Assignment #2

11

Assignment #22nd April 2014Principles of MarketingSir Ejaz MianGroup Members:Owais Aslam ParvaizMuhammad Sanwal KaziArsal SiddiquiHammad IqbalKolson Pasta : Macaroni

ContentsExecutive Summary3Introduction4Marketing Segmentation strategy4Segmenting the market4Defining and choosing the right segments4Choosing a targeting strategy:5Product Attributes:5Product differentiation5Positioning in the minds of the consumers5Product Life Cycle and Corresponding Strategies5Brand equity6Kolson Pasta on the BCG Matrix7Product life cycle7Price Strategy:7Basis of pricing7Factors Considered While Pricing8Product Cost:8Extent of Competition in the market:8Customer Demand and Utility:8Value:9Price Differences Across Different Class Stores9The Price of the Kolson differs at different class stores classified as Class A, Class B, and Class C stores. Also in the following table are mentioned the prices of different competitor products of Kolson.9Reasons why the price of this commodity cannot be raised to a very high level9Reasons why the price of this commodity can be charged much more than the cost price10Product Line Pricing10Marketing Distribution Channel system10Marketing Distribution10Kolsons Promotion Practices : introductory and growth stage11Kolson's competitive advantage : growth and maturity stage11Role of sales force12Integrated marketing communications12Suggested change strategy13Challenges the Company Faces:13Competitors of Kolson13Product:14Packaging:14Advertising:15

Executive SummaryKolson may not be one of the biggest brand names in Pakistan, but it is surely a very well recognized brand, with a reputation of excellence in what it has to offer. Be it Slanty, which every child and his parents know about or be it pasta, which is not only used in homes, but in restaurants also on large scale to make scrumptious dishes, at least one sub brand of Kolson products is present in most houses regardless of lifestyle, socio economic class or demographics. For our Assignment, we chose Kolson Pasta because that has what has given Kolson a well-reputed identity. Not only was Kolson the first national brand to introduce Pasta to the local market, but it has also succeeded in maintaining its strong position in the market throughout the years, despite the influx of competitors such as Bake Parlor and Crispo. The Pasta comes is divided further into many sub categories including spaghetti, macaroni, lasagna and the newly added, vermicelli. Through this report we analyze how Kolson, the brand itself has grown over the years, with our main focus on Kolson Pasta and the changes implemented in that particular sector. To conclude, Kolson Pasta is a very popular brand amongst pasta eaters and is present in the household of every pasta eater. Where competition does exist, Kolson still manages to maintain its edge in the market through its years of trading experience and unparalleled quality.

IntroductionKolson spearheaded the pasta market in Pakistan a few decades ago and has maintained a supreme share in the market ever since. All products in the pasta category which includes spaghetti, macaroni, noodles, and lasagna fall under the brand of Kolson. This makes the company a branded house, and Kolson Macaroni, the subject of our research, a product of this brand. The following sections in this report examine the marketing strategy employed by Kolson and the marketing mix of Macaroni.Marketing Segmentation strategySegmenting the marketDemographics: In order to identify the target market Kolson first segments its market on the basis of demographics as upper middle to upper classes of income groups are the ones Kolson try to gain maximum share out of. Gender: Gender is a big component for Kolson as it is a kitchen commodity and since a woman is the heart of the kitchen and to gain maximum affection and respect out of the family she should win in the kitchen is what the general view. Therefore females are the decision makers to whether to buy their product or not thus their main focus stick at the females of the house. Age and marital status: Age and marital status also has a big influence on the decision making as young mother or in other cases mothers of young are more inclined towards the usage of products such as the Kolson pasta. This gives us another perspective of the segmentation, thus a newer target market of reaching out to children and creating a desire for them. Factors such are these are the ones that influence the most on the buyers decision making process.Defining and choosing the right segmentsIt could be said the emotional component of the brand value pyramid is an integral one as products such as the one in question have largely to do with what they represent. Age factor plays a big role as the young are more adaptive towards changing trends.Moving forward geographic segmentation is important especially at the beginning introductory stage. This can simply be described as Pasta is a newly introduced product to the Pakistani market and it speaks for a certain lifestyle that not everyone everywhere can live. If we were to divide this distinction in the rawest form it would mean the division of rural versus the urban. For products such as the pasta, expecting market sales from the rural market would be a much far-fetched goal. This is because pasta is not a three times a day meal but can be defined as a luxury treat for an average family that may be consumed on a two weekly or a monthly basis. Of course these may differ on various grounds but for the time being we stick with this generalization. Thus moving the rural consumers from flat bread to pasta as said earlier is a much far-fetched goal therefore Kolson caters to this market to almost a zero percent.Choosing a targeting strategy:Lifestyle, consumer attitudes and education are factors that also add to realization of the target market; as it can be expected people who share similar interests and have access to the similar situational stimuli be it in the form of exposure or the awareness, may act similarly. Therefore using these and some other basic bases Kolson segments and thus targets its market for the maximum share from the market.Product Attributes:Product differentiationTherefore to reach out to the defined target consumers Kolson need to use the right mediums of marketing that are shared by most preferred target groups. To choose the medium Kolson undertakes both primary and secondary research to understand how their target market functions. Tools of research being the traditional surveys, focus groups sampling activations, social media blogs etc.Positioning in the minds of the consumersOnce that is done and Kolson has identified the triggers for their target market the next step becomes easier and that is the finding of mediums. For Kolson these mainly comprise of cooking shows, printed media, specific cooking magazines, activations, discounts at selected stores, TVCs etc. Being the pioneers, the consumers had to be educated on the use of the product. Content integration in the form of the cooking shows was the best way to do so. This simply means that the product being integrated in the shows. By using this medium Kolson triggered different basis influencing consumers were met. These being: the positioning of the brand in the minds of the consumers relative to the competitors product. However they did not have any local competitors at the time except for Bake Parlor, they did have competition from the international brands that were already available in the market. Thus by using this medium the positioning worked miracles as now consumers were convinced that the quality of the product is just as good as any. For any brand, positioning is one of the key factors that the marketers try to achieve; positioning being done positively then rest becomes easier. Thus by achieving this Kolson had made its tasks easier. Secondly these cooking shows star the countrys best chefs who mostly correspond to the aspirational group when it comes to the viewers of these shows. The target markets of these shows directly compliment the target market of Kolsons product in this say. Another effective way of creating desire for the consumers is to use their aspired idols and have them be the convincers in their own ways. Again acting on the emotional aspect of the brand value pyramid but this time it comes with behaviors and product attributes. Therefore a complete educating core was formed and a lot of dimensions that needed to be communicated were transferred from the brand to the customer. This is an ongoing activity that Kolson practices.Product Life Cycle and Corresponding StrategiesKolson Pasta, the product, is defined by all its consumers as another name for Fine Quality. An average consumer when picks up Kolson Pasta, confidently, out of all the brands placed on the shelves of a store, they not only buy the finest quality of pasta available at local level but also they choose to prefer heritage and legacy over above else. The core customer value comprises of how the customers perceive the product to be. The quality is described as The traders and the consumers know about it. The actual product is prepared form purely European modernized plants that offer the finest quality of wheat, which is the core raw material for pasta. The Brand Name Kolson only adds to the quality, while the packaging and design has a deeper effect on the buyers as they are able to view the actual product in the transparent coating. Lastly, the augmented product for such a consumer commodity is not provided as it is a perishable and not a long lasting product.Product and service decisionsKolson Pasta is a convenience product as it is frequently purchased and requires little planning, shopping effort and consumer attention. The price is low while the distribution channel used is one that helps makes the product accessible at an arms length. The product is widespread and is available at all locations, for the promotion is mass and standardized, and is not specialized in any part. The product packaging is styled and designed in a way that the customers can recognize it without any confusion while the transparent look helps the consumer identify between the different shapes of Kolson Pasta. Kolson Pasta has used line filling/line stretching by adding different shapes of pasta (i.e. little elbow, twisted elbow, large elbow, spiral, ring, large shell etc) to satisfy dealers and to give variety to consumers. The product line/product mix is defining the following manner:-Product mix width: 4(Snacks, Pasta, Biscuit, Cakes)-Product mix length: 10 in Pasta ONLY (Plain/Colored/Roasted/U-shaped vermicelli, Long/Elbow Macaroni, Egg noodles, Lasagne, Spaghetti)-Product mix depth: 10 in Macaroni ONLY (Different shapes mentioned above)-Product mix consistency: All products are consistent.Brand equityThe brand equity of the product is defined as established, and that too to the extent that when Kolson was bought out by Lotte Confectionary, from national to international, the packaging was not changed otherwise all the consumers would go into a hustle bustle. Since Kolson is pioneer is Pasta therefore it benefits the end consumers with their legacy and since Pasta attracts the women who consider their kitchen to be their treasure chest the brand has built a reputation and is positioned in a very subtle manner. Kolson Pasta has an extension of both the tangents, one being line extension while the other is brand extension. Kolson Pasta on the BCG MatrixWhen talking about the BCG matrix, Kolson Pasta is classified as a star since constant investment is being done and it is reaping profits. The market share of Kolson Pasta amongst the various pastas available (Bake Parlour etc) is the highest because of its superior quality and reasonable pricing. Kolson is the brand favored by women as they can relate to the quality of raw product and the home made meal that they offer their own family. The market for Pastas is in the growth stage as Pakistanis are the roti chawal people and to bring them to Italian dishes is not a task that can be performed overnight, it is gradual. Kolson Pasta is a customer oriented and consumer centric product, Kolson evolves with their consumers and Pasta is a new concept for people (the Pakistani masses) as they prefer their conventional food and they still consider pasta as a luxury food.Product life cycleWhen it comes to the Product Life Cycle (PLC) Kolson Pasta cannot be easily labelled as at either of the stage. With respect to the time that Kolson Pasta has been on the shelves of the market we can assume it to be in the maturity stage but since Pakistani people still have to familiarize themselves with pasta as Pakistanis prefer to have their traditional items and dont focus on western delicacies, pasta being one of them, therefore the product is classified as in the growth stage. This also coincides with the star label of the BCG matrix. People are still adapting to its growth, that early adopters have take their pick now its the turn of the majority.

Price Strategy:It is said that cost is a fact and price is a policy. Kolson is the company which is the pioneer in the pasta products. Their main concern is quality. Since they have been in this industry since 1942 and their product quality has not deteriorated over the years, they have created a perception among consumers that they offer guaranteed quality and they have a competitive advantage and can apply value-based pricing on that basis.Basis of pricingBrand value is directly proportional to cost. If you want to increase your brand value, it affects price accordingly. Kolson uses a mix of both, value as well as cost-based pricing. Because consumers have the perception that Kolson does not compromise on quality, they can price it a little higher than the competitors. But on the other hand, since it is a convenience product, Kolson also has to keep its price on the lower side. Thus the price is a mix of value and cost-based pricing.Factors Considered While PricingPrice must match the utility offered by the product or service. The customer is always ready to pay a price equal to utilities he gets from theproduct. Below are the factors to be considered while pricing.Product Cost:The cost must be such so as to cover the variable as well as fixed costs of the company as well as make a profit. Consumers living in this inflation understand that prices will increase for certain things, just as prices of commodities and transportation are rising so will prices of certain products.Extent of Competition in the market:When a firm does not face any competition then it can enjoy complete freedom in fixing the price. But when the competition is more than price is fixed keeping in mind the price of competitors product. In Kolson's case, Bake Parlor is a very strong competitor and they try to keep their prices within a certain range of the competitor's price.Customer Demand and Utility:When demand of the product is inelastic i.e., no or very less substitutes are available then company can fix up a high price.Whereas when demand is elastic i.e., more substitutes are available then price has to be brought down. Since Kolson Pasta is a meal, its substitutes would be local foods like rice and other full meals. Since rice, wheat etc. are staple foods, pasta is a relatively elastic commodity whose price is responsive to peoples taste, and because pasta and macaroni are still foreign in Pakistani culture, they are not considered staple foods, hence their prices are elastic. On the other hand, if product is highly demanded then price can be high but at the time of low demand price has to be brought down. During the months of Ramadan, Kolson starts the "educational program" on cooking channels, where they make housewives aware of the various ways in which macaroni can be cooked and enjoyed. This is therefore, the time for high demands as people usually skip dinner which includes the rice and wheat, and try out new recipes. This season allows Kolson and other macaroni manufacturing companies to just raise their prices a little so as to reap seasonal profits. At this time too, they cannot raise their prices too much because there are a number of substitutes available.Value:The value of a product in the eyes of your customer is another important factor to consider in pricing strategies for your business. Pricing too high or too low will leave an impression on your customers and will influence their decision to buy or not to buy.Price Differences Across Different Class StoresSince the government of Pakistan has not made a law which makes it necessary for Kolson to print retail prices on macaroni, the price varies from store to store. But, it varies only within a given price range. In this case, taking advantage of the situation, has Kolson tried to apply segmented pricing? Or is it just the retail stores cutting their profit margins in order to achieve higher sales?The price differences are there across different class stores because some stores like Chase Up are known for their discounted prices whereas, the people coming to A class stores don't care for 5 or 6 Rupee difference between stores, so their prices are comparatively higher as compared to B-class stores or those which offer discounted prices.The Price of the Kolson differs at different class stores classified as Class A, Class B, and Class C stores. Also in the following table are mentioned the prices of different competitor products of Kolson.Class AClass BClass C

AghasEBCONaheedChase UpShop N GoNew Shinning

Kolson606564526065

Bake ParlorN/A6064556565

CrispoN/AN/A6052N/A65

Table 1: Pricing of Kolson and Different competitors in different class stores.

Reasons why the price of this commodity cannot be raised to a very high level Many substitutes available Not a necessity Competitor Prices Cannot raise to a level that it becomes out of the range of the customersReasons why the price of this commodity can be charged much more than the cost price This product cannot be made at home. There is oligopolistic competition. The habitual consumers cannot stop their consumption.Product Line PricingKolson manufactures two products with almost the same ingredients and the same machine. These products target two very different markets. Macaroni targets young mothers and young girls while on the other hand, vermicelli targets a more rural central population. Due to this, the fixed price is divided between the two products, thus, lowering the cost price of macaroni and increasing profit margins.

Marketing Distribution Channel systemKolson has a network of over 113 distributors all over Pakistan. While working with these distributors, the company ensures that the product is available at all stores in the relevant market for pasta. The number of stores across the country where Kolson pasta is available stands well over 70000.Kolson targets the tier 1 metro towns namely Karachi, Lahore, Islamabad, and Rawalpindi followed by tier 2 metro towns that include Hyderabad, Multan, Faisalabad, Quetta, and Peshawar. In other words, pasta is pushed towards urban centres rather than rural areas.Marketing DistributionThe marketing system followed by Kolson is a multichannel distribution system. The producer which is Kolson ties up with its distributors which take the product to the retailer as well as the wholesaler, meaning two routes are taken to the end consumer. The wholesaler services the small businesses which are out of reach of the distributor and in essence caters to a geographically different consumer segment. Since the wholesalers buy the product in bulk, Kolson gives them discounts.There are some benefits for the retailer as well. Working with the distributor is advantageous for the retailer in the sense that a regular supply is ensured for him because the distributor is partnered with the producer. This saves the retailer on his transportation costs too. Also if there is any discount scheme offered by the company, the retailer knows that it will come directly to him and not be swallowed by any intermediary party.

Figure 1: Kolson's Distribution System

Kolsons Promotion Practices: introductory and growth stageKolson aired its TVCs in the introductory stage and used a typical happy and satisfied family setting to communicate its core benefit to the consumer i.e. good food will make a good house. The strategic part of the Kolson TVCs was when to air it. Fortunately when Kolson introduced pasta range, there came about a revolution in the Pakistani media that was the huge influx of the morning shows and the hype they created. Kolson soon realized that as for the cooking shows, their target market was also target to the morning show. Therefore Kolson used the slots in between the morning shows to air their advertisements. Thus, reaching out to the stay home mothers, hence the target market. The rest of the mediums that Kolson used held similar taste to it as they used the essence that Kolson defined for their marketing strategy that was to educate and emotionally position their product.Kolson's competitive advantage: growth and maturity stageCurrently there being a few local brands in the pasta industry, consumers buying behavior tends to tilt towards habitual buying. The three head brands of pasta in the local market being Kolson, Bake Parlor and Crispo, it becomes convenient for the buyer to very quickly understand the differences of the different brands. Therefore the consumers move from the variety seeking buying behavior to the habitual one. Kolson has an added advantage on this scale as they being the pioneers, consumers were accustomed to buying their brand and when the newer brand arose Kolson did not struggle much. If we look at the definition of the market we see how integral creating value for the customer is. Kolson has put his foot on the right side by not overselling their brand but by providing their best quality. Only then can they attain the value of out of the consumer. This has helped them reach the level of market share they today own in the pasta industry i.e. about 45 percent.Role of sales forceThe sale force ensures that the brand is available at the right place at the right time in the right quantity. Ensuring your product goes through the factory through the distribution channel to the market. For us all these effort would go to waste if the sales force fails to deliver. Its your product you have worked on for which your price, your position, your packaging is perfect; if it fails to deliver in the right place it is useless.

Integrated marketing communicationsIt is estimated that 2014 would be an exciting year for Kolson Pasta. Kolson has planned to uplift the brand and make it younger and for this, the whole marketing mix is in the process of a transformation, from the actual product to the packaging to communications. The company hopes to increase its appeal to its consumers with a full-fledge aggressive campaign that is in store for the turn of the year. So far, this information is classified and is not available to anyone outside Kolson.

Figure 2: Product placement in cooking show

Suggested change strategyThe consumers because of the superior quality they have to offer favor Kolson but since the product has already been adopted by the innovators, early adopters, and a part of the early majority it is now time for Kolson to focus on some areas that have not received much attention over the past years.We believe that Kolson needs to change its packaging so as to reflect on its quality and status. The price and product themselves scream out loud to the middle upper class and upper class but have not been able to achieve the consumer confidence in upper class. Changing the packaging will not only boost sales till a certain point (adding strangers and barnacles to their customer relationship groups) and add to their customer base but will also improve brand equity. For Kolson now is the time to add the name of Lotte to their product which will act as a cherry on the top and improve their position in market as the upper class look for quality and name, Kolson has now got both. The only reason Kolson did not add Lotte to their products a few years back was because the customers were familiarized with their traditional and local look but now is the time to change it, for better. As far as the packaging is concerned, creativity with colors is very significant and an elegant and sophisticated look is what they need to attract the customers.Challenges the Company Faces:Competitors of KolsonAs Pasta is an Italian dish, there are many international competitors that Kolson has to compete with. But, since these are more expensive than the local brands of pasta, they are not reachable for the middle and lower class people. The competitor that Kolson has to compete with on a local scale is Bake Parlor. Whenever you go to a store, you see a red pack in the pasta category. Bake Parlor, although not a pioneer in the pasta industry in Pakistan is one strong competitor. Other Imported competitors are Baronia, Selva, Maria, Buitoni, Pasta Zara, Kraft, and Del Monte. Imported pastas are very expensive therefore they are not the potential competitors of Kolson.As Pasta is an Italian dish, there are many international competitors that Kolson has to compete with. But, since these are more expensive than the local brands of pasta, they are not reachable for the middle and lower class people. The competitor that Kolson has to compete with on a local scale is Bake Parlor. Whenever you go to a store, you see a red pack in the pasta category. Bake Parlor although not a pioneer in the pasta industry in Pakistan is one strong competitor. Product: Bake Parlor's R&D department figured out that since pasta is new in the Pakistani culture, and women in Pakistan still do not know how to make different dishes from that one bag of pasta, they should include something that makes it easier for them to do so. The spice-inside category of Bake Parlor when introduced made a huge impact in the market. Their excessive campaign about "Ab to sabhi khatay hain" (Now everyone eats) including a very famous chef Mehboob caused all to try this new launch at least once or twice before becoming a regular customer of Bake Parlor. There are various varieties of spices including Biryani, Tikka, Fajita, Hot and Sour, Seven Spice, Bar-B-Q and many others. Bake Parlor has tried to incorporate Pakistani flavours in Pasta to target those markets where consumers thought that pasta was just a continental dish. The Biryani and Tikka flavors encouraged Pakistani households to eat it as a "meal" and not just a snack for the younger generation.Recently, they have launched the samosa, achari, chaat, meatball and about three other flavors. They are tapping those markets which did not eat macaroni. Kolson says that macaroni is for the young mothers, but Bake Parlor, by introducing these spice varieties is encouraging mothers, old women and entire families to try pasta because it has been incorporated in their Pakistani flavors.Packaging: Bake Parlor's packaging in the transparent packaging range is red. It captures consumer attention. There is also a small picture of a bowl with pasta in it to further contribute to the buying decision of the consumer who has been attracted by the red. There are easy instructions with pictures at the back to make it easy for those who are new to this to make pasta.The boxed range is also red in color. But, as compared to Kolson's boxed range of macaroni, it is more appealing to the eyes, as it has a big picture of a very delicious bowl of macaroni. Kolson's box is simple and the macaroni that they show on the front is plain. Bake Parlour knows that Pakistani people really like spicy food, so keeping this in mind; they have designed a pack which appeals to the Pakistani consumers.Advertising: Bake Parlor advertises its simple and spice-included range through electronic media, flyers, and billboards. Everyone remembers their tagline "now everyone eats" (ab to sabhi khatay hain) because of their excessive campaigning when they first introduced their spice range. Apart from that, they tried to influence people through reference groups. Chef Mehboob is a well known and qualified chef in the eyes of Pakistani women. His appearance in the Bake Parlor TVC, gained them a high edge.In the end, though Kolson is a trailblazer in the pasta industry in Pakistan, Bake Parlor is working according to its R&D department and has gained some competitive edge due to this.