Assignment
When a 140-year-old company finally redesigns its logo, that's big news. Graeter's, the beloved Cincinnati-based maker of premium ice cream, is still managed by direct descendants of its founders. Over the years, the company has added complementary products such as baked goods and candy. These days, ice cream accounts for more than 85 percent of Graeter's $30 million in annual sales-and the highest profit margins come from selling packaged ice cream to supermarkets and grocery stores. To support coast-to-coast growth, the company has not only changed its logo, it has forged new distribution relationships, added new ice-cream flavors, introduced a rewards program, and moved into social media. In short, Graeter's marketing efforts take full advantage of 21st century technology, even though some of the firm's recipes date back more than a century and all of the ice cream is still made by hand to preserve the quality that made the brand famous.
FROM SCOOPS TO SUPERMARKETS AND BEYOND For most of its long history, Graeter's concentrated on making ice cream and selling it by the scoop in its own shops. Then it began distributing packaged ice cream through Kroger's supermarkets in Cincinnati, a relationship that led Graeter's to new customer insights and, ultimately, to lucrative new markets. Kroger's data revealed that out of the tens of thousands of brands sold in its stores, premium-priced Graeter's commands the strongest brand loyalty. Kroger owns the King Soopers grocery chain in Denver, and research there showed that more Denver ice-cream buyers choose premium brands than cheaper choices. To test reaction to Graeter's, King Soopers began carrying 12 of the firm's best-selling ice-cream flavors. Graeter's expected to sell two or three gallons per store per week in Denver.
Within a few weeks, however, it was selling an average of five gallons per store per week. Next, Kroger stores in Texas and Georgia began carrying Graeter's ice cream, and customer reception was so positive that distribution was soon expanded to the entire national network of 2,400 Kroger-owned stores. Today, Graeter's works with Kroger, Whole Foods Market, and thousands of grocery retailers across the country, sometimes selling directly and sometimes through food brokers. Its ice creams are also on the menu in some fine restaurants and country clubs. In addition, the company operates an online store and will ship ice cream overnight to any of the 48 continental states (California is its biggest shipping market). The management team would like to explore selling Graeter's in Canada, perhaps within the next five years. "The challenge, of course, is to preserve the integrity of the product as we grow," says CEO Richard Graeter II.
"But we have done that for more than 100 years, and I'd argue that it's better now than ever." A TASTE OF GRAETER'S The company's top-selling flavor is black raspberry chocolate chip-at 30 years young, a relatively new edition to the product line. It's always on the menu at company stores, along with other popular flavors and an ever-changing group of more than one dozen limited-time seasonal and "mystery" flavors. For example, Graeter's used its Facebook page to announce the introduction of Cake Batter Fudge Brownie as a recent mystery flavor. Depending on how well limited-time flavors sell, some will become a regular part of the menu, some reappear during a later season, and some will vanish forever. Publicizing these unique flavors helps Graeter's build excitement among current customers and bring new customers in for a taste.
Publicity about Graeter's rich, creamy products has sparked floods of orders from customers who live miles from any store. Before Oprah Winfrey told viewers on her talk show that Graeter's was the best ice cream she had ever tasted, the company was filling about 40 mail orders per day. After Winfrey's on-air compliment in 2002, "the next day we probably shipped 400," the CEO remembers. Since then, Graeter's has enjoyed occasional brand exposure on the Food Network, the Fine Living Channel, the Travel Channel, and even the History Channel. Because Graeter's competes with brands owned by multinational giants, it faces the same challenge in new markets as any "small, regional niche player," says George Denman, vice president of sales and marketing. Its marketing is focused on "establishing a relationship with the consumer, building brand awareness [through] trial and repeat . . . One of the first things we do is we demo the product. We get it out in front of the consumer and get them to taste it, because the product sells itself." The company has also been reducing its price to distributors, who can then promote Graeter's pints at special sale prices. "If a consumer has maybe been buying Ben & Jerry's and never considered ours, because maybe that dollar price point difference was too high, this gives her the opportunity to try us. And once she tries us, we know we've brand-switched that consumer right then," Denman adds.
"SWEET REWARDS" FOR LOYALTY Graeter's created the "Sweet Rewards" program to motivate repeat purchasing at its scoop shops, identify its best customers for special in-store attention, and reinforce customer loyalty. Customers simply pick up a Sweet Rewards card in any Graeter's shop, register for the program online, and present the card whenever they buy in a Graeter's store. Members get 10 bonus points for joining and one point for every $1 they spend. They can redeem points for rewards such as a free T-shirt, a freeGraeter's teddy bear, or a discount on future purchases. Because Graeter's collects purchase data electronically and has the e-mail address of every member, it stays in touch with special promotions such as double rewards points for buying featured items. Through its Cincinnati-based ad agency, Graeter's does some local advertising, including point-of-sale displays in grocery stores, radio ads, print ads, and billboards. The company launches small-scale promotions for new-product introductions, National Ice Cream Month, and other occasions.
The head of sales and marketing says, "We are looking at electronic couponing, where consumers will be able to go to our Web site as a new consumer . . . and secure a dollar-off coupon to try Graeter's, just for coming to our Web site or joining up on Facebook. We've done loyalty programs with Kroger where they have actually direct-mailed loyal consumers and offered . . . discounts as well . . . . So far it's worked well for us. We've had to go back and look at the return on investment on each of these programs and cut some things out and improve on some other things, but in the end we have been very pleased with the
Questions
1. Which of Graeter's marketing-mix elements are most likely to be affected by external forces in the marketing environment, and in what ways?
2. Graeter's scoop shops sell ice cream, sorbet, smoothies, candy, and (in Cincinnati only) bakery items. Should the company consider a brand extension such as iced coffee drinks for its scoop-shop menu? Explain your answer.
3. Is Graeter's using intensive, selective, or exclusive distribution? Why is this level of market coverage appropriate for its ice cream products?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.