Green Giant

Analysis of Green Giant Case

1. What studies should Green Giant buy?

The studies selected for this analysis need to provide the necessary information to take the decision while being cost effective. Our analysis suggests that the studies that Green Giant should buy to make a informed decision related to launch of the product in Quick Thaw Packaging are as follows:

Tests	Vital information captured
Market Data	· Frozen fruits have only 2% in the market which is very less. · Around 60 % in frozen fruits is from vegetables and fruits. · Retail grocery stores spending on frozen fruits have grown only 8 %. While frozen vegetables growth is 38%.These tables give us an idea as to what the market is for frozen fruits like.
Consumer Attitudes: Frozen Fruits	· To increase popularity ‘CONVENIENCE OF STORAGE’ and ‘ACCEPTANCE OF VARIOUS CANNED FRUITS’ has to be increased. · Long thawing time is a disadvantage as per table 5B.So bringing in "Quick thaw" will increase acceptance which is an important factor influencing popularity as per Table 5A.
Two City Taste Test	· Birds Eye is the preferred brand amongst all the respondents. · 65% of homemakers mentioned dislike for Green Giant frozen fruits and main reason was the taste(12%) ,they felt it was very sweet. · Mellon Balls is not accepted as a product.(39%) · Birds Eye Cherry product has a major dislike.(71%). · Green Giant should not invest in Mellon and Cherry. · Method of preparation is an advantage for Green Giant.
Consumer Package Preferences	· In case the company wants to launch Strawberries, Peaches, Blueberries they should not launch it with cream sauce. Syrup sauce and quick thaw pouch is preferred.
Three City Taste Test	· People have readiness to buy Mixed Fruits, so Green Giant can consider it as a product to be launched.
Package Test	· Quick Thaw packing is highly favored irrespective of the brand.
Pricing Study	· Pricing should be done 31-40C as max respondents are in that category.
Competitive Information	· As per table 26A and 26B it appears that chief competition Birds Eye has reached saturation in promotions and advertising.
Nielsen Data and Projections	· Sales data, to project the profitability.

2. Will Quick Thaw expand the market for frozen fruit?

Yes, quick thaw will expand the market for frozen fruits because of the following observations:

a) Table 5b suggests that consumers think “long thawing time” as a disadvantage. This will be comparatively less for quick-thaw packaging.

b) Table 11 suggests that 72% interviewees preferred quick-thaw packaging method.

c) Table 18 suggests that consumer reaction was positive for Strawberries, Peaches, and Blueberries packed with quick thaw pouch.

3. If quick –thaw expands the market for frozen fruit, who will the major competitors and what may Green Giant expect?

Green Giant will face a major competition from Birds Eye as their test marketing has already begun for Quick Thaw packaging. Following points provide illustration to this:

a) Table 11 suggests that majority respondents prefer Quick-Thaw packaging with 72% in favor of that. And Birds Eye has already launched tests in the market for the same so Green Giant would be facing tough competition in it.

b) Green giant might also come up with syrup sauce and quick thaw pouch as it has got favorable responses for this category from consumers as shown in table 18.

4. Will frozen fruits in the quick thaw pack be profitable for green giant?

Quick thaw packaging has high levels of acceptance as explained in the above description. This means that the chances of success of this packaging are high. Balance sheet of 2007 as compared with 2006 indicates that capacity in terms of plant and equipment has been upgraded by raising new capital in the current fiscal year.

In terms of profitability of the quick thaw packaging, analysis of the cost structure versus the pricing in the market shows that it would be profitable for green giant to sell frozen fruits in quick thaw packaging.

Capturing the market sales trend (table 30b) for the frozen fruits market gives us a prediction of sales for the month of August – September 07.

YoY, With a decrease of 10% in units and 5% in retail sales, projected sales is 57575 units and total retail $21900 going by the trends, as depicted by the graph below.

Delivery cost per case is 6.25 to 7. As one case contains 24 units of 16 ounce of fruits, this makes per unit cost for the company at nearly 26cents. Pricing study provides information that per doz cost would be $4 to $4.55, i.e., after retailer markup of 25% to 30% would make the per unit selling cost of 29 to 30cents. This shows that selling one unit of quick thaw packed fruit will give nearly 3 to 4 cents profit.

Keeping the projection for near future and the profit per unit, it can be deduced that the product would generate profit for the company.

Annual volume sales quick thaw of bird eye for the current year is 8.4 million ref: (table 30a). Assuming that Green Giant is considering bird’s eye as a close competitor, it would require production of nearly 7.5 to 8 million cases. This would call for plant expansion by 7 million. But the company already has expanded its plant this year by investing 7.15million. Hence further expansion would not be required. This will avoid any further fixed cost to the production.

From the market survey quick thaw packing is going to be accepted by the market. Launching would be advised through mixed fruit and strawberry flavors. Once these two products grow, other flavors can be introduced one by one.

Learning from the Class

Learning from the Cases – Marketing

Zara

· Merchandizing strategy: wide range and shallow(few) units

· Not lead but follow fashion.

· Tangibilize the service and intangibles the product business.

· Bamboo shoot strategy: Remain low for some time and then grow big.

· Load time = 1 / (1 – capacity utilization). Ideal capacity to be ready for on demand.

· Trend-spotting

· Vertical Integration

· Bullwhip effect

· Differential price strategy

· Oil Stain technique: Flagship store

· Decentralized

Ikea

· Product-Price matrix

· Reverse positioning- no sales consultant and take home yourself concept

· Laddering technique- probing to know preference of a customer

Worthington

Model:

· Awareness, Interest, Desire, Adoption

· Awareness, Interest, Evaluation, Trial and Adoption

· Concurrent engineering

· Product development and feedback go along. Reduces cycle time.

· Benefits segmentation: Psychographic and Demographic

· ROMI – return on marketing investment

Signode Industries

· Never compete only on price

· Distribution model vs direct selling model

Price Flex at Signode Industries

Pricing decision has to take into account the inherent conflict between

· Need to win customers

· The need to halt market share erosion

· And to provide cash for the corporation

· Bolster the morale of the sales force.

Solution

We believe that the company has to raise the prices of the product by 6.8% and give the facility of price flex to its sales force. Price Flex would give the sales person the authority to cut prices and give discount of about 7% over and above the normal discounts. Maintaining the current book prices would not be viable as it would eat into the market share of the company and the competitors would also keep on undercutting by providing increasing discounts thereby keeping prices constant.

Boosting the morale of the sales personnel is a major objective that needs to be achieved. The Sales force has had a tough time in the market competing with other companies in terms of pricing. The new policy of price flex would bolster their confidence in competing with other competitors, such as Alpha and Bentley, and also bolster them to keep the greatest margin possible for the company.

The implementation of the Price Flex would have to change the way the remuneration for each sales personnel is calculated. Instead of giving bonus on the net value of sales done, the new remuneration would be calculated based on the gross margin of profit generated by the sales person. That will drive the sales personnel to get the highest margin from each customer and minimize the discount that he can offer.

Maintaining profitability:Previous experience shows that Increasing prices of the goods have resulted in loss of market share by 10%. Still with a price increase of 6.8% and a [price flex policy, bigger and national account would be retained and increased prices from other buyers would result in greater cash flow.

Increase value added services: This gives a competitive advantage, by providing services suchg as custom sizes, grades, machines and tools. Signode would score over others since no one else provides them.

Maintaining Loyalty of existing Customers: It is important for Signode to distinguish itself from Alpha and Bentley. Both of them do not support customers in customized machines and toolswhereasSignode does. Thus Signode has to differentiate itself in the market by maintaining its advantage in customization.

Stimulating further volumes: To increase the volume of sales of the company by taking action to convert its existing non users (services) into users and increase the frequency among current users, and to expand into under developed markets.

Golden Hybrids

· Slimming the innovation pipeline- focussing on products in demand

· Improper R&D

· Debtor and Inventory days should be considered.

· Value added proposition

BMW

· FAB model- features, advantages and benefits

· Internal and external branding

· Corpus Callosum:

· Product integrity: coherence and FIT- give what is promised.

· Geometric Functionality adoption: design, benefits, cost acceptance

Cofidis

Market segmentation based on attitude

· Enthusiast

· Specialist

· Receptive

· Adverse

MBNA

· Viral marketing: word of mouth

· Affinity marketing: get the right customer and retain them

· Lifetime value of customers:

· Profit and Growth = Employee Satisfaction = Service Value = Customer Satisfaction

· No correlation between market share and profit. Quality of market share is important.

Push and Pull strategy

· Push – reaching customers directly through wholesalers and retailers

· Pull – wherein you generate demand for product thru advertisement and then consumers will be curious to know about the product

· BRE- business re-engineering: Am I do right things?

· BPR- business process re-engineering: Am I do things rightly?

ü To improve cost, quality and delivery time

Building Brand Equity

· Last fool syndrome – people hope price will rise and the guy who buys last falls in this trap. He is fucked.

· Value = Benefits offered/ price

· Generally you should offer more benefit and increase value

· Brand weight

ü High awareness

· Brand Length

ü Stretch into new products/services

· Brand breadth

ü Displays demand of brand in International market

· Brand depth

ü Brand segments the consumers on higher values. Eg: Apple

Financial indicators

ü Churn rate: % of customers leaving

ü CLV: present value of all future cash flows expected from customers

ü Factors considered: total revenue (value of purchase, repurchase rate, quantity of purchase, buying for how many years, profit obtained) and cost of acquisition (including marketing costs)

ü CAV- Customer’s asset value:

ü No. of customers * CLV

ü More powerful the brand more the CAV

Net promoter score

ü X = % of people recommending

ü Y = % of people not recommending

ü NPS = X – Y

ü Non-moving inventory biggest drawback in marketing and retail.

ü Cross margin is return on inventory investment.

ü Acquisition cost = total cost/ response rate

3 frameworks for propagating Value Based Management

1) Balance Scorecard

2) EVA

3) Activity Based cost eg: Godrej

BSC

· Financial health

· Customer satisfaction

· Internal business processes

· Learning/growth/innovation

ABC

· Identify activities

· Identify variance on those activities

· Identify standards on these activities

SIGNODE

SIGNODE

Q. Should Gary Reed implement Price Flex?

Yes, because of the following main reasons:

1. Alpha is the biggest competitor for Signode. Most of the competitors sold strapping roughly at 95% of Signode’s book price. They faced intense competition on price in the market causing a fall in the market share by 10%. Also there are concerns that the competitors, who even though have increased their book prices, might continue to charge actual price levels in an effort to gain market share. Competitors have also traditionally followed dropping book prices along with Signode, and any reduction now would not help. Signode, in this situation needs to control pricing out of the gamut of the book price, and implementing Price Flex would be the apt solution.

2. Quadrant analysis of price paid vs cost to serve provides the following reasons for us to believe they should implement price flex:
- In a situation where cost to serve and price paid are either both high or both low a price increase needs to be implemented.
- In a situation where cost to serve is very high and price paid is very low, an immediate price increase is needed.
- Only the quadrant where price paid is high and cost to serve is low, no price increase should be done.

3. They are a highly leveraged company. It would not be feasible to provide same high discounts to all customers. Thus, they need segmentation to drive the discounting model. They can continue to charge premium prices to the service oriented customers while offering discounts to the customers who purchase this on a commodity basis. This would allow them to strike a balance between managing customers and profitability at the same time.

4. In the current context of falling market share as well as a falling profit margin while the raw material costs are increasing, passing the costs to customers directly would further decrease the market share. This is so because of customers’ options to move out to the existing fierce competition. Consumers want strappings at lower prices, rather than new tools and new machines. So Signode should focus on price flex to achieve lower prices for these customers.

5. Their sales volume through distributor is already less than 1%. Since they don’t have a strong distributor network and rely heavily on their sales team, they need to empower them to take decisions based on the preferences of each customer. Implementing Price Flex would allow them to give these options to the sales team.

ZARA

ZARA

1. Zara implemented “Quick Response”, helping retailers to reduce errors in forecasting and inventory management by planning assortments closer to the selling season probing the market. Zara would typically take no more than 6 weeks to deliver a product into stores starting with the design phase, in contrast with a period of 6 months for its competitors. Zara had used “Just In Time” very effectively.

2. Zara had a standardized product strategy and they positioned these products differently in each individual market. They utilized multiple markets to make adjustments in product mixes to obtain maximum profitability.
When entering a new country, they opened a flagship store in a major city, and gathered marketing insights into local demand patterns. These analyses would be used for countrywide expansion.

3. Zara created artificial scarcity in the multiple markets it operated in. They did this using rapid product turnover, furnishing their stores with new designs twice a week. Designs would typically phase out within a 3-4 weeks signaling customers purchase as they see, before the design is no more available.
Moreover, fabric purchased was un-dyed to provide flexibility for in-season updating of fashion.

4. They continuously tracked customer preferences. They would employ young staff with 78% women who would provide their insights to designers on a regular basis. These were incorporated in the continually evolving designs.

5. Zara used consumption information system that supported detailed analyses of PLC and tracking customer preferences. Apart from this, worldwide sales data was captured by Zara’s IT systems.

Mystery Shopping

Background of GAP

GAP is an American clothing and accessories retailer based in San Francisco, California. It is a part of the group with the same namesake ‘The GAP, Inc’. It was founded in 1969 as a single store by Donald G. Fisher and wife Doris. The store's merchandise consisted of Levi's and “Long Playing” records; later they came up with their own private label in 1974.

The GAP, Inc today is one of the world's largest specialty retailers, with approximately 3,100 stores and fiscal 2009 revenues of $14.2 billion. They achieved this by slashing costs and improving the margins. Gap, Inc. has more than 135,000 employees and operates over 3,465 stores worldwide. Stores in Canada, France, Ireland, Japan, UK, and US (and Puerto Rico) are company-owned stores. Stores outside of these countries are owned and operated by franchisees.

GAP Inc. operates five of the most recognized apparel brands in the world. These are:

· Gap

· Banana Republic

· Old Navy

· Piperlime

· Athleta

Culture at GAP: The culture at GAP helps us understand why the brand is such a huge success. It mainly emphasizes on keeping its customers first and it continuously works on quality of its clothes to meet customer’s expectations. It always looks for different ideas and new ways of working, inspiring creativity. GAP works with integrity and believes in giving back to the Society. It meets all its goals by taking responsibilities and setting priorities.

Chronological evolution of GAP:

· 1969: Opens the first store on Ocean Avenue in San Francisco

· 1970: Sales reach $2 million. Second store opens in San Jose, Calif.

· 1974: First private label store opened. Launches "Fall into the Gap" campaign

· 1976: Gap goes public offering 1.2 million shares of stock on the NYSE

· 1986: The first GapKids store opens in San Mateo, Calif.

· 1987: The first GAP store outside the United States opens in London, England

· 1990: The babyGap line is born, debuting in the GapKids store in San Francisco, Calif

· 1992: Gap becomes the second-largest selling apparel brand in the world.

· 1997: Gap opens its Online Store at gap.com

· 2000: Gap launches its Gap Maternity on Gap.com

· 2006: Gap stores open new franchisee stores in Malaysia, Singapore, UAE

· 2009: Gap, Inc co-founder and board member Donald Fischer dies at the age of 81

Strategy employed to enter UAE:

Gap Inc. announced a franchise agreement with leading retailer, Al Tayer Group, to introduce into five key markets in the Middle East. Al Tayer Group plans to open about 25 Gap stores by 2010. The first Gap stores opened in the later part of 2006.

Marketing Strategy (and Target Customers) of GAP

GAP tries to market itself as a brand for young people with middle level incomes and focus only on casual wears. In promoting their brand, they intend to use both traditional medium like print media, billboards and non-traditional media like internet. They also intend to keep growing in the international markets. Also, it has regularly used Hollywood celebrities to market itself.

Their segmentation, target market selection, positioning is as follows:

· Segmentation: GAP follows various segmentations like geographic segmentation like place where the store is located, demographic segmentation like gender, age and behavioral segmentation like what kind of clothes people prefer.

· Target Market Selection: Out of the above segments, GAP has chosen to focus on men, women of younger generation who like to wear casual wears and have also started a store for kids. They target those customers who want good quality but affordable clothes.

· Positioning: They have positioned themselves as a brand with fashionable clothes for the middle income segment (affordable) young customers in the smart and business casual wears category.

GAP – Competitive intelligence

To identify the competitive intelligence of GAP, we identified the following main clothing retail brands. We went to their stores and made the observations as detailed below:

1. Aeropostale: is an American clothing retail chain that mostly sells casual clothing with over 900 stores in the United States, Canada, Puerto Rico and the United Arab Emirates. Their stores are usually located in shopping malls and large marketing areas. They have recently launched a line for kids also. We made the following observations about their store:

· They do not have a kid’s section

· The space utilization was not done properly. The store looked very congested

· Aesthetic sense was not good

· There were lot of varieties in design

· The clothes were mostly affordable

· Lot of bright colored clothes were available ( as compared to GAP)

· Sale sign was prominently visible

· Location of store was not that good as compared to GAP. It was on the first floor corner side of Dubai mall

· They were doing lot of advertisements in the mall itself to increase awareness of their sales

· Out of Zara, GAP and them, their service was the best as customer service representatives were pro-active and approached the customers themselves without asking

2. ZARA: Zara is the flagship chain store of Inditex Group owned by Spanish tycoon Amancio Ortega. The group is headquartered in Galicia, Spain. Their USP is that they need just 2 weeks to develop a new product whereas the industry average of 6 months. Its most unusual strategy is its policy of almost zero advertising. We made the following observations about their store:

· Sale sign was not prominent

· There were 3 sections – Men’s section, Female’s section and Kid’s section

· Prices are comparatively higher

· They were trying to cross-sell by putting shoes, pants and shoes at one place

· Their customer care representatives were not pro-active

3. H&M: H&M offers fashion and quality at the best price through a broad and varied range of fashion. The collections are extensive and replenished within a day. Hence, customers can always find something new at H&M. It is a Swedish clothing company and cater to the following segment - women, men, teenagers and children. It has around 2,000 stores in 37 different countries and employs around 76,000 people. Observations about their store are:

· Display of clothes through main windows was prominent

· Arrangement of clothes in H&M was very systematic

· Clothes on sale were not segregated and were mixed with fresh arrivals

Services

Following are few of the prime intangible services that we identified in the mystery shopping exercise:

1. Return policy: GAP accepts unwashed, unworn or defective merchandise at any GAP store locations in the UAE, Kuwait, Bahrain, Qatar and Oman within 14 days of purchase date. Either payback or Customers will have choice of exchange as well.

2. Customers were provided the facility to pay either in cash or through card also.

3. Attendants were customer friendly. Though they did not express any proactive behavior in helping customers, but they are available on call throughout the store. Most important thing to be noticed is that cash counter attendants helped the customers by taking floor attendants position also.

Observations

Our mystery shopping yielded a number of key observations on GAP, as listed below:

· Prime location: Just way ahead of the main entrance to the mall, near the land mark aquarium which everyone would visit.

· 25% to 40% SALE board visible from entrance, aquarium, stairs and first floor also.

· On entering the shop, segregated men and women sections. Kids Section was internally connected and also had a separate entry.

· Only casual wears and no formal wears in all the sections.

· Shopping bags were not available.

· Very few bright colored clothes were there. Most of the clothes on the rack space contained dull colored dresses and was not visible properly to the people walk by.

· Racks and tables were spread all over the floor which caused hindrance to free movement of customers within the shop. Space utilization was not effective.

· Unnecessary replication of same design and pattern of clothes in the rack space.

· The clothes under sale were kept in on a separate table with sale board. The clothes which were not on sale were kept mostly on racks and shelves.

· Cash counters placed at the centre of the shop.

· Optimum lighting in the entire store.

· Sizes of few types of apparel were not available. Also, rack spaces were left empty in between.

· Floor attendants were found idle and chatting with each other. They responded only on call.

· Company has launched premium series of jeans called 1969 which did not click in the market. These jeans were not kept at the entrance. They were kept in the interior section of the stores.

· Men section contained male attendants and Female attendants in female and kids section. This is applicable for cash counter as well. This provided comfort to the customers choosing any kind of garments.

· “Made in XXX” tag was prominently displayed on the back side of the clothes.

· Product prices are targeted for middle income segment customers.

Recommendations

Based on our GAP mystery shopping experience we would make the following recommendations to GAP for them to make a lasting impression on the customers:

1. GAP can offer Membership Cards to retain customers and to create customer loyalty.

2. Shopping bags can be provided in the shops to make the whole shopping experience more comfortable as currently people have to carry all the selected clothes

3. Should offer a wider range of designs and vibrant color offerings.

4. Store space utilization can be improved to provide free space for movement of the customers

5. Sales attendants can be trained to be more proactive in helping the customers rather than waiting for a call from customers.

6. Advertisement can be improved as the store is offering an ongoing sale through bill boards and pamphlets etc as done by its competitors.

References:

1. http://en.wikipedia.org/wiki/Gap_(clothing_retailer)

2. http://www.gap.com/

3. http://en.wikipedia.org/wiki/Zara_(clothing)

4. http://en.wikipedia.org/wiki/H%26M

5. http://en.wikipedia.org/wiki/A%C3%A9ropostale