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Global Markets Final Exam: The Principles Launch Introduction to Italy In order to ensure a successful launch for Principles in Italy, Proctor and Gamble (P&G) needs to tailor their marketing strategies to the culture of Italy. While experiences from Principles launches throughout the world can be helpful, there is no guarantee that Principles can achieve the same level of success in Italy. P&G has a very unique and popular product in Principles, but it will require a correct marketing strategy focusing on Italian consumers in order to be successful.

Italy is clearly different from other European countries. Some large brands that are popular throughout Europe, such as Nikkei, have become extremely popular in Italy. Certain brands such as Neutral and VESA have achieved this level of success only in Italy. On the other hand, some U. S. Leading products such as Kellogg cereals and Pepsi- cola sodas achieved success throughout Europe, but not in Italy. This demonstrates that Just because P&G’s marketing strategy has worked in other European countries, it doesn’t mean that its current strategy will work in Italy.

Italy vs.. Europe P&G’s management should look at Principles launches in other European countries to alp prepare for the Italian launch. At the same time, they need to recognize that Italy is very different from these other countries. P first achieved success in the U. K. And Germany, countries where consumption patterns were similar to those in the North American market. Principles began to expand into the southern European market as well, where launches in Spain and Greece both achieved success. In southern Europe, consumption patterns were entirely different.

Rather than grabbing market share for the snack market, these countries required Principles to try to modify the consumption habits of consumers. For example, Italy eats a larger percentage of their meals at home (77% for lunch, 90% for dinner) compared to the US (< 50%). This clearly translates into less snack food consumption and an immediate less favorable outcome for Pringles. Another issue with Italian consumption habits is the widespread perception that potato chips are unhealthy. These cultural differences must be addressed to a greater degree than elsewhere.

In Principles ads, P should attempt to emphasize the benefits and fun associated with snacking (as done in the current ads), because the Italian market is not necessarily familiar with these concepts. In the future, P may also consider marketing Low-Fat/Healthier brands of Principles in Italy, to deal with the health-conscious consumers. Test launches have been run in other European countries such as Spain and Germany before their launches of Principles. Both Spain and Germany have experienced success with Principles. The market test results of Italy can be compared to those of Spain and Germany to gain projections on future outcomes.

The market tests results came out very favorably for Principles (See Exhibit 24). Results from purchase intention, value rating, and likeability were all at least as good as those in Spain and Germany. Given that Principles was very successful in both of these countries, it looks like it is definitely possible for the same to occur in Italy. Market tests revealed that Italian consumers launch initially, both BBC and Paprika were successful, with BBC seeming more innovative and Paprika seeming more reassuring for regular consumption.

P should definitely attempt to expand flavors in Italy over time, but if the added costs of expanding flavor lines is too high initially (additional fixed costs > additional demand generated), Paprika may be the safest initial flavor because it will generate repeat researches, which will aid in building the brand and reputation of Principles in Italy. Consumption Trend While the amount of potato chip consumption in Italy may be lower than that of other markets, the trend of that consumption in Italy should be analyzed to see if there will likely be growth in the future.

Potato Chip consumption has been increasing in Italy since 1994 (See Exhibit 19). From 1994 to 1998, Per-capita consumption in Italy (keg/ capita) went from . 76 to . 85. While consumption of other salted snacks increased as well, they did not increase to the degree that potato chips did. Potato chips are the largest salty snack category in Europe and it continues to increase. Total annual potato chip consumption increased 12. 6% in volume and 20. 8% in value over this time period. Health freaks are decreasing (32% to 28. 4% from 1994 to 1997) while followers are increasing (35. % to 394%) (See Exhibit 22). These changes look like good news for Principles. Potato chips, as well as other salty snacks, are consistently becoming more popular in Europe and Italy. If this trend continues, the market size should continue to grow, providing more opportunities for Principles. Sweet snack eave been significantly more successful than salty snacks in Italy. Sweet snacks have had a strong focus on consumer needs, constant innovation of product and packaging, and heavy investments in advertising and trade promotion. Salty snacks currently do not do this.

If P can apply these marketing strategies to the salty snack market, they may find that it has Just as much untouched potential as the sweet snack market. Competition When entering a market, P must look at its competitors. What are the traits off successful competitor? How will P differentiate themselves from competitors to steal their market share? San Carlo owns the largest market share of the salty snack market in Europe, with about 25% of the market (See Exhibits 8-11). It owns about an equal share in the percent of salty snacks at both the retail and catering/bar sectors.

When looking at potato chips specifically, San Carlo is even bigger in Italy, owning 45% of the market at retail and 42% at catering/bar sectors. What contributes to San Carol’s success? One of the main things looks to be its distribution setup. With over 160 warehouses and 1300 direct salespeople selling to stores, this distribution system seems to be its competitive advantage. P&G must ensure that it can match this distribution system if it wants to someday gain some of San Carol’s market share. Another competitor, Babbles Italian Sir, is selling a product very similar to Principles – chips in a tube.

Why will Principles be more successful than this company, who owns less than 2% of the market? P is confident that Principles is a unique product that is better than existing alternatives in Italy. Market tests have revealed that most consumers agree (See Exhibit 25). P must make these advantages clear to potential Italian consumers. P may be able to use its expertise to better market the brand to the Italians. Another potential advantage is P’s already existing throughout Europe in the past and should be able to use some of the same resources and knowledge to produce Principles in large quantities.

P&G will have to make tough adjustments, though, because snack products are often consumed away from home in alternative channels such as hotels, restaurants, and catering. P&G currently is not set up for this system, but will require it in order to experience any success. Making the investments to make Principles available at places like bars and cafeterias (which represent about 25% of sales) will be well worth it in the long-run (See Appendix 1 for investment costs). P&G should look into the marketing strategies of its competitors as well.

San Carlo had about a 36% share in voice in 1998, proving that its marketing skills may be part of the reason of its success. Babbles had about 7%, compared to 0% the past 3 years. This signifies that Babbles is starting to advertise its product, making it important for Principles to enter the market as soon as possible. A marketing strategy should involve a high number of advertisements in order to match the success of San Carlo. Age Distribution The age distribution of consumers is important to understand in marketing Principles in Italy as well.

P&G should look at both what age are those who actually consume the product, and what age are those who buy the product. In both the U. S. And the U. K. , those who actually eat Principles tend to fall within the 10-34 age range. However, those who decide/buy the product tend to be between 18-44. Italy is different in that kids aged 5-12 consume more than in the other countries. The decision influence, however, is similar to other countries, with ages 13-44 having the most “decided” volume per year. This tells us that this age range contains the people who are actually buying the product, whether or not they consume it.

Marketing methods could be adjusted to target these kids more, but it is still most important to target those who have the decision influence. Thus it is recommended that P&G attempt to target the younger population to a higher degree than in other countries. The cost of GRIP for the 4-14 age group is actually less than 50% of the cost of GRIP for the 15-44 age group, resulting in savings. At the same time, we recommend a new advertisement, requiring significant investment, to target this age group (See Appendix 1 for advertisement costs) Advertisement Content One way to analyze a country culture is through Hopefulness 5 forces.

In designing ads for Principles, P&G will want to take into account Italy’s position within each of these 5 forces. Current marketing strategy by competitors includes ads that show young people gathering to snack on products, often referencing U. S. Culture. These ads fit with Italy’s high level of individualism (DIVIDE). Other features of Italy include high masculinity (MASS), high uncertainty avoidance (AJAX), and low long-term orientation (L TO). High MASS implies that Italy is a competitive society, high I-JAG implies that Italians do not like unexpected scenarios, and a low L TO implies that

Italians are more short-term oriented. Future advertisements should look to apply to these cultural values of Italy. Italy also should carefully consider how it plans to newspapers, indicating that TV ads would likely be more effective than newspaper ads. These strategies should be used in creating ads in the future. Pricing It is recommended that Principles follow the recommended price of 2990 Lire. While, this may not be a good choice in the long-run as a result of a low profit margin, it will attract a lot of first time users who will then become repeat customers.

Prices eave been on an upward trend (See Exhibit 5), and thus price increases can be made in the future if they are determined to be needed (See Appendix 1 for pricing effects). P&G will likely want to utilize price discrimination in order to optimize its profits in different regions with different demographics in Italy. P&G likely has data on the demographics of Italy from its other businesses and studies can be carried out to find how demographics affect potato chip consumption. Promotions are a valuable tool P&G can use to help begin to develop a strong Principles brand in Italy.

A strong rand presence, linking the consumer to the product, will lead Principles on the path of long-term success. Promotions are especially important early on. Getting a customer to buy Principles once will potentially make them a lifelong customer. Through word of mouth, every customer is also a form of free advertising for the company. Smaller packaging has proven to improve volume of sales, and thus should be used at this stage of the launch. Initially, pricing decisions may be adjusted in order to expose as many people to the product as possible. One possible option for P&G to consider is an acquisition of a similar brand in

Italy. P&G has had a lot of success with acquisitions in the past, and should keep its eye open for potential targets. For example, a company that has a good distribution system to the non-retail outlets, something that P&G currently lacks, may be a good investment. Uniqueness With other products similar to Principles not having much success, it is very important that Principles emphasizes what makes it unique in order to develop a good brand reputation and to attract customers. Conclusion The limitations on this analysis include the lack of data provided regarding profits, ales, and costs in other countries.

With further data, more cause and effect relationships could be determined to help analyze how a new strategy will affect sales, etc. In the future, P&G should continue to adjust its marketing strategy to find what works best for Italy. In summary, P&G should look to further target the 5-12 age group through an additional TV advertisement focused on younger kids. The Paprika flavor, as well as original and SC&O should be introduced rapidly at the price recommended (2,990 Lire) in order to build a brand and attract repeat customers.

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