Pret a Manager Competition - Case Study Example

SOSTAC Essay for Pret A Manger SOSTAC Essay for Pret A Manger Situational Analysis Pret A Manger has considerable online presence. The chain has a custom website for each of the five countries in which it operates – the United Kingdom, the United States, Hong Kong, China and France. In order to encourage its customers to stay up to date with its latest news, launches and recipes, Pret A Manger maintains a Facebook page and a Twitter handle through which it stays in touch with its customers. The chain also runs an online newsletter, a powerful digital marketing tool that it encourages its customers to subscribe to by signing up with their email. In order to demonstrate that its coffee is indeed organic, the company has, on its homepage, a video clip in which its coffee farmers and suppliers from Peru explain how their coffee is organic. Pret A Manger runs a Website that is dedicated to the online placement of orders, dubbed “Pret Delivers”. A registered customer logs in with their email and password, places an order and it is delivered to their home or office, provided it is near a Pret shop (Pret A Manger, n.d.). The company enjoys good publicity in online dailies. An example is a 2013 story carried by the Daily Mail in which the writer praises the chain for employing foreign workers (Poulter, 2013). US-based international fast food companies constitute the bulk of Pret A Manger’s competition. The leading ones among these, according to QSR Magazine 2012 data are McDonald’s, KFC, Burger King Corp, Pizza Hut, Subway, Domino’s Pizza, Starbucks Coffee Company, Wendy’s, Dunkin Donuts and Dairy Queen, by international sales starting with the one that generated the most sales as at 1 December, 2011 (QSR Magazine , n.d.). In terms of online presence, most of these firms are at par with Pret A Manger. For instance, most have online ordering and home and office delivery services, maintain Facebook pages and Twitter handles and receive considerable positive publicity. Objectives The first objective of this marketing plan is to increase the company’snet profit before tax to£200 million by 2020 up from £67 million in 2014. The 2014 figure represented a 9% increase on the 2013 figure (Chesters, 2014). The 2013 results were achieved in what continues to be a challenging and competitive market. Thus, the results demonstrate the resilience of Pret A Manger’s business model. The improving performance has increased the confidence of the chain’s investors and that confidence has been expressed through their willingness to fund further overseas growth. This plan seeks to build on the improved performance to increase the net profit before tax. Secondly, the plan seeks to increase online sales by 20% by January 2016. Despite the potential of online sales to increase overall sales hence net profit before tax, the company is yet to take the full advantage of the online channel. The third objective of the plan is increase customer loyalty by January 2016. Research has shown that it is much cheaper to sell to a repeat client than to a new one. Repeat clients can also contribute significantly to the realisation of the second objective of increasing the volume of online sales. However, to date, Pret A Manger has not had a customer loyalty reward scheme in place (Smithers, 2012). The fourth and last objective of this plan is to increase awareness on the Pret A Manger brand during the current financial year. Strategies In the face of stiff competition, many fast food customers, especially those that have not developed loyalty to any particular brand, grapple with the question of why they should buy from one service provider and not the other. In order to achieve the above objectives, Pret A Manger must give its potential and existing customers compelling reasons as to why they should buy from them and not their competitors. Value proposition (VP) is at the heart of winning the hearts and wallets of new and existing customers(Anderson, et al., 2006). Pret A Manger has realised the potential contribution of online sales to overall sales revenue and profits. For this reason, besides convincing customers to buy from them and not their competitors, Pret A Manger must emphasise to its customers why they should buy online as opposed to buying from one of their shops. This constitutes an online value preposition (OVP). The concepts of VP and OVP are the foundation of the strategies proposed in the following paragraphs. The first objective of increasing the companys net profit before taxation will be met through the realisation of the second, third and fourth objectives. In addition, the company will continue with its expansion drive. Recent expansion has been driven by growing demand for the companys sandwiches especially in the United States and Hong Kong. As a result, Pret A Manger will open a number of new branches in these two markets. However, the company will have to exercise caution in its quest to expand and grow its profits in order to avoid a repeat of what happened in the 2012/2013 financial year. During that year, the company made some of the highest volumes of sales in its history. In total, the firm realised a sales revenue of £509.9 million yet it did not make a profit(Bridge, 2014). The company had taken £272 million worth of bank loans to open new shops across all the four countries it operates in. The loans attracted interest payments of £13 million. In addition, it had to pay £36 million worth of dividends to its shareholders even though the payments were meant to be postdated to 2020. The company has since recovered from the mess. The increase in online sales will be realised through the generation of marketing buzz. Marketing buzz refers to the interaction of the users of a product, usually through the social media, that either amplifies or changes the original marketing message (Greg, 2006). A brand owner can deliberately generate buzz about their product or the buzz can develop spontaneously out of an event that enters the public domain either though the social or conventional media. The former approach is advocated. The effectiveness of buzz resides in the fact that individuals in social settings find it easier to trust each than an organisation that has vested interests in the product that is the subject of buzz(Siefert, et al., 2009). Even as the company seeks to use the buzz strategy, it must bear in mind that buzz can either be positive or negative. Positive buzz results in positive associations with the brand or product. By contrast, negative buzz emanates from bad product associations in the minds of consumers such when a company recalls a product over safety concerns. Negative buzz may hamper the success of a product or brand. It cannot be overemphasised that customer loyalty is key to the success of any business regardless of the industry in which it operates. As a result, many businesses come up with customer loyalty schemes in a bid to retain their customers. Unfortunately, most such schemes fail to achieve their goals (Stank, et al., 1999). The main reason these schemes are ineffective is because organisation craft them from their point of view; at best they are best guesses of what the customer may like. This plan proposes a different strategy for securing the loyalty of Pret A Manger customers. The strategy consists in using Pret A Manger customers’ perception of the performance of the firm as opposed to the firm’s self-monitored performance indicators. This strategy will afford the firm deeper insights into the needs and wants of its customers. Having grasped those needs and wants, Pret A Manger will then devise the operational means of meeting them. This approach has been proven not only effective, but also low-cost(Stank, et al., 1999). The fourth objective that seeks to increase awareness on the Pret A Manger brand will be realised through the use of owned and earned media. Owned media refers to the channels that a brand controls, such as its websites. Earned media, by contrast, are created by customers and include communities of brand enthusiasts. These two represent a departure from the past when organisations relied mostly on paid media such as television and billboards to promote their brands (Edelman, 2010). Tactics The OVP will be operationalised by means of a message displayed on the homepage of firm’s online sales site, Pret Delivers thathighlights why a Pret A Manger customer should buy online. Free delivery should be one of the many reasons, but the company must assure the customer, after the example of Zappos, that the delivery will not be delayed by virtue of it being free (Chaffey, 2011). The message should have a link via which to place an order online. The message should be conspicuous, colorful and combine both text and pictures to captivate the attention of the customer. Traditionally, Pret A Manger has relied on bank loans to fund the opening of new shops in the United Kingdom and abroad. However, in the light of the challenges experienced in the 2012/13 financial year relating to servicing credit facilities and rising cost of credit, the organisation will need to explore other alternatives of funding its expansion drive. First, the firm should consider funding growth using retained profits. However, as retained profits alone are insufficient, the organisation may consider the second alternative: becoming a franchised business. In its general sense, franchising entails a system of distribution in which one party (the franchisor) allows a second party (or the franchisee) the right to avail the products or deliver the services of the former according to an established system of marketing(Combs, 2003). The franchisor provides the following to the franchisee: training and support, the product, the brand name and the trade marks. In return, the franchise owner pays to the franchisor a once-off management and recurrent royalties after an agreed grace period. Franchising is popular in the fast food industry and is exemplified by MacDonald’s, one of Pret A Manger’s major competitors. The main advantage of franchising is that it will enable Pret A Manger to grow at little cost using other people’s capital; the franchisee provides the needed capital(Dada, et al., 2009). Buzz will be created through the building of suspense around the launch of a new shop or product, controversies and guest bloggers and other social media influencers. Influencers will amplify positive messages about the Pret A Manger brand because of their reputation in their respective communities. However, for the social media campaign to be a success, the company will do due diligence to locate and engage social influencers that are positively inclined towards the Pret A Manger brand. The company must then furnish them with information about it and its products and give them incentives to disseminate that information among their respective communities. The ultimate goal of the campaign is to transform individuals into loyal customers who will then add impetus to the campaign. The main challenge is for Pret A Manger to understand how virtual communities work and be able to use that knowledge effectively(Powell, et al., 2011). In order to realise the third strategy, the company will put in place mechanisms for collecting feedback from customers regarding how they perceive the company’s products and levels of service. The cumulative customers’ perceptions will form the basis upon which Pret A Manger should reorganise its operations with the view to meeting the needs and expectations of its customers and so win their loyalty. The mechanisms will include links on the company’s main website and the online sales website through which customers can give their feedback. An alternative is to have pop-up messages that request visitors to spare a few minutes to complete a short survey. However, this latter option could be a nuisance to some visitors and should be considered with caution. Whatever method is used to get the customer to the survey form, due diligence should be done to keep the forms brief and concise; it is unlikely that most people will have more than a few minutes to spare(Macdonald, et al., 2012). In order to encourage participation in the scheme, the company must assure customers that their views will be taken seriously and acted upon. The online feedback gathering effort should be accompanied by similar ones in the company’s various stores. The activities outlined for the operationalisation of the second and third strategies also apply to the fourth strategy: the use of owned and earned media to promote the Pret A Manger brand. Action The realisation of the first objective – to increase sales through expansion – will necessitate the setting up of a committee of Pret A Manger’s Board of Directors to examine the possibility of the firm becoming a franchising business. The committee will examine the franchising models of various firms in the global fast food industry with the view of identifying the model that may best suit the company bearing in mind its size and goals. The committee will then prepare a report on the matter and present to the Board for consideration. For the remaining objectives, an in-house team of IT professionals will be established at the company’s headquarters. The team will be charged with revamping the company’s websites to accommodate the various actions recommended in this plan, creating content for the company’s social media platforms and ensuring a steady flow of guest bloggers and social media influencers. The team will also perform any other functions that may be necessary for the full implementation of the plan. Where necessary, the team may outsource specific tasks. The team should be adequately funded to be able to execute its mandate. The media campaign contained herein will be launched immediately as there are no setbacks of seasonal variation. Control Progress towards the realisation of the first objective – to increase the company’s net profit before taxation to £200 million by 2020 – will be measured using the intervening financial reports. Depending on how the company performs in the coming financial years, the target of £200 million and the means of achieving it may be reviewed to reflect the prevailing business environment. The attainment of the second goal – to increase online sales by 20% by January 2016 – will be measured using monthly sales volumes. The proportion of online sales will be computed against total sales. If need be, the strategies and tactics proposed for the realisation of this objective may be reviewed. The third objective of increasing customer loyalty will be measured using the contribution of repeat clients towards total sales volumes. Online selling will make it easier to use customers’ personal details to monitor the statistics. The fourth objective – to increase brand awareness – will be measured using the volume and the ratingof the activity generated by marketing buzz (Luo & Zhang, 2013). The volume will be used to measure the number of monthly exchanges relating to the Pret A Manger brand. The aspects of volume will include visits, the numbers of followers and subscribers, views and mentions. Rating will be used to measure, in qualitative terms, the positive and negative sentiments about the brand. References Anderson, J., Narus, J. & van Rossum, W., 2006. Customer Value Propositions in Business Markets. Harvard Business Review, March, pp. 1-10. Bridge, S., 2014. Debt-laden Pret a Manger turns £500m sales into a loss amid hefty interest payments. [Online] Available at: http://www.thisismoney.co.uk/money/markets/article-2772054/Debt-laden-Pret-Manger-turns-500m-sales-loss.html [Accessed 14 April 2015]. Chaffey , D., 2011. Online value proposition examples. [Online] Available at: http://www.smartinsights.com/digital-marketing-strategy/online-value-proposition/online-value-proposition-examples/ [Accessed 14 April 2015]. Chesters, L., 2014. Pret A Manger plans to open more shops in America and Hong Kong. [Online] Available at: http://www.independent.co.uk/news/business/news/pret-a-manger-reports-15-sales-jump-9340379.html [Accessed 14 April 2015]. Combs, J., 2003. Why Do Firms Use Franchising as an Entrepreneurial Strategy?: A Meta-Analysis. Journal of Management, Volume 29, pp. 443-465. Dada, O., Watson, A. & Kirby, D., 2009. Dispelling franchising myths: franchisors and franchisees as entrepreneurs. Sacramento, 23rd International Society of Franchising Conference. Edelman, D., 2010. Branding in the Digital Age: You’re Spending Your Money in All the Wrong Places. [Online] Available at: https://hbr.org/2010/12/branding-in-the-digital-age-youre-spending-your-money-in-all-the-wrong-places [Accessed 15 April 2015]. Greg, T., 2006. The Buzz on Buzz: Building the buzz in the hive mind. Journal of Consumer Behaviour, 4(1), pp. 64-72. Luo, X. & Zhang, J., 2013. How Do Consumer Buzz and Traffic in Social Media Marketing Predict the Value of the Firm?. Journal of Management Information Systems, 30(2), pp. 213-238. Macdonald, E., Wilson, H. & Konuş, U., 2012. Better Customer Insight—in Real Time. Harvard Business Review, September. Poulter, S., 2013. Eight in ten Pret, a Manger workers, are foreign-born despite sandwich chain being set up by British entrepreneurs. [Online] Available at:http://www.dailymail.co.uk/news/article-2313044/British-chain-Pret-Manger-employ-foreign-born-workers.html [Accessed 14 April 2015]. Powell, G., Jerry, D. & Groves, S., 2011. ROI of Social Media: How to Improve the Return on Your Social Marketing Investment. 1st ed. Singapore: John Wiley & Sons. Pret A Manger, n.d. Welcome to Pret Delivers. [Online] Available at: https://order.pretdelivers.com/ [Accessed 14 April 2015]. QSR Magazine, n.d. The Global 30. [Online] Available at: http://www.qsrmagazine.com/content/global-30 [Accessed 14 April 2015]. Siefert, C. et al., 2009. Winning the Super "Buzz" Bowl: How Biometrically-Based Emotional Engagement Correlates with Online Views and Comments for Super Bowl Advertisements. Journal of Advertising Research, 49(3), pp. 293-303. Smithers, R., 2012. Store Wars: Pret a Manger and Eat. [Online] Available at: http://www.theguardian.com/money/2012/jun/22/store-wars-pret-a-manger-eat [Accessed 14 April 2015]. Stank, T., Goldsby, T. & Vickery, S., 1999. Effect of service supplier performance on satisfaction and loyalty of store managers in the fast food industry. Journal of Operations Management, 17(4), pp. 429-447. Read More