ANALYSIS OF DILMAH’S CURRENT

MARKETING STRATEGY

Sameera Hapugoda
1. Introduction
This assignment discusses an in-depth analysis on customer-driven marketing strategy of
Dilmah, one of the world’s leading Sri Lankan tea brand. Detailed analysis performed on market
Segmenting, Targeting, and Positioning. Further, the assignment explores marketing mix, how
Dilmah conveys these marketing strategies to real life. Based on the analysis performed,
recommendations are provided for better future performance based on market intelligence.

2. Overview of Dilmah
Dilmah, a company founded by Merrill J. Fernando in 1988 and named after his two sons,
Dilhan and Malik. Fernando has focused on quality, authenticity and ethics which were missing
on tea industry those days. Other multinational tea brands utilize Ceylon tea and blended and
mixed with various multiple origins tea and was promoted in worldwide as unadulterated Sri
Lankan tea. Their focus was to purchase at the lowest price, paying little respect to quality.
Dilmah challenged this persuasion and presented the concept of Single Origin, unblended tea.
Over the past 30 years, Dilmah was able to create a segment of the tea market that was driven by
quality. Today Dilmah is accessible in more than 100 nations and considered as one of the best
tea brands on the planet and considered as Sri Lanka's main producer and exporter of tea bags.
Dilmah is also the world’s first producer-owned tea brand.

Vision Statement of Dilmah

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Bring quality, authenticity, and integrity back to tea and in doing so, to make our business a
matter of human service. As a family brand, with family values at its core, we believe that there
needs to be an objective beyond the purely commercial aspect and that it is an obligation of
every company to give back to its community and to the environment.

3. Segmenting, targeting and positioning

There are three processes toward an effective customer-driven marketing strategy such as:
i. Segmenting
ii. Targeting
iii. Positioning

I. Segmenting
According to Kotler & Keller (2016), the consumers can be categorized according to their
varying needs and wants. Segmentation involves divide markets into meaningful customer
groups who share a similar set of needs and wants. Initially, Dilmah noticed that other tea brands
had mainly focused on low cost products. Dilmah recognized that some extensive segments of
customers’ need premium quality tea and decided to offer what these segments were required. At
present Dilmah cannot be considered as a niche player anymore and recognised as the third
largest standalone global tea brand.

Dilmah perceives different customer segments based on consumer characteristics (geographic,

demographics and psychographic) and consumer responses (behavioral segmentation).

a) Geographic segmentation
Dilmah has segmented its global market based on geographic criteria such as different regions,
countries, and cities. Currently, Dilmah is selling their products more than 100 countries all over
the world including Middle East, US, UK, Australia, Canada, Europe, Russia and most of the
Asian Countries through their distribution network and online sales. Dilmah online shop delivers
its products all over the world which is preferred by most of European and US customers. The
main considerations are given to preferences and purchasing behavior of customers in selected
geographic areas. Dilmah is mainly targeting urban and semi-urban population and all climates

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(Northern & Sothern), and it has created a high brand image and superior price comparing to
many of its rivals. Dilmah has able to create a high brand awareness in these geographic
segments which lead to high level of brand loyalty.

b) Demographic segmentation
Demographic segmentation involves dividing the market based on age, gender, family size,
family life cycle, income, occupation, generation, education, religion, race, and nationality.
Demographic segmentation variables are easy to measure and the most popular bases for
segmenting customer groups. Dilma has extensively focused on these criteria and identified a
wide range of products for these customer groups. Dilmah is equally focusing on both male and
female customers and income level from high to medium.

Dilmah has offered a wide range of product to serve different age groups and different stages of
life-cycle. As an example, premium Ceylon single origin tea and Watte series for the middle
aged to elderly customers. Organic tea selection, natural green tea selection and decaffeinated
teas are preferred by more health-conscious life cycle stages such as aged between 30 to 50 and
even customers aged above 50’s. On the other hand, fun tea selection, t-series and vivid tea
selction are prefered by young generation.

c) Psychographic segmentation
Dilmah uses the psychology and demographics to better understand its consumers and they
divide customers based on their lifestyle and values.

Dilmah is very innovative and reached to many customer segments. Due to the conventional
picture of tea, youths were away from tea. Dilmah presented the t-series which is a drastically
extraordinary collection of gourmet teas -cocktails, t-mocktails and other hot and ice teas, mainly
to match with the lifestyle of youths. The new series was presented with vivid packaging and
exciting theme of “Teatime Rocks”. Further Dilmah launch t-bars to enhance the style of t-series.
Tea bars prospered in presenting a fashionable and innovative approach with young people.

Dilmah has carefully designed their products to cater the values of consumers for both higher
resources and lower resources personnel.

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 d) Behavioral Segmentation:
Dilmah focuses on segments that use its products daily basis (usage rate and status), quality-
conscious and premium price & alert on nutritional information and health benefits (benefit
sought), mindful and informed, with medium to strong brand loyalty (loyalty status).

Dilmah is extensively communicate the health benefits of tea for example, green and dark tea
contain intense characteristic cancer prevention agents which can shield normal tea consumers
from numerous degenerative illnesses such as heart diseases, diabetes and oral diseases.

II. Targeting
A target market can be characterized as qualified accessible market the company chooses to
peruse, and such strategy depends on resources and capabilities of company, product variability,
product life cycle, market variability, and competitive position of the firm. Dilmah follows
differentiated marketing approach and targets different market segments with unique marketing
mixes for those segments. Specially designed product, price, placement and promotional
program is used for the segment. 

As an example, Dilmah targeted the hotels and restaurant segment and they noted that the lack of
quality of tea available even in the five-star hotels and restaurants. Based on the discussions had
with the chefs, executives in food and beverage and purchasing, Dilmah understood all of them
wanted to give their customers a unique and innovative experience and keen on differentiating
their offering compared to rivals. After identifying the untapped, Dilmah launched its Seven Star
Luxury Tea Experience which added excitement and innovative tea experience. Today most of
the hotels and restaurants use Dilmah tea because of this targeting strategy.

Dilmah mainly target high and middle-class customers and it also targets the youths and women.
Women have a significant influence in the buying process, especially the housewives, and
appeals them to exercise their buying power. Porter’s five forces model helps determine the
long-run attractiveness of the market or market segment as follows;
1. Threat of rivalry: Dilmah faces intense competition from brands such as Lipton, Tetley
and Twinings. Dilmah is promoting its passion for tea and set of values (authentic,

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 sustainable business practices, finest quality and ethics), very innovative and luxury
products for many segments, incredible promotional and advertising and social
campaigns to manage the threat of rivalry
2. Threat of new entrants: Dilmah’s current market segments face medium to low risk of
new entrants mainly due to the long experience serving those segments and unique
positioning.
3. Threat of substitute products: Various categories such as coffee, aerated drinks and
energy drinks can be identified as substitute products. Coffee is still considered as
dominant drink in many parts of the world.
4. Threat of buyer’s bargaining power: The wide cluster of choices available in the market,
offering at lower costs has encouraged bargaining power. This threat is managed by the
brand communication strategy and greater quality of the product.
5. Threat of suppliers’ bargaining power: Due to large number of suppliers in the tea
industry and low switching costs, threat of suppliers’ bargaining power is low.

III. Positioning
A successful positioning strategy requires two activities, namely determining a competitive
frame of reference and identifying optimal Points of Parity (POPs) and Point of Differences
(PODs).

Dilmah tea has able to occupy a unique position in the minds of its customer segments as
“The Single Origin Tea” when comparing with its competitors. Dilmah’s unique selling
preposition clearly differentiated from competitors and concentrated on single appealing tag
line. Dilmah is showing their commitment for the perfect cup of tea by showing that the great
care into the sourcing, packing and delivery of every cup of tea. This shows how Dilmah has
established strong category membership in the target segments and unique competitive
position.

Regarding PODs, Dilmah uses single origin unblended tea and wide range of luxury selection
for various customer segments, a founder who devoted his life for tea who struggle against
the multinationals to fulfil his dream, a 30-year family story and a strong journey behind the

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 brand and remaining faithful to high quality Ceylon Tea. These unique attributes are
unmatched to any competitor in the tea industry.

Regarding POPs, Dilmah has offered various flavors to target a broad segment of the
population and opening stores worldwide to appeal to different cultures worldwide to match
with its competitors such as Twinings and Tetley.

4. Marketing mix
Marketing mix is a powerful tool to understand Dilmah’s marketing options in terms of
product, place, price and promotion and analysis how the Company meets customer
demands.

Product
Product can be analyzed using below attributes;
 Core benefits: Various scientific researches have shown antioxidants contained in tea
good for the many degenerative diseases and Dilmah is extensively promoting these
findings.
 Packing: Dilmah uses attractive and colorful packaging and shows the quality of the
products. The color, images and slogan of Dilmah’s packaging combine to promote
superiority of the product and increases customer loyalty and brand equity.
 Quality level: Dilmah maintains its quality and often exceeds customer expectations by
using freshly picked tea leaf and other natural flavors promoting the authenticity of
Ceylon Tea.
 Product range and features: Dilmah has varied product range including a premium
selection, a Gourmet Tea selection, Special Green Teas and Exotic Teas etc. Dilmah is
available in different sizes, different flavors (spicy, mint, sweet.etc.), different strengths
(light, medium and strong) and caffeine levels (medium and caffeine free).

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  Differentiation; Dilmah has well differentiated its products from its competitors by
superior quality, product range, attractive packaging, promoting healthy life and brand
name.

Place
Dilmah has its own distribution channels in many countries and for the rest, they depend on
international distributors to make its products widely accessible in supermarkets and tea shops.
In addition, Dilmah online shop delivers directly to the end consumers all over the world which
is expanding rapidly due to the convenience. For instance, Dilmah has established their own
distribution channels in UK, Australia, USA, and European countries where customers prefer
products directly from the producer. On the other hand, Dilmah uses local distributors in Middle
East region since the customers trust products coming from their own distributors. Dilmah
established tea Boutique in selected locations to promote its products and illustrate their passion
for the tea. In addition, Dilmah has diversified into leisure and hospitality sector by operating
Ceylon Tea Trails, Cape Waligama and Wild Coast Tented Lodge, three boutique luxury resorts
to provide a unique traveler experience by promoting Ceylon tea.

Price
Dilmah has adopted the value-based pricing strategy, since Dilmah maintains an authentic and
traditional manufacturing process focused on quality. Due to high differentiation and brand
image, Dilmah is charging a premium price comparing with its rivals. Dilmah believes their loyal
customers are not highly price sensitive but seek for the quality. On the other hand, Dilmah
heavily relies on supermarket chains, it continuously faces the pressure to reduce supplier
margins.

Promotion
Dilmah has placed a high importance on promotion due to extensive competition in industry and
creating a superior brand image. It is believed that Dilmah is the most successful tea brand
relating to promotion. Dilmah is promoting its business activities as a human service and bring

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justice to Sri Lankan tea industry and fair trade. Dilmah has able to win the hearts and minds of
its customers by going beyond the general expectations.

Dilmah is using below methods to promote its products.

 Products will be advertised by many TV commercials locally and internationally.

 Magazines, newspapers and directories
 Internet and social media are useful in advertising due to wide coverage; products will be
advertised in the Dilmah Facebook fan page and Twitter.
 Dilmah will be sponsoring many events such as sports events, musical shows and
concerts. Dilmah is the sponsor for the Sri Lankan Cricket team.

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5. Recommendation

 Expand the local market share - Dilmah’s current market strategy extensively focused
on foreign markets and there is a greater opportunity to expand in the local market. Most
of the locals still consider tea as cheap and general commodity and Dilmah can change
this perception through its innovative promotional campaign. Some of its products are not
locally available. It is recommended to focus on multiple segments locally such as
youths. As an example, Dilmah ice tea can be promoted as a fashionable and healthy
drink (enhanced with different fruit flavors) to compete with soft drinks such as Coca
Cola and Elephant House products (mostly unhealthy and high sugar content) and
increase its market share locally.

 New series of teas to focused diabetic, cholesterol and heart patients - One of the key
immerging marketing trend is that customers are more health conscious and seek
extensive health benefits. Dilmah has already adopted these trends and introduced natural
green tea selection and herbal infusion collection. It is recommended to further innovate
different heathy tea for consumers with diabetic, cholesterol and heart patients. using Sri
Lanka’s herbals such as Kohomba and Kottamalli Tea. This will also be inline with
Dilmah’s current marketing strategy of promoting Ceylon Tea. The Company is
innovative and highly focused on its research and development. Therefore, Dilmah can
develop a new tea series for this segment and promote it globally to further increase its
market share and brand image.

 Expansion of t-lounges – Dilmah t-lounges are used to provide unique tea experience to
customers with food paring. Currently t-lounges are only situated at Sri Lanka, middle
east, Philippines and Indonesia. It is recommended to expand t-lounges to Europe, Russia
and western market. Specially cocktails and mocktails with alcohol can be promoted in
these countries and the concept of food paring with Ceylon tea can be promoted.

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  Going green – Based on current market strategy, Dilmah uses its packaging to promote
its products and provide product details. Dilmah requires to adopt sustainability in
product design process and use eco-friendly packaging. It does not tarnish the superior
product image with customers and can appeal to the customers on Dilmah’s consideration
on environment. An ethically produced, eco-friendly products will capture wide
consumer base globally and better competitive advantage specially for next 2-5 years.
Therefore, it is recommended to use biodegradable packaging and effects on eco-friendly
products can be displayed to increase consumer awareness.

6. Conclusion
At present global tea market is highly completive and consists of many multinational companies.
To succeed in this intensively competitive market, Dilmah requires to advance its marketing
strategy to face the challenges in the environment. Globally Dilmah tea has strategically
positioned as the Ceylon ‘s market pioneer in tea products. By implementing the
recommendations to the current marketing strategy, Dilmah can further improve its future
performance based on market intelligence.

7. References

 Kotler,P.,& Keller, K.L. (2016). Marketing Management. Noida, India: Pearson India
Education Services.
 Dilmah tea. Retrieved from https://www.dilmahtea.com/
 Dilmah product range. Retrieved from https://shop.dilmahtea.com/
 Dilmah super brand. Retrieved from
//www.superbrands.com /lkc1/pdf/15_consumerSB.pdf

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