Assignment 1: Launch Whole Grain Pizza product

Marketing Management II

Submitted To Prof. G.D.Apte

Submitted By Akshay Agarwal Roll No: 2013PGPM003

Launch Whole Grain Pizza Product The launch of a whole grain pizza kit will capitalize on the same consumer trends that prompted the release of Cucina Fresca: growing demand for quick, customizable home meal replacements that are refrigerated and available in tasty, whole grain options. Also, pizza is a core component of the ItalianAmerican food category that cannot be ignored because it is frequently purchased by customers on a monthly basis. The whole grain pizza product resolves the time-and health-related concerns of American consumers in one of their favorite dishes. The growing demand for a whole grain crust has been addressed by local pizzerias and take-out franchises, but not in the store-bought refrigerated pizza market. The immediate release of the pizza kit would allow the company to penetrate this market before Rigazzi and benefit from first mover advantages. As a result, the 1st year wholesale volume estimates would exceed the return requirements by approximately $4.5 million (see Exhibit 1: Whole Grain Pizza Concept Purchase Volume Estimate, Year 1 [Excellent]). The excess returns can be reinvested into the firm and used to expand the manufacturing facilities or further extend the product line. If the pizza kit is launched, the firm must consider the potential consequences. We must review the potential consequences if the wholesale volume estimate is calculated using the percentage repurchases when the product is perceived to be of mediocre or average quality (see Exhibit 2: Whole Grain Pizza Concept Purchase Volume Estimate, Year 1 [Mediocre, Average].

Exhibit 1: Whole Grain Pizza Concept Purchase Volume Estimate, Year 1 (Excellent) Total Purchase Intent Definitely would buy % of Definites who actually buy Definite Purchases Probably would buy % of Probables who actually buy Probable Purchases Trial Rate Marketing Plan Adjustment Target Households Cucina Fresca Pasta Customers Non- Cucina Fresca Pasta Customers Customer Awareness Non-Customer Awareness All Commodity Volume Distribution (ACV) Marketing Adjusted Trial Rate Cucina Fresca Pasta Customers Adjusted Trial Rate Non- Cucina Fresca Pasta Customers Adjusted Trial Rate Cucina Fresca Pasta Customers Trial Purchases Non- Cucina Fresca Pasta Customers Trial Purchases Total Trial Purchases Repeat Purchase Inputs Repeat Purchase Occasions Repeat Rate, by Product Services Excellent Product Repeat Volume, by Product Scenario Excellent Product Total Purchases 18.00% 80.00% 14.40a% 43.00% 30.00% 12.90b% 27.30c% 58,500,000 6,435,000d 52,065,000e 50.00% 12.00% 40.00% 5.46f% 1.31g% 351,351h 682,051.5i 1,033,402j,k 2.00 49% 1,012,733l,m 2,046,135n

Definitely would buy x % of Definites who actually buy: 80% x18% Probably would buy x % of Probables who actually buy: 30% x43% c Definite Purchases + Probable Purchases: 14.4% + 12.9%= Trial Rate d Target Households x 11%: 58,500,000 x11% e Target Households x 89%: 58,500,000 x11% f Trial Rate x Customer Awareness x ACV: 27.3% x 50% x 40% g Trial Rate x Non-Customer Awareness x ACV: 27.3% x 12% x 40% hTarget Households x Cucina Fresca Pasta Customers Adjusted Trial Rate:58,500,000X5.46% i Target Households x Non- Cucina Fresca Pasta Customers Adjusted Trial Rate: 58,500,000 x 1.31% j Cucina Fresca Pasta Customers Trial Purchases + Non- Cucina Fresca Pasta Purchases: 351,351 + 682,051.5 k Rounded down because cannot include 0.5 of a household l Total Trial Purchases x Repeat Purchase Occasions x Excellent Product Repeat Rate: 1,033,402 x 2.00 x 49% m Rounded down because cannot include 0.96 of a product n Trial Purchases + Repeat Purchases: 1,033,402 + 1,012,733
a b

Total Sales Volume Retail Sales Volume TruEarth Sales Volume In Excess of Return Requirements

$25,331,151.30o $16,465,248.35p $4,465,248.35q

o p q

Total Purchases x Average Spent per Purchase: 2,046,135 x $12.38 Retail Sales Volume x (1-Food Retailers 35% Gross Margin): $72,835,811.1 x (1-0.35) TruEarth Sales Volume Minimum Return Requirement: $16,465,248.35- $12,000,000

Exhibit 2: Whole Grain Pizza Concept Purchase Volume Estimate, Year 1 (Mediocre, Average) Inputs from Exhibit 2 Trial Rate Total Trial Purchases Repeat Purchase Occasions Repeat Rate, by Product Services Mediocre Product Average Product Repeat Volume, by Product Scenario Mediocre Product Average Product Total Purchases Mediocre Product Average Product Total Sales Volume Retail Sales Volume (Mediocre Product) TruEarth Sales Volume (Mediocre Product) Retail Sales Volume (Average Product) TruEarth Sales Volume (Average Product) 27.30 1,033,402 2.0 21% 37% 434,028.84r 764,717.48s 1,467,430t,u 1,798,119v,w $18,166,783.40x $11,808,409.21y $22,260,713.22z $14,469,463.59aa

Based on these wholesales volumes, the average product perception meets the return requirements. The firm would gain $2,469,463.59 in extra cash if they were to launch this product. However, the mediocre product does not meet the return requirements (off by $191,590.79). We are only off of the return requirements by a small margin (1.596%bb); thus, we may consider taking on this initial loss for the first year. Considering the growth rate of Cucina Frescas retail sales between the 3rd quarter of 2006 and 2007 (194.44%cc), we may predict that the initial sales volume will grow between the first and second year of the product launch. The future sales volume will most likely cover the companys initial return requirements in the 2nd year and the losses from the first year

Total Trial Purchases x Repeat Purchase Occasion x Mediocre Repeat Product Rate: 1,033,402 x 2.0 x 21% Total Trial Purchases x Repeat Purchase Occasion x Average Repeat Product Rate: 1,033,402 x 2.0 x 37% t Total Trial Purchases + Mediocre Product Total Purchases: 1,033,402 + 434,028.84 u Rounded down because cannot have 0.84 of a purchase v Total Trial Purchases + Average Product Total Purchases: 1,033,402 + 764,717.48 w Rounded down because cannot have 0.48 of a purchase x Total Purchases for Mediocre Product x Average Spent per Purchase: 1,467,430 x $12.38
r s

Retail Sales Volume for Mediocre Product x (1-Food Retailers 35% Gross Margin): $18,166,783.40 x (1-0.35) Total Purchases for Average Product x Average Spent per Purchase: 1,798,119 x $12.38 aa Retail Sales Volume for Mediocre Product x (1-Food Retailers 35% Gross Margin): $22,260,713.22 x (1-0.35) bb (TruEarth Sales Volume (Mediocre Product) Return Requirement)/Return Requirement: ($11,808,409.21$12,000,000)/$12,000,000 cc [{ (2007 Retail Sales-2006 Retail Sales)/(2006 Retail Sales)} + 1] x 100%: [{($35,000,000$18,000,000)/($18,000,000)} +1] x 100%
y z