The University of Western Ontario

12

The University of Western Ontario

Marketing Management Report

Business 1220 Section 014 Eric Janssen

Jae Han Le (250541691)

December 9th 2009

Executive Summary

Penny Thomas, a graduate of Richard Ivey Business School and a 25 year-veteran in the retail industry, has recently acquired the rights to the Greater Toronto Area’s franchising rights for Marble Slab Creamery. The Franchisee is impressed by the head office’s successful backing of other franchising stores and would like to take advantage of the relatively low financial risk investment. She wonders what sort of decisions she must make in order for her to meet the revenue goal of $400,000 by end of the year and has put aside $10000 to promote herself.

Marble Slab Creamery is an internationally successful brand and quickly becoming a major competitor in the quick service dessert business. The company’s willingness to commit to the highest quality of the products demanded by their costumers has successfully guided them to becoming a successful business model. The new franchise business consists of Penny and experienced and educated daughter. Externally, ice cream has always been successful in generating profit due to the social phenomena of sweet treat. There are heavy competitions in the ice cream industry. Franchising business such as Dairy Queen and Baskin Robins offer similar products in somewhat close price range. If Penny fails to promote her business and differentiate herself from her competitors as a high quality product provider, it will be difficult for her store to survive. In order for her to successfully establish herself, she would need to find different target market. There are many segments in the pool, however the relatively wealthy family seems to be the most prominent. As the products and prices of Marble Slab reflect, the ice creams are not cheap. The other groups like young adults might prefer the brand, however, majority of them will not become a regular costumer because they wont be able to afford such prices. Penny will have to appear much more attractive to the families, especially targeting the children because the parents will want to spend money to provide for their children.

She would have to locate her outlet in an area, which her target market resides in. Oakville Ontario is a perfect place for her new business to bloom at. The town is consisted of 166,000 residents (almost 55,000 families) and has an average income of $101,000. This community is a huge potential costumer pool for her business, something very important for her success. Penny will have to promote herself in order to generate knowledge amongst her potential clients. The methods most likely to succeed are bus advertisement, radio commercials and newspaper advertisement. These methods will cost her $9922, which is just under $10,000 she has set aside as a promotional budget. Her main profits will come from selling products at her main store but the financial analysis has proven that the catering options she can provide will produce a profit of $3552 annually. It will not only produce extra cash but also help her promote her business throughout the community of potential clients. One of the restrictions of franchising a brand is the corporate standard selling price. Although she does not have a choice, her prices should reflect her target costumers and the location. As the price is not cheap, it should reflect on the high quality of the products and therefore appeal to her target costumers only. Although her competitions are priced much lower, she will always have a pool of costumers who are more interested about the quality of the product rather than the price.

Overall, Penny Thomas set a $400,000 revenue goal by the end of the year. Through three effective promotion methods such as radio commercial, a correct selection of the location at Oakville and a premium target market, Penny Thomas will be able to reach the goal. With a loyal costumer base established after a successful grand opening, Marble Slab Creamery and Penny Thomas will stay in business for a long time.

The Marketing Challenge

Penny Thomas, a graduate of Richard Ivey Business School, recently acquired the rights for the Marble Slabs Creamery franchise in Greater Toronto Area. She has two weeks before she has to report back to the head office in Alberta with the detail plan for her business. Including in her plan is selection for her new outlet’s location, different product offering, adequate product pricing and effective promotion methods. She has set aside $10,000 for her promotional campaign before the new outlet’s grand opening. Using different method to successfully advertise her new business, She wanted reach the 400,000 revenue goal in the first year. She was also wondering if event catering, with all the extra costs, would be financially feasible for her new business.

Internal Analysis

Marble Slab Creamery, one of the fastest growing franchises in the quick service segment, is an established brand from Huston, Texas. NexCen Brands Inc recently acquired the Canadian operation, however, they do not play a vital role in the daily operations. The franchise business itself was designed so that the storeowners assume only small amount of financial risk because of the establishment of the brand with its loyal costumer base, especially with a brand such as Marble Slabs. Different store location of the company is run by individuals who have bought the franchising rights from the head office in Alberta, Canada. Although Penny Thomas had to pay $25000 for the startup cost and has to continue to pay the head office the 6% of the sales as a loyalty fee, She was attracted by the simplicity of franchising. She particularly liked how the brand power and other resources of Marble Slab Creamery were all accessible with her franchising rights. This meant that there were fewer problems she would not have to face the difficulties of a brand new business because she was simply adapting a successfully proven business model in her new location. Penny’s new venture is mainly consisted of herself and her daughter. Penny herself has 25 years of experience in the retail business and knows the risks and difficulty of operating a franchised store through her father’s experience. Along with her daughter, who graduated from Richard Ivey Business school and currently working for Kraft Canada, they will be able to make the correct business decisions based on their qualification and their experience.

External Analysis

The ice cream industry is very prominent, due to the social image of ice cream as a treat, yet very competitive. Marble Slabs is adapting to the new trend of the healthy living style (frozen yogurt), which in turn allows their products to be flexible for all ages and cultures (kosher approved). This will allow Penny’s new business to be attractive to diverse customers and will she will be able to access larger customer pool. The ice cream industry is fluctuates heavily depending on the prices of commodity products and seasons. However, being a franchisee of a big brand such as Marble Slabs will enable her to be relatively competitive due to the corporation’s resources to secure a hedging contract for their storeowners. The recent decline in the economy is a worrisome to storeowners like penny because ice cream is not a necessity, rather a luxury. The downturn in the economy might lead to overall decline in her gross sales and is a factor she must consider before opening her store. Ice cream has always been a social phenomenon ever since the invention of refrigerator. Marble Slabs offer specialty products, which will carry a certain lure for the costumers who are looking for a treat or a gift.

Competitive Analysis

Marble Slab Creamery faces two direct competitors who offer similar products at somewhat of a close price range. Basin Robbins, one of the most recognized ice cream brand in the world, has a huge presence in the Canadian market. They have strategically positioned their products, prices and stores targeting costumers that are interested in the quality products that Marble Slab offers. However, their weakness is that they do not offer any customizable products like Marble Slab. If Penny successfully advertises their product’s ability to be highly individual to match the costumer’s tastes, they will be successful in distinguishing themselves away from Baskin Robins, thus enabling them to successfully compete against them. Dairy Queen, another direct competitor in the business, offers a product called the “Blizzard”. This product is almost identical to the product at Marble Slabs, yet it is at a lower price range. This might attract much bigger consumer pool but it will not attract those who are looking for a higher quality products such as the ones offered at Marble Slabs. The indirect costumers that offer ice cream products all have huge marketable gaps between their product and ours. The ice cream offered at McDonalds and grocery stores have a huge quality difference compared to the products offered at Marble Slab. Their business is not dedicated to treats like ice cream and while their prices might be quite cheaper than ours, it lacks quality. The difference is big enough to have to not worry about it because Marble Slab is not competing for the same costumer base. Because of the high quality products Marble Slabs guaranteed its costumers, her outlet required somewhat highly trained employees compared to her direct competitors. Although this might raise the expenses for her, it guarantees that trustworthy employees in whom her costumers will appreciate service her products.

Consumer Analysis

Because of the prices and the quality of the products offered at Marble Slab Creamery, the product is not for everyone. There is a huge potential in the Family segment. The parent’s willingness to pay for their children’s treat is a huge motivation in this costumer base. More often, the families will find it easier to purchase the products depending on the location of the store. It is very important for the outlet to be family friendly and providing the children with any reasons to be motivated to come to Marble Slab Creamery. The young adults also are willing to pay for the treat if they have the financial capability. More often, they will visit during social interactions. If Penny could make the outlet appear much more mature and grown up, as much as the products are, then she will not have any trouble appearing attractive to this age group. Women in Marble Slab’s costumer base could have a huge impact. They are the ones who are mostly spending money on a day to day shopping. They will be usually the ones with children deciding on which store is most appropriate for their children’s treat. If Penny can appear women friendly (with décor and flavors), they will certainly attract more costumers.

Target Market

Marble Slab Creamery offers the highest quality product and service. Their main costumer base should be able to afford the products without feeling it to be too expensive. The most profitable target for Penny’s business would be the families with high income. The kids under 15 will have an high impact on the parent’s purchasing mindset and will continue to visit the store as long as the new business makes a good first impression on them. Although the young adults have the potential to become profitable, they may feel that the products are too expensive for their income, or rather the lack of income. The women can be very profitable since they are mainly the ones shopping in a household. However, they can be very health conscience, which can have a negative impact on Penny’s sales figure. Although Marble Slab does offer yogurt, it’s not entirely convincing for them to become a regular loyal costumer.

Product

Marble Slab Creamery offers only premium quality products that are catered to individual taste of each costumer. The fresh ice cream combined with delicious variety of mixins has successfully proven to appeal to targeted customers in other regions. The Product selection is very important in Penny’s business plan. Her products have to appeal to her specific target market. For that reason, she should decide very carefully on the flavor choices she has and make sure they are popular amongst kids under 15 years old (i.e. Bubble Gum flavor). Not only should Penny offer in store products, she could also offer event-catering option. It would be a terrific way to promote her business (i.e. birthday parties within Oakville area) as well as earn extra profits aside from her main business (see exhibit 3). As shown in exhibit 3, the profit from catering just during the first year would be substantial ($3552). This is not including the promotion and advertising generated at the place of catering. In a small knit tight community like Oakville, such promotional word of mouth as the “must-have” for a birthday party would spread fast, generating interest not just for the catering business but also the main outlet itself.

Placement

Based on the demographics of the target market set as a wealthy middle age family, Oakville seems to be the most prominent. Oakville is a lakeside town with a population of 165,000 people. If we assume the average household consists of 3 people, there are about 55000 families in the area. The median household family income is very high at $101,675. This is an ideal location where Penny’s ideal target market resides with a huge potential costumer base. Penny’s new business should be located at a high traffic area with a lot of parking options around the area. This would be ideal at locations such as next to shopping district, grocery store, school and parks. The location’s high traffic should allow the pedestrians to stop by or drivers to park their car. Oakville is the perfect choice for the target market demography. Other locations such as Vaughan do have a bigger population but their median income is not high enough for Penny to appeal to the costumers without upsetting their pockets. While places such as the Toronto Annex Area have bigger income, their population is too small at just 27480, which will really limit Penny’s costumer base. The beaches also has a low population and a very low income, moreover, the seasonality fluctuation will be too great there as the traffic is heavily affect by the harsh weather.