Summary

Summary 183

We used the marketing mix to characterize competitive activity in food service. As product is essentially the guest’s experience, all the elements of the operation are important. Food quality is absolutely essential, and new food products are a major way of stimulating guest interest and renewing an operation. The product life cycle concept means not that established products or concepts die out but rather that concepts need to be reinvigorated.

Price has been used as a lead variable in the marketing mix, but competitive prices develop eventually. Consequently, long-term competition is usually focused on nonprice variables. Temporary price cutting, as with coupons, can be effective in the short run, particularly in the off season. Although price reductions risk cheapening the product in the guests’ eyes, sometimes market conditions dictate a long-term reduction in price levels, as in the case of fine dining at the end of the 1980s, when guests’ perceptions of value changed.

Place denotes two somewhat different ideas. Place as location involves factors such as traffic, population density, and proximity to major attractions. On the other hand, the notion of places refers to distribution and intercept marketing. This involves having operations, sometimes downscaled PODs, available wherever customers choose to go in large numbers.

Promotion is a critical element in the food service marketing mix. Food service is one of the largest advertisers in North America, and advertising is often built around themes that are used in several ads or commercials. We discussed the increasing role that the Internet is playing. Sales promotion is used to stimulate immediate purchase. Some of its principal tools, usually called deals, are coupons, games, and promotional merchandise. In upscale operations, sales promotion often takes the form of special events. A highly targeted form of sales promotion is aimed at a company’s present customers in frequent-guest programs.

Food service must compete with all other consumer products and services but faces particular competitive challenges from C-stores, supermarkets, and the comforts and conveniences of home.

Key Words and Concepts

Review Questions

1.How has the competitive climate in which the food service industry operates changed over the 20 years?

2.What is the role of new products in a competitive strategy?

3.What are the stages of the restaurant life cycle?

4.What are the benefits and risks of value pricing?

5.How is the concept of distribution being used in food service competition?

6.How is the Internet being used in food service competition? What new developments do you anticipate in the use of the Internet in food service competition?

7.When is sales promotion used? What are its principal elements?

8.Discuss the significance of each element of the marketing mix in food service competition in your city. What recent developments strike you as significant in the local competitive scene?

9.What competitive practices have grocery chains in your area engaged in that will affect food service? How do you rate local C-store competition against quick-serv- ice restaurants?

Internet Exercises

1.Site name: Buca di Beppo

URL: www.bucadibeppo.com

Background information: Buca di Beppo is a neighborhood restaurant where guests

feast on family platters of real, immigrant, Southern Italian specialties in a boisterous, celebratory environment that recalls the Italian-American supper clubs of the 1940s and 1950s. In immigrant fashion, they serve their food family-style, in portions meant for sharing.

Chili’s

URL: www.chilis.com

Summary 185

Background information: Chili’s offers a distinct, fresh, healthy mix of grilled American favorites prepared in a way that keeps guests coming back. Chili’s is part of a family of restaurants operated by Brinker International.

Site name: Smokey Bones

URL: www.smokeybones.com

Background information: Smokey Bones BBQ is a casual dining restaurant that combines great-tasting, authentic American barbecue with a rustic, mountain lodge decor. Smokey Bones is part of a family of restaurants operated by Darden Restaurants.

Site name: Outback Steakhouse

URL: www.outback.com

Background information: Outback offers high-quality food and service, generous portions at moderate prices, and a casual atmosphere suggestive of the Australian Outback. Although beef and steak items make up a portion of the menu, Outback also offers a variety of chicken, ribs, seafood, and pasta dishes.

Exercises:

a.What characterizes a good restaurant Web site from a marketing standpoint? What elements should be present on a Web site to make it an effective marketing tool?

b.Which of the above Web sites do you believe presents the best marketing effort? Why?

c.Which of the above restaurants advertises promotional merchandise on their Web site? How effective do you believe promotional merchandise is in attracting customers?

d.Overall, discuss how effective you believe Internet Web sites are in marketing a restaurant concept. Why?

2.Site name: Convenience Store Decisions

URL: www.csdecisions.com/

Background information: Convenience Store Decisions is the in-print “Idea Factory”

for the convenience store industry. Written for and read by the industry’s decisionmakers, the monthly magazine has a qualified circulation of more than 40,000 subscribers and offers award-winning, compelling editorials and consistent coverage of current issues of real concern to convenience store operators.

Site name: The National Association of Convenience Stores

URL: www.nacsonline.com/

Background information: The National Association of Convenience Stores (NACS) is an international trade association representing more than 2,200 retail and 1,800

supplier company members. NACS member companies do business in nearly 40 countries around the world.

Site name: Convenience Store News —Food Service Section

URL: www.csnews.com/csn/foodservice/index.jsp

Background information: Convenience Store News’ mission is to deliver the insight, analysis, market research, and business intelligence that helps C-store retailers stay ahead of what’s next. –The e-publication provides critical information to grow sales and profits.

Exercises:

a.Review the above Web sites to determine the food service products and services provided by convenience stores. What type of food service products are typically sold in convenience stores? What are the emerging products that convenience stores are migrating toward in the future?

b.Who is the target market for convenience-store food services?

c.Which restaurant sectors do the convenience stores compete against and what strategies should that restaurant sector utilize to maintain their customer base?

d.What potential job opportunities might be available for hospitality management students in the convenience store industry?

Notes

1.Robert Lewis and Richard Chambers (2000). Marketing Leadership in Hospitality, Hoboken, NJ: John Wiley & Sons.

2.The marketing mix is a convenient frame of reference for discussing current competitive practices. Some would argue, however, for other, different definitions, and in fact, the definition we employ evolves from a simple four-Ps approach to something a bit more complicated.

3.Deborah Silver, “Life in the Fast Lane,” Restaurants and Institutions, February 15, 2001.

4.Deborah Silver, “Small Change,” Restaurants and Institutions, August 15, 2000.

5.Another form of marketing communication, which is not discussed here, is public relations. This is particularly important to upscale operations.

6.2004 Restaurant Industry Operations Report (Washington, D.C.: National Restaurant Association, 2005).

7.Standard and Poor’s Net Advantage, 2006.

8.McDonald’s Press Release, September 2, 2003, Munich Germany.

9.Rebecca Gardyn and John Fetto, “Race, Ethnicity and the Way We Shop.” American Demographics, February, 2003.

10.“Restaurant Operator Technology Survey,” National Restaurant Association, 2001.

11.Reid Paul, “The Online Experience,” Hospitality Technology, July/August 2006.

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12.Cihan Cobanoglu, “The New Service Frontier: The State of the Online Restaurant Industry,” Hospitality Technology, July/August 2006.

13.R&I Insider, Restaurants and Institutions, April 1, 2005.

14.Correspondence with National Association of Convenience Stores, (www.NACSonline. com), November 14, 2006.

15.Steve Adams, “A Market Heats Up,” The Patriot Ledger, June 30, 2006.

The Hospitality Industry

(Courtesy of Sodexho.)

Sodexho operates ships providing river and harbor cruises throughout North America and Europe. Compass Group, until recently, owned several hotel chains and is also involved with facilities management in the health care sector. As one quickly discovers, there are numerous companies that operate in sometimes completely different hospitality environments simultaneously, as evidenced by the preceding examples.

Returning our focus specifically to the on-site food service sector, we should first attempt to define it. Simply, it consists of all locations where food is served outside of the home but where food service is not the primary business, such as universities or sports arenas. This definition obviously includes a significant number of locations, and indeed, the sector is quite large and varied. This will become clear as we delve further into on-site food service. One way to articulate what this segment is all about is to make comparisons with the more visible restaurant industry.

There are significant differences that exist between restaurants and on-site food service, and students should be aware of these. One important difference is that whereas on-site food service once represented a “captive market,” restaurant customers have always had a range of choices, including choices of facilities and menus. This distinction still exists, but to a much lesser extent. On-site food service providers, both selfoperated and managed, have found that, with certain exceptions, guests do have a choice in the long run. As a result, food service operators have found that a marketing approach that views patients, company employees, and students as guests and focuses on their preferences is an approach that tends to win more friends than the old eat-it-and-like-it institutional attitude.

Success is also measured a bit differently, by the participation rate of the guests. University students who don’t like the food withdraw or cut back on board plans; patients who have a choice of hospitals often choose the institution with superior food service; and even prison inmates find ways to assert their food preferences. In an age of consumerism, moreover, even guests who can’t “vote with their feet” and go someplace else don’t hesitate to complain. Therefore, competition among the various food service contractors is often decided on the basis of marketing techniques as well as management skills.

Another major difference between traditional restaurants and on-site services relates to their primary functions. Even though many companies provide both restaurant and on-site food services and use similar marketing and managerial techniques in both areas, the major difference between the two markets is that the food service in institutions is a small part of a larger operation with a greater purpose of overriding importance— health care (hospitals, nursing homes, etc.), education (K-12 and universities), or businesses (services and manufacturing), for instance. In a commercial restaurant, the challenge is to please the guest. In the on-site environment, it is necessary to meet the needs of both the guests and the client (i.e., the institution itself).

The distinction between client and guest is important. The client is the institution (bank, university, etc.) along with its managers and policy makers. These are the people who ultimately award the contract or, when the institution operates its own food service, hire and fire the food service director. Pleasing the guest (i.e., the individual diner, patient, student, or resident) is important, but the client must be pleased as well. The evidence suggests that the food service operator must do what is necessary to keep the client happy. Sometimes this isn’t so easy. There may be a substantial difference in an institutional setting between the needs and wants of the guests and those of the client. In school food service, for instance, the client’s (i.e., the school’s) goal is to provide not only adequate meals but also nutrition education by showing the students what a nutritionally balanced meal is like. The goals of a young schoolchild may obviously be quite a bit different.

If the food service is operated by a managed services company, the two parties must agree upon the type of contract to be followed as well as negotiate the terms of that particular contract. Contracts can take a variety of forms. Contracts sometimes call for the institution to essentially allow the contractor to operate on a break-even basis and to pay the contractor a fee every period for the management of the operation. Other contracts allow the contractor to operate solely on a profit-and-loss basis, where the contractor covers its own expenses and manages the revenues, taking sole responsibility for the profit (or loss) at the end of each period. Other contracts might be a hybrid of these two, depending on the scope of the operation. However, in most segments, the movement seems to be more toward profit-and-loss-type contracts. Whether the operation is subsidized, break-even, or for-profit, however, there is always some budgeted performance target that must be met regardless of who operates the service. Even for self-operated institutions, the trend is for them to become more self-sufficient, with a greater degree of fiscal responsibility.

Finally, the two segments (commercial and on-site) have very different operating challenges. For example, the number of meals and portion sizes are much easier to predict in on-site operations. Because of this greater predictability, these food service operations often operate in a less hurried atmosphere than that in restaurants, in which customer volume and menu popularity often fluctuate (it should be noted that this is not as true as it once was, though, as many operations move more towards a retail model).

Moreover, although managers tend to work long hours in commercial food service, the working hours in on-site food service are usually shorter, or at least more predictable. This is particularly true in environments that have discrete operating periods such as colleges and universities, and most businesses.

On the other hand, although a guest may visit a restaurant frequently, few of them eat as regularly in their favorite restaurant as do the guests in on-site operations. Thus,