About Gourmet Garden:

Most produce is grown and ripened using a ton of chemicals, using harmful waters, toxins and heavy metals to make the produce. Purchasing authentic organically grown produce is difficult. In this tough situation, Gourmet Garden offers a solution.

Gourmet Garden grows Naturoponic and organic fruits and vegetables in greenhouses. This produce is 100% free of chemicals. They offer a wide assortment of produce and also sell spices, breadsm cheese and spices on their platform, hence completing the basket.

Gourmet garden does not have physical stores but they harvest from their farms and deliver to the customer doorsteps within 3-24 hours of ordering. Over 1 lakh families have ordered from Gourmet garden.

Selection criteria- Gourmet garden is a series A funded startup (8.3mil funded) with over 100K + app downloads, 75%+ repeat customers, functional in 4 cities and is operational for over 4 years. These facts assure that there is a strong PMF for gourmet garden.

Core Value Proposition:

Serving as a one stop shop for every family's fresh produce needs, Gourmet garden offers the following value to its users-

• Convenience- The customer choose the quantity, assortment and mode of payment from the comfort of their house. Once order is placed, they will get a door delivery of the order within 3-24 hours of order placement.
• Freshness- The produce is harvested only after the customer places the order, ensuring the produce retains the taste and desired ripeness
• Safety- The produce and other offerings are grown in naturoponically or sourced from organic produce farmers. With no chemicals being used, the produce is the most safe offering available in the market.
• Range- The platform not only offers essential Fruits and Vegetables, they also have exotic produce, oils, cheese, precut produce, spices, etc so that the customer can purchase a verity of range from a singe platform.

ICP snapshots-

Experiencing the value proposition-

• The customers place the orders by choosing the required items and quantity on the app.
• They pay through the wallet/ choose any digital means of payment or choose COD for delivery.
• They receive the order to their doorsteps and is fresh produce.

Step 1 Litmus test- Retention

Gourmet garden claims to have a strong retention of 70% of its orders coming from existing customers. Being a E-commerce company, lets assume that the conversion rate is 80% and 70% retain, a net of 56% of the customers remain as loyal customers

A graph of retention as a function of time

Deeper engagement-

1) Higher frequency- the core customers use the app to order products upto 3 times a week (as they seek to have fresh produce for every meal).

2) Use more than one feature- Customers purchase not just fruits and vegetables but also other offerings such as cheese, bakery products and use the wallet system to do payments and store excess cash.

3) Higher transaction value- by ordering exotic things such as produce, cheese and cold press oils, customers have increased their purchasing transaction values on the platform

Willingness to pay-

ICP 1, 2 and 3 stated above have a higher priority of money than time. Upon user interactions, they are already purchasing in the range of Rs 5000-15000 worth of Fruits and vegetables for their houses on an average month.

Since gourmet garden is in the same space, this is the minimum price the customers are willing to pay for the same offerings that they are now purchasing from retail stores. Further, through Swiggy's Instamart, Zepto and Bigbasket starting to charge delivery fee, there is an indication that the customers are more inclined to pay for the service of door delivery as well.

Step 2 Substitute pricing-

Gourmet garden is in the premium fruit and vegetable category and it solves the core problems of

1) Finding good produce that is healthy and chemical free

2) Door delivery of produce

3) Variety of offerings including cheese, bakery items and cut produce

4) Wallet for easy transactions

Competition landscape is mentioned below:

Step 3 Pricing Design-

Whom to charge?

Since this is a trade E-commerce model, we would be charging every customers for the basic purchases of produce on the platform but given that, we optimize for the following users in the RFM grid-

1) Champions- customers who have placed an order in the last week, place an order weekly and have a very high monitory value with an AOV of Rs 1000

2) Loyalists- Customers who have placed and order in last 7-15 days, place an order weekly and have a high monitory value with an AOV of Rs 800

3) Potential Loyalists- Customers who place an order in last 1 week, place an order once in every 15 days and have a very high monitory value with an AOV of Rs 1000

When to charge?

Save Time: Customers have to hop between different stores and E-commerce sites to find an assortment of exotic and regular produce thill they get comfortable with the quality across the channels. With gourmet garden, they can relax, purchase from one place and not worry about the quality at all.

Save Money: with a pricing that competes with regular quick commerce platforms and the organic sections of big basket, gourmet garden helps families save money in their purchases in the high end produce segment.

Efficient: With an offering of cut vegetables, ready to cook salad selections, gourmet garden makes a 'lazy cook' be more efficient.

When customers order from the platform, they experience the efficiency in ordering cut produce and ordering all produce at once in the first three orders. Further, they also can compare the price viz a viz competition in these 3 orders. We can start charging a user post the first 3 orders and this would typically take 30 days from placing the first order.

What to charge for?

Gourmet garden is an E-commerce platform that offers fresh produce delivery to doorsteps. Hence the aspects that can be charged for are:

1) Output- Gourmet garden can charge for every order that the customer receives from the platform. The delivery also is a component of the output and can be charged on top of the regular order value based on the distance/ AOV value.

2) Accessibility- Since gourmet garden is a platform that does deliveries, to have a higher retention value, we can charge the customers for accessibility to a service that is similar to Zomato's gold. The idea would be to charge less for delivery fee, eliminating minimum order value and a subscription service for monthly produce- all through a membership plan.

Hence the customer should be charged for Output (produce ordered) and Accessibility (membership program)

How much to charge?

For a customer who uses Gourmet Garden, they have to incur the following costs if they go to the market and purchase the items on their own-

1) Time cost - 4 visits per month x (0.5 hours shopping per trip + 1 hour commute per trip)

= 6 hours per month

Lets assume that the average person in this price bracket earns Rs 500 per hour, this equates the cost of time to be Rs 500 x 6 = Rs 3000 per month

2) Cost of produce- The cost of produce will be perceived as the same as the best produce they are purchasing in the market and this cost would be Rs 10,000 on an average per month

3) Wastages- As there are always wastages as the produce purchased will usually be of a lower quality, a 10% wastage is a standard. Hence this cost is 10% of 10k = Rs 1,000

4) Premium for better produce- Getting fresh and chemical free produce is next to impossible in the market. Assuming that this cost is equivalent to the cost of health insurance that families pay (as both are to avoid costs that one pays against medical treatment), one can equate this to Rs 1000 per month

With the above considerations, the total value added by Gourmet Garden is Rs 3K + 10K + 1K 1K = Rs 15K per month. The platform can charge Rs 12K where 10K is the perceived costs of produce and 2K is for the service that has a perceived value of 5K (15-10K) in the customer's view. Thus the multiple is 2.5X of value added to the customer.

How to show pricing?

1) The surround effect- Since the produce is of the highest quality, a surround effect will greatly enhance the reason for the customer to purchase the produce. The surround effect can be achieved through

• Packaging that is both at a SKU level and an overall level
• High level of service and delivery experience
• Great customer service

2) Social proofing- We can show the value of the platform through great user testimonials, reviews on the appstore and on social media channels along with similar communication on the platform.

3) Charm pricing- Since most produce have a considerable markup value, pricing should always be rounded down to the closest number ending with 9- eg Rs 39/kg for onions, Rs 29/ 300g of ladyfinger ,etc.

System 1 vs System 2 design-

As gourmet garden is an E-commerce platform, a System 1 design makes more sense than a System 2 design. A system 1 design makes more sense as-

• Purchasing requires low efforts
• Its a high frequency purchase category
• Most purchasing decisions require minimal logic
• Purchases are rapid
• The AOV is relatively low

However, since Gourmet garden sells produce that requires the customers to have trust, a detailed product information can be provided thorough an information section that is hooked to the product on the app and is displayed only after the customer chooses to view this additional information. This additional information should have the produce's average life, storage details, nutrient information, place of origin and allergy information.

Hybrid pricing model-

Is the product a want or a need?

The product is a want for the particular ICP as it is attached to health concerns

What is the first purchase ticket size?

Typical ticket size is Rs 500

Time between product discovery and purchase?

This time can vary as it is an E-commerce app but this is typically 15 days.

Post purchase gratification?

The gratification is instant post order delivery as the produce is unmatched compared to traditional channels

Is the frequency of use high?

The app is used to make weekly purchases, making the frequency relatively high.

Is there a large purchase commitment?

No, there are little to no switching costs to move to competing platforms.

Is there an appetite to pay?

yes, ICPs perceive the value of the offering to be high and of value, hence are willing to pay for great produce.

Hence gourmet garden should charge a Transactional price for each transaction on the platform and can also introduce a Subscription model to reduce the AOV, delivery fee and add other incentives, thus ensuring that the customer sticks to gourmet garden for his/her purchases.