Marketing Plan: Strategy for Marble Slab Grand Opening

Essay Revision Assignment Adrian Chan Writing 2299F Original Course: Business 1220 Professor Eayrs June 21, 2013

Chan 1 Executive Summary: The marketing challenge is to attract customers and convince them to purchase frozen desserts from Thomas outlet. If possible, this outlet should be close to Thomas home. With a promotional budget of $10,000, mandated selling prices, and a possibility of event catering, Thomas must complete many analyses for her marketing report to submit to head office. Recommendations: Thomas should target young adults aged 15 to 24 because they have disposable incomes, are less price-sensitive than other customer segments, and would pay more to be able to socialize with friends and have fun. They are also likely to convince friends to buy ice-cream, thus creating loyal customers. On the other hand, families want child-friendly options so Dairy Queen would be their choice of brand and they do not carelessly spend, unlike young adults, on icecream. The women segment is too broad to create a product that is enjoyed by all women, and with Thomas limited resources, she cannot undertake such a broad, undefined market. Most young adults can be found in downtown Toronto, where they heavily populate the streets because of the extensive shopping experience and proximity to the University of Toronto and Ryerson University. This guarantees traffic to Thomas outlet, especially since young adults out of the area can commute by subway, diversifying the potential customer base. Event catering should be offered to young adults because it allows Thomas to diversify her revenue streams, especially during slow winter months. The portable slab option should not be offered because it is designed for very large events, like wedding and corporate meetings, of which young adults do not host. The Sundae Bar should be offered initially because it is more profitable and popular than the Ice Cream Social. Thomas should advertise through Pattison Outdoor and Now Magazine because they can specifically target a large amount of young adults. Street level media units are most viewed by young adults who crowd the streets of downtown Toronto. Now Magazine is read mostly by young adults and is easily accessible to them. These visual mediums are able to best represent and showcase Marble Slab's delicious products and social experience. As well, they are more likely to connect with this younger audience who appreciate visual branding. Conclusion: To reach Thomas goal of $400,000 for her first year, she must sell 137, 987 units. The revenue from event catering can offset about 320 units. To breakeven, a minimum of 8117 units must be sold. Her revenue goal can be achieved because of the specific promotions catered to young adults. As well, the downtown location is a hotspot for young adults and shoppers who are less price-sensitive compared to other locations and seek social and fun shopping options, of which Marble Slab reputably provides. As this is Thomas' first year, she should engage in marketing and customer tracking tools to analyze the success of her promotions and product selection. Above all, however, Thomas should frequently participate in the store's daily operations to get a sense of the store's direction and any other opportunities for expansion.

Chan 2 Introduction: Penny Thomas requires a marketing plan for her new Marble Slab outlet in the Greater Toronto Area. Her revenue goal for the year is $400,000. Decisions about the target market, product, placement, price and promotions must be completed for the first time and within a budget of $10,000. In addition, she must consider the economic environment, her company's resources, and the local competition. Her plan must be submitted to head office in two weeks. Internal Analysis: An MBA graduate from the Richard Ivey School of Business, Thomas sought a career change after 25 years of experience as a buyer for the Hudson's Bay Company. Fueled by her entrepreneurial spirit, she recruited part-time assistance from her daughter Rhea who is a recent Ivey HBA graduate. Both have completed the "Ice Cream University" program offered to franchisees and now have the skills and knowledge to run the outlet. Given Rhea's present full time job, however, she can only commit to the grand opening day. Although Thomas must adhere to standards set forth by the franchisor's management, such as fixed pricing of products, she can easily rely on the expertise of head office in areas such as financing and marketing. For example, each franchise benefits from branding and promotional campaigns initiated by a national shared advertising fund, to which all franchises must contribute. With over 400 stores worldwide, the shared marketing and brand recognition provides franchises with a already established (and successful) business model and presence. External Analysis: Despite the U.S. economic recession in 2008, the Canadian economy remained strong; consumer spending and the Canadian gross domestic product continued to grow. However, Canadian merchandise exports and commodity prices are expected to decline in the coming

Chan 3 months, potentially decreasing the Canadian economy for the rest of 2008 (at the time of Thomas' plan). Also, fluctuating market prices of dairy and other commodity products can affect the company's cost of goods sold. Ice Cream is a popular snack, with the average Canadian consuming 8.4 liters annually in 2007. Marble Slab also offers fat-free frozen yogurt for health-conscious individuals. Unlike competitors located within shopping centers, Marble Slab outlets are typically located in plazas or along busy streets, so harsh weather is more influential on consumers. Competitive Analysis: There are many other frozen dessert chains and grocers that sell similar products to similar target markets. Direct competitors include Baskin Robbins and Dairy Queen while indirect competitors include McDonalds, Starbucks, local grocers/convenience stores, and other food establishments that offer a social environment to consumers and sell dessert products. A comparison of their strengths and weaknesses are described in Exhibit 1. Customer Analysis and Target Market: Marble Slab's data indicates that an even split of men and women visit its franchises, earning a loyal clientele willing to pay for its "affordable luxuries." While ice cream appeals to people of different ages, with only a $10,000 promotional budget, it is best for Thomas to focus on one particular customer segment. Exhibit 2 compares the various types of markets and their characteristics. Thomas should target the young adult market because Marble Slab's fun and social atmosphere is valued by young adults in particular. Marble Slab's customizable options and mixins concept with the blending done on a marble granite slab has entertainment value that is most appreciated by young adults. Especially since Marble Slab is primarily located as stand-

Chan 4 alone outlets on plaza strips, many young adults would take the opportunity to take a break from shopping and socialize over ice-cream. Marble Slab's premium pricing, as a result of its highquality products, would not be as discouraging to young adults as it would be to families who have financial responsibilities not shared by young adults. Families should not be targeted because they would opt for cheaper, more kid-friendly establishments, such as Dairy Queen and McDonalds, a reputation and image that Marble Slab does not emphasize (or have as much). Families have health concerns for their children while young adults are less health conscious, especially in social settings (although some can be). The market that Thomas defined as "women" should not be targeted because this market is too broad for meaningful promotions. Also, as the primary grocery shoppers of a household, they would prefer buying ice-cream at grocers because of its bulk size and cheap prices rather than at Marble Slab with smaller and more expensive portion sizes. It is important to note that both families and women would enjoy Marble Slab's products and would definitely contribute to sales but in terms of promotions, especially with Thomas' limited budget, it is more cost-efficient to target a market that would respond favorably with Marble Slab's current branding and image, product benefits, price points, and promotional efforts. Placement: While Thomas prefers the Vaughan location due to its proximity to her house, she should consider other placement options in the GTA (exhibit 3 compares potential locations). Thomas should choose the Toronto Annex area because of its large student population and guaranteed foot traffic from neighboring stores along Bloor Street. This busy and lively location fits well with our target demographic of young adults who enjoy social interaction. This location is close to many subway stops, making it very accessible to young adults, and within

Chan 5 walking distance to the University of Toronto and several popular museums. Also, there are no direct competitors within the vicinity. Despite expensive leasing and difficulty in securing a spot, this is exactly the area where our audience can be found. However, this area would probably not support event catering since it has both the lowest overall population and young adult population according to the case study. But the household income is second highest and while the number of residents may be low, there is still a large majority that frequents, studies, or works in the area but are commuters. Therefore, the location is likely to be busier than suggested by the statistics in the case study. This is not to say that other locations do not have a high population of young adults or are not appealing. The location in Vaughan would be within a large shopping complex close by a movie theatre, the Beaches is a popular tourist site that is enjoyed by young adults who would be less price-sensitive during vacations, and Oakville has a large population and the highest median household income, which works well with Marble Slab's higher price points. However, the Annex has a strong, livelier shopping district that cannot be matched by Vaughan. Also, young adults shopping at Vaughan would be more price-sensitive than those in the Annex. The Beaches is heavily affected by the weather and would not have the same steady, predictable customer traffic that the Annex would have. And Oakville, like Vaughan, would not have the same type of young adults that frequent the Annex, who are the kind of people that Marble Slab targets usually (e.g. craves social interactions and eager for exciting, fun shopping experiences). Product and Price Thomas is required to select the flavors for the store's first month. Exhibit 5 outlines the 21 flavors she should offer. Since the case study provides no information on what flavors are most preferred, Thomas should conduct further research in the future to determine which flavors

Chan 6 are most preferred and then cater her selection to that. Event catering, although not required for franchisees, gives Thomas an additional revenue stream, especially during slow winter months. Unlike the fixed prices for the ice-cream, Thomas has complete control over pricing. Exhibit 6 shows the potential profits achieved based on the number of people attending per event. The Portable Slab is the most profitable, followed by the Sundae Bar and Ice Cream Social. The sensitivity analysis is based on Thomas' projection that she can host 2 events per weekend per year, totaling 104 events. In terms of pricing, Thomas is worried about competing directly with other Marble Slab franchises for catering. She can either decrease, match, or increase the prices compared to other nearby franchises. However, Thomas should match their prices for now to ensure consistency between franchises. Although she can undermine their prices to be competitive, it may be frustrating on the customer's side to see different prices between franchises, so given Thomas' lack of experience, it would be best to simply match their prices and keep an eye out for any opportunities to change pricing. Thomas can choose to provide any or all of the catering options. It would be unlikely to reach 100 people per event in her first year so the profits from 40 people is more realistic. Since the Portable Slab requires an additional investment of $2,500, Thomas should wait until she has more experience and insight to offer this pricier option. The Ice Cream Social is cheaper and may appeal to young adults more, but there is a financial consequence if she cannot meet at least 40 people per event so she should, again, postpone this option until she obtains more experience and a strong, stable customer base. Therefore, the Sundae Bar, with the lowest financial risks, should be offered first to test the market. If she enforces a minimum of 40 people per event, she can avoid any losses. When Thomas gains more experience and can generate interest for event catering, she can look into the other options, but first she should test the waters.

Chan 7 Promotions: With only a budget of $10,000 for promotions, Thomas must choose between several different advertising options (exhibit 4). She can place ads or coupons in newspapers, magazines, radio, outdoor (e.g. billboards), or mail. To target young adults in the Annex area, Thomas should place ads in Now Magazine because it has a high young adult readership and is distributed free of charge in the downtown area, making it very accessible to young adults. Since the Annex receives large foot-traffic and is frequented by many people who commute by nearby subways, outdoor advertising by Pattison Outdoor would be most effective for Marble Slab's stand-alone outlets. Thomas should purchase the 12x annual double page, which would most effectively capture the reader's attention, and opt for the four-color process that would best illustrate Marble Slab's ice-cream best. For outdoor advertising, Thomas should purchase the street level units because it is cheaper than the outdoor billboards and will be viewed more by pedestrians in the Annex since it is on eye-level and along their pathway. The total cost of these promotions is $84951. Toronto Star should not be pursued because although it is Canada's most widely read newspaper, it does not specifically target young adults. Also, many young adults do not read newspapers in this digital age. With 104.5 Chum FM, an audio medium may not be the best way to represent Marble Slab's fun, social experience, high quality ice cream, and interactive mixins concept; a visual, colorful way would be more appealing, especially to the young adult population who would appreciate creative and exciting visual advertisements. On the street units, flyers and magazines, the slogan, Sweet Success, should be emphasized along with a picture of young adults enjoying sundaes at a party. This image
1

Prices for each option: Double Page = $6140. Four-Color Process = $1295. Street Units = $995 (per insertion) + $65 (production fee).

Chan 8 portrays the idea that if a host wants his/her social event to be successful and enjoyable to everyone, he/she should have Marble Slab cater it. In smaller font, the brand slogan, The Freshest Ice-Cream On Earth, should be included to establish branding. On the street level units and coupons, the slogan, Take Time to Enjoy Yourself, should be highlighted and a picture of an ice-cream cone should accompany it. This message is very strong because most students do not take the time to enjoy themselves because of educational or work commitments. If they see the fun Marble Slab experience, it will encourage them to get together with friends and enjoy some ice-cream. Financial Feasibility Thomas' goal for the first year of operations is $400,000 in revenue, with two possible revenue channels: 1) sales of ice-cream products and 2) sales from event catering. In order to breakeven for the first year, Thomas must sell approximately 8117 units, and to reach her revenue goal of $400,000, she must sell 137,987 units (exhibit 8). In lieu of all the market research, calculations, and analysis done so far, is this an achievable number for Thomas? I argue that yes, Thomas can sell at least this much to reach her goal because of several reasons. First, the location is densely populated with heavy, shared foot traffic from neighboring shopping options on Bloor Street, a very busy street. The close subway stops provide potential customers who work, study, or socialize in this shopping area, not to mention the large student population from the University of Toronto and Ryerson University. Especially during the summer, Bloor Street is filled with customers who are more inclined to consume ice-cream after shopping and enjoy Marble Slab's high quality experience. The median household income is quite high, and out of all the customer segments, young adults are most likely to connect with Marble Slab's social environment and fun customizable options. Though pricier, customers in Bloor

Chan 9 Street/Annex are not as discouraged by Marble Slab's premium prices than other locations. Event catering can also help compensate for the slow traffic during times of bad weather. Monitoring Plan Since this is Thomas' first year of operations, she does not have much data and experience to confidently predict some of her marketing goals. To measure the success of this marketing plan, she can analyze how people found out about her outlet through surveys and focus groups or talking with customers and engaging in social media (should she create a social media presence). Relating promotions directly to sales results is difficult, since there can be many influences on a customer, but Thomas can obtain a qualitative sense of the success of her promotions through customer feedback, store traffic, and customer purchasing patterns (dollars spent, frequency of purchases, products purchased). Event catering is a promising revenue stream so she can engage customers who previously pursued event catering to understand their needs and wants. Other tracking methods include following repeat purchases through a customer database driven by point-of-sale systems to assess customer loyalty. While there are many research and tracking tools, for Thomas, on-going detective work through frequent presence in the store can give her a better idea of the success of her marketing efforts as the markets change.

Chan 10 Exhibit 1: Competitive Analysis Strengths Large variety of high-quality products, including "31 Original" flavors Strong financial and promotional power in Canadian market Similar prices to Marble Slab Blizzard treat competes directly with Marble Slab's mixins concept, and it's cheaper Also serves hot food and kid-friendly items World's largest and well-known restaurant McFlurry competes with Marble Slab's mixins Cheap prices and fast service is very appealing Known for customized drink experience and friendly service Relaxing, social atmosphere with couches and free Wifi internet Cheaper and wide selection of ice-cream products

Baskin Robbins

Weaknesses Lacks ability to customize ice cream

Dairy Queen McDonalds Grocers and Convenience Stores

Starbucks

Quality is not as high as Marble Slab Serves soft-serve icecream, not as fresh Limited frozen dessert options and serves only soft-serve ice-cream Expensive Limited food options for children Lacks social environment Low quality

Families (with children) Young Adults Women

Exhibit 2: Customer Segment Analysis Pros Cons Families have higher Marble Slab lacks kid-friendly options disposable incomes Parents do not want their kids to eat icecream regularly (an occasional treat) Willing to please children who love ice-cream Freedom with money Many competitors already targeting this market Strong appetite for social interaction Primary grocery shopper for More health-conscious family Too broad a market to focus advertising Exhibit 3: Evaluation of Potential Locations Pros Cons New outdoor complex with exciting Close to Starbucks and shopping options Baskin Robbins Adjacent major highway and major Must commit to 10 year shopping centre with movie theatre term Large student population Most expensive option Heavy foot-traffic, close to Bloor Street Close to numerous subways and museums Popular tourist site Five direct competitors

Vaughan

The Beaches Toronto Annex Area

Chan 11 Oakville Strong social atmosphere and nearby shopping Highest median income out of all options Least expensive option Little direct competition nearby Harshly affected by winter Can the smaller town support event catering from Marble Slab? Far away from home

Toronto Star

Now Magazine

104.5 Chum FM Outdoor Advertising Canada Post Direct Mail

Exhibit 4: Analysis of Promotional Options Description Canada's most widely read newspaper with circulation of 360,000 to 608,000 copies sold per week Wider audience than magazine and radio audience Most expensive option Longstanding entertainment magazine distributed weekly with readership of 321,000 Readers can pick up free in downtown Toronto stores, street boxes, and limited areas in the GTA Target Demographic: 15 to 24 years old Target audience of 25 to 54 years old Over 1.2 million Canadian listeners (920,000 in Toronto) Facilitated by Pattison Outdoor, a leading outdoor advertising company A visual way would be effective for Marble Slab's ice cream Cheapest option Able to send flyers to targeted postal routes based on demographic variables and lifestyle information Thomas is concerned coupons would be viewed as junk mail

Exhibit 5: 21 Flavours Selected as per Headquarters 1. Sweet Cream 11. Amaretto 2. Vanilla 12. Banana 3. Double Dark Chocolate 13. Peach 4. Chocolate Swiss 14. Peanut Butter 5. Strawberry 15. Pistachio 6. Amaretto 16. Raspberry 7. Butter Pecan 17. White Chocolate 8. Coffee 18. Vanilla Bean 9. Caramel 19. Key Lime 10. Cheesecake 20. Honey 21. Chocolate Rum

Chan 12 Exhibit 6: Sensitivity Analysis of Event Catering Options Sundae Bar Portable Slab2 Ice Cream Social 40 100 40 100 40 100 $14,976 $1,040 $11,898 $27,914 $28,912 $998 $14,977 $2,600 $29,744 $47,321 $72,280 $24,959 $14,977 $1,040 $9,884 $25,901 $37,232 $11,331 $14,977 $2,600 $24,710 $42,287 $93,080 $50,793 $14,976 $1,040 $9,884 $25,900 $24,752 -$1,148 $14,977 $2,600 $24,710 $42,287 $61,880 $19,593

People Employee Cost Supplies Cost Ice Cream Cost Total Expenses Ice Cream Revenue Annual Profit

Employee Cost Supplies Cost

Ice Cream Cost Catering Revenue

Exhibit 7: Calculations of Sensitivity Analysis Sundae Bar Portable Slab Ice Cream Social Two employees per event at $12/hr. 6 hrs per event. 104 Events per year. 2 employees * $12/hr * 6 hrs * 104 events per year = $14, 976 $0.25 per person at each event $4.95 - 52% contribution margin ($2.57) $5.50 - 48% contribution = $2.38 / person [rounded to two decimal margin ($2.64) = $2.86 / person points] $6.95 / person $8.95 / person $5.95 / person

Exhibit 8: Units to Breakeven and Achieve Target Revenue Breakeven Breakeven = Fixed Costs/Unit Contribution = $25,000 (start up fee)/$3.08 (average margin) = ~8117 units Revenue Target Revenue Target = Target + Fixed Costs/Unit Contribution = $400,000 + $25,000/$3.08 = ~137, 987 units Revenue Target Revenue Target = Target + Fixed Costs - Event Revenue/Unit with Event Catering Contribution =$400,000 + $25,000 - $998 (Sundae Bar, 40 people)/$3.08 = ~137,662 units

Profits should be deducted by $2500 because of additional investment of equipment.