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Discovering customer needs through research

Curriculum Topics
Purpose of research
Types of research
Research findings
Implementation and
evaluation

Introduction

Each market is capable of being further sub-divided into segments.

Barclays is a global bank. It provides a range of financial services

shares particular characteristics. These include such factors as

in 56 countries. Barclays provides retail banking services to

age, life stages, geography or occupation. Within the market of

customers, whether they are individuals or businesses. It offers a

personal banking, the segments could include categories such as

broad range of financial products and services including current

students, graduates, new to work, mature, and families. By

accounts, savings accounts and general insurance.

identifying different market segments, organisations can ensure

A market segment is a part of a whole customer group that

they are providing products or services to meet the needs of these

Within the UK, Barclays communications are designed to help

customers. In addition to this, appropriate promotional techniques

customers Take One Small Step to managing their money better

can be used to reach the people in the separate segments.

every day.

Through segmentation, Barclays has been able to devise

appropriate banking offers for customers in different segments.

Different kinds of customers represent distinct markets for

This approach is helping Barclays to improve its market share of

Barclays. The market for personal banking services is very

the student accounts market.

competitive. Personal customers have a choice of banks on the

high street or on the web to assist them in managing their

Barclays believes students constitute a very important market

finances. For example, they can have their salaries paid into

segment for the business. Students may be choosing a bank for

accounts, pay bills through the bank or save money to gain

the first time and Barclays hopes to retain these customers. By

interest on their savings.

focusing on the specific needs of this segment, Barclays hopes to

attract more student customers and keep them in the long term.

There is also a competitive market for business banking services.

Using market research has enabled Barclays to identify the right

Businesses require different services such as credit management,

product offer that will meet their needs.

payments for suppliers or loans and overdrafts to help them to

The case study shows how market research enabled Barclays to

a mortgage to buy a new building.

improve its student account offer.

Market: Any medium through which

sellers and buyers can negotiate a sale.

Market segment: The percentage of

sales within a market that is held by one
brand or company.

Segmentation: Dividing up a
marketplace into parts, each comprising
a group of consumers with common
characteristics.

GLOSSARY

survive and grow. For example, an expanding business may need

Market share: The percentage of sales

within a market that is held by one
product, brand or company.

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Purpose of market research

The purpose of market research is to gather data on customers
and potential customers. The collected data aids business decision
making. This therefore reduces the risks involved in making these
decisions. In order to create a product proposition that would
attract new student accounts, Barclays needed to understand fully
the needs of this target market. Before engaging on external
market research, Barclays began by asking itself a series of key
questions. It did this to ensure the business was fully aware of all
the relevant issues and did not make incorrect assumptions.

This internal understanding was vital. With this background,

Barclays designed a programme of market research. The purpose
of this was to establish what students really needed from a bank.
In this way it could offer appropriate products and services which

would add value to students.

Who are our

key customers?

Types of market research

What are
their needs?
Evaluation

7
In-line
management

Help
customers
Take One Small
Step to managing
their money
better
every day

Delivery/
implementation
of product or
proposition

Barclays began a process that involved both primary and secondary

research. Primary research involves finding out new information. It

What proposition
should we offer
to meet their
needs?

finds the answers to specific questions for a particular purpose.

These enquiries may take the form of direct questioning. For
example, it may include face-to-face surveys, postal or online

4
How should it
be delivered?

questionnaires, telephone interviews or focus groups. This type of

direct contact with people is valuable as it gives specific feedback to
the questions asked. However, it is important that the questions are
clear and that the researcher is trained. This will ensure that the

results are not influenced. Although primary research can be

expensive and time-consuming, the up-to-date and relevant data
collected can give organisations a competitive advantage. This is

In asking itself these key questions at the start and reviewing

because their rivals will not have had access to it.

internal customer data, Barclays was able to clarify its rationale for
acquiring students. Firstly, students provide an opportunity for

Barclays primary research process began internally with two key

developing a long-term relationship. As the student market

questions:

segment increases each year in September/October as the

Who should our key customers be?

university term starts, Barclays has an annual opportunity to target

What are their needs?

new student customers who need an account and who might not

The insights from these questions provided a factual basis to

yet have chosen a bank.

work from.

Secondly, the use of this data highlighted that in the years after

After this an external agency was employed to carry out an

opening their accounts, Barclays was able to establish a valuable

opinion panel. This took the form of an online questionnaire. The

long term relationship with students. This meant that students

results of this delivered data about the market itself, as well as

could now be seen as an extremely important market segment,

Barclays market share among this target audience. Quantitative

and attracting new student customers became a significant

research presents information in a numeric way, such as graphs,

opportunity.

tables or charts that can be used to analyse the information.

GLOSSARY

Product proposition: The total mix of

benefits represented by a product and
offered to the customer.

Primary research: Acquisition of new

data to meet a specific objective.

Quantitative research: Research

resulting in numeric data capable of
statistical analysis.

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Secondary research may be quicker to carry out but may give less
specific outcomes for the topic in question. This part of Barclays
research revealed that student accounts in 2009 amounted to
0.4 million out of a total market of 5.4 million new accounts.

Research findings
Numeric data gives a factual basis for planning - a snapshot of a
situation. On the other hand, qualitative information can find out the
For example, Barclays found from the questionnaire that 81% of
students surveyed held a savings account and 32% an
investment savings account (ISA).

things that really matter to consumers. For example, 80 out of 100

consumers questioned might say they preferred one brand of coffee
over another. However, more valuable information comes from
understanding what it is they prefer. Is it the smell, the taste, the

The opinion panel also provided qualitative feedback on what was

packaging or the price? To meet student needs for a valuable, helpful

of interest to students and what they wanted from an account.

financial service, Barclays needed to understand what students really

Qualitative research provides information on consumer

wanted. By using student focus panels and staff working in branches

perceptions, such as:

with a high proportion of student customers, Barclays was able to

how they feel about products and services

discover students concerns, priorities and strength of feeling.

what they like or do not like

what they would want from a new product.

The outcomes of the opinion panel and the sample of student

customers showed that:

The panel produced valuable insights which Barclays used to help

students relied heavily on different forms of credit. These

re-evaluate its existing student account. It then used the

included an easily manageable bank overdraft to finance their

information to develop new features and benefits to meet the

time at university

established needs.

students wanted and often needed to own high-tech gadgets

The enhanced student account proposition was then tested

students wanted to have separate accounts to manage their

and electrical goods, such as laptops

directly with 100 existing and new Barclays Student Additions
account holders. This was carried out through bank branches and
an online questionnaire. The sample group provided more

student borrowing and spending

any incentives offered would not alone motivate students to
choose that product. They were expected as part of any deal.

qualitative feedback about what motivated students to choose a

particular bank. Although small, the sample allowed Barclays to get

This insight was a real help to Barclays when considering the most

a feeling for how students would respond to the proposition. For

attractive proposition for students. Its objectives were to attract new

Barclays, it was important to know what motivated a student to

student accounts. It also wanted to retain students as customers

choose a bank. Using existing students meant the bank was able

for life in a profitable relationship that met their financial needs.

to assess if the new offer would meet their needs. The expectation
was that new and future students would also find it attractive.
Secondary research focuses on existing information. It uses
published data that previous research has already discovered.
This covers a wide range of materials, such as:
market research reports
sales figures
competitor marketing literature

Qualitative research: Research that is

concerned with opinions, feelings,
perceptions and attitudes.

GLOSSARY

government publications, e.g. national statistics.

Secondary research: Collection of

already existing data, typically from
books, journals or websites.

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www.bank.barclays.co.uk

Barclays could now start to put together an offer that would

embrace the main concerns of the target market. These concerns
were financial security, credit availability, flexible banking and the
right sort of incentives.

Implementation and evaluation

In 2009, Barclays set up a working group to oversee the setting up
of the new student proposition. It used the insight from the research
to establish the key features and benefits of the student account:
no monthly fee to keep costs down for students
the account. Previously this started at 500 in the first year and
increased through the years of study. This extension helps
students manage their finances
mobile banking and a network of local branches for ease of
access to accounts.

Conclusion

These features are valid for the life of students studies.

The Barclays student account proposition shows how it is crucial
Of several incentives tested with students, Barclays found that an

for a business to listen to its market. To do this effectively means

incentive based on a mobile or telecoms offer would have most

targeting specific market segments to discover their needs.

appeal. This idea was tested further with students on university

Barclays new student account proposition was an insight-led

campus. The students expressed a clear preference for an

approach. Using carefully constructed and phased market

incentive offering mobile broadband:

research, the bank was able to gain an overall insight into the

The broadband offer looks good...Id definitely go in to find out

thinking of students.

more. Its good if the broadband offer is for the life of the
accountyou may be in halls for the first year but not after that.
To establish this incentive, Barclays researched broadband providers.
It then entered into partnership with Orange - the UKs number 1
broadband provider. Oranges strengths were a good business fit for
Barclays and ensured that the offer had credibility and perceived
value. Students who signed up for a Barclays student account were

In the early stages of the research, it was discovered that the

student segment provided an opportunity to develop a long-term
relationship. It was found that students were not necessarily here
today, gone tomorrow. If the bank made a valuable and relevant
offer, students were likely to remain lifelong customers.
Barclays initial target was to increase the overall number of
student accounts by 25%. This target was exceeded with an

able to obtain a 25% discount on the monthly cost of whichever

increase of 34%. As a result, Barclays increased its market share

Orange mobile broadband scheme they chose.

of the student market, moving from third to second among the

top four market leaders. The process of meeting customer needs

Having developed a student banking proposition that Barclays felt

is an ongoing one. Barclays has a continuing plan for re-evaluating

confident would appeal, it began to communicate the message

its student proposition to ensure it remains relevant to the target

and promote the new student offer. An innovative marketing plan

audience.

was launched which involved:

a word-of-mouth campaign through 100 voices (at
www.100voices.co.uk) which encouraged students to share their
promotional literature available in branches nationwide. This
proved useful information for Barclays colleagues as well as for
students and their parents to take away
online advertising through barclays.co.uk
direct mail to prospective students through the summer before

research used by Barclays in this case.

2. Explain the main differences between qualitative and
quantitative research.
3. Analyse why Barclays needs qualitative research in this
context.

QUESTIONS

experiences of managing money whilst at college or university

1. Describe, with examples, the primary and secondary

4. Evaluate the impact that market research has had in

enabling Barclays to meet the needs of its customers.

going to university.

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How the role of marketing drives business forwards

Curriculum Topics
Purpose of marketing
Market research
Product and price
Promotion and place

leading position and market share, Portakabin focuses on two

Introduction

areas: it seeks new customers and provides exceptional service to

Portakabin designs and delivers modular buildings. It provides

retain existing ones.

clients with inspiring buildings of outstanding quality. Its original

market was the construction industry, with its portable buildings

This case study shows how Portakabin uses marketing to identify

providing on-site storage and accommodation. In the last 40 years

and anticipate customer needs and then meet them.

its portfolio of modular buildings has extended to include offices,

medical centres and schools.

The purpose of marketing

The two main Portakabin markets are both in the building sector.

The Chartered Institute of Marketing (CIM) defines marketing as:

It produces both modular buildings and single module buildings.

The management process responsible for identifying, anticipating

Modular buildings are permanent, all-steel kits that can be used

and satisfying customer requirements profitably.

to construct almost any size and shape of large building as

required. These are made in a factory and transported to sites to

Marketing is therefore about finding and keeping customers.

be built. For example, schools, call centres and office space can

Business writer Peter Drucker points out how important good

all either be extended or created as a new build. Single module

marketing is to a business:

buildings include toilets, office space, shower blocks and storage

units. These can be transported directly to the client on a lorry,

Because the purpose of business is to create a customer,

extremely quickly.

the business enterprise has two - and only two - basic

Portakabin operates in a highly competitive market. There are now

other businesses producing similar buildings. Portakabin needs to
provide products and services that satisfy customers needs.

functions: marketing and innovation. Marketing and

innovation produce results; all the rest are costs. Marketing
is the distinguishing, unique function of the business.

difference between Portakabin products and competitors

Portakabin demonstrates innovation in its exciting range of

products in terms of quality and levels of service. To keep its

products and new ideas.

Market: Any medium through which

sellers and buyers can negotiate a sale.

GLOSSARY

Portakabin must also ensure that customers understand the

Market share: The percentage of sales

within a market that is held by one
brand or company.

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Customers can choose from a range of applications. These may

Market research

be for nurseries and childrens centres or classrooms, surgeries,

clinics and hospital wards. These differ from competitors products
through their high quality specifications and the outstanding
service provided to the customer.
Portakabin divides the market into different market segments to
enable it both to identify and meet the needs of customers in
those areas. Three of its main segments are Manufacturing,
Education and Health. The business must understand what its
customers in each segment need and then provide goods and
services to meet needs. Marketing activities inform customers
about products and services and persuade them to buy. An
effective marketing campaign takes account of the AIDA model
principle - that it should raise Awareness of the product, excite
Interest in it, create a Desire for it and encourage Action to buy it.

a
i
d
a

awareness
interest
desire
action

Raising awareness and creating interest may involve the use of

promotional techniques such as exhibitions, websites, direct mail,
email and telemarketing campaigns. The sales force will then
capture the demand that has been generated and turn this into
sales. Satisfied customers then come back for more products but

Portakabin uses both primary and secondary market research to

find out what its customers need.
Primary research is first-hand research, such as interviews and
focus groups. Such research often gives better qualitative data
in the form of opinions, views and comments. Portakabin held
focus groups with customers and found that they wanted more
light in office buildings as this increased productivity. Portakabin
was able to respond with the Ultima Vision range, which lets in
more light through its increased window space.
Secondary research uses data and information that has already
been published. It may provide market and industry quantitative
data, often in the form of statistics. Brand Vision quantitative
research showed the importance of on time and on budget
delivery. In 2009, Portakabin delivered 99.6% on time and on
budget. This compares very well against a construction-industry
average of 59% on time and 46% on budget.*
Portakabin also uses market research to find out what new
products or services customers may want. Sometimes it carries out
one-off research projects. This is called ad hoc research. These
may focus on developing a specific new product or finding out how
to develop an existing one. For instance, Portakabin developed the
new Ultima Vision range in response to the need to provide existing
buildings with more light. Portakabin Datakom has met the need to
deliver data cabling to office buildings by providing telecoms systems,
computer access points and air conditioning already installed. This
allowed customers to move in and begin work straightaway.
Portakabin market research focuses on two key performance
indicators (KPIs) - customer satisfaction and Net Promoter
Score (NPS). Using over 2,000 customer surveys a year,
Portakabin finds out if clients are happy and what issues affect
them. It asks customers to rate Portakabin on a scale of 1 to 10
on aspects such as administration, delivery and installation, the
quality of the building and their overall experience. The results are
used to target and improve customer satisfaction. The average
score has risen from 8.2 per customer in 2003 to 9.1 in 2009.

also recommend the business to friends. Such customer loyalty

and word-of-mouth recommendation is essential to a business like
Portakabin. Portakabin regularly scores more than 9 out of 10 for
customer satisfaction and this translates into increased
recommendations. These, in turn, drive sales growth. This high
rate is one of the reasons why approximately 50% of the
Portakabin Groups business is from past customers.

Portakabin also uses mystery shopping, where researchers pose as

normal customers. The results of mystery shopping show that clients
are impressed with the 'human' skills of Portakabin staff. These
include courtesy, being helpful, building rapport and professionalism.
Such skills are a key factor in building customer satisfaction,
creating loyal customers and generating repeat business.
*Construction Statistics Annual 2009, Office for National Statistics

GLOSSARY

Market segments: A recognisable

consumer group consisting of people
with similar needs and characteristics.
Customer loyalty: The action of a
customer in returning to a business due
to a good previous experience.

Market research: The systematic

process of collecting and analysing
primary and secondary data about
customers and their relationship with
products and brands.

Key performance indicators (KPIs):

Any significant variable that can be used
to monitor how well an organisation is
fulfilling its objectives.

Net Promoter Score (NPS): A way to

measure customer loyalty through those
who would recommend the business to
colleagues.

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Business writer Frederick Reichheld, who devised the Net

This promise gives Portakabin a significant competitive edge over

Promoter Score tool, claims that the only real question a business

traditional-build suppliers. The Portakabin Hire Customer Charter

needs to ask its customers is: 'How likely are you to recommend

has built in penalties of one weeks free hire for every day that the

us to a friend or colleague?' The NPS score shows how popular

project is late. The Portakabin Sales Customer Charter gives an

Portakabin is with existing customers. This is important as

additional 12 months product warranty free of charge if there is

procuring a building is a large and often long-term commitment.

delay. Since the launch of its innovative warranty package in

A high score shows that customers are happy with Portakabin

January 2004, Portakabin has sold over 2,000 buildings and only

and ready to recommend them. NPS also predicts sales growth

0.17% of customers have made a claim against the warranties.

the higher the score, the faster the business grows. Portakabin
uses NPS to measure the strength of this customer loyalty. The
results are extremely positive. On average, across the UK hire and
sales businesses, Portakabin achieves an NPS score of 89. That

Product

compares very well with the scores of other industry leaders, such

Place

as Google (78), Waitrose (73), Nokia (60), and Starbucks (56).

Price

Customers are clearly happy with the quality of Portakabin

Positioning

products and the service they receive. This is vital in the

Promotion

competitive industry Portakabin operates in as repeat business is

an important and cost-effective way of generating sales.

Portakabin assures product quality through a process called the

3 stage gate. This is the planning, manufacturing and delivery of
the solution. Its external accreditation process also
demonstrates approval of its standards by an independent body.
An example of getting the product right can be seen in its
Portakabin Decant School concept. The process of moving a
school into new buildings is often a difficult and lengthy one. Many
short-term buildings may be needed during the move. The
Portakabin Decant School provides a total accommodation solution
designed to enable a school to transfer with minimum disruption.
To understand what teachers and students needed, Portakabin
referred to government recommendations for standards of space

The marketing mix: product and price

and light in schools. The buildings it provided exceed government

standards for space per pupil. A variety of other products and

Traditionally the marketing mix the balance of elements needed

services such as access ramps and steps, security and fire alarms,

for effective marketing is referred to as the four Ps. These are

air conditioning, interactive whiteboards and data cabling mean that

Product, Price, Promotion and Place. Portakabin adds a fifth P

Portakabin provides a one-stop-shop for all the needs of a school.

to this mix with Positioning. This shows how the business

This makes the transition from old to new buildings quicker and

intends to position itself to customers so that it is different from its

minimises disturbance to students learning.

competitors. It is closely linked to its Unique Selling Point

(USP). Portakabin has positioned the brand at the top end of the

The price of Portakabin buildings is set at a competitive level.

market, offering high quality buildings and high levels of service.

However, this may be higher than rivals to reflect the better levels

It gives customers added value in terms of confidence and peace

of building quality and service that are offered. High quality,

of mind. This is supported by the Portakabin Customer Charter

support services and the Customer Charter mean that Portakabin

which promises buildings will be delivered on time and on budget.

can charge a premium price for its premium service.

Brand: A name, design or symbol that

gives a product, product range or
company an identity that is distinct from
competitors.

External accreditation: When an

outside body is used to ensure quality,
usually up to preset industry, national or
international standards.

GLOSSARY

Unique selling point (USP): A specific

benefit of a product or service that
competitors do not or cannot offer.

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Portakabin has moved away from its original focus of construction

Email. Promotional emails were sent out to a key database of

prospects.

site accommodation (now only a small part of the business) to

office, education and health environments. For example, it was

Public Relations. This took the form of press releases to

appropriate education and construction publications.

able to replace the health centre facilities destroyed by floods in

Cockermouth, Cumbria in 2009 in just 15 days. It provided 21

An additional targeted web page was added to the Portakabin

website to support the campaign.

consulting rooms, patient waiting areas and ample office space.

The new building offered a standard which, according to the

Time lapse construction videos showed the stages of a project

on the Portakabin website and on YouTube.

clinical director exceeded expectations.

Special school open days were organised through Portakabin

Promotion and place

Promotion helps to turn prospects (i.e. possible customers) into

Place refers to where customers can buy products or to

actual customers. Research shows that it takes around five

distribution channels. Portakabin is a business-to-business (B2B)

touches to turn a prospect into a customer. A touch can be a

operation, which has 45 hire centres across the UK. This means

communication, such as advertising, or a sales contact.

no customer is more than a one-hour drive away. Service teams

Portakabin uses both above-the-line and below-the-line

are therefore close to customers so can resolve issues quickly.

methods. Above-the-line involves paid-for advertising through

targeted channels such as trade magazines.
Below-the-line promotion is generated in other ways. Portakabin
methods include direct mail, public relations and open days. Its
website (www.portakabin.co.uk) is also a point of promotion as it
gives customers immediate access to the scale and capability of

Conclusion
Portakabin supplies premium working environments to clients who
demand ever-higher standards. It maintains its leading position in
a competitive market with a balanced marketing mix. This is
designed to provide clients with quality products and highest
service levels. It has developed as a trusted brand.

Portakabin product and services. It seeks to persuade them to

buy its products and services through detailed information and

Market research is particularly important in helping to measure the

product images on the website.

effectiveness of the marketing mix. Customer loyalty is measured

by how likely a client is to recommend the business to colleagues.
High satisfaction scores show that Portakabin is providing goods
and services which continue to delight customers.

1. Describe how a business such as Portakabin uses

marketing to drive business.
2. Explain how Portakabin uses different types of market
research, both primary and secondary, and different

In the case of the launch of the new Decant School product,

place in Portakabin. Explain why the balance of the

Portakabin targeted local education authorities (LEAs) and

marketing mix is more important than any single

education contractors. It used several methods to reach them.

For instance, it placed a double-page spread advertisement in

element.

QUESTIONS

methods within these.

3. Analyse the balance of price, product, promotion and

4. Evaluate the contribution of customer feedback to the

relevant education and construction magazines. It also used

success of Portakabin. Suggest at least one other way

several methods of below-the-line promotion:

by which Portakabin could collect feedback and give

Direct mail. This was a letter, with a printed leaflet that showed

reasons for your suggestion.

a decant school complex.

GLOSSARY

Above-the-line: Promotion through

advertising: TV, radio, internet, press
etc.

Below-the-line: Indirect sales

promotion other than advertising e.g.
price promotions and point-of-sales
displays.

B2B: Sales by one business to another,

rather than B2C which involves selling
directly to the final consumer.

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Protecting the marketing mix

through intellectual property rights
Introduction
The Intellectual Property Office is part of the Department for Innovation, Universities and
Skills. It is the official government body responsible for granting intellectual property
rights in the UK. The Intellectual Property Office supports innovation by granting intellectual
property rights. This is property that originates in the mind as an idea, such as a design of a
car, a piece of computer software or the words and music of a pop song. Businesses take
steps to protect their physical property, such as equipment, raw materials and buildings, but it
is just as important that they protect their intellectual property.
Consider the development of a product such as a mobile phone. The manufacturer needs
physical resources such as offices, factories and machines - but what really makes the
difference between different phones? The value in many products is not the physical materials
for example, the metals and plastics that are used. Mobile phones are shaped by ideas:
improved technology leading to, for example, faster communications, music and digital
photography, cool designs and world-class brands. Think of the value in an iPod or a
downloadable song. Intellectual property is often more valuable than warehouses and office
blocks. This may be described as a knowledge economy. There are several ways in which
the Intellectual Property Office can help a business to protect its intellectual property (IP).
Patents provide exclusive rights to exploit an invention for a limited period usually 20
years.
Designs protect the appearance of a product and can be registered for legal
protection.

CURRICULUM TOPICS
Marketing mix
Innovation
Business expansion
Intangible assets

GLOSSARY
Intellectual property rights:
The rights of the owner to protect
their ideas.
Knowledge economy: The use
of knowledge technologies (such
as knowledge engineering and
knowledge management) to
produce economic benefits.
Patents: A legal right that
establishes for the holder of the
patent the right to be the sole user
or producer of a new process or
product.
Designs: The appearance of a
product.
Trade marks: Unique logo or
symbol displayed on a company's
products.
Copyright: Legal protection for
authors, composers and artists
from having their work copied or
reproduced without their
permission.

Trade marks such as brand names and logos can be registered and protected.
Copyright is an automatic entitlement to stop others copying any kind of written or
recorded material.
A company like Apple uses these safeguards to patent its inventions and register its designs.
These protections can be applied across the world. For example:
it has registered its brand names as trade marks, such as iPod, Macintosh and iMac. This
prevents competitors directly copying these brand names
its distinctive logo (the apple with a bite taken out of the side) is registered as a trade mark
products sold through iTunes are also protected under copyright. The writers of each song
usually own these rights.
To see how important IP protection is in practice, this case study looks at how one technology
company, Forensic Pathways, has used these legal safeguards for a new development.
In the UK there are now over 70 million mobile phones in use. The vast majority are used
legitimately, but mobile phones are also used by criminals and terrorists. Computer
technology can now analyse calls and messages from many different mobiles at once.
A computer program that could plot, map and analyse that data so that criminal networks
could be identified would be valuable. How would the developer protect the product before
reaching the market?

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Forensic Pathways is a highly innovative company based in Staffordshire that provides

products and services for the police and security services. It specialises in investigative tools
for crime, security and fraud. The company exploited rapidly-advancing computer technology
to develop a new product, the Forensic Phone Analyser. This allows police and security
services to search for phone numbers, SMS text messages, contacts and images, across all
the data available, not just case by case. Marketing planning showed that the product could
secure substantial sales so the company invested time and money developing the product.

GLOSSARY
Marketing mix: A series of
variable factors (product/price/
place/promotion) used by an
organisation to meet customer
needs.
Target market: The specific part
of the population to whom a
product offering is aimed and all
marketing communication is
tailored.
Brands: Name, symbol or design
used to identify a specific product
and to differentiate it from its
competitors.

If a competitor developed an equivalent product based directly on Forensic Pathways

software, all Forensic Pathways work would be undermined. The company would incur the
development costs but not have the opportunity to recover those costs by being first to
market. To prevent this happening, it took steps to protect its intellectual property rights from
the beginning of the development process.

The marketing mix

Marketing is about projecting the right product at the right price in the right way to the right
customers. This is how value is added. Bringing a product to a market involves balancing
several key ingredients. This is called the marketing mix: the 4Ps of product, price,
promotion and place. Every offering will need a slightly different mix of these factors,
depending on the product itself, the target audience and the market. The logical starting point
is always the customer. A product must deliver value to customers in the target market by
meeting customer requirements.
Forensic Pathways had carried out detailed market research and understood the needs of
its target market: the police and security agencies that have the legal right to access
mobile phone data. This research enabled Forensic Pathways to identify what features the
product would have to meet these customers needs. However, before investing in
development, Forensic Pathways needed to check whether such a product already existed.
By searching the patent database on the Intellectual Property Offices website, a business
can verify that its idea is entirely new. A patent gives protection from copying or imitation
by competitors.
Price needs to be competitive and offer customers value for money. Forensic Pathways
needs to make positive return on its investment and recoup its development costs. The
ability to protect intellectual property is crucial here. If a competitor could simply take
Forensic Pathways technology and software to develop a similar product, it could price
this product much lower because it would not need to recover research costs. In effect,
taking out a patent gives a company time to exploit its research in the marketplace.
Forensic Pathways uses its specialist knowledge of the market and personal links with key
customers to promote its product. By registering the company name and the product
name, the Forensic Phone Analyser, as trade marks, it prevented other companies using
these names. This provides clarity for customers. Rival businesses cannot offer similar and
perhaps inferior products with identical names. Companies use trade names to build and
identify their brands.
The final P in the marketing mix is place the channels to market. This is the process that
enables customers to buy and receive the product. This can include the use of wholesalers
and retailers, the work of the sales force and direct marketing techniques. This activity can
be compromised if the product is confused with similarly named rival products. This legal
protection for product and brand identity is also important when it comes to the sales
process itself.

Product
Forensic Pathways has high levels of knowledge in electronics and computer programming.
For its new product, Forensic Pathways wanted to do far more than simply extract data from
mobile phones. It wanted to be able to alert investigators to patterns in the data. Powerful
analytical computer programs could reveal pictures in the data that might spark new lines of
enquiry and provide evidence of criminal networks.

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The Forensic Phone Analyser was the first product of its type in a specialised but growing
market. While the Analyser was in development, its intellectual property (the specialised
combination of technical know-how and computer software) was not at risk. Only a few
trusted employees knew the underpinning technology and software. All electronic information
on the project was held on secure servers and networks. However, once a product is
launched on the market, it 'breaks cover. A competitor might be able to unravel the finished
product, working backwards to reveal its design and operating principles. This is known as
reverse engineering. The resulting slightly different but essentially copied product might
then be fast-tracked into the same market.
Forensic Pathways knew the product would add real value but it would only prove profitable if
it were protected with the safeguards offered by the Intellectual Property Office.

The first step was to patent the technology. A company can apply to patent a product
or a process if it is a clear inventive step...capable of industrial application. A patent
stops anyone else copying the invention for up to 20 years. The patent owner can
take legal action against anyone imitating or copying the idea during that time and
can also license or sell the patent rights. This gives the developer time and opportunity
to recover development costs.

1
2
3
4

The next step was to claim copyright for the software. This provides the same
protection as copyright on books and music. Software cannot be copied, stored on a
computer or converted to other computer languages without the owners permission.

Forensic Pathways could also make the visual elements of its product a registered
design. This prevents a competitor attempting to copy its distinctive features.

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GLOSSARY
Reverse engineering: The
process of discovering the
technological principles of a
device, object or system through
analysis of its structure, function
and operation.
Capital: Money, buildings,
machinery, equipment etc.
Profit margin: The percentage
of sales value that is profit.
Skimming: A pricing strategy
where a relatively high price is set
for a product or service at first,
then lowered over time.
First mover advantage: The
first company to introduce a new
product to market has the
opportunity to extract the greatest
long term benefit from the product,
compared to that which following
companies would be able to gain.
Niche: An area of a market that
has a particular group of
customers with specific
requirements.
Competitive advantage: A
strategic element that enables an
organisation to compete more
effectively than its rivals.

The company also registered the name Forensic Phone Analyser, along with its brand
and logo as trade marks.

With all these safeguards in place, Forensic Pathways was able to commit capital to the
phone analyser development with confidence.

Price
Pricing depends on the market. There are many different pricing strategies that a business can
apply. Setting a relatively low price can attract customers but reduce the profit margin. This
approach is called market penetration. It is often used in highly competitive mass markets
with large volume turnover of goods, for example, tins of beans in a supermarket.
However, Forensic Pathways operated in a very different type of market. It was targeting a
relatively small customer base police services and security agencies with a new product
that had no immediate rivals. This meant the company could choose to set a relatively high
price that carries a higher margin. It would allow the company to generate a realistic return
on its high development costs. This approach is called market skimming. It is often the
chosen strategy for innovative products. Reductions in price can follow later as competitors
enter the market. The company would enjoy first mover advantage, achieving
penetration of its market niche without major price concessions.
This strategy relies on IP protection to give competitive advantage over rivals, based on
the products technological capability and the reputation of the Forensic Pathways brand. If
other firms steal or imitate these assets, then Forensic Pathways would see slowing sales.
Worse, the competition for customers could force the company to push down prices, lowering
profit margins and reducing potential for future investment.

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Promotion and place

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GLOSSARY
Above-the-line promotion:
Direct expenditure on advertising,
such as for a TV commercial.
Below-the-line promotion:
Use of indirect promotional
methods such as public relations
and advertorials; promotional
activity other than advertising.
Balance sheet: A financial
document that shows what a
business owns (assets) and what it
owes (liabilities) at a particular
moment in time.
Assets: Something that is of worth
to an organisation e.g. people,
cash, financial claims on others,
machinery, buildings.

The most innovative product in the world will still fail if potential customers do not understand
the value it brings to them. The most effective method of promoting sales will depend on the
type of product and the target market. For a mass-market product, such as a new blockbuster
movie, above-the-line promotion such as internet, television and press advertising may be
appropriate. This usually has high costs and is less easy to measure the impact, except by
specialised market research.
The Forensic Phone Analyser is a specialised product in a niche market. It needed a different
approach to promotion. The companys main strategy is to use below-the-line promotions
to contact potential customers directly. Below-the-line promotion has the advantage of being
less expensive and more under the business control:
The product was showcased at trade fairs and exhibitions attended by key buyers in the
security industry.
Emails and mail shots were sent to possible customers.
Forensic Pathways also used its relationships with existing customers to introduce the new
product by direct mail or telephone sales.
With its product and brand identity protected within the UK by intellectual property,
Forensic Pathways could confidently promote the Forensic Phone Analyser in this market.
However, with over 2.5 billion mobile phones in use worldwide, the company also wanted to
target overseas markets. It therefore needed to protect the product worldwide. The World
Intellectual Property Office based in Geneva, Switzerland is heading the development of a
global system for protecting intellectual property. Businesses can now make a single
registration of original designs giving protection across most countries. However, the law
enforcing protection varies in effectiveness from country to country. Globally there is a huge
trade in counterfeit products and some countries are not strict in enforcing copyright. Forensic
Pathways still needs good legal advice to deal with risks. It is possible to challenge any
infringements by taking companies to court.

The Times Newspaper Limited and MBA Publishing Ltd 2009. Whilst every effort has been made to ensure accuracy
of information, neither the publisher nor the client can be held responsible for errors of omission or commission.

Conclusion

84

The balance sheet of most businesses still emphasises the value of physical assets such
as buildings, plant and equipment. Yet typically, around 75% of a firms value is in its
intellectual property, such as knowledge, copyrights and brands (trade marks). The business
writer Charles Handy calls it the 3Is - information, intelligence and ideas.
Many businesses are able to exploit their intellectual property but they need to be aware of
the risks. Ideas could easily be copied and the whole basis of a new product could be lost.
This is why the services of the Intellectual Property Office are so important.
The Intellectual Property Office offers innovators and creators protection for their new ideas
and products, without which there would be less investment in innovation and brand
development. It also enables future generation of new ideas. Although protection of a patent
remains in place for around 20 years to prevent direct copying, the knowledge content of
patents is made public after 18 months. This stimulates further innovation and competition.

Questions
1. What is intellectual property (IP)? How can a business gain legal protection for its IP?
2. Explain how IP protection can be essential to the marketing mix.
3. Analyse why protecting IP has become so important to firms such as Forensic Pathways.

www.ipo.gov.uk

4. To what extent do you think IP protection is in the public interest?

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Extending the product life cycle

Introduction
Businesses need to set themselves clear aims and objectives if they are going to succeed.
The Kellogg Company is the worlds leading producer of breakfast cereals and convenience
foods, such as cereal bars, and aims to maintain that position. In 2006, Kellogg had total
worldwide sales of almost $11 billion (5.5 billion). In 2007, it was Britains biggest selling
grocery brand, with sales of more than 550 million. Product lines include ready-to-eat cereals
(i.e. not hot cereals like porridge) and nutritious snacks, such as cereal bars. Kelloggs brands
are household names around the world and include Rice Krispies, Special K and Nutri-Grain,
whilst some of its brand characters, like Snap, Crackle and Pop, are amongst the most wellknown in the world.
Kellogg has achieved this position, not only through great brands and great brand value, but
through a strong commitment to corporate social responsibility. This means that all of
Kelloggs business aims are set within a particular context or set of ideals. Central to this is
Kelloggs passion for the business, the brands and the food, demonstrated through the
promotion of healthy living.
The company divides its market into six key segments. Kellogg's Corn Flakes has been on
breakfast tables for over 100 years and represents the Tasty Start cereals that people eat to
start their day. Other segments include Simply Wholesome products that are good for you,
such as Kashi Muesli, Shape Management products, such as Special K and Inner Health
lines, such as All-Bran. Children will be most familiar with the Kid Preferred brands, such as
Frosties, whilst Mum Approved brands like Raisin Wheats are recognised by parents as being
good for their children.

CURRICULUM TOPICS
Product life cycle
Ansoffs matrix
Marketing mix
Extension strategy

GLOSSARY
Aims: the end purposes towards
which a business focuses its activities.
Objectives: the end purposes that
an organisation or individual seeks
to achieve.
Brand: a name, symbol or design
used to identify a specific product
and to differentiate it from its
competitors.
Corporate social
responsibility: how a business
shows it cares not just about
products, but its people and
communities, its place in society.
Market share: the percentage
slice of a particular market
occupied by a product.
Product life cycle: the way sales
of a product change over time.
Research and development:
processes that involve investigating
new ideas for products and taking
them forward to be test marketed.
Start-up costs: those costs that
have to be paid once to establish a
business or brand - also called sunk
costs.

Each brand has to hold its own in a competitive market. Brand managers monitor the success
of brands in terms of market share, growth and performance against the competition.
Key decisions have to be made about the future of any brand that is not succeeding. This
case study is about Nutri-Grain. It shows how Kellogg recognised there was a problem with
the brand and used business tools to reach a solution. The overall aim was to re-launch the
brand and return it to growth in its market.

The product life cycle

The five typical stages of the life cycle are shown on a graph. However, perhaps the most
important stage of a product life cycle happens before this graph starts, namely the
Research and Development (R&D) stage. Here the company designs a product to meet
a need in the market. The costs of market research - to identify a gap in the market and of
product development to ensure that the product meets the needs of that gap - are called
sunk or start-up costs. Nutri-Grain was originally designed to meet the needs of busy
people who had missed breakfast. It aimed to provide a healthy cereal breakfast in a
portable and convenient format.
1. Launch - Many products do well when they are first brought out and Nutri-Grain was no
exception. From launch (the first stage on the diagram) in 1997 it was immediately
successful, gaining almost 50% share of the growing cereal bar market in just two years.

KELLOGGS

Each product has its own life cycle. It will be born, it will develop, it will grow old and,
eventually, it will die. Some products, like Kelloggs Corn Flakes, have retained their market
position for a long time. Others may have their success undermined by falling market share
or by competitors. The product life cycle shows how sales of a product change over time.

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2. Growth - Nutri-Grains sales steadily increased as the product was promoted and became
well known. It maintained growth in sales until 2002 through expanding the original
product with new developments of flavour and format. This is good for the business, as it
does not have to spend money on new machines or equipment for production. The market
position of Nutri-Grain also subtly changed from a missed breakfast product to an
all-day healthy snack.

GLOSSARY
Market saturation: when there
is no room for any more competitor
products; the market is full.

3. Maturity - Successful products attract other competitor businesses to start selling similar
products. This indicates the third stage of the life cycle - maturity. This is the time of
maximum profitability, when profits can be used to continue to build the brand. However,
competitor brands from both Kellogg itself (e.g. All Bran bars) and other manufacturers (e.g.
Alpen bars) offered the same benefits and this slowed down sales and chipped away at
Nutri-Grains market position. Kellogg continued to support the development of the brand
but some products (such as Minis and Twists), struggled in a crowded market. Although
Elevenses continued to succeed, this was not enough to offset the overall sales decline.
Not all products follow these stages precisely and time periods for each stage will vary
widely. Growth, for example, may take place over a few months or, as in the case of
Nutri-Grain, over several years.

4. Saturation - This is the fourth stage of the life cycle and the point when the market is
full. Most people have the product and there are other, better or cheaper competitor
products. This is called market saturation and is when sales start to fall. By mid-2004
Nutri-Grain found its sales declining whilst the market continued to grow at a rate of 15%.
5. Decline - Clearly, at this point, Kellogg had to make a key business decision. Sales were
falling, the product was in decline and losing its position. Should Kellogg let the product
die, i.e. withdraw it from the market, or should it try to extend its life?

Strategic use of the product life cycle

When a company recognises that a product has gone into decline or is not performing as well
as it should, it has to decide what to do. The decision needs to be made within the context of
the overall aims of the business. Kelloggs aims included the development of great brands, great
brand value and the promotion of healthy living. Strategically, Kellogg had a strong position in
the market for both healthy foods and convenience foods. Nutri-Grain fitted well with its main
aims and objectives and therefore was a product and a brand worth rescuing.

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Kellogg decided to try to extend the life of the product rather than withdraw it from the
market. This meant developing an extension strategy for the product. Ansoffs matrix
is a tool that helps analyse which strategy is appropriate. It shows both market-orientated and
product-orientated possibilities.
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GLOSSARY
Extension strategy: a way of
extending the life of a product,
for example by changing it,
re-branding it or re-pricing it.
Ansoffs matrix: a model
developed by business writer Igor
Ansoff for deciding the risk of
possible courses of action.
Brand image: the lifestyle or
other image associated with a
brand.
Unique selling point: a specific
benefit of a product or service that
competitors do not or cannot offer.

Extending the Nutri-Grain cycle

identifying the problem
Kellogg had to decide whether the problem with Nutri-Grain was the market, the product or both.
The market had grown by over 15% and competitors market share had increased whilst Nutri-Grain
sales in 2003 had declined. The market in terms of customer tastes had also changed more
people missed breakfast and therefore there was an increased need for such a snack product.
The choice of extension strategy indicated by the matrix was either product development or
diversification. Diversification carries much higher costs and risks. Kellogg decided that it
needed to focus on changing the product to meet the changing market needs.
Research showed that there were several issues to address:
1. The brand message was not strong enough in the face of competition. Consumers were
not impressed enough by the product to choose it over competitors.
2. Some of the other Kellogg products (e.g. Minis) had taken the focus away from the core
business.
3. The core products of Nutri-Grain Soft Bake and Elevenses between them represented over
80% of sales but received a small proportion of advertising and promotion budgets.
4. Those sales that were taking place were being driven by promotional pricing
(i.e discounted pricing) rather than the underlying strength of the brand.

Implementing the extension strategy for Nutri-Grain

1. Fundamental to the re-launch was the renewal of the brand image. Kellogg looked at
the core features that made the brand different and modelled the new brand image on
these. Nutri-Grain is unique as it is the only product of this kind that is baked. This
provided two benefits:
the healthy grains were soft rather than gritty
the eating experience is closer to the more indulgent foods that people could be eating
(cakes and biscuits, for example).
The unique selling point, hence the focus of the brand, needed to be the soft bake.

KELLOGGS

Having recognised the problems, Kellogg then developed solutions to re-brand and re-launch
the product in 2005.

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GLOSSARY
Investment: putting funds to use
in the hope of securing returns later.
Marketing mix: a series of
variable factors such as the four Ps
(product/price/place/promotion)
used by an organisation to meet its
customers' needs.
Point-of-sale materials:
information that is used where the
sale actually takes place, such as
displays in stores and by tills.

Page 4

2. Researchers also found that a key part of the market was a group termed realistic
snackers. These are people who want to snack on healthy foods, but still crave a great
tasting snack. The re-launched Nutri-Grain product needed to help this key group fulfil
both of these desires.
3. Kellogg decided to re-focus investment on the core products of Soft Bake Bars and
Elevenses as these had maintained their growth (accounting for 61% of Soft Bake Bar
sales). Three existing Soft Bake Bar products were improved, three new ranges introduced
and poorly performing ranges (such as Minis) were withdrawn.
4. New packaging was introduced to unify the brand image.
5. An improved pricing structure for stores and supermarkets was developed.
Using this information, the re-launch focused on the four parts of the marketing mix:
Product improvements to the recipe and a wider range of flavours, repositioning the
brand as healthy and tasty, not a substitute for a missed breakfast
Promotion a new and clearer brand image to cover all the products in the range along
with advertising and point-of-sale materials
Place better offers and materials to stores that sold the product
Price new price levels were agreed that did not rely on promotional pricing. This
improved revenue for both Kellogg and the stores.
As a result Soft Bake Bar year-on-year sales went from a decline to substantial growth, with
Elevenses sales increasing by almost 50%. The Nutri-Grain brand achieved a retail sales
growth rate of almost three times that of the market and most importantly, growth was
maintained after the initial re-launch.

Conclusion

The Times Newspaper Limited and MBA Publishing Ltd 2008. Whilst every effort has been made to ensure accuracy
of information, neither the publisher nor the client can be held responsible for errors of omission or commission.

Successful businesses use all the tools at their disposal to stay at the top of their chosen
market. Kellogg was able to use a number of business tools in order to successfully re-launch
the Nutri-Grain brand. These tools included the product life cycle, Ansoffs matrix and the
marketing mix. Such tools are useful when used properly.

92

Kellogg was able to see that although Nutri-Grain fitted its strategic profile a healthy,
convenient cereal product it was underperforming in the market. This information was used,
along with the aims and objectives of the business, to develop a strategy for continuing
success. Finally, when Kellogg checked the growth of the re-launched product against its own
objectives, it had met all its aims to:
re-position the brand through the use of the marketing mix
return the brand to growth
improve the frequency of purchase
introduce new customers to the brand.
Nutri-Grain remains a growing brand and product within the Kellogg product family.

Questions
1. Using current products familiar to you, draw and label a product life cycle diagram,
showing which stage each product is at.
2. Suggest appropriate aims and objectives for a small, medium and large business.
3. Explain the difference between market
orientated routes and product orientated routes
in Ansoffs matrix.
4. Consider the decision taken by Kellogg to opt
for product development. Suggest a way in
which it could have diversified instead. Justify
your answer.

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New products from market research

Curriculum Topics
Market research
Types of research
Quantitative and qualitative
Product development

Kelloggs with a sales value of 68 million*. In 2003 the Crunchy

Introduction

Nut brand created a brand extension. This involved using the

The Kellogg Company is the worlds leading producer of cereals.

Crunchy Nut name to launch a new product called Crunchy Nut

Its products are manufactured in 18 countries and sold in more

Clusters. This variant has two varieties, Milk Chocolate Curls and

than 180 countries. For more than 100 years, Kelloggs has been a

Honey and Nut. Both of them have enabled the brand to reach a

leader in health and nutrition through providing consumers with a

wider group of consumers. This brand extension is now worth

wide variety of food products. These are designed to be part of a

21 million in annual value sales.*

balanced diet and meet the different tastes of consumers. Kelloggs

focuses on sustainable growth. This involves constantly looking

This case study focuses on the importance of market research

for ways to meet consumer needs by growing the cereal business

during the development and launch of Crunchy Nut Bites, a more

and expanding its product portfolio.

recent extension to the Crunchy Nut brand. The objective of this

innovation was to provide a new flavour and texture for consumers,

Market research is a specific area of marketing that informs

helping Kelloggs extend its share of the breakfast cereals market.

businesses like Kelloggs about the things consumers need, how

*IRI sales data

best to design products to answer those needs and how to

advertise those products to consumers. Market research goes
beyond finding out what consumers are thinking today. It can
identify what consumers might want in the future. In this way
market research helps a business to make more informed choices.
This reduces the risks for any new product development (NPD).
It also increases the likelihood that products will be well received
by consumers when they are launched.
Kelloggs launched Crunchy Nut Cornflakes in the UK in 1980.

Sustainable growth: Developing the

business to meet the needs of
consumers today, while respecting the
needs of future generations.

New product development (NPD):

Term used to describe the processes
involved in creating a new product.

Sales value: The value of sales made

over a fixed period of time.
Brand extension: The use of a well
known brand to launch a new and
complementary product.

GLOSSARY

Since then, it has become one of the most important brands for

Variant: Alternative to the core product

introduced by the maker of the brand.

EDITION

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Why carry out market research?

Of the hundreds of products launched every year in consumer

goods markets, very few reach significant market share. In order

Many organisations are described as product orientated. This

to reduce risks, market research is, therefore, essential.

means they develop a product and then look for a market to sell
to. Kelloggs is market orientated. This means that the whole

A product extension is a less risky way of increasing market share

organisation focuses on the needs of its consumers. It is therefore

by providing consumer products with new features under an

essential that it identifies and anticipates changing consumer

existing brand. New product extensions give more choice to

needs before the development of new products.

consumers and help them to feel more favourably about the

existing brands.

Product orientated

Market orientated

Seeking a market
ffor th
the product
d t

Building a business
around the needs of
the consumers

Market research adds value to businesses like Kelloggs by

identifying consumers needs. It helps Kelloggs to plan ahead, for
example, looking at what products or extensions it should develop
and for whom. It focuses the business on the needs of its
consumers. An organisation that does this can improve its
competitive advantage.

Types of research
To develop a new Crunchy Nut brand extension, Kelloggs

In an established market, such as breakfast cereals, there is little

commissioned primary research. This is research gathered first-

room to increase the overall sales in the market. Kelloggs is

hand to answer questions that are specific to the project.

therefore always looking for ways to strengthen its own portfolio.

Designing new products is a good way of doing this. However,

Although primary research is often time-consuming and expensive,

this can take a long time and may involve considerable costs. In

it is considered as a reliable source of information because it is

addition to the resources required during development, suppliers

directly from the consumer and is specifically designed to meet the

must produce an advertising campaign to raise awareness of the

objectives of a project. There are a number of different ways of

product among consumers and encourage retailers to stock the

collecting primary data. Sometimes agencies are employed to

product. Launching a new product can be a risky business.

collect data using, for example, street interviews or a questionnaire.

This is a systematic list of questions that obtain feedback from the
consumers. For the development of Crunchy Nut Bites, Kelloggs
used various different methods of primary data collection.
Primary market data may involve qualitative research or
quantitative research. Both types of data are valuable in
understanding what consumers want or need. Qualitative data is
concerned more about opinions, feelings and attitudes.
Quantitative data is in numerical form and is usually gathered from
a large sample of respondents.

GLOSSARY

Product orientated: A business

strategy that focuses on the product
rather than the customer.
Market orientated: Focusing an
organisation on the needs of its
customers.

Competitive advantage: A strategic

element that enables an organisation to
compete more effectively than its rivals.

Primary research: Research that is

carried out for the first time to meet a
specific objective.

Qualitative research: Associated with

consumer responses, feelings, attitudes
and descriptions.
Quantitative research: Associated with
figures or numbers that help to make the
research more objective - usually taken
from a large number of consumers.

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Stage 1: Discovery
Secondary data
(data published by
other organisations)

Primary data
(project specific)

Initial research aimed to identify a set of new food ideas that

would be suitable for developing a new Crunchy Nut product.
Secondary research from Mintel and Datamonitor was used to
find out about innovation trends in the cereal market. It was also

Analysis of research

used to find out about new products, flavours and foods from
around the world. Food developers at Kelloggs used this

Product decisions

Qualitative research establishes a conversation with consumers.

It prompts consumer reaction to, for example, a new product idea
and helps researchers understand what they think of it, how it
makes them feel, why they find it interesting or not. Qualitative
research may be obtained through focus groups, where a
moderator captures feedback from a group of six or seven
consumers to the ideas shown to them. Those ideas may take
the format of drawings or having new food prototypes to taste.
Quantitative research may use questionnaires administered to
large numbers of respondents. This allows statistical analysis,
such as the calculation of a mean score or percentages. It aims
to give a representative picture of what consumers think of a new
product idea or a new (real) food. It may involve the use of scales,

information to come up with a number of new food ideas.

Focus groups were used to provide qualitative research. These
were used to show consumers the new food ideas in the form of a
number of different (real) food prototypes, including a mini crispy
lattice product and a nutty triangle. The focus groups captured the
attitudes and feelings of consumers towards the new foods. This
primary research helped Kelloggs to find out how new product
suggestions could be developed and still fit in with the Crunchy Nut
brand. It helped Kelloggs to establish what consumers were looking
for in terms of potential new flavours and textures.
The results allowed Kelloggs to discard some ideas. Other ideas
were appealing for consumers but needed refining and further
development. At the end of this stage, Kelloggs had a number of
new food ideas that all seemed to appeal to consumers.

so numbers get associated with a particular meaning for

Stage 2: Selecting the best idea

example, on a evaluation scale of 1 to 7, where 1 means very

This stage aimed to select the best idea arising from the stage 1

poor and 7 means excellent. Crucially those numbers need to

research. Kelloggs put the ideas from the focus group on boards.

be interpreted to enable the business to understand the

The boards had pictures showing product ideas and a description

consumers overall response.

of what the new product would be like. These boards were then

In addition, Kelloggs used secondary research which is existing

research that has already been collected by other organisations.
Sources of secondary data include books, journals, the internet and
government statistics. Market research agencies collect a range of

shown to a large group of representative consumers in a

quantitative survey. They were asked to rate those ideas against a
number of scales, so Kelloggs could identify which product ideas
consumers liked best or disliked.

data which they process and use to provide organisations like

Kelloggs with research. The benefits of secondary research are that
it is quicker and often less expensive than primary, although it may
not always be completely related to the needs of a specific project.

Information gathering
discovery to selection
For Kelloggs, the order in which the information is gathered is as
important as the type of information being gathered. In order to
develop the new Crunchy Nut Bites, Kelloggs undertook four
distinct stages of research.

Prototypes: A single example of a

planned product that can be tested and
modified before entering production.

Mean: Average of all values.

Secondary research: Uses data that

has already been collected and/or
published e.g. in newspapers, books or
reports.

GLOSSARY

Focus groups: Small group, usually of

6 to 8 people, used as part of a process
of research to elicit feedback.

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The quantitative data created specific statistical information that

The data collected also helped to calculate a sales forecast for the

indicated that a new Crunchy Nut Bites idea was perceived as the

new product for the first and second year in market. The forecast

most appealing amongst all the ideas tested.

was used by the finance department to set budgets, organise the

It established what proportion of people liked the new product

supply chain and to schedule food production. Once the data

idea enough to buy it.

was analysed and the product concept tested, Kelloggs was able

It also identified those product ideas that had the best or least
sales potential.

to make the strategic decision to go ahead with the new product.

Production could then take place.

Information gathering
development to launch

Conclusion
Kelloggs used market research throughout the whole development

Once the best idea had been selected from stage 2, Kelloggs
needed to make this idea become a real product. The Crunchy
Nut Bites food prototype recipe was refined using the feedback
from another qualitative and quantitative survey.
The qualitative research helped Kelloggs food technologists to
explore the taste and texture of the new food idea in more detail.
Kelloggs needed to understand the eating experience of the
consumer before a decision could be made about how to develop
the recipe in more detail. Following this stage, four product
recipes were developed and these prototypes were then tested
with representative groups of consumers in a quantitative survey
to see which product consumers preferred. This enabled Kelloggs

process for a new product for the Crunchy Nut range, from the
initial idea to the planning of production and delivery. During the
earlier stages of research, consumer responses helped Kelloggs to
explore lots of different ideas in an open way. It then crafted some
ideas in more detail and screened those ideas with consumers to
select the one which seemed to have the highest appeal.
The idea became real by testing several recipes, refining the food
prototype selected and developing the design for packaging.
Once the food and packaging elements for the new product had
been developed, the whole product was tested with consumers to
ensure it met their needs. The data also provided a sales forecast
to predict the first two years of sales of Crunchy Nut Bites.

to select the best one.

Crunchy Nut Bites has extended the Crunchy Nut family of products.
Also, at this stage, the pack design for the new Crunchy Nut Bites

In doing so it has brought new consumers to the brand and

was developed. Several designs were developed aimed at giving

increased its consumption. Kelloggs launched Crunchy Nut Bites in

the new product the same look and feel as the rest of the

September 2008. Sales data shows it was one of the best

Crunchy Nut family. The packaging designs were tested with

performing brands to launch in the breakfast cereal category with a

consumers, which enabled Kelloggs to select the final packaging

sales value of 6.9 million in its first full year of sales.* This illustrates

design for Crunchy Nut Bites

that the detailed market research undertaken during the planning

stages was valuable. It helped to ensure that the product extension

Stage 4: Forecasting sales for the new Crunchy Nut Bites

hit the spot with consumers straight away.

*IRI sales data

At Kelloggs, every product has to undergo one final test prior to a

new product launch. This is called the In Home Usage Test. The
consumers are given the product to try for several days and this
product for the first time. At the end of the trial, consumers
complete a report on what they thought of the food in the form of
a questionnaire. This final survey measures how appealing the
new product is to consumers and how likely they would be to buy

2. Explain the difference between primary research and

secondary research.
3. Analyse why an organisation like Kelloggs would use
both qualitative and quantitative data.
4. Evaluate why market research can reduce the risks of

QUESTIONS

enables Kelloggs to capture how consumers interact with the

1. Describe the purpose of market research.

a new product launch.

it in real life.

GLOSSARY

Budgets: Financial plans for the future

that show where costs and revenues will
come from.

Supply chain: The chain of processes

linking the manufacture of products with
physical distribution management so

that goods are moved quickly and

efficiently through various processes to
meet consumer needs.

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Stage 3: Crafting the idea into a complete new product