Packaging and marketing
This chapter examines the relationship between packaging and marketing. It defines marketing and marketing responsibility and examines the role of marketing in production-led, sales-led and marketing-led companies. It explains the main marketing responsibilities including identifying the need for a product, knowing the market, determining price, determining strategy for the distribution of a product and determining brand values.
The chapter evaluates the importance of a brand, and the various elements that make up a brand, including coherence, uniqueness, relevance, distinctiveness, market appeal and brand protection. The complete marketing mix is considered including product, price, promotion and place. The role packaging plays in product promotion and advertising is also considered. With the need for more detailed and complex information on packs, the importance of consistency of communication is evaluated with examples of how this can be achieved more effectively, including use of digital technology, global brand management and corporate identity manuals. The use of market research tools and techniques to identify customer needs including SWOT analysis, gap analysis, consumer research, demographics and socio-economic groupings, psychographics, consumer panels, test markets and competitor research are all considered, with the objective of achieving a successful new product launch.
The Chartered Institute of Marketing defines marketing as: ‘The management process responsible for identifying, anticipating and satisfying customer requirements profitably’. An alternative definition comes from The Dictionary of Marketing Terms, which describes marketing as ‘the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organisational goals’. Whichever definition you favour, marketing encompasses everything to do with coming up with a product and service, making customers aware of it, making them want it and then selling it to them profitably. The important word here is ‘profitably’, because all marketing activity, whether market research, market development, promotional activities or advertising must ultimately be accountable to bottom-line profit-and-loss scrutiny. Without profit a company will simply go out of business and marketing management is but one facet of an organisation’s management team. However, it is a fact that a business cannot succeed without marketing, although the precise role of marketing professionals will vary dependent on the nature of the business.
The role of the Marketing Department varies from organisation to organisation. Whatever the precise definition of the role, communication is a vital part of its mandate. The Marketing Department often has a better understanding of the market and customer needs, but should never act independently of the packaging technologist, product development or technical departments. Marketing needs to be involved wherever discussions take place regarding new pack or product development and other customer-related discussions. In recent years the introduction of digital media has brought an explosion in the number of channels marketers can use. However, the basic processes of understanding customer needs, developing appropriate products and providing fair and balanced information remain a vital part of marketers’ role. Marketing is an integral part of any business, whatever the type of organisation.
Some companies are production-led, i.e. in simple terms they sell only what they can make and innovation is not very high in the company’s product strategy; an example would be a cement company whose product fulfils a basic requirement and is distributed and packed to provide only containment, protection and product information. This type of company usually has a core, commodity product. It may be constrained with regard to product and pack innovation. It may also concentrate on developing a unique or special service. It would rarely advertise or promote its products and services.
Some companies are sales-led, customer-driven, their packaging and marketing activity determined by customer requirements. Many packaging converters, particularly carton and label manufacturers and others supplying bespoke printed materials, come into this category. They produce to meet the customer’s order and specification. Their vital need is to understand their customers’ requirements and often their customers’ customers. Opportunities exist in these types of companies for innovation in both product and service. It is vital for their sales forces to look, listen and be on the same wavelength as their customers’ packaging technologists and product development teams.
A large proportion of companies are marketing-led. This includes those selling food and drink, household products and toiletries, i.e. FMCG (fast-moving consumer goods) producers, plus companies selling other items such as clothing, textiles, household products, DIY and garden supplies, etc. Selling has been traditionally via supermarkets and stores, where the customer makes a self-selection, or via other selling methods such as printed catalogues and mail order. However, the advent of the world wide web (www) has changed much of this and it is now increasingly normal to purchase almost anything from the web.
It is among the marketer’s responsibilities to identify the need for the product, whether it is existing or new. This is particularly crucial in new product launches because only 2% of those launched will ultimately succeed. Therefore the marketer must ask the the following questions:
• What can be improved? If the product is an existing one, what can I do to improve it? Minor modifications, small design or functional changes can often transform something mundane and basic into a winner.
• Is there room for me in a crowded competitive market? Without a special feature or something which differentiates your product from the competition, the answer is probably ‘no'! However, if you identify your target or niche sector and concentrate on that area alone, you may find you have something that can fill a gap in the market or, even better, supply a need which previously no one knew existed. However, to do this you will need to undertake market research, which will be dealt with later. All this has the ultimate objective of moving products or services from producer to consumer in a profitable way.
• Who are your potential customers? Do you have a database of names and addresses? Is the information up-to-date? You may be surprised to find that often it is out of date and therefore not useable. Companies change address and telephone number, and move location more often than you think. Do not launch until you are sure of your facts.
• ? Be accurate and precise in your market assessment, this will determine many things including the investment to be made. Use accurate and reliable market data to undertake your market evaluation. Do not use old statistics otherwise you may make erroneous decisions.
• When do they want their products? Demand can be seasonal (e.g. Christmas or Easter) and a new product launch which is too early or too late can be disastrous. Timing is everything. Much of the information needed can be gathered by market research, or basic knowledge and understanding of the market.
• Know the total cost of the product. No marketer can undertake pricing strategy without having a complete picture of start-up costs, manufacturing costs and other factors such as costs for a licence to produce in a particular country or territory.
• Know the development costs. The cost of research and development can be forgotten about or overlooked. This cost is a key part of any project, and can ultimately influence the final decision as to whether to proceed to a full market launch. Sometimes costs can be shared between the packaging producer and the customer to help reduce the burden of the development process, which can sometimes be protracted and difficult to define precisely in terms of time.
• Know the factors affecting cost. Things to consider include items which may be special one-off costs such as bespoke, customised tooling which may be expensive and involve long lead times. There may be special costs for artwork or origination which may make the product prohibitively expensive and therefore too costly for today’s market. Whatever the extra cost is, be aware of it and build it into the whole costing model or matrix.
• What price will the market be prepared to pay? The more added-value features, the more the market will be prepared to pay for the product. The more the product is perceived as a commodity one, the less the opportunity for a higher price. It is also important to know the price of your competitors’ products and pitch your price accordingly. Do not price yourself out of the market. However, a higher quality product will often require a higher price, by virtue of the extra costs involved in production. It will also require higher quality packaging with more added-value features.
• Where will the product be sold? Traditionally sales have been through supermarkets, department stores and specialist retailers. Of course, the internet has changed much of this. New products are often ordered on-line, called off from warehouses and distributed direct to customers by fleets of lorries and delivery vans. The strategy adopted by marketers has therefore changed to reflect the speed, quick reaction and dynamism of the new channels of distribution. Out of stock is simply not acceptable today. ‘Just-in-time’ was the mantra for delivery of product some years ago. Today ‘just-in-time’ is almost too late.
• What selling methods are needed? Whereas before, catalogues and mail order were the alternative way to shop, rather than a visit to the supermarket or store, now the internet has created an unstoppable juggernaut of new sales patterns. Marketers must understand the new channels to market. Whatever method they choose, they must be ready with products and packaging which are lighter in weight, more vibrant in colour and design and more environmentally acceptable, to meet the needs of a greener and faster moving world. Often selling by a combination of all these methods will be required today.
• What size of pack? There are many factors to consider here, including the size of the original bulk pack, the secondary pack and the tertiary pack. Shelf-space is at a premium today and ultimately no marketer wants his or her product to be tucked away behind others on the shelf in the store. Success in achieving widespread distribution will depend on many things, not least of all the benefit of a multi-million-pound marketing and promotional budget. However, once in the stores, the size and shape of the pack will play an important part in the final decision on shelf location. One of the key factors in deciding pack size is perception of value. The pack must reflect the size or shape of the product contained. Too large or too small a pack in relation to the product it contains will have detrimental effects in terms of sales success. You can only add value so far by size of pack, and after that it becomes counter-productive.
An important influence on pack size is the amount of product information that is now required to be displayed on the pack itself. Ingredients, weights, preservatives, nutritional information, quantification and explanation of terms such as ‘low in sugar’ are now all listed. Control of information stems from a number of UK and European labelling standards and guidelines. Use by, best before, storage conditions, business name and address, place of origin, instructions for use and batch numbers are now required. With a global market, much of this information has to be displayed in more than one language. When deciding on a pack size it is essential that all the above information is included, in a clear and concise way. The pack size must reflect the size of product, but it must also be sufficiently large to cover all compulsory and legal information requirements. However, this is only the start because a marketer needs to ensure that his or her product’s brand identity, its logo, and any special promotional offers are all included on the pack in the correct way. This is a complex area and a balance has to be maintained between retaining brand identify and ticking all the boxes from a legal and statutory viewpoint.
• What are the display requirements? A new product launch or a re-launch of an existing product will benefit from point-of-sale display and special merchandising. The marketing responsibility here is to ensure the display retains the original design features of the pack and that the brand values are maintained in terms of shape, style, logo and other features.
• Telling the consumer about the product. A new product launch will benefit from a launch event, something which is done on a large scale to tell the world about the exciting new product about to hit the market.
• Advertising media. Traditionally this took the form of national, trade, technical, local and regional press, or, if the product is a new or existing major consumer brand, national TV, cinema or radio. The advertising spend on TV has been affected in recent years by the internet, which is seen by many as a more cost effective way to reach a modern audience, who get their information via electronic means rather than from traditional media.
• Timescale. The successful launch of a new product depends much on the roll out and the ability to get the product into the store at a pre-determined time and date. It is no good having a high profile advertising and promotional campaign, letting the consumer know about a new product, only to visit a local store and find it is still not on the shelf. It is the marketer’s responsibility to ensure the new pack is available in sufficient quantity to meet the demands of an eager and expectant consumer.
It is essential for marketers to discover what product and pack attributes will appeal to the market. For example, novelty or unusual pack features may appeal to children, added-value innovative features may appeal to consumers purchasing premium products. There is a whole array of consumer research techniques to discover which pack style or feature appeals to different groups of consumers. These will be investigated later in the chapter.
Marketing and packaging are complementary functions in any organisation. This is particularly true in FMCG producers, where the link between the two can be vital, particularly in the launch of new products which involve packaging of a technical nature. The packaging technologist can play an important part in guiding the marketer through the design, product development, production and cost implications of choosing a new type of packaging. Whilst the marketer might understand the overall features of a new package, the packaging technologist can fully explain every function and ensure that the marketer makes the correct decisions, from a technical viewpoint. The relationship goes much further than this in some organisations, leading to the creation of a role within the company of Packaging/Marketing Specialist, whereby one person with sufficient knowledge of both functions undertakes a combined role. It will require a considerable amount of technical and commercial knowledge to aspire to this role, but the benefits can be considerable.
A brand is a mark of authenticity, something which imparts an intrinsic value to a product. It is a guarantee of reliability, a mark of quality and inherent goodness. Iconic, long-lasting brands are truly special. It is fascinating to look at market leaders from 1925 and see how many are still in a leadership position. Here are some of them:
These are names which have a massive brand equity and kudos. This is reflected in the way these companies go about their marketing activities. It goes without saying that a brand should be fiercely protected. This is vital as the brand name differentiates one product from another. Arguably it is a promise, a commitment that the product being purchased is intrinsically good.
If your product is the same as everyone else’s, there is little encouragement to buy yours rather than theirs. If your packaging is the same as everyone else’s you will devalue your brand and lose your brand identity. However, this issue becomes more complex when faced with the growth in retailers’ own brands. Arguably these are not branded products as such, more taking their brand values from the presence and integrity of the retailer’s name. In this instance the retailer is the brand and the customer’s confidence in the individual product derives from the confidence the consumer has in the retailer’s name and brand identity.
This has been further extended or indeed confused by the launch of retailer subbrands, ‘value’ or lower cost lines, and added-value premium lines which intrinsically convey messages of superior quality, often by their packaging. In the lower cost brand market, Sainsbury’s ‘basics’ range is a good example as is their ‘Taste the Difference’ in the added-value sector. Much of what has been discussed here comes down to the packaging and the product perception by virtue of the packaging style, quality or image.
What is the brand’s relevance to peoples’ needs? Is the brand still one which consumers wish to purchase? The brand can become the badge and often it is its package shape or design which signals the desirability of the brand. All Nescafe Coffee jars still have a distinctive shape which differentiates them from other coffee.
A brand must stand out. A consumer’s product attention in the store whilst looking at the shelf will last 7 seconds at maximum. Some 68–80% of purchasing decisions are made whilst facing the product on the shelf. In a food superstore there are at least 16,000 products on display and in a traditional department store there are 30,00040,000 items. It is therefore essential that a brand must be recognisable. Customer research has revealed that colour is often the first thing which attracts. Colour can be detected in the store shelf from as much as 10 metres away. From 4 metres the shape of the pack becomes discernible and only from 1 metre does the customer identify the brand. What the package needs therefore on the shelf is shape, colour, strong graphics and branding. However, the brand must balance the need to ‘stand out’, with the requirement of reassurance, recognition and customer awareness. Too much change in a brand identity is not always good.
A brand must continue to differentiate a product from the competition. It is essential that it achieves that vital commodity – product differentiation at the point of purchase, i.e. a uniqueness of product. A brand can do this by its packaging. A brand must also make the customer want to buy it. Of course, national brand loyalty has declined in recent years, almost to the extent that supermarket loyalty (influenced by the incentives which stores have introduced, such as loyalty cards) has become an important factor in purchasing decisions. However, a brand which still conveys a strong image and identity will provide an important incentive to make consumers want to buy it, once they are in the store. Procter and Gamble’s ‘Ariel’ and Unilever’s ‘Persil’ may face own brand competition but they are still iconic products, aided by their packaging and brand identify.
The first impression of a product is its packaging. If the packaging conveys an aura, an impression of quality via its shape, graphics, use of colour or print, it is going a long way towards protecting its brand integrity. The product and the packaging can become intertwined and become one and the same to the consumer. In some cases the packaging can often overtake the product in terms of priority and importance to the overall concept.
The price is determined by the position required by the brand. A high-quality product, demanding a high price, will also require the high-quality presentation available from high-quality packaging materials. A lower quality or commodity product will not have as high a profit margin and thus not be able to sustain the cost of expensive packaging or design. A product’s price often communicates as much to the consumer as its advertising or promotion. Consumers perceive a product’s value based on its price in many situations. Some forms of packaging, which were once considered to be new or innovative, over a period of time became less high value and therefore moved into the commodity market category. An example of this is PET bottles in the beverage sector, particularly soft drinks.
The profitability of a product is the difference between the selling price and the total cost of getting the product to the point-of-purchase. Packaging can make a major contribution to profitability both by influencing the price which can be commanded for the product and by its direct effect on total product cost. The cost of packaging includes not only the bought-in packaging material costs but also development costs including special tooling, artwork and origination.
The promotion is essentially the communications strategy of a marketing plan. It refers to the activities used to get the consumer to recognise the product and be encouraged to buy it in preference to others. Promotion refers to the advertising which takes place both when the product is launched and later on to sustain and grow its sales. Promotional activities might also include:
Other promotional activity is more direct and usually occurs at the point-of-purchase in the supermarket. This can take the form of ‘money off’ packs, added-value offers involving extra product for the same or special price, samples, the classic ‘BOGOF’ (buy one get one free) offers, or the offer of free/reduced price gifts. Packaging is often the major vehicle for promoting such activities. Another technique which helps to promote the brand and protect its authenticity is range extension, i.e. by adding other variations of the same product. For example, people have been eating Kellogg’s cornflakes at breakfast time for more than 100 years. The company’s ‘Special K’ brand – aimed at people managing their weight – has been around for 50 years. There are now at least 10 different varieties and to cater for the ‘on-the-go’ breakfast market there is a range of ‘Special K’ cereal bars. Kelloggs is trusted by consumers. It was the most trusted cereal maker in eight European countries from 2007 to 2011, according to the Reader’s Digest Trusted Brands Survey. This means consumers are more resistant to moving to cheaper or own-label brands. Kelloggs are keeping their brand protected by emphasising that value can be obtained from more than cheaper prices. However, they are still at great pains to make clear in their advertisements that they have been making cereals for 100 years, reconfirming iconic brand status.
New media, particularly the Internet, has provided a new tool for marketing, communication and promotion. The communication aspects of the new media are immense, allowing brands to launch websites to reinforce messages which are also contained in their product packaging. To use the Kellogg’s example again, ‘Special K’ is using the web to communicate its healthy lifestyle programme. Its ‘My Special K’ website includes a personal plan for ideas and advice in the whole area of healthy living. Brand integrity is therefore a key part of this process.
The place is not only where the product is sold, but also refers to the distribution method and the way in which the product is merchandised. The strategy behind how a product is distributed and sold is a very important element of the marketing mix. For example, do you want your product to have wide distribution and be sold everywhere? Or do you want to create a niche market, in a more exclusive up-market sector? For traditional store and supermarket merchandising, the part packaging has to play here is in ensuring that the product arrives at the point-of-purchase in good condition so that it will still attract consumers to make the purchase. It must also maintain its function of protecting/preserving the product throughout its use.
The essential elements of packaging in the marketing mix are the brand name, the logo (which frequently refers to the brand name), the colour of the pack, its shape, size and texture. The Coco-Cola brand name, for example, is recognised world-wide because of its distinctive typeface and shape of the iconic Coco-Cola bottle, which gives the brand its own persona or identity. As a result of this you are never in doubt that the product is one from Coca-Cola.
Achieving the correct product persona is vital in persuading the target audience to buy the product. Deciding on the elements of that persona can only be undertaken when the needs and desires of the target audience are fully understood. This is the key role played by market research, which we will deal with later in the chapter.
Advertising is the most visible and highly remembered part of a marketing campaign, apart from the pack itself. Adverts frequently use images of the pack or incorporate features of the design to link the two together in the minds of the customer. With a distinctively shaped container and/or an attractive graphic design, the recognition potential of the pack on the store shelf is greatly enhanced and helps to rekindle the message delivered in the advertisement.
It is also necessary to identify which types of media to be used to carry any advertising message. This essentially is the media plan and can include magazines, newspapers, billboards, web banners, radio adverts, TV adverts, sponsored TV and radio programmes, cinema adverts, posters and flyers, directory listings and in-store displays. The TV advertisement has traditionally been the most effective way of reinforcing brand messages. However, this medium has suffered in recent years as the use of new media has risen. TV advertising is expensive and with the rise of digital communications and the ability of the computer to receive more complex and animated information, brand reinforcement using pack images is increasingly being made by this route. According to a survey produced by The Internet Advertising Bureau (IAB) and Pricewaterhouse Coopers in 2011, internet advertising in the UK increased by 13.5% to £2.26 billion. This is a 27% share of the total advertising market.
The recognition process is aided by the use of additional advertising material at the point-of-purchase. This may take the form of shelf-edge cards, store displays and other devices, such as references to promotional activity to attract the attention of the customer and assist the product launch. However, it must be remembered that the pack itself acts as on-going advertising medium in front of the consumer, reinforcing the need for good presentation and instant brand recognition.
A brand image is a powerful commodity. How a company is perceived will influence a consumer’s disposition and his or her readiness to buy the company’s products. When a consumer purchases a branded product he or she is identifying with that image, i.e. with the perception of a brand. The image is essentially part of the product. Brand image, integrity and consistency of communication are therefore most important factors in the packaging and marketing interface and should never be overlooked. Consistency of communication must be maintained across all facets of advertising and packaging, over the complete product range and indeed through the entire life of a product.
The supply chain has been revolutionised in the last 10 years thanks to the Internet and digital communications. Global brands have global brand management, handling every facet of the complex process which brings packaging to the retailer and ultimately the consumer. All of this should ensure greater consistency of communication. However, in the case of packaging the need for global consistency through all the stages of design, product development, print and final conversion to finished pack has never been greater, and arguably never more delicately positioned. Get this process wrong in the minutist of ways and the consequences can be catastrophic, leading to a devaluation of brand equity.
During the past 10 years or more, a large number of packaging producers and FMCG companies have set up production sites in Eastern Europe, the Far East and even further afield. Some multinational companies have moved all corporate and production operations to new overseas sites where costs are much lower. The way these organisations develop global marketing and packaging strategies is diverse. However, what they have all found is that the use of digital technology is driving them to improved business efficiency. They have found that the same digital technology has enabled them to better control the consistency of communication in terms of global pack design, advertising, promotion and point-of-purchase because it can all be viewed electronically, proofed, amended and, only then when agreed by all, finally printed and converted into a finished pack for a world market. The greater benefit here is speed of response and cost savings.
Corporate identity or brand manuals (or ‘Corporate Bibles’ as they are sometimes called) are an ideal way to ensure that consistency of communication is adhered to, once a branded image has finally been produced in all its forms. By this method every aspect of use of brand – logo, colours, typeface, font, size of lettering, etc. – are all laid down in terms of what can and cannot be done. Every department and function in the organisation should retain a copy of the manual and use it as an important point of reference to ensure correct reproduction of identity and image at all times.
The responsibility for managing this document will normally belong to the Marketing Department. They will need to liaise closely with the packaging technologist to ensure the rules governing communication of a protected brand name or logo are being strictly adhered to, most particularly on the pack itself. With the multiplicity of printing methods and packaging substrates in which branded packaging appears today (from glass, metal, folding cartons and labels to corrugated cases, rigid plastics and flexible plastics), it is vital that a consistency of image is maintained in all the ways in which a brand appears on any one package at any one time. An inconsistency in a global brand in terms of colour of pack, style or use of logo across different packaging materials, for what should be the same consistent recognisable image, can have devastating effects for the brand owner, ultimately devaluing the brand.
The need to be consistent in brand communication is complicated today by the need for complex and detailed information to appear on any pack. Features for more robust methods of product tracking and traceability, much of which is required by legislation and regulation, now appear. The strict legal requirements for consumer information must be clearly displayed on the outside of the package, allowing customers to check before purchasing exactly what is inside. In the case of the food market they will need to know where the goods come from and even detail about whether allergic reactions could result. Nutritional information is now listed in some cases, and more recently carbon footprint details. All of this means that consistent communication will become more difficult to achieve. On a small area of a pack a brand image and identity will require careful control and management to ensure it is accurately and precisely displayed, amongst all the other legal and mandatory information. Nevertheless, it must be adhered to at all times. The marketer and the packaging technologist will need to work closely together to ensure everything is included and the brand integrity is consistently maintained.
In the pharmaceutical market the leaflet label containing all statutory and legal information, including product contents, has proved to be a major benefit to ensure all these details are correctly displayed. The marketer will need to ensure this information is accurate, not least of all because it is normal today for many leaflets to be printed in multiple languages, for international/global markets. This all comes down again to consistency of communication and the importance of retaining pack and brand integrity.
Often today FMCG producers employ marketing communications or design agencies to create much of the image and brand identity which appears on packs. With multi- million-pound budgets, specialists with creative skills are often needed to convey high-profile messages to sophisticated audiences. Whilst their role is important, ultimately it is the in-house marketer’s responsibility, working closely with the packaging technologist and other functions in the company, to ensure that image consistency, in all pack formats, is maintained at all times.
The marketing process starts in many companies with the concept or idea of a new product. It ends when the product is ultimately bought again by the consumer. However, to get to this final stage, many processes have to be gone through. In the definition of marketing provided by the Chartered Institute of Marketing the words identifying, anticipating and satisfying customer requirements are used. The market research phase of any new product launch is the ‘identifying’ part of this definition, because identifying in this instance means to look at or understand the requirements of the market. This can only be effectively achieved by thorough market research.
If the idea is a new one, much market research and evaluation has to be carried out to determine whether the idea or the product concept is viable, both economically and technically. Equally, if the product is a change or modification to an existing one, clear objectives have to be drawn up to establish the criteria for the change.
In assessing consumer needs, the marketer is assisted by market research and the many tools available to him or her. Without doubt, intuition, flair or ‘ gut feel’ still have a role to play. Often a new idea or concept for a pack starts life just like that – a thought at an unlikely time which sparks off a discussion or debate in the company. However, today, in the highly competitive FMCG market, analytical assessment of consumer needs and desires is vital. It is a fact that the majority of new product launches fail. The figure is as low as a 2% success rate in many areas. Only products which are well researched, fit the market needs and are well packaged and promoted will ultimately be successful. Market research can be carried out at any stage of marketing activity.
As an initial evaluation of a company’s competitive position, SWOT analysis is a valuable market research tool. It stands for Strengths, Weaknesses, Opportunities and Threats. Normally strengths and weaknesses are determined by internal factors, whereas opportunities and threats are determined by external factors. Strengths can help improve your product, market share or performance. Weaknesses can contribute towards losing competitive advantage, market share or financial performance. Opportunities and threats are factors which exist in the market. One example is a competitor launching a new product which could impact significantly on sales values. Arguably this could be a threat and an opportunity, depending on how this is viewed. It could be an opportunity to launch a superior more advanced alternative product or a threat because it could take sales away from your company’s product.
Research can then continue into specific segments of the market. Gap analysis (finding out where there are pockets of demand for specific products or services not being currently met) is a very useful technique. It is first necessary to decide how to judge the gap over time, for example by market share, profit, sales and so on. Then ask two simple questions – ‘where are we now?’ and ‘where do we want to be?’. The difference between the two is the gap. The next stage is to close the gap and decide on methods as to how this can be achieved. Strategic gap analysis and tactical gap analysis will help in this process.
Gap analysis is followed by researching prospects in those specific segments identified, to find out details of size, price, variety, colour and so on, of a product which will be acceptable to potential customers. This will not only lead to more customers being reached who will ultimately buy the product, but also reduce the number of potential competitors to be faced. Finding a niche market can often be the key to success for small, medium and sometimes even large companies. Some niche markets will be very distinct, others will be more subtle. The product could also cross several market segments and marketing activities might need to be adjusted as a result.
During the stages of product and pack development, there will be further research to test performance in use and consumer reaction. Consumer panels are a very useful way to gauge reaction to different pack concepts. A variety of new pack designs can be presented to the panel and their feedback to each new idea is often a very important factor in deciding whether to proceed to market with a new idea or concept. A range of shapes, materials, colour and print options will be presented. Opinions or preferences already expressed in a company about a potential new pack can often be reinforced or, indeed, refuted by this method. During the launch of a new product, research will also be used to test the effectiveness of advertising and promotional campaigns to see how well the product is being received.
When researching a product or a market sector there are various ways of segmenting the information for ease of analysis. One of these techniques is known as demographics. It works by dividing the population into categories. This essentially sorts the population by:
In the UK this is normally done according to job function or occupation of the head of the household or chief income earner, as shown in Table 6.1. Retired persons who have a company pension or private pension, or who have private means are graded on their previous occupation.
|Socio-economic group||Occupation of chief income earner|
|A||Higher managerial, administrative or professional|
|B||Intermediate managerial, administrative or professional|
|C1||Supervisory or clerical and junior managerial, administrative or professional|
|C2||Skilled manual workers|
|D||Semi and unskilled manual workers|
|E||All those entirely dependent on the state long term, through sickness, unemployment, old age or other reasons|
In addition to the standard categorisation, mintel, the international market research group, also analyses the consumer research it undertakes in another way. ‘Lifestages’ are derived from analysis of Mintel’s own consumer research and are split into four main groups:
Mintel has also created special groups of consumers to typify consumer habits in the early years of the twenty-first century. Some Mintel reports also use consumer research analysed by ACORN category. This is a geo-demographic segmentation method, using census data to classify consumers according to the type of residential area in which they live. Each postcode in the country can, therefore, be allocated an ACORN category. With all these tools at their disposal, the marketer should be well armed with information to make informed decisions about potential pack success.
However, there are many other factors which influence purchasing decisions, such as personal preferences, which are not identified by demographics. This is where psychographics becomes a useful tool, because it gives information on what actually motivates people. Psychographics is a term used in marketing to describe consumer buying motivation and behaviour. Psychographics essentially segments a market for marketing purposes by classifying potential customers by their attitudes and values. It investigates what makes a consumer want to buy a product.
Even though you may have determined your demographic group, people within that group still have very different perceptions about the benefits or value of a particular product and will be motivated for different reasons. These differences are known as psychographics. The need is to determine not only who will buy your product, but what makes them want to buy it. Psychographic information such as spending patterns, whether consumers are brand conscious, what influences their buying behaviour and what promotional methods they respond to most, are all essential pieces of information.
Psychographics is a valuable tool to identify motivation factors. Market research is a tool to help identify the need. It then helps to answer whether a proposed product or offering meets that need. For example:
Market research, particularly at the consumer panel/consumer research stage, can provide answers to some vital questions, in deciding whether a product or pack will succeed. Market research will reveal whether the target consumer recognises the offering. It will tell us:
Tests may be conducted using new packs against old, new packs against the competition and new packs against variations or alternatives to each other. The ‘winner’ is normally the most preferred option, although there is rarely an outright winner. Such testing or research panels are conducted after researchers have identified a suitable group of people and recorded reactions to the packs.
For new product development, as well as researching the effectiveness of a design, it is essential to test that the product meets the needs of the consumer from a perception viewpoint, as well as in reality. Does it deliver all the emotional benefits which are expected? Does it provide the correct perceived value? Is it correctly positioned in the marketplace? The elements which make up this positioning can be assessed and categorised in many ways.
Research can be conducted by consumer panels, sometimes in town centres or shopping malls, or products can be given to individual consumers who are asked to try them at home and report their findings. The information derived from these tests helps the marketing professional to fine-tune the product and the packaging to give a greater guarantee of success when finally launched. All this is essential so as to avoid unnecessary cost. An unsuccessful new product launch will cost many millions, in the case of a major FMCG producer brand launch. The research will also reduce the chance of failure, because extensive research and investigation has been conducted into the viability of the new pack or concept before it is actually launched.
Test markets are another way to avoid the large financial cost of failure. By this method a smaller launch, sometimes regional (such as in a particular commercial TV region), will be undertaken. The feedback from the consumer reaction in this area will help the FMCG company decide whether they can proceed to a full-blow national or international launch. If the response is negative, the full launch can be cancelled and large amounts of money saved.
Competitor research can play a vital part in any decision to launch a new product or modify an existing one. Marketing strategy must reflect what the market is looking for in terms of new packs (e.g. lightweight, environmental benefits, less material content) and what the pricing policy should be. Successful positioning of a new product in the market can only be achieved if its market position and perception have been fully evaluated against its competitors. Also any promotional campaign will need to be effectively planned and researched so that a new product’s advertising is sufficiently different from that of its competitors. All of this is essential because, as we already know, most new product launches fail. Without market research the likelihood of failure is even greater.