Sun Chips Marketing Strategy: A Case Study Analysis
Porter’s 5 Forces
Barriers to Entry
Barriers to entry are low as Frito-Lay sells a lot of chips in different categories. In any case, they are their own competition. With the creation of Sun Chips, they reduced the sales of other unhealthier chips within their own company.
Seller Power
Seller power is high given that they are entering a new industry, introducing a new healthy option with chips. The fact that they didn’t make it with Prontos in 1974 did not stop them from continuing to pursue their goal.
Rivalry
Competitive rivalry is not that high. Frito-Lay Inc. dominates most of the chips business, and people continuously continue to buy from them. Sure, there are other companies that try to imitate their product, but customers know Frito-Lay is reliable and will continue to purchase from them.
Buyer Power
The power of the buyer is high in the case that they are buying more of one product than the other. Frito-Lay Inc. is selling the only healthy option chips in the market, and therefore it only affects the fact that people are buying fewer Lay’s and Doritos, causing cannibalization. It has an effect on the sales of products within the same company.
Threat of Substitute Products
The threat of substitute products is low given that Frito-Lay is the only company in the industry targeting an audience interested in a healthier lifestyle. Therefore, there are not many substitute products in the market.
4 P’s of Marketing
Product
Sun Chips were introduced in two different flavors: original as well as French onion. They were packaged in two sizes, a 7-ounce package and an 11-ounce package, identical to Doritos. There would also be a trial package of 2 1/4 ounces. They wanted to package the chips in a bag that portrayed exactly what was inside with a sprig of wheat.
Price
The price would be the same as Doritos. The price had represented a good price point as well as good value: 7 ounces being $1.69 and 11 ounces being $2.39 for the suggested retail price.
Place
Sun Chips were going to be distributed through Frito-Lay’s store door delivery system. The delivery/salesperson solicits orders, stocks shelves, and introduces merchandising programs to retail store personnel. Then they would be sold in supermarkets, grocery stores, convenience stores, and other retail accounts that already stock these products.
Promotion
The main audience for Sun Chips was adults between the ages of 18-34, since they are the principal purchasers and heavy users of snack chips. The second audience was 34-49, as they were more concerned with healthier options. Under the age of 18 would be exposed to this because the items would be at home. The advertising messages were going to be subtle, including wholesomeness, simplicity, and fun. Coupons were also placed in newspapers to entice people to try the product.
PESTLE Analysis
Political
No political factor in this case.
Economic
In terms of economic factors, Frito-Lay suffered with the launch of Prontos in 1974, but they did not give up, and they created Sun Chips, which created a 30 percent increase in sales but at the same time reduced the sales for Frito-Lay’s potato, tortilla, and corn snacks.
Social
Social ties back to the same idea of customers wanting that healthy option and therefore Frito-Lay tailoring to this need and continuing to do research to create the perfect healthy bag of chips. Tailoring to specific audiences and taking the risk of cannibalization.
Technological
Frito-Lay was very intuitive and therefore decided that their third customer target was people under 18 living at home that would simply be exposed to the chips at home from the people who had bought them, older than them.
Legal
No legal factor in this case.
Environmental
In terms of being environmentally friendly, Frito-Lay is producing a product that could reduce potential unhealthy customers. They are aiming towards creating a healthy option for their customers.
Consumer Buying Behavior
According to the text, the main target was 18-34-year-olds, as they were avid buyers of chips. Then continued to 34-49, who were concerned with health issues and therefore were more prone to buy this product, and then there were people under 18 that would be exposed to them at their own home.
SWOT Analysis
Strengths
- Original brand
- Sun Chips were the first healthy chip option introduced
- Target audiences according to their chip preferences and how often they buy the chips
- Tailored to the specific needs of the customer and gave them a “healthier option”
Weaknesses
- Competition from national brand firms, regional brand firms, private brand firms
- Failed the first time they tried to introduce Prontos in 1974
- Introduced Sun Chips and did not know what the outcome would be
- Cannibalization within the company due to higher sales in the healthy option and decreased sales in unhealthier options like Doritos
Opportunities
- New entry to the healthy chip option
- Create a distinctive alternative to the everyday chip
- Differentiate from other brands and the chips within their same company
- Tailor to those customers that may not eat chips because they are unhealthy
Threats
- Customers not liking the product
- As many as 650 snack chip products introduced each year
- Frito-Lay and the reduction it had in the purchase of less healthy options
- National and regional competitors were examining the chip with the intention of developing their own version.
Generic Business Strategy Used
The basic strategy consisted of growing the established Frito-Lay brand through line extension, creating new products to meet changing consumer preferences and needs, developing products for fast-growing snack-food categories, and reproducing Frito-Lay successes in the international market. Meaning they wanted to make sure they recognized the needs of their customers, the fact that they seek variety, low-oil light line, experiencing different growth rates and initiatives to pursue production opportunities outside the United States.
Company’s Competitive Advantage
They had the competitive advantage in that they were the first company to decide they were going to come up with a bag of chips that would tailor to those who wanted chips that were healthier, and therefore they had that advantage.
Core Competencies
Frito-Lay is a worldwide leader in the manufacturing and marketing of snack chips. It works to make sure their customers get exactly what they want and need with a touch of quality, and that is how they continue to keep their name high.
keep their name high.