Heinz Ketchup free essay sample

Heinz was experiencing a significant issue with its strategy in term of distributing their product to a retailer that shelves not only Heinz’s product but their own as well. The retailers have a commanding role in placing Heinz products alongside the in-house ketchup they make as well as other brands. This creates a significant problem for Heinz in terms of maximizing profits by increasing sales since the retailer is not only concerned about Heinz but also concerned about the private label it sells itself. Heinz sees a benefit in selling the larger bottles of ketchup but the retailers see that as a threat to its own brand and therefore creates a conflict of interest. List any outside concepts that can be applied: A company such as Heinz needs to strategically set their prices keeping in mind historical data relevant to its consumers and at the same time have enough margin for the retailers that are shelving their product. We will write a custom essay sample on Heinz Ketchup or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page There are different avenues that Heinz could primarily take in order to alleviate itself from any discrepancy through price setting that could arise from the retailer and/or the consumer. Cost-based pricing: This method of pricing is contingent upon accounting data and keeps the Return On Investment (ROI) in mind when setting prices. Typically, cost-based price approaches are cost-plus pricing, target return pricing, markup pricing or breakeven pricing. Competition-based pricing: This can be simply stated as the prices are being set with keeping in view what price tag the competition are putting up on their products. Customer value-based pricing: In this method of price setting value-based pricing is given significance. The perceived customer value of the product has leverage in price setting and therefore the price revolves around how a company such as Heinz could increase customer value. This method of price setting for a commodity such as Heinz ketchup could be an intricate issue for the company. Heinz understood that it needed to add value to customers by innovating their product, creating shared value but keeping in mind what the after affects could be of price. Heinz created an upside down bottle which pioneered the way consumers used bottles. They also introduced bottles that were packaged to cater the needs of those households or businesses that saw more value for their dollar. Heinz also promoted their products through price promotions for selective products, however this created a significant marketing problem. Heinz cannot simply compete solely on price as there are other variables such as differentiation and customer value creation as well. In efforts to create shared value, research into customer needs can be leveraged in order for Heinz to differentiate itself. This could create a pull strategy which would assist Heinz in creating an arsenal against the retail channel. List relevant qualitative data: -Regardless of its market share which created a leadership position for Heinz, it was experiencing three years of reduced operating income. -Heinz ketchup was an innovative product that has dominated and controlled the ketchup industry since 1960. -Since ketchup was able to have a significant shelf life consumers often bought more in anticipation of need. List relevant quantitative data: -Heinz experienced consumers shifting from the 24oz. bottle to the twin 50oz. bottles. -Heinz had $100 million in sales from the 15 brands out of which ketchup sales attributed to 30% -More than 47% of consumers that bought ketchup had a bottle of Heinz at their residence. Describe the results of your analysis: Heinz was a favorable brand to consumers; however the issue lied within Heinz’s retail strategy. The retailers created a conflict of interest while working with Heinz. These retailers had private label products of their own which were being shelved alongside Heinz. In essence, these retailers were controlling their in-house product as well as Heinz, which was inevitably going to create an issue. The retailers had control over not only their own product but their competitors as well. This put Heinz in a bad predicament simply because Heinz could not leverage retailers. Instead it was offering them trade deals and was cutting into its wholesale prices to get some sort of a marketing edge at the retail level. This meant that Heinz before it even came on the retailers’ shelves had fierce competition, had its margins reduced which had a direct impact on its profitability. Heinz understood that it needed to undercut the competition and introduced trade promotions which were effective but consumers and the retailers were smart. The consumers waited for periodic sales of the Red Rocket and retailers received allowances to compensate the margin compression. Introducing a larger product size or bundling two same products would require larger shelf space and the retailer was not ready to give that up that easily. Even if some of these retailers were to consider allotting Heinz more space they would ask for slotting allowances. Describe alternative action: -Heinz could just follow the course it has been on for the last so many years and not create any conflict with its retailers. -A sense of shared value needs to be created to be able to effectively sell Heinz ketchup in light of the strict competition and smart consumers. Therefore, in efforts to link other brands of Heinz can pave the way in creating awareness. Heinz could bundle other products with their ketchup by putting a coupon on the 24 oz. bottle for Worcestershire sauce. -For every bottle of Heinz that is bought, 1% of the profit margin will be donated to charities that the retailer sponsors and matches it. -Make the Heinz ketchup with the lowest margin to be more efficient by cutting costs in terms of manufacturing it until it is shelved in the retailers’ store. -Create a line of Heinz ketchup that is organic and gravitate to those consumers that are health conscious and willing to pay for a product that has fewer preservatives. Describe your action plan: The consumer, retailer and the manufacturer need to understand and promote shared value that could spark the interest of all the parties involved in the buying process. This can discourage significant challenges which can present themselves to not only the retailer but the manufacturer as well. Heinz needs to take necessary steps towards crafting a promotion that not only encourages referrals but promotes the brand and builds loyalty. Therefore, if I was to be given the above choices in alternative action I would push shared value in efforts to create a common goal for the retailer, consumer and the manufacturer. In option two the advantage would be that if the consumer was in need to buy ketchup s/he would see promotions of its 24oz. bottle and have a coupon for other sauces it sells. It could potentially also educate the consumer that the bigger the bottle or bundled package ketchup the higher the value of the coupon. However, if in the case the bigger ketchup package or bundle is not available on the shelves they could ask the retailer to get it and make the retailer realize the potential it has in gaining value.