Application of the marketing mix

of Heineken International

Introduction of Heineken International

Heineken is one of the most famous international
Dutch brewing company, established in 1864 in
Amsterdam. The founder, Gerard Adriaan Heineken
had started with a single brewery and over four
generations of the family the company has grown and
expanded its business all over the globe. The Heineken
International owns 165 breweries in more than 70
countries and Heineken brand has become well-known
to not only the beer consumers but the public worldwide.
By now Heineken as the second largest beer producer
in the world offers more than 200 premium, regional,
local and special brands for beer lovers. Mentioning a
Fig 1 : Heineken logo (Seeklogo.com, 2015)
few and starting with the two main brands, the
flagships are Heineken Lager Beer and Amstel and furthermore the portfolio includes
Fosters, Tecate, Sagres, Bira Moretti, Zagorka or Murphy's. Besides breweries the
Heineken International is the leading cider producer in the UK having iconic cider
brands such as Strongbow and Bulmer's. The business has been providing an
appreciated service for centuries thereby building one of the most valuable beer and
cider brand among its competitors and still growing more powerful.

Market segment description

Since Heineken company operates globally having international network of
distributors and brewer subsidiaries therefore it is more important and indispensable
for the company to identify segments in order to meet the different needs of their
customers and target their markets internationally. So market segmentation allows
the company to target more precisely its business territory thus they can allocate their
products the most effective way thereby exploiting potential in certain segments.

Geographic method

There are several types of segmentation which contribute to select target market in
order to match Heineken's products to the strongest affinity of its potential customers.
Segmenting market can be conducted by geographic characteristics as Heineken
divides its markets into regions including Western Europe, Central and Eastern
Europe, Africa and the Middle East, Americas and Asia Pacific. Geographic market
segmentation facilitates the company to adjust its strategy to various needs and
wants in a manner of considering the changing market conditions by different
regions. Since regions are distinguished based on their physical location, culture,
habits and economic development therefore Heineken has conducted in-depth
research collecting and analyzing relevant data to elaborate the way of fulfilling the
expectations of each region. Therefore, Heineken operates with different portfolios
which are assigned to different consumption preferences in different geographic
areas. For example, geographic segmentation provides Heineken guidelines for
positioning, pricing and advertising. That means the company offers different brands
and prices for West Europe or Eastern Europe than Americas and Asia Pacific in a
manner of considering the disposable income of each region. Similarly, in case of
advertising since Heineken has a variant image in different regions i.e. in West
Europe Heineken is the market leader and their products are considered as daily
consumer goods in turn in Asia people consume it for special occasion. In
accordance with geographic segmentation both positioning and promoting play the
key role to success.

Fig 2 : Truly global presence ( IIA, 2015 )

Demographic method

Heineken also segments market by demographic characteristics which factors

include age, gender, habits, race and religion. The first two, age and gender play
critical role in the beer industry because the countries where Heineken markets its
product have different regulations concerning minimum age for drinking alcohol. For
example, in Netherland the legal age at which a person allowed to consume a beer is
16 in contrast in the United States that number is 21. Thus targeting the market of
beer consumers and planning a strategy the age must be taken into account. Other
factor Heineken reckons with is gender since usually the beer is mainly sold to the
men but then ciders which also produced by the company are very popular among
women. In addition, Heineken can ignore such factor as race because that character
has no influence on the beer consumption. However, the religion in turn can be
important aspect in some cases. There are Muslim countries where because of the
religious habit and attitude people are not allowed to consume alcohol.
Socio- economic method

There is another factor namely socio-economic that can be interesting for the
business in terms of perceiving and analysing such standard of living related
conditions that impact on the performance of the company. So Heineken focuses on
the customers' income in order to decide how to distribute its different products. For
those groups having larger income (higher social class) the company offers premium
or super premium categories. Usually, it can be said about the Heineken beer that is
more expensive than its casual rivals. Therefore, consumers who tend to buy more
exclusive Heineken products belong to middle or high-income class.

Psychographic method

No doubt, one of the most important methods for Heineken is psychographic

segmentation referring to such approach which considers consumers' lifestyle,
activities, interests and income as well to determine a market segment (similarly
mentioned with socio-economic). Heineken's marketers therefore investigate
consumers' drinking habits based on their lifestyle that can be very diverse and
divergent i.e. life style of students or workers or life style of people living in rural area
or urban area. Also important for the business to get to know about consumers'
activities and interests that impact on their buying behavior in order to propose proper
commercial and advertisement. Since Heineken is aware of its consumers' needs
and wants and their lifestyle therefore the company could build a strong brand which
is based on its consumers' brand loyalty and self-consciousness. The company
produces and delivers a great quality of the beer at higher price suggesting that
Heineken shares with their customers a higher value that fits to their society class
with a more sophisticated and demanding lifestyle.

Positioning and product mix

Analysis of positioning

Positioning analysis is a process of analyzing how a company's current brand is

perceived by the targeted market segments. The analysis discloses how effectively
the positioning of a brand influence the mind of consumers. Heineken tends to
position its product as a high quality and enjoyable beer for demanding and
sophisticated consumers. The positioning statement of Heineken is as follows:
"For successful, middle class men, Heineken is the beer that offers an enjoyable
good-time"
Positioning a product well so that what it offers meets the target market needs
contributing to build a strong brand. Heineken has positioned its brand emotionally
embedding deeply in consumers' mind leading the business to success.

Products and brand offered

"Heineken presents itself as a global brand and offers premium beer as a global
product. It is the world's best-selling premium lager beer, which matches the global
slogan: serving the planet" (Doole and Lowe, 2008)
Heineken puts a great emphasis on improving brand awareness and international
image by applying strict standards on the brand (style, value, development) and
ensuring same ingredients and quality all over the world.

Product life cycle analysis

Product life cycle analysis divides products into four stages as follows:
Introduction stage is the first stage of life cycle the product faces challenges from
already existing brands and the sales volume are really low.
Growth stage is a growing life cycle when a product has been known and accepted
by the consumers resulting constantly rising revenue for the business.
Maturity stage is the dominant life cycle when a product has a high level of
consumption and relevant market share with sales peak.
Decline stage is the last stage of life cycle when the demand is declining for the
product resulting decreasing sales and low level of revenue.
Heineken currently has gained a large market share of aprox.15% in the global
market. And it is still growing and having reached the maturity stage of its life cycle.

Boston Matrix analysis

Boston Matrix is a marketing tool used for identifying the potential and prospects of a
business by conducting a portfolio analysis on market growth and market share.

Fig 3 : BCG Matrix ( Sean Maines, 2014 )

The Boston Matrix has four categories to describe market opportunities for the
company which are stars, question marks, cash cows and dogs. As the diagram
shows there is no product within "dogs" square indicating such brands that has low
market share and low market growth not generating cash for the business. Besides
"dogs" in the left square the "cash cows" comprises three brands such as Heineken,
Amstel and Strongbow which generate high market share but has no potential for
market growth prospects. The company all has to do with it is to exploit them as long
as possible. Above " cash cows" in the diagram the "stars" lines up three units
including Newcastle, Amstel Light and Heineken Light which have the best market
share in a fast growing market generating the most cash for the business. And on the
right above in the square the "question marks" such as UB Group, Tsingtao and Jillz
show low market share in growing market and has a potential for turning into "stars".

Product development process

Innovation plays key role in Heineken's current and future success therefore the
company is launching 12 brand new products into the market including Foster's,
Radler LIme, and Ginger, Bulmers Five Fruit Harvest, Bulmers Indian Summer,
Affligem Triple, Blonde and Double, Desperado Verde, Strongbow Citrus Edge and
Old Mout Cider Summer, Kiwi, Lime, Passion Fruit and Apple. These exciting brands
as the company's new development gives its beer and cider loving consumers far
more opportunity to choose among many enjoyable tastes. In return Heineken
generates growth and strengthens its brand and reputation.

Porter's competitive forces

Supplier power: Company acquires row materials mainly from farmers therefore the
bargaining power of suppliers is high.
Buyer power: Since consumers have many choices to choose among different
brewing companies' brands therefore the bargaining power of buyers is high.
Competitive rivalry: Beer industry is continually growing and all the players intend to
obtain larger market share thus the competitive rivalry among them is very strong.
Threat of substitution: Beers belong to the group of alcohol drink so as wines or
champagnes and consumers of alcohol drink can choose which kind they want to
enjoy therefore the threat of substitution is high.
Threat of new entry: Due to many small brewers entering the market and creating a
more competitive environment therefore the threat of new entry is high.

Stakeholder analysis

The company has conducted a research relying on

its stakeholders' opinion. The results show that
Heineken has kept positive overall reputation for
the business deserving a high level of trust of its
stakeholders. Stakeholders recognize Heineken
as a reliable company which takes responsibilities
for its partners and its business. Also the company
cares about its employees winning their respect and
commitment as well as building a strong relationship
with them.
Fig 4 : Stakeholder engagement (Heineken.com, 2013)

Methods of distribution
Analysis of distribution channels
The distribution channel is commercial path, a route sales as how a company
allocate its product or service delivering to the end consumers. There are several
types of distribution channel from which the business can choose to bring its products
to market by considering the company's marketing strategy developed. Using 4Ps of
marketing is related to how a company to define its distribution channel which is to be
the best suitable for the target consumers. A distribution channel can be direct, when
the companies sell their products directly to the customers, or it can be indirect
selling products through intermediaries such as wholesalers, distributors, agents or
retailers which make the products available for the end users. Also distribution
channels can be owned by a company or the partners can provide it for a business.

Fig 5 : Distribution decision (The beer club, 2015)

Management of distribution channels

Heineken International is one of the largest brewing company all around the world
operating 165 brewing plants in more than 70 countries which are divided into five
regions including Western Europe, Central and Eastern Europe, Africa and the
Middle East, the Americas and Asia Pacific. Therefore, the company had to establish
its distribution channels worldwide to organize delivery towards the end users. As a
first stage of product sales when Heineken entering new markets is exporting its
products over there for the target audience thus building up its brand awareness. And
then if the business has made a progress Heineken starts giving licences to local
breweries for cooperation in order to achieve a market expansion. In case of
successful cooperation having market share extended the parties decide to choose
hierarchical or intermediate mode such as merger or acquisition when Heineken
owns other brewery as its own subsidiary shortening supplying chain to the
consumers. Also Heineken for achieving a strong presence in US and Latin America
acquired FEMSA. With FEMSA's portfolio Heineken distributes brands such as
Tecate and Sol gaining larger market share in Hispanic area.

How channels reach target market

There are many ways to reach target market introducing new products. Companies
can use channels which are owned by them or they can pay for channels or even
earn them. Heineken has own websites, social media sites such as Facebook Page,
Twitter account or Youtube Channel. Usually, to get message delivered to customers
Heineken use traditional media paid. Commercials, advertisements appear on the tv,
in magazines and newspapers that contribute to building up brand awareness as
Heineken makes promotions to popularize its products among its target audience.
 Fig 6 : Heineken:Current Channels (Francesca Balbi, 2013)

Pricing strategies
Analysis of strategies used

Pricing strategy is vital for Heineken to keep its market position and ensure
sustainable growth by using different pricing strategies. Depending on marketing
objectives and markets targeted the company always applies a such strategy which
adapts to changing conditions in order to increase sales and maximize profit. Since
Heineken is a global company and having interests all over the world therefore the
business applies three different methods of pricing strategy. Usually, Heineken uses
premium pricing strategy when entering the new markets. That means higher price
applied than competitors use during the first stage of the product life cycle. Since
Heineken has positioned its brand as premium and super premium beer brand
moreover the company has gained significant competitive advantage in West Europe
therefore they tend to apply price skimming. But economy pricing strategy has been
used in India and Asian countries keeping prices low to attract target segment for
increasing larger market share.

Promotional strategies
Analysis of strategies used

Heineken puts a great emphasis on promotion by using a well-tuned advertisement

and the company focuses on the sponsorship strategy. Heineken has various
sponsorship program all over the world founding such needs of entertainment and
recreational activities as sports, music and fashion in order to appear itself and
display its brands everywhere its consumers might go to have fun and relaxation. So
Heineken organises " The Heineken Cup" participating in European Rugby Cup, on
the music side the company has made partnership with Metronomy which is a well-
known band cooperating with Heineken on a new visual design for their brand. And
also the company has partnership with fashion creators i.e Christian Lacroix who
designed several new Heineken's products.
(Heineken International, 2016) (Group EBE8-02, 2016)
List of references:

Group EBE8-02 2016, Heineken International Marketing Report [online] Available from:
http://www.academia.edu/5423868/GROUP_EBE8-
02_Marketing_Assignment_2_Table_of_Contents Accessed on 07 February 2016

Heineken International Company 2016, Heineken [online] Available from:

http://www.theheinekencompany.com/brands Accessed on 07 February 2016

List of figures:

Fig 1: Seeklogo.com 2015, Heineken logo [online] Available from:

http://seeklogo.com/heineken-logo-168528.html Accessed on 07 February 2016

Fig 2: Instituut van Internal Auditors 2015, Truly global presence [online] Available from:
http://www.iia.nl/SiteFiles/IIA%20Congres/2015/Presentaties/IIA_Congres_2015_Presentatie_Brak
enhoff_Joop.pdf Accessed on 07 February 2016

Fig 3: Sean Maines 2014, BCG Matrix of Heineken [online] Available from:
http://strategycapstone.ning.com/forum/attachment/download?id=6347991%3AUploadedFile%3A5
685. Accessed on 07 February 2016

Fig 4: Heineken.com 2013, Stakeholder engagement [online] Available from:

http://sustainabilityreport.heineken.com/The-big-picture/Stakeholder-dialogue/Our-stakeholder-
groups/index.htm Accessed on 07 February 2016

Fig 5: The beer club 2015, Distribution decision [online] Available from:
https://thebeerbenchers.wordpress.com/ Accessed on 07 February 2016

Fig 6: Francesca Balbi 2013, Heineken: Current channels [online] Available from:
http://www.slideshare.net/fbalbi/heineken-16104483 Accessed on 07 February 2016