Introduction
1980s saw an increasing account of dual
income households in America. With mothers, wives and sisters working out of
homes to contribute towards the family income for a better lifestyle; there was
also the incidence of ‘time poverty’ with less time remaining to cook meals at
home. DeRosa founder of TruEarth started the company to take advantage of the
opportunity and sell ready to eat healthy gourmet meals to the rising middle
class.
TruEarth launched Cucina Fresca, its
gourmet pasta range which was an instant hit in the market. It now deliberates
over launching a healthy ready to eat pizza range. Given the market size of
$4.4 billion of this particular category, launching the pizza offering is quite
lucrative to TruEarth. However, it has to be careful in choosing the right
course of action by taking into account, reception by the prospective customer
and the strategies of its various competitors in this segment.
Problem Analysis
The estimated size of pizza market in the
USA is about $53 billion (2007). Of this two thirds of the turnover comes from
restaurants, deliveries and take aways. Just about 11% which is approximately
$4.4 billion from the total turnover, comes from the refrigerated pizza sales.
This is the segment TruEarth is eyeing. However, as players such as Nestle and
Kraft already have presence in the segment with their low cost offering and a
close competitor Rigazzi is gearing up to launch a similar product as
TruEarth’s, focus of TruEarth is on coming up with a pizza which is not only
rightly priced but is also healthy and tastes good.
TruEarth
can take over this segment by simply materialising on the fact that most pizza
consumers do not want to cut on their pizza consumption. Almost 33% have
expressed that they’d want a pizza offering which is healthier than the usual
pizza. Hence the need gap is quite obvious and moving at the right time can
bring huge profits to the company.
Problem Statement
Thus, gauging from the situation,
TruEarth’s problem is deciding between two proposed ways to proceed. That is,
either to capitalise on a first mover’s advantage with its unique offering or
to wait for Rigazzi to take the first step and then follow it afterwards.
Alternatives
The alternatives present in this case are
two and our explained below:
1.
The first option is to gain on
a first mover’s advantage; taking the market by storm and establishing a
substantial market share by aggressive marketing.
2.
The second option is to launch
after Rigazzi and gain a better idea of how the market is likely to react to
the offering by TruEarth. This is a safer approach if TruEarth is unsure of the
results of the various researches it conducted.
Recommendation
The best approach for TruEarth will to
launch first and take the first mover’s advantage. The company has already
successfully launched Cucina Fresca on the basis of Nielsen BASE research
method; and if the results of the study are to be believed for this new
offering than surely TruEarth should kaunch first and capture the market.
The company needs only about $12 million of
sales revenue to break even in the first year. As the survey and studies point
out that, even if the product turns out to be mediocre the revenues will be
approximately $14.5 million in the first year. If the product turns out to be
excellent, TruEarth may see approximate total revenue of $22.6 million. Thus,
the company gains in either case, should the product turn out to be mediocre or
excellent.
Conclusion
The case analysis has been successful as
far as arriving at the best possible solution to the problem is concerned.
However, it is recommended for the managers at TruEarth to double check the
results of various studies conducted under the Nielsen BASE method. Also,
corrective measures should be taken according to the knowledge unearthed about consumer
preferences (such as making crust less chewy and making the pizza reasonably
priced). Lastly managers should endeavour to find out about the attitudes and
trend in markets other than the high potential ones to have a clearer
understanding of the product’s appeal and its prospect of gaining a sizeable
market share and penetration.
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