Pricing and Promotion Strategies
Gluten-Free Products: Pricing and Promotion Strategies
Americans are not very healthy. Obesity plagues almost 70% of adults and 35% of children and teenagers (“Americans Increasingly Health Conscious” 2014). It is statistics similar to these that have prompted many people to reconsider the types of food they eat and the amount of exercise they get. In 2009, people spent an estimated $29 billion on managing diet and losing weight. Methods included low calorie food, diet drinks, programs for weight loss and other types of services, drugs and natural remedies, and procedures such as bariatric surgery (“Americans Increasingly Health Conscious” 2014). Foods and drink with a low number of calories constituted approximately 73% of the total. Trending toward flavorful food that assists in weight loss, attention is turning toward types of intake labeled “health food”.
On grocery store shelves beside vegan, sugar- and fat-free, and replacement meals, gluten-free products have been drawing more attention than ever before. Based on a Google survey of 178 participants, 64% stated they would not buy gluten-free products (Lim 2014). Of that group, 38% felt the products were more expensive, 32% say no need for them, 18% didn’t know why, and only 9% thought the products did not taste appealing. A theory based on these results indicate that taste is not a large reason for abstaining from gluten-free consumption. If the products were comparably priced and 50% of the survey respondents were educated to the benefit of the products, most of the deterrents to purchase would be overcome.
Promotional Strategies
The general public perceives gluten-free products to be healthier. A person with celiac disease has moderate to severe reactions to products containing types of wheat, but the percentage of the population with the diagnosis is relatively small. Elaine Watson (2014) writes that according to Packaged Facts, a consumer market research firm, 35% of people buying gluten-free products do so because “they are generally healthier”. Only 15% purchase the products because of member of the family has a gluten allergy, while 27% believe they assist in weight loss and 21% because they think the products are low in carbohydrates. Overall, gluten-free products are now characterized as simply being healthier.
When given a choice of buying a product with the normal amount of calories and buying a product that taste even a little less appetizing but is perceived as healthier, many consumers will choose the latter. This opens a market for creation of competitive foods that can claim the “gluten-free” label. These include bakery products such as cookies and bread, frozen foods to compete with quesadillas and burritos, and possibly even hamburgers in fast food establishments (Watson 2014). This venture is primarily focused on the production and sale of gluten-free snacks. Projections state 5%-10% of all products with wheat ingredients will shift to gluten-free replacements. Some products are also capable of being offered in other flavors. Interestingly, some products are carrying the label “gluten-free” when they do not contain any gluten normally, such as fruit.
The consumers who appear to be more interested in dietary information and health trends are women and those under 35 years of age (Watson 2014). Placing gluten-free products in the chain franchised grocery stores rather than in specialized health food stores makes their purchase easier for busy people inclined to purchase them. Consideration is also toward placement in convenience stores where point-of-purchase displays promote health-on-the-go.
Patients with celiac disease are generally aware of the need to avoid wheat products. Consumers interested in the general health benefits already have a wide variety of written articles promoting the consumption of gluten-free foods. However, distribution of coupons and sample tasting opportunities in stores will encourage people who have not tried the products to do so. There was a time not so long ago when yogurt manufacturers had the same sample tasting tables because of the popular misconception the dairy product was not enjoyable. To many, the concept of gluten-free has the same connotation yogurt previously held – unpalatable.
Community outreach is also an avenue for public education. Talented speakers with samples can seek out opportunities at fairs, health expos, schools, exercise facilities, retirement communities and any other similar venue. Brochures or handouts with recipes and inviting photographs will enhance the presentation.
Terence Lim (2014) recommends incentives to visit a website devoted to gluten-free consumption. He encourages visiting the website by posting recipes, awarding vouchers for products for bringing friends to the site and sharing on Facebook, and employing Twitter promotions. Students receive discounts for presenting their identification card.
Marketing Summary
Flyers are an inexpensive type of marketing for bulletin boards and to distribute at events attended by the target population. The return on flyers are approximately one sale per 1000 flyers.
Local Television Programs is free advertising. Local television programs, particularly in the morning, are always looking for interesting individuals to fill their time slots. A discussion of gluten-free products followed by mention of the brand name reaches everyone listening. The station will be more cooperative for this slot, usually about 10 minutes, if a television ad is purchased to follow the interview.
Television advertising requires the production of the commercial. The station who is selling the commercial time will produce it, but careful clarification and editing is needed to create an ad that is not irritating. The station will also usually not want to run an ad created by another station, although they may be convinced. The station will want to sell a package of advertising, the cost dependent on how many slots and at what time they air. Time slots that range at random over certain times are cheapest, if members of the target market are watching television at 2am. The slots will cost more for specific times, and even more for specific shows. However, the return on this form of advertising is one of the best, reaching all demographics.
Radio commercials are tricky to make so they capture the attention of the listener. Again, the purchase of specific times are more expensive than rotating spots. Radio is slightly cheaper than television, but the results are not as good. Consider sponsoring certain activities such as weather announcements, particularly during hunting season. This is cheaper than an actual spot, although the station may require you to buy your own slots in order to get a weather sponsorship.
Billboards are expensive, but can be effective. Almost every person in a vehicle will notice a good billboard. An interesting or funny character will draw attention and assist in remembering the name. However, this is only good for impacting a local market and is not going to be cost effective for this product. Piggy-backing onto another customer’s billboard will decrease the expense for both promotions.
Participation in events such as health fairs and food expos is a good way to create contacts and inform the public of the product. Booths themselves are relatively inexpensive and signage would be a one-time expense. However, only local markets are impacted and the booth would require a knowledgeable employee to spend hours. This person would also need to be very upbeat and outgoing to create possible interest. Coupon giveaways, booklets and handouts with recipes from the internet such as All Recipes, and tasting should also be part of the expense. Well-constructed booths with great signage are a moderately significant initial investment, but it will last for years. Booths should be utilized at every opportunity.
Local print advertising can range from the local high school paper to the newspaper. Local print advertizing should be eye-catching, so the size needs to be adequate. Color should be used if possible. The telephone number and website needs to be clear, and each placement should have a “Mention UTDFH for a FREE GIFT”. This will track the response for that particular ad and justify the recurring placement or not in that periodical. STAY AWAY FROM THE YELLOW PAGES!! Buy space in sports programs, local events, local newspaper, and any other possible print ad. They will be relatively inexpensive, easy to track, and you are not obligated for long-term contracts.
Nationally syndicated magazines specific for the target market is a good investment. They may require a minimum number of months. The print ad should be the same used in local print advertising. Again, use a specific code to track performance. It is not necessary to take the inside back or front pages; placement inside the magazine’s body is fine.
Magazine articles are solicited by magazines to fill their pages so they can sell advertising. These should be submitted 3-4 times a year. The placement of the print ad needs to be on the same page as the article. For instance, “Kickstart Your Weight Loss Program” can have an illustration and bullet points of these problems with solutions. During the body of the article or at the end, recipes for the product and contact information can be included for questions. The publisher expects this and will approve the article if it is well-written, informative, and maybe even amusing. This is free if a good writer is available to transfer information.
Signage in stores is for a store that is initially trying the product. Ask to supply signage to their specifications. The vendor will be willing to spend more on it than the store manager. Ask for point-of-purchase displays on the counter at the cash register, in the aisle with it, or at the entrance to the checkout line. Ask for an end cap to an aisle. Again, use the same colors as the print ads and the character/logo if allowed.
A good website can make or break a product. Again, keep continuity with the logo/character and colors. In addition to information and pricing of the product, have testimonials, pictures, and locations for purchase. Solicit website links with other websites that sell products that partner with this one such as natural skin care or exercise videos. There will be links to their website and they will have links to yours. These are usually traded freely. In addition, consideration should be given to the creation and maintenance of a blog for interaction by consumers.
The ultimate goal is to create enough interest in the product to have a store, particularly a nationally franchised store carry the product. With good statistical presentation, a store can be convinced to give the product a “try out” period. Try to negotiate for the end caps or an area to do initial kick-off presentation signage. DO NOT approach a franchised store until there is enough local interest to create sells once it hits those shelves. Working with local stores with local owners is a good way to start. Put the booth in the foyer or outside the building to discuss the product with individuals and offer tastings. Offer a handout or booklet of recipes and information. Of course, the print ad would cover the entire back of the booklet with a coupon.
National advertising in the form of the website, national magazines, and a steady growth in stores will make the franchise consider placing you in all their stores. At this point, think of going on the television program “Shark Tank” to increase production, increasing advertising, and make this a business more successful.
Pricing
Determining the price of a product requires several steps in any market. A simple impersonal survey on a website or even an employee standing with a clipboard in the supermarket asks participants if they would purchase the product at one price, then one higher, then one higher. The results indicate approximately what price range is acceptable for the people surveyed (Allen 2014).
Naturally, the price needs to cover the cost of production, distribution, marketing, and other expenses. The company also meets payroll and loan payments. The amount of product sold comes into account; the lower the price, the more product sells. But this may not always hold true. Sometimes high prices sell well, and low prices do not.
As with any other product, there is an option to have less expensive gluten-free offerings as opposed to more expensive and desirable options. The purpose of this venture is to focus on the population with the household income to support buying a higher-end selection of gluten-free products. In addition, this population tends to be more educated and has already been exposed to the health benefits of gluten-free.
Placement into higher-end grocery stores and specialty stores places the product in front of the consumer. While not considered a gourmet food store, placement into Target may be a good starting point. Premier shelf assignment encourages notice of an eye-catching wrapper. Single serving and multiple serving options offer the opportunity to be placed at separate locations in the store. For many customers with extra cash flow, a higher price indicates a better product. When placed beside a less expensive product that contains gluten, there is the possibility the perception combines health benefits with a better product due to the higher price tag.
The next step indicates pop-up stores in the New York City area would be successful. A pop-up store is a temporary retail display that is small and occupants may move from one pop-up location to another to expose different traffic patterns to a product.
Franchise stores similar to Walmart do not meet the target market for this venture. The secret to pricing is to place the price where the target market will pay for it.
There are also several strategies for pricing. If a company is in survival mode, pricing covers costs and allows the business to continue operations. This venture is interested in higher pricing to differentiate the product in the marketplace. A decision to maximize profit margins occurs when sales are unpredictable or sporadic. To promote penetration of the market, maximizing quantity lowers profits while giving the illusion the company is experiencing high sales numbers. Short-term revenue maximization focuses on creating investor confident by placing a higher priority on revenue than on profits. Short-term profit maximization looks at cash flow rather than long-term profits.
Through the selection of proper pricing strategies appropriate for the company and savvy promotional activity, the success of a company specializing in high-end gluten-free snacks is a viable concept.
References
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http://www.inc.com/guides/2010/09/how-to-buy-tv-advertising-on-a-budget.html
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Watson, Elaine. “What’s the Size of the US Gluten-Free Prize? $490M, $5bn, or $10bn?” (2014)
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