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HND5208 – HOSPITALITY SALES & MARKETING A budget-friendly marketing plan for a new coffee shop – ‘Eco-Coffee’.

Michael Formosa, Angelo Vella & Ema-Sinead Zammit

HND5208 – Hospitality Sales & Marketing

B.IHM 1st-Year End of Year Assignment

Contents Introduction ....................................................................................................................................................... 2 Marketing within the Hospitality Industry ..................................................................................................... 2 Executive Summary............................................................................................................................................ 2 The Market Analysis........................................................................................................................................... 3 Company ........................................................................................................................................................ 3 Customers ...................................................................................................................................................... 4 Conditions ...................................................................................................................................................... 4 Competitor Analysis ....................................................................................................................................... 5 The Marketing Strategy & the Target Marketing Selection ............................................................................... 5 Service Positioning ............................................................................................................................................. 5 Marketing Mix Decisions.................................................................................................................................... 6 Products .........................................................................................................................................................6 Price ...............................................................................................................................................................7 Place ............................................................................................................................................................... 7 Promotion ......................................................................................................................................................8 Financial Projection............................................................................................................................................ 8 Marketing Plan Assessment ...............................................................................................................................9 Controls .......................................................................................................................................................... 9 Competitor Responses ................................................................................................................................... 9 Anticipated Results ......................................................................................................................................10 References .......................................................................................................................................................10 Appendices.......................................................................................................................................................11 Appendix 1 ...................................................................................................................................................11

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HND5208 – Hospitality Sales & Marketing

B.IHM 1st-Year End of Year Assignment

Introduction

Marketing is ‘the management process responsible for identifying and satisfying customer needs profitably’ – Chartered Institute of Marketing Marketing aims to recognise that customers are of critical importance to a company and that profit and the survival of the company depends entirely upon the continual process of satisfying customer needs. In summary, it involves the recognition and anticipation of demand, the stimulation and satisfaction of demand. (Mawson, 2000) Our company is a coffee-shop which focuses on serving specialty coffee while being low-impact in delivering our products. We strive to become as eco-friendly as it can get as we try to raise the bar in the coffee-shop industry.

Marketing within the Hospitality Industry Effective marketing and dynamic selling are significant in the hospitality industry because, for example, if a table in a restaurant or a room in a hotel remains unsold that day, the income is lost forever. This makes hospitality products perishable unlike consumer products which can be sold the next day. Furthermore, the hospitality industry is a highly competitive marketplace for which traditional advertising streams such as television and newspapers have become increasingly insufficient. The industry is dominated by chains which use aggressive marketing skills complimented by expensive state-of-the-art marketing plans to win customers in the highly competitive environment. As hospitality management students, familiarizing ourselves with knowledge and understanding of business disciplines like marketing aids in creating a creative, more personal, low-budget marketing plan to suit both the company and satisfy the customer.

Executive Summary

This report was commissioned to analyse and evaluate the sales and marketing of our new coffee shop ‘Eco Coffee’. The aim is to create an effective marketing plan which can attract and satisfy customers, while generating a profit. It is not an easy task to generate profits from the first year of business, however, we are aiming to make this possible. Methods of analysis include SWOT Analysis in terms of the company and the market environment. Findings include the positioning of competitors and methods by which we can provide a satisfactory service while sticking to a tight budget.

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HND5208 – Hospitality Sales & Marketing

B.IHM 1st-Year End of Year Assignment

The report finds the prospects of the company in its current position are quite positive – making profits in its first year. Any areas of weakness, such as inconvenient opening-hours and high staff turnover require further investigation and remedial action by the management. Recommendations discussed include: •

Further decreasing wastage levels to stick to the purpose and aim of the company.

•

Increasing inventory/Offering a wider variety of goods e.g. coffee, pastries etc.

Limitations of the report include forecasting of financial projections and competitor responses may not be entirely accurate as they are only predictions.

The Market Analysis

The market analysis is a detailed examination of the business environment in which a company operates. Hence, it is the foundation of information upon which marketing planning decisions are made. It aids the company to understand the dynamics of the market by segmenting it into components. The market analysis should be an on-going process of assessment and re-evaluation of a property’s performance. (Wearne, 1996)

Company Firstly, as marketers, we should conduct a SWOT analysis to evaluate our company’s strengths, weaknesses, opportunities and threats. This will help us, as managers, to anticipate important positive or negative developments that may have an impact on the firm and its strategies. ‘Strengths’ include internal capabilities that may help the company reach its objectives. ‘Weaknesses’ are internal limitations that may interfere with the company’s ability to achieve these objectives. ‘Opportunities’ and ‘threats’ both refer to the external factors which may be exploited by the company or may challenge the company’s performance, respectively. These can also be considered as the marketing trends. (Kotler & Armstrong, 2017) This is a SWOT analysis custom made for our company:

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HND5208 – Hospitality Sales & Marketing

B.IHM 1st-Year End of Year Assignment

Strengths - Baristas are well-trained and attentive to detail - Attracts a large portion of the student market due to its strategic loaction (near university) - Coffee bean supplier specializes in highquality beans e.g. brazilian

Weaknesses - Opening-hours are not late enough to accomodate hard-working students/academic staff - Short-staffed - High staff turnover

Threats Opportunities - University students are resorting more to coffee-drinking - An increase in students in the university - Business complexes are opening in the vicinity

- Food places are becoming more common; highly competitive environment - The price of coffee has increased - More students are licensed; they might drive off to somewhere else instead of stay on campus.

Customers The primary objective of our company is to satisfy the customers’ needs and wants. It is important to accommodate the needs of the fast-paced lives of students. Our main clients are students, people are environmentally conscious, academic staff i.e. lecturers, university administration and other staff. On a smaller scale, we also accommodate skaters from the skatepark, students from the vicinity e.g. Junior College, business people from the vicinity e.g. EY Malta and iGaming companies and even hospital staff. We will try our best to exceed expectations to develop a sense of obligation for loyalty in the customer. This will allow us to retain long-term clients. Frequent customers are very important to a business as they tend to spend more, cost the company less and make valuable references (personal-selling) to new potential customers. It is also cheaper and easier for the company to retain and cross-sell/upsell to existing customers than to acquire new customers.

Conditions For our company, the largest market condition is the pricing of our products since our customers are mostly students, who are very conscious about what they spend their money on due to a low income. We can also provide coupons and discount cards, similar to those provided by our competitors (see Appendix 1), and attractive deals. We also need to ensure that the service is quick since our customers might not have much time to spend. In the case that our customers are on the go, we need to provide an efficient take-away service. However, in doing so, we will promote the use of reusable cups by selling them and encouraging people who already own one to use them and placing a tax on disposable cups since we are taking an environmentally-friendly approach. From a demographic point of view, since Malta is quite a small country, the coffee shop is accessible by practically 4

HND5208 – Hospitality Sales & Marketing

B.IHM 1st-Year End of Year Assignment

everyone on the island and is also easily accessible by wheelchair users, pet-owners, families, people from all races etc. In terms of suppliers, Malta imports various types of quality coffee beans which gives us more choice.

Competitor Analysis A market analysis is incomplete without a compilation of the competitors’ marketing strategies. To build a picture of comparative performances, we have compiled files of the opposition’s advertising, sales promotions and have even seen their products in action. (Refer to Appendix 1)

The Marketing Strategy & the Target Marketing Selection

It is essential for a marketing plan to include a strategy whereby certain customers are being targeted. In a perfect world, it would be ideal to target all types of customers, however, in practice this is not possible. This is because customers in any market differ in their wants and buying practices. Through marketing segmentation and targeting the coffee shop can divide large markets into smaller sectors which can ultimately be reached more effectively and efficiently with products that match the targeted customers’ needs. The main 4 ways a form can segment its market is through geographic, psychographic, behavioural and demographic variables. For the coffee shop, the variable most crucial is demographic. As explained previously, since our coffee shop is located near the national university, our main clients are students, academic staff i.e. lecturers, university administration and other staff. On a smaller scale, we also accommodate skaters from the skatepark, students from the vicinity e.g. Junior College, business people from the vicinity e.g. and even hospital staff. It is important to accommodate the needs of the fast-paced lives of students. Another influential factor is income. Students at university only earn a stipend, not many have a job, and if they do it is a part-time job. Hence, it is important that the products are not too costly as most students are on a tight budget. The geographic variable holds that the market should be segmented according to the country or region the client is from. However, due to the extremely diverse university, having students coming from across the globe, it is quite difficult to target specific cultures. Due to this reason we have decided to focus more on demographic variables rather than geographic.

Service Positioning Service Positioning is a mean by which the establishment is defined by consumers on important attributes such as the location that the establishment occupies. The company establishes an image or identity that is unique from the competitors. 5

HND5208 – Hospitality Sales & Marketing

B.IHM 1st-Year End of Year Assignment

The positioning of our coffee shop will be reasonable in price and high in quality compared to other coffee shops in the market. Positioning Maps roughly indicate where the company stand in terms of price and quality in comparison to other companies in the market.

This is a positioning map indicating our conditions in terms of price and quality

compared to our competitors.

Marketing Mix Decisions The marketing mix is used to achieve the goals made by the company. Its strategies can be grouped under four (4) main categories: product, price, place and promotion. The blended outcome of the tactical marketing tools will deliver the intended value to the targeted customers.

Products The product-line is a group of products that are closely related because they function in a similar manner, they are sold to the same customer groups and are marketed through the same types of outlets or fall within given price ranges. In our case, our core product-line is coffee. We also sell other beverages such as tea, smoothies and juices and foods such as pastries; however, these are not our main selling point.

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B.IHM 1st-Year End of Year Assignment

HND5208 – Hospitality Sales & Marketing

The Levels of our Product:

Food/Drink

Price The prices we have decided to charge for our products and the reasons for selecting those prices are determined by the expectations of our target market. Meaning that we make use of customer value-based pricing. However, we also price our products in accordance to our corporate objectives and the activities of the competitors. Occasionally, we also make use of promotional pricing strategies whereby we temporarily price products below the real price to increase short-run sales to attract more customers at the beginning since it is still a start-up business.

Place After creating a market offering and deciding on how much to charge it for, we must then decide on how to make the offering available to target customers. The site chosen for the establishment is part of the place strategy 7

HND5208 – Hospitality Sales & Marketing

B.IHM 1st-Year End of Year Assignment

because it is from the place, that we will sell our products. In our case, the establishment will be located near university ground in Msida. We also need to consider the inventory of the company, logistics and any distribution channels and transportation should we need it. For example, if we might plan to make deliveries in the future.

Promotion The promotion aspect involves a variety of communication channels such as advertising, personal selling, sales promotion and public relations to increase the company’s sales and help reach profit goals. Most times, a tactical mix (a mix of the said communication channels) is used to make a successful promotion strategy. Since we are still starting-up, we shall first begin with point-of-sale displays and signs, enthusiastic employees and some budget-friendly advertising. Eventually, we aspire to invest more in our advertisements and social media marketing. We shall try to make use of such a mix to fulfil our goals.

Financial Projection Statement of profit and loss for period ending 31 December 2019. € Sales

€ 500,000

Less cost of sales: Purchases

350,000

Less closing stock

(35,000) (315000)

Gross profit

285,000

Less expenses: Wages and salaries

70,000

Insurances

8,000

Lighting and heating

15,000

Maintenance

4,000

Office equipment

7,000

Miscellaneous

2,500

Rent

60,000

Advertising

10,000 156,500

Net Profit

8,500

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HND5208 – Hospitality Sales & Marketing

B.IHM 1st-Year End of Year Assignment

Since we are still starting up the business, we took a loan from the bank. We also invested some of our personal earnings throughout our previous businesses. As regards to budgeting, we are saving on electricity by resorting to solar energy for the lighting and heating purposes. We are also going to use energy-saving light bulbs. We will also filter grey water and use reverse osmosis systems to make potable water. Furthermore, maintenance and depreciation costs will be low since all the furniture and equipment will be new. We will also be using reusable napkins, mugs, cutlery etc. meaning that we will not have any continuous expenses on disposable items. Another method of reducing cost is though sponsors and investors. An example of a potential sponsor and supplier is The SIMONDS FARSONS CISK PLC in Malta. They provide most of all assortment of beverages in the island, with this the company provides branded glassware along with signs and providing cheap fridges with their advertisements. The concept of reducing expenses also corresponds to the concept of our project, which is to develop a budgetfriendly business which has a low impact on the environment. The fixed costs of the company include rent, insurance, depreciation of the equipment (furniture and fittings, coffee machines etc.) and salaries. While our variable costs will include the lighting and heating, advertising, wages and office expenses. We predict that we will not be running at a loss because we are conscious to buy the most economical products. We will be making profits immediately. This is also because coffee and tea have a large margin of profit. In fact, a teaspoon of coffee for an Americano coffee costs around 0.08c and is sold at around €1.50. Making a profit of €1.42.

Marketing Plan Assessment Controls In this section we will explain what we will do should are marketing plan be unsuccessful. Measurement is a crucial part of any business because it gives you a sense of direction. Some ways of measuring the coffee shop are via ...