(2)Introduction
Introduction is where the sales of the product/service are starting to raise and then this means that the product/service is starting to make profit, which means that promotion has started and people around me are getting to know me more and the product/service that I am willing to offer. A penetration pricing is used as they are many competitors within the location I have opened my restaurant. For my business this stage will be the opening of the restaurant to they target market so promotion is a very important here. I will be providing free samples and food at half price for the first day
(3)Growth
Growth means that I am starting to achieve the market share and also the sales are more than they were in the Introduction stage, this basically means that the consumers are enjoying my service and telling others to use it. This gives me a very good image and reputation. As my service is well known and I am becoming more profitable I will continually keep trying to raise awareness of my brand. Also I will try and expand my business by using possibly a website
(4)Maturity
This basically means that I have captured the market share and also the sales and profit are growing regularly, which means that I am getting more money day by day. My service will try and differentiate and the brand is the key to this. I will gradually start to lower my prices as there is competition, and try and find different ways to penetrate the market. Promotions will become more widespread and better variety if media will be used, to keep customer awareness I will do heavy advertising. As my company will have gained market share and will be well known, this will be the point of starting to think of producing new products or improving on the service.
(5)Decline
Decline basically means that the consumers are not very happy with your product/service and that they are not satisfied with it, which means my sales are going down. This is very bad because if this does happen then my business would go down and I would be out of business, which leads me to nothing at the end of the day. To avoid this I could use extension strategies to keep my business in the market.
From my SWOT analysis I can see that my main strength towards product is my unique selling point. The reason this is a strength is because there are currently not many people that offer shisha. There is a lack of this in the market making this a huge advantage to me as a business because of the small amount of places offering shisha, this will give me the opportunity to capture all of the available market segment. This is different, and this is something my competitors cant offer, such as; dragon chef and Nandos. From my secondary research I identified that 55.9% of people in slough are Asian, this is a major advantage because my restaurant holds an Asian theme. This will in turn open up the opportunities of expansion for me if I can capture the market I will be required to expand to accommodate all the possible customers, the opportunity of expansion will have a very positive effect on the overall business because this will increase the popularity of the name Buzz Palace and if we open more branches around England it will slowly develop not only in terms of popularity but profit, if I am making sufficient profit. This will in turn make a large percentage of surrounding area possible customers. Another strength that I have identified and applies to my product is the fact that I will be using fresh ingredients this will result in my products being prepared to a better quality allowing me to raise prices to what the consumers believe are suitable.
From my SWOT analysis I also identified a number of weaknesses that could affect my business, the most significant weakness was my inexperience in the market. Another problem I will be troubled with is the difficulty of raising capital for myself, I will struggle raising sufficient amount of money to purchase stock, equipment and other things necessary to set up my business. The way i intend to overcome this problem is by using my own personal savings and to raise from within the family. The reason I have chosen to this is because I will only be offered a limited amount of money because of my financial situation. So I believe to I should raise as much as I can without the help of a bank. As this will lead to me paying back less and in the long run I will end up paying less, and can then in turn invest more into my business. Another way to overcome my inexperience in the market would be to guarantee quality food and service to my customers and use this to get customers rather than using past experiences to help make my decisions. I will offer training to staff and train myself to help overcome this problem, I could use the experience of the chefs and their experience in the food market to help me, if I can use all these then I will not have trouble establishing myself in this market. From my research I have determined that if my business is to grow at its predicted rate then it will open up many opportunities for me. In terms of that helping my product it would be to expand the menu, I intend to limit my menu to start with and make the shish I offer to be my focal point but as the success of the business increases then I will expand my menu. E.g. I could introduce new dishes onto the menu and possibly even introduce new tobacco flavours. This will also help my business in the sense that it will keep my customers interested and possibly attract new customers. The one major threat I see to my business in terms of my product is the possible changes in law. E.g. If there is a new law on there being a ban put on some food colouring that is used in many spices that I offer, I will have no choice but to replace that product as it is a banned ingredient. If there is a change in laws and there is a ban on tobacco as this is my unique selling point it is likely to have a very drastic effect on my business. If this did occur then I would be required to stop serving Shisha. One way I could overcome this problem is to launch a new product to replace the banned product. This is seen as a very risky procedure as success rates as low.
From my pest analysis I also discovered a number of problems that could affect my product. A political factor that could affect my product is legal factors, as I have previously discussed about the fact that if there is a change in laws then I would be forced to make changes. If there is a change in the food safety act then I am required to follow these rules or I am seen as breaking the law. If they decide to put a ban on a certain spice that I may use in my dishes I would be required to stop selling that product or alter it. If this is a popular dish then it will cause my profits to fall, it may also deter customers because that might have been the dish that made them want to revisit the restaurant. Also if there is a change in the governments taxation system it could affect my business if they are required to pay more to the government. This taxation would not only affect me but all my competitors so if I am required to make any price changes then it is likely that my competitors are as well. One economical factor that I have noticed will affect my product is the inflation rate, the reason I have determined is the fact that if there is a drastic change in the inflation rate then it is likely to affect their buying patterns. E.g. if the inflation took the value of the pound down then it is likely that people would spend less because it would mean that the people would be earning less I terms of money value. One social factor that I believe would affect my product would be environmental issues as my focal point is tobacco smoking, I will be contributing to the amount of pollution in the world. Also customers could be put of if my packaging is seen to be littering the streets. Another social factor could be peoples lifestyles, if the public approach a more healthier lifestyle then it could affect my business as tobacco smoking is not see as a healthy way of living. I way I would overcome this problem would be to launch a new healthier part of my menu where I will serve healthy dishes.
In my primary research I established that the two most popular types of food were English and Asian food.28% of people prefers Asian food this is to be my businesses focal point when selling food. This is nearly a third of all people interviewed; this is a positive sign for me as a business. I also noticed that people where willing to pay between 5-9 pounds per dish, I am basing my pricing around this and my competitors prices. From my questionnaire results I saw that 88% of people wanted to try Shisha. This is very positive for my business, as Shisha is my unique selling point.
PRICE
Pricing is the only mix, which generates a turnover for the organisation. The remaining 3ps are all variable cost for the organisation. It costs to produce and design a product, it costs to distribute a product and promote it. Price must support all these elements of the mix. Pricing is difficult and must reflect and supply and demand relationship. So my company has to consider pricing as a key factor because they will have to use pricing towards all the other 4ps the development of the product, the location and the promotion of product and service.. I will base my pricing on other businesses. Having a good competitive price will help me succeed in attracting customers. A lowered competitive price will help me attract more customers, the price can’t be too low, because I will not be making profit, and it can’t be too high, because no one will come and buy food that is overpriced.
To determine my own pricing I carried out competitor a competitor analysis and also primary research helped me. I intend to sell my dishes at around £4 a dish and my meal deals will range from £5 to £20.From my SWOT analysis I could see that my specialist chefs were a major advantage to my Pricing side of the business. The reason being that quality chefs prepare quality food and I will be able to charge a competitively high price. Another strength I have established is the fact that there is a market for my product as I saw in my primary research 88% of people interview wanted to smoke Shisha. So I believe that because of the demand for my products, people will be willing to pay the prices I have set. From my SWOT analysis I could see that my competitors were my biggest threat, when I set up my business it becomes difficult for me to break into the market. I have based my prices around the prices of my competitors so they are very similarly priced and until people notice my business for one reason or another whether it be for our quality or our unique selling point (shisha).But until then my competitors will hold a majority of the market. To help me break into the market I will have to manipulate my prices and promotion to attract customers. I intend to use penetration pricing to help me with this, that is likely to interest potential customers and when they decide to try out my restaurant it is down to my business to provide quality food and services to make the customers want to return to my restaurant. I also used the PEST analysis to help me with pricing, one political factor that I saw was the VAT, if VAT was to increase then it would not affect me too much in losing customers because the fact remains that VAT changes will not only affect me but all my competitors, this is overcome because if I increase my prices then it is almost certain that so will my competitors. On the economical side of things employment rates can affect my prices, the employment figures in slough show that 65.3% of slough is employed, this is very encouraging because it shows that people will have money to spend on my business.
There are different pricing strategies that can be used to sell your product they are the following:
- Penetration pricing
- Price skimming
- Cost plus pricing
- Competitive pricing
- Demand based pricing
- Positioning pricing
- Discount pricing
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Penetration pricing- prices are set very low so that the company can enable the company gain a foothold in a very competitive market by e.g. special introduction offer. Once this has been achieved process may be progressively or selectively raised. My business will use this method to start of my business as I will be in the introduction stage of the product life cycle so I will be trying to persuade my target market to use my service by offering meal deals and special offers, and then when my market grows and I get more customers and my product is for demand this will be probably in the growth period I will start to raise the price of my product because I will no now that it’s a success and this will also increase profit which I could use for improvements.
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Price Skimming- prices are set initially very high to take advantage of some people’s desire for a new product or design for at a price. Prices are later reduced to appeal more to the mass market. Skimming is most effective is inelastic i.e. People want the product at that price. Buzz Palace will not take on this method as customers get very unhappy with the change of price and I will get a negative publicity about my service which will result in me losing out on customers and then my service will lose profits, also I have to think the sensitivity of the price my target market want.
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Cost plus pricing- prices are based on the cost structure of a business and should be used to maximise profits. The cost of production is used as a base line figure and the price in then marked up by the required amount. Cost plus pricing tends to ignore the demand for product and competition. I might consider this factor but this is not really referred to the product it’s just how much is needed for the product to be lounged.
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Competitive pricing- this is the situation where the business sets a price roughly in line with its competitors. My business will consider this strategy as it’s easier to do and can be effective and could be also mixed in with penetration pricing, I will use this method when my product is in the introduction period because I will want customer to come to my restaurant because I will be providing products for the same prices or less then the my competitors this will make them come here as they will find that I am cheaper but thee food provided is quality.
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Demand based pricing- processes are based on what the business thinks the customer is prepared to pay. I has used this method because from my primary research my questionnaire I have found out how much my target market are willing to pay for a good/quality Asian dish. But as lifestyle change then so do customer demands due to economic factors which have an on impact people’s life. So I will continue doing surveys to see what the requirements of my customers are and if I am fulfilling them.
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Positioning pricing- prices are set which reflect the consumer’s view of the product. If you are offering a high quality establishment and service consumers would expect to have to pay premium prices. If the layout of my business is very smart and looks and has an atmosphere of an expensive restaurant, customers will be willing to pay the amount required due to how well set the restaurant is in terms of looks and the quality of the service.
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Discount pricing- this is usually used when one business sells to another. But i have considered discount pricing by using my unique selling point primarily, which is if people book online they get 30% discount of the shisha.
PLACE
This means by which product and service get from producer to consumer and where the consumer can access them. Place is also essential and is also important because if you do not have a location or distribution channel you can produce a product and price it but you have to consider what method you will use to lounge or sell your product. They are two distribution channels which are:
DIRECT DISTRIBUTION INDIRECT DISTRIBUTION
I will be using both types of distribution channels as they are both required for my service that I am providing. I will be using direct distribution within the restaurant because I will be providing the service from the manufacturer (chef) to the customer/ consumer the food will be provided directly to them. Also I will be using the indirect distribution because of my products which is either by internet or by phone which means it is from the manufacture to the retailer and then it reaches the customer.
I established many things from my SWOT analysis, one thing I saw was that my location was a major strength; the main reasons behind this were the fact that it is going to be situated in the middle of the Slough high street and is constantly populated with people and therefore will be an attraction. Also the travel accessibility is very good as the train station is near by and busses run frequently in and out throughout the day. As a town which is currently growing rapidly due to expansion and development of properties it is very likely that this growth will positively affect the life span of my business. As more people move in to the area the town centre will get busier and the flow of customers will be more productive.
However due to the fact that the High street being a busy location, the rents and rates would be more than basing the business in Farnham Road for example.
An opportunity which may arise for me in the long term is if my business is established on firm grounds of providing a good service, the opportunity to expand further a field could arise. It may be worth my while to open another branch in close proximity of each other to ensure that both sides of the High Street catch the essence of “Buzz Palace”.
This is one thing that Gregg’s Bakery has done and I feel that this was a great opportunity for them as they maximize sales. A key point about the launch of food restaurants and cafes is that people normally prefer to travel less to get there. This was one of my questions that I asked the interviewees. I found that majority of them would travel up to 1 mile to get their food.
A downside to this point is that due to the growth in the market the actual number of competitors would increase making business opportunities more difficult to grasp. This would be a possible long term threat that my business may face as franchises may move in to the market and may undercut my prices. I may be required to do wider range of marketing to increase awareness of my business and this obviously would be a further cost that I may be faced with, which could be crucial to ensure that my business survives in the market.
From the PEST analysis I have identified that a social factor that could affect my business is the way people spend their money. The way they shop and socialize in years to come. The disposable income of individuals would also affect the survival of my business. Due to the strength of the pound, the spending power is great at the moment with interest rates at low percentage and people earning more money.
PROMOTION
A successful product or service means nothing unless the benefit of such a service can be communicated clearly to the target market. An organisational promotion mix consists of:
- Public relations
- Sales promotion
- Personal selling
- Direct mail
Promotion is also used to make the consumer aware of the existence of a product and service it’s not jus advertising it’s to grab attention of the consumers in the market.
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Advertising- is any non-personal paid form of communication using any forms of mass media for example leaflets and posters. I will use this form of promotion to start of my business as I will have to limit my finances in the field of advertisement that I will have at the beginning of the business. I will start of using leaflets and pamphlets and posters to grab customer awareness and also it will not cost my service too much. When my business has reached certain success and money is made available I may launch a heavier advertising campaign
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Public relations- this involves developing positive relations with the organisation media and public. This can be done through sponsorship of local events I will consider this after it’s product is demanding because then I will have a good relationship with my customers so even if I do not get a response from the general public i will still have my target market.
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Sales promotion- commonly used to obtain an increase in sales short term. Could involve using money off coupons and special offers. My business will use this method in the growth stage of the product because I will have increase in profit and to find more customer and keep growing my market I will offer meal deals and special offers which will catch the eyes of the consumers in my market.
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Personal selling- selling a product service one-to-one. I doubt will really consider this method because it will not get a range of people and they will not be a growth in the market or the market share.
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Direct mail- is he sending of publicity material to a named person.
There has been a growth in direct mail campaigns over the last 5 years spending on direct mail now amounts to £18 billion a year representing 11.8% of advertising expenditure.
Direct mail allows an organisation to use their resources more effectively by allowing them to send publicity material to a named person within the target area. By personalising advertising response rates increase thus increasing the chance of improving sales. I will like to use this method as you can see that this is a successful method of the promotional mix but when I start of my business I will not have enough profit to use this method but gradually as my service is well known and is bringing in steady money.
I established many different things through different research methods I used; from my SWOT analysis I identified that my strength would be my location. The way I could use my location to help with my promotion would be to use my location to promote successfully. As I am situated in the slough high street it is constantly populated, so I will be needed to use very bright and eye-catching posters to catch the attention of potential customers. If this is done properly then the awareness for my restaurant will spread very quickly prompting a quicker pick up for my business in terms of profit.
One opportunity I was able to establish was the ability of me my business being able to expand. If I carry out my promotion properly then I will attract a lot of customers this will then in turn increase my profits. This will present me with the opportunity to expand my business as I will have made sufficient money to invest.
One threat I determined was my competitors taking market share, I way I intend to overcome this is by launching a successful promotional campaign. If I do this well and people are aware of my business then they are likely to come to my business. This will have helped me capture some of the market share, if I can capture enough of the market then this will pressurise all my competitors and if I can keep this up it will drive my competitors out.
Also from my secondary research I determined that 88% of people will listen to the radio at least once a week thus showing me that radio advertisement is a good way to get in touch with potential customers. From a separate piece of research I saw that 57% of people were first informed of a new restaurant through fliers that came through doors, this is another method I could use to raise customer awareness.
Location
Start up costs of my business
There are many costs of running my business, they fall into two categories fixed costs and variable costs. Fixed costs are wages, rent etc and variable costs are raw materials, bills and advertising.
Sales forecast
I used the 90/30 method to calculate my sales revenue.
If a shisha restaurant was to open, how likely is it that you would visit it?
Forecast market share:
0.90 X 22 = 19.8
0.30 X 56 = 16.8
19.8% + 16.8% = 36.6% market share
Once a week: 6 x 52 = 3.12
Once a month: 20 x 12 = 2.4
Twice a month: 66 x 12 = 7.92
More: 4 x 12 = 0.48
3.12 + 2.4 + 7.92 + 0.48 = 13.92 visits per year
I chose to use the mid point of each price.
2.5 x 0.08 = .20
10 x 0.70 = 7
15 x 0.22 = 3.3
0.20 + 7 + 3.3 = £10.5
My target market consists of 119,067 people
119,067/16.8 = 7087 customers
Annual sales revenue = 7087 x 13.92 x 10.50 = £1035,835.92
Total sales revenue = £1035,835.92
Using this sales forecast I was able to predict my market share
