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Chapter 7
Marketing
© Copyright 2011 by the National Restaurant Association Educational Foundation (NRAEF)
and published by Pearson Education, Inc. All rights reserved.
Marketing Overview
A market is 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
determining what products
and services to offer, how to
position them in the
marketplace, how to promote
them to potential buyers,
how to price them so people
will buy them, and how to get
the goods to these buyers.
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Marketing Concept
 In the current business environment, marketing drives
the operation.
 This means that an operation has to do the following:
 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.
 This approach is called the marketing
concept.
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Basic Marketing Concepts
 The marketing mix is 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:
 The product-service mix consists of all of the food and services
offered to customers.
 The presentation mix consists of all the elements that make the
operation look unique.
 The communication mix includes all of the ways an operation
actively tries to reach, or communicate, with its desired
customers.
 A successful operation needs to keep up with consumer,
or market trends.
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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:
1.
2.
3.
4.
5.
7.1
Research the market
Establish objectives
Develop a market strategy
Implement an action plan
Evaluate/modify the action
plan as needed
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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: These are 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.
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Section 7.1 Summary
 In order for a business to provide a product or a service
profitably, its customers, or market, must desire the
product or service that the business is trying to provide.
 Marketing is the process of communicating a business’s
message to its respective market.
 The contemporary marketing mix model consists of:
product-service mix, presentation mix, and communication
mix.
 A marketing plan is a list of the steps an operation must
take to sell a product or service to a specific market.
 In a SWOT analysis, you identify your restaurant’s
Strengths, Weaknesses, Opportunities, and Threats.
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Market Research Methods
 There are four basic methods
marketers use to gather research:
 In the experimental method, an operation
might try 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.
 With the survey method, a marketer
gathers information using questionnaires.
 Sampling involves testing a product with a
specific, small group of people, sometimes
called a focus group.
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Market Segmentation
 The target market is comprised of 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, while target marketing
treats people as different from each other and tries to
make 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.
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Ways to Segment a Market
 There are four basic ways to segment a market:
 Demographic segmentation looks at the personal makeup of
individuals in a given location.
 Geographic segmentation includes such factors as where
consumers live, where they work, and what kind of transportation
they use to get around.
 Segmenting a market by product usage can also shed light on
how best to serve a community.
 Lifestyle segmentation looks at the activities, hobbies,
interests, and opinions of a given target market.
 A value proposition is a statement of the value an
operation’s target customers will experience when they
purchase its products and services.
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Creating a Market Identity
 Positioning is creating a clear, specific
identity for both a product and the
operation within the marketplace. In the
restaurant and foodservice industry, it is
all about standing out in a crowd.
 Positioning consists of three steps:
1. Identify possible ways to differentiate the
operation within the market and create a
unique identity.
2. Select the right mix of differentiating
aspects.
3. Communicate the chosen identity to a
specific target market.
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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.
 Marketers and managers have to select the right mix to
position an operation properly.
 Managers and marketers must clearly communicate an
operation’s chosen identity in the market.
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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.
 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 at large.
 Direct marketing: Making a concerted effort to connect directly
with a certain segment of the market.
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Types of Sales Promotions
 Types of Sales
Promotions:






Special pricing
Frequent shopper program
Premiums
Special events
Samples
Contests and sweepstakes
 Typical promotional
materials:
 Premiums
 Carryout and door hanger
menus
 Apparel and branded
merchandise
 Point-of-purchase (POP)
materials
 Merchandising materials
 Direct mail
 Email
 Signage
 Flyers
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Public Relations:
Engaging the Community
 Publicity is the attention an operation receives.
 One way to get good publicity is by engaging in the affairs
of the community.
 Community relations involve interacting with the people
in the local area to create awareness of and trust for an
operation.
 Once marketers have identified community relations
opportunities that align with their marketing plans, they
can think about how to become involved in a way that
generates good publicity.
 Media relations are the relationships that marketers
maintain with media outlets.
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Section 7.2 Summary
 The four basic methods used to gather research are the
experimental, observational, survey, and sampling method.
 Market segmentation is breaking down a larger market into
smaller groups of similar individuals to help identify target
demographics in any given location.
 Positioning means creating within the marketplace a clear,
specific identity for both a product and the operation that offers
that product.
 There are many ways for marketers and managers to
communicate with their market.
 Sales promotions provide special incentives for customers to
patronize an operation.
 The purpose of public relations is to generate positive publicity.
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Menu Overview
 There may be no stronger marketing tool for a restaurant
than its menu.
 The menu functions in two ways: planning and
communication purposes.
 The basic function of the menu is to tell customers what the
operation has to offer. The menu also presents an opportunity
to distinguish its items from those of the competition.
 The menu may be an operation’s best sales tool. It can
greatly influence what customers decide to order.
 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.
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Types of Menus
Understanding the different types is a good first step in determining or
identifying an operation’s goals and function in the marketplace.
 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: With this type of 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.
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More Menus
 Fixed menu: This menu offers the
same items every day.
 California menu: This menu lists all
meals available at any time of day.
 Prix fixe menu: This is the opposite
of an à la carte menu in that it offers
multiple menu items at one price.
 Table d’hôte menu: This menu is
similar to a prix fixe menu in that it
bundles various elements of the
menu into one package.
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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.
 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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Creating the Menu
 Managers and chefs must take into account these elements in
the planning phase of menus:
 Physical layout: Planners must take the physical layout, or space,
of the operation into account when they design a menu.
 Personnel: Planners must consider the qualifications of the staff of
an operation.
 Ingredients: Managers and chefs want to create a menu that best
reflects fresh, seasonal ingredients.
 Wants and needs of target market: Managers must address the
wants and needs of the market, not their personal preferences.
 Expectations of target market: These must be met once the
operation is established and continues over time.
 Profit margin: Planners must create the menu with profitability in
mind throughout the entire process.
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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:
 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.
 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.
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Pricing the Menu
 Pricing the menu is a critical process: it provides information
to customers and it determines profitability.
 The price of items on a menu also points to the market
category of the restaurant, indicating quality of the food, level
of service, atmosphere to expect, and so on.
 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. Then,
management must build in profit.
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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
 Straight markup pricing: With this method, managers mark up
the costs according to a formula to obtain the selling price.
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More Menu Pricing Methods
 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.
 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
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Menu Pricing Methods (Cont.)
 Set percentage increase method: With this method,
managers calculate the markup for the 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
7.3
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Analyzing Menu Sales
 It is crucial to the success of an operation that managers
analyze how well items on the menu are performing.
 The sales volume of a menu item is the number of
times the item is sold in a time period.
 Conducting a sales mix analysis helps managers
maximize profits. A sales mix analysis is an analysis of
the popularity and the profitability of a group of menu
items.
 Menu engineering is systematically breaking down a
menu’s components to analyze which items are making
money and which items are selling.
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Menu Engineering
1. First, list all of the menu entrées in column A.
2. List the total number of purchases for each item in
column B.
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Menu Engineering (Cont.)
3. Divide each item’s sales by the total number of
purchases (covers) to determine each item’s menu mix
percentage:
Item number sold / total number of purchases
= menu mix percentage
4. In column K, categorize each item’s menu mix
percentage as either high or low. To determine menu
mix percentage, take 100 percent (1.00) and divide by
the number of items listed in the test.
5. List each item’s selling price in column D.
6. List each item’s standard food cost in column E.
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Menu Engineering (Cont.)
7. List the contribution margin for each item in column F.
Determine the contribution margin by subtracting the
item’s standard food cost (column E) from its selling
price (column D):
Selling price – Item food cost = Contribution margin
8. In column G, record the total revenue. Determine total
menu revenue by multiplying the number sold of each
item (column B) by its selling price (column D):
Number sold × Selling price = Total revenue
Total this column at the bottom of the column.
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Menu Engineering (Cont.)
9. In column H, list the total item food cost. To obtain this
figure, multiply each item’s food cost (column E) by the
number sold (column B) to obtain total food cost
(column H):
Item food cost × Number sold = Total food cost
Total this column at the bottom of the column.
10. List the total item contribution margin in column I.
Determine this value by multiplying each item’s
contribution margin (column F) times the number sold of
each item (column B):
Item contribution margin × Number sold
= Total item contribution margin
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Menu Engineering (Cont.)
11. Categorize each item’s contribution margin as either
high or low in column J, depending on whether or not
the item exceeds the menu’s average contribution
margin. Determine the menu’s average contribution
margin by dividing the total contribution margin in
column I by the total number of items sold in column B:
Total contribution margin of all menu items / Total number sold =
Average contribution margin
12. Use all the data gathered to classify each item into
categories in column L. Classify each menu item as a
star, plow horse, puzzle, or dog.
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Using Menu Item Classifications
 Stars: These items are both popular and profitable. For
the most part, stars should be left alone.
 Plow Horses: These items are popular but less
profitable. These items are often an important reason for
a restaurant’s popularity. Because they are less
profitable, one solution may be to increase their price.
 Puzzles: These items are unpopular but very profitable.
One of the best solutions to helping out a puzzle is to
decrease its price.
 Dogs: These items are unpopular and unprofitable.
Eliminate all dog items if possible. Replace them with
more popular items.
7.3
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Section 7.3 Summary
 The menu may be an operation’s best sales tool. It can
greatly influence what customers decide to order.
 Understanding the different types of menus is a good first
step in determining or identifying an operation’s goals and
function in the marketplace.
 Most menus organize foods according to the order in
which they are usually eaten.
 Managers and chefs must take into account several
elements in the planning phase of menus.
 Well-designed menus are pleasing to read, easy to
understand, and clearly express the identity and character
of the operation as a whole.
7.3
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Section 7.3 Summary (Cont.)
 Pricing the menu is a critical process: it provides
information to customers and it determines profitability.
 Profitability is the amount of money remaining for an
operation after expenses, or costs, are paid. This
difference is also called the margin.
 There are many methods of pricing menu items.
 It is crucial to the success of an operation that managers
analyze how well items on the menu are performing.
 Menu engineering is systematically breaking down a
menu’s components to analyze which items are making
money and which items are selling.
7.3
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