Political Factors
Produce an analysis of the macro-environment for the core brand and the new product. Do this by choosing 3 major external factors of the macro-environment from the PESTLE framework. Discuss current influences from each of these 3 factors which could help or hinder the progress of this business.
A business communicates with its external environment for carrying out its operations. These factors cannot be controlled by the business (Perera 2017).
Political Factors- Nestle, being a multinational global brand has to always comply with the regulations of the government and the political environment of any country. Failure to do so would result in the occurrence of serious problems. The growth of the company was largely affected due to Brexit as several skilled workers were lost from the UK due to the Brexit deal. A lack of a skilled workforce has made it difficult for Nestle to plan the launching of new products and their proper marketing. About 31% of organisations in the UK are uncertain about proper operation due to the evacuation that has occurred in the pool of candidates. The relocation of production facilities from Britain would lead to the loss of jobs of around 300 people which would pose a negative impact on the workforce. Nestle is facing issues with an increase in supplying costs on the basic ingredients and materials due to a shortage of resources. Hence, the quality of products is getting compromised leading to a loss of customers.
All the political factors mentioned could hinder the growth of the business of Nestle in terms of popularizing and marketing the new product KitKat V.
Economic Factors- The analysis of the external environment of the activities of the business holds a very crucial place for the development of any organisation (Shtal et al. 2018). With trade wars having continuous growth between the US and China, the cost of raw materials is getting hiked day by day. This makes it difficult for Nestle to keep the prices of KitKat V low and as a result of which, the sale of the product might drop since people to middle income might find difficulty in purchasing the product regularly. The growth and profit share of Nestle is found to improve due to the growth of the market and hence the profit of the company is increasing slowly from 7.5 to around 10 US billion dollars gradually (Shaw and Shaw 2022). This serves to be a scope of opportunity for Nestle to popularise Kitkat V in the market and increase its sales. There has been significant growth in the comfort food sector lately. The trend of fast food and confectionery consumption is supposed to grow in the next 10 years. Hence it will present a scope of growth of the company so that they increase their sales. Thus, increasing the production of KitKat V will be beneficial for the company.
Social Factors- The attitude of the public towards diet has changed gradually. People have resorted to eating healthier foods mostly. People have become very conscious about diet and figure nowadays and Nestle is very much aware of these trends and lifestyles of the people. Thus, Nestle is focussing on producing healthier products that will retain the preferences of customers well. Nestle anticipates understanding the needs of the customer and thus they will be able to offer high and competitive products that are relevant and innovative while catering to the needs of the customers (Team 2022). The need for adapting to cultural settings such as language, culture, religion and other settings are factors that influence the company’s operations. Vegan KitKat produced by Nestle will cater to the demands of customers who do not consume any products from animal sources.
Economic Factors
Identify one customer profile of the core brand. Use secondary research to show evidence of who the target market is for this new product. Then describe what a typical customer for the core brand looks like using behavioural, demographic, geographic and lifestyle segmentation and explain whether the target audience for this new product would be the same or different from the current customer profile, and in what aspects.
Customer segmentation of Nestle: The customer’s segmentation of Nestle has been done by categorising the segments into four categories:
Behavioural: In this kind of segmentation, the organisation divides its customer based upon their preferences and choices along with their behaviour patterns (Camilleri 2018). It is depending upon their benefits that Nestle efficiently segments their market. They make Cerelac for kids who are regular users of their products. Kids and parents benefit a lot from this product as it is enriched with a lot of minerals. The youth and the adults are potential users of the products of Nestle. The company mostly produces confectionery products and convenient foods, breakfast cereals and weaning foods. Kids are heavy users of such foods, the youth are medium users while adults are light users of such foods. While kids and the youth are regular purchasers of Nestle products, adults are occasional purchasers.
Geographic: When a market is divided into geographic segments, it signifies that customers in a market have needs based upon the places where they live (Gichuru and Limiri 2017). Nestle produces different kinds of products for customers belonging to climatic regions. There are beverages such as Nescafe, which can be consumed by people in cold weather to warm the body. At the same time, beverages like Nestea Ice can be consumed in hot and humid weather to cool the body and bring freshness. The organisation segments its market based on divisions. Each division is further subdivided into different zones and some executives sell their allocated products into their zones.
Demographic: Demographic segments are created with the gender and age group of customers. These are also called customer personas (An et al. 2018). Nestle segments its products for the customers according to their age groups. The demographic segmentation of Nestle has been done by taking gender, income level, marital status and age of the customers. Certain products like Cerelac, Lactogen and Nido are made for infants. Caffeinated beverages are mostly for office goers which means it targets the age group of 20-40. Products like Munch and KitKat are for children, young aged and adults which covers the age group of 10-40.
Lifestyle: This segmentation is done by analysing how a person lives. It includes activities such as healthy eating habits, participation in sports along other hobbies. For example, Nesplus Crunchy Flakes is a breakfast cereal that is consumed by individuals who like to have a healthy breakfast. Another one called Nestle Fitness and Fruits also belongs to the same genre. Healthy beverages such as Milo are also manufactured by Nestle for kids who want strength and sturdiness for academics and activities.
Social Factors
Nestle Vegan KitKat is a product that is made from 100 per cent cocoa that is sustainable the has been obtained through the implementation of the Nestle Cocoa Plan in conjunction with an alliance known as the Rainforest Alliance. It is known that Vegans do not consume any product that is obtained from an animal source. Hence, the milk in the product has been replaced with a product having a rice-based alternative and imparts flavour as well texture to the product. Thus, a customer segmentation profile for this product is as follows:
Behavioural: This product will be consumed on a moderate level and an occasional basis by consumers.
Geographic: KitKat V will be consumed by people belonging to all sorts of the climatic region.
Demographic: Chocolate bars are mostly craved for by children and youth. Hence, the customers who will prone to consumption of this product will mostly be between 10 to 35 years of age group.
Lifestyle: KitKat V, as the name suggests will be consumed by people who are Vegan by food habit. Also, this product can be consumed by people who are lactose intolerant and have an allergy to milk and milk products.
Thus, the earlier products of Nestle and KitKat V when compared together, it is analysed that the customer profile of both is more or less the same, except the lifestyle segmentation which is different for the two.
Produce two perceptual maps that show the positioning of the core brand you have chosen and at least four other competitors. One map must have the axes ‘price’ and ‘quality’, the other needs to have different axes of your choice. You cannot do ‘price’ and ‘quality’ again. Define each of your axes and explain why you have positioned the core brand and its competitors in the way you have.
Figure: Positioning Perceptual Map of KitKat V in terms of Price and Quality
Source: (Created by the Learner)
With the help of perceptual mapping, a product’s position or the position of its brand is established that renders a comprehensive picture of the situation of competition in the market along with the extent of differentiation that particular brand or product is in the minds of the established group (Grundström 2015). In the above image, two dimensions of price and quality have been selected. With the help of this perceptual map, Nestle will be able to determine where the company wants to position their newly launched product Vegan KitKat, according to the perception of the customers. The X-axis moving from left to right contains the dimension of price while the vertical Y-axis moving from top to bottom consists of the quality as the dimension. KitKat V as a product can be placed on the segment of High quality and low price. The product is produced of high quality which is safe for consumption to the consumers and they render optimal nutrition to the customers. The product provides nutrition, wellness and health through the usage of vital ingredients or nutrients. The optimum blend of all nutrients in KitKat V has a wonderful taste. It leaves a wonderful after taste in the mouth which gives immense pleasure to the customers.
Customer Profile
When consumers continue to make choices of their foods, Nestle brings options that match the lifestyle preferences and hence the brand is widely accepted and liked by consumers all around the world. Nestle takes care of incorporating the best product into the market by researching the current trends prevailing in the market. Likewise, the company does not compromise on the quality of cocoa used in its product. Moreover, the price of products decided by Nestle is not too high and hence the combination of a high-quality product at a reasonable price makes it a widely accepted product in the High Quality- Low Price segment of the positioning map.
Cadbury Dairy Milk is a very popular chocolate product that can be considered as cheap and best. Lindt Lindor is a brand that prices its products for the rich economic class of people and hence cannot be afforded by people regularly. All the other products on the map have been placed according to their popularity in the market.
Figure: Positioning Perceptual Map of KitKat V in terms of Density and Crunchiness
Source: (Created by the Learner)
A perceptual map analyzes the significance of the image of the brand and the value the customers add to the same (Das, Prakash and Khattri 2016). This perceptual map consists of positioning some of the chocolate brands of the UK based on their smoothness or crunchiness. This map is hence depicted based on features of the chocolate brands. The X-axis determines the Smoothness of the products which signify how smooth or crunchy are the concerned products of. On the other hand, the Y-axis depicts the chocolate density of the products. From the above perceptual map, it can be understood that KitKat V, that has been placed in the segment of crunchy and less dense. This product is wafer-like and the chocolate coating of KitKat V is not much.
On the other hand, Hershey’s and Kinder are products in which the density of cocoa are less and they have a smooth texture when consumed. Twix is a product with balanced smooth and density and hence is placed on the axes. Cadbury Dairy Milk, a popularly used product has a rich content of cocoa in it along with no amount of crunchiness and thus is placed in the quadrant of more density and smooth texture.
Use Ansoff to show how the new product line fits within one of the growth strategies for the core brand. Explain, why is this growth strategy the right action for the brand to take. Briefly explain the marketing mix (4Ps) for this growth strategy and how it will help to achieve growth.
Ansoff Matrix is a tool of a strategic framework that helps organisations and marketers to formulate strategies for the future growth of a company. The four types of strategies as per the Ansoff Matrix: Market Penetration, Product Development, Market Development and Diversification.
Market Penetration: Nestle attempts to sell its products into the markets that are already existing. For this, the company uses aggressive marketing. For facilitating the growth of the new product line, KitKat V, Nestle has used several channels for marketing such as incorporating enhanced flavours and ingredients along with making the packaging of the product lucrative and attractive. Nestle also acquires some small competitors in the market for reducing competition (Khan Kasi 2022). Moreover, Nestle undertakes the promotion of their products at different levels and provides offers and discounts so that greater purchases are facilitated on reduction of prices.
Market development: After the promotion of markets in the existing markets, Nestle moves on to acquire new markets for their products. This is called market development. For this, the product is modified for suiting the local market. While entering a new market, Nestle ensures that the price of the product is affordable at all costs.
Product development: For any kind of product development, only the product does not matter. The environment, customer and technology also matter (Kalogiannidis and Mavratzas 2020). At the time of launching its products, Nestle undertakes the development of products. Product development is done by modifying the product in terms of packaging and price. These are launched in the market after the modification of the product. The price is also adjusted so that fits the profit margin.
Diversification- This is the riskiest strategy for launching a new product. Nestle makes use of Horizontal diversification. The company diversifies their current products and launches new products that are related to them.
Nestle is using Market Penetration as its growth strategy for entering markets safely. They are adopting the same strategy of growth for the promotion of KitKat V as well. The organisation uses this strategy so that it can be ahead of the competitors and thus capture a substantial position through the selling of food items that appeal to the target customers. For instance, vegan consumers and lactose-intolerant consumers will be immensely pleased with the launch of a KitKat V which is devoid of milk and suitable for their basic needs and demands.
Product: KitKat V is a certified vegan product that does not contain milk but consists of a rice-based product that imparts flavour as well as texture to the product (Nestle 2022). The product comes wrapped in the colourful paper having pictures of leaves on the wrapper. There is a capital V on the wrapper emphasizing to customers that it is a vegan product. KitKat V is immensely tasty to eat and the best part is that it consists of enhanced amounts of chocolate wafers inside the wrapper as well.
Price: Nestle decides the price of KitKat V to sustain competition in the market. It is probably one of the first companies to have introduced vegan chocolate for sole vegan customers. The popularity of KitKat is already high in the UK market and hence, its vegan variant will also receive a lot of appreciation. The price set will be such that it can be afforded by almost all economic categories of people.
Place: Nestle produces KitKat in about 15 countries such as Brazil, Canada, Germany, Russia and many others. It can be understood that the distribution strategy of Nestle is quite strong and they will use this network for the promotion of KitKat V as well (Nagarathinam et al. 2021). This will ensure even distribution of the product to the existing markets.
Promotion: Nestle decides attractive taglines for attracting customers to buy their products. The company will make promotions for their newly launched product using several strategies. Of these, social media marketing and advertisement shall be the prime ones. Promotions will also be undertaken through as well so that the reach of the product to customer’s increase.
Using the new product, you have chosen, describe each stage of the buying process and how consumers might interact with the core brand. Include relevant sources to support your analysis of the customer journey.
The process of consumer buying, according to Philip Kotler consists of five sequential stages. The model of consumer buying behaviour is useful for understanding the buying behaviour of the consumers in terms of buying products (Kanagal 2016). Before reaching the final decision stage the buyer has to move through four integrated stages. The stages are as follows:
Identification of problems: This step involves recognising the issue which is to be met. It is the need of the customers which is the source of the buying behaviour. The problem of buying on the side of the customers arise when there is an unmet need. Marketers should identify the circumstances which trigger a certain need. Since vegan consumers do not intake any food products from milk sources, consuming chocolates becomes a problem for them. Thus, Nestle identified the need of launching a product that could cater to the requirements of vegans. The product would also meet the needs of patients who are lactose intolerant since such people have an allergy to milk and its products. Thus, the idea of launching KitKat V came into existence.
Searching for information: Consumers who are looking for a solution will always try to resort to various media, newspapers and social media, visit grocery stores or contact a salesperson for gathering information on the new alternative which has been launched in the market. Nestle tries to place their products into the prospective awareness set of the customers. They will elicit information that is valuable and on this basis, they carry out effective communication with the target market. KitKat V is a vegan product that is made of plant-based products. There is the usage of rice-based products which gives the desired texture and flavour to the product.
Evaluating the alternatives: After collecting information on the product, consumers try to examine what alternative options are available in the market for that product. For this, criteria such as benefits of alternative products, their USP, price difference and popularity are examined. The main objective of the step is to position the product as the best choice. In the case of KitKat V, there is no other alternative of vegan chocolate wafer available in the market. Thus, it is the only potential option available for the target customers.
Making purchase decision: In this stage, the consumer makes a promising decision choosing one brand of preference after thorough study and market research. The consumer usually chooses the brand that provides high-quality products at a reasonable price. The selection is done by comparing several brands together (Qazzafi 2019). A proper comparison brings out the good and bad points of each brand. While deciding on the choice of KitKat V from Nestle, consumers may decide to depend upon the special attribute of the product that makes it unique. Since there is no competition for other vegan chocolate products in the market, the choice will be easy. The customer also decides on the time, place and quantity of purchase in this stage.
Behaviour post-purchase: Consumers always purchase a certain product with some amount of expectations. This decision is always systematic and a customer is never completely satisfied with their decision. The post-purchase behaviour of an individual has always influenced the level of satisfaction he or she receives from using the product. On using KitKat V, customers shall remain highly satisfied due to the taste and significance of the product. Besides, the price and packaging will be so affordable and lucrative that customers shall opt for repeat purchases of the product.
Reference List
Use this section to report the references that you used for your research and understanding of the assignment. This needs to be in full Harvard referencing style. A good rule of thumb is to have at least 3-4 references per question. The more the better. You can find help with this on the CASE website here.
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Grundström, C., 2015. Perceptual Mapping. Wiley Encyclopedia of Management, pp.1-2.
Kalogiannidis, S. and Mavratzas, S., 2020. Impact of marketing mix strategies effective product development issues in MNCs/Retail. International Journal of Business Marketing and Management (IJBMM), 5(12), pp.118-125.
Kanagal, N.B., 2016. An extended model of behavioural process in consumer decision making.
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Perera, R. (2017). The PESTLE analysis. Nerdynaut.
Qazzafi, S.H.E.I.K.H., 2019. Consumer buying decision process toward products. International Journal of Scientific Research and Engineering Development, 2(5), pp.130-134.
Shaw, A. and Shaw, A., 2022. PESTLE Analysis of Nestle | SWOT & PESTLE Analysis. [online] SWOT & PESTLE Analysis. Available at: <https://swotandpestleanalysis.com/pestle-analysis-of-nestle/> [Accessed 8 January 2022].
Shtal, T. V., Buriak, M., Ukubassova, G., Amirbekuly, Y., Toiboldinova, Z., & Tlegen, T. (2018). Methods of analysis of the external environment of business activities.
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