Business Analysis of Yoplait in Mauritius

Business Analysis of Yoplait in Mauritius What is yogurt? Yogurt is a dairy product formed by the fermentation of milk from the action of two live bacteria; lactobacillus bulgaricus and streptococcus thermophilus. These are micro-organisms which transform the milk into the yogurt through a process by which they convert the lactose present in the milk into lactic acid, making the product digestible for people who are cannot ‘tolerate milk and maintaining the balance in the intestinal flora. The yogurt should contain 10 millions of lactic ferments per gram and must be alive to be designated as ‘yogurt. Yogurts are thus fresh products which should be kept frozen at most at 6à ¢Ã¢â‚¬Å¾Ã†â€™ up to its expiry date in order to conserve all its nutritional benefits. History of Yoplait Yoplait was established in 1965 and was recognised as the first complete range of fresh daily products. Furthermore, Yoplait showed innovation as it was the first brand ever to offer refrigerated products to its customers in ‘throw-away packages whereas other products were still sold in jars. In 1967, Yoplait came with the concept of fruit yogurt and established itself on the French market before conquering the world. From its huge success, new products were consecutively launched; diet dairy products in 1972, the first drinking yogurt, Yop, in 1974, yogurt specially for kids in 1985, the fromage frais, Cà ¢lin, in 1987, a range of milk-based desserts in 1992 and Perle de Lait in 1996 (to cite the most famous ones). Yoplait also differentiates itself from other yogurt brands as it constantly shows originality by launching new products, improving them and working strongly on promotion around the world. Today, Yoplait is so successful that it is present in almost 50 countries through subsidiaries, joint ventures and franchisees. It is the number two worldwide (after Danone) and latest statistics show that more than 15,000 cartons of Yoplait are eaten every minute around the world. As the Chairman of Yoplait states, â€Å"We are determined to ensure that the little flower continues its growth and blossoms all over the world.† Yoplait in Mauritius The Yoplait brand established itself in Mauritius in 1976 through a franchise with Maurilait Productions Ltà ©e, a subsidiary of the Food and Allied Group of companies, established in 1966. Maurilait Productions Ltà ©e is today the producer of Yoplait, Candia and Miko products through franchise, technical partnerships and international branding. Marketing mix of Yoplait in Mauritius Product The presence of Yoplait in Mauritius is not only concerned with yogurts, but with a variety of other products. However, for the purpose of the study, it should be noted that the emphasis will be entirely made on yogurts. In this sense, Maurilait has segmented its yogurts into different categories; 1. Firm yogurts; comprising of Nature Sucrà ©, Nature, Silhouette Nature, and Ti-Yoplait. 2. Mixed yogurts; 3. Drinks It should also be noted there also exists different conditionings and groupings for Yoplaits yogurts, namely, tubs of 100g, 115g, 125g, 150g and 1kg. Price Different Yoplait goods have different production costs and therefore have different market prices. When these products are freshly manufactured at Maurilait Productions Ltà ©e, they have a lower price than when they are distributed by Panagora Marketing Ltd. This is so, because Panagora also has to gain a profit from their transactions. However in Mauritius, the outlets show differences in price of Yoplait yogurt products over the whole island. Since, there is no law pertaining that the manufacturer or distributor can impose a fix price for their products, retailers have the right to put their own prices irrespective of whether it is exaggerated or not. Thus, Maurilait and Panagora can only recommend prices for the products. (see Appendix) Place (Distribution) It is Panagora Marketing Ltd, another subsidiary of the Food and Allied Group of Companies, which is in charge of the distribution of all products manufactured at Maurilait Productions Ltà ©e. It ensures that all Yoplait products are accessible to everyone within the island. To do so, it was established that the distribution will be carried out according to three distinct groups: 1. CDP, that is, Commerce De Proximità ©. This category englobes all cornershops, cafetarias and other little businesses around the island. 2. GMS, that is, Grandes et Moyennes Surfaces. For this group, Panagora ensures that the distribution is adequately made to all supermarkets and hypermarkets in the country. 3. Food service, comprising the sale and distribution of Yoplait products in bulk, namely to hotels and restaurants. It should be noted that this system is in fact used for all products distributed by Panagora Marketing Ltd, in order to ensure that the specific needs and requirements of the different categories are met. Promotion All advertisements of Yoplait in Mauritius are designed and disseminated by one of the most famous advertising agencies in Mauritius, namely, Circus Advertising Company Ltd, which is again a member of the Food and Allied Group of Companies. Regarding sales promotion, feasibility studies are conducted by Maurilait Productions Ltà ©e in collaboration with Panagora Marketing Ltd. If the studies reveal that such promotion will be profitable for both organisations, it is again Circus which will be in charge of promoting the new offers. Literature Review Introduction This section will mainly investigate how customer satisfaction, retention and loyalty affect an organisation. But before going into the subject, an essential point should be considered; customer relationship. As will be demonstrated in details below, satisfaction is more likely to induce loyalty and hence profitability if relationships between customers and firms are effectively managed. Customer Relationship Management (CRM) deals with the management philosophy that enables a business to identify, attract and retain the most ‘profitable customers and at the same time build and manage strong relationships with them by delivering superior value and satisfaction. The different stages related to the creation of those relationships are illustrated below: The courtship stage is the one in which the company starts to ‘know the customer and so loyalty is very weak and nearly inexistent. The relationship phase is where the feeling of commitment towards the organisation starts to grow. A strong attachment to the firm is created and the customer is no more likely to switch to competitors. Finally the marriage stage is when a long lasting relationship is created. At this stage, the degree of loyalty is very high and the customers even get personally involved in the organisation. It should be noted that the customers should somehow not be taken for granted. The marriage stage is not an eternal one, and if ever the customer gets disappointed by the company repeatedly or if the relationship is not effectively managed, he may stop any contact with the company, that is, dissolute the relationship. From now on, this section of the study will focus on how these relationships are linked to the satisfaction rate of the customer and how it affects the whole organisation. Customer satisfaction In earlier decades, Hunt (1977) already identified customer satisfaction as the degree to which the customer is pleased by a product and how far he feels his needs and wants being met. More recently, Schiffman, et al. (2008) defined customer satisfaction as being ones perception of the performance of a product or service relative to ones expectations. As can be noticed, the dimensions of customer satisfaction have evolved and they are no longer restricted to simple terms like pleasure and needs fulfilment. Instead, thorough investigation was conducted to come with the essence of the customer satisfaction state; expectations and perceptions about the products and services offered. Kotler et al. (2005) also argued in the same sense, saying that â€Å"customer satisfaction depends on the products perceived performance relative to the buyers expectations.† Both definitions show that if the performance of a product is below the level of expectations, the customer will eventually be dissatisfied and if ever the expectations level matches that of the product performance, satisfaction occurs. Hoyer and MacInnis (2001) illustrated this theory by using the confirmation and disconfirmation paradigm; This model conceptualises the occurrence of satisfaction and dissatisfaction states. For instance, consumers have expectations about the performance of a product. For example, a consumer has certain expectations before tasting a yogurt. If the level of expectations matches that of the performance, in this case the taste of the yogurt, there is confirmation of expectations and the customer is neither satisfied nor dissatisfied. On the other hand, if the performance of the product goes beyond customers expectations, there is positive disconfirmation and the customer is satisfied. If ever the performance of the product is below the level of expectations, there will be negative disconfirmation and thus, dissatisfaction. Furthermore, it is also claimed that a customer is highly satisfied and even delighted if the performance experienced from the product exceeds the expectations level, meaning that both satisfaction and delight may occur from the positive disconfirmation stage. To come forward with this argument, Lovelock and Wirtz (2004) adapted a diagram of how factors influence the customers expectations based form Zeithaml et al. (1993) work. However, there is no ‘absolute definition of the term ‘customer satisfaction and over the past years, many authors tried to illustrate it but we can observe that the different definitions converge to the same broad ideas on the relationship between how the product performs and what the buyers expect from the good itself. During the last decades, organisations came to understand the growing importance of customer satisfaction and from there, the need for delivering value to customers and building relationships came into existence. Importance of customer satisfaction Even with the growing importance of customer satisfaction, some companies still underestimate its value. In the article Surveys value is underestimated (Anon, 2005) it was consequently argued that measuring customers satisfaction also involves the measurement of their dissatisfaction. The author firmly believed that the dissatisfied customers, together with prospects, hold valuable information contributing to the success of the company. Arussy, L (2005) even consolidates this argument by saying that customers and companies both demonstrate distinct ways of thinking, operating and decision-making. Companies fail to satisfy their customers as they assert that they understand them when in fact, they are just following their own rules. Behaving in such a manner ends up in creating the efficient relationship paradox, as illustrated below. In simple terms, the efficient relationship paradox relates to the way in which customers are taken for granted. Before the creation of any relationship with customers, that is, at the courtship stage, companies invest huge amounts of money in promotion and other marketing tools to attract them. When the customer enters in the relationship phase, that is, he starts to demonstrate financial and emotional interests, the firm drops the level of investment in order to maximise profits. In so doing, the customer does not feel valued and automatically defects, thus having the opposite result of firms prior expectations. This is illustrated as the gap in the above diagram, showing that there is a complete misunderstanding between the customers anticipations and the companys actions. Consequently, organisations must be able to understand that customers should not be treated as â€Å"one time acquisitions†. They should essentially be oriented towards valuing their customers and fulfilling their expectations in order to provide them with what they are waiting for and so, giving them satisfaction. Sà ¶derlund (1998) also points out that customer satisfaction generates a powerful tool of colossal importance for organisations; the word of mouth. As described by the cited author, it is â€Å"the extent to which the customer informs friends, relatives and colleagues about an event that has created a certain level of satisfaction†. Hart et al. (1990) went into more details by claiming that the level of the satisfaction may either positively or negatively affect the word of mouth. For instance, satisfying the customer creates positive word of mouth, that is, talking ‘good about the company, and dissatisfying the customer leads to negative word of mouth, that is, talking ‘bad about the firm. He added that â€Å"customers who have had bad experiences tell approximately 11 people about it; those with good experiences tell just 6†. This demonstrates that companies should be extremely careful in delivering value to their customers as failing to do so, may cost them a lot in terms of their reputation. Bad comments may be spread nearly twice faster than it would have been with positive comments. Subsequently, organisations should focus on providing satisfaction to their customers so as to enhance the building of a good reputation. To return on the efficient relationship paradox subject, firms should be conscious that maintaining such an unwise strategy will create a pool of frustrated and dissatisfied customers who will not hesitate to ‘bad-mouth† them and degrade their reputation, which would evidently imply extensive costs for the organisation to overcome this dilemma. Factors affecting customer satisfaction Many drivers of customer satisfaction have been identified through the numerous research conducted during the past decades. However, for the purpose of this study, factors influencing customer satisfaction in the service industry will not be considered since it will not be relevant with the actual research being performed. Consequently, some of the most important drivers of satisfaction are summarised below:- Total Quality Management (TQM) In this line, Rampersad (2001) argued that to attain satisfaction of customers, everyone in the organisation should consider that constant improvement in performance is of primary importance. In order to achieve this, there are fundamental questions that the firm should take into consideration: Which products/services the company provides The product/ service should be defined as more concretely as possible; the more specific the definition is, the better the customer needs are met. Who are the customers The company should know all its customers and examine their needs attentively. It should be noted that both internal and external customers should be considered, the internal ones being the employees. What are the wants and requirements of customers At this stage communication is crucial. Customers needs and desires should be investigated together with their feedback about the current offering. Which are the processes that need to be improved From all the data collected, the company becomes aware of whether they are able to fulfil their customers expectations, needs and wants. And the firm is also now able to improve areas in which all the above steps revealed failures. However, even if everything is respected, TQM relies on the principle that there is always room for improvement. Employee Skills and Satisfaction Rampersad (2001) also stated that â€Å"All employees determine the degree of customer satisfaction. Employees from within departments should be considered as customers of each other† For a customer to be satisfied, he should obtain a good service from the employees, and for the latter to deliver such a service, they should be satisfied with their job. Regular surveys Monitoring customers expectations and perceptions via regular research is an excellent tool for maintaining the standards of an organisation. When a firm is well informed about the expectations of a customer, it can easily deliver value according to those anticipations. Furthermore, it is also essential for a firm to be aware of how customers perceive it, together with the perceptions of the product or service offerings and performance. With these precious pieces of information, organisations are able to be proactive and thus know exactly how to satisfy and even delight its clientele. Technology According to McKinsey (2001), technology can be critical in leading to critical improvements in levels of customer satisfaction if it is properly used. West (unknown) also added that companies should compulsorily be up to date with technological advances or else be confronted to irreversible consequences. Technology can provide additional features to a product, enhancing better product quality. Technology can also improve productivity and thus be easily fulfilling increasing demand. Taking Yoplait in Mauritius as example, technology succeeded in increasing the yogurts lifetime from 28 to 30 days within only a few years. Reputation and Credibility Kuusik (2007) found in his research that it is of critical importance to match the image and values both from the companys and customers perspective. Also referred as trustworthiness, the level of credibility is critical to the behaviour of the customer. If the level of trustworthiness decreases, the customers will no longer be satisfied and will eventually start to look out for other alternatives. A company should always maintain a high reputation in order to keep its customers satisfied. Sales and Post-Sales Experience It is often the case that products are more likely to be sold by distributors rather than the manufacturers themselves. Therefore, an eye should be kept on the customer experience at the point of sale, since the satisfaction level of customers is inevitably linked to the service quality obtained there. As such, customer sales experience can leave â€Å"a good or bad taste†. If a customer obtains a great sales experience, it is most probable that he will be satisfied and stay with the organisation, whereas if the sales experience is poor, he is more likely to switch to competitors. In the same line, after sales is also a critical factor. The customer should be able to obtain the desired information and assistance about the products purchased. For example, a customer must be able to ask for exchange if ever he purchased an expired product. Customer loyalty Oliver (1999) suggests that loyalty is â€Å"a deeply held commitment to rebuy or repatronise a preferred product or service consistently in the future, thereby causing repetitive same-brand or same-brand set purchasing, despite situational influences and marketing efforts having the potential to cause switching behaviours.† However, the term customer loyalty may be found to be complex to define, and for this reason, many authors tried to categorise and segment customers with the aim of understanding the nature of their loyalty and thus take the most appropriate marketing actions. Rowley (2005) tried to illustrate it by asserting that customers may show loyalty in various ways; i) they can choose to continue to do business with a particular provider, ii) they may also increase the number of purchases or the frequency of those purchases or iii) they can become advocates of the firm. However, it should be noted that the categories above may eventually be overlapping, that is, a customer may show all three behaviours, or simply one or two of them. Taylor, Celuch and Goodwin (2004), came with the following research model Taking the definition of Bowen and Chen (2001), the behavioural approach considers the repeat and consistent purchase of products and services making the customer a loyal one. However, repeated purchase does not necessarily symbolise a form commitment to the company Attitudinal approach uses the emotional and psychological attachment felt towards the firm. It states that â€Å"the attitudinal measurements are about the sense of loyalty, engagement and allegiance.† After having questioned nearly 10,000 respondents in the United States of America about the real application of these variables on loyalty, these two authors reached to the following conclusions: Behavioural loyalty is mostly concerned with brand equity and trust while affect, resistance to change and value do contribute but to a lesser proportion. Concerning satisfaction, it seems that there exists no significant statistical relationship. Again, brand equity and trust have a major relationship with attitudinal loyalty whereas affect and satisfaction have a smaller contribution. In contrast with the results obtained with behavioural loyalty, no significant statistical connection seems to be present between attitudinal loyalty and value and resistance to change. Therefore, they asserted that all the variables present in the model have a contribution to the loyalty level of customers but they can vary across different settings and situations. Bowen and Chen (2001) in addition to the behavioural and attitudinal approaches, illustrated another measurement of loyalty; the composite approach. It combines both the behavioural and attitudinal dimensions which states that loyal customers have positive attitudes towards the organisation, are committed to repeat purchase and recommend the product/service to others. Furthermore, Dick and Basu (1994) argued that loyalty is in fact the strength of the relationship between those behavioural and attitudinal behaviours (repeat patronage and relative attitude) and accordingly proposed four conditions of loyalty which are illustrated in the diagram below Rowley (2005) segments even more the loyalty dimension by suggesting four additional orientations: Captive are most of the time customers who continue to purchase and use a product or service because they have no other alternative. They have a positive attitude towards the brand but may easily be poached by competitors who offer alternative products and especially if the switching cost is reduced or facilitated. Convenience-seekers are routine buyers who purchase with low involvement and usually engage in repeat transactions associated with the brand. They do not show any particular attitude towards the brand and are susceptible to promotions offered by competitors which show more convenience than what they are actually having. Contented customers generally evaluate products based on their merits and attributes and the brand owner may use this opportunity to build relationship with those customers who already made transactions with the brand. They have a positive attitude towards the brand but may switch if they get better value elsewhere or if the product is lagging behind compared to others on the market Committed ones barely consider other brands and are prepared to be involved in the brand or firm. They have a positive attitude and deliver positive word of mouth comments. These customers may somehow be lost if the product fails repeatedly with no appropriate recovery and if competitors offer new products that deliver more value. Each level of the diagram can be defined as follows;  · Suspects: These include all the buyers of the product present in the marketplace who are either unaware of the product or have no intention of purchasing it  · Prospects: These are potential customers who are attracted by the businesss offerings but have not yet started any transaction.  · Customers: Buyers of the product who do not have any feeling of attachment towards the organisation.  · Clients: These are repeat customers who do have a feeling of attachment towards the company but whose contribution is more passive than active.  · Advocates: They are clients who support actively the organisation by recommending the product and service to people around them.  · Partners: This is the strongest form of customer-supplier relationship which is maintained as both parties perceive the relationship as being mutually advantageous. Relationship between customer satisfaction, customer loyalty and profitability. Many companies tend to assume that the link between satisfaction and loyalty is simple and linear, that is, the higher the satisfaction level, the higher the loyalty rate. However, many studies showed that this believed link is neither simple, nor linear. In their study, Bowen and Chen (2001) found out that â€Å"customer satisfaction does not equal customer loyalty†. The resulting table below indicates the relationship between the overall satisfaction of the respondents and their intent to return and willingness to recommend the company. Score on overall satisfaction % Stating they would recommend the hotel % Stating they would return 7 62.6 65.0 6 29.8 24.6 5 and lower 7.6 10.4 Their research, making reference to that of Oliva et al. (1992), also revealed that when satisfaction has reached a certain level, there is a considerable increase in loyalty, and similarly, when satisfaction level declines to a certain point, loyalty drops radically. As the research of Bowen and Chen shows, only extremely satisfied customers would repeat purchases and spread positive comments on the firm. The authors Hill and Alexander (2006) also gave their opinion about this relationship. Based on the research of the Royal Bank of Scotland (n.d), they pointed out that there was a very close link between satisfaction and intended loyalty and customers could only be retained at the highest levels of satisfaction. On their part, Mittal and Lassar (1998) claimed that, while a dissatisfaction state was synonymous with a switching behaviour, a satisfaction one did not guarantee loyalty. They therefore asserted that, still, there was a correlation between satisfaction and loyalty, but that this relationship was rather asymmetrical. In this sense, Bennett and Rundle-Thiele (2004) concluded that managers should not entirely rely on sole fact that satisfaction ratings of customers are high are enough to predict future purchase. Hence, companies should realise that merely satisfying customers is not enough; instead they should concentrate their efforts to extremely satisfy and delight them. As Berman (2005) stated, organisations must do more than delivering on expectations of their customers. In this sense, Gee et al. (2008) added that customer delight can provide the stable loyalty that companies look for. The Kano (1984) model cited in Berman (2005) work distinguishes three levels that explain how customer delight can be reached. i) Must be requirements It is defined as the basic requirement that the customer expects from the product. If this requirement is not matched, the customer will eventually be dissatisfied. ii) Satisfier requirements This requirement has the ability to bring about satisfaction. The more of these are fulfilled, the higher the level of satisfaction. iii) Attractive requirements These are additional requirements that the customer neither expected nor expressed. It is believed that if these requirements are met, delight will be attained. Nevertheless, Gustaffson et al. (2005) also identified two other drivers of customer loyalty, namely, calculative commitment and affective commitment. The calculative commitment is the rational and economic decisions taken by the customer regarding costs and benefits implied, together with costs of switching to other brands, whereas the affective commitment is an emotional factor based on the value and trust offered to the customer. Subsequently, as argued, loyalty is essential to retain current customers. Reichheld (2002) suggested that if customer loyalty is obtained, profits will eventually follow. In his collaborative study with Sasser (1990) and cited in Lovelock and Wirtz (2007), four reasons why loyalty contributes to a firms profitability were identified; 1) Profit is derived from increased purchases When an organisation provides high-quality products and service, individuals may wish to purchase more with them. This may be due to an increase in family size or increase in affluence. It should be somehow noted that in whatever the cause, the loyal customer will continue to purchase with a single company. 2) Profit is derived from reduced operating costs Loyal customers cost less to serve because they know the product and attached procedures and thus require less information and assistance. 3) Profit from referrals of other customers Loyal customers provide free promotion to the company by spreading positive word of mouth, implying that the firm needs less investment in this domain. 4) Profit from price premium It often happens that new customers benefit from an introductory discounted price, whereas loyal customers are more likely to pay regular prices, and even higher ones during peak periods. Clark (1997) went in the same sense by saying that loyal customers will remain customers for a longer period, will purchase more, will be willing to pay more and will provide more business by means of referrals. However, organisations should understand that it is far better to ‘cultivate existing customers than to ‘hunt for new ones. Reichheld and Sasser (1990) even found that 5% increase in customer loyalty and retention is enough to generate a profit increase range of 25% to 125%. Still, companies should bear in mind that all their customers are profitable ones. Clark (1997) recognised that a firm should accurately choose and care for its most profitable customers and at the same time, deselecting the least profitable ones. To make the right decision, organisations can make use of Reinartz and Kumar (2002) model. Customers are segmented into four categories based on their forecasted lifetime duration and profitability. According to Noone et al. (2003) interpretation of Reinartz and Kumar (2002) work; * Butterflies are highly profitable short-term customers. They are always in search of best deals and avoid building relationships with organisations. * True friends are highly profitable long-term customers. These customers are believed to exhibit true loyalty and commitment to a single firm and efforts should be directed towards building relationships with them. * Strangers are low profitable short-term customers. It is with this kind of customers that firms should particularly avoid investing in building relationships with them. Gee et al. even states â€Å"Identify early and dont invest anything† * Barnacles are low profitable long-term customers. They are usually loyal but have a negative impact on profitability. Dear Sir/Madam, My name is Marie-Estelle Lebon and I am a student in Marketing Management Level III at the University of Mauritius. For the purpose of my final year project, I would like to have your opinions on the Yoplait yogurts specific range of products and I would be grateful if you could assist me in filling this questionnaire. Rest assured that all the information that you will provide is only for academic purposes and will rema