Kellogg’s Business Strategy: Success Factors and Barriers

Introduction:
The importance of customers and their value plays a major role and cannot be neglected by the companies in today’s business world. The implementation of different new strategies and marketing plans will not help if the companies do not pay attention to the customers. Any company’s marketing plan agenda should and will always include customers. Customer focus and retention is a powerful strategic advantage that helps to increase the profitability of the company and to survive in the high competitive environment. The different consumers across the world might lead to varying consumer behaviours which result in identifying varying concepts by decision making units to sell the products.

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In a company like Kellogg’s the purchasing process is dependant on consumer behaviour. The buying pattern of the consumers has an influence on directly related phenomena as well as post marketing phenomena. Kellogg’s has seen a downfall in sales in the past decade and still continues to see. There is a huge discussion in the EU market about the food nutrition and labelling and the negative media image produced about the products of the company. The Kellogg’s products are criticised by food standard agency (FSA) as red products and junk food. They said that the company is trying to show their products healthier than they actually are. These statements and actions of FSA has not only affected the overall business and its image but also the consumer attitude towards the products. This report talks about how Kellogg’s can resolve the issue by using marketing research and customer focused strategy.
Company Profile:
Kellogg’s is the world’s largest cereal maker since 1906 and is located in the United States. Kellogg’s products has become a part of the delicious mornings for the people around the world since a century. Its business is operated in two segments: Kellogg’s North America and Kellogg’s International. 66% of the revenue to the company comes from North America region which consists of the Canada and the United States. The remaining 34% comes from the Kellogg’s international market which consists of Europe (20%), Latin America (8%) and Asia Pacific (6%). The products vary from ready-to-eat cereals to convenience foods such as cereal bars, cookies, toaster pastries, crackers, frozen waffles, snacks and veggie foods. Obesity and Health & Wellness is the primary concern for people in the world today. Kellogg’s has invested on this trend by introducing many health focused products like Kellogg’s®, Pop-Tarts®, Cheez-It®, Mini-Wheats®, Nutri-Grain®, Rice Krispies®, Keebler®, Special K®, Chips Deluxe®, Famous Amos®, Morningstar Farm®, Sandies®, Eggo®, Austin®, Club®, Murray®, Kashi®, Bear Naked®, Gardenburger®,All-Bran®,and Stretch Island®. The demand for its products came from the continuous advertising since 1906. The main competitors are General foods, Quaker Oats, General Mills and Ralston-Purina. It started out in Battle Creek, Michigan with 44 employees which eventually has grown into a multinational company with 30,000 employees. The manufacturing of its products is taking place in 18 countries and selling them over 180 countries successfully with the implementation of intelligent strategies and leadership.
Key Success Factors:
The main key factors for Kellogg’s Success are it perceived to have a healthy image when compared to other daily breakfasts and snacks like chocolates and crisps. They made the products convenient enough so that they can be carried anywhere easily. They offer a range of cereal bars which are quite useful for people on the morning rush. Few Kellogg’s products are really versatile as mom’s can give them as a snack between breakfast and lunch to their kids. Sodium content in the food is a major issue that the company has to deal with. Kellogg’s are trying to develop products with less salt content and including more amount of fruits in the bars and cereals for people with health concerns. They have created a high level of brand awareness in the people which allowed them to win the customer loyalty. They have designed various products since a century for all age groups from children’s to adults. Innovation has influenced Kellogg’s market to a greater extent. Introducing new products according to the changing markets and tastes of people from time to time has made Kellogg’s to win the customers. They offered the products at a lower price which made an average household to afford, hence retaining the customers at large. Kellogg’s market its products itself. It do not manufacture cereals for any other company who sells them under their own brand. All these factors added for the company to run successfully and become the world market leaders in the highly competitive market.
Strategy:
Kellogg’s aim was to be the food company of choice and also make customers understand the importance of a balanced lifestyle which can be achieved by their products. The mission is “to drive sustainable growth through the power of the people and brands by better serving the needs of customers, consumers and communities.” Based on their vision and mission they crafted their strategy to achieve aims and objectives with the power of position and brand image. Kellogg’s targeted various groups of people and deigned the products accordingly to attract their mind sets. ‘Balanced Lifestyle’ is the broad strategic objective of the company. It implemented these strategies by some tactical plans like supporting the physical activity among all age groups and to sponsor these activities with the use of companies resources, the communication of the balance diet to consumers using the cereal packs, and also introduction of food labelling which would allow consumers to understand the balanced diet content of their products. Kellogg’s has introduced the recommended Guideline Daily Amounts (GDA) to their packaging labels. This allowed the customer to have a knowledge of the amount of nutrients in take in a serving of Kellogg’s food. Their strategy is to attract customers by encouraging them to take part in the swimming programs organised by the company in relationship with the Amateur Swimming association (ASA). Kellogg’s has sponsored almost 1.8 million awards every year to the swimmers. This idea of teaming up with ASA has helped the company to reinforce its brand image. It also has started many community programs and breakfast clubs to create awareness of their products in people. By all these activities it shows that the company is trying to create a good CSR image in the industry. Kellogg’s believed that if consumers are given proper information about their products, they can retain them. So, they chose various methods to communicate their objectives to the world such as using cartoon characters, and also through effective advertising. It also distributed nutrition magazines for the employees to make them better understand about the objectives.
Solution:
In a major business study about Kellogg’s, it is seen that their consumers buying behaviour is mostly dependant on the company’s focus towards customers and how well they treat them rather than manufacturing, pricing or merchandising of the products. Consumers tend to purchase the products which are more healthy. Hence they want to know all the available information about the products they want to buy or consume. The product’s information, beliefs, intentions and attitudes of the customers influence the decision process. So Kellogg’s has to perform a market research on whether the consumers buy their products based on the label information or not. The visual inspection of the product or the experience of purchasing the product play a major role in the decision making of the consumer. Advertising and promotion of the product might as well have a greater impact on the buying pattern. It is difficult enough to understand the consumer behaviour within the borders of a single country. Understanding and serving the needs of consumers from different countries can be daunting. The values, behaviours and attitudes of the consumers vary greatly across the world. Kellogg’s must design the marketing programs and products according to the peoples needs. For example, in the United Kingdom where most people eat cereal regularly for their breakfast, Kellogg’s should try persuading consumers to buy their brand rather than a competitors brand. In France, however where most people prefer croissants and coffee or no breakfast at all, it should advertise to convince people to eat cereal for breakfast and in India, where many consumers eat heavy fried breakfasts and skip meal all together, the company should make attempts to convince the buyers to shift to a lighter, more nutritious breakfast diet.
To cover up the damage caused due to the labelling issue by FSA, Kellogg’s Should determine the customer’s needs and convert them into requirements. In order to fulfil them, it should fully understand the current and future needs of the customers, identify the customers, determine their key product characteristics, identify and assess market competition, identify opportunities and weakness, define financial and future competitive advantages, ensure that it has sufficient knowledge about the regulatory requirements, identify the benefits to be achieved from exceeding compliance and also identify their role in the protection of community interests. Kellogg’s can start launching some new products aimed at the health conscious consumers. They can start selling them for a lowest price in the market and satisfy them with a good value products for every penny they spend. They can concentrate more on three groups of people like individuals, families and supermarkets who wanted to have a healthy diet. They can focus more on health conscious people from age group from 25-50 by promising them healthy diet with their products. By the introduction of these products in the market they can show the customers that Kellogg’s is being paid attention to what they want and how important their health is to the company. They can start collecting information from consumers and people by conducting surveys about what kind of products they are actually looking for and based on that they can prepare them and position them to win the competitive advantage. So the only mantra to attract the customers again and to cover up the loss created by FSA is obsessive customer attention. Even though making health conscious customers happy might affect the short term profits, yet it helps to acquire a loyal customer base which pays off in the future. Making these products available at all consumer stores and super markets at a lower retail price might assist in building up the brand image yet again. Advertisements play a crucial role in winning the brand image and loyalty of the customers. If the company tries to create an awareness about the product and the low price buying strategy, it would encourage the consumers to buy them that results in the greater sales of the product.
Potential advantages by focusing on customers:
Awareness of changing dynamics of the consumer market will definitely help Kellogg’s to gain a competitive edge in the cereal industry. The increasing trend of health consciousness and the changing tastes can be known time to time by extensive market research. The feed back from consumers and the surveys conducted will allow the company to learn about their drawbacks and work up on them. It enables the business to minimize price sensitivity, improve profitability, differentiate itself from the competition, improve its image in the eyes of customer, achieve a maximum number of advocates for the company, increases customer satisfaction and retention, enhance its reputation, improve staff morale, ensure products and services are delivered right ‘first time’, increase employee satisfaction and retention, encourage employee participation, increase productivity and reduce costs, create a reputation for being caring customer-oriented company, foster internal customer / supply relationships and also bring about continuous improvements to the operation of the company.
Barriers to overcome:
For Kellogg’s to win back its brand and image customer loyalty and becoming customer focused organisation there are some barriers to overcome
Internal Focus: Rather than focusing on improving the output measures like revenue, cost and returns, the firm should pay attention to input measures like staff satisfaction and customer experience.
Command and Control Culture: A command and control culture in the organisation creates internal conflicts, poor communication and mistrust. This constrains the freedom of building customer relationships and also the exchange of knowledge for better growth of the company.
Short Term Approach: The company should not tend to fall back to the product-thinking strategy, instead it should hold on to the customer focus strategy and treat it as a long term initiative which might help acquire customer loyalty and retention to the firm.
Inadequate Customer Data: With small volumes of customer data it is difficult to analyse customer’s behaviour and manage relationships. So, they should always make sure that adequate amount of data is available on the customers to understand the buying behaviour patterns.
Understanding the customers: Though the company has gathered enough information, it is sometimes difficult to harness it. So it should try understanding the attitudes and beliefs of the customer.
Conclusion:
Labelling on food products plays a major role in the decision making process of a consumer. The buying behaviour of consumers is richly embroidered by the labels available on the product. In the Kellogg’s case labelling issues created a damage to the company. The best way for Kellogg’s to recover from this situation is to use the launch of the new products as a strategic technique to win back the customers it has lost. The glue that hold the organisation together is strong customer focus. It acts as a fuel for an improving the brand image of the company. Every employee should be committed and dedicated towards their work in order to build a customer focused organisation. If Business neglects to create a true customer focus, they need to face huge unnecessary costs for poor service raised due to the active promotion of the customers who are dissatisfied. This might result in investing extensively in marketing and advertising by the company to gain back the customers attention. The life blood of the organisation are the customers who allows the firm to realise their main goals and objectives to survive in the market and also to make a profit. Their behaviour helps the products to attain a recognition and allow them to last for longer periods. Consumer behaviours keep changing from time to time and the best thing the company could do is to develop strategic ways that make the consumers buy the products may it be old or new. So, customer focused strategy is the only thing which keeps the companies alive and growing in this highly changing competitive market.