Term Project

Business 120 Introduction to Marketing Cindy Stewart

The University of the Fraser Valley
Prepared by: Melissa Levesque, Praneet Batwar, Golam Kabir, Harman Otal 6/20/2012

1.

Perform a situational analysis for the poorest performing product being offered by your company and then determine a repositioning strategy for the product if required. If not required, give evidence to support why you think a repositioning of the product is not required at this time.

We have performed a situational analysis on the Lemon Rosemary Chicken. It is a new ready to eat rotisserie chicken being offered at PriceSmart store in the Clearbrook area. We chose this product as it not selling as well as its competitor. We have performed a situational analysis, analyzed the marketing mix, and made some recommendations.

Table of Contents
Introduction ............................................................................... 3 Situational Analysis.................................................................... 3 Product Analysis........................................ 3 Promotional Mix.................................................................... 3 Effect of Stores Location on Sales.............................................. 3 Repositioning Strategy and Recommendations......................... 3 Appendix 1................................................................................. 4 Appendix 2................................................................................. 4 Appendix 3................................................................................. 4 Appendix 4................................................................................. 4 Appendix 5................................................................................. 4 Endnotes .................................................................................... 5 Bibliography ............................................................................... 6

PriceSmart Foods - Poorest Performing Project

Company and Product Introduction On March 8, 1915, Robert C. Kidd purchased a store at 746 Columbia Street in New Westminster, British Columbia. He developed several innovative merchandising techniques to attract customers to his store including odd-penny pricing and selling 18 ounces of tea for the price of a pound. The store was soon known as the "overweight tea" store. When Kidd opened his second store, he decided to call it "Overwaitea". In 1968, Jim Pattison purchased Overwaitea. With over 120 locations serving communities across British Columbia and Alberta, OFG operates six different store formats with its highly competitive multi-banner approach Save-On-Foods, Overwaitea Foods, PriceSmart Foods, Cooper's Foods, Urban Fare and Bulkley Valley Wholesale. All are owned by the Jim Pattison Group. Lemon Rosemary Rotisserie chickens have been newly introduced at the PriceSmart Foods Clearbrook location. They are a variation of the regular rotisserie chicken having freshly squeezed lemon, cracked pepper, and dried rosemary sprinkled on them. They are also left to marinade overnight with half a lemon and a rosemary sprig inside of them. Since it started being available for purchase it has not been selling well, selling on average 10 a day. In this report we will provide a situational analysis for the product, whether a repositioning strategy is necessary, and our recommendations.

Situational Analysis The SWOT Analysis is done to accurately evaluate the state of a product or a firm. In this case, the Lemon Rosemary Chicken is the product on which we will be perform the SWOT Analysis.

Strengths It is a new product which offers a different and a new flavor. It is priced reasonably considering the fact it is marketed as a gourmet food product. Weaknesses It has a higher price than the other competitor product. The Lemon Rosemary chicken is not well advertised at the Deli. There werent any promotional activities during the release of the product. Opportunities The summer has a lot of people going camping and taking trips. This product can be marketed to them as a ready to eat gourmet food. Ever growing population of Abbotsford. Threats Several other grocery stores in the area that offer similar products. Health conscious people switching to greens and salads.

Product Analysis Firstly to rightly classify the products we need to identify the needs and the wants of the target customers. The product Lemon Rosemary Chicken is targeted at customers who are either looking for a quick lunch or something to pick-up for dinner on their way home from work. The wants of the customers can be cooked chicken and the needs can be identified as eating ready to eat food or chicken. The Lemon Rosemary Chicken and Rotisserie Chicken are competitor products that generally tend to the wants of the customers i.e. the want to eat cooked or ready to eat chicken. Both are modestly priced. The needs can be satisfied by substitute products which can be anything chicken or ready to eat food. Some of the products that we will be reviewing are fresh chicken and frozen chicken. The chicken from all the four products are of the brand Hallmark, so they are of equal quality.

Lemon Rosemary Chicken This product was recently introduced at a higher price than the regular Rotisserie chicken. What makes it special is that it has an added flavor of lemon and rosemary. It was released with the intention of being a gourmet choice of rotisserie chicken. It was priced at $8.97. The Average weight is around 900 grams. This product is cooked fresh daily in the Deli and is stored at a warm temperature. Analyzing the first month sales, this product wasnt received well by the target customers. The average sales per day are around 10-12 units per day, which is very less considering the store is located in a central location in Abbotsford. The only time when the sales increase for this product is when the Deli runs out of the regular Rotisserie Chicken. The product is placed in the Deli section of the store. The Deli at PriceSmart is strategically located close to the entrance and the checkouts. Looking at Save-on-foods (PriceSmarts sister store) which is in another part of the town, the reported sales for the lemon and rosemary chicken are a much higher.

Rotisserie Chicken The Rotisserie has always been a hot seller at the Deli at PriceSmart. Its ingredients consist of Salt and fresh Chicken. It is modestly priced at $6.97, and sells 50+ units per day. This product is also cooked daily in the Deli. The average weight is also 900 grams. Comparing the sales of the Rotisserie chicken to the Lemon and Rosemary chicken, it is reported that the sales of the Rotisserie is a lot higher than that of the Lemon and Rosemary chicken. In contrast to the Lemon and Rosemary chicken, the Rotisserie chicken is advertised better than the latter. Large posters of the Rotisserie are put up near to the Deli.

Fresh Chicken Fresh chicken is another alternative. Although it is not a direct competitor to the Lemon and Rosemary chicken it is substitute product which satisfies the need of the customer to eat chicken. The average price is around $6.35/kg.

Frozen Chicken Another substitute product is the frozen chicken. It is priced at $10.49 for 1.36kg.

Promotional Mix PriceSmarts promotional mix strategy for Lemon Rosemary Chicken consists of the following tools.

People Identifying your target market is very important before the product is released. The primary target market for the Lemon Rosemary chicken is the working class who want something quick for lunch, or want something easy for dinner that requires virtually no preparation. They are most often going to buy it on their lunch breaks or on their way home from work.

Place PriceSmarts placement in store of the Lemon Rosemary Chicken is ideal because it is located in the Deli. The Deli is ideal for this convenience product as it is in close proximity to the entrance, checkout and the exit. This provides convenience for the target market, who are most often in a hurry. (Refer to Appendix 1)

Promotion (Sales Promotion and Advertising) Advertising is one of the most important tools in the promotional mix. Advertising of any product creates consumer awareness about the features and benefits of it over other products. PriceSmart does very limited advertising for its Lemon Rosemary Chicken, whereas, it has large advertisements for its regular chicken. The Lemon Rosemary Chicken does not have any posters or hoardings advertising the launch neither the price of the product. The rotisserie chicken on the other hand has a huge poster over the Deli with the price of the chicken. This could be another reason why their Lemon Rosemary Chicken is sold much less compared to their regular rotisserie chicken. (Refer to Appendix 3 and 5) Sales promotions are used to increase the sales of a product for a short time by giving some kind of incentives to consumers. PriceSmart does not currently have any kind of sales promotion strategy for its Lemon Rosemary Chicken. An excellent stategy could be having free samples of their Lemon Rosemary Chicken for customers. Perhaps after tasting the product people would be willing to pay the higher price. Another stategy would be to provide coupons to make the Lemon Rosemary Chicken the same price as the regular rotisserie chicken. Having both the products priced the same would encourage people to try the new product since they arent required to pay a higher price for the additional benefits.

Effect of the Stores Location on Sales A grocery stores location in relation to a products target market can be one of the most important factors in the success or failure of that product. If we observe carefully, we can see PriceSmarts location can be having a direct effect on the sales of the Lemon Rosemary Chicken. This can be seen when comparing the prices of houses in the two different areas of town. Property in the Sumas area where the Save-on-foods is located are typically more expensive than the houses located in the Clearbrook area where the PriceSmart is located. People living in higher priced homes generally produce a greater income. (Refer to Appendix 6 and 7) Since people generally shop closer to their homes, this will have an effect on the income of the shoppers at each store. People in the Sumas area will most likely have more income therefore they will be willing to pay more for gourmet products, and have the luxury of not being as limited by price. Shoppers in the Clearbrook area however will have less disposable income therefore price becomes a much more dominant factor in their purchase decisions. This could explain why sales are much higher for this product at Save-on-foods vs. at PriceSmart. Another major factor that can affect the sales of the product, can be the active competition the store gets from other similar stores. On South Fraser Way there are five superstores namely Independent grocers, The real Canadian Superstore, London Drugs, PriceSmart and Safeway. Four out of five of these grocery stores have their own Delis. Even though it is in a prime location, PriceSmart faces a serious competition from these stores.

Repositioning Strategy We do not believe that a repositioning strategy for this product would be effective in increasing sales. The products target markets are working class people on their lunch breaks and seniors and homemakers who are home during the day who are looking for a quick and easy lunch. The other target market is people who do not have time to cook dinner and want to grab something on their way home from work. The products position in the store is ideal for all of these customers as it is located right beside the entrance, checkouts and exit. Moving it anywhere else in the store would simply cause an inconvenience for all the customers looking for a ready to eat meal in a hurry.

Recommendations As there is no repositioning required we have several other recommendations that we believe will increase the sales of the Lemon Rosemary Chicken at PriceSmart. We recommend first increasing the advertising of the Lemon Rosemary chicken to increase consumer awareness of the product. This can include creating a bigger and more obvious sign, or creating ads that appeal to the target market. To find out which types of ads would be successful, more research need to be done on the target market. Such as seeing if they have any other wants, needs or interests in common that can be used in the advertising to generate interest. Having some sort of ad in the stores weekly flyer would be beneficial as well, as those flyers are distributed to most houses in the area. Another place to advertise would be on the stores website as well. Our other recommendation is setting up demos of the product. These demos should be done around lunch and dinner time when the target market is most likely to be in the store. Customers may be scared to pay a

premium for this product without knowing if they like it first. Our hope is that after tasting the product, that fear will be eliminated and they will be less reluctant to try out the new product, and in turn continue to buy it. Our final recommendation is to have a sales promotion were customers receive a coupon that would make the Lemon Rosemary Chicken the same price as the regular rotisserie chicken. We believe this will entice people to try out the new product, as they will receive the added flavour and gourmet appeal without paying any additional cost. This has the same goal as the demo: that after trying the product, they will be willing to pay more for the benefits. The store could also supply recipes for other meals that can be made using the Lemon Rosemary chicken, such as various pasta dishes or stir frys. The store can also offer other products for free as a bonus for buying the Lemon Rosemary chicken. They have previously done this sort of idea with the regular chicken and it was quite successful. And lastly the store could offer promotions where you receive bonus save -on-more points for buying the product, as this rewards based program is very successful within the company.

Conclusions The Lemon Rosemary Chicken was launched with the intention of giving a particular target market a better dining option. The product did not generate many sales. There were several factors which caused the product to not sell as expected. The major factor is the location of the store. The average income group residing around the store does not have as much disposable income to spend on luxury products. They are more price focused, looking for the cheapest options as long as they are still of good quality. For example, the regular rotisserie chicken is located in the same convenient location, is of the same quality of meat but is two dollars cheaper. Another reason is that the advertising of this product has been poor to virtually non-existent. Even though it was recently launched, no banner or poster was used to advertise the product. It also has not been advertised in the weekly flyer at all. Lastly, there are several competing stores located very close to PriceSmart that have Delis as well, with similar products. As the location of the product in the store is very convenient, relocation within the store is not needed. Moving the product anywhere else would only take away from the benefit of convenience that it has. Although with some minor improvements, the store can ensure the better sales. In conclusion we say that not only does the selecting the right target market is important, but it is also important to understanding the certain market segments overlap each other. For example, in this case, PriceSmart has tried to target working individuals, but what it has failed to take into account is that the working class has different income groups, this product should have been targeted specifically at working individuals with a higher income. A better promotional mix should be implemented to market the product to the desired target market. Advertisements and Promotions should be designed to attract the particular target market.

Appendices
1. The rough layout of PriceSmart Clearbrook, clearly indicating the location of the Deli

2.

The Lemon Rosemary Chicken

3.

The price of the Lemon Rosemary Chicken

4.

The regular rotisserie Chicken

5.

The banner advertising the regular Rotisserie chicken.

6. The map of Abbotsford showing the areas and the average price of the 3-4 Bedroom houses.

7.

This is the comparison between the prices of the houses in the areas.

Clearbrook area
Address MLS F1204903 3 Beds, 2 Baths# 24 3075 TRETHEWEY ST, Abbotsford Lighthouse Realty Ltd price $206,000 Address MLS F1212592

Sumas area
Price $354,700

3 Beds, 2 Baths2500 CAMERON CR, Abbotsford RE/MAX Little Oak Realty

MLS F1202119 3 Beds, 2 Baths# 35 3030 TRETHEWEY ST, Abbotsford Century 21 Coastal Realty Ltd.

$209,000

MLS F1200240 3 Beds, 2 Baths# 3 36189 LOWER SUMAS MTN RD, Abbotsford Lighthouse Realty Ltd.

$539,900

MLS F1207387 4 Beds, 2 Baths32419 PEARDONVILLE RD, Abbotsford RE/MAX Little Oak Realty

$249,900

MLS F1210214 4 Beds, 2 Baths34567 KENT AV, Abbotsford RE/MAX Little Oak Realty

$329,900

MLS F1212819 3 Beds, 2 Baths2324 BAKERVIEW ST, Abbotsford RE/MAX Little Oak Realty

$289,900

MLS F1209689 3 Beds, 2 Baths2259 TAYLOR WY, Abbotsford One Percent Realty Ltd

$489,000