Wendys Marketing Strategy free essay sample

The industry is going from strength to strength as the nation’s appetite for personal services and retail goods continues to grow and the business model attracts new industries. Facts The number of franchise chain has jumped by 21. 4%, from 700 in 2002 to 850 in 2004, according to Franchising Australia and it is growing. 2010 Reported double-digit increases in revenue and profits and expect the same this financial year Industry Segmentation 0. 20% 8. 70% QSR 31. 80% Takeaways Leisure Locations Mobile Street Vendors 59. 20% Wendy’s History †¢ †¢ †¢ Start up: In 1979 opened the first shop in a shopping centre in South Australia; Business Model: Adopted a franchising model; Growth: 250 stores in Australia and New Zealand over 30 years. Position: Fast food industry within the treats segment. Wendy’s with use of franchising model (lower risk capital and fast expansion into new locations) now has 250 stores. †¢ Positioning in franchising industry: †¢ Low cost entry †¢ Low royalty and marketing fees †¢ Easy and fun to run †¢ No special skills required †¢ Initial support guidance for recently established franchisee . Strategic Challenges facing the business Strategic Challenges Industry Maturity: †¢ The fast food industry is competitive and mature. With little room for growth and still more players coming into the industry and soaking up the available profits. The public awareness of negative health consequences of fast food †¢ Increased focus on the quality of food served in fast food restaurants. Fast food companies have responded by adopting healthier choices and have had some measure of success, but the shadow of bad press still hangs over the industry. The rise of commodity prices †¢ Increase in produce prices significantly crunched many fast food franchises. The affect of the GFC †¢ During GFC there was some increase in consumer visits as people choose cheaper fast food options over fast casual or traditional restaurant choices. But overall, the recession hurt spending, and consumers overall purchased less with each trip. Regulation: †¢ With issues concerning public health (obesity) as well as the quality of produce (Horse Meat Scandal, Free Range Chicken) being the source of controversy both here and overseas. The industry could face tighter sourcing, manufacturing and labelling standards in the future. 1. Environmental Analysis Environmental Analysis Political / Legal: Health campaigns – healthy eating, obesity Deregulation of shopping centre / store hours likely New food nutritional guidelines just released Increasing minimum wages + superannuation costs (labour intensive nature of the industry means 16. 8% of costs are wages) Discussions about ‘sugar tax’ Economic: GFC has meant decreases in overall consumer spending, and increase in propensity to save. Fast food is sensitive to consumer confidence levels (which have been low in recent years). High levels of competition in the fast food industry, a small number of global players doing well and significant local startup activity and competition. Availability and price of produce can have an impact – for example bananas when there was flooding, fruit when we have droughts, milk production when there was very high rainfall in Victoria. Fast food / ice cream may be seen as an affordable luxury, and even in challenging economic times certain segments can tend to reward themselves. IMPLICATIONS: Increased focus on healthy / low fat options means most participants in the industry will spend increasing time on new product development in this area, so to stay competitive will require investment in this area. Social / Demographic Trends: Aging population – initial indication that aging population may be a negative for the industry (assumption that they consume fewer treats). Areas with higher concentration of teenagers has seen increased demand for fast food compared areas with more mature aged customers. Single dwellers (rather than families) – go for convenience aspect Trend for healthier options as awareness builds with consumers, and fast food and high fat/sugar foods continue to get poor media exposure. Time poor consumers – convenience is increasingly important. Technological Trends Smartphone technology now widespread – allows customers to find local stores and provides ability to order online. Allows company to more effectively segment and market at a local level (though messaging, offers etc). Particularly for tech savvy younger customers. Packing technology – Improvements and innovations packaging for fast food, snacks and treats. eg Individual packaging which has allowed sliced fresh fruit to stay crisp and fresh for longer. POS technology – self serve, and other POS technology now widespread – can have an efficiency as well as a novelty value. Social media / marketing – increased use of social media and online marketing, in addition to traditional marketing approaches. 1. Market Analysis and Segmentation Market Analysis Wendy’s is positioned in the fast food industry, within the treats (ice-cream / deserts) sub-industry. They refer to their positioning within this larger market as â€Å"masters of taste and masters of providing the most indulgent, fun, I HAVE to come back here again treat experience. † Australia is one of the largest consumers of Ice-Cream. However, the increased emphasis on health and nutrition has caused demand for traditional ice cream and other similarly high-sugar and fatty foods to fall overall. Emerging Submarkets – low fat, health focused submarket of the ‘treat / icecream’ market. Market Profitability Fast Food Ice cream markers are profitable, though margins are lower than in some other industries due to heavy competition. Key Success Factors – product innovation (for example new lower fat options), attractive product presentation (to make offering more appealing, to maximise impulse purchases) , having a clear market position (brand and positioning is clear on what segments and products its offering – whether a health positioning, indulgent treat etc), Convenient access (good locations with high walk/drive by traffic, access to parking, proximity to other complimentary retailers or businesses), stock control (ability to manage stock and stock costs – to minimise logistics cost, wastage etc), human resources (reliable, customer focused staff). Segmentation A number of segmentation approaches were considered including customer demographics (eg gender, age), customer lifestyle (families, young singles, retirees), product benefits (taste, quality, prestige, diary content, low-calorie), channel preference (shopping centre, stand alone/high street, home delivery, take away), price sensitivity (low cost, high cost) and customer needs based. A needs based segmentation was chosen as it allows the most useful combination of Segment 1 Family Needs Convenient Fast speed of service Type and size of package Indulgent Treat (Reward / Satisfaction) Economical Convenience Segment 2 Gourmet / Specialty Indulgent Treat (Reward / Satisfaction) Quality ingredients Quality positioning Brand prestige Convenient location Special Features / differentiators Quality Segment 3 Health / Lifestyle Indulgent Treat (Reward / Satisfaction) Convenient location Quality ingredients Lower fat / healthier choice Range of serving sizes Healthier Choice Primary Driver Competitors Mr Whippy Gellatisimo Baskin Robbins Krispy Kreme Cold Rock New Zealand Natural Andersens of Denmark Ben Jerries Haagen-Dazs Michels Patisserie Most competitors now have a ‘low fat’ range, but competitors such as Wow Cow and other frozen yogurt companies tend to position their product to this segment. New Zealand Natural Wow Cow Boost Juice Higher proportion of women exist in this segment, with higher levels of importance places on lower calorie treats (lower fat and sugar). Segment Characteristics Consumers prefer products that offer strong value for money. Purchasers are generally not the consumer. A high level of price sensitivity exists in this segment. Higher proportion of consumers in this segment tend to be single or couples without kids. Prepared to pay higher price point, and to pay for quality add ons such as. Brand appeal and prestige can be more important (thus many international / imported brands operate in this segment). 50% % of Market 25% 25% 1. Competitor identification and analysis Competitors Core needs provided by Wendys: Fast food consisting of sweet snacks, cold beverages, light meals and coffee. Strengths and Weaknesses Position in the Marketplace Strengths Branding Coverage – 320 stores Specialisation Donuts Weaknesses Lack of healthy alternatives Strengths Strong brand Coverage – 300+ stores Usually has eat-in options Weaknesses Mass produced food Limited healthy alternatives Strengths Branding/Marketing Fundraising efforts Distribution through 7-Eleven Weaknesses Mass produced Extremely un-healthy Strengths Unique concept Visually enticing store Good coverage (100 stores) Good product selection Weaknesses Only stock seasonal products Targeted to a limited market (kids) Strengths Coverage (700 stores, 22 countries) Wide range of products including healthy alternatives Take home packs available Weaknesses Products made overseas (NZ) Seasonal products Usually positioned within the fresh food/supermarket area of major shopping centres, Donut King targets casual shoppers and those requiring family deserts. Located within major centres Michel’s targets shoppers for a casual light meal /coffee or a take-home desert. Situated in a variety of locations including air-ports, shopping centres and standalone stores, Krispy Kreme targets adults who desire a sweet snack or milkshake for an affordable price. Positioned at children mainly in beachside locations. Unique concept of creating your own unique ice cream. Mainly situated in shopping centres and beach side locations, New Zealand Natural targets adults wanting premium ice-cream for immediate consumption or take home packs for family desert. 1. Strategic Challenges facing the business SWOT Wendys Competitors STRENGTHS: Australian icon with strong branding. Long standing history with the first store open in 1979. Geographic coverage with 250+ stores across Australia. Positioned in high foot traffic areas generally in shopping centres. Wide product range (cold beverages, light meals, frozen yoghurt ice cream). Affordable franchise fees (lt; $100,000). Easy to operate stores. WEAKNESSES: Limited speciality in a particular product. Minimal healthy options available. Mainly seasonal products. Wide spread of product purchases by the market (as seen in segmentation). Generally has young staff with limited customer experience STRENGTHS: Mostly consist of Australian Icons. Wide geographic coverage. Visually enticing stores (attribute to most franchises). Strong branding and marketing. Most make products fresh. Majority are seen as a gourmet offering. Wide consumer target market WEAKNESSES: Majority sell seasonal based products. Higher end products tend to be priced high. Most are seasonal offerings (summer products). Majority do not offer a wide range of healthy alternatives OPPORTUNITIES: Capitalise on a larger market share by offering healthier alternatives. Potential to offer organic products. Potential to offer customised ordering. Offer seating options to customers. Offer take home ice-cream packs. Partnership with complementary businesses. Expand products into alternative locations such as cinemas. THREATS: Any future fast food tax. Rising popularity of healthy fast food alternatives. Rising cost of retail rents. Rising popularity of take home ice cream packs. OPPORTUNITIES: Expand into alternative locations such as cinemas or schools. Frozen yogurt is not common amongst competitors. Expand healthy alternative range. Expand into offerings for winter THREATS: Any future fast food tax. Rising popularity of healthy fast food alternatives. Rising cost of retail rents. Rising popularity of take home ice cream packs from supermarkets 1. Outlook Outlook Growth Existing Business Model: The growth prospects for the Fast Food industry and Wendys is good as long as they can follow consumer trends which are largely optimised by the push toward eating healthier. This is demonstrated both in consumer habits as well as a diversification of many of the larger fast food businesses also trying to over a broader variety of options for consumers (McDonald’s Healthy Menu). Wendys strong brand and low cost of entry for investors (franchisees), the business is perfectly positioned to look at other products or even new business altogether that tap into healthier eating and dispositions of the Australian Consumer. There is also opportunity in the market to better segment their geographic footprint and premiumise their existing franchise business. Looking at areas with higher socioeconomic traits and not only serve different products but create a more upmarket environment for their products to be consumed in with an emphasis on quality. Growth Existing Products New Models: With the Wendys brand commanding a popular place in Australian consumers hearts. There is a very real possibility that Wendys could viably follow in the foot steps of some of its American counter parts such as Ben Jerries, to start selling branded CPGs supermarkets. With a variety of SKU’s that they could initially focus on to help people take their Wendys experience home with them. This could include, tub ice-cream, shakes and ice-cream cakes. Growth, New Markets and Products: With their understanding of the Franchise business and strong supplier relationships. Wendys could also look at either starting an alternative, healthier product range, that could also be distributed through a new brand and store. Leveraging their existing competencies and supplier relationships to capture different, perhaps more affluent and currently Wendys averse consumers. 1. Appendix References Anonymous2010, Sep 21. Franchises in Australia Expect Double-Digit Revenue,profit Rises. Asia Pulse. https://www. mja. com. au/journal/2011/195/1/advertising-fast-food-children-australian-television-impact-industry-self Schaper, M, Gehrke, J 2013, FRANCHISING REGULATION IN AUSTRALIA: RECENT TRENDS AND CURRENT ISSUES, International Journal Of Franchising Law, 11, 1, pp. 3-13, Business Source Complete, EBSCOhost, viewed 20 April 2013. Fast Food Industry Profile: Australia 2010, Fast Food Industry Profile: Australia, p. 1, Business Source Complete, EBSCOhost, viewed 20 April 2013 http://www. news. com. au/national-news/obesity-levels-show-australia-is-the-chubby-country/stor y-e6frfkvr1226064083008 http://www. ibisworld. com. au/industry/default. aspx? indid=2005 http://www. franchisehelp. com/industry-reports/fast-food-industry-report WILLIAMS, M. 2013. Fuel Retailing in Australia. In: WORLD, I. (ed. ) IBIS World Industry Report. EDWARDS, J. 2013. Ice Cream Manufacturing in Australia. In: WORLD, I. (ed. ) IBIS World Industry Report. CONNELL, S. 2013. Fast Food Services in Australia. In: WORLD, I. (ed. ) IBIS World Industry Report.