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Chapter 15 Restaurant Business and Marketing Plans Objectives • After reading and studying this chapter, you should be able to: – Identify the major elements of a business plan – Develop a restaurant business plan – Conduct a market assessment – Discuss the importance of the four Ps of the marketing mix – Describe some promotional ideas for a restaurant Introduction • Business plans – Increase probability of success • Communicate to financial backers • Restaurants – Are experiencing extreme challenges • Difficult times Business Plan • Improve chances of operational success – Assist in obtaining financing – Communicate to potential investors – Define operational purposes • Key ingredient: – Sustainability Business Plan (cont’d.) • Elements – Cover sheet – Description of the business – Description of concept, licensee, and lease – Market analysis and strategy – Competitive analysis – Pricing strategy Business Plan (cont’d.) – Advertising and promotional campaign – Other information – Financial data – Existing restaurant balance sheet – Appendices Business Plan (cont’d.) • Mission statements – Generally do not change • Goals – Reviewed as often as necessary – Established for each key operational area • Strategies or action plans – Who is going to do what, when, and what order – Specific dates Marketing • Based on a marketing philosophy – Patterns the way to relate to guests, employees, purveyors, and the general public • Fairness, honesty, and moral conduct – Finding out what guests want and providing it at a fair price – Asks would-be operators: • Who will be my guests? • Why will they choose my restaurant? • Where will they come from and why will they come back?” The Difference Between Marketing and Sales • Marketing – Broad concept – Includes sales and merchandising – Determines who will patronize the restaurant and what they want in it – Ongoing effort – Gets into psyche of present and potential patrons – About solving guest problems The Difference Between Marketing and Sales (cont’d.) • Sales – Part of marketing – Focuses on seller needs – Activities that stimulate the patron to want what the restaurant offers – Sales mentality exists when seller thinks about only of his or her needs • Pushes an item on a customer – Closely related to advertising, promotion, and public relations Marketing Planning and Strategy • Marketing plans – Must have realistic goals while leaving a reasonable profit margin • Guest satisfaction, market share, sales, and costs • SWOT analysis – Strengths, weaknesses, opportunities, and threats • Strengths and weaknesses: internal factors and can, over time, be controlled by management • Opportunities and threats: external factors Market Assessment and Market Demand • Market assessment – Analyzes community, potential guests, and competition – Helps to answer the all-important questions: • Is there a need for a restaurant? • Who will be the potential guests? • Market demand factors – Population in the catchment area – Demographic split of this population Market Potential • Estimated maximum total sales revenue of all suppliers of a product in a market during a certain period – How many people in the market area are potential customers? – What is the potential for breakfast, for lunch, for dinner? – Will your restaurant attract guests from outside the immediate market area? – Who is your market? Market Segmentation, Target Market, and Positioning • Market – Total of actual and potential guests – Generally segmented into groups of buyers • Similar characteristics – Within these groups are target markets • Groups identified as the best for the restaurant Typical Segmentations • Geographic – Country, state/province, county, city, and neighborhood • Demographic – Age, sex, family life cycle, income, occupation, education, religion, and race • Behavior – Occasions, benefits sought, user status, usage rates, loyalty status, and buyer readiness Positioning • Once the target market is identified – Important to position the restaurant to stand out from the competition • Focus on advertising and promotional messages • Key to positioning – How guests perceive the restaurant • Involves tailoring an entire marketing program Competition Analysis • Analyzing competition’s strengths and weaknesses – Helps formulate marketing goals and strategies to use in the marketing action plan • Comparison benefit matrix – Shows how your restaurant compares to the competition • You choose the items for comparison (e.g., name recognition, ease of access, parking, curbside appeal, greeting, etc.) Marketing Mix: The Four Ps • Every marketing plan must have realistic goals – While leaving a reasonable profit margin • Cornerstones of marketing – Place (location) – Product – Price – Promotion Place/Location • One of the most crucial factors in a restaurant’s success • Ingredients for success – Good visibility – Easy access – Convenience – Curbside appeal – Parking Product • Main ingredient: excellent food – People will always seek out excellent food • Especially when good service, value, and ambiance accompany it • Three levels of restaurant product – Core product: function part for the customer – Relaxing and memorable evening – Formal product: tangible part of product – Physical aspects, décor, and a certain level of service – Augmented product: other services – Valet parking, table reservations, etc. Product (cont’d.) • Product analysis – Covers quality, pricing, and service • Atmospherics – Design used to create a special atmosphere • Experiencing greater emphasis • Product development – Innovative menu items • Added to maintain or boost sales Product (cont’d.) • Product positioning – Conveys the best face/image of the restaurant • What people like most about it • How it stands out from the competition • Restaurant differentiation – Owners usually want their restaurant to be different in one or more ways • Call attention to food or ambiance • Product life cycle – Introduction to decline Price (cont’d.) • Cost-based pricing – Calculates cost of ingredients • Multiplies by a factor of three to obtain a food cost percentage of 33 • Competitive pricing – Checks competition to see what they are charging for the same item • Price and quality – Direct correlation Promotion • Goals of a promotional campaign – Increase consumer awareness – Improve consumer perceptions – Entice first-time buyers – Gain higher percentage of repeat guests – Create brand loyalty – Increase the average check – Increase sales (particular meal or time of day) – Introduce new menu items Advertising • Types: – In-house – Tie-ins and two-for-ones – Loss-leader meals – Advertising appeals – Twitter and Facebook – Travel guides – Yellow pages – Mailing lists