Product essentials
Performing consistently in the market can be a tough job. Many factors that can affect profitability of the company in the long run need to be considered with great importance. Here, a situation has been created that can potentially damage the profit making ability of the company. We have a situation in which our main competitor has provided a price drop of 10% on their product that is almost exactly similar to the product offered by our company. Our product, the Monster energy drink till now have had a significant impact in the market. Hence, it becomes important that we develop a strategy keeping in mind out past and present strategies and how much they need to be changed for generating better future profitability for monster.
The first thing we need to look towards are our product offerings. The product being discussed is the monster energy drink. Our beverage is mainly targeted towards the adventurous consumers, the athletic consumers, the diet conscious consumers and the cocktail lover consumers. The product has been able to generate significant fan following through brand image promotion. The drink is now a significant competitor of the already established beverages such as red bull, Coca Cola and Rockstar. The popularity of the beverage in Australia is also increasing. It is already known that the industry of energy drinks is fast growing in the country. If we look at the figures the industry has grown gradually by an average growth rate 6.7% since 2010 considering the Australian market. The market presence of the product is further enhanced by the unique packaging of the product. Moreover, our event sponsorships have given us greater mileage in the recent years. More and more youths have been attracted towards the product due to our sponsorships of various extreme sports and youth events. Our tagline “unleash the beast” is working well among the target customers and generating more product interest.
However, the recent lower pricing strategy can affect the future profitability of the company. We will have to understand the strengths and weakness of our product.
Product strengths
- Avant-garde design and presentation of the products attracts the new age customers
- Brand image is strong and we have a strong customer base
- The product is currently lower valued than the main competing health drinks
- The financial backing is good and there is good product depth
Weakness
- There is a lack of advertisements in mass media
- There is not much content to attract female buyers
- The audience have to listen to aggressive sports music and energetic promotion content
Opportunity
- The product has good potential for realizing the developing markets
- The company can introduce more natural healthy products for increasing and extending customer base
Threats
- There is a growing concern among customers in regards to the side effects of long term energy drink
- The growth of lower priced drinks that are offering close to the same product value
- The government regulations that affect the product manufacture can get stricter.
Thus, it can be seen that along with strength and opportunities our product also has some significant weakness and threat factors. These need to be kept in mind when the strategy to tackle the pricing challenge from the competitor is being considered. Hence, I believe that the management should consider other factors as well. Price promotion along with product enhancement needs to be done.
Product strengths
The development of an effective strategy is much required given the position of market threat that has been created due to the price drop of the main competing product. An important thing to consider before the development of effective strategies is the market of Australia. The demand for energy drinks in Australia is to remain high according to the predicted market scenario. Thus, it will be very important for us to understand how we can effectively enhance our product offerings. Our company will have to take advantage of the low supplier bargaining power to create effective partnerships with suppliers that can provide the raw materials required to increase our product quality and extend our offerings. Monster has held a firm grip over a sizeable portion of the market through inducing brand loyalty. It has been found that slightly increased prices of the product due to the decreasing price of the competitors will not greatly affect the market base. The threat of substitute products are significantly large. A growing number of health conscious people are inclining towards healthier product substitutes like fruit based drinks. The customers seem to be more concerned about their calorie intake rather than showing a great shit towards cheaper energy drinks. A major threat is that energy drinks are being increasingly judged as being unhealthy. A situation of controversy has been created that will affect the rival products as much as the monster energy drink.
Hence, the pricing strategy will have to be considered just as importantly as the newly emerging factors that can govern the present and future conditions of the market. The company essentially has to make the product more appealing towards the general public and has to enhance and subsequently promote more health friendly elements of the product. The strategy that the management has to look forward to is the increase of product differentiation along with the optimal management of cost leadership. The strategy that we would like to suggest to the management is to increase the product variety, usage of healthier ingredients, decrease the sugar content of the product and slightly lower the prices. We will have to promote the product as a healthier upgrade to the previous version that is also slightly cheaper. This will enhance the value for the current customers and attract the more health conscious customers towards the product. Thus, effective optimization of the product needs to be integrated with a reasonable pricing strategy. The customer’s beliefs and attitudes have been found to be the principal guiding force towards product preference. Hence, the lowered prices of our rival can naturally create a sense of suspicion in regards to the health factor concerning the rival beverage.
Weakness
We will have to take a SMART approach towards the implementation of the strategy. The strategy takes into consideration specific, measurable, attainable, relevant and timely.
Firstly, the sugar content of the beverages need to be reduced along with the caffeine content. A significant organizational limit should be set in regards to the reduced quantity of these elements. Considering promotion the specific goals for our product will be to promote the newer values of the product. Free sample distribution needs to be done, effective campaigns need to take place, well-known brand ambassadors should be employed to increase product acceptability.
Secondly, the measureable value should be implemented. The sugar and caffeine limit should be exactly stated and subsequent limits should be imposed. Concerning promotion, the supply should be exactly similar to the projected generation of demand. Primarily, we need to attract the short term value for the customers and build on the same when it has been created. Thus, the demand need to be subsequently increased.
Thirdly, goals that are attainable need to be created. The consumers need to be made aware of the healthier product changes that have been made. This should be done through the use of mass media as this will help to reach a large number of intended customers. The promotional aspects should be effectively planned. The promotional aspects that will be cost effective should be used more in order to generate better profitability from the promotion. Online media has to be effectively used as well.
Fourthly, relevant and realistic goals need to be set. The changes should be in accordance with the Australian beverage laws. Sugar content and caffeine content reduction should be in accordance with the acceptable use of sugar use prescribed by the government health agencies. The company should negotiate industrial terms to ban misleading beverage adverts. The promotion of the product should be optimized in accordance with the existing laws to generate greater acceptability among the public.
Fifthly, timely goals for implementation should be set. We will need to make changes to the product within 2 quarters. The product will be launched subsequently for gaining effective market growth. The growth we are expecting is 5 to 10% till the next year. The company need to endorse public or youth events every three months and focus on the effective promotion of the product to capture public attention. The advertisements will have to be done on a timely basis, exactly at times when a particular demand can be addressed.
Conclusion
In conclusion, we believe that the better product can provide the company with far more effective tools to counter the competition than any simple price reduction promotion. An optimally efficient product enhancement strategy will be far better as it will create a whole new perspective about the product among the target audience. The previous customer base can be kept intact and a new health conscious customer base can be created. The slight reduction in prices will be enough to optimize the product offering and we do not need to reduce the price beyond the 10% of our rivals. Our profitability can be maximized through the strategy
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