- The central problem in this case is the launching of new product in the market, especially after the impressive test in Mineapolis, Minnesota. Exhibit 2 displays a number of products in this industry in the US markets. Some of the names in this exhibit are names of products in Frito-Lay’s production line. The figures posted show that these snack chips were doing well in the market in terms of sales. This means that the new products would have to compete with these brands, and other brands not featuring in the top ten. This problem is compounded by the fact that the new product would be vended under a new brand name, meaning that it would not benefit from the established brand names under Frito-Lay’s portfolio.
- The sub-problems in the case include the flavor combinations and the production plans. The production plans include issues with the size of the packages and the impact this will have on sales. Frito Lay has two flavors at the moment, the natural flavor and French onion. There are thoughts to include a third flavor, cheddar. There are also sub-problems including the flavor combinations and the acceptability of this in the market. Additionally, Frito Lay is concerned on whether to continue testing the market or introduce the product to a percentage of the customers or the full introduction of the product.
- The two qualities that characterize the industry preferences on taste and healthy eating habits. These are two characteristics that industry players should consider as sources of strategic alternatives. There are changing trends towards healthier eating habits due to the rise in non-communicable diseases. Nonetheless, people still want delicious products. This characteristic is especially important for the repeat business aspect. These two characteristics are important for pointers for strategic guidance. This is because they embody market trends and customer needs. The case shows Frito-Lay’s genius in heeding these qualities in their product design phase.
- As intimated above, one of the trends in the market is the change to healthier eating habits. Consumers are increasingly aware of the composition of the products in the market. Consumer choices are guided by not only the taste of a product, but also the health implications of a product. For instance, the case adds that consumers are shunning potato chips made from oils with high cholesterol and the amount of other elements like sodium and fiber. Another trend in the market is the increasing significance of brand awareness. Brands that are popular post remarkable results in terms of sales. Exhibit 2 shows some of the top ten selling brands in the American market. These products are items lines of top brands in the industry. As such, companies are investing heavily in brand awareness in order to gain leverage over their competitors.
- One of the types of consumers that might make the target for Sun Chips is consumers who want to make a saving. Additionally, Frito-Lay, in its advertising strategies promise customers a saving by buying Sun chips. Another type of consumer who might make the target market is one who is concerned with the health aspects of a product. This is because the product is unique in this aspect compared to other products on the market. The decision process for these consumers is that a healthier product is being offered at a low price.
- Sun Chips marketing intermediaries are concerned about product cannibalization. More precisely, thirty percent of Sun Chips buyers came from other products in Frito-Lay’s portfolio. This means that less of these other products would be bought from the shelves. This is of concern to the marketing intermediaries, especially because the distribution strategy of Frito-Lay is to use convinience stores, supermarkets and grocery stores where other products in the company’s product line are sold.
- Swot analysis
- Strengths
- Sun Chips has a brand visibility because of aggressive marketing campaigns.
- The attractive packaging of the products and the high quality of the products attract more consumers.
- The use of multigrain ingredients presents healthier options for the consumers.
- Weaknesses
- The use of ingredients based on pork alienated consumers from certain religions and also vegetarians.
- Sun Chips has a very small market share in the global market.
- Opportunities
- Sun Chips can market itself as a green product because of its biodegradable packaging.
- Frito-Lay can introduce Sun Chips into other markets where the product is not available.
- The brand image can be enhanced by producing more variants.
- Threats
- Cannibalization of other products in Frito-Lay’s product line.
- Changing market trends and preferences regarding snack foods.
- Increased competition for Sun Chips from products from other brands
- Unlike Prontos launch, Sun Chips has many attributes with which the consumers identify. Sun Chips is made with oils that have fifty percent less saturated fats compared to chips that are made using other oils that are free of cholesterol. This means that Sun Chips, in addition to being free of cholesterol, also have lower saturated fats (Kerin 203). This attribute is not present amongst its competitors. Additionally, the product contained lower amounts of sodium compared to other products. These attributes are concerns of the average consumer according to market trends. The fact that Frito Lay addresses them in the product gives them leverage over the other competitors, something that Prontos did not have.
- The perceptual map on exhibit 3 shows the pretrial product perception across the divide was everyday snack as an attribute and healthy product as another. From the perceptual map, it is arguable that Sun Chips has ample opportunities for growth. Firstly, the healthy attributes of the product have been emphasized. Compared to the other products, Sun Chips has less sodium, cholesterol and saturated fats. This means that it can compete favourably with the other healthy products. The fact that the number of these products compared to everyday snacks is less adds to this argument. Secondly, due to its assortment of flavors, the product can also compete favourably with other products in the everyday snacks. Holding all factors constant, Sun Chips would have a better combined market share compared to the other products.
- Firstly, it is apparent from the numbers in exhibit 5, for any flavor combination, an advertising and merchandising budget of twenty two million dollars posts better results. This makes sense because with the extra money, more merchandise are produced and sold over a larger area. The numbers show a close comparison between the two flavor combinations in the different parameters. However, the natural and mild cheddar combinations should receive the higher budget for advertising and merchandising. This is because the cumulative trial rate for the first year and the cumulative repeat rate for the first year is higher than that of the other combination even at a higher budget.
- I recommend that Frito Lay should perform a full scale of product introduction. This is important because the test results are impressive. From the numbers posted in the trials, customers are perceptive to the product. Additionally, the market trends at the moment favor the full-scale introduction of the product. This is because as a first mover, the product meets a need in the market. The French onion and natural flavors should be introduced in the market. This is because from the test market, natural flavor accounted for 45% of the sales while French onion accounted for 55% of the sales. This is impressive, especially when the advertising and merchandising budgets come into play.
Works cited
Kerin, Roger. Frito Lay:Sun Chips Multigrain Snacks. Southern Methodist University. 1995.Print.
