Product And Service Segmentation Case Study
Tetra Pak is a leading industry in the packaging and food processing industry. The company has utilized innovative strategies such as aseptic technology and integrated food processing machines into being a leader in innovation, providing excitement to its customers, and producing a wide range in offerings. The paper recommends some ways the company can use to segment its products, and at the same time market them. Factors to be considered during marketing would also be analysed. The importance of the environmental approach in Tetra Pak will be considered with an analysis of the importance of having a positivecorporate image. In conclusion, the core competencies of the company will be identified highlighting their importance in organisations.
Tetra Pak a company that began in the 1950’s as a packaging company for milk has managed to effectively utilize innovation and creativity to become one of the largest suppliers of packaging systems for milk, drinks and fruit juices, and many more. The company has 119 marketing companies across the world, 59 packaging material plants including licensees, and twelve packaging machine assembly factories. The company has 21,672employees and achieved in 2010 net sales of EUR 8.96 billion (www.tetrapak.com). Tetra Pak products are now sold in more than 170 markets. This paper will provide an analysis and possible recommendations of the company’s marketing operations.
Tetra Pak offers a wide variety of products and services that range from packaging to food processing systems. Therefore for the company to realize growth there must be a proper strategy of segmentation of products and services, and customization of their benefits. The strategy requires detailed answers on the following questions:
How to segment the products?
What research procedure to use to develop a segmentation strategy?
What segments to customise for customer benefits?
How to allocate resources among the segments?
How to implement the product segmentation strategy?
Product segmentation in the company should follow the STP (Segmentation, Targeting, and Positioning) process where the three activities are undertaken in an orderly way. The product differentiation approach can be employed in marketing when the products and services in question are unique in an industry that has an imperfect competitive market (Giloni et al., 2008). Tetra Pak’s products and services are unique and so they are currently segmented in five categories which are: filling machines, service products, packaging, processing and equipment, and distribution equipment all of which are unique in their own accord (www.tetrapak.com).
However, segmenting the company’s products require information on the characteristic of the market where the products and services will be offered. The characteristics noted here is potential of the target market, target market growth over the years, and competitiveness of the target market. The characteristics can be obtained from simple surveys, interviews or case study analyses. The information acquired can be used in segmenting the products. A case in example is where according to the financial times, (2011), the global consumption of milk in developing economies was seen to increase by 1.6%. The increase provides information for the company to review its packaging segment into one that will accommodate the expected increase in milk consumption.
Having segmented the products, it is often recommended that the management should select certain targeted segments as it is not good to pursue all segments at once (Hax, 2010). The criteria of selecting target segments is, they should be measurable (size and characteristics), strategies can be able to be implemented, and should be sustainable. The target segments for the company can be packaging where it is attractive (results in revenue), and product service where there is an increasing demand for out-sourced services and solutions that reduce downtime and costs in production.
There is also the need of customizing the benefits of the segmented products so that customers could feel that the company values them. Customization is done as a positioning strategy where customers associate certain services and products with customized features that accompany them. An instance is where Tetra Pak’s packaging product is customized to serve various markets and products. Furthermore, the tetra-brick being specifically customized to serve the European market, and tetra-recant being customized for food products originally packed in cans.
In implementing the STP strategy in segmenting the products, Tetra-Pak will be able to enhance its competitive position, examine and identify growth opportunities, and be able to match company resources to the targeted market segments hence greatest return on market investment (ROMI) (Hill & Jones, 2008).
Marketing of Products and Services
The company has to come up with a market research and plan that will aim at adding value to its products and services, separate it from competitors, becoming a valuable resource, and enable it anticipate change in the business environment. Since the organisation is a packaging industry and is expanding in the food processing industry, the various ways that products and services can be marketed are: public relations; consumer promotions; trade promotions; editorials; and sales literature.
Public relation is a technique whereby the public image of the company is maintained through maintaining communication between the public and the company (Stone & Ron, 2008)). The technique provides the business with an exposure to the public through topics of public interests or news items that present a third party approval with no direct payment. Tetra Pak can promote its green image technologies through speaking at environmental conferences. The company can also use the social media which include web 2.0 applications such as Twitter in promoting and analysing products and services offered. Public can instantly express their opinions on Tetra Pak’s latest innovations and solutions.
Consumer promotions can be used where the company implements actions that are aimed at stimulating sales through influencing end-consumers (Douglas & Craig, 2011). The company can offer free advisory services on equipment maintenance on first time customers who use the new integrated liquid processing system. Furthermore, a loyal reward program can be used where customers collect points or credit on the amount of purchases they make. Consumer promotions go hand in hand with trade promotions which in this case the company can come up with a marketing campaign that is aimed at building demand of products and services at the middle man level. The specific trade promotion that can be used is in-store displays in retail stores to draw attention of the product.
Editorial and literature sales are aimed at the conservative market that includes industries (Stone & Ron, 2008). These target markets require brochures, catalogues, MSDS (Manual Safety Data Sheet) and many more so as to accept to purchase products and services. Editorials in magazine also are good advertisers of the company’s offerings. Literature sales that the company specifically can use are brochures and MSDS which are to be offered to industrial companies periodically with accompaniment of subscription charts.
The critical factors that should be considered in marketing Tetra Pak’s products and services include (Douglas & Craig, 2011): competition, customer, life cycle of product, and media. Competition should be considered in the sense that the company has to understand its competitors, evaluate their strategies, and how they marketing their offerings. For new products, such as inventions, tetra pack should put themselves in potential customers’ shoes and consider the benefits and ills.
Customer is a factor whereby efforts should be made by Tetra Pak to market products and services to the right customers who are most likely to purchase. It is much easier to target the right customer than creating a market for products. Life cycle of products and services should also be considered where Tetra Pak knowing the point in the product and service cycle will determine the marketing technique to be used. Marketing at the introduction stage is different from marketing at the decline stage of the cycle (DASH). Finally, media determines the how Tetra Pak would market its offerings. If there was a prior public relation about the company’s offerings then an interest would be created as opposed to no prior public relation. Therefore, media would affect the marketing technique to be used by Tetra Pak.
Creativity, Innovation and Design
In the packaging and food processing industry creativity, innovation and design help in attaining competitive advantage through three dimensions that include: excitement of customers, competitive leadership, and portfolio enrichment (Bowonder et al., 2010). The listed dimensions clarify the appropriateness of an industry’s innovation strategy at every stage and every part of the organisation’s value chain (Bowonder et al., 2010). By creating excitement amongst customers, innovation offers customers with specific value propositions, for instance, in the form of an exciting experience in the case of service solutions provided by Tetra Pak in integrated food processing systems. Furthermore, in the products section, Tetra Pak’s innovation and creativity department came up with a natural beverage called magic portions that was free of additives (www.tetrapak.com). The product created excitement amongst the nutritionists requiring natural drinks hence a success.
Competitive leadership is attained through innovation where firms are able to outmanoeuvre and surpass competitors. Competitive leadership involves analysis of competitors, competition benchmarking, learning the competitor, and evolving a road map that would make firms stay ahead of the pack (Jones, 1982). The third importance of innovation is that it supplements the firms’ offering range by adding innovative offerings, which ultimately result in new market opportunities. Even established industries in large markets have to use innovation strategies to form new segment markets.
There are certain innovative strategies that Tetra Pak can use to maintain their competitive advantage and they are all related to achieving the listed three dimensions of innovation. The strategies that can be implemented to generate innovation and achieve customer satisfaction are:
Use of Platform offerings: – Where a range of offerings are created to share a common technology and to address related or even markets.
Co-Creation:- Working with consumers so as to use their insights to come up with ideas and designs on new products and services.
Reducing Marketing Cycle Time: – Reducing marketing time so as to enable consumers obtain offerings early. This surprises competitors forcing them to only react on what the company has offered.
Enhancing the Brand Value: Where brands especially those that were losing value get unique offerings hence exciting customers.
Strategies that can be used by Tetra Pak in attaining competitive leadership are: leveraging technology where the company’s technology is leveraged to be better than its competitors; future-proofing where new product and service ranges are produced to reduce future uncertainty; Lean Development to reduce waste and cost of production; and partnership with other players in the industry to come up with new services and products that would meet competitive pressures.
Enriching the portfolio of Tetra Pak would be achieved through using four strategies that are: innovation mutation where new products are created through mutating technology; Creative destruction which is a technique of purposely wiping out a current offering and replacing with another; market segmentation where new segments are created so as to create a window of opportunity for globalisation; and Acquisition where brands, market, or technology is acquired so as to expand the company.
The strategies that are listed in achieving competitive advantage are all to be implemented through incorporating critical stakeholders of the company. The critical stake holders are R&D team, manufacturing, marketing, and administrative functions of the organisation who should work closely with customers.
Climate change has risen to the top agenda presently where most organisations and consumers advocate for what is referred to as green technology. Therefore for Tetra Pak, being a successful company also entails a commitment and care of the environment in order to achieve profitable growth that is in accordance with environmental conservation and good corporate citizenship. The importance of the environmental approach took root in 2000 through the Energy goal and later on through the climate goal of going green in 2005 (Kotler et al., 2006).
Apart from the two goals, the company has developed other goals, activities, and evaluation and organisational structures all with a view of converting climatic aims into actions. The management believes that the total environmental impacts depends on actions taken during various manufacturing periods of its products and services, from design and purchasing, through to transportation, filling, consumption, and disposal (Kivimaa, 2007). The listed operations will include efficient, safe, and environmentally sound production and distribution globally. Stakeholders such as employees, customers, suppliers, and communities will be integrated together in achieving the environmental goals.
Tetra Pak has reduced the environmental impact of their products through: producing aseptic cartons that are 20% lighter than twenty years ago to promote waste management; having an environmental council of employees that sets and monitors environmental goals; having staff in business areas that are responsible for environmental excellence; and being partners with the WWF climate savers programme since 2006 (www.tetrapak.com).
Making sure that Tetra Pak addresses climatic change is not a must as profits would still be realised, but the reason why the company implements the environmental approach is to achieve a respected corporate image. Having a respected corporate image is important in the sense that a company that mismanages or ignores its image will most likely encounter problems. “Reputation problems are seen to grow like weed and ultimately result in direct and indirect escalation of costs (Mark, 2007, p. 54).”
It is important that a company has a respected corporate image so that it secures and sells the brand name of the company to the general public (Jamali, 2007). Identification of the brand is important in an expanded market as it determines the availability of its services and products. Successful marketing of a product requires a lot of input from the firm in question. Corporate success is always close if for sure the company’s image to the public and consumers is distinguished as a structure within the market.
Furthermore, a respected corporate image secures excellent media relations where the media will always portray a company in good light on all mediums of communication (Jamali, 2007). This will result in adding value of the corporate that will be largely acknowledged by the public. The public will be also be nurtured if the company’s services and products are advertised as successful. Apart from value, a good image will also improve the sales of both the media organisation and the corporate.
Finally, a good corporate image will significantly impact adverting of a company’s offers. If the image is of essence, then it would act as the first impression when broadcasting advertisements. The public will quickly recognise the name that is presented on the advertisement. Therefore, in having a good corporate image, a company is able to persuade and overwhelm the public into trying goods and services offered.
The company has been a leader in the packaging and food processing industry for more than half a century. This is attributed greatly by competencies such as innovation and creativity, being good recruiter and retainer of labour, having a partnership with customers, colleagues and suppliers, and environmental sustainability. They are all grouped into two categories which are technical and non-technical. Technical competencies include achievements, skills, knowledge of the company, expertise and relationship (Jones, 1982). Non-technical competencies are results, competitiveness, and accountability of the company (Jones, 1982).
Innovation and creativity in Tetra Pak is a technical competency where the company has concentrated not only in packaging but in coming up with solutions for processing and distribution of food products. An example in innovation in Tetra Pak is the design of an integrated system that contains common automation software for packaging and processing. Innovative solutions in a company are specifically designed to be economical as possible with minimal utilization of resources. A company being creative and innovative competent will also be able to benefit from the three dimensions which are leadership in innovation, wide product and service range, and create customer excitement (Kotler et al., 2006).
Since the company is not common in the public, by being a B2B business company as opposed to a consumer goods one, it has a special labour recruitment programme. Labour is recruited from certain universities, industrial forums, and working closely with executive recruiters (Kotler et al., 2006). The benefit of having a competent recruitment program is that companies are able to not only recruit special and talented personnel, but are able to have a high retention rate. In setting up a recruitment program proper investment is required with programs that test the aptitude of potential employees. Aptitude scores enable organisations to properly categorise employees in accordance to character, potential, and skills.
In having a partnership with critical stakeholders in the society, Tetra Pak has managed to achieve much and at the same time celebrate its achievement. An example is in Germany where Tetra Pak has made substantial cuts in the time needed for handling customer claims with an intention of improving customer satisfaction (www.tetrapak.com). Therefore in addition to improving customer satisfaction, partnership amongst critical stakeholders in the society results in a company improving its corporate image, achieve corporate standards, and promote a positive working environment for employees.
Tetra Pak has managed to be competent in environmental sustainability through coming up with products that are lighter than before and can be recycled all in the view of proper management of the environment. Environmental sustainability in any organisation is important in the sense that the global climate has rapidly changed. The climate has resulted in less water, higher temperatures due to increased carbon dioxide emissions from factories, and pollution from non-recyclable products and industrial wastes (Mark, 2007). By promoting environmental sustainability in their goals and strategies, companies will contribute towards a healthier environment.
Non technical competencies of the company in the form of results are that the company has managed to set up 9048 packaging machines in 2010, delivered 351 packaging machines in 2009, 51859 operating processing units in 2010, and having a total sales of 140, 030 packages in 2010 (www.tetrapak.com). This results shows that the company is a successful B2B business company with a bright future in terms of growth.
This paper has managed to outline recommendations that Tetra Pak might have to do in segmenting their offerings, marketing their products, and strategies that stakeholders might do in order to maintain their competitive advantage. Furthermore, a critical analysis of the company’s approach and its core competencies were highlighted.
It can be concluded that segmenting the company’s products and services requires the use of STP (Segment, Targeting, and positioning) process where the market analysis of individual offerings are studied all with a view of segmenting the most sales achieving product and merging the under achieving offerings. After market analysis the executives segment the offerings after which a certain market is targeted who will be the recipients of the offerings. Positioning of the product will be done with a view of selling the offering.
It is also noted that Tetra Pak could sell their offerings through public relations, trade and consumer promotions, and sales literature and editorials. These methods of marketing are affected by factors such as the media, customers, life cycle of product, and competition. The innovativeness of Tetra Pak has benefited the company in three dimensions which are enabling the company to be an innovative leader, excitement of customers, and availability of wide portfolio offerings. This was further highlighted by offering strategies that would enable the company maintain its competitive advantage.
The environmental approach of the company is a priority so as to achieve growth and promote a good corporate image. The approach was initiated in 2000 and has managed to secure the brand image of the company. Furthermore, the core competencies of the company are being a leader in innovation and creativity, good recruiter of labour force, partnership with stakeholders in the society, and achieving environmental sustainability.
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