Carvel Ice Cream, an American multinational entered the premium ice cream segment of the Chinese market in 1992. However, the Chinese Ice cream market was already flooded with stiff competition from foreign and domestic players. The company experienced some issues in attaining the desired market share and revenues and this case analysis focuses on the different aspects of marketing strategy for Carvel Ice Cream in China.
As the growing Chinese market seemed to attract major international companies during the late 20th century, there were some specific factors which attracted the multinational firms towards the country. These factors which created a pull for the Carvel Ice Cream towards Beijing are as follows:
1. Sustained presence of main competitors of Carvel in the USA like Baskin Robbins made it an essential fact for them to raise their market share by entering the vast Chinese market.
2. Better economic growth for leading Chinese cities like Beijing and extremely controlled inflation rates (-1.4%) (Gleave,2010).
3. Steady rise in the base incomes for Chinese citizens and corresponding rise in the upper middle and upper-income level earners (earning more than 29,800 Rmb) in the country (Gleave, 2010). This implied for a parallel rise in the net disposable income for this consumer segment in China.
4. Better government aid on key amenities like housing, education, transportation, and healthcare services enabled the rise in the net earnings of the Chinese people 80,000 Rmb (Gleave, 2010).
5. 90% literacy was an extremely important aspect to evaluate the consumer behavior in Beijing.
6. Freezer ownership was estimated to be close to 15% which left enough scope for the Ice Cream manufacturers to grab the untapped market.
7. A well developed domestic Ice Cream industry with the presence of a majority of low-cost Ice creams in the Beijing market.
8. Immense scope of entering the developing premium segment Ice Cream as very few players existed in that segment.
Thus, it can be summarized from the above-mentioned factors that the Carvel owners were extremely assured by the assured factors of sustainable economic growth, steady rise in disposable income of the natives, better earning potential due to government aid, sustained presence of its prime competitors from the US markets, and a huge scope for the Ice Cream manufacturers to attain the share of the untapped markets. The important driver for this decision presence of Basking Robbins in the Beijing market which laid the foundation of premium segment Ice Creams and there were not more than three players in this segment.
Recommended marketing strategy (marketing objectives and target segment)
The three crucial aspects of the marketing strategy for Carvel in Chinese (Beijing) markets can be affirmed by developing adequate marketing objectives and target segment for the proposed line of products offered. The coming segment specifies how these factors need to be designed to shape their strategy in Chinese markets.
Marketing objectives: The key marketing objectives for Carvel’s current situation are as follows:
Increase revenues and market share by adopting the strategic positioning and competitive pricing of the offered products with respect to Haagen-Dazs and Baskin-Robbins.
Developing effective marketing strategy to position the new line of Ice Cream Cakes introduced by Steven Wang
Deploying adequate targeting over the customer segments that can prove the best-fit for the current line of products
Deciding an adequate marketing mix for the offered Ice Cream cakes segment with respect to their product positioning status in the Chinese Markets.
Target Segment: The target segment for Carvel’s current line of Ice Cream Cakes can be primarily divided into three types of consumers, they are as follows:
Middle and upper-class consumers – This segment is the most needed one for the premium segment of Ice Cream cakes and other products. This segment has the potential of spending more and thus being a direct contributor to increased revenues.
‘Little emperors’- The term implies to the lone child for every household who was the object of every marketer because his most of wishes were granted by his parents. Hence, targeting the little emperors could definitely result in the assured sales, irrespective of price constraints.
Expatriate community living in Chinese cities- This community comprised of the foreign nationals who lived in Chinese cities like Beijing and were usually working for different business and embassies. Since these consumers were most inclined to their aboriginal taste preferences, they posed to be a great opportunity for the Carvel’s target of raised revenues.
Marketing strategy: The marketing strategy derived from the incorporation of the above-stated aspects of the market can be summarized in a two-part strategy. Firstly, the marketing mix (4P’s) for the new line of Ice Creams and existing products should involve practical insights to reach the target segments with perfect positioning. Secondly, the positioning of the brand and its range of products should be customized to match the discussed marketing objectives. A proper execution of the above two aspects, coupled with perfect supply chain oriented value and adequate marketing communications; can definitely lead to the accomplishment of the objectives.
Marketing plan
The marketing plan for the offered range of products can be classified into the four crucial P’s of product, price, place, and promotion. These are suggested are as follows:
Product: The three existing product categories are those of Fountain Ice Creams (comprising of the soft and hard helping), novelties (single serving), and Ice Cream cakes (‘Little Love’ & ‘Piece of Cake’). As per Wang’s decision of creating a differentiated positioning for the brand, the new range of Ice Cream cakes should be specifically positioned in the Beijing market via adequate strategy.
The suggested tactic for this is to reduce the category of offered products and focus the marketing communications on the Ice Cream Cakes. The rationale behind this is that a focused positioning of the newly launched products can revamp the entire image of the brand in the Chinese markets.
Pricing: The current pricing of Carvel’s Ice cream Cakes is already the lowest in the Beijing market (as shown in the exhibit B) but it should be reduced further by managing the cost over-run of the cakes. As stated by Wang, the cost can still be dropped by 35% by managing the amount of air fused into the Ice Cream. Luckily, Chinese consumers like Ice Creams with more air content in them.
Thus, this tactic aims at further lowering of the prices that will change the premium segment pricing for Carvel’s product to some affordable range. The rationale behind this is to have a dual boost on the consumer satisfaction by providing more air to the consumers and lowering the prices of the offered Ice Creams.
Place: There are already 6 stores in Beijing that serve as points of purchase which are basically wholesale and retail stores. Wang is already planning to enhance the brand visibility at supermarkets and other places with larger access to customers. However, a set of 12 small stores across the city is recommended. 6 of them will have Ice Cream Cake manufacturing & sitting facilities, 4 of them will have only freezers and sitting facilities, and rest 2 will have only ‘pick and carry’ format.
This tactic will increase the product distribution of the newly launched Ice Cream cakes and also increase the company’s image in terms of increased proclivity to reach the consumer as per their convenience. The rationale behind this strategy is to get wider access and brand visibility vis-à-vis competitors.
Promotion: A special 3-poin t promotion strategy is recommended for the existing products. This will target the Beijing Shoppers guide (print ads), leaflet distribution (schools, events, and colleges), and the mass Asian conventions and gatherings.
This tactic aims at adding to the brand promotion in terms of specifically addressing the three target segments. The rationale behind this is to ensure that maximum exposure of brand and new products.
Positioning of Carvel Ice Cream in Chinese Market
The positioning map gives a relative estimate of the brand’s current positioning, vis-à-vis competition (Kessler, 2010). In terms of the evident positioning of the products, Carvel has a larger number of products offered when compared to its competitors, Haagen-Dazs and Baskin-Robbins. In fact, their pricing is also lower than both of the competitors but the overall segment of Ice Creams comes under the premium category. Hence, Carvel needs a strategy to address the consumers by leveraging its relative pricing. For this positioning, the product lines should be reduced to only a few products and their names and pricing should be specifically positioned with respect to the competition. The given positioning map of the company explains the given situation in detail.
Positioning map
References
Gleave, T.(2010).Carvel Ice Cream- Developing the Beijing Market. Ivey Management services, 1-12. Print.
Kessler, L.(2010).Visualizing Your Brand Perception with a Positioning Map Part 1.Positionist view. Retrieved online from http://www.innismaggiore.com/positionistview/read.aspx?id=56
