Amul has been a market leader in dairy products for decades however Amul Chocolate is the only product which is not doing so well. Amul Chocolates was the market leader in 1970’s but lost its place to Cadbury in the last 10 to 20 years. Amul has successfully extended its milkman image to ice cream, butter, cheese and other dairy products, but has made no headway in chocolate. The main reason behind the decline of the product is lack of promotion and concentration on other dairy products.
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Marketing Plan to increase the Sales of Amul Chocolates.
Since Amul Chocolate as a product is declining & incurring losses to Amul we now make a marketing plan to improve the performance of the product. We will concentrate on the domestic performance of Amul Chocolate which means we will make a plan to increase the sales of Amul chocolates in India.
We would be using the SOSTAC model to describe the market plan for Amul to improve the sales of Amul Chocolates. SOSTAC is the abbreviation for Situation Analysis, Objective setting, Strategy Development, Tactics, and Action & Control.
Situation Analysis
Situation Analysis is the study of trends within the economy and a comprehensive analysis of market, competitors and the company itself. Now, we will analyze the situation of Amul chocolates using Porter’s five forces framework which was developed by Mr Michael Porter of Harvard Business School in 1979. This framework helps us to identify forces that determine the competitive intensity and therefore attractiveness of a market.
Porter’s Five forces framework for Amul Chocolates
1. Bargaining power of the suppliers: In order to produce chocolates the materials required are cocoa, milk, sugar, butter, milk powder, fruits etc. Amul is a market leader in India in products like milk, milk powder and butter so it does not require any other supplier. Other materials like cocoa , fruits and sugar can also be bought easily as there are many suppliers considering that India is a land of farmers where Agriculture is the backbone of the economy. Also there are millions of farmers who supply fruits and sugar so the bargaining power of the supplier is very less.
2. Bargaining power of the buyers: India is a fast growing nation and buyers have a lot of options when it comes to deciding which chocolate they want to buy. Hence the bargaining power of the buyers is high.
3. Threat of substitute products: In the last few years, Indian sweets have been substituted by chocolates. So there is possibility that people can go back to sweets because nowadays sweets manufacturers have introduced different varieties of sweets like fat free sweets, sugar free sweets etc. Also lot of people these days prefers power bars and protein bars which are also delicious like chocolate but healthier as well compared to chocolates. Also there can be other substitutes like waffers, cakes etc. India is well know for making duplicate products of big brands like Daily Milk for Dairy Milk(Cadbury’s ace product) & Kir Kat for Kit Kat(Nestlé’s ace product).Chocolate manufacturers need to make sure they differentiate their products well & make consumers aware of the difference because a large number of people in India are illiterate.
4. Threat of potential entrants: In the Indian chocolate market there are 3 major players namely Cadbury who is the market leader, Nestle & Amul. These 3 companies have been sharing 99% of the chocolate market in India for many years which clearly explains that there is no real threat of new entrants. However, in the last 5 years, foreign brands like Mars have entered the market with products like Mars bar, Bounty & Snickers which have become quite popular in major cities like Mumbai, Bangalore and New Delhi.
5. Competitive Rivalry: The biggest factor that is affecting Amul’s market share in India from last 10 to 20 years is the growth of its competitors like Cadbury & Nestle. Now, with the entry of foreign players like Mars its getting tougher for them to increase the sales.
Objective Setting
Objectives are the motive of the company’s operational activities. It is basically what the company wants to achieve. Nothing happens until we plan and good plans have goals and objectives. Setting objectives lays the foundation for the company’s operations. It shows us the path to follow. Objectives can also be called as battle plans, the stepping stones on the path towards achieving our goals.
Objective of Amul Chocolates
The objective of Amul as a company is to give ‘Value for money’ to its customers. Amul has a range of superior products, consumed by every age group. Since Amul chocolates is not doing well like Amul’s other products like milk, yoghurt and cheese the objective of Amul Chocolates as a Business Unit would be to increase its market share in India from a 5% in 2010 to 15% in the next 5 years by carrying out proper promotion activities and to produce variety of chocolates to give consumer more options.
Strategy development
Now that we have set our objectives we need to make a strategy to attain the objective of increasing the market share by 10% in 5 years which is difficult because of the declining trend and competition however possible because of the Brand strength.
We would be using the Ansoff Matrix, Market segmentation to describe the strategy of Amul Chocolates to increase its market share in India.
Ansoff Matrix
Market penetration: Market Penetration means when a company sells its existing products to the existing market. Amul can use this technique to increase sales in India.
They also need to advertise and carry out lot of promotional activities to inform the consumers that they still exist and can provide them with what they want. It’s been years that Amul’s chocolate advertisement has been telecasted on India’s major television channesl like Start & Zee. Sales promotions like discounts and free samples can help them to increase the Brand awareness and attract customers to switch brand from competitors. This is the Celebrity age and every big company uses a celebrity as a Brand Ambassador for its product. For example Amitabh Bachchan (Greatest Indian Actor) for Cadbury & Rani Mukherjee (Indian Actress) for Nestle, Amul also use a brand ambassador for the promotion of its chocolate.
Market Development: Market development is a situation where a company is involved in expanding into new markets with existing products. Amul as a company needs to target rural areas of Northern India like Uttar Pradesh, Bihar, Jharkhand and Uttaranchal because most of the people in these states are farmers who have many children. Also one more benefit of supplying chocolates in these places is that its competitors like Nestle and Cadbury do not have a big market in these places. Amul has a strong brand name in rural areas because of its other dairy products and also has a strong supply chain and logistics to reach these places. The Indian Government will also provide them subsidy or lower taxes because they would be contributing socially by entering into rural markets.
Product Development: Product development means a company modifies its product i.e. improves it to appeal to the existing market. Amul needs to make changes to its product (chocolates) like introduction of more flavours and attractive packaging because the wrappers Amul uses is not at all attractive compared to those used by Cadbury and Nestle. Packaging is very important because of majority of the consumers are kids and youngsters who like attractive packages. Many kids buy chocolates not because they like it but because of attractive wrappers. This would keep them in competition with competitors like Cadbury and Nestle. Currently there is a trend for low calorie and fat free food because people want to be fit; introducing low calorie and less fat chocolates would be a strong recommendation.
Amul must into market alliances with various portals to offer products (on those portals that were developed for festive occasions such as Valentine’s Day and Friendship Da0y.
Market Segmentation
Market Segmentation is a process of dividing a large market into identifiable segments having similar wants, needs or demands. The objective of market segmentation is to design a marketing mix that matches the expectations of customers in the targeted segment. Every product is produced with a target in mind.
Amul must divide its market using 2 bases of segmentation.
1. Demographic Segmentation
2. Geographic Segmentation
Demographic Segmentation: Demographic segmentation is segmentation of market on the bases of factors such as age, gender, income, occupation etc
Amul must divide its target market on age factor.
Age 2 to 15
Age 16 to 35
Age 35 & above
For children up to 15 years old, Amul should produce chocolates like plain bars filled with chocolate in other words high on energy and sweet. The product should be rich in chocolate, nuts and milk. For children they must have a lot of variety because children have the tendency to try different chocolates. This is the most important target group for Amul considering the product. Hence, major focus should be on the products targeted to this market.
For the market in the age group of 16 to 35, Amul should produce chocolates which are low on calories and less fattening as this market segment is diet conscious. Before taste they think about calories and putting on weight. For this segment Amul should also introduce protein bars which have become a trend these days. Youngsters who work out and are fitness conscious consume lot of such items to keep them full and away from high calorie food products.
For the market in the age group of above 35 years, Amul should produce sugar free chocolates because at this age many people in India are diabetic or have been asked to consume less sugar.
Geo-demographic Segmentation: Geo-demographic segmentation is a segmentation technique that classifies people according to where they live. The concept is based on the presumptions that people who live within a particular area exhibit common purchasing behaviour.
Amul should divide its market in to 2 segments
Developed cities like Mumbai, Bangalore, Pune, Kolkata and Delhi
Under Developed states like Bihar, Uttar Pradesh, Jharkhand etc.
People in developed cities like Mumbai, Bangalore and Delhi have a high purchasing power compared to other places in India. The literacy rate is high in these cities, people have access to different mediums of advertising and infrastructure is developed. Amul should produce and supply high quality products in these cities with no compromise on price. However, they must keep in mind that their competitors are already enjoying a great amount of market share in such places. Cadbury to some extent enjoys a monopoly in such cities because of its quality of products, availability and immensely strong brand name. Amul must match Cadbury’s quality to excel in the market.
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States like Uttar Pradesh and Bihar are not developed like Mumbai and Bangalore. The literacy rate is less than 50% with poor infrastructure. Many people don’t even have access to electricity. Majority of them are poor farmers. Amul has an advantage here because their competitors like Nestle don’t have easier access to such places. Amul has a strong network because of its ace products like Butter, Cheese and Milk which are available all over the country. Amul should introduce chocolates which are cheaper but high on energy in these places.
Tactics
Tactics are the measures that help in achieving strategies. Tactics generally include the use and manipulation of the 7 P’s of marketing. In this case we would be using four P’s.
Product: The major reason why Amul chocolate as a product is declining from the last 10 years is because of not meeting the demands of the consumers. Cadbury & Nestle who are doing well in the chocolate market have continuously launches new products and have been successful. Every product has a life and it gets over one day. No product can live forever. Innovation is the key to survive in modern day. Companies need to modify and improve their product time to time. Innovation also led consumers to think that the company cares about their needs and changes time to time to meet their demands. For example, When Nestle launched Kit Kat in India it was a big hit. People just loved the taste of the chocolate & its packaging. However after a few years it started losing its share then Nestle introduced couple of flavours Orange and Mint which increased the market share. Amul also needs to introduce new varieties of chocolates and improve its existing ones. They should introduce milk chocolates like Nestlé’s Milky Bar, Chocolates with fruits and nuts like Cadbury has its Fruit and Nuts, Mint chocolates like Nestlé’s After Eight etc. Introduction of power bars & low calorie chocolates will also be a decent step to increase the variety of products. Also the packaging is a crucial factor because majority of the consumers are kids who are easily attracted by attractive and colourful packages. Amul has the history of unattractive packaging. If we compare the wrappers and boxes of Amul chocolates to Cadbury & Nestle, the packaging of the competitors is far superior. Amul has to stop their ancient method of packaging and adopt modern methods.
Amul must also spend a good amount of money on reaserch and development to identify the demands of the consumers and strategy of their competitors.
2. Price: Pricing is an important strategic issue because it is related to product positioning. Furthermore, pricing affects other marketing mix elements such as product features, channel decisions, and promotion. The objectives of pricing are to maximize profits, to signal high quality and also to survive in many cases. Pricing must take into account the competitive and legal environment in which the company operates. From a competitive standpoint, the firm must consider the implications of its pricing on the pricing decisions of competitors. For example, setting the price too low may risk a price war that may not be in the best interest of either side. Setting the price too high may attract a large number of competitors who want to share in the profits. Factors like cost of production, demand, competition, availability of substitutes and inflation should be considered while setting prices. Majority of people in India live in villages and have low disposable income. With such a heavy competition in the chocolate market, Price plays a very important role. In India, Brand loyalty is very rare. People will change their loyalty if they can spend less. Amul must produce high quality goods and sell it at a competitive price. Amul will have to follow competition based pricing technique which implies that they would need to set prices on the basis of what its competitors do in order to compete with them. It’s said that India is a rich country of poor people. Since the sales are going down, in order to lift them they can sell at a comparatively lower price to boost their sales. For example, If Cadbury sells its Fruit and Nut for Rs 20 Amul can sell it for Rs 18.
Place: Place in marketing is referred to the channels of distribution through which products flow from the manufacturer to the consumers. The channels of distribution mean intermediaries or middlemen who act as a link between the manufacturer and the consumers. Factors that need to be considered when choosing the place are the characteristics of the product, characteristics of the buyers, control and competitors channels. Since chocolate is an edible product, Amul should adopt an intensive distribution strategy where in they will manufacture products and make it available at various shopping malls, food joints, local stores, Chocolate parlours etc. Amul has a big brand name because of its dairy products. They can easily use it to increase the awareness of its chocolates using various distribution channels.
Amul Chocolate Parlour
Promotion: Promotion refers to exchange of information between an organisation and the consumer of its products. Consumers here include Customers, shareholders, employees, government and other parties related to the products like trade union and media. The aim of promotion is to inform the consumers, differentiate from other products and to persuade them to buy. There are many techniques of promotion like Advertising, Sales promotions, Direct Marketing & Personal selling.
Amul has been criticised for lack of promotion. Amul has a strong brand name because of its dairy product leadership. Amul must advertise its chocolates using media like newspaper, television and internet to inform the public about the quality & the price of its product. Consumers have a short memory and its important for companies to remind them about the products. Amul has totally shifted its focus from chocolates towards milk and other milk products and have totally ignored chocolates. Using the mediums like Television and newspaper the company needs to remind the public that they are back with improved products at an affordable price.
In order to survive in the competitive market where players like Cadbury & Nestle enjoy the market share Amul has to be different. They need to give the customers a reason why they should buy their products. Amul has to use Sales Promotion effectively to announce their comeback. They can give price discounts, more for less offer & free samples to increase their sales.
Amul must also provide free chocolates to municipal schools where majority of children come from a low income family. Free gifts like pencils or Books can also attract their target market i.e. kids.
Amul also has to focus on Business to Business customers. They can give special discounts or free samples to major retailers like Big Bazaar & D-Mart to sell their products.
Action
Now that we have set the objectives & marketing strategies, it becomes necessary to turn them in to action plans. Action includes 3 activities.
Allocating tasks and responsibilities: Since our strategy is simple i.e. to innovate our product and promote heavily, we would allocate the task of product development to the manufacturing sector where they will check the products of successful competitors and manufacture chocolates in line with them. The manufacturing sector will be responsible for the quality of the product. The promotion of the product would be the responsibility of the marketing sector where they will advertise and provide special offers.
The above Gantt chart shows the scheduling of activities of Amul Chocolates. $50 million would be the budget for product development and research related to production & the activity will be carried from September 2010 to December 2010. The budget for Promotion would be $50 million (including Advertising & Sales promotions).
Here we have used the Objective and Task method technique of budgeting by estimating the cost of the production and sales activities.
Control
Control means taking corrective measures when anything doesn’t go according to the plan. Amul must use the Sales Control method. They would be monitoring their sales every 3 months to check if they are meeting the set target. If anything goes wrong then they can take corrective measures.
Advertising Sample as per the Marketing plan
Value offered by Amul
1. Value for money: Amul’s believes in giving value for money to its customers and it has always followed that principle. Its products are of high quality and available at affordable prices.
Customer Driven: Amul as a dairy product manufacturer has always focused on customer satisfaction. Amul has consistently produced and supplied quality dairy products like milk, butter and cheese in India and other countries.
Adapt quickly to the changing environment: Amul has always met the ever changing customer needs by being innovative in its dairy products. This is a major factor why they have been a market leader in dairy products for many years.
Customer feedback: Amul has taken regular feedback from the customers & worked upon the negative aspects to improve the quality and increase customer satisfaction.
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