Considering the fact that Kingsford charcoal is a) a cash cow (high relative market share and low market growth) and b) price inelastic, we strongly recommend a total line pricing increase combined with aggressive investment in advertising and trade promotion across all channels, specifically food stores and mass merchandisers, that can exploit the greater advantages of charcoal over gas grilling. The target segment market should be Instant Acceptors because they account for 62% of total volume consumed and use both regular and instant charcoal products. This target market consists of adults, mainly males (60%) that likely belong to younger, larger, higher income families that look for quality in products (80% of grill ownership falls in this category). As mentioned before, the high relative market share (in relation to Royal Oak; 8.13 (57.7/7.1)) and low growth in the industry make Kingsford a cash cow in Clorox’s portfolio, which means that, as a market leader, the company may command premium prices and profits that can be used for investments and other projects. Marketing Mix
In order to understand the typical grilling behaviors and patterns to create an effective marketing plan, we need to take into account the fact that, according to exhibit 6 on the case, 49% of households own a charcoal grill and 20% of households own both gas and charcoal indicating that there is still a huge need for consumers to purchase charcoal; furthermore, the majority of the diehard grillers prefer charcoal grilling over gas. Product: differentiation from direct competitors and gas grilling based on the quality of Kingsford Charcoal. The regular charcoal has high quality of lighting faster and burning longer, while the instant charcoal offers convenience.
Kingsford is a mature product; therefore, more brand awareness is a must to grow the market, which can be achieved through a market penetration strategy of expanding the grilling season to increase consumption and purchases. Price: Kingsford charcoal is delivering premium value (Lab tests proved that Kingsford’s product is superior to Royal Oak and the private label brands), which means good perceived customer value that Kingsford can use to charge a higher price to match the quality of the product1; given this and the inelasticity of demand, Kingsford should increase the prices of its whole line. Some retailers may resist, but will not be surprised because competitors already increased prices over the last year. The price inelasticity of the product means better profit scenarios for the company, something that is needed to support the promotion initiatives. Read Kingsford Charcoal case study
Promotion and advertising:
the advertising needs to be increased to include more media outlets in order to produce more messages and awareness among consumers. Advertisements should be mainly increased between May 1 and September 1, because charcoal purchases are seasonal due to grilling behaviors. However, advertisements are continued over the rest of the year at a lower rate to extend the grilling season. The message for the advertisements will be focused around the “real barbecue flavor” that charcoal grilling gives food (compared to gas grilling) and demonstrating that grilling can be used outside the summer months. New media, such as TV (adds during sports games, cooking and home based shows), magazines (sport and food related), billboards and sponsored events should be explored to maximize the message. The value proposition (positioning) should be simple: “better taste, any season of the year”… to emphasize a better experience (again, compared to gas grilling) throughout the year, not only reserved for the summer months or peak season. Additionally, Kingsford needs to contribute trade money to help reduce prices during Memorial Day and July 4th holiday weekends. This will “calm” retailers after the price variations; Improve in-store displays, especially end of aisle, to make Kingsford visible because charcoal purchases are mainly impulse purchases. Kingsford wants to be the brand that consumers purchase when walking by a display; Feature the product in stores circulars that are mailed to local consumers. This will help maintain product and brand awareness for consumers each week and motivate purchases because charcoal is a low involvement purchase product, which means that little effort is put into making the decision.
Intensive distribution to have Kingsford Charcoal in as many outlets as possible. Club stores for largest sizes of the two products such as Costco and Sam’s Club; food stores (convenience and supermarkets), mass merchandisers (Target), and drug stores (Walgreens) can be used for the other sizes. In this sense, special attention should be put in food stores because they account for 66% of total charcoal sales. Moreover, it is crucial to display the right quantity of products on the floor in a central location for holiday weekends. Displays combined with
featured pricing and inclusion in store circulars is not only good for Kingsford, but also for the store. This helps reinforce the strategic alliance with the stores and may facilitate efficient product display and commercial exclusivity.
Plants currently running at approximately 80% of total capacity; if there is an increase in volume of more than 5% for several years in a row, there would be supply issues. It is difficult and expensive to build additional capacity. If Kingsford was to run out of capacity, there are not many alternative sources for charcoal production.