CRESCENT PUREAnalyzing Crescent’s Product Positioning

at P.D.B (A Specialty Beverage Company)

HARVARD BUSINESS SCHOOL CASE

-By Chinmaya Lovekar, MIT Manipal

PDB BACKSTORY• Portland Drake Beverages (PDB) is a manufacturer of organic juices

and sparkling waters.• PDB acquired Crescent in July 2013.• The drink’s combination of energy-enhancing, hydrating, and all-

organic ingredients made it a natural extension for PDB’s existing organic product lines.

• The vice president of marketing, Sarah Ryans is working on the product-positioning strategy for Crescent Pure • She has just a few weeks to finalize her

decision.

Before we see what the dilemma seems to be let’s look at some history..

• Peter Hooper, a native of Crescent, Oregon, saw a market opportunity for a healthy, energizing drink.

• He found popular energy and performance-enhancing drinks unhealthy, too sweet, and artificial.

• He experimented, and crafted an organic, all-natural beverage lightly infused with organic juices, herbal stimulants, and electrolytes.

PDB Acquires Crescent.. Booth, the CEO of PDB felt it important to expand PDB’s trusted and popular suite of organic products; he knew that functional beverages—specifically energy and low-calorie sports drinks—were rapidly growing segments, and sought to expand into these areas through acquisitions.PDB thought it could leverage its manufacturing facility, organic suppliers, and distributor relationships to expand Crescent’s presence geographically only if the drink performed well in the market for a year.

Situational Analysis

Before selecting and negotiating with distributors, PDB needed to determine the most effective positioning for Crescent. The drink’s positioning would influence where the product was sold and, therefore, which distributors PDB would select. There were initially two viable positioning strategies which would maximize Crescent’s revenues. Some felt the drink’s energizing ingredients supported an energy-drink positioning, while others felt that due to the drink’s hydrating elements, a sports-drink positioning made more sense.

A third possible positioning strategy would be to place Crescent focusing on the drink’s healthy and organic roots would attract the most consumers.

Objective of the CaseTo develop a successful marketing strategy using:1. Customer Segmentation2. Product Differentiation Strategy3. Evaluation of perceptual maps

The data used has been carried out by the market research wing of P.D.B.

Customer SegmentationCustomer segmentation is the practice of dividing a customer base into groups of individuals that are similar in specific ways relevant to marketing, such as age, gender, interests and spending habits.

Product Differentiation AnalysisProduct differentiation (or simply differentiation) is the process of distinguishing a product or service from others, to make it more attractive to a particular target market.

Perceptual MappingA perceptual map is a visual representation of how target customers view the competing alternatives in a Euclidean space which represents the market Pair-wise distances between product alternatives directly indicate how close or far apart the products are in the minds of customers The axes of the map are a special set of vectors suggesting the underlying dimensions that best characterize how customers differentiate between alternatives

An Example of perceptual mapping:X axis :AgeY axis :Nutrition

All these marketing techniques will help in determining a suitable product positioning strategy.

Positioning of Crescent can be done under the following headings- An Energy drink

OR A Sports drink

OR An Overall “Health &Wellness” drink

Market ResearchRyan knew that good positioning, if successful, could shape potential customers’ opinions about a product or service before they’d even seen or experienced the product in question.

CRESCENT PURE All Organic & All Natural Beverage

Positioning Analysis for Energy Drink PositionCrescent delivers a boost of energy to combat fatigue and promote mental focus. Most people describe Crescent as a refreshing drink.Thus it is suitable for an energy drink position.

Pricing StrategyCheaper than usual energy drinks in market!Crescent Price Other Energy Drinks

$2.75 < $2.99

Market for ProductThe projected market for energy drinks in 2013 is $8.5 billion.The market for energy drinks was growing; between 2010 and 2012, the market for energy drinks had grown by 40%.

Targeted CustomersMost advertising for energy drinks targets the most enthusiastic consumers, men 18 to 24 years olds.“Our drinks help you do everything you want to do (even risky things!).”

CRESCENT

Product Differentiator/ OpportunitiesCrescent’s organic certification and minimal (as compared to leading competitors) caffeine content provide strong differentiators for the energy market. Our drink is a healthier alternative to leading brands, whose artificial sweeteners and excessive levels of stimulants are likely to prompt a subset of consumers to switch to healthier options. Apprehensions/ ThreatsRegular consumption of these drinks has fallen because of negative media attention. News stories were highlighting the drinks’ alleged health risks

Positioning Analysis for Sports Drink PositionCrescent’s hydrating elements, paired with the mental focus and energy boost, can enhance athletic performance. 42% of sports beverage drinkers considered sports drinks “anytime beverages” and did not associate them only with exercise. They attracted a wider consumer base than did energy drinks, and regular users consumed them more often.

Pricing StrategySports drinks come in a variety of sizes and average $1.00 to $2.00 for 12-oz. and 24-oz. containers, respectively. Crescent’s $2.75 price point for an 8-oz. can will be significantly higher than are those of similarly sized sports drinks, so our positioning and advertising will have to build the case for its premium price.Market for ProductIn 2012, the market for sports drinks was $6.3 billion.They attracted a wider consumer base than did energy drinks.

Targeted CustomersSports drinks appealed to younger consumers—62% of those between ages 18 and 24, and 77% of those ages 12 to 17.

Product Differentiator/ OpportunitiesNew diet and low-sugar sports drinks were growth areas for the industry. Diet and low-sugar sports beverages, which did not exist before 2009, had grown by 33% between 2010 and 2012, taking market share from traditional sports drinks.

Apprehensions/ ThreatsConcern regarding rising childhood obesity rates resulted in government-mandated guidelines to remove high-calorie sugary drinks and snacks, including sports drinks, from school vending machines beginning in 2014.

The 3rd OptionContemplating a broader positioning strategy:Ryan wondered if a third, “broad appeal” option would make the most sense for Crescent. What if Crescent positioned itself as an organic refreshment and capitalized on the growth of the organic food and beverage industry.

This would easily bring the product in front of more eyes.Booth wants Ryan to recommend an approach so that he could identify possible distributors and retail outlets and hire advertising firms to develop and execute a strategy for the coming year. A broader approach would complicate these efforts. If enough time and distribution channels could be used, these positioning would have worked. Now that time is short and PDB does not have enough money to cater to many distribution channels, this task would be very difficultTime and money are the most crucial factors for the launch of Crescent. Thus this approach should be neglected.

We have 2 viable options for marketing nowWhich would serve as a better marketing position?Let look at some statistics which would help us gauge the two options and hopefully help us reach a final conclusion.

Customer SegmentationCustomersThe largest group of energy-drink consumers were males between ages 18 and 34. Parents of children were also more likely to consume energy drinks. Sports drink appealed to a younger age group of only 18-24. Sports drinks are mostly drunk by males, only a small percentage of females seemed to enjoy it. Based on this count, energy drinks will automatically give you a bigger market share.

Market GrowthEnergy drinks attain revenue up to 8.5 billion dollars and are expected to grow to 13.5 billion dollars in a few years period.Sports drinks revenue is much smaller. The market increased only 9% between 2007 and 2012. In 2012, the market for sports drinks reached $6.3 billion in the United States and was expected to grow to $9.58 billion by 2017. This clearly shows sports drink position is a much easier source of revenue than energy drinks and a higher rise in growth of energy drinks is expected.

PricePrices for energy drinks in the U.S. range from $2 to $5 per can, based on can size (8 oz., 12 oz., or 16 oz.) and retail outlet. The average price for 8 oz. of energy drink is $2.99, above our $2.75 price point. Crescent’s $2.75 price point for an 8-oz. can will be significantly higher than are those of similarly sized sports drinks, so our positioning and advertising will have to build the case for its premium price. PDB wants Crescent to reflect PDB’s pricing strategy in other product lines, which was to deliver quality organic products at affordable prices. PDB had experimented with premium pricing in previous product launches, and the strategy had backfired. Thus a better choice would be a energy drink position, as it provides both a quality organic juice and affordable prices.

Product Differentiation StrategyWe see that Crescent provides a healthy alternative to most energy and sports drinks. Product differentiation strategy is to focus on the drink’s healthy and organic roots which would attract more customers.

News highlighting energy drinks negative aspects can be used positively for CrescentSchools can be convinced of the healthy nature of the drink and thus make it a part of can be sold at schools

The 2 big advantages of Crescent!Energy Effect

Crescent’s herbal stimulants (guarana seed and ginseng) delivered 80 milligrams of caffeine, roughly the same amount of “energy effect” as a cup of coffee..

Sugar Quotient

Crescent’s sugar quotient (derived from organic, raw cane sugar) was 70% less than leading energy and sports drinks, on average

Evaluation of Perceptual Map for Crescent Perceptual maps measured consumer perception of leading sports drinks and energy drinks on two sets of paired factors: (1) energy and hydration, and (2) nutrition and taste. These maps have been provided by the Market Research Department of Crescent Pure.

Perceptual Map for Sports Drinks

Comprehension of Perceptual Map

Gleam and Drip had 73% and 21% market share, respectively. The remaining 6% of market share ($378 million) was split fairly evenly among roughly 20 producers. New diet and low-sugar sports drinks were growth areas for the industry. Diet and low-sugar sports beverages, which did not exist before 2009, had grown by 33% between 2010 and 2012, taking market share from traditional sports drinks. This position shows low competition and possibly high growth of Crescent but it will happen in a very small niche, which does not show much market growth.

Perceptual Map for Energy Drinks

Comprehension of Perceptual MapTogether, Fright, Razor, Torque, and Stellar accounted for 85% of category revenue (34%, 27%, 16%, and 8%, respectively). The remaining 15% was split between roughly thirty independent regional and national producers. Sales of energy drinks with lower levels of caffeine and purer ingredients were rising due to consumer demand for healthier food and beverage choices. Though this position has high competition, Crescent can gain market share by showing that it has healthy and organic roots. Apprehension regarding the alleged health risks of energy drinks can be used to its advantage by showing its healthy side. A much higher growth can be expected in this position.

ResultsCustomer SegmentationThe position ‘Energy drink’ might capture a bigger customer base, revenue and has a viable pricing strategy.Product DifferentiationBoth share the same product differentiation strategy but it would be wiser to show that differentiation strategy in a bigger market, which is energy drinks.Perceptual maps also show how Crescent can gain market share as a energy drink and sports drink.

ConclusionUsing all these marketing strategies, we can now

conclude that we should position Crescent Pure as a

Energy Drink!

Summary• History of P.D.B• History of Crescent Pure• Situation Analysis • Positioning Analysis• Conclusion

Disclaimer

Created by Chinmaya Lovekar from MIT Manipal under the guidance of Professor Sameer Mathur, IIM Lucknow during a marketing internship.