Even as the world makes slow but definite progress towards a semblance of normalcy, it has become crystal clear that COVID-19 is here to stay for the foreseeable future. This is bad news for the F&B industry, with it being one of the hardest hit by the pandemic and circuit breakers.
This crisis has forced many restauranteurs to pivot while innovating and brainstorming new ideas to adapt to the restrictions and delivery-focused industry. Others have taken it upon themselves to improve different aspects of their business during this lull period – and this article is aimed to help you re-evaluate your marketing mix to elevate your business to the next level.
The 4P’s of Marketing
This is a marketing framework introduced by Neil Borden in the 1950’s and popularized by McKinsey that is still very much relevant to this day. These 4 pillars of marketing refer to product, price, place and promotion. The 4 Ps are traditionally used to formulate a product & a corresponding marketing strategy that will effectively reach out to the audience. However, it can also be used to evaluate an existing product offering. We will use this framework as a basis to explore every aspect of a F&B business and explain how each element can be optimized for a restaurant.
Product essentially refers to a good or service a company or business offers to customers in exchange for monetary gain. Products generally fulfil an existing demand; in the case of the F&B industry, restaurants are fulfilling a natural human need – sustenance. However, this is the most basic form of food. Innovation has led to different cuisines and food offerings that are no longer needs but wants.
The day Apple was changed forever. (Cr: Inc)
The best example of needs vs wants is Apple with its iPhone, iMac and even the iPod. When Steve Jobs first came out to introduce these products, there was no demand for such products because it was beyond the public’s imagination. At that time, phones were simplistic in design and focused on functionality – like Nokia. Apple evoked desire that the public did not even know was within themselves and created demand for aesthetic & minimalistic phones. This trend continued with touch screens and the rest is history.
In a F&B setting, Mala Xiang Guo fits the bill as an example as well. Even though a majority of Singaporeans love spicy food, being able to choose the level of spice of a dish was not too popular a concept back then. You simply ordered a dish that suit your palate. It took some time for it to get popular, primarily due to its unique style of ordering, unassuming storefront and lack of menu information at first glance, but Mala Xiang Guo has since gone on to be a staple food among all Singaporeans with its customizable spice levels and wide assortment of ingredients.
Now, why is this important? It’s because most restaurants’ products are not “needs” – they fall into the category of “wants”, which alludes to the necessity of demand being created.
1.1 Core Product VS Side Product
And this leads to our next point of knowing and understanding your product. Every business has its “core” and “side” product(s). Generally, your core product is your signature product and represents your brand as a whole. KFC is known for its fried chicken, and Pizza Hut for its pizza. Pretty straight forward, right?
In this case, focusing on perfecting your core product is instrumental for success. Fragrance, taste, nutrition, texture & presentation are some factors to play around with. You can create demand by customers wanting to try your products due to any one of the factors above.
A local example of this is Lao Ban Beancurd. The traditional beancurd Singaporeans were familiar with was hot, while Lao Ban introduced cold beancurd with a different texture and unique taste. It was an instant hit and Singaporeans formed ridiculous queues to get their hands on a packet of Lao Ban. Sure, the fad has died down somewhat, but that’s a story for another time.
Side products typically refer to additional or complementary services. For full-service restaurants, this encompasses the entire dining experience: queuing, ambience, speed and quality of service etc. These side products enhance the perceived value of your core product which will be elaborated further under the next 4P – Price.
The Product Life Cycle is a big part of product management. It allows you to evaluate which stage your core product is at – Infancy, Growth, Maturity or Decline – and decide on the best course of action to maintain profitability and extend its life expectancy. The entire Product Life Cycle represents the timeline when a new product is introduced until it reaches the end of its shelf life and removed as an offering. Different products move through the life cycle at different speeds; some do not even make it past the infancy stage.
In the F&B sector, products typically do not have any problem making it past the infancy stage – in fact, the problem is with short lifespans. Don’t get us wrong, decline is inevitable; every product eventually stops being relevant. It is just a matter of time. F&B trends come and go, and it is your role as a business owner to ensure that proper measures are taken to extend this Product Life Cycle as long as possible.
Using bread as an example, let us visit its Product Life Cycle:
This brings us to the obvious topic of extending the Product Life Cycle. What are some ways you can extend the shelf life of your product and prevent obsolescence?
You can come up with new and improved versions of the product, such as the iPhone with its annual updated models. Each version essentially resets the Product Life Cycle, even though it is still the same product at its core. This is not as applicable for the F&B industry, though Genki Sushi did something somewhat similar by taking a traditional sushi concept and combined it with technology to improve the user’s experience with auto food delivery systems. Typically done in the maturity stage.
This is pretty straightforward – price can be lowered to encourage new customers to buy it. This is typically done in the decline stage when sales have slowed down.
Utilise different platforms to reach new markets once the current one is no longer as responsive. Some companies even shift their attention to foreign markets such as developing countries as adoption rates in other countries might be slower compared to developed countries. For the F&B industry, it will be more of searching for other possible channels to increase your market reach. Typically done in the latter 3 stages; the earlier, the better.
Change the customers’ perspective of your product through means of advertising. A new image could breathe new life into your product and encourage purchase. Typically done in the latter 3 stages, though the execution and concept will vary greatly at different stages.
It’s important to understand which part of the cycle your product is in so you are able to respond before your product becomes obsolete.
2.1 Real Value vs Perceived Value
When it comes to pricing, real value and perceived value are the two most important factors to consider. There are also other internal and external factors to consider such as staffing expenses, overhead costs, and competitors' prices. In some cases, business executives may raise the price to give the product the appearance of being a luxury. Alternatively, they may lower the price so as to get more consumers to try their product.
Real value refers to the actual cost of the ingredients used in the dish itself while perceived value is how much customers think the dish is actually worth. As mentioned in the previous section, the core product can only reach a certain perceived value, typically determined by ingredients and taste. Your side products can help to elevate the perceived value, but in a similar vein, could also end up being detrimental and lower your value if the two are not in harmony.
Imagine a luxury platter with a wide assortment of the most expensive seafood, but served in a dining environment that’s poorly ventilated with below average service and loud, obnoxious music. The overall perceived value drops, and customers will not be willing to pay more despite the core product being of high quality.
2.2 Pricing Strategy
With the concept of value established, let’s visit the topic of pricing strategies. These strategies help businesses plan the price of products according to factors such as the market situation, competitors and nature of the product itself. There’s many different pricing strategies and we’ll gloss over 4 here that’s more relevant in the F&B industry.
2.2.1 Penetration Pricing
This pricing strategy refers to when a restaurant enters the market at an extremely low price, drawing attention and customers away from their higher-priced counterparts. It is, however, not financially sustainable due to low profit margins and banks on your customers sticking around as you eventually raise your prices.
2.2.2 Value-based Pricing
A value-based pricing occurs when companies price their products or services based on the customer’s willingness to pay. This often means that despite being able to charge more, their products end up being affordable and helps boost customer loyalty.
2.2.3 Premium Pricing
Premium pricing, otherwise known as prestige or luxury pricing, is when companies set a big price tag on their products to portray an image of luxury. It focuses heavily on perceived value rather than its real value.
2.2.4 Cost-Plus Pricing
The most common pricing strategy by far for restaurants, cost-plus pricing focuses on adding a fixed mark-up to the cost of production. For example, the real value of a plate of pasta is $2 and a markup of $8 (400%) is added.
Place essentially refers to location, but it’s not just limited to the physical brick-and-mortar definition. This extends out and covers other platforms or channels you are selling your products on. The end goal is always to utilize all the channels at your disposal to get your products in front of the consumers that are the most likely to purchase them.
Some common examples of places consumers typically purchase products are through online stores, apps, retail stores & as a quirky part of Singapore’s culture, some chat groups as well. In the F&B industry, businesses are always looking to explore every possible channel to reach their target market.
To elaborate on the point above, here are some of the commonly used online social media or communication platforms and their corresponding popularity among Singaporeans.
It might come as little surprise to most that YouTube, Facebook and Instagram still reign supreme, but the fact that Facebook Messenger and LinkedIn aren’t far behind might. WhatsApp is by far the most popular chatting app in Singapore, followed by WeChat and Telegram in second and third respectively.
Popularity aside, you have to consider your business’ target audience as well and whether it aligns with the platform you would like to sell your product on. Let’s just take Linkedin and Twitter as examples.
The demographics of the users on these two platforms vary drastically. Average age and gender distribution are two key differences between the two. Further in-depth market research can also reveal the users’ psychographics, such as their buying behaviour and lifestyle habits. You can make better informed decisions with this information, avoiding deployment of resources that might end up being a waste by choosing the wrong platform.
Promotion, at the most fundamental level in the marketing mix serves as a communication aspect, creating channels and breaching the distance between companies and customers.
Promotional activities are done in hopes of achieving a few major objectives such as:
- Awareness Building
- Interest Creation
- Demand Stimulation
- Provision of Information
- Product Differentiation
- Brand Building
Under the promotional mix itself, it can be further split into 5 elements.
Usually a paid form of promotion, mass media across traditional and online platforms are used to push these messages across to consumers. It is generally catered to the public and has no personalization aspects to it due to the one-sided nature of advertisements that do not allow for proper communication or feedback from the receiving party. It can be viewed as an aggressive form of getting word out about your brand or product. Advertising can achieve different objectives like the ones stated above.
2 Sales Promotions
Short-term discounts or activities that typically result in an increase in sales.
3. PR & Sponsorship
Public Relations & Sponsorship aims to improve the public’s opinion of the brand as a whole through media outlets or influencers. It also leads to the association of a certain image with the brand. Some examples of paid sponsorships are sports or charity events, where the brand’s logo will then be displayed prominently on banners, leading to recognition and awareness. Other methods of building this image can include sending of products to organisations to be used for their events (goodie bags, product sponsorship such as water for a marathon etc).
4. Direct Marketing
Targets specific groups of potential customers through an assortment of customized e-mails, text messages or telemarketing. Medium level of personalization.
5. Personal Selling
Directly contacts individuals, be it in person, through online platforms or over the phone. Aims to create and form a relationship with these individuals to encourage brand loyalty. High level of personalization.
All of these elements are highly relevant regardless of the industry you’re in. Most F&B businesses find themselves limited to a mere few promotion tactics due to limited resources and manpower. Sales promotions are the most commonly seen element of the promotional mix, so let’s discuss that in a more in-depth manner.
In order to reap the maximum benefits from running sales promotions, such promotions cannot be ran blindly and randomly just for these surges in sales. It could even harm your business if done without a proper plan in mind in the long run. We have to first understand that as an overarching rule, sales promotions are meant to solve certain issues a business is facing. Let’s take this particular promotion as an example.
Cr: Gong Cha
We all know Gong Cha, the Taiwan tea giants who took Singapore by storm when it first touched the shores of Singapore. This Happy Hour promotion was done to address a specific problematic Gong Cha has identified. Are you able to point out what it is?
If your answer was anything along the lines of increasing the customer crowd during the afternoon lull period, you’re absolutely right! The motive behind this Happy Hour promotion was to encourage purchase and increase sales during the afternoon on weekdays as there’s low customer traffic.
P.S: Running a 1-for-1 promotion isn’t feasible for everybody, so do keep your profit margins in mind!
Here is another sales-based promotion for you to think about. Can you figure out the motivation behind the daily promotions?
The 4P's can be viewed as interconnected individual variables. Each element is important both in isolation and when married together to deliver the best results. Think of it as the holy grail of F&B: a good product at a reasonable price that delivers the best value with the best possible profit margins, sold at the right place with optimized promotions to deliver the message to your target market.
And you can do it too!