David Chocolatier Business Strategy Analysis

David Chocolatier

 

 

Executive Summary

This report is about David Chocolatier and how he runs his business. I have advised him on many elements of his business. I found David cares greatly about his customers and his craft, that he went abroad to learn how to make his chocolate properly. He should react quickly to changing customer and technological changes. David has segmented his market very well. However, he needs to position his products beside all the other famous brands. David’s target market is anyone who enjoys delicious chocolate. David needs to do surveys to get a better idea of what customers want. David needs to think of charging slightly lower prices than he does already. He needs to work on his distribution. Overall, David is building a good business for himself but could have the potential to have more.

Table of Contents

Introduction

Discuss the factors in the micro and macro environment that impact on the business.

Microenvironment

1. Customers

2. Suppliers

3. Competitors

4. Distributors

Macroenvironment

1. Political/legal

2. Economic

3. Ecological/Physical

4. Socio/Cultural

5. Technology

Discuss the segmentation variables & targeting & positioning strategies that are most applicable to this business.

Segmenting Variables:

Targeting Strategies:

Positioning Strategies:

Determine the types of market research which you would conduct with a view to new product development.

Types of market research

Ad-hoc Research

Continuous Data

Describe and comment on existing product, product line(s), range & branding.

Advise David on pricing (premium) products & product lines & the product range.

Advise on distribution: (English) market, online & other intermediaries).

Conclusions & recommendations.

References

Figure 1: The Micro-environment and Macro-environment

Figure 2: How Segmentation, Targeting and Positioning apply to digital marketing strategy

In this report I will be talking about David Chocolatier and advising him on how to market his business in a better way. I will be advising him on the micro and macro-environment, segmenting his market and business strategies, types of market research he could conduct, branding, pricing and distribution for his business. This advise could potentially help him grow his market and expand his business.

Figure 1: The Micro-environment and Macro-environment

Sourced by: (ericmoe18, 2015)

(Pahwa, 2018) cites that the marketing Environment is the combination of external and internal factors and forces which affect the company’s ability to establish a relationship and serve its customers.

Microenvironment

Forces that that affect the company and its ability to serve its customers. The actors in the microenvironment are: Customers, Suppliers, Competitors and Distributors.

Customers: There is a need to study customers closely as they are essential to any business. This will determine if the business will be a success or failure. The willingness to adapt to tailor the customers needs and wants are vital as this will cause customers to be loyal. From my research, David has travelled to Italy, France and Belgium to learn the art of chocolate-making from the world’s most renowned chocolatiers (Chocolatier, 2015). This shows me that David cares about his customers as he wants them to be in pure delight while enjoying their chocolate. However, I would advise David to learn more about the customers wants and needs as he will find out what customers would like to buy and would eat. Having knowledge about customers trends and changing with the trends is essential for success.

Suppliers: (Blog, 2014) cites that suppliers can control the success of the business when they hold the power. The supplier has the power when they are the only or the largest supplier of the company’s goods; the buyer is not vital to the supplier’s business. David needs to treat his suppliers as his partners, therefore, building good relationships with them and paying suppliers on time. David should keep on top of his stock take and make sure everything is running smoothly to avoid the business having trouble in the future, in case of strikes or stock shortages and not paying debts.

Competitors: Competitors are those with products and services that are considered by consumers as being reasonable substitutes for other products. There is a need to understand competitors’ strengths, weaknesses, strategies and response patterns. Looking at competitor’s response to changing trends and prices will help businesses in the long run. I think David should react quick to the trends and get a step ahead of his competitors.

Distributors: Help the company to promote, sell, and distribute its goods to final buyers e.g. resellers. This may change distribution channels to keep in touch with customers. David should distribute elsewhere besides at the English Market and online and sell in other counties to promote his chocolate. He wants it to be known that his chocolate was made in Cork, however I think he is losing out on more profits because he not selling anywhere else.

Macroenvironment

The company and all the other factors operate in a larger macroenvironment of forces that shape opportunities and pose threats to the company. Factors such as; Political/Legal, Economic, Ecological/Physical, Socio/Cultural, Technology.

Political/legal: Determines the rules by which business can be conducted. Certain laws can restrict what can be made and how a product is made, how much of a certain ingredient can be in a product. For example, there is sugar taxes in certain countries, so this may stop companies from putting more sugar in their product than they want as the tax may be high to produce. David should have all the ingredients and allergens listed on the packaging of the chocolate. Listing the ingredients should help him avoid legal action against the company.

Economic: Economic environment can affect supply and demand. David needs to predict economic boom and recession. Example: recession may lead to fewer purchases of luxuries, so this may lead to lack of demand for David’s chocolate as he puts his chocolate at a premium price. If the country is in recession, David may want to reduce his prices to keep him in business and to maintain the customers he has and attract new customers.

Ecological/Physical: (Pahwa, 2018) cites that the physical environment includes the natural environment in which the business operates. This includes the climatic conditions, environmental change, natural disasters and pollution. All businesses have an obligation to their customers and the environment to be environmentally friendly. When David is manufacturing his chocolate and packaging, he needs to bare this in mind when doing so. David should make sure his packaging is recyclable or biodegradable. Make sure that the ingredients are environmentally friendly.

Socio/Cultural: (Blog, 2014) cites that the impact the products and services your organisations bring to market have on society must be considered. Any aspects of the production process or any products/services that are harmful to society should be eliminated to show that your organisation is taking social responsibility. David needs to investigate customers beliefs and values when know what to make for his products, how to design his product.

Technology: (M., 2015) cited that as technology is advancing day by day, the firms have to keep themselves updated so that customers’ needs can be met with more precision. Technology may pose a threat if firms cannot compete with their rivals. David needs to keep up to date with newest technological trends for his business to thrive. I would advise him to give more information on his website, promote his chocolate on social media such as; Facebook, Instagram etc. This will promote his business to a far bigger audience than he already has.

 

(Hanlon, 2018) cited that today, Segmentation, Targeting and Positioning (STP) is a familiar strategic approach in Modern Marketing. It is one of the most commonly used marketing models. A SWOT matrix is also used in modern marketing, this helps identify a company’s Strengths, Weaknesses, Opportunities and Threats. This popularity is recent since previously, marketing approaches were based more on products rather than customers. In the 1950s, for example, the main marketing strategy was ‘product differentiation’ cited by (Hanlon, 2018).

This visual from Dave Chaffey of Smart Insights book shows how Segmentation, Targeting and Positioning apply to digital marketing strategy.

Figure 2: How Segmentation, Targeting and Positioning apply to digital marketing strategy

Sourced by: (Hanlon, 2018)

Segmenting Variables:

Behavioural Variables

Benefits sought from the product and buying patterns, purchase occasion (gift giving), purchase behaviour (brand loyalty), usage and perceptions, attitudes, beliefs and values. Brand loyalty is very important in any business but if David could identify his loyal customers that would help him massively.

Psychographic Variables

Used when it’s believed that purchasing behaviour is correlated with the personality (brand choice reflects self-expression) and lifestyle (reflects on interests and opinions) of consumers.

Profile Variables

Using socio-economic variables (social class, education and income), geographic location (preferences) and demographic variables (gender, age and family life cycle).  Certain people who buy David’s products may not be able to buy his chocolate all the time due to income or where they person is living. David could introduce stores elsewhere to fix this problem.

To apply the marketing idea and successfully satisfy customer needs, different products and services must be made available to diverse customer groups. For example, David makes milk, white and dark chocolate. However, he should start to make chocolate with different types of nuts and other ingredients. He should make chocolate for vegetarians and vegans so that he will have more of a market and this way he could have something for everyone. He could also segment into the hot chocolate business and making the powder hot chocolate. White, milk and dark hot chocolate cold be made with different flavours for example caramel.

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David could also venture out into the chocolate milk segment if there was a gap in the market. However, there is a lot of competition in the chocolate market. If David could make his chocolate brand known to a lot more people, he could then venture off to segment more. I would advise and encourage David to make his brand known to others through social media and advertising it on TV. This would greatly help him in the future.

 

Targeting Strategies:

Target Your Best Customers: (Tools, 2018)

You should decide which segments to target by finding the most attractive ones. There are several factors to consider here.

Profitability of each segment. Who contributes most to David’s business? What is the potential growth of David’s customers, is it a continual growth? How does it relate to its other segments?

I think David should really look closely at who his market is and who he wants to market at other than the market he has if he is to expand his business. He should also consider what is the scope of his customers. David should have an idea of who he is targeting his market at, such as who can afford his product and where people are living.

Positioning Strategies:

(Smartling, 2010) cited that a positioning strategy is a deliberate branding plan or process that operates on the symbolic levels of consumer consciousness, where meanings and associations – even of individual words – really hold weight.

Successful positioning is often associated with products or services possessing favourable connotations in the minds of consumers. This positioning relies on four factors:

Clarity – the positioning idea must be clear

Consistency – consistent message required

Credibility – differential advantage must be credible

Competitiveness – differential advantage must be competitive.

David should position his product to customers beside other well-known brands such as Cadbury or Nestlé. This would help David, as customers would see this new chocolate on the shelves if he would sell elsewhere other than the English Market or online. David should make a position matrix, and this would help him discover where he is placed in the matrix.

Figure 3 Perceptual Map

Sourced by: (Prasad, 2008)

Market research is mostly concerned with provision of information about markets and customer responses to various product, price, place and promotion decisions. Davis needs to do market research before developing any new products. When approaching market research, it is best if David does the marketing research himself.

Types of market research

Types of marketing research David could conduct is ad-hoc research and continuous research.

Ad-hoc Research

Ad hoc reports emphasise on specific marketing problems. Ad-hoc data collects data at one point in time from one sample of respondents cited by (Mikuljan, et al., 2018). For example:

Advertising testing

Product testing

David should conduct his market research by surveying the people and therefore this will help him discover what people would like to eat or drink and what types of chocolate they would like to savour. Advertising testing is similar to product testing. Tests of your advertising campaigns can save you valuable time and resources. By taking potential campaigns straight to your audience and evaluating their response you can focus on establishing a truly influential advertising (Mora, 2015). Product testing is having a thorough knowledge of how your product meets (or doesn’t meet) your customer’s needs or satisfactions is crucial both to product development and marketing, so these types of market research studies need to be conducted throughout a product’s life cycle (Mora, 2015).

Continuous Data

Gathers information from external sources on an ongoing basis, which means some respondents are interviewed frequently on a periodic basis. This will show the changes in customer trends. For example:

Consumer panels

Loyalty cards

Retail audits

Consumer panels study consumer buying patterns over a prolonged period of time. David should create a consumer panel, of people who are current or prospective customers should be on the consumer panel. David should be following customers purchases and therefore they will know their customers buying patterns. This will tell David how loyal his customers really are. Therefore, a company should have clearly identified its target segment and drawn a demographic profile of its target customer before it creates a consumer panel (Chand, 2018). Retail audits can help a company trace the sales of its brands by means of scans of barcodes on packaging which is scanned at the checkout. Since customers purchases are not tracked over a period of time, brand loyalty and switching behaviour of customers cannot be measured (Chand, 2018). Knowing who has switched brands is very useful to any business and this can show who is really loyal. Therefore, loyalty cards could be introduced to David’s business as this would be an incentive for customers to stay loyal and to keep buying David’s chocolates. Many businesses have introduced loyalty cards, and this seems to have helped to retain customers. I would advise David to get the cards made and send them out to all of his loyal and current customers. If any new customers come into his shop, he could offer them the loyalty cards also.

A product is anything that can be presented to a market for attention, use, or consumption and that might satisfy a want or need of a customer. David’s shop in the English Market specialises in Hot Chocolate, Milk / Dark / White / Diabetic / Flavoured chocolates, gifts, Irish Fudge and Cloudberry Macarons (Chocolatier, 2018). I think David has a very good existing product line. He has a chocolate bar, hot chocolate and macarons in his product line (AKA brand stretching). The product life cycle is a useful tool for the changes that may take place during the time that a product is on the market. It can be applied to both brands and product lines. Branding a distinguishing name or symbol intended to identify and differentiate products from those offered by competitors. His branding allows premium pricing for his product. He has a range of chocolates for all kinds of people to enjoy and indulge in. David could also make gluten free chocolate for people who have coeliac. This will make more people want to try his chocolate. He could also introduce chocolate with different types of nuts. For example, having options for a consumer is good to have as they would inevitably try all the different types of chocolate if they like nuts.

Price is the amount of money charged for a product or service. Pricing depends on what type of brand it is, how much of a profit is made in the business or what competitors are doing. David is able to charge premium pricing as he is making the product himself and it is in a existing business where chocolate is usually charged at a high price as competitors have done the same such as Cadbury’s and Nestlé. However, David could reduce his price slightly if he wanted to earn more as people would buy more. David could charge higher for his chocolate bars and lower prices for his hot chocolate product line.

Distribution decisions must be combined with other elements of the marketing mix. Products can develop a competitive advantage based on services provided through physical distribution activities. David also distributes online, which is beneficial for his business as he only sells in Cork. David should consider distributing in other shops such as Supervalu, Dunnes Stores, Centra, local stores etc. David could distribute his products to organisations who facilitate distribution. These intermediaries can provide specialised services. I think David should distribute by business to business (b2b) as the other retailers or department stores would be more known and it may be easier for his chocolate to sell.

In conclusion, David has a growing business which has been profitable. David’s business has a very good product line and range, David wouldn’t need to change too much on that part. However, he needs to distribute his products elsewhere as this would make his business more profitable. Distributing only in his store in Cork or online is not enough for him to be making a massive profit compared to other chocolate makers. I think David needs to focus on his existing products and product lines and market his products to his customers other than Cork. David’s pricing can stay where it is as he is proving a premium homemade product. Overall David has very exciting road ahead with his existing range.

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