RSM 332 Marketing Research

Fall 2011

Thursday 1:00 pm - 3:00 pm WO 20

Professor: Mengze Shi

Project: TruEarth Healthy foods case

Chernenko Kirill

998581510
TruEarth it is the" strong player" company, offering healthy and gourmet whole grain products
consisting of only highest-quality ingredients. After the huge success in making fresh and tasty pasta in
2006, TruEarth is planning to extend the product line introducing fresher than frozen and healthier than
delivered pizza. Unfortunately, consumers have too many choices by powerful giants like Kraft and
Nestle. The question is launching this Italian-American product into market or not.

In the first place, we have to focus on 3 things

- how favorable is the market (dynamics and volume)

- how favorable is the product in market (demand and return)

- how to launch it (competition and recommendations)

People need healthy and tasty pizza, which will be easy to prepare and made of only high-quality
ingredients (no dried spices and sweeteners). Therefore, the demand for healthy pizza will be growing in
US together with popularity of diets and products targeting authenticity and quality.

To predict the demand for a new TruEarth's product we have to make simple calculations.

Table A. Whole wheat pizza Purchase Volume Estimate, Year 1

Trial Purchase Marketing Plan

intent (Pizza Adjustment
Survey)
Definitely would 18% Customers of 11%
buy Cucina Fresca
% of "definites" 80% Customer 50%
who actually buy awareness
"Definite" 14.4% Non-customers of 89%
purchases Cucina Fresca
Probably would buy 43% Non-customer 12%
awareness
% of "Probabels" 30% Projected Customer 11x0,5+89x0,12=
who actually buy Awareness 16.2%
"Probabels" 12.9% ACV 40% (from table B)
purchase
Trial Rate 12.9+14.4= Marketing- 27.3%x16.2%x40%=
27.3% Adjusted Trial Rate 1.8%(rounded)
Target households 58.8MM (from table B)
Trial 58.8x1.8 %=1.1(MM)
households(MM)
Repeat purchase 2.0 (from Table B)
occasions
Repeat purchases 2x0.49(excellent product) =
1
Total purchases (1+1.1)x12.38(retail)=26MM
So, there is $26 million of revenue. As Eckstein estimated that 12million is needed to meet company's
return requirements. Therefore profit will be $26MM -12MM = $14MM. Conclusion: launch the
product as soon as possible before competitors!

Unfortunately, this is only the prediction, assuming that customers will find the product excellent. What
if the penetration will not be exactly 11%? TruErth's evaluation is the range between 5% and 15%. Let's
show the link between 3 types of pizza's volume (Mediocre 21%, Average 37%, Excellent 49%) and 3
types of penetration (5%, 10% and 15%)

1st case. Cucina Fresca Pasta Customers 5%, Mediocre 21%

Projected Customer 5x0,5+95x0,12=

Awareness 13.9%
Marketing- 27.3%x13.9%x40%=
Adjusted Trial Rate 1.5%(rounded)
Trial 58.8x1.5
households(MM) %=0.88(MM)
Repeat purchases 2x0.21(mediocre
product) = 0.42
Total purchases (0.88+0.42)x12.38(r
etail)=
16.1 MM
This is the worst case scenario when the product is below average in quality and number of customers
who is aware of TruEarth is only 5%. But still there is 4MM profit.

2nd case. Cucina Fresca Pasta Customers 5%, Average 37%

Projected Customer 5x0,5+95x0,12=

Awareness 13.9%
Marketing- 27.3%x13.9%x40%=
Adjusted Trial Rate 1.5%(rounded)
Trial 58.8x1.5
households(MM) %=0.88(MM)
Repeat purchases 2x0.37(average
product) = 0.74
Total purchases (0.88+0.74)x12.38(r
etail)=
20 MM
3rd case. Cucina Fresca Pasta Customers 5%, Excellent 49%

Projected Customer 5x0,5+95x0,12=

Awareness 13.9%
Marketing- 27.3%x13.9%x40%=
Adjusted Trial Rate 1.5%(rounded)
Trial 58.8x1.5
households(MM) %=0.88(MM)
Repeat purchases 2x0.49(excellent
product) = 0.98
Total purchases (0.88+0.98)x12.38(r
etail)=
23 MM

4th case. Cucina Fresca Pasta Customers 10%, Mediocre 21%

Projected Customer 10x0,5+90x0,12=

Awareness 15.8%
Marketing- 27.3%x15.8%x40%=
Adjusted Trial Rate 1.7%(rounded)
Trial 58.8x1.7 %=1(MM)
households(MM)
Repeat purchases 2x0.21(mediocre
product) = 0.42
Total purchases (1+0.42)x12.38(reta
il)=
17.5 MM

5th case Cucina Fresca Pasta Customers 10%, Average 37%

Projected Customer 10x0,5+90x0,12=

Awareness 15.8%
Marketing- 27.3%x15.8%x40%=
Adjusted Trial Rate 1.7%(rounded)
Trial 58.8x1.7 %=1(MM)
households(MM)
Repeat purchases 2x0.37(average
product) = 0.74
Total purchases (1+0.74)x12.38(reta
il)=
21.5 MM

6th case Cucina Fresca Pasta Customers 10%, Excellent 49%

Projected Customer 10x0,5+90x0,12=

Awareness 15.8%
Marketing- 27.3%x15.8%x40%=
Adjusted Trial Rate 1.7%(rounded)
Trial 58.8x1.7 %=1(MM)
households(MM)
Repeat purchases 2x0.49(excellent
product) = 0.98
Total purchases (1+0.98)x12.38(reta
il)=
24.5 MM

7th case. Cucina Fresca Pasta Customers 15%, Mediocre 21%

Projected Customer 15x0,5+85x0,12=

Awareness 17.7%
Marketing- 27.3%x17.7%x40%=
Adjusted Trial Rate 1.93%(rounded)
Trial 58.8x1.93
households(MM) %=1.13(MM)
Repeat purchases 2x0.21(mediocre
product) = 0.42
Total purchases (1.13+0.42)x12.38(r
etail)=
19.2 MM

8th case Cucina Fresca Pasta Customers 15%, Average 37%

Projected Customer 15x0,5+85x0,12=

Awareness 17.7%
Marketing- 27.3%x17.7%x40%=
Adjusted Trial Rate 1.93%(rounded)
Trial 58.8x1.93
households(MM) %=1.13(MM)
Repeat purchases 2x0.37(average
product) = 0.74
Total purchases (1.13+0.74)x12.38(r
etail)=
23.15 MM

9th case Cucina Fresca Pasta Customers 15%, Excellent 49%

Projected Customer 15x0,5+85x0,12=

Awareness 17.7%
Marketing- 27.3%x17.7%x40%=
Adjusted Trial Rate 1.93%(rounded)
 Trial 58.8x1.93
households(MM) %=1.13(MM)
Repeat purchases 2x0.21(excellent
product) = 0.98
Total purchases (1.13+0.98)x12.38(r
etail)=
26.12 MM
This case is the best but it requires best product and best prices. Nevertheless, in any case total revenue
exceeds total cost, which means that the world must see healthy and tasty TruEarth pizza.

To determine the consumer's point of view on whole grain pizza Truearth team conducted 300 mall
intercept interviews comparing takeout, refrigerated and Truearth Pizza. No doubt that these product
categories are slightly different from each other; in spite of this, interviewees generally consider pizza as
easy-to-prepare and conveniently accessed product for the whole family. Past experience of consumers
shows us that takeout pizza is most convenient and accessible, which gives it the competitive advantage.

Moreover, takeout pizza earned the highest consumers' evaluation in freshness and variety choices. In
terms of quality attributes, consumers rated the highest both takeout and TruEarth pizza because of
high-quality ingredients. In addition, TruEarth pizza scored 9.1 out of 10 (even higher than takeout) for
the healthy ingredients. This fact can be influenced buy the brand image of TruEarth, the company
focused on food made of superior ingredients offering greater quality and authenticity.

Exhibit 6 is showing that 17% of interviewed principal grocery shoppers would switch to TruEarth, if it
were launched. Unfortunately, those customers who prefer to make pizza at home or order from
restaurant are less likely to change their purchase behavior if TruEarth pizza is available on shelves.

All things considered, to satisfy the needs of customers and increase the chances of success TruEarth has
to concentrate on freshness, convenience and easy-to-prepare concept. Furthermore, to take and keep
the competitive advantage over delivered, refrigerated and frozen pizzas TruEarth team should maintain
mind-catching price*(see Table B) as "consumers have so many options we need to compete against"
(Rose Carlton, the director of business development).

However, before taking for credit the suggestions above TruEarth have to launch product first (before
Rigazzi!). If TruEarth is first in market (3-6 months before Rigazzi), it will earn the competitive advantage,
collecting the essential experience and getting into scale production with lowering prices in the future.

Positioning product is also very important part. TruEarth has to say "No" to remorse and "Yes" to
providing pleasure and satisfaction. Introducing "guilt-free gourmet pizza with healthy, whole wheat
crust and high-quality ingredients" TruEarth will be unbeatable (Eckstein, brand manager)
*Table B. Recommendations in terms of quality and prices by competitors

Quality/Prices by competitors' Price

pizza Lower Same Higher
Lower Do not change price Reduce the price Increase the quality,
Quality Same Do not change Reduce the price Make analysis of the
quality prospects within the
market
Higher Do not change price, Make a product of
Increase the variety higher quality in the
of ingredients, competitors'
Make more precise segment
positioning