ATTENTION AND PERCEPTION CASE
QUAKER BAGGED CEREALS
- Part 1 -
It is 1997 and Quaker is about to introduce a new line of cereals in Central America: Bagged cereals. The marketing team expects that this new line of cereals will help them double market share and improve profitability in this competitive category.
Quaker is known in Central America primarily for its oatmeal products. With an 80% market share, Quaker is the indisputable leader in the oatmeal category. However, this category is not growing and Quaker is looking for growth opportunities in other areas of the breakfast segment.
Quaker is perceived as a quality and trustworthy brand among children and adults. Oatmeal is among the products that are served for breakfast in a typical Central American household. Other breakfast products include cold cereals, bread and other corn based products.
Although Quaker has been competing in the cereal market since the early 1990’s, it hasn’t become a major player in the category. Traditionally, Kellogg’s cereals have led the market with 70-75% of market share. Other major competitors include Nestle-General Mills and Post.
Kellogg’s produces locally its best-selling brands: Corn Flakes, Cocoa Krispies, and Frosted Flakes. There are also a few local producers that compete in the market with low quality products packaged both in boxes and bags. All other major products in the category are imported and therefore pay import duties. To note, Kellogg’s leading product, Corn Flakes, is the lowest priced and represents 50% of Kellogg’s sales.
Economic situation in Central America prevents most households to afford cereals in breakfast on a daily basis. Therefore, price plays a significant role in the marketing equation.
The heaviest cereal consumers are young people, especially children. Therefore, most of the marketing activities in the category are strategically thought to capture children’s attention. For example, over the years, Kellogg’s has identified its products with fun characters that are clearly recognized by the kids, such as Tony the Tiger. Most ads and promotions are developed around these characters, which end up being perceived as a brand in themselves.
Quaker bagged cereals would offer a wide variety of options for kids and the whole family. This product line features an innovation aimed to save money to both the company and the consumer: instead of packaging its product in traditional boxes, the new line will be offered in bags, that are much cheaper to the firm and allow transferring part of the savings to the customer in the form of a lower price.
A description of the products can be found at: As part of the product’s image, and following the trend initially imposed by Kellogg’s, every product of this new line directed to kids has a fun character associated with its name.
Recently conducted blind tests with consumers indicate that Quaker bagged cereals perform as good or better than other major brands. On the other hand, further market research indicates unfavorable results about the packaging concept, as consumers perceive the concept of a “bagged cereal” as a signal of low quality product.
As the marketing team is getting ready to launch this new line of breakfast cereals, they realize there are a number of issues to solve:
First, in a category in which companies spent millions of dollars in advertising and promotion, the team should prepare an efficient strategy that allow differentiation from the other hundreds of products. To make things worse, the marketing strategy is highly constrained by budget availability. What kind of differentiation strategy should the brand pursue, given that its budget is way below that of other brands in the marketplace?
Second, supermarkets were reluctant to give Quaker additional space on the cereal shelves given the proliferation of brands in this category. However, after tough negotiations with the main supermarket chains in the region, Quaker got the approval to include its new cereals on the shelves. The space negotiated, however, was in general much smaller than Quaker wished. This poses a bigger challenge for the marketing team: How will the brand capture the consumer’s attention when they walk through the cereals’ aisle when other cereals have much more shelf space devoted to them?
Finally, Quaker bagged cereals contain, on average, 450gr of cereal. Meanwhile, competitor’s products vary in sizes from 350gr to 550gr, although due to the hard economic situation facing local families, the 350 gr size is by far the most popular. Although Quaker is aware that the price per gram is much better for its product, they acknowledge that the out-of-pocket price for the consumer is not significantly lower, which rises a further question: How can the team influence consumer perception to identify Quaker bagged cereals as the quality-cheapest alternative? In other words, how can the brand communicate the real price difference to the customer?
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