Running head: The Ready-to-Eat Breakfast Cereal Industry in 1994 (A) Case Study Solution
Offering high quality and value-added products
Among the manufacturers of the private label cereals; the significant increase in the technological competence had allowed them to offer the value-added and high quality products to the customers, helping them in generating high sales and returns.
Difference between branded products and private label
The branded cereal manufacturers were engaged in building their own brand and the customer loyalty in hopes of leveraging the customers’ demands into shelf space. The manufacturer brand tended to serve the interest of the manufacturer first and the benefit of the retailer who carried those products; whereas, the brands owned and marketed by sellers were refereed to private labels, proprietary brand and store brand.(Harding, 2015).
One of the considerable difference between branded cereals manufacturers and private labels was that the branded cereals manufacturers were leading the overall market, while the private labels were following the branded cereals manufacturers. Similarly, the branded cereal manufacturers were creating opportunities for the customers and were leading them towards qualitatively better lives. The private labels brands were cheaper in terms of the fact that the retailer could optimize the production to suite the demand from customers, and reduce the cost of advertising.Whereas, the branded cereal manufacturers were spending enormous amounts over advertisement and promotion.
Goal of General Mills reduction in trade promotions
In April 1994, it was announced by General Mills that it planned to reduce 175 million dollar out of its trade promotions as well as coupling budgets &simultaneously cut the prices on its biggest and valuable brands, which accounted for about 40% of the company’s total sales by the average of 11 percent.
The reason behind the company’s announcement was to reduce the gap in the products’ prices with private labels, reduce reliance over the inefficient coupons, shift some of the trade promotions budget to consumer promotions, i.e. advertisement and stop the mutually destructive escalation of trade promotions. By doing so, General Mills hoped to accomplish various goals with its reduction in prices and the trade promotions, which are as follows:
- Rebuild the brand’s loyalty.
- Recover the lost business.
- Reduce the internal cost of coupons.
- Take share back from the private labels.
In an attempt to reduce the products’ prices; the General Mills hoped that it would be able to attract the customers and serve them, increase its profit returns, gain some of the market shares back, which were lost due to the private labels, offering at lower prices. Additionally, the company intended to reduce its focus from the trade promotion due to the fact that the trade promotion involved coupon printing expenses,administrative expenses and so forth. Not only this, the coupon trade promotion most likely reduced the cost of switching, and was destructive towards the brand’s loyalty building activities. Due to this reason, General Mills hoped to spend on advertisement, to improve the good-will, create brand visibility and generate huge profit returns rather than spending over advertising budget on the coupons that were targeted at the price-conscious customers.
Risk
In contradiction to the benefits of the General Mills’ reduction in trade promotions; there are various risks involved with the plan, which are as follows:
Big Three gain GM share
One of the considerable risk of reducing the trade promotions is that if the competitors start adopting the approach of General Mills, they would gain the shares of General Mills from customers that reduced prices of General Mills are not more beneficial as compared to the benefits drawn from the discount coupons.
In addition to this, if the competitors start reducing their prices by 11 percent and likewise their spending on the promotional activities; they would be able to retain their customers and gain their lost market share back, thus reducing the potential of General Mills to gain maximum amount of benefits from the approach of reducing the trade promotions.
Lost customers
By reducing the trade promotion; there is a likelihood that the company would lose its customers who were attracted by offering coupons. Additionally, the company would not be able to attract the price sensitive customers, who get attracted by coupons and discounts, as the use of the aggressive trade promotions helps the company in achieving the gains of 2 to 3 percent in the market share through swaying the purchase decision of the price-conscious customers.
Stop speedy promotion
The trade promotion and coupons are among the sources of speeding up the promotional activities and introducing new customers to the store, thus by reducing the expenditure on trade promotion; the company might face difficulty in accelerating the product’s adoption in the market.
General Mills’ strategy
In light of the competitive environment as well as the current market conditions; the strategy of General Mills for reducing the trade promotions, would work in the near future. It is also backed by the fact that neither the coupons nor any other type of trade promotional activities could stimulate the dramatic customer demand in the market.
In addition to this, the customers were signaling that the high prices of the products would not be sustainable in the near future. The coupon based promotional activities are-expensive for the company and the company is in dire need of putting a stop to the loss of its market share and has to become more efficient in the current competitive market environment.
The significant reduction in the trade promotions helps General Mills to offset some of the lost profit returns, due to the reduced product’s prices. The reduction in the trade promotion also involves associated cost of redemption, distribution, printing and reimbursement of handling fee of grocers amounted to $610 million. Also, the extensive use of the trade promotions and coupons would last negative impact over the company’s quality image and wouldn’t yield long-term benefits for the company, because the trade promotion are for shorter period of time and give boosts to sales for a limited time period.
Due to the brand quality image dilution; the competition from private labels, reduction in prices of the products, short-term orientation and an increased price sensitivity; it is believed that the strategy of General Mills would work for long term.
Competitive advantages of a BRANDED GOOD MANUFACTURER employing mobile coupons
For advertisers, the mobile coupons has become a prevailing approach for communicating promotions to a wider range of customers. An increased focus of the advertisers over launching campaigns, which include: mobile coupons, increasing sales and driving retail traffic, help the companies in bringing depth to their brand’s loyalty, encouraging the visitors to shop from mobile apps, and promoting the products on the basis of the customers’ behavior. The slower death of the paper coupons is followed by an increased prevalence of smartphones and customer’s preferences to shop online.(Schuman, 2009). Additionally, the online coupon market is expected to grow in near future, as both retailers and customers are switching to-online shopping.(Chapkanovska, 2020).
Due to the emergence of technology and an increased willingness of the customers to shop online,because of the easy features of online shopping, such as:convenience, ease and avoiding crowds and long queues for checkout. It is because of the reason that e-commerce and internet have drastically changed the way people research as well as shop for their desired products.(FARBER, 2016). Over 70 percent of all customers tend to have an access to discounts, who want online shopping via mobile phone or other suitable electronic devices.(Lazar, 2018 ). Offering a digital coupons to the customers help businesses to increase engagement of customer on mobile platform, increase customer loyalty and boost the customer conversion rates.
Taking the example of Unilever; the company attempted to trial the test of mobile coupons, which could be redeemed by the customers through having a supermarket cashier scan in their smartphones. The coupons included a number of discount offers for some of the most-popular brands of Unilever, including:Lipton tea, Hellmann's Mayonnaise, Dove soap and Breyers Ice Cream.
The advantage of offering mobile coupon is that it doesn’t involve recycling, and there wouldn’t be any chances of fraud as the company could track the path of the coupon and easily target coupons by location.(Tsirulnik, 2009). Additionally The purpose of the company is to provide convenient means of shopping experience to the customers, exploit the opportunities of providing the an accessibility to the customers, providing ease and efficiency, understanding the customer’ behavior – as well as their desired cadence of getting the message from brand, through which the company wouldn’t only drive the engagement but would also achieve retention.(Wilson, 2019).
In addition to this, an-increased significance of offering mobile coupons rather than paper coupons is because of the increased competition in the market, rapid adoption of mobile phones, challenge to meet the individual needs of all the customers and so forth.(Slavin, 2020)...............
This is just a sample partial case solution. Please place the order on the website to order your own originally done case solution.
Related Case Solutions & Analyses:
Red Force Labs: Securing Online Transactions at What Price
Operational Capabilities: Hidden in Plain View
Being Distinctive vs. Being Conspicuous Gender and Performance in Groups
Carlyle Japan (A)
Multinationals and Foreign Direct Investment
OppenheimerFunds and Take-Two Interactive (A)
Service Redesign at South Devon NHS Trust (B) (Spanish)
Banking on Change (A)
American Greetings
StepSmart Fitness
