Kingsford Charcoal Company Marketing Analysis

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Table of Contents

Target Markets
Product Strategy
Pricing Strategy
Distribution
Promotion Strategy
Sales Forecast
Notes

Target Markets

Kingsford Charcoal should focus its advertising and promotional campaigns on men since they constitute about half of the consumers. Men are usually the main consumers of Kingsford Charcoal’s products because they frequently use them in making barbecues. The willingness and the ability to purchase products, such as charcoal from Kingsford Charcoal, make men form an important target market. Therefore, it is very important for Kingsford Charcoal to target males in order to increase the use of charcoal grills in various households. An increase in the purchase and the use of charcoal among men leads to a corresponding rise in the sales Kingsford Charcoal’s products.

Another recommendation is on the fact that Kingsford Charcoal needs to tailor its advertising and positioning strategies to the needs of young families, which are new entrants in the grill and charcoal market. Young families use grills for cooking and warming homes, and thus Kingsford Charcoal needs to advertise its products to this set of the target market to increase awareness of the products and encourage potential consumers to purchase them. The target at young families implies that Kingsford Charcoal should also focus on women since they are part of the structure of the young families, and thus they dictate some of the products purchased by them.

Product Strategy

Kingsford Charcoal should position the blue bag in a way that does not only increase its appeal to the target consumers, but also meets the needs and expectations of consumers. Since consumers of grill and charcoal’s products are concerned with the quality of what they purchase in regard to the price, Kingsford Charcoal needs to ensure that the blue bag meets the consumer requirements for it properly to position itself in the market.

To increase its appeal to consumers Kingsford Charcoal needs to position, design, and shape the red bag in a manner that appeals to the target consumers. It is recommendable that Kingsford Charcoal should engage in operations that convert consumer expectations into products. Appropriate positioning of the red bag in the market can increase the demand for the products and thus boost purchases that target customers make.

Pricing Strategy

Since consumers are the main determinants of purchases and revenues earned by Kingsford Charcoal, it should price its products to suit the purchasing power and preferences of the target consumers. One of the recommendations is that Kingsford Charcoal should employ competition-based pricing strategy. The need to employ competition-based strategy is to facilitate effective competition among Kingsford Charcoal and its competitors, such as Royal Oak. Competition from companies like Royal Oak and private label brands makes competition-based pricing strategy very crucial in the quest of Kingsford Charcoal to increase its market share and revenues.

Kingsford Charcoal should price its products after an extensive market research on the potential customers and understand their purchasing powers, preferences, and buying behaviors. It is important for Kingsford Charcoal to see that many consumers of charcoal and grill purchase these products during the months of April and September. Hence, Kingsford Charcoal needs to increase the awareness of its products in April and September since most of the target consumers buy grilling products during these periods. Through market research, Kingsford Charcoal will have an effective understanding of the potential target consumers and their buying patterns.

Kingsford Charcoal needs to price its products in a manner that best suits the buying abilities of customers and thus makes them increase their purchases. Kingsford Charcoal should know that now consumers are more concerned with product quality as opposed to the past. Therefore, product pricing should be in a way that meets expectations of consumers in terms of quality and quantity. Additionally, consumers usually benchmark the product quality and quantity of Kingsford Charcoal with what competitors offer in the market, and therefore, make their purchasing decisions using their findings.

Distribution

Kingsford Charcoal should ensure that its products are availed at the right points or locations, where the target consumers are located. Distribution can be practical and efficient if its execution comes after research and consumer survey so that Kingsford Charcoal can avail its products at the correct points, where potential consumers can easily access them without much struggle.

Notably, Kingsford Charcoal needs to distribute its products during the peak season like April or September when potential consumers direly need the products. Supplying charcoal and grills during winter is not effective since consumer willingness to buy and use them at that periods is relatively low.

Additionally, Kingsford Charcoal must ensure that middle players or intermediaries are few so that the aggregate cost of its product remains within the purchasing power of consumers. Middle players in the distribution of products increase prices due to the costs incurred and profit margins made. Moreover, the reduction of intermediaries makes it fast for consumers to get the products on time and when required.

Promotion Strategy

The total budget employed by Kingsford should be within its operating costs so that the profit margin and its expenditure are not strained. Budgetary allocations should have their basis on the expenditure incurred during promotion and the relative cost of every promotional element.

Kingsford Charcoal needs to use promotional elements, such as advertising, direct marketing, sales promotions, public relations, and personal selling. These elements of promotion are very essential in increasing the revenues and sales volumes of Kingsford Charcoal against its competitors, which supply charcoal or gas grills. The main aim of the elements used is their ability to reach out to the target consumers and inform them on the features of existing products offered by Kingsford Charcoal.

Kingsford Charcoal should use promotional elements in a way to reduce the costs incurred in the promotion and increase the sales volumes. Additionally, the elements need to be strategic in the process of conveying information concerning Kingsford Charcoal’s products so that they persuade consumers to raise their demand for the products at minimal costs.

The selected advertising media should relay the right information concerning the quality and quantity of products offered by Kingsford Charcoal. The fact that Kingsford Charcoal is an old company that has been operating for several years implies that it has a higher market share as compared to its competitors that supply charcoal or gas grills. The long life and extensive market share of Kingsford Charcoal help in reducing the overall budget costs spent in advertising its products because many consumers know the products it offers.

To meet its objective of reaching out to the potential consumers, Kingsford Charcoal should position itself rightfully and ensure that its products from the blue and the red bags are in line with the expectations and demands of consumers. The message used in advertising should be convincing, appealing, and persuading. Slogans, such as ‘Fuel Food’s Flavor’, can help Kingsford Charcoal to increase the demand for their products among target customers.

Sales Forecast

Pro Forma Income Statement

Kingsford Charcoal

For year 2000 and 2001 (four different scenarios)

(All numbers in $000 000)

	2000	2001 Scenario 1	2001 Scenario 2	2001 Scenario 3	2001 Scenario 4
	Revenue
Net sales revenue Cost Of Goods Sold	350 245	349.53 244.67	346.078 242.25	347.255 243.0785	346.34 242.438
	Profit
Gross profit	105	104.86	103.828	104.17	103.902
	Marketing costs
Media expenses	4	1	1	1	1
Reduced revenue	29	31	31	31	31
Sales promotion	9	8	8	8	8
	Total fixed costs
Total marketing expenses	42	40	40	40	40
Estimated net income before tax	63	64.86	63.828	64.17	63.902

Notes

Calculating the net sales revenue

In this case, the year 2000 is the base with sales revenue of $350M.

Scenario 4

Kingsford intends to increase blue bag and red bag prices by 5% across all the distribution channels.

The 5% increase in prices across all the lines will decrease sales by $3.66M. However, the blue bag sales represent about 75% of the total shipments. Therefore, blue bag sales will decline by (75% of $3.66M = $2.745M), whereas, the red bag sales will decline by (25% of $ 3.66M = $0.915).

Therefore, the sales revenue in this scenario will be $350M -$3.66M = $346.34M.

Scenario 3

Kingsford intends to increase blue bag prices by 5% across all the distribution channels.

The price increase affects the blue bags only, therefore, the sales revenue in this scenario will be $350M – $2.745M = $347.255M.

Scenario 2

Kingsford intends to increase blue bag prices by 2.5% across all the distribution channels.

According to Exhibit 10, a 5% price increase in blue bags resulted into a 7% merchandise loss. From the exhibit, increasing the blue bag prices by 2.5% across all the channels will result in a merchandise loss of 10%. If a 7% merchandise loss is equated to a loss of $2.745M, a 10% merchandise loss is equitable to {(10*2.745)/7} = $3.9214M. The sales revenue in scenario 2 will amount to $350M-$3.9214M = $346.078M.

Scenario 1

Kingsford intends to increase prices for blue and red bags by 5% in all the club stores.

In scenario 1, a 5% price increase for both the blue and the red bags results in a $3.66M sales decline. In this case, a 4% price increase across all the channels would cause a sales decline of {(4*3.66)/5} = 2.928. However, club stores only account for 16% of the total sales. Therefore, the decline in total sales will be (16% of 2.928) = 0.46848. The sales revenue in scenario 1 will be $350M – $0.46848M = $349.53M.

Calculating the costs of goods sold (COGS)

Gross profit margin = {(Revenue – COGS)/Revenue}

COGS = Revenue- (gross profit margin)*Revenue

In this case, the gross profit margin is 30%, and the revenue in the year 2000 is 350.

Therefore, the COGS in 2000 is = $245M.

Similarly,

COGS for the year 2001 (scenario 4) = {$346.34M- ($346.34M*0.3)} = $242.438M.
COGS for the year 2001 (scenario 3) = {$347.255M- ($347.255M*0.3)} = $243.078M.
COGS for the year 2001 (scenario 2) = {$346.34M- ($346.078M*0.3)} = $242.255M.
COGS for the year 2001 (scenario 1) = {$349.53M- ($349.53M*0.3)} = $244.671M.

According to the net income figures, it is worth noting that Kingsford Charcoal may not generate more profits than it has done before. Therefore, the executives of the company should employ other strategies that would reap great benefits to the company instead of focusing on the prices.

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