Prague University of Economics and Business Faculty of Business Administration
Master´s Field: International Management
Master’s thesis
Klára Bambasová 2021
Prague University of Economics and Business Faculty of Business Administration
Master´s Field: International Management
Pet CBD market in the Czech Republic
Author: Klára Bambasová
Thesis supervisor: Ing. Tomáš Ryška, Ph.D.
D e c l a r a t i o n o f A u t h e n t i c i t y
I hereby declare that the Master´s Thesis presented herein is my own
work, or fully and specifically acknowledged wherever adapted from other sources. This work has not been published or submitted
elsewhere for the requirement of a degree programme.
Title of Master thesis:
Pet CBD market in the Czech Republic Abstract:
The focus of this thesis is on CBD (cannabidiol), a substance extracted from cannabis, and its perception amongst Czech society. The subject is first viewed from the global dimension, after which the focus concentrates on the local dimension and the point of view of the Czech citizen and/or potential consumer.
The perception of CBD is being examined through research performed for the ultimate purpose of finishing the thesis. Further attention is being paid to the social aspects as well as to the legal aspects, concerning the usage and sales of CBD products. All of the previously mentioned steps build up a path to the goal:
to be able to suggest the ideal marketing communication for Releaf s.r.o.
Keywords:
CBD products, perception of CBD, marketing strategy, marketing communication
Words of appreciation:
I would like to thank my thesis supervisor, Ing. Tomáš Ryška, Ph.D., for his support throughout thesis creation process and for his valuable insights into the industry he provided. I always enjoyed our discussions and value him deeply as an academic and a human being.
Additionally, I would like to thank my friends and family for their continuous
Table of Contents
Introduction ... 1
1 Marketing strategy and planning ... 3
1.1 Situational Analysis ... 4
External Environmental Analysis ... 4
Internal Environmental Analysis ... 9
1.2 Planning ... 10
Marketing Goals ... 10
Marketing Strategy ... 11
Marketing Mix ... 12
Communication Strategy ... 14
1.3 Methodology ... 18
2 CBD industry ... 22
2.1 Global CBD pet care industry ... 24
Current global trends ... 31
2.2 Local CBD pet care industry ... 31
Current local trends ... 32
PESTEL analysis of local market ... 33
Porter’s five forces analysis ... 38
Competitor analysis ... 41
2.3 Releaf For Pets ... 49
SWOT analysis ... 50
Marketing strategy of Releaf For Pets ... 54
2.4 Conclusion of the industry analysis ... 61
3 Perception of CBD products in the Czech Republic ... 63
3.1 Survey: perception of CBD in the Czech Republic ... 64
Interpretation of survey results from dog owners ... 65
3.2 Qualitative interviews: perception of CBD in the Czech Republic ... 70
Interpretation of qualitative interview results from dog owners
... 70
3.3 Research findings ... 84
4 Recommendations/strategies suggested based on the research ... 88
Conclusion... 93
Limitations of the thesis ... 95
Appendix ... 96
Appendix A ... 96
Appendix B ... 102
Appendix C ... 108
Bibliography... 1
List of Figures
Figure 1 – Strategic marketing planning process ...4
Figure 2 - Porter's Five Forces ...7
Figure 3 - Projected Annual Sales of CBD for Pets ... 25
Figure 4 - CBD Market Share ... 25
Figure 5– Reasons for using CBD ... 27
List of Tables
Table 1 - The communications mix ... 16Table 2 – Competitor analysis ... 48
Table 3 – Suggested segmentation ... 56
Table 4 – Dog age statements analysis ... 72
Table 5 – Dog medical issues, statements analysis ... 73
Table 6 – CBD vs. THC difference, statements analysis ... 76
Table 7 – Interviews summary ... 84
Introduction
Globalization is a continuous process penetrating more and more into everyday life, affecting basically everyone. The world is becoming more driven by technology, and therefore, the pace of living is also increasing. Due to this acceleration of the world in combination with the covid-19 pandemic, the level of stress people are experiencing has constantly been growing. Specifically, the ongoing pandemic caused the level of stress and anxiety to grow within pets, due to the constant presence of their owners and the changes or even elimination of their routines (Khourdaji, 2021b). Various factors increase the discomfort in pets, like where and how they live, how they are treated by their owners or what pet illnesses are being induced by breeding the animals and
“purifying” their breeds, amongst others.
Nowadays, people often create powerful bonds with their pets and care for them deeply. Such strong connections and empathy expressed towards pets by their owners create the need for a product that acts as a calming and relieving agent, and not only for people but equally for their pet companions. Such need has been recognized and targeted by CBD (cannabidiol) oil from Releaf For Pets and other producers. Only recently, the brand started operating in the Czech market. As a new entrant, Releaf For Pets is currently only establishing its presence on the Czech market. Hence, there is a need to create a marketing strategy or form of marketing communication to help the company thrive in the Czech market in the long term.
First of all, to be able to establish such a marketing strategy, the company needs to understand well what the perception of CBD by the Czech society is to be able to market their product accordingly. Therefore, the research part of this thesis will focus on understanding the perception of CBD amongst Czech dog owners. Moreover, the author will attempt to give particular suggestions of actions to be performed by the company in terms of marketing, in accordance with the answer to the central question of the thesis: How to market the newly entered brand, Releaf For Pets, to the Czech consumers?
Throughout the thesis, the author will be looking at marketing strategy and communication generally, in the theoretical part. The second topic to be discovered is the CBD industry, from the global and local point of view. Topics discussed will include the uses of CBD in different products, its usage amongst the population and the current trends, especially of the Czech population as the target market.
As CBD products are relatively new and due to the nature of the raw material it is produced from (cannabis), it can be viewed rather negatively, potentially even illegally. Hence, increased attention must be paid to legal aspects limiting the marketing of products containing the said substance. In order to achieve a comprehensive review, current European legislation will be considered.
Without jumping to unreasonable conclusions, it is possible to anticipate that legal aspects concerning CBD are not going to be exceptionally encouraging of products containing this ingredient. As the source of CBD is cannabis, commonly misused as a drug, CBD, may be perceived rather negatively or at least interconnected with the effects marihuana has on people who use it in different forms. This area can turn out to be more challenging than the legal aspects of CBD as the perception is an idea or a picture the people themselves create. Given the guidelines that products have to abide by, it is possible to understand what is or is not permitted and can be sold. However, if there is only a limited number of customers, due to the perception created in their minds, it can be a real problem. On the other hand, niche markets are also worth exploring for many firms. Therefore, as already said in the very beginning, the research performed for this thesis will have a significant focus on the perception of CBD by the society, especially by the Czech society.
After concluding the research, subsequent findings will be presented in the third part of the thesis. These will serve as a significant contribution of the thesis and a valuable study for Releaf for Pets, providing a solid base for building the appropriate marketing strategy and communication of the brand for the Czech market.
1 Marketing strategy and planning
Companies are trying to find their competitive advantage to establish themselves in the market and reach a superior position over their competitors.
They are doing so by bringing into action their marketing strategy, which helps analyse the business environment, identify the right customer segments for their products, and ultimately compete with other businesses to reach a dominant position on the market (Drummond, Ensor & Ashford, 2008).
Oftentimes, the term strategy is interchanged with the term plan. This might have been true in the past. However, currently, strategy is viewed and defined as the long-term direction a company should be heading into, ideally while having an idea of the steps that need to be undertaken to get there.
Nevertheless, the terms go hand in hand, and the definitions are not universal.
Strategic marketing planning is the actual process of creating the plan to achieving the company’s goals over a certain period (Gilligan & Wilson, 2003).
Nowadays, while the business environment is as volatile as it is, planning is more complicated, often changing the execution as the original plan can simply not be fulfilled due to the new circumstances. However, as Gilligan and Wilson (2003) claim, at this point, the plan is not even the most critical part. It is the journey and the experience the management gets while working on the plan, preparing them for the possible changes.
The strategic marketing planning process is divided into four main phases:
Analysis (or Marketing audit), Planning, Implementation and Control.
Ultimately, the strategic plan is created with the components resulting from the previously mentioned phases, forming part of the company’s marketing plans (Kotler, Wong, Saunders & Armstrong, 2005). For the purpose of the thesis, the focus will be on the first two stages, the Analysis and Planning.
Figure 1 – Strategic marketing planning process, Source: Kotler et al., 2005
As an important note, Kotler et al. (2005) also highlight the importance of the mission statement, especially when a company finds itself at the beginning of the business journey. At this point, the mission statement can significantly help not to lose focus and move in the right direction when formulating the company’s strategic goals to fulfil the purpose why it is being established (ultimately). The mission statement is, however, helpful also at a later stage of the existence of a company and should often be revisited by the management as to not part from the initially intended accomplishment for the broader environment.
1.1 Situational Analysis
The marketing audit or marketing situational analysis is the starting point for the whole strategic marketing planning process. At this stage, the management should understand where the company is at a given point in time. The situational analysis should examine all three elements that enter the marketing strategy (these are customers, competitors and the factors on the inside of the business) (Drummond, 2008). It should generally follow the SWOT framework, which means that the internal and external environment of the company should be examined separately (Hollensen, 2015).
External Environmental Analysis
Firstly, the external environmental analysis, which covers the Opportunities and Threats of the SWOT analysis, should be performed. The external analysis can further be broken down into macro and micro (or the competitive)
environment analysis complemented by Porter’s five forces, followed by the last step, the market analysis (Drummond, 2008).
Macro environmental analysis
As it usually is, the analysis starts broadly and gets more into detail in the next steps. Thus, first framework for the macro environmental analysis is PEST(EL).
PEST(EL) is a unilateral framework which enables a general look at the external environment and brings an overall idea of the external influences and factors affecting the company. PEST is an acronym for the Political/legal, Economic, Socio-cultural and Technological factors of the macro environment (Gilligan & Wilson, 2003). First, the model was called PEST but later on the additional EL had been added, for Environmental and Legal factors, as both are getting more and more attention and importance nowadays, resulting in major impact on businesses (del Marmol, Feys & Probert, 2015).
As some factors influence various categories of the analysis, it is often not clear where in the analysis they belong. This is also supported by the fact that previously, the legal factors were grouped together with the political factors.
As confusing as this may appear to be, generally, this doesn’t pose any threat to the resulting analysis as long as all of the important influences are indeed covered, no matter in which category (Král, Machková, Lhotákova, & Cook, 2016).
When examining the political environment, the focus lays on the governmental institutions of a country above all, subsequently also on other international organizations that may influence the political situation on the market. When looking at the legal aspects, treaties or agreements made on an international level must be considered. This is valid for the member states of the European Union, as for such, not only the national legislation applies but also the one on the Union, potentially worldwide, level (Král et al., 2016).
Economic factors that influence and disclose a country's situation are usually examined by observing statistical data and international indicators, such as a country's GDP, consumption, inflation, exchange rate movement, or demographic data about the country's population (Král et al., 2016).
The socio-cultural environment of a country is definitely more complicated to observe and summarize. First of all, this is due to the fact that cultures are very diverse, and even if certain convergence is happening, it is a prolonged process (fortunately). Not only is the issue the difficulty with which we can draw a conclusion about a culture, but it is also the fact that culture has various definitions. Not everyone understands the meaning of the word equally.
Geert Hofstede tried to capture in his cultural dimensions model (Král et al., 2016). Even though the data for said dimensions is available, it does not guarantee a total understanding of a country's culture. The actor in the setting of the foreign culture must observe and listen carefully to be able to adjust to it.
The last of the PEST analysis to be examined is the technological environment. Especially factors like the level of development of local infrastructure or penetration of telecommunications or Internet are examined. However, even more, important than that is the category of R&D in the country, which may be estimated by the investments made into the industry from outside and from within the country (Král et al., 2016).
Last group of factors as to have the complete PESTEL analysis are the environmental factors. These can refer to the weather conditions of a country or the geographical location and consequences it brings; however, especially in recent years, the focus is somewhere else. Lately, the focus is primarily on the topics of pollution or sustainability due to the noticeably deteriorating situation of the natural environment, which is only worsening gradually (Shatskaya, Samarina & Nekhorosheva, 2016).
Porter’s five forces (industry analysis)
According to Hollensen (2015), the situational analysis usually goes from the outside towards the core, meaning that the macro environment is analysed first. Before moving directly to the microenvironment, he suggests performing Porter’s five forces analysis, labelled as the meso level. This is given by the nature of this framework, which looks at the industry the business operates in but not directly at the market, hence not going much into detail and not serving as the microenvironment analysis.
The model created by Michael Porter includes five forces that establish what the competition is like in an industry. The level of competition, which subsequently establishes its potential of profit, is usually recognized on a scale from mild to intense competition. However, Porter accentuates and eliminates the thinking about competition only in the form of other companies/players on the market in question. To be exact, the forces that establish said level of competition are five and are divided as follows by Porter (see Figure 2):
competitive rivalry, the threat of new entrants, the threat of substitutes, bargaining power of suppliers and bargaining power of buyers (Porter, 1979).
First, the individual forces are analysed and obtained the result; it is the goal of the company to take a position within the industry that will allow it to make
use of the forces affecting it or where it will be able to defend, potentially fight back, these forces. In order to do so, it is crucial for the company to understand the position and power or potential of the other agents, not just the competitors (Porter, 1979).
While performing the analysis, it is up to the researcher to decide on the depth of the analysis needed and how they decide to evaluate the forces; however, assigning low, medium, or high marks to each force is a generally accepted reasonable approach.
Figure 2 - Porter's Five Forces, Source: Heubel, 2021
Micro environmental analysis
The micro environment analysis can be divided into two or even more separate analyses, depending on the source. For example, Drummond (2008) considers it completed by performing the competitor and market analyses.
However, it is necessary to consider that market analysis includes many categories such as possible market size, customers, distribution channels, or even trends currently observable at the market, being quite extensive.
Generally, the marketing microenvironment of a company is built by the actors that have the ability to influence it in any way, especially considering the influence on its marketing practices. Hollensen (2015) also claims that
can be named as competitive intelligence, defined as gathering and analysing information about products, customers, and competitors. Taking the term to the next level, he speaks of competitor intelligence (CI), which focuses only on the competitors instead of competitive intelligence.
The competitor analysis, which enables to build the competitor intelligence, draws upon the industry analysis performed using Porter's five forces framework. Furthermore, competitor analysis should be performed constantly due to the rising competition in today's market.
When performing the competitor analysis, the manager should ask and find answers to the following five questions, according to Gilligan (2003): who are the competitors, what are their goals, what are the competitors' strategies and are they successful, what are the competitors' strengths and weaknesses and lastly, what might be competitors' behaviour in the future, especially with respect to the possible rise of more competition. These questions should be enough to build a comprehensive picture of the current competition and therefore be prepared for the market, considering the competition category.
According to Kotler et al. (2005), there are six steps to completing the competitor analysis. First comes identifying competitors, which can already be tricky as depending on the point of view, the outcomes can be quite different.
What Kotler does, is taking the industry and market point of view separately.
In the case of the industry point of view, competitors will be firms producing the same product or service. However, in the case of a market point of view, the competitors may also be firms from another industry, satisfying the same customers' needs.
Nowadays, competition is relatively wide almost in any industry or market, making the competitor analysis quite tricky due to the high number of rival businesses. To make the analysis more effortless for the businesses, strategic groups have been put in place. These are formed only by close competitors of a firm, enabling the fundamental analysis in terms of its time and management by eliminating indirect competitors (Drummond, 2008).
The second step of the analysis is the determination of competitors' objectives.
At this point, the firm is looking at if the competitor is seeking the highest possible profits, if that is in the short run or the long run, and if not, it tries to understand the competitor's motivation is then. Often, it is not, in fact, profit maximization as economists would suggest (Kotler et al., 2015).
The third step is the logical continuation of the identification of competitors' objectives. Supposedly, in the previous step, the goals have been identified.
Therefore, the next step is identifying competitors' strategies, in other words,
understanding how the competitors plan to reach those objectives. It is also recommended to compare past and current strategies in order to understand the competitors' development and direction they are moving into (Drummond, 2008).
Assessment of competitors' strengths and weaknesses is the fourth step of the analysis. At this point, companies should be looking at the capabilities and resources of the competitors, which will then indicate what the strengths and weaknesses may be; however, this is not as easy to establish sometimes as much if the information is not publicly accessible (Kotler et al., 2005).
The fifth step of the analysis can be pretty complicated as the company is supposed to establish its competitors' reactions or at least reaction patterns.
According to Kotler et al. (2005), competitors' reactions may vary immensely, depending on whether they would react to significant price cuts, increase in advertising, or product alterations. What he suggests, in all cases, is that the strength of the reaction is probably connected to the perception of own customers loyalty, i.e., if a firm believes that its customers are very loyal, no solid reaction for counterpart action is expected.
The final step of the analysis lies in the selection of competitors and how to treat them, i.e., if they should be attacked or avoided, depending on the company's strength and, most importantly, confidence. However, generally, companies prefer to aim at weaker companies as such 'battles' do not require many resources. Also, these competitors should be relatively easy to identify with, for example, the customer value analysis (customers' evaluation of competitors' products/services) (Kotler et al., 2005).
However, it is essential to note that frequently, businesses fail to recognize or identify the relevant competition which may occur due to the other firms being too small, new or about to enter the market or existing on foreign markets, but not yet present on the domestic market. Nonetheless, such cases should not be disregarded as the situational analysis works with the current situation, but it should also consider the potential future development (Drummond, 2008).
Internal Environmental Analysis
As previously mentioned, Drummond (2008) suggests that the environmental analysis follows the SWOT analysis. Supposably, the Opportunities and Threats have been analysed during the external environment analysis.
Therefore, during the internal environmental analysis, the focus will land on the Strengths and Weaknesses of the company/product.
Again, depending on the source, in some cases, the internal environmental analysis can be considered part of the company's microenvironmental analysis (Kotler et al., 2005).
As the last part of the marketing audit, the internal analysis completes the picture of the company in its environment. It helps with the decision of where the company should position itself on the market to extract its capabilities and efficiently satisfy the needs of the market (Drummond, 2008). As the company decides where to position itself, at the same time, the decision of whether the inside out or the outside in strategy will be applied should be taken. This decision will establish whether a company will start from its resources, seeing what it is capable of bringing to the market or if it will engage first in a 'dialogue' with the market as to find out what is it that is lacking, only after which the question of how to achieve this will be asked (Day & Moorman, 2010).
Throughout the internal analysis, factors as company resources, assets, competencies, portfolio, brand life-cycle position or benchmarking towards other competitors on the market are observed. Generally, the firm's capabilities can be one of the outcomes of said analysis (Gilligan & Wilson, 2003). Hollensen (2015) also adds the organisational culture and values, structure or critical factors for future success such as know-how, experience or financial resources to the analysis. He also mentions that in many aspects, the internal analysis overlaps with the competitor analysis (previously discussed in chapter 1.1.1 External Environmental Analysis).
1.2 Planning
Once the first phase of the overall analysis is completed, it is possible to start the second phase, strategic planning. Strategic planning sets general direction for the company or its business units. It can be broken down into several parts, such as the company's mission, strategic objectives, SWOT analysis, portfolio analysis and objectives and strategies. What follows is the marketing plan, which could be defined as further development of the strategic plan and is specific for each of the company's businesses, so it follows the same stages as the strategic plan but on a deeper level (Kotler et al., 2005).
Marketing Goals
In order to be able to create a plan, a company needs to have its objectives set to know what it wants to achieve. Generally, no company has just one objective to pursue; they have multiple, however, with different importance, for example. Therefore, Gilligan and Wilson (2003) set some rules for the
objectives, which should be hierarchical and follow the SMART rule. This rule is often followed by businesses nowadays as it is pretty easy to grasp and establishes which qualities the objectives should fulfil. The SMART rule stands for Specific, Measurable, Achievable, Relevant and Time-bound, and these are the attributes the objectives should have (MacLeod, 2012).
Marketing Strategy
According to Kotler (2005), after the SWOT analysis and definition of marketing objectives, the marketing strategy should be created to establish how those objectives will be achieved. The previously identified company advantages should be stressed here as subsequent segmentation, targeting and positioning are based on those. The marketing objectives are generally bound to specific target markets, hence focusing on segmentation, targeting and positioning at this stage of the marketing plan.
Segmentation, targeting and positioning, or the STP approach, are crucial to identify the right group of customers for the company’s product and especially for the specific marketing mix of a product (Hollensen, 2015).
Segmentation of the market is the process of dividing the market into groups based on a common denominator, such as customer characteristics or specific behaviour. It is quite the crucial step in marketing strategy as based on this;
the company decides which products will be delivered to which markets.
Hence, the basis for good market segmentation is the knowledge of the customer and especially of his behaviour in response to a specific marketing mix (Drummond, 2008).
Targeting is the process of selecting one, or a few, of the previously identified segments and customizing the product to those segments. These must be chosen based on the overall match of the product and the customer needs and then based on the opportunities, and potential the segments can offer to the company. Once the target segments have been identified, the product can be slightly customized to better fit consumer needs. Companies engage in undifferentiated, differentiated or concentrated marketing based on the approach to the chosen segments, which depends on whether the consumers from different segments are treated as one or as multiple, with methods applied to them being changed and tailored (Hollensen, 2015).
The last stage of the STP approach is positioning. It includes creating an image of the company/product in the customer’s mind. It is well-connected with the company’s brand, and it is at this stage at the latest, if not sooner, when it is vital to choose which brand features or aspects will be emphasized and most
noticeable of a brand. These brand aspects obviously have to be attractive to the chosen consumer group – the segment – and help differentiate the company from its competitors. However, companies need to be cautious about satisfying the consumer and instead position themselves on their capabilities and authentic identity rather than trying to answer the consumer’s wishes.
Lastly, positioning is extremely important for companies with a similar product as others due to the already mentioned differentiation (Riezebos &
van der Grinten, 2012).
An essential factor in the scope of positioning is also pricing. Riezebos and van der Grinten (2012) stress that more than ever, it is essential for brands to choose and keep a specific pricing level as it is imperative in relation to competition nowadays. Hand in hand with pricing also goes the brand communication, which ensures the attraction of customers, based on the effective communication of relevancy of the product to the consumers until the purchase of the product.
Overall, the conclusion drawn from the stated above about positioning is that pricing and communication are critical. However, pricing can only be influenced to some level, based on costs the company incurs and based on the threshold the consumer is willing to pay. On the other hand, communication depends entirely on the company and can be influenced at all levels. Therefore, it would be recommendable for companies, especially smaller ones, to focus on communication suitable for the targeted customers. After all, “winning companies are those that meet customer needs economically and conveniently and with effective communication” (Kotler et al., 2005, p. 35).
Marketing Mix
One of the very basic concepts in marketing is the marketing mix. It is usually defined as the set of tools that marketers have available to them and should use to attract the customer and convert him into a buyer or just influence the target customers in the desired way. Often, it is also called the 4 Ps, by the first letters of each tool: Product, Price, Place and Promotion (Kotler et al., 2005).
Hereabove, the marketing mix of a product has been described. However, it is worth mentioning that there is also the extended marketing mix or the ‘7 Ps’, which is appropriate to use in case of marketing of services as in such case, the traditional ‘4 Ps’ are not sufficient to describe, analyse and influence all the available tools the company has at its disposal. The additional 3 Ps would be the People, Process and Physical evidence (Lancaster, 2018). However, as the 4 Ps are sufficient for the purpose of this thesis, further on, the traditional marketing mix will be examined.
Product is the first and most important of the marketing mix as it is the actual item being sold to the customer, and everything else parts or comes to the product. Therefore, at this stage, the characteristics of the good should be examined, and some of these are the following: functionality and appearance of the good itself, its packaging and image, or even the image of the product (Lancaster, 2018). Kotler et al. (2005) also emphasize that the product does not necessarily need to be a physical good, but also service, organization, place, idea or even a person. Other accompanying characteristics of a product should be examined here, such as services or warranties included in the product or can be purchased as extra.
Price as the second P is relatively straightforward. It is simply the amount of money the customer has to pay in order to obtain the product. Depending on the product and seller, price is something that can be negotiable, but in many cases, it is not, especially not in the case of common-use products. It also entails payment conditions or discounts. There are many forms or methods for setting a product price; however, a company should always bear in mind that pricing should always go hand in hand with positioning a product or the brand on the market, as mentioned above (Kubicki & Milano, 2015).
The third P of the marketing mix to be further discussed is the Place, which stands for the distribution policy of the product. It includes factors as distribution channels, therefore the availability of the product, the assortment and inventory, the logistics it takes to deliver the product to the chosen distribution channel and to the customer and generally any other activity needed in order to make the product available to the customer (Kotler et al., 2005).
The fourth P to be discussed is Promotion. Some literature states that promotion is the synonym of communication, replaced in such a way as to fit the marketing model mix built up from only ‘Ps’ (Kostelijk & Alsem, 2020).
Here, all the activities performed to communicate with the customer and pass on to him the desired message is examined. Often, promotion is used interchangeably with the word advertising, however, incorrectly. Promotion involves even activities such as personal selling or the general publicity of a company/brand/product (Kotler et al., 2005).
As Kotler et al. (2005) present, same as about the marketing mix, it is possible to study the promotion mix. It establishes the specifics of a company’s communication mix (synonym for the promotion mix), which form of promotion it involves in achieving the marketing goals. It is the mixture of personal selling, advertising, sales promotion and PR (public relations) that
Communication Strategy
As mentioned above, some authors claim that promotion is generally all about communication, if it is not the same. It is an extremely visible part of the marketing mix; therefore, it must be very well thought through as it directly affects the audience and can ruin all the company efforts, even though it would have the best product for the best price (Lancaster, 2018).
As it usually is, in order to do something well, one must first understand the process. Therefore, marketers need to study the communication process first before proceeding to plan the communication strategy. As Kotler et al. (2005) describe, there are two main actors: the sender and receiver, where the sender is trying to pass on a message to the receiver through an appropriate media or the communication channel. However, in order for the message to be communicated effectively, the sender's encoding process and receiver's decoding process must correspond. Another essential element of the communication process is the noise which can distort the message in a certain way, resulting in the receiver not getting the message as intended by the sender.
As long as marketers understand the process mentioned above and consider its elements, they have a good starting point for developing a successful communication strategy.
According to Kostelijk & Alsem (2020), there are the following elements to a communications strategy that is to be examined and planned step by step: the communication target group, message, objective, creation and media resources, communication budget and the last phase of monitoring and evaluation of communications outcomes.
As the first element of the communication strategy, there is the target group.
It is necessary to bear in mind that the marketing target group and communication target group are not the same, even though they are one in many cases. However, the distinction between a consumer and buyer is vital here, and the communication target group must be the buyer (Kostelijk &
Alsem, 2020).
Depending on the literature studied, the following step is the communication message or the communication objective. Putting message before the objectives are explained by it having to comply with the overall communication goals of the brand; however, Kotler et al. (2005) agree on defining the objectives first. Ultimately, the objective is the purchase of a product. However, marketers need to distinguish between the buyer- readiness phases and recognise where the customer is at a given point in time,
as the purchase itself is only the last stage out of six through which the customer has to go. These are the following: awareness, knowledge, liking, preference and conviction, leading up to purchase. These stages follow the path of the customer getting to know about the product, to having more information about it and starting to like it, until preferring it over other competitive products to being convinced that the product is the right one for them and buying it.
According to Kostelijk & Alsem, 2020, the message phase can have one of two forms: it can be either a thematic communication or an action-based communication. Thematic message communicates the product's characteristics as such, therefore introducing the product further or attracting the customer by the product's quality. Whereas action-based communication concerns temporary changes such as discounts, according to the definition.
However, it is imperative to keep in mind the positioning of the brand itself, as certain forms of action-based communications would not be appropriate and could damage the company's or brand's reputation or name in the eyes of the customer.
After the message is created, it is vital to choose the media resources or the appropriate communication mix, which has already been briefly mentioned within the Promotion 'P' of the marketing mix.
In order to build the right communications mix, marketers must choose the right combination of channels, tools and media to use for the product's promotion. First of all, communication channels are either personal or non- personal. In the case of personal channels, there are two or more individuals directly engaging in communication. In contrast, the non-personal channels include mass communication without the direct feedback of the message recipient (Kotler et al., 2005).
In Table 1, there are some of the communication tools that may be used by the marketers to effectively communicate with the customer, ultimately leading to the purchase of the advertised good.
Table 1 - The communications mix, Source: Smith, Zook, 2019
In terms of marketing tools, there is a vast number of these, with new tools appearing constantly and from which a marketer can choose from. A few, mainly online, tools will now be talked about more in detail.
One of these selected tools is content marketing. In fact, its name is quite self- explanatory of its meaning. In the literature, it is often defined as one of the forms of marketing at the same time as a business process which focuses on production and subsequent distribution of content which should inform, attract and persuade the customer from the target audience to the purchase of the product by its relevance and value (Balteș, 2015). In order to succeed in content marketing, there are six principles to it and these are indispensable for success: 1) a need has to be filled, 2) consistency in marketing, 3) being human, 4) choosing and maintaining a point of view, 5) excluding typical sales language, 6) be the best in the category (Pulizzi, 2015). These guidelines provide the base for successful content marketing. According to Papagiannis (2020), content is the critical element of marketing and so is its production. It is so successful nowadays, due to its usefulness for the customer, which is supporting the traffic for websites and building a strong brand image in the minds of customers whose needs and interest match the content produced by the business.
Speaking about web traffic, SEO should be mentioned as well. Search Engine Optimization is one of the tools of SEM, Search Engine Marketing, and it works on the basis of algorithm factors and based on how different content is phrased and what quality it has. In the end, what SEO does is organize Google search results for the person who searched for something based on his personal preferences, it provides the access to the searched content via links and
evaluates the quality of the found website, which also influences the position in Google search results. Mostly due to the quality it takes into account, it is quite related to content marketing (Ledford, 2009).
Another online tool worth mentioning is social media. Nowadays it is widely used in marketing due to its reach, given by the overwhelming presence of people on these platforms. The presence is immense with around 2 billion users on Facebook, as well as on YouTube, who are thanks to the marketing options on these platforms within the reach of basically any company present online. As the popularity of social media is so high, a new category of marketing developed and it is the social media marketing. By definition, this form of marketing is the use of social media as a channel for communication with customers, allowing companies to create and deliver their offer and bringing value to the customer, at the same time (Tuten, 2020).
Last tool to be mentioned in this part of the thesis is the word of mouth (WOM).
The concept is getting a lot of attention as according to some, it is what helps distinguish the most valuable customer and characterizes him as the one who brings to the company the most, new customers, who then increase the company’s profitability. From the definition it is therefore understandable, that marketers should focus on customers who do not necessarily generate the most profit themselves but, in fact, bring along the customers that do. That is also what word of mouth is or does; it is the referral of satisfied customers who motivate, consciously or not, people in their surroundings to become the customers of the brand on question. As many companies realize the power of WOM, some marketers are coming up with incentive programmes and offers in the form of providing a discount or a free product to the customer who will, indeed, bring more customers for the company (Kumar, Petersen & Leone, 2007).
In promotion, marketers can choose from two promotion mix strategies, as Kotler et al. (2005) specify. These are the pull and push strategy; each of these strategy’s names is quite self-explanatory, as one of them is supposed to push the product through the distribution channels to the customer, whereas the pull strategy will rather motivate and persuade the customer to buy the product through the promotion of its positive characteristics and appeal to the customer. Hence, demand is being created this way, pressuring the distributors to include the product in their sales portfolio. However, as described in the book, firms usually use a combination of both of the mentioned strategies.
At last, a theory or a framework that needs to be kept in mind is the PESTEL
the business environment; Political, Economic, Social, Technological, Legal and Environmental. It is generally used to get an overall view of the situation in the said environment, and it has previously been mentioned in chapter 1.1.1.
However, for the purpose of the thesis and general marketing of the product, the legal factors are especially important as CBD, which is derived from hemp plants, is quite a new and sensitive topic. What is being observed under the legal factors are, for example, the regulatory bodies releasing new legislation concerning the business/industry. Legal factors are extremely important for businesses generally, as they can potentially even shut the business down.
Therefore, such factors need to be closely examined and continuously monitored in order to avoid any issue that could become even vital for the business/industry (“PESTLE Analysis: Business Environmental Analysis”, 2011).
1.3 Methodology
Overall, the thesis consists of two main parts, the theoretical and practical parts. The theoretical part (chapter 1) discusses the frameworks, concepts and ideas used in marketing nowadays. Further on, the concepts discussed in the theoretical part will be applied in the practical part (chapters 2, 3 and 4) to the company's case, which is the subject of this thesis, Releaf For Pets.
Quantitative survey
Two methodologies were used for the purpose of this thesis and in order to collect primary data. The first one is a quantitative survey conducted through questionnaires. This method is relatively superficial, which is the reason why it is used as the first. It provides a general idea of the awareness of the Czech dog-owner population of CBD and their possible experience with the natural compound.
The questionnaire was created following the survey research process as outlined by Burgess (2001), starting with the definition of the aim of the research itself and identification of the population to be the target group of the survey. As the questionnaire aimed to unravel the question of perception of CBD amongst dog owners in the Czech Republic, the goal is quite clear. At the same time, the purpose of the questionnaire also directly defines the target group of the population of respondents, dog owners in the Czech Republic. The next decision was related to the form of a collection of responses. Due to the extensive use of the internet amongst today's society and also due to the current pandemic state, online questionnaires proved to be the best option for the research. The Google Forms platform was used, and the survey was
distributed through the following link: https://forms.gle/Jnt1vHXo4i5uFAk48. As this form of research has a broader reach, it has opted for distribution of the survey amongst the author's acquaintances (always dog owners) and in an online dog owner community reached through social media (Facebook, in specific).
In the following stage, the survey design, the survey questions were put together so that the questionnaire would not be too long as lengthy surveys immediately discourage the participants from filling them in. The questions included basics such as knowledge of CBD by the respondent, his/her perception of the chemical, (potential) usage for personal needs or for dog's needs and factors that may influence the decision of the respondent to use or not use non-prescription CBD products. The complete questionnaire can be found in Appendix A of the thesis. The last step of the survey process, the collected data analysis, is to be found in chapter 3.1 of the thesis (Burgess, 2001).
Although online surveys offer numerous strengths such as broad reach, flexibility and speed, they also carry some disadvantages and limitations. Aside from potentially low response rate, the researcher does not have the opportunity to monitor who is indeed filling out the survey, if the respondent isn’t finding any issues or unclear questions/answers while filing out the survey and such surveys are impersonal, not allowing the researcher to observe the respondent in order to gather deeper knowledge or understanding from the respondent based on his reactions, mood or facial expression, for example (Evans & Mathur, 2018). Taken into account the limitations mentioned, a second research methodology has been chosen.
In-depth Interviews
After the online survey, the second and principal qualitative methodology was applied, the in-depth interviews. This method allows us to understand the perspectives of individuals on specific topics or ideas (Boyce & Neale, 2006).
This has been the main research method that directed further development of the thesis. These qualitative interviews provided the most valuable input and findings. The interview questions were primarily based on the survey questions; however, they were discussed much more in detail and with follow- up questions.
The interview type chosen for the purpose of the thesis is the general interview guide approach described by Turner (2010). This type of interview has been considered the most suitable because the questions are
approximately set from the beginning. However, the wording can be different, as well as it allows for a more informal interview. Informal interview setting was necessary in this case for two reasons. First of all, the dog owner community appears to be informal; second of all, the topic which the interviews were conducted about is still relatively unexplored and the interviewees could have certain reservations to open up about it. Therefore, the author decided on a laid-back and informal environment and mood in the interview process to receive genuine and accurate answers.
Turner (2010) also provides guidance on the overall interview process. Much attention is paid to the preparation for the interviews, which should include the following: preparation of a calm interview setting as to focus entirely on the interview, presentation of the interview goals, stressing the confidentiality, the interview process explanation and its length, giving the interviewee the option of contacting the interviewer later on in case they have any questions, wish to change their answer or withdraw part of the interview/the entire interview from the research and lastly, preparation of a tool that will help the interview record the answers (it be taking notes or recording the interview).
According to Turner (2010), the next stage after the preparation for the interviews, is the identification of interview participants, which are in this case dog owners in the Czech Republic, as the research focuses on the identification of their perception of CBD. Furthermore, the interviewees have been selected based on their age, gender, and occupation. What is also recommended is pilot testing, which could also be named a mock interview. This serves the interview or the researcher to test the questions and the interview technique, potentially identify some flaws that may be present and subsequently eliminate them.
Also, pilot testing can help improve the previously prepared questions, which should be open-ended and neutral, not suggesting the desired or expected answer to the interviewee. Follow-up questions may also be formed based on the pilot testing; however, as the interview form is relatively informal, these should not be pre-set and should be formed rather naturally to fit the interview flow.
After the interviews are concluded, the last stage of data analysis and interpretation concludes the research. To draw significant conclusions from the interviews, Boyce & Neale (2006) suggest looking for patterns in the responses received. In case there is no particular pattern identified, the researcher can group the interviewees based on a common denominator (such as age, for example). Another suggestion is to pay attention to the way the questions were answered, if with enthusiasm, or only briefly, and to the mood or attitude of the interviewee demonstrated while giving such answers
(Burgess, 2001). The in-depth interviews are discussed in chapter 3.2 of the thesis.
Aside from the quantitative survey and qualitative interviews, desk research has been conducted. This method provided secondary data from the industry and served as another valuable resource for the thesis. The desk research mainly included the review of available literature related to the industry and reports created by independent firms. It has been beneficial to find out what the current trends are and how the industry is performing on a global level.
2 CBD industry
In the following chapter, the work will focus on the analysis and description of the CBD industry and subindustries relevant for the company. This chapter will serve as a basis for further market analysis.
Cannabis sativa, commonly also called just cannabis, marijuana or more popularly 'weed', is a plant famous for its recreational use as a light drug.
Another name typically used is hemp, which refers specifically to cannabis that contains up to 0,3 per cent of THC, one of the cannabinoids, when dried. Aside from THC (tetrahydrocannabinol), which is the psychoactive agent in cannabis, it also contains CBD, another cannabinoid. CBD (cannabidiol), however, is a non-psychoactive agent. Therefore, it does not cause the state of delirium, as THC does (Oultram et al., 2021).
The Endocannabinoid system, present both in humans and animals, is known to be one of the most understudied systems; however, this is slowly changing for the better. It is defined as the system that maintains the ongoing homeostasis in the human body. The endocannabinoid system is formed by the endocannabinoids (cannabinoids produced by the human body), cannabinoid receptors and others. Due to the presence of cannabinoid receptors, cannabinoids have a significant influence on human and animal bodies. There are interactions between the endocannabinoid system and the endocrine system, affecting the food intake and activity of the hypothalamus, thyroid gland, pancreas or pituitary gland, amongst others (Borowska et al., 2018).
Numerous clinical trials have also supported, that cannabinoids can diminish the symptoms of some serious illnesses, such as multiple sclerosis, schizophrenia, Parkinson's disease, epilepsy, or even cancer; anxiety or post- traumatic disorders and can improve people's sleep patterns, the already- mentioned food intake, help with acute inflammations or alleviate from pain (even chronic) and decrease the symptoms of opioid addiction (Oultram et al., 2021). However, the research done so far on the topic is not yet sufficient and is not even near to its end; it is rather at the beginning.
Talking about CBD specifically, aside from medical treatments, it is also being used in skincare, for example. It has proven to be effective for the already- mentioned inflammation reduction and pain alleviation. However, it also positively affects conditions like eczema, acne or skin redness ("How Do CBD Oil Skincare Products Work?", 2021).
Overall, CBD is proving to be highly effective in alleviating or curing many medical conditions that people experience, which is also why the industry is
constantly growing nowadays and hides excellent potential, as it is not reasonably discovered yet. CBD and THC both also have great potential in medical care. However, this topic is much more complex and requires significant expertise, which the author does not possess. Hence, this other field is being acknowledged here but will not be discussed further. The focus will be on over-the-counter products.
The mainly discussed cannabinoid so far has been CBD, cannabidiol. However, THC is also gaining more interest amongst recreational users and researchers (not only) due to the entourage effect discussed in "Beyond THC & CBD:
Understanding the Entourage Effect" (2020). It is known that CBD is the agent that limits especially the adverse effects of THC. However, the entourage effect could be labelled as working vice versa, meaning that the active effect of CBD is enhanced in case it is used in combination with controlled amounts of THC and terpenes. This effect has been proven within the treatment of cancer, epilepsy, inflammation, pain or anxiety. Therefore, for such conditions, it is, by some, recommended to use the full-spectrum CBD products, which contain all of the active ingredients from cannabis, therefore also THC. On the other hand, broad-spectrum CBD products contain all active ingredients from cannabis but THC; therefore, such products can be labelled as THC-free. Third, isolate CBD is a regularly produced and sold option, which contains only CBD as an active ingredient from cannabis ("Full-Spectrum vs. Broad-Spectrum CBD, What's the Difference?", 2021).
There are many products and segments where CBD is used, or at least there is an interest in using CBD, such as the food and beverage industry, supplements, etc. Recently, however, another area where CBD is being used appeared, and as unexpected as it may be, it is the pet care industry. As previously mentioned, the endocannabinoid system is present in animals, as well as in humans.
Therefore, the effects are valid too. According to Prohibition Partners, the pet global CBD market's estimated value in 2020 was 214 million USD, and it is supposed to almost double by the year 2024. Hence, with such expected growth, this particular industry seems to be quite perspective and worthy of looking into (Khourdaji, 2021a). On the other hand, as Dawson (2019) writes, the penetration of CBD into pet care was expected, alongside its usage in cosmetics, even though there are more regulations that the products must abide by.
It is possible to find various types of products containing CBD in pet care, similarly to the variety of products for humans; however, for the purpose of the thesis, the product in focus will be the CBD pet care industry and precisely
one product CBD oil. This is given by the nature and scope of the company that will be in focus, later on, Releaf For Pets and their product, CBD oil for dogs.
2.1 Global CBD pet care industry
CBD can be used for medical issues, but nowadays, people use it to help change their lifestyle for the better. Meaning that what the users are searching for is not necessarily ‘only’ the pain alleviation or improvement of their medical conditions and help with other serious problems. The use of CBD for less severe causes is on the rise. The motives are its positive effects on the body as well as on the mind, such as acceleration of workout recovery, improved condition of skin when used in skincare or better mood or kickstart of the day when CBD beverages are consumed in the morning (CBD coffee or tea, for example). These are only some of the positives of CBD; the number of all of them is pretty vast; moreover, as the research in this field is only flourishing now, more of its effects could appear (“Can CBD be the Key to a Healthy Lifestyle?”, 2021).
Another phenomenon that is much on the rise is the pet humanization trend.
This means that people treat their pets more like members of their families rather than just an animal, sometimes characterizing them even as children and applying such behaviour (Khourdaji, 2021a). Aside from the human-pet relationship, what is also changing is the value of the global pet care industry, which is expected to reach 181 billion euros by the year 2025. There are three specific areas, the most significant drivers of value growth; pet food safety, sustainability and pet health. These are the areas where companies can focus their efforts, especially as they are promising in terms of growth and profits (“Pet humanization and the future of pet food packaging”, 2020).
By combining the facts about CBD trends and current pet care trends, CBD oil for dogs seems like a product with quite some perspective for the future, as due to pet humanization, the amounts paid in the industry for pet products are skyrocketing. People want to provide excellent quality of life to their pets, which is why the sales of CBD products for pets are expected to be steadily increasing over the following years, as depicted in Figure 3 below.
Figure 3 - Projected Annual Sales of CBD for Pets, Source: Khourdaji, 2021b
The above figure applies to pets generally. However, the group Prohibition Partners (2021) also published a statistic clarifying which animals are CBD products are mostly being bought and, therefore, where the most significant potential lies. As can be seen below, in Figure 4, by far the most popular group of pets for CBD products are dogs, after which horses come second, however, not even close to dogs.
Figure 4 - CBD Market Share, Source: Khourdaji, 2021b
Based on the above information, this industry seems to be highly promising, practically a guarantee of success. However, due to CBD being derived from cannabis, generally highly associated to being drug, the rules accompanying the production and sales of CBD products such as CBD oil are quite complicated, as there is not much clear legislation concerning specifically this topic, and regulatory organs are just working towards the formulation of comprehensive legislation related to the topic. This is also given by the fact that there is not much research yet on the effects of CBD on pets, as most researchers focus on the effects this natural compound has on human body (Khourdaji, 2021a). Further on, more attention will be paid to the legal aspects of the topic in chapter 2.2.2.
Pet CBD consumer research by Brightfield Group
Brightfield Group research conducted in the US will now be discussed as it can provide a closer look into and an understanding of a more developed CBD pet market. This research is quite extensive and covers from details about the pet and pet owner to reasons why CBD is used in each case and how is that working for the pet.
First of all, it is essential to note that the research participants have been divided into two groups, based on the fact if they are CBD users (=people who give CBD to their pets) or interested (=people interested in giving CBD to their pets). Thanks to this distinction, it is possible to draw some conclusions as to what may convince the group ‘Interested’ to become the ‘Users’; hence some guidance and direction for marketing can be provided here.
The research conducted is not specific to any concrete animal; it focuses on pets in general. However, as one of the questions referred to the pet in question, the results state that the vast majority (almost 90%) of the ‘Users’
are referring to a dog and almost 83% of the group ‘Interested’ are referring to them too. Therefore, these results may well be used for the purpose of this thesis. Aside from pet type, the pet age has also been explored. The most common pet ‘User’ is between 1 and 7 years, but within the other age groups, usage is not significantly lower. However, amongst the group ‘Interested’, the statistics show that more people interested in giving CBD to their pets are, above all, owners of older pets, which corresponds with the motivators for CBD use (Brightfield Group, 2021).
Talking about the reasons for using CBD for pets, it is clear from Figure 5 that number one is reduction of anxiety, which is the case for both ‘Users’ and
‘Interested’. The second reason, also connected to anxiety, is alleviation from situational anxiety, i.e., stressful situations for the pet such as unusual
environment or occasions (somewhere else but not home, fireworks, etc.). The third most common motivation amongst ‘Users’ is pain management; however, it is the second most common reason a participant from the group ‘Interested’
would list. This corresponds with the pet age group from the ‘Interested’
category, showing that interest in using CBD to help reduce the pain pets experience is a great motivation. Last quite popular reason is the improvement in pets’ general well-being or mood.
The last highlight from the research worth discussing is if the pet owner discussed the use of CBD on their pet with a veterinarian or not. From the
‘Users’, almost 74% of respondents have discussed the option with the vet. On the other hand, from ‘Interested’, only roughly 12% of respondents have discussed the option with the vet. Hence, it is possible to conclude that if more
‘Interested’ respondents would discuss the matter with their vet, they would probably become ‘Users’. Therefore, a firm producing and selling CBD products for dogs collaborating with veterinarians should be more successful.
Figure 55– Reasons for using CBD, Source: Brightfield Group, 2021
The presented research also dived into the topic of other pet treatments. In case pet owners were using other forms of treatment previously to CBD, large portion of them still use said treatment in combination with CBD, meaning that it is not a common assumption amongst pet owners that CBD would interfere, in a negative way, with other forms of treatment (Brightfield Group, 2021).
The research also uncovered the topic of pet owner beliefs. This topic is considered highly important, as it unveils the personal motivations and drivers of pet owners as to the usage of CBD. Therefore, such beliefs are also very important to be understood by marketers of brands selling CBD products as they can provide a recipe to how one can market a product more efficiently.
However, it is important to keep in mind that these are beliefs the pet owners have, they are not facts proved by medical, or other, research.
Furthermore, it is clear that most pet owners believe that their pets’ quality of life has been improved by CBD and also that many pet owners think that their pet lives better than most others, or that they are providing a higher level of care to the pets. Also, nearly 84% of pet owners claimed that they are willing financial sacrifices for their pets. This is a reasonable finding as CBD products generally are of a higher price (Brightfield Group, 2021). No doubt that this is very much supported by the previously mentioned pet humanisation.
The research also has a section dedicated to the type of CBD that the pet owners use. Almost 72% of pet owners use pet CBD products but about one quarter of respondents use CBD which is labelled as for humans. The effects pet owners noticed on their pets include general increase of calm, improved sleep and/or mobility, better appearance and even decreased number of seizures (referring to dogs with epilepsy), effectively supporting clinical research. These positive results of CBD treatment are being confirmed by the respondents as nearly 84% of them find it effective and nearly 87% of them would recommend pet CBD.
Pet CBD can have many forms, from edibles, through oils or tinctures, to capsules or powders. Most of the respondents from the mentioned research are using edibles for their pets. Although CBD has different forms, dosage of CBD that pet owners are using for their pets does not depend off of it. Most popular or most commonly used dosage for pets is between 5 and 10 mg of CBD per dose, regularly consumed at least once a day, or even more often. It is possible to assume that the fact that some pet owners use CBD for their pets more than once a day is possible as CBD is not addictive nor toxic, making it safe and not worrying about possible overdosage of the pet (“Releaf 5 & Releaf 10”, 2021). As previously discussed, CBD products can be of various chemical compositions based on what substances from cannabis they contain.
