Kit Kat Case Study

Kit Kat Case Study Assignment #1

2/27/2013 INSTITUE OF BUSINESS MANAGEMENT SAADIA MANSOOR AHMED-12809

Q1. What is the situation facing Kit-Kat: the strengths and weaknesses of the brand and the opportunities and threats it faces? Answer: Strengths:  The 2-finger format is the market leader in the Chocolate Biscuit Countline sector.  The high quality product is hard to copy.  Their leading position in the market gives them a price premium.  They are already an established brand so they have a high advertising budget. Weaknesses:  The 4-finger format is not hunger satisfying compared to its competitors on the market  The 4-finger format is not the market leader, only a weak no. 3. It cannot dictate prices or products. Opportunities:  Demographic: the lifestyle is becoming busier, people are tending to digest a small snack in between rather than eat a real meal  Market: customers are welcoming new kinds of flavors, recent releases of new Kit Kat flavors has shown that it will be pretty successful Threats:  Competitive activity: Price cutting actions by groceries are giving hard competition to Kit Kat. New brands are pushing their way into the market, taking away some of Kit Kat’s market share.  Demographic: Shifting consumer age forces Kit Kat to define new target groups, advertisements have to be improved.  Economics: Less salary will make things like Kit Kat become a luxury; there is a possibility that their sales would be reduced.

Q2. Why are the Kit Kat two-fingers and four-fingers marketed differently? How do the customers for the Kit-Kat four-finger differ from those for the Kit Kat two-finger? What are the differences in the way the company addresses the two target markets? Answer: They are market differently because the two different types of target groups and they should not compete with each other. Also they are acting in two different markets (CBCL and General Chocolate Countline). 2-fingers: Like already mentioned the target groups are parents, who buy the bar for their children. To encourage them to buy the Kit Kat they offer special promotion like buy one, get one for free. 4-finger: the target groups of the 4-finger bar are 16-24 years old customers. To encourage this group to buy the bar they make promotions at the Point of Sale, like giving out samples.

Q3. What is the effect of European integration on the marketing of Kit Kat? What are the barriers to the brand's standardization across Europe? Should the company now move towards standardizing its brand and packaging across Europe?

Answer: First of all, Europe`s nations differ in their people`s habits, customs, traditions and mentalities. That`s why an advertising campaign may work in the UK but not in Germany because those two countries have a different sense of humor.

Moreover, there are different advertising laws existing in Europe. Whereas the comparison of two products in an advertisement is legal in the UK, this method is not allowed in Germany. Another barrier is the different income levels in Europe which make a standardized price policy very difficult in the Pan-European market. There is also the question of packaging which differs from one country to another. A standardization might be difficult because e.g. in the UK the unpacking of a Kit Kat bar has become a ritual. Concerning the ingredients of Kit Kat there also differences. In Germany Kit Ka Looking at the barriers making a standardization difficult, Nestle should not go for a standardization, at least not in every field. Concerning the packaging, Nestle should stick to the silver foil with the red band wrapped end to end in the UK, because of the earlier mentioned ritual way of unpacking Kit Kat and because of the competition with Cadburys, which product comes in a blue foil and a blue wrapper. A field where standardization might be useful is the production and manufacturing of Kit Kat. Importing Kit Kat Minis to the UK showed that consumers do not taste the difference in ingredients. A better usage of the company`s capabilities would also lead to lower production costs. Once again the question appears whether Nestle should use one marketing approach for one single European market or whether it should use different marketing approaches for separate markets. To act consumer-oriented in order to survive in the highly competitive confectionery market, Nestle should keep the different advertising styles they are already using. But although having these different styles, Nestle should try to build up a Pan-European image of Kit Kat is produced with other ingredients than in the UK.

Q4. How would you describe the organizational structure of the company and its marketing department? In what alternative ways could the company organize the management of its wide range of confectionery? What structure would you recommend? Prepare a brand plan for Kit-Kat Answer: The company has a cascade system. Each of its brands has an own marketing strategy and management. Each brand has its own goal and they are trying to pursue their company’s objective rather than defend themselves against competitors. Kit Kat’s organizational structure is Functionally organized: where functional specialists head different marketing activities and it also has a Product Management Structure: using this approach a manager develops and implements a complete strategy and marketing program for a specific product or brand. This is competitive world and must never forget that customers have a choice. If they are not satisfied with a Nestle, they will switch to another brand. The pursuit of highest quality at any price is no guarantee for success, nor is a single-minded cost-cutting approach. Lasting competitive advantage is gained from a balanced search for optimal value to customers, by simultaneous improvement of quality and reduction cost. Success can never be taken for granted. Nestlé must watch and learn from its competitors. If they do something better, Nestle must improve its own performance. Nestle can achieve competitive advantage through Quality. Although Kit Kat continued to be the Number 1 confectionery brand, by the late 1990s its volume sales were falling. Faced with several increasingly attractive competitive offerings, consumers began to see Kit Kat in its traditional form as lacking in excitement and interest, with purchases being driven more by habit than positive choice. Although the four-finger Kit Kat

continued to be highly popular with its core target market of 25-40 year olds, it was losing popular appeal with younger consumers. Quantitative objectives

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Nestlé should set demanding quantitative objectives for the launch. Nestlé must aim to: Achieve 90distribution in all sectors of the confectionery market. Increase sales in subsequent years.

Qualitative objectives  

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Nestlé also set several qualitative objectives. These are to: Broaden the number of occasions on which people consume Kit Kat, with the vision that Kit Kat would be the natural choice for all breaks Increase Kit Kat's market penetration by enticing new consumers to the brand, and by persuading lapsed users to return to the product, with particular emphasis on the 12-20 year old segment Create real innovation in the CBCL market.