Distribution

Distribution forms the 4th P of Marketing and is extremely crucial in reaching out the product from the manufacturer to the consumer. Distribution refers to how an organisation will distribute the product or service they are offering to the end user. The organization must distribute the product to the user at the right place at the right time. Efficient and effective distribution is important if the organisation seeks to meet its overall marketing objectives. If an organisation underestimates demand and customers cannot purchase products because of it, profitability will be affected.

Two types of channel of distribution methods are available. 

Indirect distribution involves distributing your product by the use of an intermediary for example a manufacturer selling to a wholesaler and then on to the retailer.

Direct distribution involves distributing direct from a manufacturer to the consumer For example Dell Computers providing directly to its target customers. The advantage of direct distribution is that it gives a manufacturer complete control over their product.

FMCG products follow an indirect distribution channel. The reasons are as follow:

1. Large consumer base
2. Faster and convenient distribution
3. Small shelf life

Being a FMCG product it is in the best interest of the company to engage in indirect distribution. Maggi typically follows the distribution channel comprising manufacturer, distributor, stockist, retailer and consumer.

Promotions

Promotions refers to a specific combination of methods used to promote one product or a variety of products. Elements of a promotion mix may include print or broadcast advertising, direct marketing, personal selling, point of sale displays, and/or merchandising.

The promotion mix majorly involves Above the line, Below the line and Intergrated marketing Communication.

Above the line (ATL), below the line (BTL), in organizational business and marketing communications, are advertising techniques, or different strategies companies use to sell their products.

In a nutshell, while ATL communications use media that are broadcast and published to mass audiences, BTL communications use media that are more niche focused. While both ATL and BTL communications can be used to either build brand awareness or drive sales through specific offers (promotions), it is BTL communication that gives the marketer the ability to tailor their messaging in a more personal manner to the audience.

More recently, agencies and clients have switched to an 'Integrated Communication Approach' because of the expansion in terms of media avenues that can be exploited to reach out to the consumers. It is the closest approach to "Through the line" form of promotions which mixes up attributes of Above and Below the line promotions.

Let us attempt to understand the three concepts in greater depth before resorting to our analysis in case of  Maggi Pazzta.

Above the line promotion

Above the line is a type of advertising through media such as TV, cinema, radio, print, banners and search engines to promote brands. Major uses include television and radio advertising, web and Internet banner ads. This type of communication is conventional in nature and is considered impersonal to customers.

BTL (Below The Line) Promotion:

Below the line sales promotions are short-term incentives, largely aimed at consumers. With the increasing pressure on the marketing team to achieve communication objectives more efficiently in a limited budget, there has been a need to find out more effective and cost efficient ways to communicate with the target markets. This has led to a shift from the regular media based advertising. In other words, below-the-line sales promotion is an immediate or delayed incentive to purchase, expressed in cash or in kind, and having only a short term or temporary duration.

Below the Line uses less conventional methods than the usual specific channels of advertising to promote products, services, etc. than Above the Line strategies. These may include activities such as direct mail, public relations and sales promotions for which a fee is agreed upon and charged up front. Below the line advertising typically focuses on direct means of communication, most commonly direct mail and e-mail, often using highly targeted lists of names to maximize response rates.

Integrated Marketing Communications:

Integrated marketing communications (IMC) is an approach to brand communications where the different modes work together to create a seamless experience for the customer and are presented with a similar tone and style that reinforces the brand’s core message. Its goal is to make all aspects of marketing communication such as advertising, sales promotion, public relations direct marketing, online communications and social media work together as a unified force.

IMC is becoming more significant in marketing practice because of the reduced cost effectiveness of mass media and media fragmentation.Increasingly the strategies of brands cannot be understood by looking solely at their advertising.Increasingly the strategies of brands cannot be understood by looking solely at their advertising.

Maggi pazzta follows more of ATL promotions but has lately adopted the IMC approach. It integrates digital advertising and promotion strategies with personal touch based social mediums like facebook. Maggi Pazzta does 360 degree promotion, which includes TV, Radio, Print and Digital.

Price

Pricing

Pricing is the process of formulating a monetary value for the product in terms of what the company aims to receive in return for the entrepreneurial and financial investment put into its operations.

Pricing  is the thin line that connects the demand and supply factors at play in the market. Both these forces approach one another and interact through changes in the pricing mechanisms and policies.

Consumer Buying Psychology:

Reference Prices:  Consumers have a fairly good idea of the price range for a product, but rarely do they recollect the exact price. When examining a product, consumers often employ Reference Prices, where they compare the observed price to an internal reference price(reference in these terms is made to other products of a similar nature in that specific industry).

For example: Maggi Pazzta is priced at Rs. 23 and Sunfeast Pasta at 18. Other ready to eat noodles like yipee is priced at Rs 20, Ching’s noodles is priced at Rs. 15. So the consumer has a fair idea that to buy such products he may have to shred around 20 bucks.

Price- Quality inferences: Many consumers employ price as an indicator to form perceptions about the quality of a product. Some brands adopt exclusivity and scarcity to signify uniqueness and justify premium pricing. For ex: luxury products, jewellery, high segment automobiles, premium watches etc.

In ready to eat food category, this factor does not play an important role and the choice of product depends entirely on consumers likes and dislikes.

Price endings: Many sellers believe that prices should end in an odd number because for example: many customers see an amplifier priced 2999/- in the range of 2000/- rather than rounding it off to 3000/-

Prices ending in 5 or 0 are easier for the customer to process and retrieve from memory but the technique of manipulating these figures in terms of price endings is in line with the idea of reference prices. A consumer would not find it inconvenient to deal with price listings that end in odd number because he would generally be able to keep the range in mind while deciding between alternatives during the buying decision process.

Maggi Pazzta has distinguishably priced itself at Rs. 23 which a consumer may not forget easily because of its uniqueness to have an odd digit in the end.

Product

The first component of 4 Ps of marketing is product, which can be understood in two forms:

The literal concept

Product Mix is the full set of products offered for sales by an organization. The product mix includes all product lines and categories, which is the variety of products the company has to offer.
For example: Maggi offers products such as Noodles, Pazzta, Sauces, Soups, and Masala.

The broad dimension

Product Mix can be seen as a constitution of various elements including the conception, production, branding and packaging of the product. Together these elements form a certain product offering. Product mix discusses the range of various such offerings.

The four dimensions to a company's product mix include width, length, depth and consistency.

    Width: The width of a company's product mix pertains to the number of product lines that a company sells. For example, if a company has two product lines, its product mix width is two. Small and upstart businesses will usually not have a wide product mix. It is more practical to start with some basic products and build market share. Later on, a company's technology may allow the company to diversify into other industries and build the width of the product mix. 
The width of the product mix in the case of Maggi incorporated Maggi Sauces, Maggi Soups, Maggi Noodles, Maggi Masalas, and Maggi Pazzta.

   Length: Product mix length pertains to the number of total products or items in a company's product mix, according to Philip Kotler's textbook "Marketing Management". For example, ABC company may have two product lines, and five brands within each product line. Thus, ABC's product mix length would be 10. Companies that have multiple product lines will sometimes keep track of their average length per product line. In the above case, the average length of an ABC Company's product line is five.  
In Maggi Pazzta, the product length is 4, as it is available in four variants; Cheese Macroni, Tomato twist, Masala Penne, and Mushroom Penne.

Depth: Depth of a product mix pertains to the total number of variations for each product. Variations can include size, flavor and any other distinguishing characteristic. For example, if a company sells three sizes and two flavors of toothpaste, that particular brand of toothpaste has a depth of six. Just like length, companies sometimes report the average depth of their product lines; or the depth of a specific product line.
Maggi Pazzta does not have a depth of its own. As the product is available in a uniform weight and size, along with four variants.

What is Marketing Mix?

A planned mix of the controllable elemnets of a products marketing plan commonly termed as 4Ps: product, price, place, and promotion.These four elements are adjusted until the perfect combination is found, which serves the needs of the customers while generating operatingf income.

THE PRODUCT: Product includes, what value are you going to sell to the market? Define it in terms of what it does for your customer. How does it help your customer to achieve, avoid or preserve something? You must be clear about the benefit you offer and how the customer’s life or work will be improved if he or she buys what you sell.

THE PRICE: Price includes how much are going to charge for your product or service, and on what basis? How are you going to price it to sell at retail? How are you going to price it at wholesale? How are you going to charge for volume discounts? Is your price correct based on your costs and the prices of your competitors?

THE PLACE: Where are you going to sell a product at this price? Are you going to sell directly from your own company or through wholesalers, retailers, direct mail, catalogs or the Internet? 

THE PROMOTION: Promotion includes every aspect of advertising, brochures, packaging, salespeople and sales methodology. How are you going to promote, advertise and sell this product at this price at this location? What will be the process from the first contact with a prospect through to the completed sale?

Product Life Cycle and Industry Life Cycle

Similar to the human life cycle, the change in variables along the course of the product's life cycle, plays a vital role in defining the segmentation and differentiation approach. Let us understand this concept in greater depth in terms of Maggi Pasta.

 

 

PRODUCT LIFE CYCLE (PLC)

A new product passes through set of stages known as product life cycle. The time-span of a product life cycle varies from product to product. Modern product life cycles are becoming shorter as products falling in mature stages are being renewed by market segmentation and  product differentiation.

Companies always attempt to maximize the profit and revenues over the entire life cycle of a product. In order to achieving the desired level of profit, the introduction of the new product at the proper time is crucial. If new product is appealing to consumer and no stiff competition is out there, company can charge high prices and earn high profits.

CHARACTERISTICS OF PRODUCT LIFE CYCLE

• PRODUCTS HAVE LIMITED LIFE

• PRODUCT SALES PASSES THROUGH DIFFERENT STAGES, EACH POSES A DIFFERENT CHALLENGE AND OPPORTUNITY.

• PROFITS RISE AND FALL AT DIFFERENT STAGES OF LIFE CYCLE.

• PRODUCTS REQUIRE DIFFERENT STRATEGIES IN DIFFERENT LIFE CYCLES.

STAGES OF PRODUCT LIFE CYCLE

Product life cycle comprises four stages:

1. Introduction stage
2. Growth stage
3. Maturity stage
4. Decline stage

INTRODUCTION STAGE

Product is introduced in the market with the intention to build a clear identity and large scale promotion is done for creating awareness. 

Companies incur more costs in this phase and also bear additional cost for distribution. On the other hand, there are a few customers at this stage, which means low sales volume. So, during introductory stage company’s profits shows a negative figure because of huge cost but low sales volume.

At introduction stage, the company core focus is on establishing a market and raising demand for the product. So, the impact on marketing mix is as follows:

Product

Branding, Quality level and intellectual property and protections are obtained to stimulate consumers for the entire product category. Product is under more consideration, as first impression is the last impression.

Price

High pricing is used for making high profits with intention to cover initial cost in a short period and low pricing is used to penetrate and gain the market share. company choice of pricing strategy depends on their goals.

Place

Distribution at this stage is usually selective and scattered.

Promotion

At introductory stage, promotion is done with intention to build brand awareness. Samples/trials are provided that is fruitful in attracting early adopters and potential customers. Promotional programs are more essential in this phase. It is as much important as to produce the product because it positions the product.

Maggi pazzta entered the market when there was only a single leader in the pasta category, Sunfeast. Also since, the brand maggi was already established in India for years, the launch of maggi pasta was welcomed by the consumers.

GROWTH STAGE

In this stage, company’s sales and profits starts increasing and competition also begin to increase. The product becomes well recognized at this stage and some of the buyers repeat the purchase patterns. During this stage, firms focus on brand preference and gaining market share. It is market acceptance stage. But due to competition, company invest more in advertisements to convince customers so profits may decline near the end of growth stage.

Effect on 4 P’s of marketing is as under:

Product

Along with maintaining the existing quality, new features and improvements in product quality may be done. All this is done to compete and maintain the market share.

Price

Price is maintained or may increase as company gets high demand at low competition or it may be reduced to grasp more customers.

Distribution

Distribution becomes more significant with the increase demand and acceptability of product. More channels are added for intensive distribution in order to meet increasing demand. On the other hand re-sellers start getting interested in the product, so trade discounts are also minimal.

Promotion

At growth stage, promotion is increased. When acceptability of product increases, more efforts are made for brand preference and loyalty.

Maggi Pasta is in its growth stage, where it uses several promotional tools like recipe contests over internet, TVCs, and so forth.  Maggi pasta recently added two new variants to the existing ones, Tomato twist and Mushroom Penne.

MATURITY STAGE

At maturity stage, brand awareness is strong and sale continues to grow but at a declining rate in comparison to the past. At this stage, there are more competitors for the same products. Companies tend to defend the market share and attempt to extend their product life cycle, rather than make profits, by offering sales promotions to encourage retailer to give more shelf space to the product than that of competitors. At this stage, loyal customers are a key ingredient in the recipe for a winning hand.

Marketing mix decisions include:

Product

At maturity stage, companies add features and modify the product in order to compete in market and differentiate the product from competition. At this stage, it is the best way to get dominance over competitors and increase market share.

Price

Because of intense competition, at maturity stage, price is reduced in order to compete. It attracts the price conscious segment and retains the customers.

Distribution

New channels are added to face intense competition and incentives are offered to retailers to get shelf preference over competitors.

Promotion

Promotion is done in order to create product differentiation and loyalty. Incentives are also offered to attract more customers.

Maggi is yet to hit its maturity stage where the sales would become constant. For now maggi sales are increasing in a subtle way and thus it is time for maggi pasta to hit this stage.

DECLINE STAGE

Decline in sales, change in trends and unfavorable economic conditions are important factors of the decline stage. At this stage, market becomes saturated and sales declines. This may be due to technical obsolescence or change in customer's taste and preferences.

At decline stage company has three options:

1. Maintain the product, Reduce cost and find new uses of the product.
2. Harvest the product by reducing marketing cost and continue offering the product to loyal niche until zero profit.
3. Discontinue the product when there’s no profit or in the case of availability of  a possible successor or selling out to competitors who want to keep the product.

Maggi pasta has not hit the declining stage and it will not be hitting the stage any sooner because of the less direct competition in the category. Sunfeast and Pasta are the only ready to eat pasta makers in India for now.

LIMITATIONS OF PRODUCT LIFE CYCLE (PLC)

Product life cycle is criticized that it has no empirical support and it is not fruitful in special cases. Different products have different properties so their life cycle also vary. It shows that product life cycle is not best tool to predict the sales. Sometimes, managerial decisions affect the life of products in this case Product Life Cycle is not playing any role. product life cycle is very fruitful for larger firms and corporations but it is not hundred percent accurate tool to predict the life cycle and sales of products in all the situations.

Industry Life Cycle (ILC)

Industry Life cycle is essentially a larger variant of the Product life cycle where the development of the industry (encompassing all kinds of brands and product offerings under the umbrella of the same industry) is traced through stages of Growth, maturity and decline. It is not directly applicable in the case of Maggi Pazzta but according to the larger operating math,  the ready to eat segment in the instant food industry as a whole can both be classified under the growth stage of the ILC.

An important integrated concept that needs to be understood is the marketing mix as it is THE COMPLETE product of a marketing process and is tailor-made in keeping with the phases in the Human Life Cycle, PLC, BLC and ILC.

Competition

Competition refers to an entity that produces similar products or services as yours and thus have the potential of hapmering your cutomer base. Competition may include direct or indirect competition. 

Direct competition refers to the same kind of products or services offered by different sellers. Whereas Indirect competition refers to the different kinds of products or services that satisfy the same requirement.

Competition analysis

ROLE OF COMPETITION ANALYSIS

• To help management understand their competitive advantages/disadvantages relative to competitors by generating understanding of competitors’ past, present (and most importantly) future strategies

• To provide an informed basis to develop strategies to achieve competitive advantage in the future

• To help forecast the returns that may be made from future investments (e.g. how will competitors respond to a new product or pricing strategy?)


Competitors of Maggi

Maggi pazzta is a new category added to the brand maggi. Maggi pazzta, faces direct competition from Sunfeast Pasta, which offers a wide variety of pasta and indirect competition from ready to eat snacks like Top Ramen, Wai Wai, Yipee Noodles, Ching's Noodles. It may also face indirect competition from category of soups like Knor, Ching's and so on.

Does 'maggi pasta' face a competition with 'maggi noodles'?

Maggi noodles has established a market for its own. It is a brand which has carved a major share of the market. Maggi pazzta does not face competition from maggi noodles because Maggi Pazzta has a customer base, which are loyal to brand maggi but have a taste for pasta.