Pedigree Growth Strategy Case Study Analysis

Abstract

Pedigree brand dog food needed a new marketing plan for 2005 as dogs had grown to be the most popular pet in the world in the previous year (Calkins, 2010, p. 1). Although Pedigree was the dog food industry segment forerunner, competition from other brands proved that it was losing shares (Calkins, 2010, p. 10). It needed a new innovation to continue to compete and be profitable in the industry. Recent studies had revealed detailed information about dog owners which could be used to determine a new competitive strategy involving connecting with customers through online marketing and selling.

Keywords: marketing strategy, online marketing, advertising, market research, competitive advantage

Pedigree Growth Strategy Case Study Analysis

In 2004, Pedigree identified that it needed innovation and a new marketing plan to stay competitive in the dog food industry. In this business, it competed with other companies such as Nestle, Mars, Procter & Gamble, Del Monte, and Colgate (Calkins, 2010, p. 8). Due to the growing popularity as dogs as pets in the world, there was an open strategic window that could be taken advantage of by Pedigree with the right focus and plan. Through developing a new competitive advantage and a new marketing strategy using online marketing and selling, Pedigree can create the innovation and competitiveness that is needed to maintain and grow their market shares in the industry.

This case study will identify issues Pedigree faces in creating competitive advantage through innovation and marketing, suggest solutions to the issues, and discuss potential outcomes through external sources and course readings.

Identification of Main Issues

In order to remain competitive and keep its high market shares in the dog food industry, Pedigree pet food required a new marketing strategy in 2004. In addition to this, the company identified that it also needed a new innovation in the company. This came to light with new market research done on dogs and dog owners of the world.

Competitiveness in the dog food industry was very strong. Nestle, Mars, Procter & Gamble, Del Monte, and Colgate were the largest global players in 2004 (Calkins, 2010, p. 8). According to Exhibit 3, from 2003 to 2004 the company’s industry shares had gone down by .6% from 15.1% to 14.5% (Calkins, 2010, p. 14).

Each of the other industry players occupied a slightly different area of the market from Nestle that had a range of products from low price to super premium, to Colgate which only made super premium dog food products (Calkins, 2020, p. 9). Each also had different product variations and marketing strategies for their products. They also “invested heavily in innovation and marketing,” which was more than $190 million in 2004 (Calkins, 2010, p. 8).

Most of that marketing was focused on “traditional media outlets” (print and TV) with less spent on other formats, like the internet (Calkins, 2010, p. 8). The message of the advertising was largely the same for most companies, focusing on key ingredients and making dogs happy (Calkins, 2010, p. 8).

In relation to advertising, according to Exhibit 3, Calkins shows that Pedigree had decreased it’s advertising from $62 million in 2003 to $57 million in 2004 and the company’ revenue has decreased as well, from $801 million to $ 784.5 million (p. 14). However, as a whole in 2004, advertising in the dog food market topped over $190 million which proved it to be a valuable investment. A change in advertising was needed in order to direct the money invested in that area to produce more profits for Pedigree.

The size of the products sold was a relatively similar amount in all brands, with little deviation. Bags of dog food from each company came in similar amounts (25-50lbs). There was little variation in the product size (Calkins, 2010, p. 6). The large size could limit convenience of buying due to the fact that the purchaser had to prepare for the purchase – either by having someone help carry the bag or be able to carry the bag themselves.

What the company must ensure is that they don’t fall into marketing myopia as discussed by Theodore Levitt (1960) in the Harvard Business Review article by the same name. Pedigree should remember that it is a business to satisfy customer needs, not just make profits. According to Proctor (2000), a “company should never rest even after it has achieved domination, but should instead offer a broad range of products that are replaced frequently and supported aggressively. Any competitor is then faced with a target that is infinitely more difficult to penetrate” (p. 442).

Possible Solutions to the Identified Issues

One solution is for Pedigree to develop a new competitive advantage for the company, which can be done by refocusing marketing strategy and investing in online marketing. The marketing mix for the company needs communicate a message that is consistent to the market. It important for Pedigree to clearly communicate the advantages of its products over competitors so that its customers are not confused about its position. Through the new marketing strategy, the company will need to keep in mind forces that shape competition – the bargaining power of buyers, threat of substitute products or services, the bargaining power of supplies, and threat of new entrants, which all create rivalry among existing competitors (Porter, 2008, p. 80).

The company can also produce products in smaller packages so that customers feel like the product costs less and is a more manageable price. This also means they will buy more often and may even try more Pedigree products since it won’t take them as long to finish the bag. The differing sizes also allows customers the convenience of being able to carry the bag to their vehicle and into their home without assistance.

Another solution is to differentiate products and extend the product line. Pedigree could reposition their products in the industry with a new recipe/formula focusing on less meat and higher quality ingredients. This would appeal to the customers who buy Beneful and other high quality brands. However, this new process could take more than a year to develop and launch (Calkins, 2010, p. 9, 11). Quality is an important aspect to maintain when differentiating products as it is one feature that is “positively related to market share and return on investment” (Proctor, 2000, p. 214).

The company could also invest more into their premium products or produce more wet dog food products because they yield a larger return than other branded items (Calkins, 2010, p. 10). Additionally, the company could also expand into other pet food segments, such as cats and other pets. Pedigree already had many different products in the dog food product line, more than 45, so the company could choose to remake them into a new product line, and tap into a new set of customers (Calkins, 2010, p. 9).

One Possible Solution and Implementation of the Solution

Developing a new competitive advantage through online marketing and selling would put the company in a position to gain market shares and remain competitive in the industry. According to Proctor (2000), “always exploit competitive advantages and never allow them to disappear unless they are being replaced by an advantage that, from the customer’s point of view, is more powerful and meaningful” (p. 466). The new advantage should take this into account and be created with the long term goal of increasing market shares.

The implementation of this solution begins with market research to determine target market and then implement online marketing. Pedigree should do more investigation regarding the most profitable customer for the company in order to target that market. In regards to marketing, Varadarajan (2009) suggests that “while a number of marketing related activities may occur within the boundaries of an organization (e.g., new product development related activities), customers respond to and competitors react to an organization’s marketing actions, activities or behaviors in the marketplace (e.g., actions such as the distinctive features of a firm’s product offering, the channels through which the product is made available, and the price of the product offering)” (p. 123).

This leads into Pedigree choosing a pricing objective and decision that is best for the goal of the company. Two options are maintenance and improvement of market position and return on investment (Wilson & Gilligan, 2010, p. 518). According to the article, Purina is the price leader and holds 27% of the market shares in the industry, so Pedigree will need to price it products competitively. This will be a strategic decision that will effect success of the solution to increase market shares (Calkins, 2010, p. 8).

The big idea to focus on, according to Calkins (2010), is “the love of dogs” and to “win the heart, too” (Calkins, 2010, p. 10). This means focusing on the needs and wants of the customer, rather than just the product. With this, the company should consider the information gathered regarding the popularity of dogs, breeds of dogs, demographics of dog owners, and capitalize on owners who had “deep attachment to their dogs” (Calkins, 2010, p. 3). This can be done through target marketing (Proctor, 2000, p. 229, 231).

“…the marketing planner also needs to develop a far more detailed understanding of what the customers view to be important and how the organization’s product range compares with those of its competitors” (Wilson & Gilligan, 2013, p. 468).

The goal of how to reach the customer should be moved toward advertising online and using online selling. While using the internet to advertise, marketers should be aware of their potential customers are using the information provided by the company and the web in general. The ads need to be appealing and targeted toward customers – new and returning (Proctor, 2000, 234). “In the case of frequently purchased products, attention has to be given to first-time buyers and repeat purchases” (Proctor, 2000, p. 250).

The type of customer that Pedigree markets towards is one that is not loyal to a particular store for purchasing the dog food. They value the convenience of the brand being available at different stores and the price being competitive (Calkins, 2010, p. 7). This opens up the possibility of changing the way it distributes its products. The distribution of products needs to be re-evaluated in order to reach new people all over the county. This includes the physical delivery of the product and also the logistics that accompany that plan. A channel distribution strategy will need to be determined, such as “Whether to distribute direct to the customer or indirectly through middlemen,” determining channel length, and intermediaries used (Proctor, 2000, p. 217).

An option regarding selling and distribution is to sell and ship directly from the manufacturer to customers after purchased from the website using either wholesale or retail prices. Rates can be negotiated with a shipping company which can then be passed on to customers. Drop shipping could also be investigated as a cost saving technique using warehouses across the country. Since shipping is a variable cost, more research needs to be done in this area to ensure that the company can adjust for the cost changes that will inevitably occur. This means that using shipping the product to the customer appeals to that same convenience and price point. Intensive or selective distribution may be the best option for the company with this in mind (Wilson & Gilligan, 2010, p. 531, 698).

Another area for Pedigree to investigate is to design a membership or loyalty plan that will automatically ship a bag of dog food every set amount of time to the owner’s home for a monthly fee. Again, this appeals to customer convenience and creates return consumers using an “extra value-based strategy” (Wilson & Gilligan, 2010, p. 422).

Description of the Expected Outcomes of the Implementation of the Proposed Solution

A major outcome of developing a new competitive advantage using online marketing and selling is that the company will be able to reach more potential customers and appeal to customer convenience. Selling products online and the shipping to consumers directly will add convenience of service and attract more customers. In addition, Pedigree could be one of the first companies to focus marketing and strategies online.

According to Proctor (2000), “More and more companies are recognizing the value of the World Wide Web to provide ‘infotainment’ which can foster brand identity and loyalty and develop long-term relationships with customers”. This can be done through “banner ads…sponsorship or co-branded ads [that] integrate companies’ brands and products with the editorial content of certain web sites” (p. 235). Pedigree can advertise on the websites of pet related companies and create further connection.

Through targeted advertising and selling, Pedigree can connect with customers and how they relate to their dogs – as children, grandchildren, friends, and as dogs – segments discovered by a study done in the 1990s by a dog food company (Calkins, 2010, p. 4). The selling message should give the customer confidence in the product, create motivation to purchase, and reassure the customer that they have made a good choice (Proctor, 2000, p. 230).

The return on investment and financial evaluation of new competitive strategies and marketing plans such as the one proposed should take into account “… estimated after-tax return on investment; payback period; variance in the estimates of return on investment and payback between the best scenario and the worst scenario—to indicate risk” (Proctor, 2000, p. 250).

The proposed loyalty/membership program will gain new and then maintain customers. However, it’s important to mention that, as Frederick Newell (2003) states, “half of all members of loyalty programmes are free riders, enjoying benefits without spending more at the business that provides them.” A solution for this could be a subscription based system that consumers sign up for.

With all the benefits to these solutions, there also come some issues to mitigate. For instance, this solution will still take quite a bit of time to develop and implement and then be effective. Because it is a new venture for the company, Pedigree needs to either train the current marketing team or hire a new group of employees with experience to implement the solution. Outsourcing marketing could be a solution in this case. The program effectiveness would take time implement and give other companies the time to gain insight and replicate their protocols (Wilson & Gilligan, 2010, p. 409).

Additionally, the company may not see a return on investment right away. Competitors may respond and replicate what they have created and will catch up and probably improve upon the original design. “Never launch a new product or take a new initiative without working out how the competition will respond and how you will be affected by this” (Proctor, 2000, p. 466). This statement clarifies the importance of understanding the company’s competitors and having a clear goal to compete for market shares and customers.

“Some people are wary of purchasing products online because of credit card fraud or distrust in the security of the internet” (Proctor, 2000, p. 233). This could also be a barrier for launching an online marketing and selling aspect of the company.

Conclusion

When dogs became the most popular pet in the world, there was a strategic window that opened for Pedigree, along with its competitors. A new marketing plan that involves innovation in advertising and distribution are a key to remaining successful. Through creating a new competitive advantage with online marketing, selling, advertising and shipping, the company can set itself apart from the rest of the pack, so to speak. It will increase its share in the industry and remain a quality and convenient choice for dog owners.