Marketing project summary

I need you to so an EXECUTIVE SUMMARYMaximum 2 pagesTwo-page, double space, executive summary is given at beginningSummarizes the whole document CLEARLY AND CONCISELYThis document is a marketing plan for Kroger company,
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Current Market and Target market
The current market that Kroger has been steadily growing in is the retailing market. Kroger has
the most supermarket stores and second in retail stores in the United States. The company
consists of a wide variety of stores that include convenience stores, jewelry stores, supermarket
fuel centers and pharmacies. Kroger has been competing with companies like Wal-Mart, Target
and with the acquisition of Whole Foods now Amazon. Kroger’s success in coexisting in such a
competitive market has been because of their ability to change and adapt to the needs and wants
of their customers. From the Kroger sustainability website, “Kroger is a leader in providing our
customers fresh organic fruits, vegetables and salads. Our organics section has grown and
expanded in response to our customers’ interest in these products” (Kroger). Kroger prides it’s
self on being able to supply healthy organic products to a large demographic of people. Being
able to manufacture Kroger brand products lets them strive to produce and sell more organic and
healthier foods. According to a Business Insider article, “Kroger is also expected to surpass
Whole Foods Market within two years and become the nation’s top seller of organic and natural
food, according to a recent report by JPMorgan Chase” (Lutz). Currently Kroger has served a
wide variety of customers, offering many different products at a lower price but lacks a superior
online distribution. Since Kroger has emphasized the importance of more organic products this
may be a good way to strategize on a target market.
Target market
The targeted market that we recommend Kroger should concentrate on is the high-end
customers. High-end customers are more aware of what is in their foods and trying to buy more
organic products for a healthier living. From the Business Insider article by Ashley Lutz, “selling
more organic food will attract high-end customers and help drive profits at Kroger, according to
JPMorgan.” Amazon has concentrated on the high-end customer with the acquisition of Whole
Foods. They plan to use their e-commerce program to distribute these products. This seems to be
the new trend and by targeting the high-end customer this may fill Kroger’s market gap.
New Service
With the environmental scanning that our consulting firm has done we have recognized that
online services are becoming a more effective way of selling products. With this being said we
believe the best way to meet the gap is with a delivery services that can be purchased online or
through the Kroger app. This service will be a subscription plan for its loyal customers that can
purchase these organically produced Kroger products. This subscription plan offers reduced costs
to select products like bread, milk, eggs, and other organic Kroger products. The customer would
be able to select weekly or biweekly and Kroger would deliver the products in a cooling bag
right to the customer’s doorstep. This subscription plan can be found on the Kroger app that is
free on any smartphone and on Kroger’s website. This service will be targeted to the high-end
customer who doesn’t like to go to the store every week and would rather shop online and have
Kroger’s products waiting on their doorstep.
Positioning
Kroger has established itself as a company that puts its customers interest first above everything
else. With this new online subscription service, customers will be able to order select Kroger
products online or through the app and have it delivered to their homes. Kroger will offer their
brands, which are made organically grown, or non-foods that are produced with the environment
in mind. The products are also considerably cheaper compared to companies like Whole Foods
or Sprouts. With online delivery services becoming the new trend, we believe this online
subscription service will fill the market gap that Kroger has. If you look at the perceptual map
below you can see all of the company’s performance and the Kroger app will hopefully fill the
online purchases that Kroger so desperately needs.
Perceptual Map
Online
Amazon
Higher sales
Walmart
Lower sales
Kroger
Target
Store purchase
Points of difference
Throughout the last couple of years online shopping has become the new up and coming trend
and most companies have started selling more products online. What makes Kroger’s online
shopping experience different from the rest is this subscription plan. Customers would select
Kroger brand products delivered to their doorstep weekly or biweekly at a discounted rate
compared to the store. The app allows customers to sign up with their own account and can
interchange different products to allow what the customer needs for that specific week. All of the
select products below can be found on the Kroger app and purchased with the subscription plan.
Select Products:
Manufacturer Name
Type
Size
Regular
Subscription App
Price
Price
Kroger
1%
Milk
1 gal
$1.19
$.99
Kroger
2%
Milk
1 gal
$1.19
$.99
Kroger
Whole
Milk
1 gal
$1.19
$.99
Kroger
Simple truth Bread
15
$1.99
$1.49
Whole
slices
$2.99
$2.49
$3.49
$2.49
Wheat
Kroger
Simple truth Eggs
12
Cage Free
Kroger
Simple truth Orange Juice 1 gal
cold pressed
Kroger
Butter
Unsalted
16 oz
$3.49
$2.99
Kroger
Water
Purified
32 pkg $3.99
$3.49
This new service that Kroger will provide is expected to positively impact other product lines
that Kroger offers under different names including:
•
HemisFare?
•
Big K?
•
Fresh Selections by Kroger?
•
Comforts for Baby?
•
Home Sense?
•
Kroger Products
•
Pet Pride?
•
Private Selection?
•
Quality Guarantee
•
Simple Truth?
•
Value Brand Products
•
Water Quality
•
Abound?
•
Luvsome?
Unique Product Quality
Kroger brand products are made to a high standard and Kroger will stand behind all of their
products with their quality guarantee. Kroger brand products are made within the United States
at one of the 40 manufacturing facilities. The Kroger app subscription plan ensures customers
that they can trust and feel confident that every single one of the products they pick on the app
will be delivered with the customer in mind.
Pricing
Because established competitors such as Amazon already dominate the e-Commerce market
with services like Prime, companies that enter will face a stiff challenge. Amazon Prime
currently offers their subscribers an additional $14.99 monthly charge on top of their prime
membership ($299.76 a year) for those interested in their grocery services excluding their
delivery fees. Similarly, Google is experimenting on its delivery service with service fee starting
as low as $2.99 for its members that pay $10 ($95 a year).
After analyzing, we felt Kroger should initially have a demand-approach to their product
with a skimming pricing and odd-even strategy. With an established customer base and
reputation, Kroger shouldn’t have trouble reaching out to a larger audience with a premium fixed
price. With a bevy of competition in this market, the higher price would create the impression
that customers are paying for quality services from a reputable brand. Furthermore, Kroger has
direct access to their own produce versus other competitors, so customers that pay should
understand their subscription is valid towards all subsidiaries of Kroger. A combination of oddeven pricing strategy along with access to all of Kroger’s supermarkets should reassure the
subscribers that what they pay for is an enticing offer.
A price tag of $12.99($155.88 a year) may seem steep for a new company entering the
competition, however keep in mind that Kroger has access to it’s own grocery stores and should
be able to offset shipping time with it’s own delivery system. Because the $12.99 is solely
towards the subscription fee, we are expecting $5.99 of it to be allocated towards fixed cost and
$7 in profit. Here is a quick breakdown of our pricing options.
1.Yearly – $155.88
2.Monthly – $12.99
3. Shipping Fee per delivery – $2 (flat rate)
Because Kroger is positioning itself closer to Amazon Fresh with similar high rates, we are able
to accommodate cheaper flat rate of $2 for every delivery. Supposed Kroger could obtain
750,000 yearly subscribers ($9,742,500 sales), the return on sales ratio would be 7.76 percent.
7.76 percent falls between 5-10% and is a decent number. Assuming the company manages to
obtain a higher number of subscribers, it should have enough leverage to play around to switch
up the prices in the future.
Kroger’s subscription service promotion
It is common for companies to introduce new products or services in a move to expand
their market share, raise customer satisfaction, improve the efficiency of their operations, and
raise the revenues. When introducing a new product or service, however, it is important that a
company promotes it across the market in order to popularize amongst the target consumers.
Without a good promotion strategy, Belch & Belch (2012) insist that the product or service will
likely fail, not because it does not fit the needs of the target market, but because the company has
failed to acquaint the target market with the product or service and its importance to them.
Kroger Company is introducing a new service on its online platform. In this case, customers that
shop on its online platform or over the app will have the opportunity to subscribe to a particular
service that the company will use in delivering the customers a number of select goods to their
doorsteps. This service targets the high-income groups that may lack the time for shopping and
may need the goods delivered to their doorsteps for purposes of convenience. The following
sections will address a number of promotion mix elements that will be applied in promoting the
new service and how the elements will complement each other.
Kroger’s new service promotion mix:
It is necessary to promote both new and existing products and services in order to raise
their priority. In this case, companies may need to develop an elaborate market mix that
constitutes multiple elements of advertising that should help in optimizing the process (Swanson
& Everett, 2016). Jointly, these elements inform the target consumers of the presence of the
products while at the same time persuading them to purchase the products. In the present case,
the process will involve persuading Kroger’s customers and more so those that shop online that
they can have the goods delivered to their doorsteps. There are various elements that may be
used in this process and that include advertisement, direct marketing, sales promotion, and
personal selling, among others.
Advertising
Advertising is one of the most important promotion mix elements that a company may
use in promoting its product and services. This is a form of marketing where a company uses
premium service providers in order to access the potential customers. This way, a company is
able to reach more people than its individual initiatives could actually do. When advertising the
new subscription service, Kroger will develop a number of adverts that should cover both visual
and audio elements to be availed to the target market in terms of images and videos. Advertising
could be done in the online media, mainstream media, or on physical locations.
Physical advertising will be done through various posters and banners that will be erected
at various locations across the US. This will, however, be done at locations that Kroger has
operations so as to optimize the success of the process. These adverts should feature both
graphical and textual information that will illustrate the new service, how the service is
conducted, and ways in which the service could be beneficial to the target market. Mainstream
advertising will utilize videos that will be aired on television channels at peak hours in the states
that Kroger has operations, and that should illustrate the message through visual data
accompanied by a verbal explanation. Finally, online advertising will be done through third-party
companies such as Google. According to Johnson (2016), the popularity of desktop advertising
has risen from 11% in 2009 to almost 20% in 2015, while the mobile advertising was on the
verge of hitting 30% as at the end of 2015 in terms of total revenues (See Figure 1). Therefore,
Kroger will focus on online advertising and particularly due to its integration with the company’s
online and in-app purchases. The message relayed through this element will focus more on
explaining to the target customers the benefits that they are set to experience in the event that
they choose the subscription service.
Sales promotion
Kroger will also utilize sales promotion in the promotion mix for the new service. Sales
promotion involves the creation of short-term incentives that are meant to boost the sales or a
product. In the present case, this will be done through a drop in subscription cost or expansion of
subscription services’ period for the first-time clients. As such, the ideal method for Kroger’s
new subscription service will involve a one-week trial period for new subscribers or a drop in the
price by half for the new customers. As such, this is likely to attract more customers to the new
service. Since this subscription will be based on weekly and biweekly periods, the company may
benefit as these customers continue to renew their subscriptions. Therefore, the cost that the
company undergoes in funding this promotion will be recovered by the accelerated subscriptions.
Publicity
Publicity is an element of promotion where a company indirectly markets its product or
service through various platforms. In this case, Kroger should consider featuring the new service
on a number of pages throughout its annual reports and brochures. At the same time, the
company could ensure that its executives mention the new service from time to time during their
press briefings and meetings. This way, it is likely to have this message circulated through the
media and thus help in popularizing it without necessarily spending resources (Lackie & Wood,
2015). In fact, Kroger could also have this service featured on premium services such as movies
and television shows. These programs are likely to reach a large number of people, which is then
likely to popularize the service and more so when the message is developed elaborately.
Personal selling and direct marketing
Personal selling and direct marketing are two closely related elements of the promotion
mix. In each case, the company communicates directly with its employees. Since Kroger serves
millions of customers each week, it could be difficult for the company to engage each customer
verbally. Rather, the company could email the customers details about the new service alongside
a subscription link. Further, Kroger could also avail pop-up messages or direct messages to
customers when they log in to the company’s online services or the application. In return, this
could acquaint the existing customers with the new services as well as ways in which they can
optimize their shopping experience.
Integration of the elements
Sales promotion integrates with other elements of marketing such as advertising, sales
promotion, direct marketing, and personal selling. In this case, the offer will be communicated to
the target market through the other elements of promotion mix and, even if customers learn about
the new service through the other four elements, they will still enjoy the same benefits as those
that learned over the company’s website. In return, this means that these elements will
complement each other by promoting the success of one another. Direct marketing and personal
selling will be conducted at the company’s premises as well as over the Internet. As such, it then
means that they will act as supportive approaches to the more expensive online advertising. In
return, this will mean that the company will reach both the existing and new customers. While
the direct marketing and personal selling approach will only reach the existing ones, advertising
and publicity are likely to meet a mix of both new and existing ones. In return, it will then be
possible for Kroger to optimize its chances of encroaching new markets while at the same time
exploring its existing market further through the creation of the new service meant to raise
efficiency.
Placement
Perhaps one of the biggest strength that will be mentioned when Kroger rolls out its online
service is the distribution method. Unlike other e-commerce rivals like Google Express that
serves as the mediator between the store and buyer, Kroger will have immediate access to their
own goods when orders are placed because they have ownership over supermarket chains.
The online service is a direct distribution channel because customers will simply order their
produce and have it shipped from the nearest supermarket location. Additionally, a web-based
service means that profits won’t have to be shared with any intermediaries, leading to higher
profits rates. Other than transportation and tech-support costs to customers, the total logistics
cost would remain low because the products will be stored at Kroger’s supermarket locations to
save further expense costs. Having it shipped from the nearest location ensures dependability. If
one store doesn’t have it in stock, the next closest location could process the order instead. A
selective distribution strategy should be carefully implemented to allow store locations to focus
on specific geographic areas only.
A target audience Kroger should focus more on is the younger generation and newer parents.
Digital retailing is mostly applicable to millennial, as recent projections by companies predict
that 70 percent of all households will start to approach it more for groceries. A challenge for the
current goal is that a majority of grocery shoppers in the current generation aren’t as familiar
with browsing the Internet to order products. Thus, appealing the subscription service to
millennial could have long-term benefits as they are more tech-savvy and return as reoccurring
subscribers (Business Insider). Kroger should examine the population demographic considerably
as they choose geographic locations to implement their subscription services due to these facts.
Organization
Kroger’s organizational chart is shown in figure XX. Although this is not the whole
organizational chart, some of the key employees are illustrated in this chart. Beginning with
Rodney McMullen, Chairman & CEO of Kroger, the immediate circle of direct reports to
McMullen are executives at Kroger. These direct reports are known as Executive Vice
Presidents, followed by Senior Vice Presidents, and finally Vice Presidents. Along the way there
are various managers and employees that fill in crucial roles in the company. Under CEO
McMullen is Digital Executive Yael Cosset. Cosset’s direct report is Matt Thompson, head of
the Digital Business division. This is the division that our new team will implement and focus all
of its concentration. The actual team will have their own manager, who will then report to Matt
Thompson, who reports to Yael Cosset, and in turn reaches CEO Rodney McMullen. The new
manager should be somebody who has shown a good performance history in the respective
Digital Business division. Furthermore, the team put together by this manager must have the
skills, expertise, and planning in order to thoroughly executes the marketing plan.
Citation
Belch, G. E., & Belch, M. A. (2012). Advertising and promotion: An integrated marketing
communications perspective. New York: McGraw-Hill/Irwin.
Daniels, Jeff. “A $100 billion opportunity: Online grocery sales set to surge, grabbing 20
percent of market by 2025.” CNBC, 31 Jan. 2017.
Johnson, L. (2016). 7 Big Trends …
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