Chapter 7 Marketing

Marketing Overview Market: a group of people who desire the product or service provided by a business. Marketing is the process of communicating a business’s message to its market. Marketing includes: Deciding what products and services to offer positioning them in the marketplace promoting them to potential buyers pricing them so people will buy them getting the goods to these buyers. 7.1 Chapter 7 | Marketing

Marketing Concept In the business environment, marketing drives the operation. This means that an operation has to do the following: Determine customer needs and wants 1st Determine the costs, prices, and profitability of products and services This approach is called the marketing concept. 7.1 Chapter 7 | Marketing

Basic Marketing Concepts marketing mix: the combination of all the factors that go into creating, developing, and selling a product. A new model is called the contemporary marketing mix, which consists of three primary elements: product-service mix: food and services offered to customers. presentation mix: elements that make the operation look unique. communication mix: ways an operation actively tries to communicate with its desired customers. A successful operation needs to keep up with consumer, or market trends. 7.1 Chapter 7 | Marketing

Marketing Plan A marketing plan is a list of steps an operation must take to sell a product or service to a specific market. Every marketing plan has five main components: Research the market Establish objectives Develop a market strategy Implement an action plan Evaluate/modify the action plan as needed 7.1 Chapter 7 | Marketing

SWOT To do a SWOT analysis (also called a situation assessment), identify an operation’s Strengths, Weaknesses, Opportunities, and Threats. Strengths: List all of the strengths of the operation; areas where it excels. Weaknesses: Identify the operation’s shortcomings. Opportunities: areas where the operation could either increase revenues or decrease costs. Threats: These are the factors outside the operation that could decrease revenues or increase costs (road construction, etc.) 7.1 Chapter 7 | Marketing

Market Research Methods Experimental method, an operation tries out a product for a limited time or with a limited group of people. The observational method involves observing how customers react in a natural setting toward a product (have wait staff present daily specials in several ways to determine which way works the best) With the survey method, a marketer gathers information using questionnaires (phone, email, cards at table) Sampling involves testing a product with a specific, small group of people (focus group) 7.2 Chapter 7 | Marketing

Market Segmentation target market: the people an operation intends to pursue as customers. Every operation should be customer driven by satisfying the wants and needs of the customer. Mass marketing: treats everyone in the market as having the same needs and wants target marketing: makes a focused appeal to a distinct group of customers. Market segmentation is when marketers break down a large market into smaller groups of similar individuals that make up that market. 7.2 Chapter 7 | Marketing

Ways to Segment a Market Demographic segmentation looks at the personal makeup of individuals in a given location (gender, age, income, etc.) Lots of young families = kids menus Geographic segmentation: where consumers live or work and what kind of transportation they use to get around Suburban restaurants close for lunch and city restaurants close for dinner Product usage: can also shed light on how best to serve a community Community loves football, host a football night @ rest. Lifestyle segmentation: the activities, hobbies, interests, and opinions of a given target market. Lots of health conscious people = offer healthful menu 7.2 Chapter 7 | Marketing

Creating a Market Identity Positioning: creating a clear, specific identity for both a product and the operation within the marketplace; it is all about standing out in a crowd. Positioning consists of two steps: differentiate the operation within the market and create a unique identity. Communicate the chosen identity to a specific target market. 7.2 Chapter 7 | Marketing

Ways to Differentiate an Operation To differentiate an operation from its competitors and create a unique identity, managers can look at the following: Product: The first and most obvious way to position an operation in the market is through the product it offers. Physical appearance/aesthetics: Use the actual physical space of an operation to create an image. Location: Location can play a big part in creating an identity. Image: Finally, image is yet another way to differentiate an operation. 7.2 Chapter 7 | Marketing

Market Communications The ways an operation communicates with its market is called the promotional mix: Advertising: Paying to present or promote an operation’s products, services, or identity. Sales promotions: Limited, or short-term, incentives to entice customers to patronize an operation (happy hour) Personal selling: well-trained service staff can also go a long way in communicating an operation’s message. Public relations (PR): an operation interacts with the community at large (sponsoring local baseball team) Direct marketing: Making a effort to connect directly with a certain segment of the market (direct mailing, telephone calls, tableside feedback) 7.2 Chapter 7 | Marketing

Types of Sales Promotions Special pricing (limited time) Frequent shopper program Premiums (cup with rest. name on it) Samples Contests and sweepstakes Typical promotional materials: Signage Flyers Premiums Carryout and door hanger menus Apparel and branded merchandise Point-of-purchase (displayed at table or counter) Direct mail (mass mailing of coupons) Email 7.2 Chapter 7 | Marketing

Public Relations: Engaging the Community Publicity is the attention an operation receives. Community relations involve interacting with the people in the local area to create awareness of and trust for an operation. Media relations are the relationships that marketers maintain with media outlets 1. press release: brief presentation of promotional info. written to sound like a news article 2. press kit: packet of info. Given to media representatives to answer questions they might have about a business 7.2 Chapter 7 | Marketing

Menu Overview There may be no stronger marketing tool for a restaurant than its menu. 2. functions in two ways: planning and communication 3. It can greatly influence what customers decide to order. 4. The menu also helps create the image or identity of an operation. The items listed on a menu say a lot about an operation, but so does the way the menu is laid out. 7.3 Chapter 7 | Marketing

Types of Menus À la carte menu: This menu prices each item separately. Du jour menu: Du jour is a French term that means “of the day,” so it simply lists the menu items that are available on a particular day. Cyclical menu: chefs or managers change menu items after a certain period of time. Limited menu: There are typically only a few items offered on a limited menu. 7.3 Chapter 7 | Marketing

More Menus Fixed menu: offers the same items every day. California menu: lists all meals available at any time of day. Prix fixe menu: the opposite of an à la carte menu in that it offers multiple courses at one price. Table d’hôte menu: similar to a prix fixe menu in that it bundles various elements of the menu into one package (value meal) 7.3 Chapter 7 | Marketing

Organizing a Menu Most menus organize foods according to the order in which they are usually eaten. Prepare foods using a variety of cooking methods. Chefs or managers can divide entrées by categories (fish, chicken, pork) Maintain balance in the choice of vegetables, sauces, and potatoes used to complement entrées. The number of desserts on the menu depends on customers’ tastes and past sales. 7.3 Chapter 7 | Marketing

Designing a Menu Well-designed menus are pleasing to read, easy to understand, and clearly express the identity and character of the operation as a whole: Layout: How the menu is categorized and sequenced also adds to the identity of an operation. Color: The colors chosen by an operation help create its identity. Font: A font can highlight certain elements on the menu, drawing customers’ attention. Art: The art selected for a menu can say a lot about an operation. 7.3 Chapter 7 | Marketing

Pricing the Menu Management needs to make sure that pricing aligns with the goals of the operation and the skill level of the staff. Price also determines profitability, which is the amount of money remaining for an operation after expenses, or costs, are paid. This difference is also called the margin. The price of a menu item must account for all of the costs involved in producing that item for the customer. 7.3 Chapter 7 | Marketing

Contribution margin + Food cost = Menu price Menu Pricing Methods Contribution margin method: There are two steps to the formula: (Total food cost + Target profit) ÷ Number of customers = Contribution margin Contribution margin + Food cost = Menu price Straight markup pricing: With this method, managers mark up the costs according to a formula to obtain the selling price. 7.3 Chapter 7 | Marketing

More Menu Pricing Methods Average check method: total revenue # of seats + average seat turnover + days open in year The result is an average check amount, which gives managers an idea of the price range of items on the menu. 7.3 Chapter 7 | Marketing

Analyzing Menu Sales It is crucial to the success of an operation that managers analyze how well items on the menu are performing. sales volume: the number of times the item is sold in a time period. sales mix analysis: an analysis of the popularity and the profitability of a group of menu items (at least 4 times a year) Menu engineering is systematically breaking down a menu’s components to analyze which items are making money and which items are selling. 7.3 Chapter 7 | Marketing

Using Menu Item Classifications Stars: are both popular and profitable. *stars should be left on menu. Plow Horses: are popular but less profitable. These items are reason for a restaurant’s popularity. Because they are less profitable, one solution may be to increase their price. 7.3 Chapter 7 | Marketing

Menu Item Classifications Puzzles: unpopular but very profitable. One of the best solutions is to decrease its price. Dogs: unpopular and unprofitable Eliminate all dog items from menu if possible. Replace them with more popular items.