1. 2014 Summer Institutes Level 3
FRMCA Level 2, Chapter 7 Marketing

2. 2014 Summer Institutes brought to you by:

3. Session Objectives
Explain the role that marketing plays in determining products and services.
Define target market, and explain why it is important to a business.
Identify the parts of a Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis.
List ways to attract and keep customers.
Identify the steps in developing a promotion mix and a promotion plan.
Explain the importance of the menu to a foodservice operation.

4. Session Objectives continued
Organize the information on a menu.
Explain principles of menu layout and design.
Identify ways to test new menu items.
Define profitability and target margin.
List and compare basic pricing methods.
Explain the purposes of a menu sales mix analysis.

5. Marketing Overview
Market: A group of people who desire the product or service provided by a business.
Marketing: The process of communicating a business’ message to its market
Marketing determines:
What products and services to offer, and how to position them in the marketplace
How to promote them to potential buyers
How to price them so that people will buy them
How to deliver the goods to buyers
Throughout this chapter, students should consider the importance of a defined public image to the success of a restaurant or foodservice operation.
Encourage students to share opportunities in which they have successfully or unsuccessfully marketed themselves.
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6. Marketing Functions

7. Marketing Concept
In the current business environment, marketing drives the operation.
To successfully market:
Determine customer needs and wants before doing anything else.
Determine the costs, prices, and profitability of products and services before starting to produce them.
Organize all aspects of the operation to provide what the customers want, and not other things.
Encourage students to explore ways in which a business could change, based on which department is prioritized. For instance, if the production department is in charge of the business, how might that affect the marketing department or the sales department?
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8. Marketing Plan
Marketing plan: A list of steps an operation must take to sell a product or service to a specific market
A marketing plan has five main components:
Research the market
Establish objectives
Develop a market strategy
Implement an action plan
Evaluate and modify the action plan as needed
Vision statements, mission statements, and organizational goals are discussed in Level 1, Chapter 8.

Relate this to the discussion of customer feedback in Level 1, Chapter 10.

Essential Skills:
 Monitoring a Promotion Scheme
Encourage students to discuss the following:
What are some promotions that would attract you to a particular restaurant or foodservice operation? Are these promotions that the operation could reasonably take? Why or why not?
How are particular promotions part of the greater action plan?
What are some reasons that a promotion might fail? How can these be avoided in future promotions?
Once a successful promotion has ended, how can a restaurant or foodservice operation retain the new customers it attracted?
How can planning, executing, and evaluating promotions be built into daily management operations, without sacrificing other tasks or objectives?
What are the best ways to obtain customer feedback about the promotion? Why is this important?
Work with the class to plan an event to highlight the achievements they have made during this course. Students should work together to develop and execute a marketing plan.
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9. SWOT
SWOT analysis (also called a situation assessment) is used to identify an operation’s strengths, weaknesses, opportunities, and threats.
Strengths: All of the strengths of the operation; areas where it excels
Weaknesses: The operation’s shortcomings
Opportunities: Areas where the operation could either increase revenues or decrease costs
Threats: Factors outside the operation that could decrease revenues or increase costs
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10. Market Segmentation
Target market: The group of people an operation intends to pursue as customers
Identifying a target market enables organizations to:
Provide the products and services needed
Avoid mass marketing, in which everyone in the market is treated as having the same needs and wants
Focus on target marketing, which treats people as different from each other and tries to make a focused appeal to a distinct group of customers
Relate this information to the discussion of how individuals make purchasing decisions in Chapter 5.
Essential Skills:
Target Marketing
Encourage students to discuss the following:
Why do restaurant and foodservice operations determine target markets?
How might a restaurant’s target market differ from its actual customers? In these situations, how should the restaurant respond and why?
How can a SWOT analysis help businesses identify their target markets?
Why is it important for a business to be flexible? Can a business be too flexible?
Restaurant and foodservice operations provide some of the most basic human needs: food, water, and human contact. However, these operations generally target their offerings to particular groups of people, based on their wants and needs. Is there a contradiction here? Why or why not?
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11. Creating a Market Identity
Positioning creates a clear, specific identity for both a product and the operation within the marketplace. The goal is to stand out in the crowd.
Positioning consists of three steps:
Identify possible ways to differentiate the operation within the market, to create a unique identity.
Select the right mix of differentiating aspects.
Communicate the chosen identity to a specific target market.
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12. 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: Another way to differentiate an operation is through its image.
An activity in Chapter 5 encouraged students to consider purchasing as the “head” and service as the “heart” of a restaurant or foodservice operation. What role do students believe marketing plays? Why?
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13. Ways to Attract Customers
Merchandising techniques at the table, such as unique garnishing or flambé
Themes, both as operation-wide celebrations and special events
Frequent-shopper cards that offer discounts or other incentives
Signature items, such as special deserts or “secret” recipes
Specials, such as “buy one, get one free” nights
Educational promotions, such as wine tastings
Level 1, Chapter 1 describes the breadth of the restaurant and foodservice industry. Encourage students to relate this discussion of positioning to that material.

14. Market Communications
Promotional mix: The ways an operation communicates with its market
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
Provide samples of communication material from a variety of restaurant and foodservice operations.
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15. Market Communications continued
Personal selling: Always key to an operation’s financial success, but well-trained service staff can also go a long way in communicating an operation’s message
Public relations (PR): The process by which an operation interacts with the community
Direct marketing: A concerted effort to connect directly with a certain segment of the market
Relate personal selling to the discussion of suggestive selling in Level 1, Chapter 10.
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16. Menu Overview
There may be no stronger marketing tool for a restaurant than its menu.
It provides two functions: planning and communication.
It presents an opportunity to distinguish food items from those of the competition.
The menu may be an operation’s best sales tool, as it can greatly influence what customers decide to order.
It helps create the image or identity of an operation.
Provide sample menus from a variety of restaurants that display a range of menu types. Encourage students to identify the message that each communicates.
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17. Types of Menus Á la carte: Each item is priced separately.
Du jour: Items are available for that day.
Cyclical: Menu items change after a certain period of time.
Limited: Limited offerings are available.
Fixed: The same items are offered every day.
California: All the meals listed are available at any time of the day—common in diners that are open 24 hours a day.
Prix fixe: Multiple items are offered at one price.
Table d'hôte: Similar to the prix fixe, various elements are bundled together, with multiple choices available for each course.

18. Organizing a Menu
Most menus organize foods according to the order in which they are usually eaten.
Variations in these categories depend on what an operation offers and the image management wants to promote.
Prepare foods within a major classification using a variety of cooking methods.
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19. Organizing a Menu continued
Chefs or managers can divide entrées by categories.
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.
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20. 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. Things to consider when designing menus include:
Medium: Managers must take into account the material on which the operation’s menu is printed or displayed.
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.
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21. Designing a Menu continued
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.

22. Testing Menu Items
Gather as much feedback as possible about the new menu.
Test new menu items using clip-on or table-tent points of sale.
New items should only be run for a limited amount of time.
Servers can suggest the items and take feedback from the customers.
Sales of new items can be compared to sales of established items.
Offer small tastings of new items for free and then solicit feedback.
Essential Skills: Testing New Menu Items
Encourage students to discuss the following:
Relate this material to the discussion of customer feedback in Level 1, Chapter 10.
Which of these feedback methods might be most productive? Why?
Which feedback methods are appropriate for use with which target markets? Why?
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23. Pricing the Menu Pricing the menu is a critical process.
Menu pricing provides information to customers and determines profitability.
The price of items on a menu determine the restaurant's market category, indicating:
Quality of the food
Level of service
Atmosphere to expect
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24. Pricing the Menu continued
Menu pricing should align with the goals of the operation and the skill level of the staff.
Price 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
Profit
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25. Menu Pricing Methods
Food percentage method: Set the percentage of menu price that the food cost must be, and then calculate the price that will provide this percentage.
Item food cost ÷ Food cost percentage = Menu price
Contribution margin method: This method works for à la carte menu items and menu items that comprise a meal. There are two steps to the formula:
(Total nonfood cost + Target profit) ÷ Number of customers = Contribution margin
Contribution margin + Food cost = Menu price
Encourage students to review Chapter 3
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26. Menu Pricing Methods continued
Straight markup pricing: With this method, managers mark up the costs according to a formula to obtain the selling price.
Average check method: With this method, managers divide the total revenue by the number of seats, average seat turnover, and days open in one year. The result is an average check amount, which gives managers an idea of the price range of items on the menu.

27. Menu Pricing Methods continued
Set dollar amount markup: This method adds a fixed dollar amount to the food cost of an item. The food cost and the dollar amount of the markup must be known:
Food cost + Markup = Menu price
The markup is calculated based on the following:
Profit per menu item + Labor cost per menu item + Operating cost per menu item = Markup
Work with students to review math skills as needed.
Essential Skills: Pricing the Extras
The Q factor represents all the possible foods that a guest might be provided for free, such as ketchup, salt and pepper, etc.
Encourage students to discuss the following:
Why is it important to consider the Q factor when determining food costs?
Guests usually pay indirectly for items like condiments, bread, and butter. What difference might charging directly for these items make to customers? How might this affect the operation’s image?
Which types of operations would probably benefit most from using the Q factor? Why?
Why is the Q factor only included when calculating the food costs of entrées?
Can the Q factor be estimated, or should it be accurately determined? What are the advantages and disadvantages to either strategy?
If an operation begins to incorporate the Q factor into its costing and pricing procedures, are prices likely to change enough that regular guests will notice? Why or why not?
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28. Menu Pricing Methods continued
Set percentage increase: With this method, managers calculate the total markup, based on a set dollar amount markup, for one or several menu items. Then, they determine what the percentage markup is in comparison to the items’ food costs:
Food cost × Percentage = Markup
Markup ÷ Food cost = Percentage
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29. Analyzing Menu Sales
Sales mix analysis measures the popularity and the profitability of a group of menu items. Conducting a sales mix analysis helps managers maximize profits.
Sales volume is the number of times a menu item is sold in a time period.
Menu engineering systematically breaks down a menu’s components to analyze which items are making money and which items are selling.
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