Introduction
Background to the study
The business environment has undergone rampant, unprecedented change during the 21st century. Some of the changes relate to consumer behavior and technological change (Tadajewski & Brownlie, 2008, p.300), affecting the performance of businesses in their operations. It is paramount, therefore, for a firm’s management teams to consider evaluating the trend of their organizations. The 21st century has witnessed rampant information explosion.
This is evident from the emergence of contextual marketing which entails marketing products and services according to the needs of the consumers (Chaffey et al 2003). Contextual marketing entails a form of marketing conducted through an automated system, advertising through the website according to the website’s content. These changes have resulted from the development of contemporary marketing. According to Shimp (2008, p.164), some of the key issues associated with contemporary marketing include a promotion, branding, and positioning.
One of the industries which have undergone rampant change is the fast-food industry. An example of a firm that deals within the food industry in the US is Kellogg’s Company. The firm deals with the production of a variety of convenience and cereal food products.
Over the past few years, the global food industry has become very competitive. Consumer demand for food products has become very complex (McDaniel, Hair & Lamb, 2008, p. 206), and this has greatly challenged the food industry. For Kellogg’s Company to attain a competitive advantage, the management team must attain high efficiency in marketing its products with increased appeal to the consumers with an understanding of the key drivers shaping the business and the entire industry. This paper entails a report on contemporary marketing.
Aim
The report is aimed at analyzing the challenges of contextual marketing and evaluating contemporary marketing implementation within an organization setting.
Scope
The report entails an identification of the key drivers within the food industry. These include competition, the health-conscious nature of consumers, technological innovation; and their effects on business.
Key drivers shaping the food industry
Increased competition
Increased competition is one of the challenges that firms in the food industry are facing (‘European monitoring center on change, 2006, p.1) due to increased economic liberalization, leading to an increment in the degree of concentration within the industry. A large number of investors are increasingly venturing into the industry due to its lucrative nature. This in turn intensifies the level of competition which Kellogg’s company already faces from large firms such as McDonald’s and Burger King. In addition, the already established firms are increasing their market coverage by opening new outlets in different regions (expansion) thus attaining economies of scale in their operation.
For a firm to survive in the long run, it must be able to position itself in the market, which acts as a defensive mechanism (Shimp, 2008, p.164). This leads to firms formulating effective marketing strategies. One of the strategies that firms are considering re-evaluating is the pricing strategy, which in most cases is a downward adjustment, which increases sales. This was evident in the case where McDonald’s reduced the price of hamburgers by a half thereby increasing sales by a margin of 7% (Shimp, 2008, p.164).
Health consciousness
According to Longman (2003, p.4), consumers are becoming keener about food safety in their consumption. Consumers are searching for products’ content information before their consumption. One of how this is being attained is searching for whether the products have met the set standards in terms of quality. By improving the quality of its products, consumers will increase their level of confidence towards the firm’s products thereby increasing the probability of the firm’s level of customer loyalty and competitive advantage.
Meeting consumers’ needs is becoming more complex (Kashani 2000, p.8), due to different consumer segments demanding different products. According to McDaniel, Hair, and Lamb (2008, p.206), consumers demand different products as their age changes. Effective market segmentation is, therefore, important to be able to meet the customers’ needs. Weinstein (2004, p.23) asserts that market targeting enables a firm to focus on a subset of the entire market.
About health consciousness, the concept of social responsibility is being emphasized amongst firms within the food industry. There is the formulation of legislation that stresses firms to adhere to the set standards. Consumers develop a positive attitude towards firms that have incorporated social responsibility in their operation (Kotler, Roberto & Lee 2005, p.65). Kellogg’s Company is aimed at ensuring that its operations are conducted in a socially responsible manner, in line with the firms’ social corporate responsibility of responsible marketing (Kellogg’s 2008, p. 29).
Technological innovation
Considering the high rate of technological innovation, consumers have appreciated the concept of electronic commerce. A large number of consumers are searching for product details from the internet to enhance their degree of certainty regarding a certain product (Coviello, Brodie, & Danaher 2002, p. 36).
This presents an opportunity for Kellogg’s company to integrate the concept of contextual marketing. One of the forms of contextual marketing that the firm can integrate is contextual advertising. For instance, through its website, Kellogg’s will be able to post product information on the website for the consumers to access. As a result, the firm will be able to reach a wide range of customers.
Through contextual marketing, the firm can integrate emerging social networking tools such as blogs. This will allow the firm to interact with the consumers, to understand consumers’ needs more effectively, thereby conducting its product innovation more optimally. As a result, it will be possible for the firm to meet its customer’s product needs culminating in increased customer satisfaction and thus increased sales for the company.
About contextual marketing, the firm will be able to integrate electronic commerce. According to Longman (2006, p.18), consumers have integrated online shopping into their consumption behavior. As a result, Kellogg’s company will be able to sell to the consumers directly thus avoiding middlemen within its supply chain. According to Leibtag and Hausman (2005, p. 3), this has the effect of benefiting society through a reduction in the price of the products.
‘Over the horizon’ opportunity
For a business to be able to achieve its goals sufficiently, it has to develop new strategies to capture the market optimally. For the ‘over the horizon’ opportunity, the business needs to come up with a new product(s) that will bring in new customers without necessarily having to reduce the income from other existing products that are offered by Kellogg’s. Within every problem, there lies an opportunity (Harper, 2003, p.10), and from all the challenges that will face the food industry in marketing, there is a need to see an opportunity that will favor the business’s growth and development.
Currently, there are a big number of individuals who prefer consuming convenience food and cereals from the company. This is being propagated by demographic changes. According to Rano (2008, para. 1), the population for single-person households has increased. This presents an opportunity that the firm can exploit. To attain this, the firm should conduct a feasibility study to determine the exact type of convenience food to supply to the identified market and/or the supplementary foods that can be consumed along with the original product, in this case, cereals.
Suppose that Kellogg’s starts a new product. Because it deals primarily with cereals, the product will come in handy with the cereals and as a complementary product. During breakfasts, many people mix cereals with honey and/or milk. If the new product is honey, which is complementary to cereals, it is a different product, and it will not in any way reduce the sales of cereals. The esteemed customers will still buy the cereals and the honey because the brand has been trusted and highly esteemed by the customers. Again it will bring in new customers who will be interested in buying honey and by so doing it will have captured the already existing customers and an additional lot of new customers.
Trend map for the business
A trend map will help a business to evaluate the positioning of its products about its competitors in the future (Mello 2003, p.142). With this understanding, and keeping in mind the trends that shape the market and influence the performance of the business, we can be able to forecast a roadmap that focuses on product development in the future (Mello 2003, p.142).
Firstly, on competition Kellogg’s may adopt on a trend map that is based on the price of the new product, a reduction. This is because consumers are sensitive to prices. Given their confidence in the products of this company, the sales will increase affecting the sales of the main product, cereals, positively, as the cross-price elasticity of demand of a complementary product will have a positive effect on the related product(s).
This will also bring in new customers who are looking at value for their money. Because Kellogg’s operates on a large scale and, therefore, they are favored by economies of scale in their production, the price reduction will not affect them adversely. They will instead increase their sales by a sizable margin. Again, since the two products, honey (new) and cereals, are placed together, the customer is likely to find the information of the new product in a place that is relevant as it is being associated with a product that is already known and doing well in the market.
Secondly, the trend of looking into the health of their customers, resulting from the ingredients they use to manufacturer their products, natural honey is a turn on to its demand and consumption. They are dealing in a product that will not only check on the health of their customers but also have additional nutritional value, which comes with honey. Here the firm’s social responsibility of maintaining a healthy population is well addressed. This will go well with the customers’ approval and continued dedication to the firm’s products. As a result the sales and the margin, resulting from increased customer confidence and buying, will increase as customers are more attracted to the product.
Lastly, a trend map will help a company to keep track of developing technological trends in the industry (Mello 2003, p.142). When marketing its new product, it can innovate new technological ways to reach its customers. Since the digital age has seen the art of contextual marketing go to a higher level, resulting in increased sales, Kellogg’s can take on a new strategy in digital applications. Suppose that the company strikes a deal to advertise with a mobile service provider(s) in the countries where it operates.
Every time a person uses their mobile phones, say, to check their credit balance, there is an added phrase at the bottom of the message that will be informing the customer of the availability of Kellogg’s products in the market. At the end of the day, a good number of customers, old and new, will go to the stores to check and possibly try out the new product(s), given the fact that the brand name under which it is marketed is an established one in the industry They can further develop codes with the same mobile service provider(s), where the customers will be linked to another page for more information regarding the product(s).
The trend map for the business/firm is now well introduced, keeping in mind the presence of the competitors and possible aping of their (Kellogg’s) strategy. However, the firm will have benefited by the time the competitors try to ape for increased competition, as it will have left an impact with the customers that will last for a considerable time, if not a lifetime.
Conclusion
Changes in the food industry’s external environment have affected the performance of firms. It is important for Kellogg’s Company management teams to consider evaluating the trend within the industry, to aid in the process of the firm developing effective future operational strategies, to ensure its survival in the long term. Some of the key macro trends within the food industry are related to competition, consumer health consciousness, and increased technological innovation. By tracking the trend within the US food industry, Kellogg’s company will be able to identify opportunities that it can exploit to develop its competitive advantage.
Recommendations
To survive in the long term as a going concern entity, Kellogg’s Company management team should consider the following recommendations.
- Conduct continuous market research, focusing on competition and consumers, to identify the key trends within the industry to develop effective marketing strategies for its survival.
- There is a need to invent new and unique strategies for the promotion of existing products and new products in the market. For our case, the firm has come up with an advertising technique that uses mobile phone technology.
- The firm also needs an open interaction with its customers to be ahead in their needs, to serve them appropriately, and thus dominate the market
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