FINAL REPORT Part 2 Marketing Environment.

By: Maria Camila Posada Abad, Natalia Arenas, Camilo Mazo and David Velasquez. MARKETING MIX ANALYSIS A. PRODUCT:

Chocolatinas Jet Leche is one of the most representative products from Compaia Nacional de Chocolates. The fundamental product is a milk chocolate bar made to satisfy personal tastes, and fulfill flavor expectations. The real product is a chocolate bar wrapped and presented in different shapes and sizes, small, regular, medium and large, (6 g, 12 g, 30 g, 50 g in order of appearance), and is packaged in plegadizas, bags and trays. The chocolate bar is commercialized under the brand Chocolates Jet and its image is an airplane on a blue background with yellow letters, it is made with Colombian cocoa with the highest quality standards showing the companys commitment with the quality of its products as well as with the environment, their collaborators, different providers and finally with its corporate social responsibility. Each chocolate bar comes with an animal sticker and a description of it, and the objective is to complete an animal album, so, even though its a snack it also educates children about nature. The product linked with Compaia Nacional de Chocolates offers support services like guided tours to the chocolate factory to explain each and every step in the production process, interactive online websites where children can create accounts, see videos, play games, complete virtual albums and also has a complete customer assistance service, with several phone lines to make complaints or suggestions; and also uses support services such as distribution channels. The chocolate bar is a convenience product because its purchase does not require much effort, knowledge, information or time, it is a quick and easy decision and its not necessary to compare between brands or prices. The product aims at being cheap, portable and accessible, and does not represent a high percentage of the income of a person. It is directed to children from 5 to 12 years old, so the advertisement is designed specifically for them using animals, fun and adventure to attract this segment but it also seeks to attract their parents attention highlighting the products nutritional value in ad

campaigns, making the chocolate bar a healthy product providing calcium and nutrients necessary in kids growth, so it becomes part of childrens and familys lifestyles. The product has several attributes that make it attractive to its target market; it is cheap, fun, traditional, delicious, energetic, dynamic, modern, portable, simple and tasty. The name of the brand was born during 1961 when the first jet airplanes were arriving to Colombia, and this type of chocolate bar was given to passengers as a treat, which represented an innovating marketing strategy for the time being, thus people started to recognize the chocolate as Jet. The product is sponsored by the Compaia Nacional de Chocolates, which is the matrix company, and owns the distribution channels used by the product. Chocolatinas Jet is a manufactured brand, and has an individual publicity campaign with its particular brand and logo, packaged in blue bags or trays, wrapped in aluminum paper with its unique logo printed on it. Chocolatinas Jet Leche is now a mature product because its customers are established and the brand cannot expect extreme growth or higher profits, it is positioned and does not require a lot of advertisement, the production costs are low, but even though it is a mature product it has a lot of competitors that can affect its sales. The product is positioned for children, and is considered by consumers as a fun product, directed to active and adventurous children. B. PRICE: The company focuses on the product Chocolatinas Jet maintaining satisfactory profits when setting prices and being a mature product which has been in the market for several decades it must be an extremely well thought decision to avoid losing market share. This objective comes from the fact that they have already established a substantial market share and can only expect an annual growth of around 2 to 3%. Nacional De Chocolates keeps its flag product of Chocolatinas jet, not because of its high profitability, nor for its low production costs, but for its legacy for being the first product of the company ever to be launched, so by maintaining satisfactory profits the product can remain in the market. The main problem that comes with the Chocolatinas Jet product line is the high cost in relation to the manufacturing process, which narrows the profit margin of the product. The company has to keep in mind a survival pricing

strategy, rather than profit maximization, because of the lack of investment in research and development which could reduce production costs and increase the profit margin. There is an elastic demand for the product Chocolatinas Jet and this elasticity is defined by a set of factors which the company has identified as follows: The first factor is the existence of a high number of big and small competitors which provide the general public with a massive number of substitute products which affect their buying decisions. If Nacional de Chocolates would decide to increase the price of their products Chocolatinas Jet, then the demand for their product would decrease considerably because customers would have many other alternatives to buy instead of the more expensive Chocolatinas Jet. Another factor that affects the elasticity of the product is the fact that even though it doesnt represent a substantial part of the consumer`s budget it is not considered to be a essential and therefore it is regarded as a pleasure item and it is affected considerably by an increase in the price tag. The next factor affecting the products elasticity is the products price in contrast to countrys rate of inflation, which although is very stable in Colombias case, has made people very conscious of their spending habits, using their resources to buy essential items first and luxuries later. Chocolatinas Jet, being a product targeted towards the masses, uses a penetration pricing strategy in order to attract a large portion of the market share, expecting to reach a high volume of sales, that will make up for the lower profit per unit and guarantee reaching the break-even point, which is essential for the products survival. Penetration pricing may discourage other companies with no market share, but as Chocolatinas jet owns a big portion of the market share, they dont have any problem adopting this strategy as they have sufficient customers to maintain high volumes of sales. Although in the beginning, the product was very exclusive and was available to very few people, the company still adopted competitive prices in order to reach the masses which represented a sizable potential market.

C. DISTRIBUTION:

Company -------> Company ------->

Wholesaler ----------> Consumer Retailer ----------> Consumer ---------> Consumer

Company -------> Wholesaler ----------> Retailer

The reason behind having various distribution channels, ranging from wholesalers to retailers and finally arriving to the consumer, is to have a better hold of the entire market and be able to reach every single person. By having various distribution channels the company makes sure that the product reaches not only the big wholesalers but the small stores and retailers as well. The company in charge of the distribution channels is called Cordialsa. These channels have different functions depending on the type of buyers. Wholesalers buy goods directly from the company and they usually buy large quantities in order to sell either to retailers or consumers. This distribution channel is usually responsible for the largest volume of sales the company may have and they are generally composed by very visible and well known customers (Exito, Olimpica, Macro, Carulla, Pomona etc.). Retailers on the other hand represent the other half of the distribution scale, accounting for the everyday consumer who does not buy in bulk and rather buy for the immediate use. Each channel of distribution is managed in different ways, depending on the type of customer they are dealing with, for example, when dealing with the wholesaler, Cordialsa has a warehouse director that is in charge of dispatching large orders and is constantly in touch with a warehouse director over at the clients warehouse which has to be ready to receive the order. The operation does not change much when dealing with smaller retailers because Cordialsa employs as well a warehouse manager specialized in small orders and dispatching to the small shops and retailers, usually with a higher frequency than the orders for wholesalers. The distribution channel system used in the company has been identified as being a hybrid or a multichannel system because it consists of a single firm (Nacional De Chocolates) setting up one or more distribution channels to reach

one or more customers through different intermediaries. This is achieved through the wholesalers who buy from the company and then sell in bulk or redistribute to other retailers or by the actual retailers who reach the smaller portions of the market and account for the individual sales of the product itself. The intermediaries in the different channels have certain characteristics which make them better at specific functions. Wholesalers are independent

intermediaries that buy goods from manufacturers and sell them to retailers and other business to business customers. These intermediaries are the ones in charge of breaking the bulk so they can sell it mainly to other businesses which will finally sell it to the end user, for example, Retailers: They are directly in charge of selling to the final consumer, making the product available when, where and in the sizes and quantities that the final consumer wants. Because of the nature of the product, retailers are usually the ones who provide it directly to the consumer instead of the wholesaler doing this. Nacional de Chocolates is oriented primarily towards an intensive distribution of their product Chocolatinas Jet because it takes advantage of every existing channel of distribution, focusing on taking their product to every single corner of the market and making sure it reaches any store capable of selling it. An intensive distribution is mostly oriented towards convenience products which have an appeal to a wide percentage of the population and therefore can be easily marketed without many extra costs. Chocolatinas Jet which in essence is a convenience product suits this model perfectly as it can be easily marketed through any and all distribution channels without having to make any changes to the existing distribution systems or the product itself. For their distribution strategy, Nacional De Chocolates uses both wholesalers and retailers to market their products and take them to their final consumers and by doing this they aim at spreading their product, Chocolatinas Jet, throughout the entire potential market. The use of both big and small intermediaries ensures that the market is completely covered and there are no gaps for their competitors to take advantage. The only existing gap that has been recognized by Nacional De Chocolates exists in areas where the temperature is too high (coastal areas)

which degrade the quality of their product as a result of the chocolate melting. The company Nacional de Chocolates is essentially considered as a wholesaler because they are known to sell large quantities, aiming at economies of scale and are not known for selling directly to the end user, they rather sell to intermediaries who in turn sell Chocolatinas Jet to the end users. Being a wholesaler the Nacional De Chocolates group has a specific marketing mix which has been adapted for their wholesalers functions. In regards to their products they focus on large volumes and presentations other than individual retail sales, as for their prices they are oriented towards large volume sales and therefore grant their customers with special conditions such as discounts or payment plans when they exceed a certain number of units or a certain amount of money spent. Due to the fact that they are wholesalers and they have to seek large market shares in order to maintain their economies of scale, the Nacional de Chocolates group has to aim their promotion efforts towards a more regional and national (even international in some cases) advertising of their products in order to be well known in the market and secure enough sales to surpass their break-even point. They are not focused on having stores which customers seek and plan to visit; instead the company sets up isolated stores, where the location is as not important as low rent costs. They use this type of strategy because the company doesnt need to get to the customers, the customers go to them, which justify the preference they have for low rents costs over the aesthetics of their store fronts. An example of a strategy they use in order to allow customers to get to know them is having tours around their factory located in Rionegro, Antioquia, where small kids can go with their parents and learn how chocolate is made and get free samples of a wide variety of products. In this case the marketing mix does not include either Personnel nor Presentation due to the fact that the company is not selling directly to the final consumers and do not come in direct contact with them. Their function is to sell in bulk (large or small) to other distributors which break down their products into the sizes and quantities that customers want to buy. These are in end, the special functions that

the Nacional de Chocolates group has to carry out being a wholesaler for their Chocolatinas Jet product. D. PROMOTION

The promotion mix of the company is composed by the basic four elements, advertising, public relations, sales promotion and personal selling; for these four activities the Nacional de Chocolates assigns a budget of 5000 million Colombian pesos, which are assigned in order of importance to each task in the promotional mix. 1750 million of Colombian pesos are destined for publicity and advertisement, 1250 million are for personal selling, 1000 millions are for public relations and the other 1000 millions are for sales promotion. The budget break down shows that the company wants to make an emphasis on advertising, basically focusing on children, and trying to attract them through TV commercials and online websites, but its also making an effort to become strong in personal selling. It is a profitable way to convince the children and their parents who are the ones that will purchase the product. The company is concerned about the public relations and the sales promotion and they undertake different activities for each of the promotional mix elements.

Personal Selling:

The internet plays a crucial role in personal selling because it is used to attract potential buyers. The Nacional de Chocolates uses its web site to inform and incentive their customers. For the young customers, their web site is more

colorful, interactive, and is really easy to access them so children can explore and learn from them. Also on its official web site they explain their history with a time line, showcase their various products, and explain the production process, basic items that concern the customer. This shows that the company cares about having a good image and showing that they are a responsible company. Nacional de Chocolates emphasizes in personal selling seeking to convince children and parents to purchase their products, in this case Chocolatinas Jet Leche. They use

promoters in supermarkets, who talk about the benefits of the product and encourage the general audience to know about more about their product. The company is placing promoters around the city where theres a large presence of children, like Divercity and El Tesoro Encantado, giving free samples of the chocolate bar, so they will know the product. Also the Nacional de Chocolates is creating spaces where children can exchange animal stickers to complete the album guided by employees from the company who help the children with this task. Another strategy they use is the planning of outside activities with children, encouraging them to learn how to take care of nature, so they can develop an environmentally concerned attitude. The company is constantly surveying its customers to make sure its personnel is doing their job properly and uses this information in the creation of new sales strategies that will attract their target market in a much more efficient fashion.

Sales Promotion:

Instead of lowering the price, Nacional de Chocolates believes in a strategy called adding value. This is when in the package says that instead of four chocolate bars, it contains five for the price of four. This is an incentive for the buyer and sends a message that he/she is receiving one free chocolate bar. It also is a great technique to increase sales because, usually the ones who see this promotion are the children and for them that is a very attractive offer. To encourage youngsters to keep buying their products they launch different campaigns, such as album stickers which are found inside the chocolate bars, needed to complete the album. This strategy makes the children want to consume a considerable amount of chocolate, because they want to complete the album. This creates as well a family bond because parents and children sit together to fill in the album, which in motivates parents to keep buying the chocolate bars. The company is specialized on point-of-purchase promotion, placing posters of the new album all around the city, supermarkets, and strategic point s so youngsters can see them and tell their parents about it. The candy aisle is full of posters and

representatives pictures of the album; this will assure that the chocolate bars will finally end up in childrens homes. The change in the albums theme has increased the sales of the product because it attracts new consumers interested in dinosaurs and endangered species. The company does not believe in reducing the products price because it considers its current value as a very accessible one, thus it does not have an impact on the consumers income.

Direct Marketing:

The company uses some techniques to get customers to buy their products while staying at home. The Nacional de Chocolates uses catalogues and mail order as their strategy to motivate purchases. The company in charge of the catalog is called

Novaventa and it is the name of the catalog as well. Novaventa is a division of the Grupo Nutresa, so the whole groups products are in the catalogue. The catalogue is sold by women who want to have an extra income or is their only income. The Nacional de Chocolates sells their different products in this catalogue. It has different promotions and also motivates women who sell this product to increase their personal sales by giving extra discounts and special gifts. People prefer buying from this catalogue because the merchandise will be sent directly to their homes and they do not have to go out and buy it. Also the company has a promotion strategy where if a chocolate product is bought then they will give away didactic toys so children and even their parents, will develop an interest in buying this product. Customers find this service convenient because each month a new catalog is launched so when the parent see that the product is running out, they just have to call a sales representative in charge and order it.

Public Relations:

The Nacional de Chocolates is making public events aimed at changing the concept people have about chocolate, in an effort to educate people, influence potential customers, attract the community and inform the media about the nutritional value the product has. As part of their social responsibility efforts the company has donated

resources to help people affected by the winter in Colombia, which has resulted in a special treatment for the company when acquiring construction licenses and permissions to harvest cocoa. They are also involved in what is called consumer education, a strategy to secure their consumers loyalty and this is one of the reasons why the Nacional de Chocolates is highly involved with their employees and their families by creating special environments so they can learn and improve their labor skills and even offer kinder garden for their employees children, so while the parents are working, the kids are having a learning experience sponsored by the company. Advertising:

The company uses product advertising because it promotes each product they have and every product has its own image, slogan and TV commercials. Comparative advertisement is used because as the product is in its mature stage is motivates the establishment of, for example Milo is one of its strongest competitors in the Colombian market and both are competing with prices and quality, and one way to gain market share in this case could be through proper advertisement. The advertisement and publicity for Chocolatinas Jet Leche is focused on children, developing advertisement appeal topics, children like and enjoy, such as adventure, nature, animals, fun, the company uses these techniques to be interesting and provocative for the kids, but also focuses in the real buyers, the parents, and the advertisement is focused on them as well, highlighting the nutritional value the product has for the children and their growth. The company makes the advertisement mostly on national television, with TV commercials and having little sections in children`s shows like Bichos Biches and Play Zone; but the company also promotes the product with outdoor publicity, like vallas in important places of the different cities. Apart from regular advertising the product is using internet in an more regular fashion and is sponsoring online games where children can play, talk and share things with their friends surrounded by the jet world. Aside from the internet Nacional de Chocolates is trying to promote the chocolate bar in different and innovative ways too, the product is sponsoring events in malls, decorating birthday parties with their product image and is collaborating with different zoos in the country and organizing event with public schools which are covered by national media

such as TV and newspapers. Considerable sums of money are being invested in advertisement in order to keep brand awareness and maintain or increase its market share; Chocolatinas Jet Leche being one of the most traditional products the company produces has to find new ways to stay in the consumers mind.