Prepared forKellogg’s President and CEO John A. Bryant

and Board of Directors

Prepared ByMaria ArzolaMatt ChaneyShirley Dam

Josh GattiKellogg’s, Consumer Research Department

May 3, 2012

MEMORANDUM

Date: May 3, 2012

To: John A. Bryant, President and CEO

CC: Board of Directors

From: Maria Arzola, Matt Chaney, Shirley Dam, and Josh GattiConsumer Research Department

Subject: Proposal for Social Media Integration

Here is the report you requested on Kellogg’s proposal for integrating into social media with information on current trends, social networking sites, and communication strategies.

From the research in this report, we have found that there is a combination of over one billion monthly active users on Facebook, Twitter, and LinkedIn, all popular social networking sites. Integrating social media into our communication strategy can help us increase brand awareness and build a higher reputation, all while increasing customer loyalty to our company. Having a higher brand reputation is positively correlated with buying behavior and ensuring success. Furthermore, integrating social media can help reap the financial benefits that we as a company have unknowingly handed to our competitors. Thank you for giving us this opportunity to work on this assignment. We hope you take our research into consideration when making your decision about integrating social media usage into our communication strategy. If you would like to further discuss the data we found in our investigation, we would be happy to provide you with anything you need. Please feel free to give us a call or email us at consumerresearchdepartment@kelloggs.com.

Maria Arzola- (209) 564-8969Matt Chaney- (209) 579-9856Shirley Dam- (209) 536-8425Josh Gatti- (209) 569-2424

TABLE OF CONTENTSPage

Executive Summary........................................................................................................................ivIntroduction......................................................................................................................................1

Problem……........................................................................................................................1Current Situation..................................................................................................................2Sources and Methods...........................................................................................................2Report Organization.............................................................................................................2

Current Trends and Information in Social Media............................................................................3Facebook for Business………………….............................................................................3Possibilities with Twitter.....................................................................................................3Recruiting through LinkedIn...............................................................................................4

Kellogg’s Current Condition……………………………………………………………………...4Kellogg’s vs. General Mills.………………………………………………………………4Things to Avoid………………………………………………………….………………..6

Cost……….....................................................................................................................................7Hiring a Social Media Manager....………………………………………………………..7Promotions, Sweepstakes and Additional Expenses…………………….……………..…7

Benefits...........................................................................................................................................8Collective Benefits………………………………………………………………….…….8Financial Benefits………………………………………………………………….……..9

Conclusions and Recommendations...............................................................................................9

Bibliography..................................................................................................................................11

Appendix…....................................................................................................................................13

LIST OF ILLUSTRATIONSExhibits Page 1: Stock Price Comparison Between Kellogg’s and General Mills...................................6

2: What Does Social Media Cost You?..............................................................................8

EXECUTIVE SUMMARY

This report explores the benefits of incorporating social media into Kellogg’s advertising and marketing strategies by showing how social networks can add to revenue, brand loyalty, and customer interaction.

Current Trends and Information in Social MediaSocial media has become an important component in society and it is vital for companies to use in order to interact with the millions of users on these sites. Facebook has 845 million monthly users and is used for more than just keeping in contact with friends. Many companies utilize for feedback, promotions, and marketing. With over 465 million Twitter accounts worldwide, creating a Twitter account can help build relationships by retweeting, replying and engaging our followers. Last year there were over 4.2 billion professionally oriented searches on the LinkedIn platform, which shows the potential utility this can have for Kellogg’s recruitment efforts.

Kellogg’s Current Condition

Kellogg’s is not currently utilizing social media to its fullest potential in our marketing strategy. Facebook is the only social media we currently use. However because of reasons we are unsure of the official Kellogg’s company page does not always come up on the Facebook Search bar. Our main competitor, General Mills, is well immersed in social media. They utilize every aspect in order to further engage with consumers. This is a large factor in their success. They have a better reputation, sense of brand loyalty, and level of profit than we currently do. According to Eric Katzman, the lack of social media usage by our company is hindering the financial benefits that could be. We should also learn form the mistakes of other companies by monitoring and managing our social media sites well.

Costs

The current salary of a Social Media Manager is roughly $100,000. This is 0.009% of the $1.1 billion advertising budget of 2011. Hiring a Social Media Manager to establish and manage Kellogg’s social media sites is at a relatively low cost in comparison to other advertising tactics and has a huge benefit overall. An additional $10,000 would need to be factored into spending since we will be offering various promotions, contests, and sweepstakes on our different social networks allowing users to follow Kellogg’s more closely and develop brand loyalty to our products.

Benefits

Social media allows Kellogg’s to reach a wider audience and promote all of our various products and brands. We can engage with current and potential customers alike on their terms. Brand presence on different social media outlets can lead to people spreading information about Kellogg’s through word of mouth. This is why we recommend the restructuring and reorganization of our current website and Facebook pages, creating a Twitter page to expand our social media reach, and utilize LinkedIn for professional career recruiting.

INTRODUCTION

Social Media is an important aspect of business in the 21st Century. With social media sites such

as Facebook, Twitter, LinkedIn, Foursquare, and Pinterest people are spending more time online.

It is important for companies to be well integrated into social media in order to capitalize on the

consumer base using these sites. Starting to build a presence in social media allows Kellogg’s to

build its reputation as a brand, engage and expand customer base, enhance brand loyalty, and

increase profits. Currently, Kellogg’s is not utilizing social media to its fullest potential. Most

young adults are active on social media websites daily and we see an increasing amount of adults

using these same sites. With young adults and families being our largest target market it is

important to engage with them on their favorite social media websites. Facebook is the only

social network used by the company, but the current Facebook page for Kellogg’s experiences

some inconsistencies and problems. It is time for Kellogg’s to restructure and introduce new

social media into its marketing and advertising strategies.

Problem

Kellogg’s is not utilizing its potential within the sphere of social media. The advertising budget

for 2011 was $1.1 Billion. Our main competitor, General Mills, does not spend that much on

advertising yet their revenue is still higher. General Mills has established a presence within

social media by having a blog, Twitter, YouTube, and LinkedIn account. Prospective revenue is

being lost since there is a lack of engagement with consumers who have a deep presence in

social media outlets. Because of the current lack of social media presence, Kellogg’s is unable to

promote brand awareness and recognition as effectively. Consumers involved in social media

want the option to interact with a brand through their various social networks. Not being

involved in social media is a huge detriment to Kellogg’s business model since it is not utilizing

a free resource to further engage with its target market

Current Situation

The only social media currently used by the Kellogg’s brand is Facebook. However, even within

that specific social network there are factors that need improvement. It is difficult to find the

official company Facebook page through the search bar. The results are inconsistent and do not

always give the official Kellogg’s company page as an option. There is no presence on the

Twitter network or LinkedIn, which limits the amount of people we are able to reach.

Sources and Methods

Our secondary research consists of examining the financial documents and social media

accounts from Kellogg’s and their competitors through online research. Also, reading many

business blogs, industry reports, journal articles, and books written on marketing strategies.

Report Organization

This report will cover current trends and information in social media, Kellogg’s current

conditions, the cost of social media integration, the benefits social media has to offer, and finally

the recommendations we have for Kellogg’s to integrate social media into the brand’s marketing

and advertising strategy.

CURRENT TRENDS & INFORMATION IN SOCIAL MEDIA

Social media is important for any company’s marketing strategy regardless of budget size. It has

quickly become a huge part of society and how people interact. Millions of users, across the

nation and even the world, are using social media to keep up to date with friends, family, and

their favorite companies. Using social media is very important for companies in this modern age

because it allows them to stay in touch with their customers and reach out to millions of people

for minimal cost. Social media provides an opportunity for companies and consumers to interact

that has previously not existed.

Facebook for Business

Facebook is the largest social network with a reach of 845 million monthly active users and is

available in 70 different languages. This shows how important it is to have an active and

organized Facebook page for Kellogg’s. Facebook has evolved from its original use to keep

friends connected to a place where companies can utilize online marketing to reach consumers

through promotions and coupons. Being able to promote our company on Facebook through

“Likes” and endorsements gives people the chance to interact with the brand more actively.

Possibilities with Twitter

Twitter has 465 million accounts worldwide and 57 million accounts in the United States. It is

an excellent way to notify customers about what is happening in the company. Creating a

Twitter account can help build relationships by retweeting, replying and engaging our followers.

Taking advantage of features like trending topics can help reach a larger audience and inform

them about any Kellogg’s products that may apply. We can utilize promotions and special offers

in order to create a buzz around the brand.

Recruiting through LinkedIn

LinkedIn is a more professional and business oriented social network that is a great way to

recruit new employees who could help improve the company. Last year there were over 4.2

billion professionally oriented searches on the LinkedIn platform, which shows the potential

utility this can have for Kellogg’s.

KELLOGG’S CURRENT CONDITION

Kellogg's is clearly not utilizing social media as part of its marketing strategy. Facebook is the

only social media site currently being used. There is an official page for the company as a whole

along with other subsidiary pages for various products owned by Kellogg's. However, it is

evident that the Facebook pages need improvement on organization and ease of access. It is

extremely hard to find the official Kellogg’s page on Facebook and it is not easy to find the link

to the page on the Kellogg’s website either. Furthermore, our website is not effective in clearly

providing links to its social media sites like major competitor, General Mills. Kellogg is absent

within the realm of Twitter and LinkedIn, which would provide many benefits that Facebook

alone cannot offer.

Kellogg’s vs. General Mills

More and more corporations are integrating themselves into social media every day, including

some of our major competitors. Currently Kellogg’s is not doing a very good job of taking

advantage of this strategy and the benefits that it could bring to the company. In fact, our lack of

presence within social media has hindered our success.

General Mills and Kellogg’s share many similarities. They both produce similar products

and hold equal shares of the market at just over 32%. Yet General Mills is currently leading in

revenue and reputation. Social media and the way it affects brand loyalty plays a key role in the

advantage General Mills currently has over Kellogg’s.

According to Eric Katzman, a bank analyst at Deutsche Bank, and an official follower of

Kellogg Company, Kellogg’s has benefited more from past acquisitions than General Mills

(Costello). For example, the most recent acquisitions for both companies have been Keebler for

Kellogg’s, and Pillsbury for General Mills. Katzman believes that although overall Pillsbury

was a better buy because of the recent decline of the cookie market (which Keebler has a big part

of), General Mills paid too much for Pillsbury and combining the two has proven to be difficult.

(Costello).

However, through the effective usage of social media, General Mills has proven to

overcome those obstacles. They have expanded their brands and have let their presence be

known to their customer base, as well as manage their customer relations by enhancing their

services. General Mills is a more attractive value because of this. They have had higher sales

growth and earnings growth, as well as having cited an increase in commodity prices which can

only mean that their products are higher in demand than Kellogg’s’. As a result, General Mills

now has a higher stock price than Kellogg’s. Kellogg’s has the opportunity to improve on their

market share, but is currently not taking advantage of social media marketing, which could

ultimately help in the effort. The lack of social media presence is hindering the financial benefits

Kellogg’s could be reaping.

Exhibit 1: Stock Price Comparison Between Kellogg’s and General Mills

Things to Avoid

While social media is an excellent way to stay in touch with customers, it can also backfire.

There are many common mistakes that companies need to avoid in order to have a successful

social media marketing strategy. It is easy for a company to think that more posts equates better

marketing, but users do not like to be spammed by one company's posts and will not hesitate to

block or unfollow a company's page. An even bigger mistake a company can make is to let a

wide range of employees have access to their social media accounts. The reason for this is that

caution should be used when posting or responding to customers. Having many people involved

in the process can get chaotic. Certain comments can be taken the wrong way and offend users.

Therefore, it is extremely important to have a limited number of responsible people manage the

accounts since they are public and reflect the values of the company.

COST

Cost plays a vital role in any marketing strategy because it determines what the best plan of

action is for the company. However, all companies should utilize social media because it is

exceedingly cost effective. Social media provides companies with the opportunity to reach out

to millions of online users for no cost at all. The only cost is what each company decides to put

into its individual social networking sites. In 2011, Kellogg's had a massive advertising budget

of 1.1 billion dollars. This is even higher than our main competitor, General Mills, which had a

budget of less than 900 million dollars. Kellogg’s clearly spends more yet reaps less benefits

from the extra expenditure.

Hiring a Social Media Manager

Social Media can help Kellogg's connect with customers for a small cost compared to the overall

advertising budget. The average cost to produce a commercial is around 350,000 dollars and

another 100,000 to display it on a less desirable time slot. However, a Social Media Manager can

set up social media websites and maintain them for $100,000 a year, according to Salary.com. A

Social Media Manager would cost less than producing and airing a commercial and is only

0.009% of the total advertising expenses spent in 2011.

Promotions, Sweepstakes, and Additional Expenses

A proposed allocation of $10,000 a year is being made for all promotions and sweepstakes

advertised on Kellogg’s social media sites. This gives people an incentive to “Follow” or “Like”

the social media sites that Kellogg’s belongs to. Because we plan to offer coupons, contests, and

sweepstakes throughout the year on our social media sites, the cost of these promotions must be

taken into account for the budget. The cost however is negligible when compared to the

advertising budget. Social media incorporation has no additional cost, other than what is put into

it by Kellogg’s. The cost is minimal, but the benefit is immense.

Exhibit 2: What Does Social Media Cost You?

2011 Advertising Expenses for Kellogg’s $1.1 Billion

Producing and Showing Commercial $450,000

Social Media Manager $100,000

BENEFITS

The benefits of social media integration for Kellogg’s are vast. It will ultimately allow the brand

the opportunity to expand its current reach. Due to DVR and online television streaming,

commercials no longer reach the target markets we seek to advertise to. With sites like

Facebook and Twitter those who no longer watch TV in a traditional manner can still be in the

know with what’s new at Kellogg’s. Spreading news about Kellogg’s through word of mouth

and social networking sites will help increase awareness regarding the brand. Revenue, brand

loyalty, and consumer interaction all have the potential to increase due to involvement in various

social networking sites.

Collective Benefits

Not only will social media help us engage better with current customers, but it can also help us

engage with potential new customers. With different social media sites the range of people

Kellogg’s is able to reach is far more than it’s current reach. With both current and new

consumers pleased Kellogg’s can raise revenue and brand loyalty, which are needed for further

advancement. Social media is also a great tool in order to receive feedback from customers or

address any questions or concerns they may have. It can also help with negative press since

there is a method and place Kellogg’s can go to address any issues that may arise. Dealing with

both customers and press alike, can be difficult, however social media can make the process

simple and clear.

Financial Benefits

One of the major benefits for using social media as a form of advertising and marketing is that it

will not cost the company much money. It is a very low risk investment because it has a low cost

but a high reward. The cost to maintain a presence on social media sites is much lower than any

other advertising medium. Social media allows for a large reach to many customers at a low

price. When companies are involved in social media, research shows that people who like a

company on Facebook are more likely to buy or spend money on said company’s products.

They are also 41% more likely to recommend it to a friend. This has great potential for Kellogg’s

in terms of revenue and rand loyalty.

CONCLUSION AND RECOMMENDATIONS

Social media integration is essential to the growth, development, and success of Kellogg’s.

Because social media is so heavily saturated it is important to capitalize on the opportunities it

provides. With Facebook, Twitter, and LinkedIn Kellogg’s can reach a wide variety of people

that is currently being overlooked. The platform these social media sites provide gives Kellogg’s

exactly what is needed to reach a large scope of people in an efficient and cohesive manner. The

benefits of further social media integration greatly outnumber the risks. It is time for Kellogg’s

to engage in all the possibilities social media can offer.

Recommendations

We recommend Kellogg’s implement the following social media structures.

Restructure and organize current Facebook and website in order to provide a simple and

intuitive experience for users.

Create a Twitter account in order to expand reach and branch out to different social

networking sites.

Utilize the functions LinkedIn provides for recruiting and potential career opportunities.

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APPENDIX

General Mills Financial Summary

Kellogg’s Finanacial Report