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The Fourth "P" Driving CPG Marketing


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Lecture originally presented to McMaster University DeGroote Business School 2MA3 Intro. Marketing 23 Nov 2009

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The Fourth "P" Driving CPG Marketing

  1. 1. The 4 th “P”: Driving CPG Marketing Arnie Strub, mba Entrepreneur-in-Residence DeGroote School of Business [email_address] Office Hours: Thurs. 12.30-14.30 DSB227
  2. 2. CPG innovation is Marketing Driven New Brand Development: Product>Price>Promotion>Place Existing Brand Development: Often driven by Distribution (Place) Place>Product>Price>Promotion
  3. 3. Strub's Business in Canada 70% R E T A I L <<< 30% Food Service >>>
  4. 4. The Retail Pickle Market Size: $120million (at retail) in Canada 90% Shelf Stable (SSP), 10% Refrigerated (ARP) Ontario Brand Leaders: #1 Bick's=45% share (all SSP), #2 Strub's=7.5% share (all ARP) All Private Label 30% share
  5. 5. Who Eats Pickles? (demographics) Show of Hands: Jar in Fridge? Eat at Restaurant? Jars of pickles are mainly purchased by Households of 3 or more people, where the head of the HH is 35+ yrs old. 70% HH penetration in Canada Missing the younger audience at Retail.
  6. 6. Purchase Patterns (behavioural) Average Purchase Frequency: 4x / year Sales are highly seasonal Two Peaks seasons: May / June (BBQ) Nov / Dec (Holidays)
  7. 7. Sales Opportunities for Strub's Geographic Segmentation Increase Sales by increasing Distribution to regions of North America not yet serviced. Options: U.S.A. Quebec Canada West
  8. 8. Pros / Cons by Segment U.S.A.+: close, large market size, higher ARP% U.S.A. -: DSD, brand unknown, compn high Que +: close, known brand, good market size Que -: low ARP%, DSD, compn high West +: known brand, WH delivery, compn low, good market size West -: far (shipping cost), low ARP%
  9. 9. Focus on Canada West Segment Items to Manage: Wholesale Selling Price (freight factors) Retail Price Point vs. Competition Internal Objectives: Maintain Profit Margins Keep Retail Price Reasonable
  10. 10. Target Wholesale Customers Safeway all western provinces Overwaitea BC and Alberta
  11. 11. Overwaitea Obstacles Best Selling 1L Jar Retail Price 25% TOO HIGH! Wholesale cost inflated due to high cost of shipping. Bringing Price Down would make Sales Efforts Unprofitable
  12. 12. Safeway Obstacles Best Selling 1L Jar TOO TALL Meat Dep't. Shelves stacked tighter Even so, Retail Price still too High Due to additional Freight costs
  13. 13. Distribution (“P”lace) Strategy Drives the Marketing Effort to Success <ul><li>Need to Lower Everyday Price (“P”rice) </li></ul><ul><li>Need Shorter Jar (“P” roduct) </li></ul><ul><li>Need sufficient margins to be profitable on in-store feature pricing (“P”romotion) </li></ul>
  14. 14. Solution: Launch a New, Smaller Jar Size of the #1 Selling Flavour Profile <ul><li>Move from a 1L jar >>> 750mL jar </li></ul><ul><ul><li>Freight cost/case 25% lower </li></ul></ul><ul><ul><li>Height of jar 25% lower </li></ul></ul><ul><ul><li>Regular Retail Selling Price: Same as Ontario </li></ul></ul><ul><ul><li>In-Store Feature Price: Profitable </li></ul></ul>
  15. 15. Price per Unit is STRONGER than Price per Litre in the absence of direct comparisons $ 3. 9 9 1L Jar 750mL Jar
  16. 16. Achieving Price Points is important in Driving Sales, especially with direct comaprisons 1.99 / 1.49 Still 50cent difference 1.49 / .99 2L Bottle 1L Bottle Show of Hands to purchase 1L at these price points
  17. 17. Thank You Questions & Answer Session