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MKT Nature View Farm

MKT Nature View Farm

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Published by: namzrulz on Jan 06, 2012
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Natureview Farm

Tuck School of Business Prof. Y. Jackie Luan

Targeting. and Positioning (STP) Marketing Tactics (4Ps) Product (Choose Value) Place/Distribution (Deliver Value) Promotion (Communicate Value) Price (Capture Value) .Marketing Management Framework Situation Analysis (3Cs) Customer Analysis Competition Analysis Company Analysis Marketing Strategy (STP) Segmentation.

Key Discussion Points How has Natureview succeeded so far?   Which growth option should Natureview pursue?  How can it manage the risks associated with the chosen option(s)? .

Harvard Business Review. Strategies for Diversification. 35 (5). . 1957. Igor.Growth Options: The Ansoff Matrix Markets / Channels Present Present Products New Market Penetration New Market Development Product Development Diversification Adapted from Ansoff.

74 (1 . (Natureview) Distributor Selling Price Margin $0. 8 oz.31 $0.27) $0. Cost Manuf.46 = $0.54 (1 ...54 = $0.54 33% = ($0.31)/0.46 15% Retailer $0.74 % Margin = 27% $ Selling Price .46 $0.46-0.15) $0.$ Cost $ Selling Price .Example: Supermarket.

69 37.99 $0. Margin $0.57 $0.0% $1.52 $2.69 40. Selling Price Manuf.6% .62 35.76 43.99 $0.98 Manuf.46 $0.19 $2.75 $0.17 36.88 $0.89 $2.08 n/a $3. Supermarket Natural Foods 32-oz.68 $0.0% $1.9% $1.6% $1.35 $2.84 $1.48 $0.70 $1.Selling Prices and Margins by Product / Channel 8-oz.18 $1.85 $2.54 n/a $0. Cost Contribution Per Unit Sold % Manuf.97 n/a $3.77 $1. Supermarket Natural Foods multi-pack Supermarket Natural Foods Retailer Selling Price Distributor Selling Price Wholesaler Selling Price $0.31 $0.15 32.07 $1.31 $0.15 $0.15 $0.5% $0.74 $0.

Calculate Incremental Profits = Incremental Revenue ± Incremental Cost .Revenue and Profit under Each Option Steps: 1. Calculate Incremental Revenues = Manufacturer Selling Price X Incremental Volume 3. Calculate Natureview¶s Selling Prices 2.

Consumer sales promotions Manufacturer Retailer Consumer PUSH strategy Trade promotions.Two Promotion Strategies: Push vs. Sales force calls . Pull PULL strategy Advertising.

000 $120.200.2MM per region $10.950 ($2.500 per chain.888) .220. 9 West) Incremental Revenue: Costs Advertising Slotting fees Incremental sales org.838) ($211. yogurt to 20 supermarkets in two Regions (11 Northeast. 4 times $15.000 per chain per SKU $200.000 $7.000) ($870. Trade promotion (NE) Trade promotion (W) Broken commission $16.000 per chain.950 $5.000) ($642.400.000) ($1.000) ($320.950 $1. Incremental marketing org.070.070. 4 times 4% of sales Calculation Incremental Revenue Incremental Gross Profit -Total Advertising -Incremental SG & A -Slotting fees -Trade promo costs -Broker¶s commissions Incremental Net Profit $16.Year 1 Incremental Profits: Option 1 Plan 6 SKUs of 8 oz.

734 1.400.770.995.480.168 (15.978 6.406) (2.000.400.000) 6.467 5 72.265.950 (642.824) (2.324.000) 4.560) 10.110.013.000) 5.903.602 (18.000) 7.Revenue and Profit Projections: Option 1 Year: Sales Revenue Less COGS Gross Profit Less Broker Commissions Less Advertising Cost Less Trade Promotions Less Slotting Fees Less SG&A Net Profit Contribution NPV 1 35.400.000 33.142.173 11.000) 3.481 3.953 3 50.989) (2.800) 9.193) 2 42.802 (1.400.000.722 (22.498.168 (925.020.850.435.419 4 60.576.000) (870.819.021.000) 0 (320.002.624.000) (870.000) 5.687) (2.950 (10.518.000 23.838) (2.000) (320.220.162 (1.067 .000) (870.320.000) 0 (320.000) (1.400.285.000 16.000) (870.748.000) (211.826.000 19.888) (196.000) 1.000) 0 (320.070.000) (870.000 27.332.400.140 (13.000) 0 (320.903.140 (771.200.

107 $10.325 $11.802 $4.214 ($823) $11. Supermarket) $9.013 2% (Supermarket 6-8 oz. Supermarket) Year 1 Revenue Year 1 Profit Year 2 Revenue NPV of Profit Over 2 Years Year 5 Revenue NPV of Profit Over 5 Years Incremental Market Share $16.798 11.640 10.2 % (Natural Foods) .057 $1.310 $19.608 $5.317 $781 $3.071 ($212) $19.6% (Supermarket 32 oz.) Option 3 (Multipack Natural Foods) $3.Summary of Financial Calculations (in 1000s) Option 1 (8 oz.285 $1.436 $33.815 $1.) Option 2 (32 oz.

Which Option to Pursue? Option 1 Revenue Objective SR profitability LR sales/profits potential Channel Partnership Competitive Response Cost to Induce Trial Brand Equity Dilution Organizational capabilities Exceeds Loss High First-mover Highly Alienating Very Risky High Possible Low Option 2 Exceeds Deep Loss High First-mover Alienating Risky Very High Possible Low Option 3 Falls Short Gain Low Might miss the boat Enhancing Low Low No High .

Key Discussion Points ‡ How has Natureview succeeded so far? ‡ Which growth option should Natureview pursue? ‡ How can it manage the risks associated with the chosen option(s)? .

product innovation Maintains price premium Builds up its marketing function Partnership / M&A .g. cause marketing. ecofriendly image): advertising. Co-promotions (e. ³cross-ruff´) Adopt ³niche´ positioning in supermarkets Premium pricing: Avoid price wars Partnership / M&A Strengthens brand (health benefits + all natural.Expanding into Supermarkets Risks Alienating Current Partners Attracting Major Players¶ Response Brand Equity Dilution ‡ Lack of organizational capabilities ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Possible Solutions Category expansion Exclusive products Co-Advertising.

What Happened? ‡ Stonyfield Farm. ran into stiff competition but did gain foothold. NH ‡ Undertook a mix of all 3 options ‡ Less successful with 8-oz than 32-oz in supermarkets. ‡ A new multipack targeted to babies and toddlers (³Yobaby´) was a runaway success 50% of $200 million revenue in 2007 . Londonberry.

What Happened? (cont.) ‡ New products introduced a year earlier in natural foods stores than supermarkets. . Stonyfield is typically the single organic yogurt. ‡ Acquired by Groupe Danone in 2001. ‡ Competitors attempted supermarket entry with mixed results.

revenue. ‡ Strategic impact is often more challenging to gauge and manage (e. also customers with their own needs.g. cost. ‡ Channel expansion is an attractive growth strategy but can be risky. gross margin. profit. organizational capabilities) ..e.Lessons ‡ The distribution channel is not just a conduit. short-run & long-run). brand equity dilution. competitive reaction.. channel conflicts. ‡ Different channel choices often have different financial impact (i.

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