SECTION A [40 Marks] Read the case study below and answer ALL questions that follow. Honour the past ... invent the future: A BIC case study Challenges In the highly competitive modern global market place, no organisation can afford to stand still. Because global markets are so competitive, large companies can no longer produce hundreds of different products in lots of different product categories. That approach is inefficient and spreads resources too thinly. Big companies recognise the importance of focusing on their power brands i.e. on those lines in which they have the greatest competitive advantage relative to rivals and which offer opportunities for profitable growth. It pays firms to invest in these products and concentrate resources on them and support them with sufficient marketing, product development, advertising and promotional efforts. In recent years, BIC has reaffirmed that its ongoing success depends on: a. Organisational efficiency BIC has simplified its product range. This has involved focusing from 9,000 SKUs to 150 products in customer-relevant packaging, and reorganising itself in the process. Production has been rationalised to a limited number of 'superfactories' which are the sole sites for manufacturing particular products for global distribution. This way of operating creates huge economies of scale whereby massive quantities can be produced at very low unit cost. For example by operating continuous flow production, where the shaver factory's production line runs for 24 hours every day, using highly automated machinery that minimises labour costs. b. Customer focus BIC focuses on two sets of customers: the retailers to whom it sells directly & the end consumers that the retailers supply. BIC carries out detailed market research to discover the wishes of these two groups e.g. the best mix of products, delivery patterns and promotions to support its products in the shops for retailers as well as final consumers' expectations and requirements for BIC products. In one city in Poland, for example, BIC supplies not only a 24hr/7day supermarket but also 100 small kiosks. To do this well, BIC had to identify the needs of both retailers and consumers. It then had to satisfy them. c. Innovation Many BIC trademarks including those shown bottom left are well known e.g. BIC, BALLOGRAF, SHEAFFER, CONT, TIPP-EX, BIC WITE-OUT. However, as well as building on the success of existing brands constantly improving the quality of the core products, the company is constantly developing new products to meet consumers' expectations and aspirations. For example, in 2002, 20of the company's stationery sales came from new products and line extensions. In a carefully controlled programme, BIC designs and launches new products that offer greater value-added technology. For example, as mentioned earlier, the BIC Cristal is the world's leading selling pen. The number one growing category in writing instruments is gel ink. It is essential that the company offers products with gel ink. BIC has combined these two ideas to create the BIC Cristal pen (the highest quality pen of its kind, and thanks to BIC's efficient methods available at an affordable price) offering the smooth writing of gel pens at a BIC price. ds 2 Conversion from the traditional point-and-ink system to the new Smooth Gel Ink system (offering greater writing comfort) involved significant modifications in manufacturing processes for inks and colourings in addition to re-tooling the machines that make the points. These changes required two years of research and a further year to implement in pilot plants (in France and the Americas), thus reflecting the large investments made by the Group in its core categories. d. Brand development BIC has invested heavily in brand development, to strengthen the recognition of the brand and its reputation among consumers. In 2003 BIC utilised Martin Johnson, the England Rugby World Cup winning captain. Johnson's association with the new 3-blade shaver, BIC Comfort 3 is another example of BIC vision = offer the 3-blade technology to all customers at a BIC Price. BIC has also developed co-branding operations with Disney, and produces a range of writing instruments (mechanical pencils, etc) that feature Disney characters, and targeted to young children, a colouring range under the Disney Magic Artist BIC brand. Fundamental values and company structure A company's values are the guiding principles that determine the way it behaves. BIC's values relate to its products, which it ensures are: functional: designed to perform a specific function well e.g. to draw a line, produce a flame, shave hair. The key to achieving functionality is to adopt the most appropriate design, engineering and technology. affordable: achieved by using appropriate design, materials production and distribution channels. universal: capable of being used by anyone worldwide e.g. the ballpoint pen, the pocket lighter, and the onepiece shaver. Building on these fundamental values, BIC has established three core categories for products, based on a global range, designed for mass appeal. BIC then helps local retailers to select the products that best suit their own customers' needs from this range. Each of the three product categories is managed by a Category General Manager, who has the overall responsibility for the marketing, development, and manufacturing worldwide. In recent years manufacturing operations have been simplified so that huge outputs can be produced from super-factories that serve very large geographical markets. Product distribution is then organised by continent, with country managers reporting to their continental manager. The organisation thus has a matrix structure based on two main lines of communication - (1) by product category, (2) by geographical region. This means that an employee working, say, in a pen manufacturing plant in France would be accountable both within the Western European division and the stationery category. This matrix structure allows combining the benefits of a strong product expertise, together with strong operational structures per geographic area. Customers/consumers BIC's customers (retailers) are not the final consumers who buy from retailers. The Group has therefore built up strong relationships with its retailers to ensure that its products are placed in the most attractive and suitable shop locations, and that the products are attractive and eye catching. This suits both parties; retailers want products to sell well too. Today, markets in most advanced economies are characterised by fewer, larger retailers and especially supermarkets that want sales of mature product categories like pens and shavers to continue growing. BIC supports retailers by innovating to stimulate growth and extend full product lifestyle providing bright, eye-catching displays of attractive products. ds 3 Segmentation When marketing a product category, firms need to identify the different market segments. Segmentation involves identifying sets of characteristics that distinguish particular groups of customers from others. For example is: 1. Based on demographics, i.e. to divide up the population into groups based on age, gender etc. BIC uses this approach to some extent, recognising that different retailers appeal to different types of consumer based on age profiles and income, and that different groups of end consumers seek different products e.g. male and female shaver requirements. Promotion, advertising and presentation of products are therefore tailored to these differences. 2. Based on usage, in addition to its world-leading range of pocket lighters, BIC introduced BIC Mega lighter designed to light BBQs and BIC Mega lighter for candles in 2004. 3. Based on the behaviour/needs of consumers. For example, BIC's research into its stationery product category shows that there are three distinct types of writing instrument shopper: seeking specific benefits, impulse buy and best value for money Best value for money This type is typically bought by offices and households that have writing instruments in virtually every room. Everyone is allowed to use any available pen, so there's no great problem if one is misplaced. Households tend to seek lower priced pens, and regularly make new purchases of assortments of writing instruments based on current needs. Seeking specific benefits Here consumers are looking for a more personalised item; something they regard as 'my pen'. It will be kept in a private place belonging to that individual, who may be reluctant to let anyone borrow it. Buying decisions will typically take longer, and involve careful consideration over choice. Key features looked for will include the pen being comfortable to hold and its capacity for producing smooth, writing that reflects the individual e.g. by colour or handwriting style. Marketing activity therefore needs to focus on these more sophisticated individual needs. Impulse buy Impulse buys are unplanned. Innovative designs will attract this segment, largely because the consumer is buying for pleasure. Purchasing in this segment is far more emotional and so the skilful marketer will seek to create 'objects of desire'. Attention grabbing Point of Sale displays are essential to stimulate impulse buys. BIC aims to create a balanced product portfolio, including: reliable, value for money products for regular household purchasers premium high quality products for the consumer that wants 'something special' novel, attractive products, sometimes with a fairly short life cycle. Conclusion BIC sustains its leading position by communicating and adhering to some fundamental business principles and practices. By focusing on its three product categories (stationery, lighters and shavers) and by identifying the various market segments the company is able to produce relevant products, some of which combine tried and tested products e.g. the BIC Cristal, and others that are genuinely innovative e.g. BIC Cristal Gel pens. At the same time, BIC looks to move into new growth areas e.g. triple blade shavers, BBQ lighters and kayaks. In this way BIC is able to live up to its aim to "honour the past while inventing the future". Source: http://businesscasestudies.co.uk/bic/ ds 4 QUESTION 1 (40 Marks) 1.1 BIC is able to live up to its aim to "honour the past while inventing the future. Discuss, using your theoretical knowledge how BIC is able to achieve this. (10 marks) 1.2 Discuss how BIC segments its market. (10 marks) 1.3 When segmenting its market, should BIC segmentation differ for consumers and industrial buyers? Substantiate your answer. (6 marks) 1.4 Discuss the various branding strategies used by BIC to build brand equity. (10 marks) 1.5 Briefly, discuss how BIC can ensure continued success. (4 marks) SECTION B [60 MARKS] Answer ANY THREE (3) questions in this section. QUESTION 2 (20 Marks) Continuing to push the envelope when it comes to next-generation radio advertising in the cut-throat banking sector is FNB with the Steve campaign. Head of Marketing: Credit Card & Vehicle Finance Barrett Whiteford explains the thinking thats led to a 40% increase in sales and more The Big Idea Realising that no one sits in their cars, homes or work for hours in order to hear and get the entire construct (4 separate messages that the bank wanted to communicate), FNB once again took to the drawing board. Their turning point came in the form of the hugely successful, and currently flighting Steve radio campaign; Much as we as marketers could see the golden ribbon and how it all worked so well together, the reality is people dont listen to ads the way we plan them. The challenge for us is that banking products are often the last thing people think about. At the same time, we need to build and grow our customer base. As financial institutions, were also bound by terms and conditions and other industry-related compliance issues, which have to be included in our ads, he explains. The birth of Steve The campaign came about by trying to turn a slice of life insight on its head. Most of it came from customer complaints such as how dare a bank call me at 7:30pm in the evening, selling me something. We wanted to make people cry, laugh, and in some cases, offend. We then sat down and wrote the ads, as long as they needed to be, to get the story across, and then we booked them, at that duration, he says. Putting its money where its mouth is, FNB went on air in May 2011, by flighting not 30 or 35 second ads, but 45, 60 and even 84 second long ads. Ads are only as good as the results Whiteford is quick to add that the tongue in cheek Steve campaign owes its success to radio. Within 2 months, this noholes-barred approach to radio advertising has resulted in more than 10 999 opened (and swiped) FNB Gold Cards ds 5 since the launch, resulting in increased uptake of other banking products on offer. Whats more, FNB also benefitted from added exposure from Kaya FM presenters waxing lyrical about the campaign in programming time, as well as other channels using the topical Steve campaign as editorial content. This has all contributed to making Steve a household name. Adapted from: www.rab.co.za/case-study-fnb-steve-campaign Based on the caselet above, critically assess FNBs Steve marketing campaign. In your discussion, include the strategies that FNB thought was best to grow their market share. QUESTION 3 (20 Marks) With the globalisation and the progression of technology, many small businesses are not surviving. Discuss what strategy will work for small companies against big players in the market. QUESTION 4 (20 Marks) Effective packaging Is An Essential Tool for Success. Since products are judged by the package they come in, marketers should spend a lot of time preparing strategies that best fit the product. In view of the above statement assess Pick n Pay House brand stance on packaging. QUESTION 5 (20 Marks) In the past, retailers held customers by offering convenient locations, special or unique assortments of goods, greater or better services than competitors, and store credit cards. All of this has changed! Bearing the above statement in mind, evaluate the marketing decisions which Zara South Africa (Spanish fashion chain) undertook breaking into the South African market.