joint ventures
Ø Competitors producing similar products
Ø Increased consumers demand for healthy products
Ø Fluctuating cocoa produce
Ø Risks of product contamination
Ø An aging population
Ø Decreased consumer spending power
Food and processing are a highly competitive industry. In the chocolate confectionery segment, Nestle Crunch faces stiff competition from equally established rivals, mainly Hershey and Mars. Although the three companies continue to battle for candy market share, the best option for Nestle Crunch would be to refocus its energies to the untapped market rather than target its competitors. Nestle Crunch can grow its revenue by increasing sale in all USA regions and across all ages and gender. It can utilise its wide distribution channels to reach more customers. In this case, the promotion component of the marketing mix, rather than the price component, may turn out to be the game changer.
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