Copyright © 2010 by John Wiley & Sons, Inc. All Rights Reserved

COMPETITIVE CONDITIONS IN FOOD SERVICE Managers must pay attention to competition now more than ever because of the following: There are more competitors than ever The “pie” is only so big The market is growing more slowly than in the past Markets are changing

COMPETITIVE CONDITIONS Some notes to consider: Slim profit margins at risk Shortage of prime locations left Entry of more domestic competitors Entry of international competitors Continued dominance of chains New business environment—some companies have left food service

COMPETITION = MARKETING Companies must try harder than ever before through their marketing efforts Marketing is not just advertising….. Marketing is “communicating to and giving…customers what they want, when they want it, where they want it, at a price they are willing to pay” (Lewis, 2000)

PRODUCT LIFE CYCLE

RESTAURANT CONCEPT LIFE CYCLE

COMPETITIVE CONDITIONS The Marketing Mix consists of four main activities (the 4 Ps – sometimes the 6 Ps): Promotion Product Price Place

PROMOTION Two major forms of Promotion (paid communications) are: – advertising – sales promotion Recent data show full-service restaurants (check averages between $15 and $24.99) spent 1.8% of sales on marketing while QSRs spent 2% In total, the food service industry spends over $5 billion each year on advertising (most is still radio and television) Less is spent on the Internet (only about 10%)

PROMOTION Sales promotion consists of paid activities other than advertising and include: Coupons (Applebee’s, Doug’s Fish Fry) Games/Contests (“Roll up the Rim”) Promotional merchandise (QSR - toys, DVD’s) The use of all three are increasing in restaurants

ADVERTISING MEDIA

PRODUCT The “product’ in hospitality is actually the guest experience This represents some combination of the tangible and intangible aspects of that experience Food and service are large parts of the experience

PRODUCT The product (food) is obviously a very important part of what a restaurant has to offer Elements of this P may include: variety, creativity, quality, etc. Because of the importance of product, adding new menu items is becoming increasingly important Restaurants have added salads, wraps, and more international items recently.

PRODUCT The process of adding a new menu item to a restaurant menu can be quite extensive: Idea generation Screening Development and testing Test marketing

PRODUCT Taking a broader view, the “Product” can also be viewed as the overall concept To capitalize on additional markets (and to combat maturity), some chains have developed or purchased new concepts

PRICE Price is also important and not just in the eating markets The eating markets is often the one that gets attention in this area though because of price wars One could argue that price is a more important differentiating factor in the eating market

PRICE Price is the only P that produces revenue (others incur cost) Changing prices is a key strategic decision, and can have critical consequences However, there is always pressure from internal and external forces to adjust price

PRICE Price is often determined based upon three factors: Cost Competition Demand

PLACE Place refers to the location – or where the product/service is sold/delivered Place is also known as Distribution As we have discussed, the notion of place is changing – from traditional locations to “alternative” locations Essentially, restaurants are looking to bring their product to the customer

COMPETITION WITH OTHER INDUSTRIES Is food service a “generic” industry? If we take a more limited view, we can accept that there are more competitors than there have ever been: convenience stores ($13 B), supermarkets (becoming a main source for take-out food) and home!