MBA404 - Consumer Behaviour & Marketing Psychology: Nestle NAN OPTIPRO

This report provides an in-depth analysis of consumer behavior and marketing psychology related to Nestle's NAN OPTIPRO 3 toddler milk powder in the Australian market, where it has been experiencing declining sales. It begins by examining the FMCG industry and the specific market for toddler milk powder, followed by an overview of Nestle's current marketing strategy, including its differentiated approach and value-based positioning. The report identifies key consumer behavior factors influencing purchasing decisions, such as the importance of quality, brand perception, and the influence of social stimuli. It also explores the personal buying decision-making process, highlighting the impact of income, past experiences, and the perceived needs of children. The report concludes with strategic recommendations for Nestle, including product differentiation, enhanced customer engagement, and targeted marketing campaigns based on a thorough understanding of consumer psychology. The analysis utilizes information from previous assessments and external sources to provide a comprehensive perspective on the challenges and opportunities facing Nestle in the Australian market.

Running head: CONSUMER BEHAVIOUR AND MARKETING PSYCHOLOGY
MBA404 Consumer Behaviour and Marketing Psychology
Individual Report
Student’s name:
Name of the university:
Author’s note:

1CONSUMER BEHAVIOUR AND MARKETING PSYCHOLOGY
Executive Summary
This report focuses on an understanding and application of various consumer behaviour
concepts and theories by analysing the facts gathered from the previous assessments and
present strategic recommendations. In this report, NAN OPTIPRO 3 is the chosen product of
Nestle, which is toddler milk powder. NAN OPTIPRO 3 of Nestle has been observing record
low sale in Australia and the repeat purchase of the product has been degraded considerably.
In the first part of the report, industry situation of the FMCG market and toddler milk powder
has been analysed. In the following section, the marketing strategy of Nestle and the
marketing communication mix of Nestle have been explained. Nestle has been using the
differentiated strategy in toddler milk for the different age group. Nestle also does value-
based positioning to reach the customers. Nestle also does direct marketing, sales promotions
and public relations to attract the customers. The information about toddler milk by
consumers would possibly differ. Correct strategy and implementation by any firms may
have an effect on the attitudes and influence the behaviour of the purchasers. The lifestyle of
the purchasers is additionally very important because it helps in presenting the specified
product as per their suitableness and this helps in generating the involved sales for the
organization. Therefore, Nestle should gather competitive advantage in the Australian market
through product differentiation like quantity differentiation and flavour differentiation of
NAN OPTIPRO 3. In addition, Nestle needs to provide value and solicit feedback to the
customers so that the customers must be engaged. Value can be provided through the quality
of the product and engaging the customers to purchase the products. Finally, Nestle needs to
come up with marketing campaign to influence the purchasers to purchase for their toddlers.
Before doing the campaign, Nestle needs to know the factors of consumer behaviours.

2CONSUMER BEHAVIOUR AND MARKETING PSYCHOLOGY
Table of Contents
Selected FMCG Product Overview............................................................................................3
Critical Analysis.........................................................................................................................3
Current marketing strategy of Nestle.....................................................................................3
Marketing communication mix of Nestle..............................................................................5
Identified consumer behavioural factors................................................................................7
Personal buying decision-making..........................................................................................8
Strategic Recommendations.......................................................................................................9
Reference List..........................................................................................................................12
Appendix..................................................................................................................................15

3CONSUMER BEHAVIOUR AND MARKETING PSYCHOLOGY
Selected FMCG Product Overview
Toddlers don't understand the need of diet and the parents get anxious when the
toddlers push away milk powder. The parents cannot decide whether they want to continue
breastfeeding or shift to milk powder. Toddler milk is marketed for the picky eaters and milk-
based toddler drink solely contributes significantly to the nutritional intake of older infants
(Moncavo et al. 2017). Nestle is mainly belonged from Switzerland and it deals in food and
drink business. Nestle is the largest food company based on revenue and it is well known for
baby food and toddler milk powder. Nestle is present in almost 190 countries and in
Australia, Nestle is an iconic brand for the toddler milk powder (Nestle.com.au 2018). Nestle
wants to shape a better and healthier world and Nestle Australia is focused to inspire the
customers to live healthier lives. NAN OPTIPRO 3 is premium nutritional drink supplement
for a toddler. Nestle toddler milk product has helped to nurture generations of young children.
NAN OPTIPRO 3 is for the children more than 14 months and the toddlers can enjoy NAN
Toddler milk supplementary to varied diet when nutrient and energy intake may not be
adequate (Nestle.com.au 2018). NAN OPTIPRO 3 Toddler milk has 14 essential vitamins
and minerals to support the development and growth of the toddlers and it also has probiotic
and LIPID Smart to bend the good fat. NAN OPTIPRO 3 Toddler milk provides the children
at least 45% of the recommended dietary intake of calcium, zinc, iron and iodine.
Critical Analysis
Current marketing strategy of Nestle
In Australia, Nestle has been facing utmost competition from the competitors like
Bellamy, Australian Deloraine, Snow Brand Australia and Nature One Dairy. Australia is
well known for the baby and toddler milk powder manufacturing country. However, volatile

4CONSUMER BEHAVIOUR AND MARKETING PSYCHOLOGY
commodity prices have driven strong revenue fluctuations over the last five years. Nestle
mainly differentiates the market by demographic and behavioural segmentation. In
demographic segmentation, it targets the middle class and upper-middle-class families who
can afford the toddler milk powder for their children. In behavioural segmentation, Nestle
Australia targets the customers based on rate of usage of milk powder for their children.
Nestle takes the differentiated strategy in Australian toddler milk powder industry as
it helps to target the homogeneous customers with their bundle of products. In toddler milk
section, Nestle has different set of products for the different age group of toddlers.
Nestle Australia uses mixed of product-based positioning and value-based positioning
strategies. Positioning strategy of Nestle is to strive to bring customers milk powder and food
which are safe and of high quality providing optimal nutrient to meet the needs of the
customers. In Australia, Nestle uses channel differentiation strategy to reach their products to
customers through sales and expert salesman and transportation (Antilla Hughes et al. 2018).
Nestle uses product-line stretchingstrategy in Australia in which Nestle launches
almost same types of products with some of the different attributes. In toddler milk-based
products; NAN OPTIPRO 3 is one such toddler milk variant. Apart from this one, Nestle
offers other variants which support early growth and normal brain development to the
toddlers. This toddler milk powder has the key minerals to support the strong teeth and bones.
Nestle is famous for quality of the food products which are up to mark and customers have
hardly any complaints.
In toddler milk powder, Nestle takes the strategy of competitive pricing. In the
Australian market, competition is high and competitive pricing provides Nestle with a
competitive advantage. Nestle generally takes the price skimming strategy on other products

5CONSUMER BEHAVIOUR AND MARKETING PSYCHOLOGY
as the customers do not switch the brands (Antilla Hughes et al. 2018). However, in
Australia, there are many other manufacturers which are famous for milk-based products.
Nestle follows typical distribution strategy as Nestle is known for the strong and good
marketing with sales network. Nestle introduces the trade discounts and other tactics to
motivate the channel. The customers need to find the milk-based product when they find on
the open market and in supermarkets. Nestle follows distribution channel fast-paced and
rewarding which helps to communicate with different channel structure from pharmacies,
supermarkets to e-commerce (Nestle.com.au 2018).
Manufacturing > Agents > Distributors >Retailers > Consumers
Nestle pushes the brand image through excellent product quality with the innovative
and witty campaign. Nestle focuses on the value of the products. Nestle does the selective
demand advertising which is intended to stimulate the demand for the brand. Nestle takes the
public relation strategy so that the customers can trust on the product for their toddlers. As an
FMCG product, Nestle does the sales promotions at the ground level. In order to increase the
faith of the customers to buy milk based products for their toddlers, Nestle regularly does the
TV commercials and online advertisements on smart and creative ways.Nestle builds and
plans the consumer experiences which reflect rich insights from the collected big data based
on customers’ expectations (Nestle.com.au 2018).
Marketing communication mix of Nestle
Advertising: Nestle has long been a proponent of responsible marketing to children
and Nestle has its Policy on Marketing Communication to children. Nestle is a founder
member of the International Food and Beverage Alliance and it always does the
advertisement made from the external agency (Reid et al. 2015). Advertisement of Nestle is

6CONSUMER BEHAVIOUR AND MARKETING PSYCHOLOGY
published in newspapers, internet and television. Nestle has a tailor-made-web-based tool
which embeds understanding of the policy among the marketers and external agency partners.
Public relations: Nestle has a PR team in Australia to clears the doubt of the
customers. PR team of Nestle provides short-term incentive to encourage the customers to
purchase the products. Public relations team creates the corporate image of the product and it
does favourable publicity of toddler milk product (Huang and Sarigollu 2014). Nestle has
high recall value in the market and Nestle uses this brand image to establish the PR. Nestle
has its access to global tools and insights and PR team does the research to attract the
customers.
Direct marketing: Nestle has direct channels of communication with the customers
and it offers improved communication, service and the ability to purchase products directly.
Nestle has credited its focus on the marketing and innovation for assisting the e-commerce
sales. Direct marketing is associated with carefully targeting individual to obtain immediate
response to cultivate lasting customer relationship (Todorva 2015).
Sales promotions: Sales promotions do the short-term incentive for the customers
who like to purchase Nestle products. The parents purchase the milk-based products for their
children; therefore, the customers want to provide the best product for their children
(Genchev and Todorova 2015). Sales promotions of Nestle are done through attractive bonus
pack and premium quality through purchase. Merchandising and point-of-sales is also done
by Nestle.

7CONSUMER BEHAVIOUR AND MARKETING PSYCHOLOGY
Figure 1: Communication mix of Nestle Australia
(Source: Self-developed)
Identified consumer behavioural factors
Consumer behaviour interaction starts with seeking to understand consumers'
relationship with the environment. Children are also positioned in the marketplace as the
parents' purchase toddler milk powder for their children. Hartman and Siegrist(2017)
commented that toddlers’ milk powder choices are connected to preferences related to the
quality, flavours and dietary habits of the children. Han et al. (2017) also supported this by
saying that diet is the child’s first social knowledge as the child learns from infancy about
his/her dietary choices. Some of the consumers believed that quality and brands’ impressions
are very essential to purchase the toddlers’ milk powder; on the contrary, some of the
consumers admitted that perception of the parents does not impact on the purchasing decision
of milk powder. The consumers’ opinion can be differed due to the past experience, aim and
demand during the purchase of milk powder. As stated by Henshaw et al. (2016), it is the
impulsiveness which impacts and persuades the customers’ behaviour before purchasing of
the toddlers’ milk powder. Survey findings from the previous assessment brought out that the
Newspapers,internetandtelevision.Web-basedtoolwhichembedsunderstandingTargetingimmediateresponseInnovationande-commerceNestleusesthisbrandimagetoestablishthePR.NestlehasitsaccesstoglobaltoolsandinsightsAttractivebonuspackandpremiumqualitythroughpurchase.Merchandisingandpoint-of-salesisalsodonebyNestle.

8CONSUMER BEHAVIOUR AND MARKETING PSYCHOLOGY
customers make the differentiation between local and international brands before making a
purchase of the milk product and they look into the labelling of the product. The customers
are the social individuals and they are active to make a decision and respond on the specific
manner to various social stimuli (Mann et al. 2015). Nestle has been facing the loss of market
and degrades profit; Nestle needs to look into the customers' psychological dimensions before
purchasing of toddler milk powder like nutritional elements, advertisements, merchandising
and brand value of the products.
Personal buying decision-making
When a person purchases toddler milk powder, there are two major factors which
influence the buyer most. The first factor is the income factor; if the purchaser belongs from
the upper-class section, the customer would be able to purchase quality and premium toddler
milk from an international brand. Two other factors are associated with income factors;
which are the frequency of purchasing and another factor is the quantity of purchasing. As
opined by Mathras et al. (2016), past experiences and information gathered from other
sources influence the customers to buy any product.
The need of the customers is an important factor which leads to buying the product.
The children’s need of consuming the milk powder triggers the parents to purchase toddler
milk powder. When the customers understand their need, the customers search for
information gathering. The customers search the information from personal sources,
commercial sources and public sources. Nestle needs to promote the products on external
sources so that the customers must get in touch with the products’ name. In the market, there
must be so many alternative products; the customers need to evaluate which one is best suited
for the children as toddler milk powder (Saad 2017). Nestle can start television commercials
or blog posts so that they can bring the advantages of drinking the milk powder. Customers
finally purchase the products after evaluation. Nestle company needs to distribute the

9CONSUMER BEHAVIOUR AND MARKETING PSYCHOLOGY
products in all parts of Australia so that the customers must avail the product. Post-purchase
behaviour of Nestle NAN OPTIPRO 3 might be satisfied when the toddler likes to have it or
the toddler can feel a milk fragrance. The customers can also have the experience of
observing the price of the same product is less at online.
Figure 2: Communication mix of Nestle Australia
(Source: Self-developed)
Strategic Recommendations
a. Gathering competitive advantage
Nestle has been facing tremendous competition in the babies and toddler milk powder
industry in Australia from Bellamy’s andOz Firm Classic. Competitors’ toddler milk products
are cheaper than Nestle NAN OPTIPRO 3. Therefore, the competitors' in the market have the
cost leadership strategy. Nestle needs to require a product differentiation strategy in which

10CONSUMER BEHAVIOUR AND MARKETING PSYCHOLOGY
Nestle needs to produce the same milk powder; however, they can introduce new flavours;
like chocolate, almond, vanilla or caramel. This product differentiation strategy would
provide options to the customers to find the best taste for their toddlers. The taste and
preferences of the toddlers are different based on the dietary habits. Product differentiation
would provide a competitive advantage of having the same product with multiple flavours.
The quantity of the products can also be changed based on the customers' requirement. Nestle
NAN OPTIPRO 3 is available in 400gm. Nestle can introduce 200gm, 1kg and 1.5kg packets.
This strategy will also provide differentiation from the competitors. Hoberg and Phillips
(2016), stated that product differentiation strategy provides marketing advantage to the brand
as it comes with better value proposition. The company will also have the better margin from
the differentiation of NAN OPTIPRO 3 and it is better than low-cost alternative approach.
b. Providing value and solicit feedback
Nestle always provides quality products to the customers; however, in Australian
market, Nestle needs to promote the value proposition to the customers. The value of Nestle
lies in the international brand image and quality standard of milk-based products. Nestle
needs to understand what drives for the customers before buying toddler milk product. Nestle
should understand the value proposition in the market and identify the segments in which
Nestle needs to target. Finally, Nestle should create a win-win price for the customers in
setting the price for NAN OPTIPRO 3. As commented by Fan et al. (2015), some of the
customer's posts query on social media pages and website of the brand, the PR needs to
solicit the feedback to create a brand image. Nestle should do the same to focus on
consumers' preferences and attributes. Quality of the product, solving the customers’
feedback and providing better value would improve the sale of the product along with
engaging the customers.

11CONSUMER BEHAVIOUR AND MARKETING PSYCHOLOGY
c. Marketing campaign to influence purchasers
At first, Nestle should target the customers to whom they want to conduct market
campaign for toddler milk powder. The consumers may want quality, taste, flavours, brand
image and proper pricing from Nestle. Nestle needs to determine the offer what they want to
provide to the customers in Australia to influence the target customers. Nestle needs to
identify the channels through which they can influence the customers. The channels can be
social media, internet or print media. Nestle already has the PR team in Australia and Nestle
should take the sales promotion strategy to improve sale and engage the customers.Campaign
attracts the customers and through the campaign, Nestle will convey its attribute to the
customers how NAN OPTIPRO 3 can help the toddlers to grow.