Executive Summary
Marketing is an important business function that ensures a company remains competitive. Kingsford is an American brand that produces premium charcoal grilling products and one that enjoyed a steady growth of revenues in the 1980s. The company has relied on an experienced team of sales executives, consistency in marketing and sales actions, superior quality, and brand positioning for success. However, Kingsford’s main problem lies in the aspect of competition. The company has faced serious challenges in regard to the strategic decisions that were necessary to avert competition in relation to aspects such as pricing, advertising, promotion as well as production, which are important in the business achieving a competitive advantage. The company has not paid much attention to advertising. The absence of media advertising has been identified as a contributing factor to the charcoal category weakness (Kerin & Peterson, 2007). These factors have adversely affected the growth of the company as it led to low brand awareness in the midst of competition.
Kingsford, as a company, exhibits a problem with regard to advertising effectiveness, which causes the problem of low brand awareness. Business experts assert that a company with a low level of brand awareness or equity will tend to have a lower open rate since it implies that the consumers do not know the brand (Cleff, Fischer, Sepulveda, & Walter, 2010). These brands will only be considered during in-store purchase decisions but outside the stores’ environment, the brands will experience low consumer recognition, which leads to low customer-based brand equity. Building brand awareness will help to stimulate brand loyalty to Kingsford brands and also serve as an indicator of quality to ensure a high customer turnover and purchase of the products in large quantities at a low price. The question is how can the brand maintain a balance between quality production and satisfying customer needs as well as participate in effective marketing and brand awareness given the diminishing customer base and limited funds?
The company is largely driven by sales and merchandising activities and part of the stepping stone to the success of the business lies in balancing investment in the charcoal grilling sector and facilitating customer interest in charcoal grilling. Traditionally, the company has not been proactive in advertising its products but has relied on the affordability of the products and the American cultural element that promotes the use of charcoal grilling. Uncertain market circumstances that go beyond the business domain also affected the business in terms of reduced demand for the products, for instance, in the case of the adverse cold temperatures.
There are several strategic initiatives that can help in building brand awareness for the company to facilitate a steady growth. These strategic initiatives are based on aspects such as investing in visual awareness, building loyalty, and direct marketing to build brand awareness. They include the option to increase the price of the products, investing more in advertising and promotion, co-branding with Cortex, or simply leave the marketing situation as it is. There exists an important relationship between brands and why consumers need it and this understanding is the key to effective brand awareness. The viability of the alternatives lies in the aspect of increased sales volume by attracting a wider customer base by increasing brand awareness. Each alternative has its strengths and weaknesses
Analysis of Alternatives
The challenges in the Kingsford case lie in the shrinking charcoal grilling market and increased competition from the gas grilling industry. Evidence suggests that gas shipments had been on the increase as compared to charcoal shipments based on the exhibition of grill shipments statistics in 1996-2000 (Kerin & Peterson, 2007). The challenges have been broadened by the decreased spending and lack of critical attention to advertising considering that the company has not participated in significant advertising campaigns. Customers could, therefore, only recognize the brand after they see it but the element of trust and loyalty were missing in the marketing domain.
One of the alternatives suggested to boost the growth of the brand was based on the aspect of pricing. The aim was to increase the price of the charcoal products to facilitate profitability amidst narrowing customer mass. Increasing the price can be used to boost customer confidence in the purchase decision but it is short-term in relation to the aspect of competitiveness (Dudu & Agwu, 2014). Many customers opted for the gas grilling in reaction to the price increase of charcoal. This means that raising the price further will only jeopardize the competitiveness of Kingsford and, therefore, the viability of the alternative would just serve to benefit the company in the short term.
The cost of the products sold amount to approximately $1.8 billion as compared to the expenses incurred in advertising and selling and administration, which was about $4 million cumulatively according to a six-month statement of earnings (Kerin & Peterson, 2007). This means that investing more on the advertising aspect will boost the earnings that may be as a result of increased sales volume. From an economic perspective, the perceived benefits that would be brought by additional investment in relation to the potential sales would suggest that the additional sales would be more beneficial. Contemporary statistics on mass media’s role in advertising indicate that the average television commercial costs between $20,000 and $250,000 to produce and an additional $250,000 for airtime (Liu, Putler, & Weinberg, 2004). This can be understood not simply as a cost but as a benefit to the company considering that the mass media can efficiently reach a large number of potential consumers in addition to facilitating niche marketing where the focus is on smaller segments who are the most likely to buy specific products or services. Comparing periods between the 1980s and 1990s to the 2000s, the usage of mass media advertising grew 15% and it is expected that spending on advertising is likely to continue to increase (Ormeno, 2007). From the ratio between the advertisement cost increments and sales volume earnings, it is statistically practical to assume a more than 40% growth in the sales with only a fraction of less than 5% used in the advertisement campaigns. As seen in Figure 1, in the US, competitors are increasingly investing in advertising and one way the company can keep up with the competition is investing further on effective advertising.
Figure 1. US Digital Ad Spending from 2012-2018
Figure 1. US Digital Ad Spending from 2012-2018. Adapted] from Market Realist, by S. Pelts, 2015, Retrieved from http://marketrealist.com/2015/09/espn-losing-game/
The idea that Kingsford is a sales driven business is widely misplaced in a competitive environment and, therefore, an important alternative is increasing spending on advertising. The option of investing in mass media is viable for advancing the course of increasing brand awareness. The interactive and more personalized nature of direct marketing through mass media makes it a viable alternative to building the image of the brand. Grilling is part of a lifestyle element and often the emphasis of customers is on quality products as exhibited in the grilling attitudes study (Kerin & Peterson, 2007). Mass media can be used to advance this selling point contribution as well as making the consumers aware of the brand products. The collaboration with Clorox also has clear business goals of boosting sales as well as brand awareness and brand perception. Brand identity through the co-branding move will contribute to models of brand equity, strategic brand management as well as brand leadership. Through Clorox’s network, Kingsford charcoal can also increase its market base by targeting the Clorox’s existing wide customer base. Advertising via mass media is thus generally the most effective and efficient method for quickly creating brand awareness and it would be suggested that social media might be a viable alternative to create the required brand awareness to encourage sales. As illustrated in Figure 2, through the social media, more people can be reached at a reduced cost and this is an important aspect in relation to the pursuit of profitability. This assumption is backed up by statistics which indicate the reducing cost of reaching more people over media platforms.
Figure 2. Average Cost to Reach 1000 People
Figure 2. Average Cost to Reach 1000 People. Adapted] from Content Marketing Institute, by J. Scherer, 2014, Retrieved from http://contentmarketinginstitute.com/2014/04/facebook-ads-content-marketing-ultimate-guide/
Plan Development
Kingsford has a significant market share compared to other brands like Royal Oak with around 59.5% of the market oriented towards the brand (Kerin & Peterson, 2007). The strategic marketing plan seeks to take advantage of elements that may complement the move towards brand awareness to grow the market share and benefit from increased sales volume. The marketing objective, in this case, should inform the advertising objective and campaign development with elements such as media planning incorporated.
Promotion: Advertising is an important element of the promotion mix of the company and should be prioritized in the budgetary domain. Advertising is an effective tool that works together with other elements like personal selling and retailer recommendations, publicity, and special promotions. There is a need to increase awareness, which can be achieved through advertising and use of mass media in particular. Makasi, Govender, and Rukweza (2014) state that the objective of advertising is to create and maintain brand preference, which relates to an important step of making potential consumers aware of a brand's existence. Advertising is instrumental in the development of brand awareness and in making the brand popular. Direct-response media promotion strategy, which can be fostered by mass media that attempt to sell the product or service outright is useful in this case, particularly for value creation. This means that the cost of mass media advertising can be spread over the many potential customers in its large audiences.
Place: The brand needs to increase its sales base so that it is accessible to many customers to complement the message of charcoal grilling as a cultural aspect in America. The distribution channels that are in the delivery of products to customers are important factors in business. Competitive distribution systems will give the brand a boost to take further initiatives, which in the short and medium term objectives will relate to brand awareness. In this regard, the company needs to incorporate more sales teams through the additional positioning of the products in the food stores and mass merchandisers that accounted for 66% and 15% of total charcoal sales (Kerin & Peterson, 2007). The additional sales teams will work together to increase brand awareness and drive sales forward besides generating income as they can build trust with customers through one on one interaction. The sales-promotion-schemes of a popular brand get customer attention easily.
Price: Higher prices are related to product quality. However, in this case, setting higher prices may effectively serve the purpose of impacting sales, and run the risk of increasing price sensitivity and reducing brand loyalty. The brand can maintain the affordable product pricing strategy and capitalize on the sales volume to facilitate profitability.
Product: One of the competitive advantages for Kingsford is in achieving product uniqueness and differentiation so that customers can see value in the uniqueness of the product features. The marketers, therefore, need to plan positions that will help to distinguish the brand’s products from competing brands to give a strategic advantage in the target markets. Rather than engaging in price competition, the firm can use the advertising and promotion strategies to fulfill a positive function by conveying important product information to customers (Williams, Petrosky, Hernandez, & Page, 2011). The marketers will engage consumers as active co-creators of value and the management of the unique strategies can be an internal function for the company.
In summary, because there are profits to be made, businesses would not spend money on advertising not unless it is effective and thus profitable. For every dollar Kingsford will spend on mass media advertising, the company will ensure consumer promotions and trade promotions are also achieved. The advertising strategy is also an integral part of the overall firm strategic process, which at a minimum focuses on considerations such as the product and the target audience while advancing the aspect of salesmanship.
References
Cleff, T., Fischer, L., Sepulveda, C. J., & Walter, N. (2010). How Global are Global Brands? An Empirical Brand Equity Analysis. Pforzheim University Working Paper No. 136. Social Science Research Network.
Dudu, O. F., & Agwu, M. E. (2014). A Review of the Effect of Pricing Strategies on the Purchase of Consumer Goods. International Journal of Research in Management, Science & Technology, 2(2), 88-102.
Kerin, R. A., & Peterson, R. A. (2007). Strategic Marketing Problems: Cases and Comments (11th ed.). Upper Saddle river, NJ: Prentice Hall.
Liu, Y., Putler, D. S., & Weinberg, C. B. (2004). Is Having More Channels Really Better? A Model of Competition among Commercial Television Broadcasters. Marketing Science, 23(1), 120-133.
Makasi, A., Govender, K., & Rukweza, C. (2014). Building brand equity through advertising. Mediterranean Journal of Social Sciences, 5(20), 2613-2624.
Ormeno, M. (2007). Managing Corporate Brands: A new approach to corporate communication. Frankfurt, Germany: Deutscher Universitätsverlag/Springer Sciences and Business Media.
Pelts, S. (2015, September 21). US Digital Ad Spending from 2012-2018 (Graph). Retrieved from http://marketrealist.com/2015/09/espn-losing-game/
Scherer, J. (2014, April 8). Average Cost to Reach 1000 People (Graph). Retrieved from http://contentmarketinginstitute.com/2014/04/facebook-ads-content-marketing-ultimate-guide/
Williams, K., Petrosky, A., Hernandez, E., & Page, R. (2011). Product Placement Effectiveness: Revisited and Renewed. Journal of Management and Marketing Research, 7, 1-24.
