A case discussion on

GALLARDOS GOES TO MEXICO

Submitted to: Dr. M.R. Suresh

9/1/2012

By: Group B7
Sahil Sinha (11047) Snigdha Chitranshi (11051) Somrhita Chakraborty (11111) Vismaya M.N. (11120) Rishi Kumar Gandhi (11164) Sahil Kathpal (11166) Soumya Siddhartha Rout (11172)

Contents
Case Facts ................................................................................................................................................ 3 Job-based market segmentation .......................................................................................................... 3 Challenges for Gallardos entry .......................................................................................................... 4 Job-based view of cooking in Mexico ................................................................................................ 4 Product Platform Planning ...................................................................................................................... 5 Opportunity Identification ....................................................................................................................... 5 Strategic Planning .................................................................................................................................... 5 Product Innovation Charter (PIC) ........................................................................................................... 6 Finding the right people........................................................................................................................... 7 Challenges Faced by Gallardo in Mexico................................................................................................. 7 Market Analysis ....................................................................................................................................... 7 Initial Reaction ........................................................................................................................................ 8 Defining respondent group ...................................................................................................................... 8 Select response situation .......................................................................................................................... 8 People Dimensions ................................................................................................................................. 9 Surrogate Questions ................................................................................................................................ 9 The Full Screen ....................................................................................................................................... 9 Must-Meet and Should-Meet Criteria .................................................................................................... 10 Product Protocol ............................................................................................................................... 11 Product Use Testing .............................................................................................................................. 12 Reaching the user group ........................................................................................................................ 13 Identity Disclosure................................................................................................................................. 13 Explanation about the product during the test ....................................................................................... 13 Recording respondents reactions .......................................................................................................... 13 Strategic Launch Planning ..................................................................................................................... 13 The Target Market Decision ................................................................................................................. 15 Launch Tactics ...................................................................................................................................... 17 Market Testing ...................................................................................................................................... 17 Controlled Sales Method ....................................................................................................................... 18 Launch Management ............................................................................................................................. 18 Suggestions /Recommendations ............................................................................................................ 20

Case Facts
The case essentially suggests that when companies segment markets and build brands in ways that match how the customer sees the market--customers hire products to get jobs done--their success rate in innovation increases. Gallardo's is a privately held firm whose products--salsas, sauces, and seasonings for Latin American dishes--were sold primarily in the south western United States. When the company had saturated that geographical market, its CEO decided to invade Mexico. The case has description of how Gallardo's marketers learned what jobs Mexican housewives hired these products to do. It also shows how the company used these market insights to segment the market along different lines than its competitors. Gallardo's products and advertisements ended up spurring significant growth in the market, but most of the growth was captured by its primary competitor, California. Gallardos Salsa and Sauces was headquartered in San Antonio, Texas. They had gained a reputation for its salsas, sauces, and seasonings. In 1973, Eric Meyer, who had received an MBA from Harvard, bought the business from its original owners. Meyers association helped Gallardos grow substantially. Companys revenue grew from $9 million in 1974 to $200million by 1990.41% market share in the canned and bottled salsas market Strong brand image, especially among the dominant Mexican and Anglo-American populations.

Gallardo's maintained a competitive price for its products and its primary channels were supermarkets, specialty stores, and also some national restaurant chains. The company took to heavy advertising and regular introduction of new products to become a dominant branded products maker in the US.

Job-based market segmentation

Meyer experimented with the concept of segmenting markets by the jobs that people were trying to get done in their lives, rather than traditional delineations such as demographics or product attributes. The strategy hit the bulls eye with Vive 4:00! a snack bar. Once the companys sales seemed to level off, Meyer decided to enter the Mexican market with its salsas and sauces, which were an essential component of Mexican cooking.

UniGlobes California was already on the shelves in most shops in Mexico, with a share of 75%.

Challenges for Gallardos entry

Mexican women preferred preparing the sauces and salsas by themselves using herbs that they grew or purchased in the local marketplace. Women who prepared their seasonings with basic vegetables would not be willing to purchase these products in ready-made form in bottles and cans. California was the countrys leading brand of salsas, sauces, and seasonings.

Job-based view of cooking in Mexico

Three fundamental jobs that arise in the lives of Mexican women who cook were identified. 1. Job #1: Expression of creative abilities and love for their family. Reinforcement of selfesteem. 2. Job #2: To appear as a talented, careful, and experienced cook. 3. Job #3: To deliver a satisfying meal, despite having less time or desire to do so. Once they understood the jobs that were in the market needing to get done, the Gallarados team set to work on designing products that did these jobs as perfectly as possible. Communication to consumers was done with the help of six television commercials that were designed to position the brand as a versatile and enriching addition that enables consumers to creatively interact with the dishes they serve their families. Results: Growing but not winning Reasons: The products were priced higher than competition. Very less or no apparent differentiation among the two brands. Failure to penetrate rural households and the modern trade channels. Ineffective communication strategy that did not establish an emotional connect with the consumer.

Product Platform Planning

Effective planning for product platforms allows a company to deliver distinctive products to the market while conserving development and production resources- David Robertson and Karl Ulrich, July 15, 1998

Eric Meyer noticed that Mexico kitchens were still following the traditional procedures of producing raw materials for sauces and salsas and then preparing them in the kitchen. Meyer wanted to let women in Mexico know about his products and can cause reasons of the products getting purchased by them.

Meyer came up with designing products in accordance of three jobs which were determined by surveying several women in Mexico. This idea allowed them to identify the women preference in preparing food for their family. The survey results came up with three jobs which were later rated by the women in order of preference among these three. This product was designed in accordance of the behaviour of Mexican women in kitchen.

Opportunity Identification
Meyer identified the opportunity of selling the products to Mexican women who still believed that the traditional way of preparing sauce and salsa. He tried to create a demand of his readyto-eat product in a market in which only 10% to 15% of salsas and sauces consumed in Mexico were ready-to-eat product. He identified a fast-growing need and he tried to adapt his product to that need. He also tried to create ripple effect in the market for his products because of its quality since years.

Strategic Planning
Meyer tried to tap a market where the consumer was not only uninterested in the product but was using something which was in use since ages. The strategies used by Meyer were to perform a survey and then do the categorization of the target market allowed him to know the behaviour of the consumer and then he strategized how and what type of product will fulfil the need of the consumer and will allow the change in usage.

Product Innovation Charter (PIC)

Background The existing way of preparing sauce and salsa was traditional one and consumer preferred using tomatoes, chillies and herbs which are grown in the home. This was due to the belief that the sauces created at home are tastier and reliable and above all cheaper in comparison to what was delivered in the market. The idea here was to analyse the behaviour of the consumer and create a demand for the product. Focus The products of Gallardos were well accepted by the consumers in the Southwest and western United States. The taste of the sauce, salsa and seasonings were liked by the consumers and this was a challenge for them to make it liked by the Mexican consumers who believed in existing way of preparing sauce and salsa. This audience was around 85% to 90% in Mexico. Goals/Objectives The major goal of Meyer was to create a healthy demand in the market for his product. A market which when tapped can give him healthy shares and can cause heavy sales in Mexico. This can also create a healthy competition with competing brand California which enjoys 75% of existing 10% to 15% of ready-to-eat consumer market. Guidelines These goals can be achieved by understanding the behaviour of the consumer and by knowing how Gallardos can convince them to use the product which was costlier than their existing way of preparing the same product.

Finding the right people

Meyer hired a Mexican- Joe Ortega, who had been his classmate at the Harvard Business School as president of Gallardos Mexico who has spent his career in consumer goods marketing. Then Ortega hired several Mexican and Mexican-American sales and marketing managers who also had experience in consumer goods marketing. Marketing Director Eddie Gutierrez, in 2001 began developing a deeper understanding of Mexican women behaviour of using salsas, sauces and seasonings.

Managements role in making creative people productive Several Mexican and Mexican-American sales and marketing managers who were hired by Ortega were made aware of the potential to learn the segment consumer market. Meyer and Ortega developed a day-long training seminar on the jobs-to-be-done concept.

Challenges Faced by Gallardo in Mexico

It entailed converting homemakers who presently grew and dried their own herbs or purchased them in their local marketplace, to purchasing ready-mixed seasoning powder. To help more and more women who presently made their own salsas and sauces from basic vegetables and seasoning, begin to embrace branded, ready-made products in bottles or cans, all significantly higher price point.

Market Analysis
Mexican Women are good at making food. And traditionally they prefer to make food by their own for their family. For Mexican women cooking was an integral and deeply rooted part of Mexican culture. In 2001, Gallardos marketing director Eddie Gutierrez began developing a deeper understanding of what Mexican women were trying to accomplish when they hired salsas, sauces and seasonings. The principle which guide them during market analysis are:1. Consumers hire products to perform specific jobs in their lives. 2. These jobs generally have functional, social and emotional dimensions to them. 3. The jobs exist in stable form, even though consumers may not be aware of them.

4. Understanding the job provides essential guidance to product design and to marketing communication strategy. They conducted survey on one-to-one interview with customer in which they asked customer had to ask to tell a specific, detailed story about the situation they had found themselves in most recently when they bought or prepared and then when they used, a salsa, a sauce or seasoning when cooking. The unit of analysis, in other words, was not the consumer. It was the situation. They consolidated all situation into three fundamental jobs arises in consumer lives.(Job1, Job 2, Job 3) in which they discuss about consumer needs , time and delivery.

Initial Reaction
After the analysis the manager of Gallardo Mexico had been focusing on internal measures of growth, and they astonished by the growth of new products of Gallardo. Between 2001 and 2002, Gallardos revenues dropped, from US $25 to $17 million, because they existing brand Hermosillo phased out of the market. But the company grew to $ 42.2 million in 2004. When asked about the growth of Gallardo in Mexican market, Joe Ortega, Managing director of Gallardo Mexico stated its all about relative growth of ready to eat market in Mexico.

Defining respondent group

As we discussed earlier , the Mexican Salsa market is female centric , so Gallardo marketing team targeted the specially house wives from different region of Mexico .They made some principle for their research work and conducted one-on-one interview with consumers . The market research team followed normal method for qualifying the size of market segmentlike counting the number of people in demographically defined segment and calculating the value of products shipped or sold by product category.

Select response situation

The marketing team conducted one-on-one interview with consumers, in which they asked to tell detailed story about a situation they found it while cooking. In addition to consumer permission, marketing team followed the women several days to observe how they make food. They summarize it in mini case. After case study completed, the researcher engaged in a pattern matching exercise in which different situation that the researcher had observed. This was critical step for quantify the size of job segment. It was difficult task because same lady had to perform 3 jobs for survey and in that they faced a lot while performing,
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People Dimensions
Gallardos have to think about the consumer problems/dimensions while concept evaluation. Consumers do not organize their thinking around products or product attributes; nor do they conform their desires to the average tendencies of people in a demographically market segment. Consumers hire products to perform specific jobs in their lives. Unit of analysis, in other words, was not the consumer. It was the situation.

Surrogate Questions
Surrogate questions give us pieces of information that can substitute for what we want to learn but cant. Gallardos marketing team can conducted interviews with consumers in which they were asked consumers to tell a specific story about the situation they had found themselves when they used salsas, sauce or seasonings while cooking. How frequently they found themselves needing to do these jobs? Can you recall a time when you felt a need to get this job done. Did you face a situation in which you were not able to fixing the meal, using salsas, sauces and seasonings?

The Full Screen

The full screen would accomplish three objectives for Gallardos entry into Mexico. 1. It would help the company to decide or confirm whether it should have gone forward with the job-based segmenting of the market at Mexico. 2. It would have facilitated the generation of a few more concepts for Gallardos market entry, which would have further been sorted to identify the best among them. 3. The full screen encourages cross-functional communication, which in turn helps in bringing the spotlight on the potholes in the concept. To accomplish the first objective to decide whether to go ahead with job-based market segmentation or not, Gallardos could have used a scoring model.

Category Technical Accomplishment

Factor Development skills required Technical equipment Likelihood of competitive cost Likelihood of quality product

Scale 1 2 3 4 5 None Perfect fit None Perfect fit

Score 4

Weight 2

Weighted score 8

Well Over Above 20% less Below Leader current level

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20

Total 48 Commercial Accomplishment Probable market share Promotion requirements Target customer Importance of task to user Fourth No.1 4 5 20

No V.familiar 3 Experience Stanger Close 2

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10

No Close Relationship

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Total 58

The scorers should have been from the major functions. Also, product managers and staff specialists should also have been brought on board.

Must-Meet and Should-Meet Criteria

Must-Meet criteria for the companys products in the Mexican market: 1. Existence of market need does it surpass the minimum required size? 2. Product advantage does it provide customers with unique benefits or good value? 3. Return versus risk is the ratio acceptable?

Should-Meet criteria:
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1. Strategic what is the strategic importance of the project to the company? 2. Product advantage to what extent do the products meet customers needs better than competition? 3. Synergies to what extent do the line of products leverage marketing, distribution, or selling strengths?

Product Protocol
Gallarrados product protocol could have included the following items: 1. Target market: Mexican women who fall into three broad job-based categories for cooking. Those who intended to express their talent and love Those who wanted to appear as better cooks Those who wanted to deliver a satisfying meal, but with lack of time or desire

2. Product positioning: A versatile, enriching addition to the meal that enables consumers to creatively interact with the dishes they serve their families. 3. Product attributes: Authenticity in ingredients Better aroma, color, flavour Ready to use Useable in a variety of food preparations

4. Competitive comparison: Very little differentiation when compared to California. 5. Augmentation dimensions: Versatility in usage

6. Timing: Late entry into Mexican market 7. Marketing requirements: Communication that helps consumers realize that the jobs arise in their lives very frequently and that Gallardos is offering a way to hire them. Need to differentiate Gallardos from California. Domination in the modern trade channel, particularly in urban areas.
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8. Production requirements: Quality standards must be met without exception. 9. Potholes: More competitive pricing required Lack of any differentiation from Californias. Communication campaign wasnt able to position the brand effectively in the consumers minds.

Product Use Testing

Use testing is an essential step that Gallardos team had foregone. Use testing of their products would have accomplished the following goals: 1. Assessing competitive reaction 2. Understanding the complex needs of the Mexican consumer 3. Clear understanding of the customers specific requirements with respect to usability, texture, aroma, taste, etc 4. Assurance of delivery of a quality product, inclusive of some augmentation rings

The knowledge that the team could have gained from use testing its products: 1. Pre-use sense reactions from users 2. Use experience details such as how easy is the use of the products, how many various types of preparations they can be used in, any required changes in taste, flavour, etc 3. Confirmation of whether the jobs are being effectively done by the product 4. Assessing the emotional connect that the products are able (or not) to make with the users 5. Thorough evaluation of the products using gamma tests 6. Diagnostic information: any shortcomings in the products could have been identified, and later improvements could have been made.

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Reaching the user group

Personal mode of contact would be the logical option for this case. More specifically, making individual contact with the users (women in particular) at the point of use (their home) or at a test kitchen would be a good move.

Identity Disclosure
Gallardos should preferably have kept their identity a secret during use testing. This is because they were a new brand in the country, and by hiding their name, they could hope to conduct competitive comparison (blind test) with Californias products.

Explanation about the product during the test

Conducting the test without making any comments would be appropriate in this case. Just a try this kind of approach would be best since it would facilitate the user to have a cooking experience as normally as in their own kitchen. Following this, commercial explanation could be provided to make them aware about the finer needs of theirs that the product was fulfilling. The test should have been conducted in the sequential monadic way over a short period of time (say, a week).

Recording respondents reactions

The following methods of recording responses could have been employed:

A five-point verbal rating scale Descriptive information (for diagnostic reasons)

Strategic Launch Planning

It involves strategic decisions and tactical launch decisions. Strategic launch decisions include both strategic platform decisions that set overall tone and direction, and strategic action decisions that defines to whom we are going to sell and how. Strategic Platform Decisions Type of Demand sought

Since Gallardos products- salsas, sauces and seasonings are new entry in an established market i.e. Mexico, so the main emphasis of the company must be drawing market share
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away from the competitors by selective demand. California brand has its products onto the shelves of 85 % of all retail stores and they already accounted for 75% of ready to eat volume whereas Gallardo is onto the shelves 35% of stores. Now, the company has a good Mexican brand name and has also acquired Hermosillo, a small spice company which had good local strength and good market share in seasonings and sauces. The company with the help of its salesman should come up with a trial purchase so that the customer can try it once and find the difference in taste which will help in launching. Aggressiveness

Aggressiveness refers to an attitude as much as money. Since, an already established brand California is a strong player in the Mexico market. Gallardo must pay a lot of attention to advertise their products and use the resources effectively and we place it in a cautious entry because they are unaware of how strong their competitor is, how is their product performance and how strongly the competitor will react as what happened is that the company advertised its product aggressively but the benefit was reaped by California also. Competitive advantage

Since, the company is planning to enter an established market where competitor has a strong hold. The company should adopt a middle choice of going with differentiation as well as pricing. The current price of Gallardos product is 4 pesos more than its competitors and there is not much differentiation worth it. So, there is a strong reason for the customers to not buy their products. Either the price should be made competitive or a clear differentiation must be there. For example-on the basis of ingredients used or some related health benefits etc. Competitive Relationship

Since the company is entering an established market where California has a foothold, the company will avoid a specific competitor and will focus directly on the customers i.e. in what way it will differentiate itself without reference of any competitor and will focus on reaching a good market share. Scope of market entry

The firm will enter the market after conducting a proper market testing i.e. the types of customers the company wants to target, the need of the product in the market, the pricing pattern to be followed, depending on the taste the customer likes, what is the usage of the product. The better the market testing is, the better will be the acceptance. Image

The image with which the company will enter the market is that our products will gratify your cooking, will enhance the taste of your dish and will give you aroma of fresh fruits and spices.

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The Target Market Decision

Alternate Ways to segment a market It describes the ways in which the target customers of the products can be classified into different categories. End Use

It refers to the type of application and usage the end user wants. For example- the size of the bottle depending on the use; the type of bottle depending on the handling i.e. glass, squeeze, plastic; kids will prefer the squeeze bottle to make cartoons; women wants easy handling and opening like bottled cap or slid etc. Geographic and Demographic

The taste and preferences differ from country to country and also from culture to culture. For example-Mexican women involve themselves actively in cooking and would like to know about the product in detail; with which food the sauces and salsas are frequently used; who uses the product the most-in this case household families. Behavioral and Psychographic

Market is segmented according to psychographic variables: Value- showing love and care for the family, authenticity of ingredients. Activity-showing creative abilities like adding to the taste, garnishing with it and how to use. Lifestyle- whether the customer like ready to eat or homemade salsas, sauces and seasonings with spices and flavor of their choice. Benefit Segmentation

This segment is of great interest in launching a product. Here, different benefits that a customer sought from a product are identified and then are used to satisfy the needs. In this case consider the two benefits as Taste and Quality.

. .
Taste

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The above figure is Joint Space map showing two benefits according to which customers rate the products. Micromarketing It is defined as dividing targets with unique purchasing patterns in clusters called micro markets. The food buyers are divided as Loyalists-who buy one brand at all times and dont use deals Rotators-who moves around in 2-3 product sets Deal selectives-rotators whose movement is affected by deals Price driven- who buy all major brands always on deal Store brand buyers-who do as their name implies Light users-who buy too little for a pattern to show.

The company is entering in an established market in some other country so loyalists are ruled out. The company will target all other clusters by keeping price competitive, offering deals like buy 1 get 10% off on the next buy, buy a combo and get 10 Rs/- off etc., store brand buyers by targeting the major retailers and advertising.

Targeting by Innovation Here, we will look at different factors that will affect the product adoption when it will be launched in Mexico Relative advantage of the product over other

It highlights the advantage of the product over the existing offering from competitor like exotic spices and flavors and attractive packaging. Compatibility

It defines whether the product is satisfying the need i.e. modifying the taste and spreading the aroma of the seasonings. Complexity

The basic idea that the company wants to deliver to the customers should be clear i.e. what we are offering, should be seen as soon as the product is used. For example- change in color if seasonings are used.

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Trialability

The trial offerings of the products should be made easily purchased i.e. in small quantities and easy to use. Communicability

The product will be available at all the modern retail stores as well as general trade stores with the help of our distribution channel.

Launch Tactics
Tactical launch decisions are marketing mix decisions such as communication, promotion, pricing and distribution and are typically made after the strategic launch decisions. Promotion

Through Advertising, publicity and sampling Sales and Distribution

Product demonstration, availability through direct channels, high intensity of coverage and push strategy by offering margins to distributors Pricing

By discounts, selling combos, kind of introductory pricing to gain acceptance Product

Introducing in a variety of flavors and packaging Timing

Building hype before launching and telling the features Personal Selling Personal selling will be employed initially because getting good retail availability and shelf position in the major retail stores of the city is must. Salespeople will be given territories where they have to sell the product or spread awareness of the product. Proper training will be given to them about how to handle queries and the persuading techniques to do the selling.

Market Testing
In this case the market testing should have been done at a very early stage because there are competitors like California already existing in the market. The company cannot afford to wait and learn as the damage from the competitors could be great. Also for products which are fast
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moving, the market testing should start as soon as the company thinks of entering as market. In this case, the product is moving to a new market than actually developing a new product. But the company should have kept this in mind that the target consumers are very particular about the taste and authenticity of the sauces and herbs being used. A market testing would have given the company an idea if the Mexican customers (largely the housewives) were satisfied with the product or not and if the company could afford to keep its prices so high. A proper market testing could have given a clear idea to the company about the communication gap through its advertisements and diagnosing this problem early would have helped to revise their ads as well as price if required. This would also save the company from market rejection problem that they are facing now and a cheaper brand gaining the benefits because of them. A proper market testing would have helped the company understand the various other needs like distribution, margin to vendors, etc. The company is facing problems because of both at present.

Controlled Sales Method

The method of marketing that could be best applicable here is controlled sales. This method is more applicable as it would give a more realistic picture than pseudo sales method in which the customer has no risk. The product is priced higher and a clear preference can be checked. Minimarkets This could be the best way to test the market. The company is well aware that it is pricing its product considerably higher than its competitor and also it is not adopting a wide distribution in the initial stages. The minimarket situation could give the company a more realistic picture of acceptance of the product over its competitor. A minimarket testing would have helped the company avoid the problems due to its pricing it is facing now. The company rightly understood the needs of the customers closely but was overconfident about its pricing.

Launch Management
A stepwise launch management could have helped the company analyse various things as follows: 1. Spot the potential problem: The potential problem over here was the price which the company overlooked. The company overlooked the fact that it is a daily consumable item and mass customers would mainly go for products that were cheaper unless the quality was a great differentiating factor. 2. Select those to control: A proper launch management would have helped the company analyze the impact of pricing the product higher and also buying out a competitor and phasing it out slowly. An expected effect matrix could have given a

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clear idea to the company about the most devastating problem that could arise and take an action immediately for it. 3. Developing contingency plans: A proper launch management would have helped the company foresee the potential problems which over here were clearly visible (price) and develop a plan ahead in case the product did not work.

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Suggestions /Recommendations
Gallardos is a strong company with adequate financial muscle. It should not have purchased Hermosillo which did not have a strong distribution channel. The main challenge in the FMCG industry is an efficient distribution channel to make sure that the product is available whenever the customer wants to avoid substitution by another brand. Gallardos could have used some efficient distribution agency to distribute its product. Till it established its manufacturing capacity in Mexico, the company could have had a central warehouse in Mexico and could have used that for distribution. The brand was not perceived as a higher-value-adding product because the taste could be easily matched by adding a few more ingredients. The company should have done its homework before launching the product at a considerably higher price in the name of a superior product. The survey it had done with the Mexican housewives was not used to it maximum to improvise the product to match the expectations of the people in Mexico. Jobs-to-be-done was not the only method to survey the market. There are many other aspects to cooking which the company ignored. The company was of the views that making the cooking easier with maintaining its authenticity would work for it. This was more of a judgement than a conclusion from research. The company could have come up with a product that would help the Mexican ladies use their own authentic herbs along with Gallardos base sauces. The Mexican women are very attached to their cooking and a mid-way could have been found to add value to their cooking than replacing their home-made herbs and sauces. The ads are not able to create a place for brand Gallardos in the minds of the women. The ads are rather focused on the jobs that can be made easier with the help of readymade sauces. The ads should focus more on how only Gallardos sauces can compete with the originality of home-made sauces. Gallardos has to decide that what segment they are focusing on and price the product accordingly. California sauces are focusing on rural markets and hence its products are accordingly priced. The retailers and distributors are getting a higher margin than the other company is getting but still the product is not moving off the shelf as quickly as its competitors. The company should take a cue from this that the product is not being preferred by customers and should do something to locate the problem. Only refining the communication strategy (advertisement) is not the solution. Gallardo needs to connect with its customers by its superior product than just creative ads.

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