Pricing Strategy for a Reopened Upscale Casual Restaurant - Business Plan Example

Pricing Strategy for a Reopened Upscale Casual Restaurant This paper designs a pricing strategy for an upscale casualrestaurant. The restaurant is an inheritance, and the new owner has to reopen it after it was closed for quite a while. This creates an opportunity for the new owner to rebrand the restaurant and fit it to the current business environment for maximum benefits. The paper seeks to examine the value that the restaurant will bring to its clientele. In doing this, the paper will also create a value communication strategy that will attract and retain customers. The paper will explore the value of adding a daily special to the restaurant menu and create a pricing strategy that best fits the daily special. The paper also attempts to determine the pricing strategy that will benefit the restaurant the most. Pricing Strategy for a Reopened Upscale Casual Restaurant A restaurant reopening as an upscale, casual restaurant requires a pricing strategy that reflects a high quality of product and service. According to Lee (2008), the pricing needs to give the impression of outstanding professional service, attractive, and a high-energy ambience, set in an upscale, attractive environment. Public safety conditions and concerns should always be considered as matters of priority. Quality should be emphasized in all the operations of the restaurant and all the products should be prepared from fresh, high quality ingredients. The upscale casual restaurant needs to appeal to customers with discriminating tastes and those with high discretionary income. However, focus should be more on the discriminating taste to create and maintain customer loyalty since those with high discretionary incomes, but lacking in discriminatory tastes, jump from one fashionable item to the next in thing. They do not form a reliable loyal customer base. Vision Statement Aroma Restaurant will depend on its professional employees’ outstanding service and fresh ingredients to provide high quality menu items. Customer satisfaction will be of paramount importance to the success of the restaurant. Aroma restaurant believes that to generate customer satisfaction, they must be served by happy employees. Therefore employees’ welfare will be foremost in all company efforts, operations, and strategies. Individual and group needs of Aroma employees will be treated expeditiously to guarantee a happy service group for incredible customer service. Communication Strategy Aroma restaurant’s value communication strategy will include various marketing and public relations tactics. As suggested by Ritzer (2009), these will include advertising, earned media outreach, website, social media, banners, street signage, printed material, and any other media as the management see fit. For maximization of its budget and outreach, Aroma restaurant will focus its outreach efforts on reaching specific audiences. This audience-centric approach will offer the best opportunity for generating customer interest from Aroma’s key target market. The market entry campaign will be titled “Aroma: Welcome to the good life” and will make use of all the above stated media platforms to introduce the clientele to Aroma’s products and services. Competition There is a high level of competition in the restaurant business. As expounded by Lee (2008), the restaurant business environment is further complicated by customer discretionary spending patterns, consumer tastes, demographic trends, and weather conditions. Other factors include economic conditions, government regulations, and costs. Costs vary in amounts, regularity, and type. The restaurant costs include the cost of food products, labor costs, energy costs, administrative costs, marketing costs, and other operating costs. A sound pricing strategy must minimize costs without compromising on quality of products and services or their timely delivery. For example, an upscale restaurant needs to provide outstanding professional customer service. This requires highly trained service staff whose wages are much higher than what may be paid to fast food service staff. Cutting wages may lead to both unmotivated and unqualified staff which will drastically affect the quality of service delivery. According to Ritzer (2009), when opening a casual dining restaurant, the owner has to gain consumer insights to avoid investing unwisely. This involves identifying and targeting casual dining customers. To appeal to upscale customers and boost incremental traffic and sales, the restaurateur has to understand and implement trade-up and trade-down activities. The restaurateur also has to analyze the different consumer behaviors by the sub segment, time of day and dining occasions. This is to enable the restaurant address the needs of multiple consumer states of need. The restaurateur must also measure the restaurant against market competition in terms of consumer patronage and value ratings attached to their quality, variety, service, health, and ambiance. This will aid in the process of formulating the pricing strategy following the additional guidelines offered in Table 1 below. Menu Pricing According to Jones (2008), an important variable to consider when formulating a pricing strategy is in-depth menu analysis. Since the restaurant expects to be using high quality fresh agricultural and other perishable products, the cost of menu items are likely to vary from time to time. However, customers will not like a situation where the prices always vary from one visit to the next. The menu analysis helps in formulating steady prices that will mitigate costs and generate profits throughout the seasons. Another reason for menu analysis is to explore trends and ensure that the restaurant’s menu considers healthy options and uses natural, organic, and sustainable ingredients which are locally available. The menu must analyze its dessert, beverage, and appetizer options and suit it to attract the target market. Table 2 summarizes some factors to consider when formulating menu prices. Differentiated Price Strategy Following advice by Lee (2008), the pricing strategy of an upscale restaurant must reflect the quality of its service and products. As such, this is the pricing strategy that Aroma Restaurant adopts. The restaurant will offer table service inside which will be higher priced, while operating a take-away service from a side shop and an outside catering service. The take-away service will cater for those in need of quality food on the go. The packaging will offer the restaurant an advertisement opportunity outside the area of service. The pricing for the take-away orders will be marginally lower than that of the table menus without compromising the high quality of the packaging or the food. The catering service will cater for customers who have private dining occasions outside the Aroma restaurant premises. The menu items will be discounted for quantity but service and product quality will be maintained. Aroma’s Daily Special Aroma restaurant will include a daily special in its menu. This will be a trade-down menu offer that will be available on weekdays during lunch hours only. The daily special will be simple, inexpensive meals prepared in the usual high quality standards of the restaurant. The daily special will be sold at a cheaper price than the regular menu items. This is supposed to attract clients with medium to low discretionary income to have a taste of Aroma’s products. This may encourage them to come back for the higher priced menu items when they want to treat themselves or offer treats to friends and relatives. The daily special is also supposed to cater for the needs of office workers in nearby office buildings on a daily basis. This will create constant customer traffic, constant cash flow, and constant marketing opportunities. Conclusion Aroma restaurant seeks to be a unique, upscale, casual restaurant offering unforgettably delightful dining experiences in a high energy ambiance. The restaurant offers outstanding professional service in every aspect of its operations. It seeks to deliver a diverse selection of main courses, appetizers, desserts and beverages to whet the discriminatory appetites of culinary connoisseurs. The restaurant intends for most of its marketing to be word of mouth recommendations by discerning customers. To achieve this, priority is given to the highest standards of quality. This may drive the costs up, but the price is structured to fit the budget of the targeted clientele. The type of targeted client base also puts quality considerations above price considerations so the restaurant will strive to offer high value menu items and service to satisfy market demands. References Jones, T. (2008). Culinary calculations: Simplified math for culinary professionals. John Wiley & sons, 138-164. Lee, A. (2008). A strategic analysis of an upscale casual restaurant chain. Simon Fraser University, 108-132. Ritzer, G. (2009). McDonaldization: The reader. Pine Forge Press. 265-290:314-336. Tables, Figures, and Appendixes Table 1. Factors affecting creation of a new restaurant’s pricing strategy Estimate Demand for Your Restaurants Products and Services 1 What do customers shop around for? 2 What is in greater demand even at higher prices? 3 Are some products or services popular seasonally? What demand seasons are those and how long do they last? 4 What range of prices do your customers expect? 5 What is the price-quality balance in your market? Consider Your Competition 1 What are the competitors pricing strategies? 2 Check your average gross margins against the competitors 3 Determine whether your policies are to sell at higher, same, or lower prices than the competition and your reasons behind the policy 4 What are the competitors reactions to your prices? Consider Effect of Pricing on Market Share 1 What are your market share goals? 2 Is the production capacity consistent with market share goals? Consider How Your Pricing Affects Your Overall Strategy 1 Determine how your pricing affects your sales/volume goals 2 Analyze how your pricing will create business 3 Determine if your strategies are in line with economic trends Determine The Effects of Your Organizational Policies on Your Pricing 1 What are the effects of the nature of your products and services on your prices? 2 What is the effect of your promotional policies on prices? Table 2. Factors to consider when setting your restaurant menu prices against competitor prices. WHAT TO CONSIDER WHEN SETTING RESTAURANT MENU PRICES Set above competitor prices when… 1 The market you operate in is not sensitive to price changes 2 The market consists mainly of growing corporate clients customers 3 The product forms an integral part of an established system 4 Your reputation and positive perceptions in the market increases the products perceived value 5 Your customers can afford the price Set below your competition if… 1 the market is sensitive to price changes 2 your restaurant is small enough not to pose a threat to competitors leading to a price war 3 You have the option to produce economically decreasing unit costs 4 Your restaurant is still operating below its full production capacity Read More