BMKT525 – Marketing Management- Spring 2020

Graded Case study # 2- V2

Instructions:

Read the following case carefully and answer all the questions.  Use a
critical and analytical style and be clear in answering the questions; general
answers earn zero marks.

The maximum score is 100 marks, each question has 25 marks.

Great Water of France, Inc.: Perrier

Perrier is naturally carbonated spring water with smaller bubbles and a distinct flavor when
compared with competing products, most of which are charged with machine-made carbon
dioxides.  The distinctively shaped green-tinted bottle, the equality distinctive label, the premium
price, and the advertising all combine to have a snob appeal and build an elitist image.

 
Perrier is globally known for its quality due to low mineral content (particularly sodium). Perrier
plans to be perfect anytime by providing the best tasting sparkling water on the market. They
are not only marketing for the rich and/or famous, but they also want to be an everyday thirst
quencher. Perrier's vision is to be the number one sparkling mineral water in the world. Perrier’s
mission is to offer bottled water to meet consumer needs anywhere, anytime.

In May of 1989 in an issue of Fortune, the company was depicted as one of six companies that
compete best. Fortune quotes, “These are companies you don’t want to come up against in your
worst nightmare. In the business they are in, they amass crushing market share.” Perrier
controlled 24% of the total US bottled-water business. Even competition like Coca-Cola,
PepsiCo, and Anheuser-Busch was hardly affecting the sales of Perrier. After all, we can
conclude that Perrier is a competitive business that also understands the importance of how
business is conducted.

In February 1990 news reached Perrier’s executive suite that traces of benzene had been found
in its bottled water. Ronald Davis, President of Perrier Group of America ordered an intensive
recall of all Perrier bottles in North America. A few days later Perrier S.A. expands the recall to
the rest of the world. At first, the excuse given by Perrier officials was that the contamination
occurred because an employee mistakenly used cleaning fluid containing benzene to clean the
production-line machinery that fills bottles for North America. Perrier now finally admits that
benzene naturally occurs in Perrier water but the problem was now visible because the workers
forgot to replace the filter. Then Perrier faced a big problem. Due to this drastic recall, Perrier
was completely out of the market for a total of 5 months. Ronald Davis, President of North
America Perrier, later pointed out that the company didn’t have to recall all 70 million bottles of
U.S. inventory. It was too late for that. By the end of 1990, it was very obvious that Perrier was
not going to regain its market position. Perrier’s sales had only reached 60% of pre-recall levels.

We can easily notice that Perrier has had great success when first got to the US market.
However, after this tremendous success, its sales get decreased dramatically. When you’re
running a business in a highly competitive environment as in Perrier’s case you have to be more
flexible and not depend on word-of-mouth advertising. That’s why in this situation the right move
according to us is to let the advertising agency launch its advertising campaign and try to regain
the company’s “newsworthiness”. We think that the initial success of the company is not only
due to that it’s a nice quencher, but because it is a naturally carbonated spring water which
consists of small bubbles and that’s what distinguishes it from the other spring waters. One of
the biggest problems for the company is the plan for shifting their distribution from gourmet
shops to the soft drink section of supermarkets. Also, another issue is their vision that their
product would be sold as a “price special”.

Questions:
1. Market segmentation divides a market into well-defined slices and uses different variables for
segmentation.  Justify which segmentation variable Perrier can use to reach the local Lebanese
Market.

2. Explain the buyer-readiness stage and apply the marketing funnel Perrier and another
competing brand for selling carbonate water in Lebanon and justify the different loyalty status for
Perrier.

3. Although many different growth strategies are available to firms, some of the best opportunities
come from growing the core—focusing on the most successful existing products and markets. 
Critically analyze the three strategies that Perrier can use to improve revenues and to lower
costs.

4. A company’s positioning and differentiation strategy must change as its product, market, and
competitors change over the product life cycle.  To say Perrier has a life cycle is to assert four
assumptions.  Discuss and explain the four assumptions and support your answer from the
case.

Answers:

1. Market Segmentation: is the process of dividing a market of potential customers into groups,
or segments, based on different characteristics. The segments created are composed of
consumers who will respond similarly to marketing strategies and who share traits such as
similar interests, needs, or locations.

The Four Types of Market Segmentation:

1. Demographic segmentation: Divides a market through variables such as age, gender,
education level, family size, occupation, income, and more. This form of segmentation is a
widely used strategy due to specific products catering to obvious individual needs relating to
at least one demographic element.
2. Psychographic segmentation: Unlike geographic segmentation and demographic
segmentation, psychographic segmentation focuses on the intrinsic traits your target
customer possesses. Psychographic traits can range from values, personalities, interests,
attitudes, conscious and subconscious motivators, lifestyles, and opinions.
3. Behavioral segmentation: Has similar measurements to psychographic segmentation but
focuses on specific reactions and the way customers go through their decision making and
buying processes.
4. Geographic segmentation: Divides the market into geographical units such as nations, states,
regions, countries, cities, or neighborhoods. So, it is important for marketers to recognize
these differences and advertise accordingly.

The target market for Perrier in Lebanon is geographic because it is world wise globally and it
took different category and nowadays it become international (Perrier is globally known for its
quality due to low mineral content) other wise it is not demographic since it targets everyone,
anyone and anywhere (They are not only marketing for the rich and/or famous, but they also
want to be an everyday thirst quencher. Perrier's vision is to be the number one sparkling mineral
water in the world. Perrier’s mission is to offer bottled water to meet consumer needs anywhere,
anytime.)

2. Buyer-Readiness Stage: the state of preparedness or willingness in which an individual

consumer may be in regard to the purchase of a particular product.
The stages are commonly listed as:
 Awareness of its existence
 Knowledge of its benefits
 Initial interest
 Preference over the competing products
 Conviction of its suitability to purpose
 Purchase power
Marketing funnel: it identifies the percentage of the potential target market at each stage in the
decision process, from merely aware to high loyal.
It can be separated into three stages:
 Top of the funnel content: in this stage of the funnel, we recommend that you create
industry or business that aim to entertain or educate your visitors that provides free value
to the user. May be blog posts, videos, social media posts, infographic, podcasts.
 Middle of the funnel goal: goal is to convert as many top of your funnel into potential
customers may use webinars: trials/demos, popup, email marketing.
 Bottom of the funnel: in this funnel goal is to get them to purchase your product
remarketing and email marketing is the tool.
Loyalty status: marketers usually envision four groups based on brand loyalty status:
 Hard-core loyal: consumers who buy only one brand all the time
 Spit loyal: consumers who are loyal to two or three brands
 Shifting loyal: consumer who shift loyalty from one brand to another
 Switchers: consumers who show no loyalty to any brand

(Even competition like Coca-Cola, PepsiCo, and Anheuser-Busch was hardly affecting the sales
of Perrier. After all, we can conclude that Perrier is a competitive business that also understands
the importance of how business is conducted) ;(their product would be sold as a “price special”).

3. The different growth strategies are as following:

 Word-of-mouth: advertising costs Perrier nothing, so it certainly is a cost-effective way
to get the word out about Perrier in Lebanon. It is the strategy has been used by coco-cola
for years. The company focus on user satisfaction tweets each month. This attention to
customer service led directly to positive word-of-mouth amongst customers. Word of
mouth is that you have limited control over the message especially in politically unstable
country with lot of control.
 Low-cost Marketing Strategies: over and over to get your company message and brand
image across to potential customers. Perrier could partner up with another unit in
Lebanon and help to promote each other’s services. Growth strategies in business can
 also include an acquisition or collaboration. Wider geographical reach is possible but
damage to or dilution of brand and reputation, cultural mismatch between organizations.
 Providing Exceptional Customer Service: that creates long-term and loyal customers is a
sound strategy to tap youth market in Lebanon. But serving an age group of youth keep
them stay calm. Keep talking and listening them is a serious issue.
Although many different growth strategies are available to firms, some of the best opportunities
come from growing the core, are as following:
1. Make the core of the brand as distinctive as possible
2. Drive distribution through both existing and new channels
3. Offer the core product in new formats or versions

4. The product life cycle contains four distinct stages: introduction, growth, maturity and
decline. Each stage is associated with changes in the product's marketing position. You can
use various marketing strategies in each stage to try to prolong the life cycle of your
products.
To say that Perrier has a life cycle is to assert four things:
1. Products have a limited life (as happened in the case were Perrier was out of the
market)
2. Product sales pass through distinct stages, each of which poses different challenges,
problems to the seller (what happened with Perrier regarding Benzene issue)
3. Profits rise and fall at different stages of the product life cycle
4. Products will have different marketing, financing, manufacturing, purchasing and
human resource requirements at the various stages of its life cycle
Most product life cycles are portrayed as bell-shaped curves, typically divided into four stages:
1. Introduction: a period of slow sales growth as the product is introduced in the market
2. Growth: a period of rapid market acceptance and substantial profit improvement
3. Maturity: A slowdown in sales growth because the product has achieved acceptance by
most potential buyers. Profits stabilize or decline because of increased competition
4. Decline: sales show a downward drift and profits erode