Reference no: EM133441192

Case study 2

Ferrero: Managing Marketing Information and Customer Insights

Ferrero SpA is an Italian manufacturer of branded chocolate and confectionery products, and the third biggest chocolate producer and confectionery company in the world. Its revenue in the fiscal year of 2015 was $9.9 billion, a 12 percent rise from the previous year. The company employs nearly 33,219 people worldwide. Because of its consistent commitment to innovation and customer focus, the company has outperformed its competitors in many markets.

The company strives to understand market preferences and has a proven track record of successfully managing marketing information and gaining customer insights. A prime example of this is when it created a new market for premium chocolate in India with the help of sophisticated marketing analysis. When Ferrero entered India in 2004, the country did not really have a ready market for premium chocolates. Since India is a very price-sensitive country, most brands offer products at low prices in small packs. Market leader Cadbury had been selling its flagship brand, Dairy Milk, at an entry price of $0.07 for over a decade. That has changed today due to Ferrero's sophisticated and ongoing analysis of the local market and its customers that paved the way for a new product segment in that region. Premium chocolates now make up about 27 percent of the market in India. Besides Ferrero, several companies compete in this segment, including Cadbury, Nestlé, Mars, Hershey, and Lindt.

Ferrero sensed as early as 2004 that there was a set of consumers in India willing to pay a premium price for a box of chocolates. To gain and manage the appropriate marketing information and customer insights, Ferrero did not hire any market research firm when it was test-marketing Rocher. Instead, it decided to go to the market on its own to better understand the Indian customer. The company set up a specific customer insights team as a center of excellence in market research. This team provided deep insight into the local market across all relevant aspects, from the launch of new products to changing packaging, developing and modifying recipes, and finding the ideal communication channels. In order to better understand the customer and their potential needs and wants as well as their habits, the Ferrero customer insights team as well as the management traveled into the metro cities as well as out of them, to Nagpur and smaller markets in the interior. They also visited consumer homes to understand consumer habits and aspirations.

As a result, Ferrero not only realized that Indians were open to buying an expensive box of chocolates, even if it was sold in a kirana store (a small neighborhood retail store in the Indian subcontinent), but they also discovered that consumers would buy expensive chocolates mostly during festivals, when they generally gift sweets. As a consequence, Ferrero supplies Rocher round the year to modern retail stores such as Food Bazaar, but kirana stores get these chocolates typically during the festival season (from October to March). During the summer months, Ferrero distributors do not usually allow kirana stores to stock more than three to four boxes so that quality is not compromised because of a lack of refrigeration facilities. The logic is that it is better not to be present at all than give the consumer a stale product. By 2014, despite being available mostly during festivals, Ferrero Rocher had captured 14 percent share in the box chocolate category. In India, where the sheer variety of sweets is vast, where recipes vary from state to state, Ferrero has managed to lodge itself in the minds of the people as a luxury and exclusive product, and people are consuming and gifting these chocolates during local festivals in addition to other occasions when local sweets are consumed.

Nestle recently launched its premium brand Alpino at $0.45 a piece for round chocolates that look like Ferrero Rocher. Although both Cadbury and Nestlé sell premium brands, they derive the major share of their revenue from mass-market products. Ferrero's strategy is different: it does not even plan to make cheaper variants of Tic Tac and Kinder Joy, but successfully pursued a premium strategy instead. Tic Tac is priced at $0.15 while most mouth-freshener candies cost $0.01. Kinder Joy is pitched as a healthy product that contains more milk than cocoa to target mothers conscious of their children's health.

The success behind Ferrero's product launches lies in its ability to manage marketing information and gain customer insights. New flavors of products are introduced only after conducting thorough research on Indian requirements and preferences. After further in-depth marketing research, the company successfully introduced an Indian flavor, "Elaichi Mint," to its Tic Tac brand in late 2014 to suit the local palate. This is the first time that the brand has introduced a local flavor in the market especially to cater to the Indian audience. The new flavored Tic Tac mint has the strong flavor of cardamom and has the tag line "The Desi Mint." This condiment is widely used in India for its health benefits and as a mouth freshener after meals.

Questions

Outline the steps of Ferrero's marketing research process in India

Explain the importance of information Ferrero gained to know the insights about the marketplace and customers in India

Define the market information system, and analyse how Ferrero used different parts of market information system for Indian market

Explain how Ferrero analysed and used the market information