We have chosen Nestle as the company that we would analyse in this assignment because Nestle is a big and well known company in todays era of globalization and very much people-oriented, and committed to understanding its consumers’ needs throughout the world in order to provide the best products for people’s lives which would make it easier for us to obtain and analyse the information about their marketing segmentation, market environment, marketing mix and background of Nestle. Furthermore, all our members, Chia Poh Ling, Lee Yue Xhing, Leow Jo Yee and Yvonne Tay are more familiar with this company, which would help to make analysing and discussions go more smoothly.
Nestlé S.A. is the largest food company in the world. It is a Swiss multinational nutritional, snack food, and health-related consumer goods company headquartered in Vevey, Switzerland. The world’s leading food manufacturer and the market leader in both coffee and mineral water, produces a wind range of products.
As the leading Food, Nutrition, Health and wellness Company, Nestlé is the provider of the best food for whatever time of day and for whatever time of your life. Nestlé’s products include baby food, bottled water, breakfast cereals, coffee, confectionery, dairy products, ice-cream, pet foods and snacks. The main shareholders of world’s largest cosmetics company, L’Oréal is Nestlé.
The objectives of the Nestlé S.A. are to be recognized as the world leader in Nutrition, Health and Wellness, trusted by all its stakeholders, and to be the reference for financial performance in its industry. [1]
Nestlé S.A is the world’s leading nutrition, health and wellness company with an unmatched portfolio of more than 2,000 global and local brands. It has 468 factories spread over 86 countries, and employs around 330,000 people. Its products are sold in every country in the world. [2] Its agricultural services provide assistance to improve the quality and yield of the raw materials it uses.
In 1867, the infant began to take the milk food supplement Henri Nestlé had developed, and a life was saved. The product, called Farine Lactée Nestlé, was soon marketed throughout much of Europe, and a new brand name began to take on life.
Henri Nestlé adopted his own coat of arms as a trademark in 1867. Translated from German, Nestlé is universally understood to represent nurturing and caring, security, nourishment and family bonding which is little nest and the now-famous symbol. The company Henri Nestlé founded as it fulfills its commitment to ‘Good Food, Good Life.’
In 1905, the Nestlé Company merged with the Anglo-Swiss Condensed Milk Company, the first condensed milk factory which opened in Switzerland in 1866. Nestlé entered into the milk chocolate business in 1904 when Peter & Kohler Swiss General Chocolate Company produced milk chocolate under the Nestlé trademark. The chocolate company later joined the Nestlé Group in 1929.
While the original business was based on milk and dietetic foods for children, the new Nestlé grew and diversified its range of products, through acquisitions and mergers with the better known brands of the time. [3]
Nestlé began in Malaysia in 1912 as the Anglo-Swiss Condensed Milk Company in Penang and later, growth and expansion made a move to Kuala Lumpur necessary in1939. Since 1962, with its first factory in Petaling Jaya, Nestlé Malaysia now manufactures its products in 7 factories and operates from its head office in Mutiara Damansara. The Company was publicly listed on the KLSE now known as Bursa Malaysia Berhad on 13 December, 1989. Today, the Company employs more than 5000 people and manufactures as well as markets more than 300 Halal products in Malaysia. Its brand name such has MILO, NESCAFE, MAGGI, NESPRAY and KIT KAT have become trusted household names and enjoyed for generations. [4]
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Market Segmentation, targeting and positioning
Market segmentation involves aggregating of prospective buyers into groups, or segments that have common needs and will respond similarly to a marketing action. [5] Nestle provide a wide range of nutritious food and beverages for everyone to practice a balanced and healthy diet and lifestyle. There are four types of major segmentation variables for consumer markets which include geographic, demographic, psychographic and behavioral. Segment marketing has given the company a clearer picture of their customers and competitors so that the company can come up with a more fine-tuned products and services that satisfied customers needs. Through market segmentation, targeting and positioning, Nestle can reach out to their customers more easily and serve their customers more effectively and efficiently.
Segmentation
We found out that Nestle classify their market by using geographic, demographic and psychographic segmentation based on consumer characteristics. In geographic segmentation, Nestle has divided their market into urban areas (cities) and rural areas (villages). Besides that, Nestle also uses demographic factor to segment its market, it consists on income level and educational level. The income level and educational level can be categorized as low, middle and high level consumers. Apart from that, Nestle uses psychographic factor to differentiate the market. The segmentation variables that Nestle uses are personality, social class and lifestyle. Nestle can groups individuals according to their personalities such as extrovert, self-disciplined or energetic. Nestle divides their customers into low social class, medium social class and high social class.
Targeting
A target market is a potential market that a company has decides to concentrate its marketing efforts and resources to enter those markets. Nestle segments its market by regions, income level, educational level, personalities, social class and lifestyle. By applying the information and observations that we get, we can simply identify the target market of Nestle.
In this case, we found out Nestle focuses on urban areas rather than rural areas. The consumption of Nestle products is often in cities as compared to villages. This may be due to income and educational level. The people in rural area mostly could not afford the products of Nestle as it is considered as luxuries. They do not have strong sense of health consciousness due to educational background. This makes them the less attractive buyers.
For segmentation by income level, Nestle has been targeting on those consumer who earn middle income and high income. People will purchase healthy and nutritious food and beverages when they have enough monetary resources to back up them. Those consumers with higher income tend to be the potential buyers for Nestle because they bring most profit into the company.
Furthermore, for educational level Nestle tends to pay more attention to those consumers who has an education background. They will be more concern of their health and they will do more to maintain it. Through education, we can improve our knowledge and develop life skills which can contribute to individual and community health. Those people with an education background are more likely to practice and maintain a healthy and balanced diet as they know health is more important than wealth.
For personality segmentation, Nestle is targeting consumers who are more outgoing and outdoorsy. It is because they require more energy and nutrition that they have lost during their activities. By adapting nutritional input to physical needs, they can get the most from their body. [6] These people wish to maintain their energy level and quick recovery after a hectic day by adapting a balanced diet that provides them with essential nutrients and energy.
In addition, from the social class and lifestyle segments, Nestle is targeting consumers who are belong to the higher social classes. They have high purchasing power so that they can afford more luxuries such as Nestle’s products. These people are the target market of Nestle because they tend to be more health conscious. Nestle’s products often emphasize on nutritional value and health benefits that can improve one’s lifestyle and health issues.
As conclusion, Nestle is able to reach out to their customers that it can serve best and most profitably. Through segmentation and targeting market, Nestle can enhance the profits for their company and increase effectiveness in their marketing campaigns.
Positioning
Product positioning refers to the place an offering occupies in consumer’s minds on important attributes relatives to competitive products. Nestle positioned itself as the world leader in Nutrition, Health and Wellness, trusted by all its stakeholders, and to be the reference for financial performance in its industry. [7] Nestle uses the slogan “Good Food Good Life” to enhance lives, throughout life, with good food and beverages. [8] Nutrition content in their products is the main focus to strengthen their leadership in nutrition industry. To remain their position in that industry, they must identify their competitive advantages against their competitors. Nestle has listed out four competitive advantages of their company that may help their company to compete with their competitors, that are unmatched product and brand portfolio, unmatched research and development (R&D) capability, unmatched geographic presence and lastly people, culture, values and attitude [9] .
For unmatched product and brand portfolio, Nestle provide the largest range of food and beverages among all the food company. Their products range from global icons to local favourites that can adapt to consumer needs, tastes and preferences, making Nestle as a global brand that relevant to everyone and everywhere. Besides that, it is supported by unmatched R&D capability that improves the products through innovation and renovation so that it can meet consumer needs and enhances consumer benefits. Nestle spent over billions of dollar on its R&D just to ensure its consumer gets the essential nutrition that their body needed.
Nestle has an unmatched geographic presence competitive advantage due to the number of countries where they presence. They have been in most countries for over decades and successfully created a strong relationship between their brands and their consumers. [10] This also means that they have has plenty of time to study about the local preferences and behaviors to improve their products taste to match the local’s preferences. The most important competitive advantage for Nestle is their people, culture, values and attitude. The Nestle culture created a strong bond between their people with a shared set of behaviors and values into a single way of doing business. Their people are determined to deliver their goals as while as creating value to the public. [11]
Marketing environment
Marketing environment consists of microenvironment (internal environment) and macroenvironment (external environment). It embraces all the marketing team inside a firm and includes all the outside factors of marketing that affect the team’s ability to develop and maintain successful customer relationships with their targeted customer group. [12] Nestle is using it to improve customer relationship management and adapt new strategies when it comes to challenges and opportunities.
Microenvironment
Suppliers
Suppliers are the one who delivered the resources needed by the company to produce the products or services to the consumers. Any problems that incurred in supplier can greatly affect the company sales and damage customer relationship. We can divide the suppliers of Nestle into two groups that are labour suppliers and material suppliers. [13] Labour suppliers are in charge of the supply of labour required by the company to optimize their production level. Labour strikes and labour relations are the most important factor to maintain labour satisfaction for company to improve their efficiency. For material suppliers, they deal with the materials needed by the company to place the finished goods on rack. The quality of the material is everything that the company focuses on as Nestle is in the food and beverages industry. By maintaining the quality and quantity of these two supplies, Nestle is able to produce high quantity product to uphold their sales volume and customer satisfaction in the long run.
Marketing intermediaries
It helps the company to promote, sell and distribute its product to the final buyers. [14] The physical distribution firms design the delivery chain for the company products to reach their final destination. The firms also in charge with the products’ safety without getting any damage while storing them temporarily. Marketing service agencies of the company helps to target and promote its products to the right market. [15] It acts as a communication channel between the customers and the company by explaining the features of the product and providing feedback with the help of survey for the company to improve the quality of the product. [16] Banks and insurance companies are financial intermediaries that help to provide monetary resources and protection to the product and company against risk that may be occurred during the operation of the company. Nestle works together with all marketing intermediaries to ensure their valuable customers have a clear image of their products features.
Customer
Nestle sells its goods to reseller markets that provide the goods to final user at a reasonable profit. Nestle also deals with customer markets which consists of individuals and households that buy a wide range of its products. Nestle works hard on making the product available whenever the customer needs them to maintain customer satisfaction.
Macroenvironment
Political environment and Social Environment
Nestle adhere to the laws and regulations that involve in its activities and the environment. The government may set quotas on the quantity of the products that it can supply and set the amount of taxes that the company must pays in order to conduct the business. To achieve a balance between them, Nestle participates in legislative and regulatory discussions between international organizations, government representatives, industry, scientific community and consumer associations. [17] In 2000, Nestlé and other chocolate companies created the World Cocoa Foundation. The WCF takes control of the issues that cocoa farmers facing, which is ineffective farming techniques and poor environmental management. The WCF aims to increase farmer income, promote sustainable farming techniques, and launch environmental and social programmes. [18]
Economic environment
Customer purchasing power is majorly affected by a range of economic factors such as income levels, inflation, taxes, unemployment, exchange rates and mortgage rates [19] . The disposable income and living standard of a country may bring big business opportunities for Nestle or the other way round.
Cultural environment
Before Nestle start its operation in any country, it mainly focus on studying the society’s cultural value, preferences and behaviors. This is because Nestle hopes its products can be accepted by the local with warm welcome and be competitive among other companies that operating at the same level. [20]
Technological environment
Technologies are the vital part of Nestle R&D. Investment in technology will definitely help the company to reduce production cost and improve product quality. For example, Nestle have developed technologies that allow them to use natural vegetable oils instead of partially hydrogenated fats in Maggi bouillon cubes and seasonings. [21] With the help of technology improvement, Nestle can create healthier products across their product range and thus improve health and quality of life in a country.
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Product
We choose Nestlé® since it is a brilliant and well known example of where as the superior quality, patented technology and basically selling directly to consumers and this whole business is growing rapidly. [22] The certified Halal status for all Nestlé Malaysia products provides assurance and pledge that Nestlé products are manufactured, imported and distributed under the strictest and tightest hygienic and sanitary condition in accordance, match to the Islamic faith. [23]
The beverages offered by Nestlé® is Milo, a jam packed with the natural goodness of malt, skimmed milk and cocoa for that great chocolatey taste loved by Malaysians from all walks of life as a Tonic Food Drink. MILO 3in1 offers the great taste of MILO in a more convenient format that easily prepare for your breakfast. Have a delicious goodness of a can of Milo whenever you go to keep energized. There are original, Mocha and Hi-Cal flavors of Milo Can. Bring home the cold delicious taste of the MILO Sejuk, just add cold water, it’s that easy. Milo UHT, MILO with the same energy-packed, rich & chocolatety taste also comes in handy ready to drink packs escpecially during festival.
Nestlé has employed a wide-area strategy for Asia that involves producing different products in each country to supply the region with a given product from one country such as Nestlé produces soy milk in Indonesia, coffee creamers in Thailand, soybean flour in Singapore, candy in Malaysia, and cereal in the Philippines, all for regional distribution.
Product Features
Why do you like Milo? This is because Milo contain varying features and benefits, such as:
Natural Goodness~ of malt, skimmed milk, and cocoa.
ACTIGEN-E~ a combination of 8 vitamins and 4 minerals which helps in theoptimal release of energy.
PROTOMALT~ a malt extract with a mixture of different Carbohydrates thatprovides energy and nutrients the body needs [24]
Product Branding
It is very important and vital because a brand is a term, name, sign, symbol, or design, or combination of these, that identifies the products or services of one seller or group of sellers and distinguishes them from those of competitors. [25] Branding helps the seller to segment markets, helps buyers and consumers identify products that might benefits them. For example, rather than just offering one general product to all customers, Nestlé® can offer the different Koko Krunch, Honey Star, Nestle Bliss, Nescafé, Maggi, Nestle La Cremeria, Tropicana, and Kit Kat. In line with the Nestlé position as “a trusted food, nutrition and wellness company”, Nestlé® also focused on nourishing Malaysians to achieve overall wellness and deliver their promise to bring “Good Food, Good Life” to the people from all walks of life. [26]
Packaging
In today’s era of globalization, for consumers, refreshing, ready-to-enjoy drinks are part of an dynamic and energetic lifestyle – whether at play, home or work. Going beyond healthy refreshment, convenience, and quality, Nestlé works hard to ensure that all packaging – including drinks packaging – respects the environment. In 2009, Nestlé was able to save 58995 tonnes of packaging material (paper, board, plastic, glass, metal) through its efforts to prevent food waste, guarantee their high quality.
The approach includes many steps such as:
decrease the volume and weight of packaging materials
using recycled making material in packaging content wherever realistic
supporting local packaging recycling and energy recovery activities
helping customer to understand and take action to recycle more packaging [27]
Labeling
Label, is a part of packaging to perform several functions like identifies the product or brand, describe several things about the product – who made it, where it was made, when it was made, its contents, how it is to be used, and how to use it safely, and lastly is to promote the brand, support its positioning, and connect with customers. [28] Nutritionists and scientists has corporate responsibility through food labeling, like Nestle has provided the details of the nutrients that the average person needs to consume each day, so that consumers could easily understand. The symbols on the Appendix were designed to show the amount of nutrition contains of Milo.
Product Support Service
Customer service is another element of product strategy, which can be a minor part or a major part of customer service. [29] Nestle, one of the world’s largest food and nutrition company, has been a popular food brand in India for nearly a century, which include head office, manufacturing plants and branch offices spread all over India. Nestle offers excellent customer support for their products and if you need any assistance from their customer support team, following information through browsing internet will help you to get in touch with Nestle customer care division easily and more quickly.
Approach Nestle customer-care via online
Visit http://www.nestle.in/ and you can find information about many brands and products like Milk products and baby food, prepared products, beverages, chocolate and confectionaries, yogurts, drinks etc.
If you have any request, query, interest, concern or complaint, submit the form at http://www.nestle.in/contact_us.aspx.
You can submit Maggi related information at http://www.maggi.in/contact_us.aspx.
You can visit http://www.starthealthystayhealthy.in/, which is a site special to mothers and new born babies.
Place
Place, also known as distribution and it involves company activities that make the product available to target consumers. It must be as conveniently available as possible that the customers want the product and service. Choosing the right product channel of distribution is key to the success of an organization because it will affect the sales volume of a company. This shown that selecting a place is very important and challenging for every company.
Distribution Channel
Nestle are subject intensive distribution where a firm tries to place their products into outlets as many as possible to meet the needs of consumers whenever. Nestle has developed distribution channels which to make sure the provision of products that the consumers able to purchase it whenever and wherever. [30] Hence, Nestle attempts to provide as many outlets as possible and expand it. Nestle uses two types of channel intermediaries that are wholesaler and retailer and it is convenient for Nestle because both channels have a lot of advantages in high number of ordering, short period of time to shipment, and have a large number of customers. [31]
Retailer and wholesaler as their intermediaries between a producer and consumer where the products from the producer to the consumer through the retailer or wholesaler. [32] Nestle as the producer and distribute their products to wholesaler or directly to retailer then retailer sells the goods and products to consumer.
Location
Convenience Stores
A small store which is located near a residential area or along the roadside and it usually open 24 hours such as 7-eleven, petrol stations, rest stops, and so on. Consumers can buy Nestle products at the convenience stores because Nestle tries to ensure the availability of products so that the consumers able to purchase it whenever and wherever. Consumers are more convenience and easily to buy Nestle products.
Supermarkets
A large, low-cost, low-margin, high-volume, self-service operation designed to serve the consumer’s total needs for grocery and household products such as Jusco, Tesco, Carrefour, and so forth. Supermarkets have a huge selection of products available for consumers at low prices. So, consumers can choose Nestle products which based on their needs then purchase it at low prices because supermarkets offer many choices for Nestle products compare with other small stores.
Superstores
A store much larger than a regular supermarket that offers a large assortment of routinely purchased food products, nonfood items, and services such as Walmart. Superstores stock huge stocks Nestle products purchasing them in large lots. So, the prices of products are cheaper. Consumers can take advantage of these price savings with buy a lot of various kinds of Nestle products such as Milo, Nescafe, Nestea, and so on. Consumers are saving greatly on time, effort, and money.
Price
A product price influences wages, rent, interests, and profits, of course some prospective customers are interested in low prices, where as another segment is more concerned with other factors, such as service, quality, value, and brand image.
Nestlé estimated and predicted the cost by doing accumulated production as if they produced mass production so it reduced their labored cost and other cost for production process it’s a big advantages and benefits of the Nestlé company who produce large quantity of units. With the help accumulated and estimated the production Nestlé Company has a low cost of production and high profit margin and Nestlé Company selecting a price method of going rate price because their pricing near the competitor pricing. A good example is Nestle juices have a market leader in beverage industry and lastly Nestlé set the final pricing related to their market competitors so Nestlé price do not have impact on the company policy, and other marketing activities. [33]
Flexible and elastic prices are the key factors of victory of Nestlé in global market, for example Milkpak being the largest selling brand is being sold out at the same price as that of other lower quality products while maintaining its quality. Their marketing strategy includes a wide range of pricing strategy, and by doing this they can retain and keep their product rates at a sustainable position. Prices are affordable and have enough money to buy to almost all types of consumers as they have wide range of single product as in the case of beverages, fruit juices are affordable to low economy class and expensive tin packed beverages are also doing business in the market. Bulk purchase discount is also provided at the whole sale markets as well as at the market stores and besides seasonal price variations are also seen, especially in the case of chocolate products, either by upsizing at the same price or reducing the sale price. [34]
Price Strategy
Price strategy is a basic, long-term pricing structure, which creates the initial price for a product and the intended direction for price movements over the product life cycle. There are three type of pricing strategy which is Market-Skimming Pricing, Market-Penetration pricing. Nestle Malaysia at present practicing penetration pricing to market Milo which is away where Nestle charges a relatively low price for a product (Milo) at the beginning as a way to reach the mass market.
Establishing Price Goal
Marketers have two choices whether to use profit towards profit maximization or satisfactory pricing. The marketer need to have an understanding of trends and changes in the market place to set a goal, mission and vision. If Nestle Milo has decided to go for profit maximization objective, they must be able to afford large amount of investment. It is not difficult to follow competitors pricing but they may not have the best to think about cost, demand and changes in Product Life Cycle. So they have to require a careful and thoroughgoing analysis before setting the price. [35]
Price Tactic Diagram
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Product Bundle Pricing
In United States and Canada, Häagen-Dazs products are produced by Nestlé and come in several traditional flavors. The example of price bundling is Haagen-dazs, a company which is famous as
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