Please read the article about the Ooooby Case and answer the multiple choice questions that follow.

Ooooby - Auckland food box business set to grow

Source: NZ Herald

Waiheke-based entrepreneur Pete Russell is on a mission to revive the local food market, one city at a time. After founding fruit and vegetable home delivery businessOoooby(Out Of Our Own Backyards) in Auckland nearly three years ago, Russell now operates the concept in Sydney, Waikato and Christchurch. Ooooby's mission is to put small-scale sustainable farming at the heart of the food system.

The self-declared "start-up guy" wants to makes locally-grown food as affordable and convenient as what people can buy in the supermarket. "We believe we can do that because we can cut a whole lot of fat out of the supply chain," Russell said. By applying the same technology and methods used in long distance supply chains, he aims to get local, natural food into the market at a competitive price without squeezing the farmer. "If we prototype that in Auckland, we can replicate from city to city," he said.

Russell started Ooooby as a social network about six years ago, building a community of local and organic growers who could trade tips, and swap seedlings and food. The network soon grew to 1500 members and Russell identified a viable food production group lacking a channel to market. "We figured 'what would happen if we could provide a way for these guys to tap into the market and make some money from their backyard?'" Ooooby has since grown to 16 part-time staff and a base of 100+ growers, and have delivered over 300,000 boxes of local and organic food to more than 30,000 homes.

In Auckland, growers deliver their food to a depot in Mt Wellington every Tuesday morning, where the boxes are packed to order and sent out in the afternoon. The food was usually picked that morning and carrying out all the work in one day meant there was no need for storage or double-handling, Russell said. A similar model is used in the other cities Ooooby operates in. Customers can choose from a variety of boxes, ranging in price from $20 for the 'Essentials Box' to $60 for the 'Big Mix Box'. Customers can also add individual items, such as miso paste, Bellbird Bread, free range eggs, among many other items, to their box orders.

"We've got a system now where we can cover all our expenses, pay everyone on less than 300 deliveries a week. So we've cracked it in terms of proving the financial model on a small customer base," Russell said. Growers were being paid a minimum of 50 per cent of the retail price. "They're getting paid well compared to if they were selling through traditional outlets," he said. Russell said the model was about being as lean as possible, leveraging off the fact that local food did not have to travel far.

Russell is originally from Australia, and has started a number of businesses there. One of the other businesses he started involved importing pastries from Europe, which were frozen and shipped across to Australia, then distributed throughout the country. "It was good money but I wasn't working on things that were fulfilling or inspiring. It was all about the money," he said. Russell said the biggest problem in the current industrial food system was that family-scale growers were fast "dropping off the vine. As the mainstream markets are consolidating and looking for efficiencies, they're not wanting to deal with 100 different suppliers. They want to deal with one supplier that can do the volume of 100." The result was that family growers were left selling at farmers markets, which were "a minute fraction" of the main market, Russell said.

End of Case

1. (i) When Ooooby advertises that they sell products from "small-scale, local, sustainable farms", to environmentally conscious consumers, they are promoting which level of the total product concept?

a.Augmented product

b.Core product

c.Branded product

d.Actual product

e.Physical product

(ii) According to their website, Ooooby currently sells six different fruit and vegetable boxes. This would be considered the __________ of their fruit and vegetable box product line.

a.mix

b.length

c.width

d.depth

e.breadth

(iii) By targeting those consumers who are concerned about the natural environment and want to buy more sustainable produced and local products, Ooooby is using which segmentation variable?

a.Demographic

b.Promotional

c.Psychographic

d.Behavioural

e.Geographic

(iv) When establishing the price of the new ready to prepare meal box, Ooooby Eats, the company's first step is to:

a.determine a pricing method.

b.determine demand.

c.evaluate competitors' prices.

d.select a pricing policy.

e.develop pricing objectives.

(v) Pete Russell, CEO of Ooooby, knows that he can improve Ooooby's service quality through all of the following elements, except:

a.Regularly reducing prices to match competitors' prices.

b.Consistently delivering the food boxes when they are promised.

c.Ensuring that customer service reps deal with customers in an honest and courtesy manner.

d.Ensuring customer service reps quickly respond to customer questions.

e.When problems occur, customer service reps deal with customers in an empathetic manner.

(vi) Ooooby has set prices for their fruit and veg boxes at $20, $30, $40, $50 and $60. This strategy is commonly referred to as:

a.prestige pricing.

b.ethical pricing.

c.odd-even pricing.

d.price lining.

e.customary pricing.