The research objective was to evaluate the value preposition associated with the product and identifying the proper price range

1. MSc in Management
December Session - Academic Year 2015-2016
Giacomo Casini
Price assessment of discontinuous
innovations: an empirical analysis on
CucinaBarilla launch

2. Source: Nielsen Innovation Overview 2013, Crawford, Di Benedetto (2014)
Research Question and Literature
2
100%
Launch
Week 1
55%
Half Year
Week 26
24%
Year End
Week 52
Success rate one year from the launch
 When innovation is pursued by opening up new value
trajectory the risk of failure is even higher
 Among the levers of marketing mix, this research will focus
mainly on pricing
 Pricing discontinuous innovations is complicated by the fact
that no direct benchmark can be fund on the market
 Pricing models adopted: Gabor Granger, Van Westendorp,
Conjoint
The aim of this research is to assess the proper methods for pricing discontinuous
innovations (Robertson 1971) and applying them to CucinaBarilla launch. This approach is
used to detect the reasons behind this unsuccessful launch and propose a correct
execution in terms of pricing and targeting
Governing existing value trajectory
Opening up new value
trajectory

3. Source: Ricerche di Marketing. Luca Molteni, Gabriele Troilo
Research Methodology
3
 Marketing Problem  assessing the proper
price for a new product, which has no direct
benchmark on the market
 Research Objective  evaluating the value
preposition associated with the product and
identifying the proper price range
ResearchFormula
Interview with CucinaBarilla Marketing Manager
Market
Analysis
Qualitative
Interviews
Questionnaire Data Analysis Segmentation
Analysis on
clusters
• Food
preparation
appliances
• Ready meals
market
• Microwaves
3 Pricing
techniques
used:
• Gabor
Granger
• Van
Westendorp
• Conjoint
analysis
• Pricing
techniques
applied to
clusters in
order to
identify ideal
target for the
launch
• Conclusions
• Factor
analysis
• Cluster
Analysis
• 303
respondents
• Diversified
panel of
respondents
• 10 interviews
• Respondents
selection
based on
Barilla
research

4. Source: Whirlpool internal presentation, CucinaBarilla website
Empirical Study - Overview of the Product
4
2011
2010 2012 2014
2013 2015
Idea generation
First contact
Barilla-Whirlpool
Partnership
Barilla-Whirlpool Finalized
Quantitative test:
1.100 people
Experience test in consumers
home: 6 months
23/04 Trade Event
01/09 Launch
CucinaBarilla can be used as a microwave/oven, to cook and heat up meals, or can be used with the exclusive
CucinaBarilla system. Users need to choose the preferred food kit among pasta, risotto, bread, cakes and others,
pour the ingredients in the bowl provided and scan the kit label on the oven RFID reader. Thanks to its exclusive
technology for the identification and automatic recording of information, the system will recognize the recipe and
will program itself, activating autonomously the required preparation.

5. Source: Whirlpool internal presentation, Euromonitor International - Value%
Markets Analysis
5
CAGR
09-14
CAGR
10-15
CAGR
14-19
CAGR
15-20
Food preparation appliances 3,6% 1,1%
Food Processors 3,5% -0,7%
Ready Meals 2,0% 0,1%
Microwaves 1,0%
Jan-Sept '14 Jan-Sept '15 Jan-Sept '14 Jan-Sept '15 Jan-Sept '14 Jan-Sept '15 Jan-Sept '14 Jan-Sept '15 Jan-Sept '14 Jan-Sept '15 Jan-Sept '14 Jan-Sept '15
SalesThsValueEUR 2880 1632 8604 8107 4150 4690 4867 5108 5000 5775 7977 8689
SalesValue% 4,9 2,8 14,6 13,7 7 7,9 8,3 8,7 8,5 9,8 13,5 14,7
Growth% 12 -43,3 4,1 -5,8 -16,3 13 5,8 5 22,5 15,5 -1,2 8,9
Jan-Sept '14 Jan-Sept '15 Jan-Sept '14 Jan-Sept '15 Jan-Sept '14 Jan-Sept '15 Jan-Sept '14 Jan-Sept '15 Jan-Sept '14 Jan-Sept '15 Jan-Sept '14 Jan-Sept '15
SalesThsValueEUR 6946 6979 6791 6866 3806 4324 3485 3515 2299 1606 2155 1706
SalesValue% 11,8 11,8 11,5 11,6 6,5 7,3 5,9 6 3,9 2,7 3,7 2,9
Growth% 13 0,5 1,8 1,1 5,5 13,6 1,1 0,8 40,3 -30,1 -14,1 -20,8
100<130€80<90€
130<160€ 160<200€ 200<250€ 250€<300€ 300<350€ >=350
<50€ 50<70€ 70<80€ 90<100€
 Product launch rolled out with the proper timing
with regards to all the market considered
 Microwaves competitive scenario would be hard
to sustain for a product like CucinaBarilla
 Combined Microwave Value Sales +3,1pts YTD
Sept 2015 vs PYTD
Microwaves price range
Sales Val%: 19,8 Sales Val%: 22,9

6. Qualitative Interviews
6
ISABELLA
 31 years old
 Engineer
 Lives with boyfriend
 Cooking is a “need”
 Looks for info online and purchases online
 Owns capsules coffee machine
 Low brand loyalty for products assessed
 Looks for easy to clean, small dimension
appliances
 Need to try CB dishes to evaluate product
 Oven priced among 550€ and 650€
 Food kits priced up to 5€
10 in depth interviews
3-4€ most frequently mentioned prices for food kits
400/500€ most frequently mentioned prices for oven
Easy to use/clean and Multifunctions most appreciated attributes
None of the respondents aware CucinaBarilla, low awareness
confirmed by questionnaire answers
Unaware
82%
Aware 18%
Tried
Not Tried Not Reuse
ReuseATAR Model – Results from questionnaire

7. Quantitative analysis - Questionnaire
7
14%
10%
16%
14%
30%
15%
1%
Age
<=25
26-30
31-40
41-50
51-60
61-70
>=71
79.49%
16%
5%
%Respondents
North
Center
South & Islands
43%
57%
Gender
Maschio
Femmina
1%
11%
37%
22%
9%
2%
8% 9%
Occupation
High school students
University Students
Employee
Freelance
Manager
Unemployed
Retired
Others
How Many times do you cook
per week?
% Count
Nessuna 7.6% 23
1 - 3 19.8% 60
4 - 7 34% 103
8 - 11 22.4% 68
12 - 15 11.5% 35
16 - 19 1.7% 5
20 o Più 3% 9
Total 100% 303
303 Respondents
42 Questions both open and close ended
Diversified sample in terms of:
 Gender
 Age groups
 Occupation
 Cooking Frequency
Unbalanced sample in terms of geographic split

8. Conjoint Analysis
8
Analysis considering all respondents
 Price of the oven (Price1) identified as most important variable of the product mix (78% rel. Importance)
 Price of food kits (Price2) second most relevant lever, with high monetary value  tradeoff with oven price
 Brand and Functions low relevance
2,99€  3,99€
If oven price 29,4€
3,99€  4,99€
If oven price 39,4€
Utilities
Utility
Estimate
Std.
Error
Relative
importance
MVUU
Monetary
value of the
attribute
Brand
Whirlpool & Barilla 0,420 0,372
2% 19,4 €
Samsung & Barilla -0,420 0,372
Price Oven
399 8,802 0,496
78% 23,1
599 -0,287 0,496
799 -8,514 0,496
Price food
kits
2,99 1,418 0,496
6%
3,99 0,144 0,496 29,4 €
4,99 -1,562 0,496 39,4 €
Function
Easy Clean 0,584 0,372
3% 27,0 €Multiple types
of preparations
-0,584 0,372
(Constant) 18,732 0,392

9. Gabor Granger Model
9
Analysis considering all respondents
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
299 399 499 599 699 799 899 999
Purchase intent
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
299 399 499 599 699 799 899 999
Revenues Curve
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
1.99 2.99 3.99 4.99 5.99
Purchase intent
-
50
100
150
200
250
300
350
1.99 2.99 3.99 4.99 5.99
Revenues Curve
at 399€
12%
Purchase Intent
at 2,99€
39%
Purchase Intent

10. 10
Van Westendorp Technique
Analysis considering all respondents
 Acceptable range: 150 – 202€
 Indifference price: 200€
 Optimal price: 175€
 Acceptable range: 2,44 – 3,45€
 Indifference price: 3,00€
 Optimal price: 2,99€

11. Cluster analysis
11
Attitude towards
cooking
Cooking
Frequency
Self Definition
Preferred prod.
atributes
Age/Gender% Employment
Frequent Family
cookers
Act of care High Dependent on others
Security/ Easy
clean/use
42/66%F Employee
Occasional Gourmet
cookers
Creativity Med
Highly social (no web)
and efficient
Quick preparation 47/63%F Freelance
Grown up
Independent
Unpleasent Low Independent routinary Dimensions 55/55%M
Managers/
Students (Univ.)
Innovators Is a need Med – Low Leaders and innovators Multiple preparations 38/60%F
Employee/
Freelance
Indifferent Only for feeding Low Social (web) Time/ Multi. Prep. 39/63%M
Students/
Employee
22%
23%
19%
27%
10%
N° cases per cluster
Frequent family cookers
Occasional gourmet cookers
Grown up independent cookers
Innovators
Indifferent

12. Innovators Cluster
12
 Acceptable range: 200€ – 300€
(vs 150€ – 202€ considering all respondents)
 Indifference price: 250€
(vs 200€ considering all respondents)
 Optimal price: 250€
(vs 175€ considering all respondents)
VanWestendorpGaborGranger
at 399€
27%
Purchase Intent
(vs 12% considering all
respondents)
499€
Suggested price from
rev. curve
(vs 399€ considering
all respondents)

13. Conclusions & Managerial Implications
13
Market
Outlook
Conjoint
Analysis
GG & VW
Cluster
Analysis
 All markets analyzed revealed
positive outlook
 Price ranges of microwave too
low for CucinaBarilla
 Price of the oven is the main limit
to CucinaBarilla purchase
 Trade-off with food kits price
 At 399€, 27% purchase intent for
innovators
 Price of food kits 2,99€
 Innovators should be targeted in
first place for the launch
 Adapt pricing and communication
Strategy Strategy
1 2
POSITIONING
CucinaBarilla has to be positioned and
perceived as a cooking appliance
PRICING PRICING
COMMUNICATION
Increase proximity with target through tailored
events, digital communication and temporary
shops
399€
3,99€
Loan
for use
2,99€
(+ Contract)
TARGET
Innovators Cluster

14. Conclusions & Barilla Reaction Plan
14
Strategy Strategy
1 2
POSITIONING
CucinaBarilla has to be positioned and be
perceived as a cooking appliance
PRICING PRICING
COMMUNICATION
Increase proximity with target through tailored
events, digital communication and temporary
shops
399€
3,99€
Loan
for use
2,99€
(+ Contract)
TARGET
Innovators Cluster
 CucinaBarilla no longer sold through
electronics retailers
 Focus on refined recipes and time
saving
 CucinaBarilla Magazine
New Business model implemented by the Marketing Manager
 Oven in the form of loan for use
 9 food kits per month at 30€ per month
 18 Months contract
 Young workers (25-40), med-high
income, innovative, limited time
available for cooking
 Cooking demonstration at lunchtime at
several companies around Milan area
 New digital plan including pre-roll videos
and new TVC
 Temporary Shop

15. Further Research
15
INTERNATIONALIZATION
LOAN FOR USE + 2,99€ per kit contract
A research similar to he one conducted here, should be carried out in specific target
countries to assess this product acceptance.
An a hoc pricing research should be carried out to assess the best possible form of
contract granting the oven in the form of lend for use and offering a certain amount of
food kits per month at a given price (2,99€)
ADDITIONAL RESEARCH METHODOLOGIES
 Hybrid Approach  Combines the benefits of the Conjoint and Fishbein analysis
 Adaptive Conjoint Analysis  Allows including a wider range of attributes to test

16. Thank You

17. Back Charts

18. Communication Gap
18
82%
18%
I have never heard about it before
I have already heared about it
27%
48%
16%
6%1%
1%
Nessuno
Da 1 a 4
Da 5 a 9
Da 10 a 14
Da 15 a 20
Più di 20
Unaware
82%
Aware 18%
Tried
Not Tried Not Reuse
Reuse
“Have you ever heard about CucinaBarilla?” “How many online purchases in the last month?”
ATAR Model
 From the interviews it emerged that none of the
respondents ever heard about CucinaBarilla
 The results are confirmed by the answers provided in
the questionnaire
 The communication strategy was in large part digital,
but despite the vast majority of respondents browses
on the internet quite often only 18% knew about this
product existence before the questionnaire
 Considering the ATAR model we can therefore expect to
lose the majority of potential consumers already at the
first step which is awareness

19. 19
Respondents Segmentation
 Drawing on Rogers we know that not all consumers are equally sensitive to innovations
 Only a smaller part of consumers can be therefore targeted initially for a discontinuous innovation to be launched
 Considering questionnaire respondents is then useful to run a segmentation in order to spot a potential cluster of consumers to be
targeted for the launch
 A single characteristic of respondents taken alone does not explain any significant difference in price sensitivity and innovation
acceptance, as the scatterplots show
 Factor and Cluster analysis were then carried out

20. Factor Analysis
20
1 2 3 4 5 6 7 8 9 10 11
QID4_4 ,841
QID4_9 ,837
QID4_8 ,802
QID4_2 ,732
QID4_1 ,730
QID1 bis ,464 ,431
QID36_7 ,815
QID36_4 ,805
QID36_15 ,686
QID36_2 ,681
QID36_5 ,582
QID36_1 ,556
QID36_11 ,483 ,451
QID4_3 ,797
QID4_7 ,783
QID4_6 ,779
QID36_13 ,564
QID36_3 ,762
QID36_8 ,654
QID36_9 ,545
QID36_12 ,407 ,466 ,440
QID8_1 ,781
QID30_TE
XT
,759
QID8_5 ,830
QID8_6 -,780
QID4_5 ,417 -,596
QID6 ,753
QID36_6 ,416
QID36_14 ,693
QID8_7 ,570
QID36_10 ,480 ,538
QID8_3 ,875
QID8_4 ,775
QID8_2 ,420 -,664
Rotated Component Matrixa
Component
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.a
a. Rotation converged in 75 iterations.
 Question 1: “How many times do you cook per week?”
 Question 2: “Which words come to your mind when thinking
about cooking?”
 Question 4: “How many online purchases have you done
in the past month?”
 Question 5: “How important are those attributes to you,
when choosing a cooking appliance?”
 Question 30: Age
 Question 42: “How would you consider yourself among
the following alternatives?”
11 Factors identified
Choice based on:
 Total initial Eigenvalue > 1
 Explained cumulative variance 69,1%

21. Frequent Family cookers Cluster
21
VanWestendorpGaborGranger
at 299€
11%
Purchase Intent
(vs 12% considering all
respondents)
299€
Suggested price from
rev. curve
(vs 399€ considering
all respondents)
 Acceptable range: 100€ – 199€
(vs 150€ – 202€ considering all respondents)
 Indifference price: 172€
(vs 200€ considering all respondents)
 Optimal price: 153€
(vs 175€ considering all respondents)