Marketing & Brand Management

Evaluating the importance of branding in chocolate and confectionary market and threat from own label products and how the Kit Kat brand has been successfully leveraged.

STUDENT NO: 21092865

Word count: 1231

Contents
Importance of Branding .......................................................................................................................... 2 Chocolate Confectionery Market ............................................................................................................ 4 The Consumer ......................................................................................................................................... 5 Leveraging the Kit Kat brand ................................................................................................................... 5 Threat of Own Label Brands ................................................................................................................... 7 Assessing the success of the Kit Kat Brand ............................................................................................. 8 Appendix A - Kit Kat: Revitalising a Brand Leader ................................................................................... 8 Bibliography ............................................................................................................................................ 9

Importance of Branding
We can trace the origins of brands as identifying devices to Greek and Roman times, when shopkeepers displayed pictures or symbols outside their shops to enable illiterate people to recognize the products they sold. This early use of 'brands' enabled producers and traders to differentiate and label their services and products through unique names and distinctive logos. Successful brands are those that represent valuable marketing assets through the coherent blending of marketing resources. To move from a commodity to a brand, the core offering needs to be augmented with added values. These extra functional or emotional benefits are what differentiate the brand from the core service or commodity and other competitors' brands. Through wellconceived and effectively managed brands, organisations can build favourable reputations which enhance the confidence of buyers, clients and users. Corstjens and Corstjens (1995) suggest that brand names serve three distinct roles: Identification at the simplest level, consumers need to know what they are buying. Assurance consumers also want to minimise the risk of making a bad purchase and want to be reassured that the product purchased will conform to certain standards. Images or associations brands need to be positioned in consumers minds so that the brand is associated with certain occasions, positive images or attributes. Doyle expands on this theory by adding that successful brands have a number of key characteristics. These are: A quality product Being first and having a unique positioning concept Strong communications programme

Aaker (1996) suggests the key values of branding for the customer as enhancing: The mental processing of information (brands enable purchase decision short cuts) Confidence in the purchase decision (risk reduction) Use satisfaction (studies suggest that customers perception of their satisfaction with a products performance is enhanced by a quality brand name)

Benefits of branding for manufacturers and customers

The efficiency and effectiveness of marketing programmes Brand loyalty (the marketing costs of keeping existing customers are much lower than those associated with attempts to get new customers) Prices/margins (customers, both end consumers and trade intermediaries, are prepared to pay higher prices for successful brands) Brand extensions (are a possible route for growth) Trade leverage (helps ensure the brand gets best and most shelf space, ensures good margins etc.) Competitive advantage (difficult for competitors to copy a successful brand)

Brands set out values for an organisation, are a major competitive asset for organisations and those with strong brands often have market values that exceed their book values. This was demonstrated by Nestl's who purchased Rowntree in 1988 for 2.55 billion, the equivalent of 22.9 times Rowntree s earnings even though Rowntree s tangible net assets were worth only about 300 million. The potential earnings from its brands such as Kit Kat, Polo and After Eight Mints made the company far more valuable to Nestl in building its strategic position as a leading global player in the chocolate and confectionery market.

Chocolate Confectionery Market

The UK chocolate confectionery market is hugely competitive, particularly among the top three players; Cadbury, Mars and Nestl, intensified by a slightly shrinking marketplace. With such extensive portfolios and a high level of penetration in this market, innovation from chocolate brands can increasingly overlap. In addition, the more successful chocolate brands such as Cadbury Dairy Milk, Mars Galaxy, and Nestl Kit Kat have tapped in to consumer demand for more sustainably-sourced ingredients and better quality product. Branding Strategies

Defines exactly how people perceive the brand Defines exactly how people behave around the brand Defines the strength of Brand Clarity Identifies the absolute unique brand personality Defines how people identify with your brand Clarifies what they associate with your brand Taps into powerful ancient cultural myths and stories Uses subconscious anchors and links Provides the illogical emotional connection

"In future the brand will be the most important asset of the firm." Jean Noel Kapferer

The Consumer
The major chocolate manufacturers have come a long way in terms of transparency in the supply chain and consumers expect to be kept informed of any changes to their favourite chocolate bar which might affect their expectation of price, quality, or size. Two in three chocolate buyers (64%) believe that brands should make it clear when they have reduced the product size or weight. One third of consumers would rather pay more than see their favourite chocolate bar reduced in size, and around 29% would keep buying their favourite chocolate bar even if the price went up. The majority (53%) are likely to buy it less often if the price rises, and one in ten will switch to a different brand.

Leveraging the Kit Kat brand

Brand extension can either be taking product to market faster or diluting the parent brand. Brand extension is a part of brand management to diversify and leveraging the existing brand by entering into new product category by new product development. Positive images and strengths of existing brand / parent brand are leveraged to bring another success story for new product. Brand extension is increasingly used by companies as a part of strategy for product developments. It is viewed as one of means to attain integrated brand architecture.

Several strategies are available to companys to leverage their brand. In the case of Kit Kat it included extending the line (Chunky Kit Kat) as well as stretching the line vertically (new flavours/fair trade certification). All these actions have had the effect of strengthening the brand. The commercial examples below provide evidence of these strategies in action.

Last year Nestl is ploughed 10m into a football-themed cash giveaway for Kit Kat to coincide with the world cup, twice the budget of the brand's 2006 World Cup activity. Packs of Kit Kat four-finger, Chunky and Chunky Caramel are featured a 'Cross Your Fingers' flash. Consumers had the chance to win 1,000 every day from 3 May to 11 July by going online and entering a unique code found on the packs. Nestl said the move was its largest investment in a promotion and it benefited from the company's biggest-ever digital campaign. Nestl announced its flagship Kit Kat chocolate brand will be certified Fair-trade. The FMCG giant scored a publicity coup by gaining endorsement from the Archbishop of York and this shift will boost sales of Fairtrade chocolate by an estimated 43m. Elsewhere in the world, the brand identified the need to be able to connect more with its consumers in order to rekindle their love for the brand and drive repurchase and loyalty. Tapping Facebook made it easy for the brand to engage with its consumers, as these loved spending their breaks and free-time uploading new photos and checking out photos of their friends. Targeting students and yuppies between the ages of 18 and 25, the brand decided that social networking was the perfect way in which to engage with its consumers. The campaign immediately went viral, with Facebook social ads as the sole drive to site effort. Nestle launched Kit Kat Chunky and a series of bold strategic decisions were taken aimed to build consumer connection over product news while leveraging synergy between media and creative in the social media environment. A consumer connection was achieved, driving huge shifts in brand tracking metrics, resulting in sales exceeding target by 150% and delivering a campaign ROI of 6.2.

Threat of Own Label Brands

As prices go up, consumers tend to re-evaluate what they are buying in an attempt to stay closer to how much they used to spend. According to data from YouGovs Recession Tracker in February 2009 more than four in ten people are increasingly switching to retailer brands, which indicate that the issue of price is at the forefront of consumers minds.Unsurprisingly many cash-strapped shoppers have started to trade down from a brand to an own label product for everyday items including chocolate confectionery. This has been reinforced by leading supermarkets encouraging customers to buy own label alternatives rather than spend money on higher-priced brands .Own label are seen to provide good value at low quality while reducing the shelf space for brands. Using this space for own label products boosts margins. Tesco has a mimic brand to Kit Kat.

Nestle has responded to threats to its market share by employing the following tactics: 1. Invested heavily in product innovations to ensure that the Kit Kat brand is ahead of the own label versions in terms of product quality and convenience in packaging. 2. Invested heavily in advertising and other promotional activity to highlight intangible benefits of the Kit Kat products 3. Kept prices comparable with own label versions thus diluting the customers perception that the premium for the branded product is excessive.

Assessing the success of the Kit Kat Brand

Brand equity is a set of assets (and liabilities) linked to a brands name and symbol that adds to (or subtracts from) the value provided by a product or service to a firm and/or that firms customers. David Aaker (1996)

Kit Kat is the UKs best-selling chocolate bar. However, in the competitive modern world consumers tastes continually change and as a result, Kit Kat had to re-invent itself from time to time in order to keep its appeal and stay on top. The launch of Kit Kat Chunky has shown that intelligent innovation and adaptation, supported by meticulous market research and product promotion, really can extend a successful products lifecycle significantly. See Appendix A for more details on revitalising Kit Kat as a brand leader. The information provided in the report has shown that Nestle has successfully enhanced its brand equity in the categories in all areas.

Appendix A - Kit Kat: Revitalising a Brand Leader

Bibliography
Journals
Mintel Reports: 1. Chocolate Confectionery UK April 2010 2. Chocolate Confectionery UK April 2011 3. Chocolate Confectionery Issues in the Market

Internet websites
http://www.thetimes100.co.uk/downloads/nestle/nestle_7_full.pdf Accessed 2/7/2011 http://www.warc.com/Content/ContentViewer.aspx?ID=6978b03b-4561-4c9a-8a1d0ae22e585167&MasterContentRef=6978b03b-4561-4c9a-8a1d-0ae22e585167 Accessed 2nd July 2011 http://www.thegrocer.co.uk/articles.aspx?page=articles&ID=212395 Accessed 30/6/2011 http://www.thegrocer.co.uk/articles.aspx?page=articles&ID=219169 Accessed 30/6/2011 http://www.marketingweek.co.uk/trends/the-beauty-of-own-label-brands/2064473.article Accessed 15/6/2011 http://tutor2u.net/business/marketing/casestudy_supermarket_ownlabel.asp Accessed 30/6/2011 http://www.open2.net/money/brands.html Accessed 3/7/2011 http://www.scribd.com/doc/44463476/Brand-Strategy-Toolkit-3-0 Accessed 19/5/2011 Course Documents: Notes 3 Branding and OL