If Paradise decide not to launch Sweet Dream maintaining its current marketing tactics Le Treat profitability (and eventually sales) will definitely shrink bringing to a potential risk on the fate of the entire frozen specialties line. After 5 years, Le Treat is reaching the decline phase of its life. Each product life cycle is determined by customer’s behaviors and competitive landscape. In this category both factors play against the possibility of having an extensive product life. * Frozen dessert consumers are looking for novelty, in fact this is what is leading to higher growth rates.
As mentioned in the case each new product introduction seemed to generate growth for the entire category. In this market, consumers would tire of a particular product and switch to a new product, which may be a different flavor of the same brand, or possibly a completely different brand. Even though brand loyalty among users of super-premium desserts (Le Treat line target) was greater than among ice-cream novelty consumers, focus groups reveal that they are still looking for new products.
On the other hand it is important to remember that almost all player of the industry are investing a lot in marketing campaigns in order to do both primary and second demand stimulation which must to be repaid in a short period of time given current customers preferences. Therefore, the company should not relay on old products, but have an integrated view of the whole line (old and new products). Introduction of new product make the survival of the category. * Intense competition is negatively affecting LaTreat positioning in the super-premium market.
LaTreat positioned as the first super-premium frozen dessert to enter the national distribution. Its good brand recognition jointly with good quality and concept leaded to higher pricing and margins (40%). Even though competitors first entered the market with lower quality and cheaper products focusing on capturing price-sensitive consumers, higher margins from the premium segment is becoming more appealing. Moreover consumers ‘wiliness of novelty may accelerate this process.
As written in the case, competitors are constantly monitoring Paradise test and Sweet Dream can be copied, thus other companies will come out with new products faster than Paradise satisfying this segment customers’ needs. On the other hand it is worth mentioning that there is also a current “fight” for shelf space in big retail stores driven by new product proliferation, which makes timing an important issue. There is an evident need to become first on launching new products. * Price-promotion conducted on LaTreat may boost sales but it is hiding the inevitable end.
In this case price-promotions are accelerating future purchases and attracting the “wrong” customers (price-sensitive) and ultimately damage Paradise brand since it not may be associated with the premium segment. In fact only 30% of Le Teat sales are made on Loyalist and Trial Users (who may become loyalist). I would recommend accepting the risk of cannibalization due to the following reasons: – LaTreat is an older product in a category that thrives on novelty. Bill’s focus groups and market revealed that there is plenty of room for a new premium-priced, indulgent dessert.
LaTreat will suffer cannibalization from competitive entries if not from Sweet Dream. – Sweet Dream may cannibalize LaTreat, but at a favorable contribution level since overall dessert-group profits will increase by having both products on supermarket shelves. – With Sweet Dream LaTreat will be able to defend its hardcore users. This should improve total company share of the frozen specialties category and reduce the three-year payout period tha calculated for the marketing committee.
In other word, if cannibalization will occur anyway, make sure the cannibal is a member of your family. On the other hand LaTreat extension (example, new flavor) may have less cannibalization risk; however it may reduce the possibility of bringing new users into Paradise brand. As Bills studies revealed in Mindland, purchasers that had not bought LaTreat wonder if the company makes other frozen desserts. In other words, LaTreat extension is limiting today downside risk, but is also limiting upside risk.
Moreover, new flavors are not “novelty” enough, in the sense that may delay the decline of LaTreat sales but it would not stop it. I would not recommend positioning Sweet Dream in the ice-cream novelty market (price-sensitive mothers); instead I would recommend selling Sweet Dream in the super-premium segment because of the following reasons: * Super-premium segment is more profitable than the ice-cream novelty segment since allow higher prices and foster loyalty, which ultimately brings larger product-cycle periods.
Moreover the super-premium segment reported higher growth rates than the latter (20% vs 8% annually). * Paradise is not new in the super-premium segment; they have good brand recognition among these users and have the right resources to serve it (distribution, marketing, etc). Even though higher margins will attract higher competition, Paradise have expertise in this market. * Sweet Dream have the necessary features (quality and novelty) to satisfy the super-premium segment while it has not been that successful (according to focus group comments) among the ice-cream novelty consumers.
In fact, Sweet Dream has done well in its low promotion markets (Midland and Pittsfield) while more aggressive promotion in Corvallis and Marion simply generated a lower quality trial by price shoppers—hence the lower repeat rate. * As previously mentioned, positioning Sweet dream as a super premium product (same segment as LaTreat) will allow the company to defend its hardcore users that will ultimately switch to other competitors if Paradise have nothing to offer.