Roma’s Lite Pizza* *Assume this is a Canadian firm. This marketing plan provides information relevant to the introduction of a new product in the U.S. market. This is a real case, but the company identity has been disguised and information has been altered to protect confidentiality. Getting a Slice of the Pie: A Marketing Plan for Roma’s Lite Pizza Pizza is one of the most popular foods in North America. People eat pizza in restaurants; they take out pizza from restaurants and grocery stores; they make their own at home; and they buy frozen pizza for quick, convenient meals. Sales of pizza products are increasing in the U.S. at a rate of 11 percent annually and sales top $30 billion, up from $17 billion in 1994. However, pizza is a highly competitive, cluttered market. It is also one of the most intensive battlegrounds in the “healthy” food category. As a result, developing and introducing a new pizza product requires sophisticated marketing and marketing communication. New Roman Foods is taking a market-driven approach to a new healthy pizza product by developing its product based on significant consumer input. The strategy behind this new product is detailed in this marketing plan, prepared by the Director of Marketing, who analyses the market, recommends a set of strategies, and coordinates the marketing-mix activities necessary for a successful launch of Roma’s Lite Pizza—a premium, low-calorie, “healthy” pizza - in the U.S. market. Situation Analysis In this situation analysis, we examine corporate goals and background information; the product category; sales trends, distribution, and pricing practices in this product category; relevant competitive information; consumers in this market; and key problems and opportunities. Corporate Review New Roman is a 12-year-old company with three business units: pizza, snacks, and entrees—all sold primarily through food stores. A larger consumer study done last year indicates that consumers perceive that our products are a good value but are not necessarily top quality or great tasting. In evaluating the success of new products, New Roman’s corporate financial guidelines require new products to have at least an 18-percent return on investment (ROI). Business unit managers adhere to these guidelines because only then can the company continue the annual ten-percent or more increase in net profits that the company has enjoyed since 1991. To ensure such financial success, the launch of this new product must be carefully planned and well executed. A review of New Roman’s channels of distribution and research and development for the new product follow. Because New Roman Foods frozen products have national distribution in the U.S. market and authorization for its products in major grocery stores, we will have leverage to obtain authorization for this new product line with our distributors across the United States. This new healthy pizza product, Roma’s Lite Pizza, fits a relatively untapped niche with a potentially large growth opportunity. In 1993, New Roman Foods began investing heavily in research and development to develop the sauces, low-fat meats, low-fat cheeses, and pastas necessary to introduce low-fat, low-calorie, low-sodium, and low-cholesterol Italian food products. An entree product line was introduced in 1993 and succeeded beyond original sales projections. The company’s two other business units continued to develop healthy versions of their products. The snacks line was introduced in late 1998. Research on the pizza line began in earnest in 1998, and now, after extensive development, the company is ready to launch a line of premium, low-calorie (low-cal), “healthy” pizzas. Product Category Review Although premium low-cal pizza may appear to be a niche product, we are operating in a complex category. Though our most direct competition comes from the frozen pizza category, competition will also come from such categories as other frozen entrees, in-store “deli-fresh” pizzas, home-delivery and restaurant take-out pizzas, and, of course, restaurants that serve pizzas. These categories, subcategories, and niches can also be compared in terms of their estimated share of retail pizza sales. That information is provided in the following chart. FIGURE A.1 Estimated 2001 Share of Retail Pizza Sales Restaurant 33% 35% Deli-fresh Frozen pizza 27% 5% Take-out delivery To best understand this competitive environment, we review four market segments: general frozen entrees, low-cal and healthy, frozen pizza, and the specific niche of low-cal “healthy” frozen pizzas. 1. Frozen Entrees The frozen-entree category is a mature, highly competitive category. Although the number of frozen- food entrees has increased over the last ten years, the outlook for this category is still positive. A supermarket trade publication, Supermarket News, has stated that both the economy and “growing interest in nutrition have helped increase sales of frozen dinners and entrees.” Other important considerations regarding frozen entrees follow. Trend Toward Low-Priced Items The economic situation during the last five years seems to have attracted people to the lower-priced entrees. The moderate growth of the economy in the last five years has led to conservative consumer purchasing patterns. Shoppers seem attracted to lower-priced frozen entrees for convenience meals, rather than the more expensive ready-to-eat products, as evidenced by buying patterns in the first few months of this year. Fastest Growth in Microwave Products Microwaves are available in 70 percent of the nation’s workplaces and in even more homes. It is estimated that 50 percent of all cooking is now microwave cooking. The challenge to the microwave food industry (and consequently the frozen-food industry) has been to come up with healthy microwavable foods that also taste good. Substantial R&D investments have been and are being made by frozen-food leaders, and this category is developing into one of the hottest growth areas in the freezer case. Growth in Snacks and Mini-Entrees Another fast-growing frozen-food product category is the meal/snack-type item. These are single-serving items such as hamburger and fries, chicken tidbits, pita- style stuffed sandwiches, mini-hotdogs, and small pizzas. This category is exploding, according to Ed Russell, director of market research at Campbell Soup Company, who was quoted in Progressive Grocer as saying that it is partly the result of the trade’s desire to compete with fast food and the 2. Low-Calorie, Healthy Foods The Weight Watchers International line of low-calorie foods has dominated this market for years even though it is perceived as a line of diet products—a slightly different category than low-calorie foods that have broader appeal to all kinds of people concerned about their health. • In most supermarkets in the 1990s, low-calorie food products account for roughly one-third of the merchandise sold and 40 percent of the gross sales volume • A supermarket trade publication reports that “with the nation’s growing health-consciousness. . . manufacturers are realizing that offering low calories is not enough; many are now flooding the market with new, reformulated, and expanded lines that combine low calories with low sodium, low cholesterol, and low fat.” • There is increasing demand for space in supermarket freezers due to the growing demand for low-calorie and microwavable versions of existing frozen-food lines. • Low-calorie frozen foods are growing 350 percent faster than frozen dinners as a whole. 3. Frozen Pizza The frozen-pizza category accounts for more than $1.5 billion in retail sales in 2000. The frozen-pizza category, however, is a mature category, and as the established lines seek niches to increase competitiveness, the hottest growth items in the frozen-pizza section are microwavables and single servings. Gourmet pizzas are also beginning to appear in the frozen-food case, although they have been slower to take off, due to the lingering “gut-filler” image of this product category. Experts predict that as good-tasting and healthier products enter the market, the gourmet-pizza market will develop just as gourmet lines developed in the frozen-entree category. The gourmet frozen pizza is definitely an undeveloped category and possibly a quite profitable niche. 4. Low-Calorie, Healthy Pizza In 1982, Cornell University researchers, along with egg industry officials and an Iowa agricultural consultant, began to market a low-calorie pizza crust; the crust was made primarily from egg whites and contained about two-thirds the calories of traditional wheat-flour pizza crust. Importantly, the crust didn’t become soggy when baked in the microwave. With continuing R&D, the industry has been improving on this low-calorie, microwavable crust throughout the 1980s and early 1990s. The push is now on to develop and market a low-cholesterol, low-calorie crust that is microwavable. • At the same time in the early 1980s, Jeno’s experimented with a line of low-calorie frozen pizza. The line, however, never made it to market because Jeno’s was bought out shortly thereafter by Pillsbury. • In 1986, the first low-calorie pizzas began showing up in pizza chains. Pizza Inn was one of the first to test this concept. • The market for low-calorie frozen pizza took off in the late 1980s with the introduction of pizzas in the Weight Watchers line and that of a smaller enterprise, Gilardi’s. The Weight Watchers line of low- calorie French-bread pizzas was similar to Stouffer’s already-existing French Bread Pizzas. “Healthy” food product claims require pizza makers to rethink their ingredients and substitute low-fat pepperoni and sausage. However, that practice only moves the calories down a notch; to move into the “healthy” list, makers must also substitute chicken and turkey for pepperoni and sausage, use more vegetable toppings and spices to enhance the flavours, and add vitamins, minerals, and fiber to the ingredients. • Figures from the Supermarket Business annual consumer-expenditures study show annual gains of three to four percent in grocery sales of frozen pizzas through the 1980s and 1990s. Diet and low- calorie frozen products played an increasingly significant part in the growth of the frozen-pizza category. Sales Trends Frozen pizza is sold throughout the year with little seasonal fluctuation. The highest period of sales is during the fall and winter months, with January, February, March, April, October, November, and December being the months in which sales exceed the average monthly share of 8.33 %. Share of Market Pillsbury, through its Totino’s, Jenos, Pillsbury, and regional Pappalo’s lines, leads the frozen-pizza market nationally with a 23.5 percent share of unit volume, according to industry research. The share of the frozen-pizza category follows. Share of Major Frozen-Pizza Brands 1. Pillsbury (Totino’s, Jenos, Pillsbury, Pappalo’s) 23.5% 2. Tony’s Pizza (Tony’s and Red Baron lines) 18.3 3. Kraft General Foods Tombstone 10.0 4. Stouffer’s 7.7 5. Quaker Oats Celeste 5.9 6. McCain Ellio’s 3.7 7. Others 30.0 Geographic Trends Regional category development index (CDI)1—breakdowns indicate the frozen-pizza purchasing levels for different parts of the United States. As you can see from the table that follows, the swings between high- and low-CDI areas are not dramatic. The north central and northeast regions are areas of opportunity in terms of their generally high levels of pizza consumption; the southeast, southwest and northwest regions have lower CDIs. CDI Based Geographical Review 1. northeast 151 2. southeast 93 3. north central 121 4. south central 102 5. northwest 95 6. southwest 87 An analysis of frozen-pizza sales by city, however, demonstrates more variable regional purchasing patterns. The product-category performance levels as indicated by CDIs are high in such cities as Milwaukee, Philadelphia, Boston, Baltimore, Chicago, Los Angeles, Phoenix, Albany, Miami, and Denver. Unfortunately, there are no clear regional delineations in such data. The same pattern holds in the cities with low CDIs. It should also be noted that New Roman’s Italian foods also have above-average sales levels in all the cities with high CDIs. Los Angeles, Boston, Baltimore, Phoenix, and Philadelphia are particularly important markets for New Roman Foods. Category Distribution Frozen pizzas are distributed through major supermarket chains, independents, and convenience stores. Some are also sold as prepared foods in such locations as bars, amusement parks, and movie houses. Low-cal products are primarily sold through supermarkets. Category Pricing A relevant pricing analysis of the frozen-pizza category, as well as the new low-cal healthy pizza niche, is largely based on the single-serve size, which is the product formulation in which Roma’s Lite will be competing. Store price checks indicate that these single-servings range in size from 634 to 12 ounces, with the most common packages found in the 7–9 ounce size. Single-slice pizzas are in the 4–5 ounce range. Prices for the single-serving items range. One interesting finding from store checks is that most brands seem to be using one price per product line no matter which topping variety is offered on the product. The supreme, for example, may be priced the same as the cheese pizza even though the cost of the ingredients is higher for the supreme. The cost differential is accounted for by manipulating the amount of the product offered. For instance, a sausage-and-pepperoni item may weigh only 7.25 ounces while the extra cheese item may weigh 9.15 ounces. They would both, however, be priced the same. Competitive Review Weight Watchers, the market leader, has more than $500 million in food sales including $279 million from frozen dinners and entrees. Its primary competitors are ConAgra’s Healthy Choice, Stouffer’s line. The newest competitor is Slim-Fast, the largest seller of liquid-diet meals in the United States, which is introducing an extensive line of low-calorie food products, including soups, pastas, salad dressings, sodas, fruit juices, and variations on the original diet drink. The new products will all be enriched with vitamins, minerals, and fiber, and the company’s president claims that “neither Healthy Choice nor Weight Watchers offers the same healthy nutrients.” Frozen Pizza Product Lines Two “healthy” pizzas are already on the market: Pillsbury’s brand and Kraft General Foods Tombstone pizza. The Tombstone entry was introduced in 1990 with a light version of its regular line claiming 50 percent less fat. H.J. Heinz Co.’s Weight Watchers and Stouffer’s Lean Cuisine have marketed pizza since 1982 and 1988, respectively. The offerings are considered “diet” products and may not even be found in the same part of the freezer case with the more traditional pizza brands. In 1990, both companies lowered sodium and fat in their offerings to keep up with the health claims of the new offerings by the more traditional pizza companies. New entries in the healthy frozen-pizza category are coming on the market at this time. Because these lines are still under development, the only thing we know about them is what is being written in the trade press. Kraft General Foods is introducing a new healthy line called Eating Right and McCain Ellio’s is launching a line called Healthy Slice. Product Offerings and Pricing Although these lines and offerings change weekly, the following is an average based on store and price checks in six high-CDI Midwestern markets. There are many single-serving and microwavable offerings, but only one company, Tombstone, has a low-cal product on the shelf. There is also one gourmet pizza line routinely on the shelf. Product and Price Comparisons Brand Type Size (in ounces) Price Celeste Pizza For One pepperoni 6¾ –9 1.89 supreme deluxe Red Baron Super Single sausage 11.25 2.10 sausage & pepperoni Red Baron Sausage 12 1.59 Pepperoni Supreme Mexican Stouffer’s Microwave Sausage 7 ¼ –10 2.89 Pepperoni sausage & Pepperoni extra cheese Deluxe Tombstone Singles Sausage 12.5 2.79 Pepperoni 9.15 2.29 sausage & pepperoni Italian sausage supreme Ranchero deluxe Tombstone Microwave Pepperoni 7.17–8.95 2.19 Sausage & pepperoni Italian sausage three cheese Supreme Taco Tombstone Light Sausage 8–9.2 2.29 pepperoni sausage & pepperoni chicken deluxe Vegetable Totino’s Singles Sausage 4.2 1.19 pepperoni combination Totino’s Crisp Crust Sausage 4.2 1.19 Microwave Pepperoni Tony’s Microwave Sausage 8.75–9 1.89–2.09 Pepperoni Sausage & pepperoni Supreme Canadian bacon Cheese Wolfgang Puck’s Spicy chicken 10.5 2.29 sausage & herb chicken & turkey sausage Positioning and Marketing Communication The four main competitors’ positioning and marketing communication strategies follow. • Le Menu. This line is offering what is believed to be a first in marketing communication campaigns for frozen-food products—a money-back taste guarantee. The campaign promotes the Le Menu Healthy line as the best tasting of the healthy choices in the frozen-food segment and its ads feature a toll-free number to call for a refund. The budget is approximately $5 million. • Healthy Choice. The line is being incorporated into a $50-million umbrella campaign that also includes Pillsbury’s other pizza products; handled by Campbell-Mithun Esty, Minneapolis. Position— pizza is also good for you; Healthy Choice’s marketing communication budget is around $26 million, nearly five times the budget of Le Menu’s healthy line. Eating Right. Features brand spokeswoman Chris Evert; handled by Foote, Cone & Belding, Chicago; budget unknown. Position—pizza for people who care about their bodies. Healthy Slice. Will spend about $4 million for the launch of its new low-cal pizza line; TAB, New York, created the campaign using the theme, “Bite into a Healthy Slice of Life.” Consumer Analysis Consumers of frozen pizza have varying demographic, psychographic, and lifestyle characteristics, which we analyse next. We also examine consumer trends in this market segment. Demographics Frozen-pizza buyers tend to be mothers of young families, single men, and teenagers. Heavy use is by teenagers, young singles, particularly young men, and children old enough to prepare their own food. Health foods, however, skew to an older and/or more upscale audience. The 40-plus market has been described as a “growing segment of the population looking for healthy, low-cal foods.” With increasing age, calorie needs decrease for most men and women. Furthermore, this segment is the leading edge of the baby boomers, who are now in their middle-age years. This fact represents a significant bump in the U.S. population profile. The 40-plus market is growing and is a key market to tap into for premium food products because they are used to a relatively good life and have the discretionary funds to spend for upscale and gourmet lines. Le Menu’s target, for example, is females 45 and older. The targeting decision involves balancing the frozen pizza market (younger, male) against the healthy foods market (older, female). Psychographics/Lifestyle The lifestyle of the typical frozen-pizza user is different from the lifestyle of the healthy-food user. The frozen-pizza market is primarily seen as downscale, with most of the product sold to people who are concerned about price but less concerned about health or taste. The image of frozen pizza is not generally as good or as high as that of restaurant pizza or fresh pizza purchased at a supermarket to take home and bake. In contrast, people who are concerned about their health tend to be more upscale. They are often scornful of frozen pizzas because of their “gut-filler” image. However, while these people are leery of high-fat and high-cholesterol ingredients such as processed meats and cheeses, they do like pizza. Selling a healthy pizza, then, necessitates reducing the amount of high-fat ingredients, using a more upscale marketing approach, and creating a product with a quality-pizza taste experience. It can’t taste like cardboard and reach this group of consumers. The following summarizes what is known about the psychographics of healthy food buyers. • Nearly half of the U.S. population engages in at least one athletic activity every day (or almost every day), and 71 percent participate in physical exercise at least once a week • A Marketing and Media Decisions article reports that “If the 1990s was the decade of diets and ‘going for the burn,’ the decade of 2000 promises a decade of health and good-for-you food.” The New York Times reports that in the 1990s consumers began turning away from the drive to be instantly skinny and focused more on foods that appear healthful in the long run rather than products that promise a quick shortcut to shedding pounds that always seem to return. • A Roper Poll confirms that this trend is long running. During the 1980s, the opinion-research firm asked consumers if they were careful about what they eat mainly because they wanted to lose weight or because they wanted to be healthy. In 1983, 35 percent cited weight and 35 percent cited health; in 1987, 25 percent said weight and 41 percent said health. Although this survey hasn’t been updated, a Roper vice-president has said that other research confirmed that this trend continued through the 1990s. • Stephen Hughes, vice-president of new ventures at ConAgra, maker of Healthy Choice frozen dinners and entrees, reported that in the 1990s, while 29 percent of the population couldn’t care less about what they eat, another 20 percent of Americans are restricted dieters, and a surprising 30 percent are so-called health-conscious people who watch what they eat: “They’re younger, mainstream consumers, who are realizing they’d better start thinking of some of these things.” Consumer Trends in Low-Cal Frozen Pizzas In terms of pizza eaters, the market for healthy products is new and relatively small at this time. The director of marketing for Pillsbury’s pizza division says that, “our consumers are telling us they want a pizza, not a diet or health food.” The questions are these: How many traditional pizza eaters will respond to a healthy claim and, likewise, how many consumers of healthy foods, who have avoided this category before because of its image as a fattening product, will eat a healthy pizza? Problems and Opportunities This new-product launch faces several problems that must be considered in strategic planning. They are as follows. • Roma’s Lite will be a late entry. • Frozen-food space is at a premium. • Cost of entry will be high. • Company image is not “high quality.” Frozen-pizza image is not “heal However, Roma also has some advantages and opportunities with the new-product launch. The opportunities include the following. • The product is in tune with a consumer trend toward more healthy food. • Pizza, especially frozen pizza, continues to be popular. • Competitive brands are more expensive. • Although the competition has low-calorie entries, no one yet owns the healthy position. Strategic Plan This strategic plan is being developed for the launch of a new low-calorie healthy pizza. The plan for introducing the product is to test-market for six months, followed by a one-year rollout that will reach 27 percent of the U.S. market in the initial launch year. Marketing Objectives The objectives of this effort are to accomplish the following during the first year rollout period. • Achieve 20 percent share of healthy/low-calorie frozen-pizza category in the first-year markets. • Achieve 40 percent trial of target market. • Achieve a minimum of 60 percent distribution in all targeted markets. • Establish sales level of $5.5 million and case sales of 821,240 units. • In each market receiving support, be the number-one frozen, low-cal, healthy pizza within 18 months. Marketing Strategies Some general strategic decisions guide the direction of this marketing plan. • Price is a less-important decision factor for this consumer segment than healthy features—low- calorie, less fat, low-cholesterol, low-sodium—and taste. Although aligning this product with the gourmet pizza category will signal that it is different from the “gut fillers,” because the market for a gourmet line is still undeveloped, the emphasis should be clearly focused on the healthy features. The gourmet concept can be signaled by upscale packaging and a few flavour options like tomato and basil. • For Roma’s Lite to get a major piece of the frozen, low-cal, healthy pizza business, we must create a strong consumer brand franchise that will pull the product through the channel. • To develop a successful pull strategy, a complete consumer marketing communication plan is needed for several reasons: 1. The majority of consumers are not aware of frozen low-cal healthy pizza and no one knows that Roma’s Lite has an entry in this niche. In Boston, we recently found that only 22 percent of consumers are aware of the Roma’s Lite brand frozen pizza, and only 9 percent are aware of frozen low-cal pizza—and Boston is one of our better pizza markets. 2. Nearly every major chain has had frozen-pizza niche items at one time (some more than once) and watched as they just sat on the shelf. The trade, as well as sales, recognizes that new frozen-pizza offerings must be advertised and promoted to the consumer if items are to move. 3. The trade is well aware that many lines don’t make it, even when supported by consumer advertising and promotion. Therefore, to take up warehouse and case space with an unadvertised line is often considered too high a risk. Several major supermarket chains now have a policy that they will not even consider adding a line unless it is backed by a consumer-pull program. 4. Not only must our consumer marketing communication program be strong, it must also have continuity—it must be more than a few weeks of TV and one or two newspaper-coupon ads. The program must be front loaded to ensure that items are moving at least a third of a case a week after 90 days. • To verify demand and continue strategy development, it is recommended that we use a six- month test market. • To minimize costs, it is recommended that we put a consumer-pull program in only selected markets and use a rollout plan that staggers the introduction of the product in six cities every three months in the first year of the launch. Targeting and Segmenting • Primary consumer target market: older teens and adult women 18–35 in high-CDI premium- pizza markets. • Secondary market: aging baby boomers, 35–49. Trade market: buyers for major food-store chains, independents, and convenience stores. Consumer Profiles Unlike Weight Watchers, which targets people on a diet, our target will be broader and aimed at older teens and adults who eat frozen pizza and who are concerned about their weight and appearance. These people regularly drink reduced-calorie beverages and/or eat other reduced-calorie foods. People who regularly buy low-calorie foods are more upscale, willing to pay more, and are more interested in gourmet items than the typical buyer of the lower-priced “gut-filler” frozen pizza. Competitive Advantage • Priced slightly below the competition. • More emphasis on quality healthy ingredients. Positioning “A delicious-tasting frozen pizza for health-conscious pizza lovers” The cuisine leader of low-cal pizza. In other words, while the taste is better than the typical low- priced frozen pizza, the ingredients are more healthful. The position will edge close to gourmet—without trying to make that claim directly—because the ingredients will be different from those of the typical frozen pizza, but not as exotic as those of the typical gourmet pizza. The more upscale audience will be able to appreciate this feature. Marketing Mix The marketing mix of product, channels of distribution, pricing, and marketing communication for this product launch are analysed next. Product We review three key components of the product: the development process, the proposed product line, and the product name. Development Four testing stages were conducted during the development phases to test consumer reaction to the product. All respondents were screened to see whether they bought frozen pizza and low-cal food and/or beverages within the last 60 days to determine if they were in the target market. 1. A 100-sample consumer test was. Costs were included in the development contract. 2. Concept and bite test against competition was conducted. Our objective was to have at least a 40 percent taste preference against the market leader; respondents were not told that the test product was low-cal until after tasting. Cost: $38,000. 3. Focus-group discussions and one-on-one interviews for feedback on product concept, usage, appearance, packaging, name, and advertising. Cost: $12,000. 4. A three-city taste test that gave the supporting documentation for our advertising claims. This test was conducted in consumers’ homes against the market leader. Cost: $6,000. All tests have been conducted, results analysed, and product reformulated as needed in response to consumer tests. The Product Line The prototype line includes seven single-serving frozen pizzas that average 8.0 ounces and between 250 and 260 calories—half the calories of the average pizza of similar size. The pizzas will be 8 inches in diameter. The line includes seven varieties. The exact calories, as well as the weight, will vary with the ingredients. Although we will still offer such traditional pizza flavours as pepperoni and sausage, the calorie count for that offering will be 270; the calorie count for tomato and basil is 230, the lowest calorie count in the line. Deluxe 280 Pepperoni & sausage 270 Canadian bacon & pineapple 265 Italian turkey & sausage 250 Spicy chicken 250 Italian veggie 240 Tomato & basil 230 • Ingredients will be part-skim mozzarella cheese, a special low-cal sauce that we are calling the “M” sauce, pork and beef products that are at least 90 percent fat free, and a self-manufactured low- cal baked crust made from a secret recipe. Spices will be used to maintain the quality pizza taste. • In addition to a single-serving concept, we will also be introducing in the fourth quarter a 10- ounce, 834-inch double-serving product. This item would allow us to say ”under 300 calories per serving,“ which is comparable to Lean Cuisine’s claim. Flavour profile is ”juicy“ (because the product has the same ration of sauce as the average extra-toppings cheese pizza) and ”sweet“ due to the special reformulation of the ”M“ sauce. Both of these characteristics will help overcome the diet-food stereotype of dry, bitter, and/or tasteless. • The caloric claim will require nutritional labeling and testing that will cost approximately $30,000 a year. This cost includes the addition of one part-time lab technician and the required annual outside analyses costs. Naming The recommended name is ROMA’S LITE PIZZA . Based on a memo from legal dated October 18, there is no problem using the term ”lite“ as long as there is a legitimate one-third calorie reduction. The fact that ”lite“ is not a registered trademark was again confirmed by counsel last week. Therefore, by using this word, which has been well seeded, it will help clearly and quickly communicate our product benefit. Other names that have also been consumer tested include ROMA’S HEALTHY PIZZA , ROMA’S LOW -C AL, ROMA’S DIET, and ROMA’S LITE AND CRISPY. Distribution After the test market, the first stage of the rollout will reach 27 percent of the country in 17 cities during the initial launch year. The markets that have been selected meet at least one of the following criteria: • a frozen-pizza category development index (CDI) of 75 percent or more, • current pizza distribution of 60 percent or more, • a strong Roma’s franchise. The following markets, which include 27 percent of the United States, are recommended for the first year rollout. Group A (program starts in January) Albany St. Louis Syracuse Milwaukee Minneapolis Detroit Group B (program starts in March) Denver Salt Lake Seattle San Francisco Los Angeles San Diego Group C (program starts in May) Miami Atlanta Phoenix/Tucson New Orleans Kansas City Chicago These markets currently account for 70 percent of our pizza volume and 47 percent of our entree volume. Even though frozen-pizza sales in the northeast are far above average (CDI of 151), we recommend that we do not initially compete with the strongly established northeast brands. Syracuse, a relatively small northeastern market, has been included as a test to determine how well we can do against these established pizza brands. It should also be noted that the northeastern regional brands have not yet established footholds or dominance outside that region. If we are to get there first, we should begin now. Pricing Costs for the eight-ounce prototypes, based on a self-manufactured baked crust, result in a line price of $16.55 per case, which would be $1.98 at retail, assuming a 30-percent retail gross margin. This cost would include 14 percent for sales promotion, ten percent for advertising, and six percent for overhead and profit. Because our individual item costs are not that far apart, and because cheese, which is on all of the items, is our second-highest cost, it is recommended that we line price; in other words, that we offer all items at the same price. This practice is favoured by the trade and will help earn their authorization. It also is in line with pricing practices within the industry. Marketing Communication The budget, schedule, and the strategies for marketing communication follow. Budget Above-normal marketing communication dollars must be budgeted for the following reasons: • Because of Roma’s Lite’s initial low volume, dollars generated at the company’s usual 10.5 percent for advertising and 14 percent for promotion are not sufficient for launching even a minimum consumer-pull program. Therefore, we must use NIBT (net income before taxes) and overhead allocation for marketing communication budgeting (16.5 %). • A strong consumer program throughout the first year of introduction is necessary to protect low-cal healthy pizza from becoming a commodity item like pizza. Schedule Begin the consumer-pull program in August for the following reasons: • Frozen-pasta sales are highest in the fall and winter. • The Roma’s Trade Presentation schedule for July is a perfect time to sell our entire program to the trade and ask for authorizations, displays, and features. Advertising When most consumers hear the words ”frozen pizza,“ they think of ”gut-filler“ products. TV is needed to demonstrate clearly that our products are significantly different from the average frozen pizza, taste much better (that is, they are ”good enough to serve to friends“), and are more upscale. Copy Strategy Convince women 18–49 who buy frozen pizza that Lite Pizza has one-third fewer calories than Roma’s Extra Topping Pizza, is a healthy product, and tastes better or as good as (depending on research results) the leading frozen premium pizza. Media Strategy The media strategy is primarily based on local media buys because of the rollout schedule. 1. Spot television is recommended as the primary medium for the following reasons: • It reaches over 90 percent of targeted households, more than any other advertising medium; as our target-audience demographics show, the target market is broad based and therefore requires a broad-reach medium. • In many markets today, TV costs no more per point than radio. • All markets would receive, in the first 12 months, 1,800 GRPs in prime, early-fringe, and daytime 2. Spot-TV buys will be reinforced with spot-radio and coupon ads delivered through newspapers. • Cost-per-coupon redeemed is cheaper with newspaper than with either direct mail or magazines. • Newspaper coupon ads provide space to explain the product and show the package, thereby reinforcing the TV message. • Because newspapers are the primary way the trade advertises, the trade can be more easily persuaded to run a tie-in feature with a newspaper coupon than with any other kind of advertising. Consumer Promotion • The pull campaign will be reinforced by seven quarter-page newspaper ads carrying 35-cent coupons. The lead time required for free-standing inserts and direct mail makes them high risks for test markets, as we learned from our last product introduction. • In-store demonstrations will also be used, especially in high-volume stores. • Tie-ins cut media and product-promotion costs in half. A quality tie-in brand is an endorsement of our quality and taste. Because awareness of Roma’s Lite pizza is nonexistent, tie-ins with brands such as Diet Coke and Diet Pepsi will help make believers out of the trade. Trade Promotion Limit the number of cases sold at a quantity discount (”on-deal“) to 65 percent for the following reasons: • As another check to prevent Roma’s Lite from becoming a deal-only item, a limit must be set. • Deals are essential for trade support; for the last 13 periods, 81 percent of entrees and 78 percent of pizza have been sold on deal. • Ten percent will be spent on trade promotions (the other four percentage points in the promotion budget will be for consumer-coupon redemption); limiting discounted volume to 65 percent will allow us to offer as high a discount as 15 percent. Packaging The consultant’s prototype design with the light background will be used to distinguish Lite from the darker background on our other pizza items. Design research found that consumers perceived a light background to connote lesser quality. This perception will have to be counterbalanced by upscale typefaces, graphics, and accent colours that communicate quality. The front panel will have a large flag saying ”only 350 calories“ or ”one-third fewer calories.“ Complete nutritional information will be on the back panel. Sales (This particular company’s organization had sales located in a separate department. The sales manager developed a separate plan for that department in cooperation with the marketing director.) Control and Evaluation This section details both the test market and the national rollout implementation plan, as well as other dimensions of marketing scheduling and program evaluation. Test Market We recommend that test marketing be conducted in three cities—Milwaukee, Syracuse, and St. Louis—for three months preceding the Group A rollout in January. Before test marketing begins, we will need to design and print packages and produce a television spot and related print ads. Also, to make sure that we have a viable product and to provide us with the hard-selling product-superiority claims that we want to use in the test market, we need to do a ”national“ consumer taste test against the market leader. Test Market Cities We recommend that we test in two high and two average New Roman markets. The following markets have been selected because of their size, distribution opportunities, and CDIs. Strong Markets New Roman Competition Albany 125 157 Milwaukee 198 113 Average Markets Syracuse 105 114 St. Louis 115 98 Test Market Costs To evaluate our test market effort accurately, we will need to do tracking studies in at least two of the markets. Our budget for the test market follows: Package development (includes design, photography, $40,000 separation, production) Production of TV spot, sales kit, promotional ads, and 150,000 related materials TV air time 298,000 Two coupon ads (850 lines) 36,000 Two FSI coupons 3,100 Coupon Redemption (1,430,000 3 4% 3 .25 3 4) 57,200 Market research (national taste test study and test market 50,000 tracking study) Total $634,300 Test Market 12-Month Forecast and Costs Estimates of sales and costs are based on the following assumptions: • 60 percent ACV (All Commodity Volume) of three items • .5 case per item per week per store • supermarkets with $2 million-plus in sales. Test Markets Number of Supermarkets Annual cases Milwaukee 427 20,000 St. Louis 449 21,000 Albany 174 8,200 Syracuse 191 9,000 Total 58,200 Test Market Payout Analysis The following costs are predicted for testing marketing in the four cities for three months: Based on the 12-month forecast of 58,200 cases at $16.50 per case, payout would take 16 months. National Rollout The budget and payout plan for the first stage of the national rollout will be based on projections that will be tested in the test market. Based on these estimates, the following dollars-per-case figures are available for marketing communication: dollars per case percent Advertising $1.79 10.50 Sales Promotion 2.32 14.00 Overhead & Profit 2.72 16.47 At projected sales of 1,121,239 cases 3 6.78 per case 5 $7,602,000 for marketing communication. Of that total, $3,250,000 will be spent on advertising; $3,750,000 will be spent on sales promotion, $602,000 will be spent on other merchandising and point-of-purchase materials. Scheduling The schedule for the national rollout has four phases. Phase I: Do consumer taste test and advertising concept-evaluation test week of March 21; results available by April 18. Phase II: If consumer tests are positive, issue approval for second stage of development, $175,000, which will include: • package design • copy for print and television advertising • three-city test against Celeste. This will allow us to have a finished product in printed packages along with a rough-cut television spot for our sales meeting in June Phase III: Begin the test-market program that will be conducted during the third and fourth quarters. Test-market sales would begin immediately after sales meeting, with first shipment during the week of June 25. Phase IV: Begin the national rollout in January with sales initially directed at the Group A cities, followed by sales to the Group B cities two months later; and then sales to the Group C cities two months after that. Ongoing Consumer Evaluation As we move into the launch of this new product line, the following are issues that we must continue to investigate from the target market who buy diet/ reduced-calorie products and frozen pizza as part of our ongoing consumer research program: 1. How are low-calorie, microwavable, and low-cholesterol features perceived by buyers of frozen pizza? • Is the feature believable? If not, why not? • Assuming that taste reception is not high for this type of product, what areas of taste/texture are liked and not liked? • Single-serve versus double-serve—which is preferred and why? (For instance, how many in the family are watching weight and do they eat together?) • How is the product used: snack, lunch, or quick dinner? 2. Is there a market for a healthy, low-calorie frozen pizza among consumers who are not currently frozen-pizza buyers? Will health-conscious consumers believe that pizza can be healthy and will they buy a frozen pizza? 3. In addition to the targeted market, is there also a market among men who buy frozen foods and/or among children—that is, will mothers buy healthy pizza for their children? 4. How do product image, appearance, and taste compare to competitors in the minds of consumers? *This is a real case, but the company identity has been disguised. FIGURE A.1 Estimated 1998 Share of Retail Pizza Sales 1A Category Development Index (CDI) is a consumption index (per household sales) that compares tha average sales for a particular market with the total country average sales. In other words, a market that consumes a lot of frozen pizza will have a CDI that is over 100; a market that consumes less than the country’s average will have a CDI that is less than 100.
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