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Perdue Foods Marketing Case Analysis

Perdue Foods Marketing Case Analysis

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Published by Melissa Summers

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Published by: Melissa Summers on Feb 07, 2012
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12/29/2012

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 AFamilyCommitmenttoQualitySince1920.
PerdueFarms
MarketingManagementIMGT8571,Spring2011ProfessorRonaldSchillMontereyInstituteofInternationalStudiesMelissaSummers,NicholasTaylor,WilliamGao,YiRoyLu,andLarisaMakshanovaMarch12,2011
 
PerdueFarms2
I.
 
ExecutiveSummary
PerdueFarmsisresearchingtheviabilityoflaunchinganewproductlineofchickenhotdogs.Inordertoprovideadefiniterecommendation,ourteamconductedin-depthresearchinordertoanswerseveralquestionsthatwereonthemindsoftheexecutives.Thequestionsweaddressedwere:HowbigisandwhatdemographicscomprisethetotalhotdogmarketandthetargetmarketthatPerdueplansonmarketingto?HowcanPerdueadvertisethisproductandatwhatpriceshouldtheysellthehotdogsinordertocoverallcosts,includingoverhead?IsthereawayforPerduetoguaranteethatthequalityofthenewchickenhotdogsdoesnottarnishtheoverallcompany’shighqualityimage?Withthesequestionsanswered,wehavedecidedtorecommendthatPerdueFarmsnotlaunchthisproductatthistime.However,wealsorecommendthatPerdueFarmscontinuetoresearchthemarketandoptions,increasetheirnumbersofcockerels,andlookintoacquiringhotdogproductionfacilitiesthattheycancontrolallaspectsofquality.WefeelthatchickenhotdogsmaybeamoreviableoptionatalaterdateifPerdueisabletoincreaseitsfacilitiesandmeatsupply.
II.
 
ProblemDefinition
GivenPerdueFarms’highqualityimage,thepoorpublicimageofmechanicallydebonedmeat(MDM),andthepossiblefuturebanofMDMalltogether,thesupplyofcockerelslimitingthenumberofhotdogsthatcanbeproducedinaweek,andthelackofcontrolovertheproductionprocessshouldPerdueFarmsconsideredtheviabilityoflaunchingalineofchickenhotdogs.Inresponsetotheindustrytrendmovingawayfromdressedfowlandtowardsprocessedmeat,PerdueFarmsisdeterminingwhethertoenterthechickenhotdogmarket.Thedecisiontolaunchthechickenhotdogswillbedeterminedbasedonwhetherornottheventuremeetsthreecriteria.ThefirstcriterionisthatthequalityofthePerduehotdogmustsurpassallcompetitorsonthemarket.Second,therevenuegeneratedfromthehotdogsmustcoverallcosts,includingoverhead.Finally,thehotdogmustbemadeentirelyofPerduemeat.Fromherewewillgointodetail,exploringthevariouscomponentsthatwillleadtoarecommendationtolaunchthenewproductortoscraptheidea.
III.
 
DecisionsToBeMade
Decision1:TargetMarketSelection
MarketDefinition
Thenationalhotdogmarketisbrokendownintotwoprimarysegmentsofretailandinstitutional/concessionaryandisbelievedtobeworthnearly$2billionannually.Thenationalmarketisthenbrokendownintogeographicalmarkets,whichtendtobedelineatedfurtherintoregionalsegments.Currently,OscarMayerholds25%oftheNortheastregionalmarket,whilethetopfourteenhotdogbrandsshare90%.Thehotdogmarketisalsoseparatedintosegmentsbasedonindividualconsumptionlevels,fallingintothecategoriesof:heavyconsumers(whocomprise
 
PerdueFarms326%ofthemarket),mediumconsumers(comprising33%),lightconsumers(representing29%),andnon-consumers(12%).
Option1:Heavyconsumers
ProsCons
l
 
Verylikelytoconsumehotdogsoften
l
 
RelativelyignorantaboutwhetherMDMisusedinproducinghotdogs
l
 
Notsensitivetotasteandnutritionofhotdogs,whicharethestrengthofthePerdueBrand
l
 
Theirbrandloyaltyislow
l
 
Highlycompetitive
Option2:Mediumconsumers
ProsCons
l
 
Accountforthelargestpercentageofthehotdogmarket
l
 
Moreawareofthetasteandnutrition
l
 
maydamagethereputationofPerduebrand
l
 
pricesensitive
l
 
highlycompetitivetoo
Option3:lightconsumersandnon-consumers
ProsCons
l
 
hugemarketpotential(31%ofthemarket)
l
 
tendtochoosehotdogsbasedontheirtasteandnutritioninsteadofprice
l
 
Perduebrandismorerecognizabletothemasahighqualitybrand
l
 
relativelylowercompetition
l
 
brandloyaltymaybehighoncetheyrecognizePerduehotdogsasthebestqualityhotdoginthemarket
l
 
maydamagetheimageofPerduebrandwhentheyknowMDMisused
l
 
requirehigheradvertisingbudgettopromotePerduehotdogamongthem
FinalDecision:lightconsumersandnon-consumers
GiventhefactthatPerdueisahighlyrecognizedbrandthatisassociatedwithhighquality,andthatthePerduehotdogwillbethebesthotdogonthemarketwitharelativelyhigherprice,wewouldchooselightconsumersandnon-consumersasourtargetmarket.Thefirstreasonforthischoiceisthatlightconsumersandnon-consumerscombinedcomposealargerpercentageofthemarketthanheavyconsumers.Anotherreasonisthattheseconsumersaremoreinterestedinthetasteandnutritionofhotdogssothatpricewillnotbetheirprioritywhenbuyingthehotdog.Inaddition,theirbrandloyaltymaybehighbecausetheytendtobuythebesthotdoginthemarket.Perduewouldgofurthertotargetthosenewandlight

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