Transcript Marketing Overview

Chapter 7
Marketing
© Copyright 2011 by the National Restaurant Association Educational Foundation (NRAEF)
and published by Pearson Education, Inc. All rights reserved.
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
• How to get the goods to these buyers
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In the current business environment, marketing drives
the operation.
This means that an operation has to do the following:
1. Determine customer needs and wants
before doing anything else.
2. Determine the costs, prices, and
profitability of products and services
before starting to produce them.
3. 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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
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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 Market
trends are consumer trends
• Changing attitude about food, service, or
aesthetics.
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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.
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Research the market
Establish objectives
Develop a market strategy
Implement an action plan
Evaluate/modify the action
plan as needed
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
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Research the Market: gathering research
• Sources- customers, employees, the community,
sales records, trade journals & government offices
Establish Objectives: clearly state what you are trying
to accomplish
Develop a Market Strategy: ways to achieve the
objectives
Implement an Action: putting the marketing strategy
into action
Evaluate/Modify the Action Plan: ongoing process of
monitoring
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To do a SWOT analysis (also called a situation assessment), identify
an operation’s Strengths, Weaknesses, Opportunities, and Threats.
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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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 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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
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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
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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
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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
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
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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.
Service
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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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
The ways an operation communicates with its
market is called the promotional mix:
• Advertising: Paying to present or promote an operation’s
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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:
 Special pricing
• Premiums
• Carryout and door hanger
•
 Frequent shopper program
 Premiums
 Special events
 Samples
 Contests and sweepstakes
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Typical promotional
materials:
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•
•
•
menus
Apparel and branded
merchandise
Point-of-purchase (POP)
materials
Merchandising materials
Direct mail
Email
 Signage
 Flyers
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Publicity is the attention an operation receives.
One way to get good publicity is by engaging in the affairs of the
community.
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Community relations involve interacting with the people in the local
area to create awareness of and trust for an operation.
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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.
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Media relations are the relationships that marketers maintain with
media outlets.
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A
folder that contains the following:
• General information about the restaurant
• Menus
• Recent press releases
• Recent awards
• Photos of the restaurant and menu items
• Goal and mission statement
• Contact information
• Additional promotion materials
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
There may be no stronger marketing tool for a restaurant than its
menu.
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The menu functions in two ways: planning and communication
purposes.
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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.
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The menu may be an operation’s best sales tool. It can greatly
influence what customers decide to order.
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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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Understanding the different types is a good first step in determining or
identifying an operation’s goals and function in the marketplace.
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À la carte menu: This menu prices each item
separately.
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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.
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Cyclical menu: With this type of menu, chefs
or managers change menu items after a
certain period of time.
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Limited menu: There are typically only a few
items offered on a limited menu.
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Fixed menu: This menu offers the same
items every day.
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California menu: This menu lists all
meals available at any time of day.
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Prix fixe menu: This is the opposite of
an à la carte menu in that it offers
multiple menu items at one price.
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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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
Most menus organize foods according to the order in which they are
usually eaten.
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Variations in these categories depend on what an operation offers
and the image management wants to promote.
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Prepare foods within a major classification using a variety of cooking
methods.
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Chefs or managers can divide entrées by categories.
Maintain balance in the choice of vegetables, sauces, and potatoes
used to complement entrées.
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The number of desserts on the menu depends on customers’ tastes
and past sales.
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1.
2.
3.
4.
5.
6.
7.
8.
Appetizers
Soups
Salads
Sandwiches
Entrees
Vegetables
Desserts
Beverages
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
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
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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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
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
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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 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
•
•
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indicating quality of the food
level of service
atmosphere to expect
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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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
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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
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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 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
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
It is crucial to the success of an operation that managers
analyze how well items on the menu are performing.
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The sales volume of a menu item is the number of times the
item is sold in a time period.
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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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1.
2.
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First, list all of the menu entrées in column A.
List the total number of purchases for each item
in column B.
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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.
5.
6.
7.3
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.
List each item’s selling price in column D.
List each item’s standard food cost in column E.
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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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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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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.
7.3
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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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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