Lesson 9 Sales and Marketing

1. Lesson 9Sales and Marketing Identifying your market, maximising your sales

2. Lesson 9: Sales and MarketingLesson Overview • 9.1 Introduction • 9.2 The changing marketplace for bars • 9.3 Marketing opportunities and strategies • 9.4 Positioning for competitive advantage • 9.5 The mix for your marketing strategy • 9.6 Sales in the bar • 9.7 Food costing • 9.8 Control and calculations of costs to achieve profit margins • 9.9 The mystery shopper • 9.10 Loyalty schemes • 9.11 Social media • 9.12 QR codes for marketing Conclusion References

3. Lesson 9: Sales and MarketingAims and Learning Outcomes of the Lesson On completion of this lesson the learner will be expected to be able to; • Describe the external and internal factors influencing the success of a bar operation • Apply management tools and marketing strategies to influence consumer behaviour • Demonstrate the formulas and pricing policies used in bars to control costs and to generate profits • Adopt sales skills and personnel projection techniques to increase sales in the bar • Use the appropriate techniques and diagnostic methods for monitoring customer satisfaction in bars.

4. Lesson 9: Sales and Marketing9.1 Introduction • Marketing and sales are critical components of running a bar business, • A lot of bars use ineffective and inefficient marketing and sales strategies. • Successful marketing and sales programmes grow organically and evolve with your customer’s demands. • Marketing strategies are commonly associated with endeavors such as branding, selling, advertising and many other functions.

5. Lesson 9: Sales and Marketing9.2 The Changing Marketplace for Bars Changes (externally) which can affect a bar’s operation include; • Political: government legislation, change in taxation structures, specific government taxes (VAT, local charges) • Economic: rising costs of labour, fuel, rates and insurance, sales instability, disposable income changes, credit facilities, high interest rates, access to finance • Demographic, social: changes in population distribution, socio-economic groupings, and growth in ethnic minorities, food fashions, family composition, and mobility of the market • Technical: mechanization for food service and production, product developments and innovations, advances in technology. Changes (internally) which can affect a bar operation include; • Products: wastage and bad portioning control, low standard yields, perish ability of food, recipes and portion sizes to be reviewed, pilferage problems • Staff: employees shortages, absenteeism, illness, use of part-time staff, poor supervision, lack of job descriptions and proper on the job training needed • Financial controls: correct pricing systems, stores and cash control and collection, high frequency of low average spend transactions. Dramatic changes in the marketplace are creating many marketing opportunities and challenges for bars. • Major marketing developments can be summed up in single theme; connections. • Huge growth in connecting technologies (social networks, IPhones, lap top computers, telecommunications and information technologies) has created exciting new ways for bars to learn about and serve consumers in large groups or one-to-one. • Bar owners are redefining how they connect with their customers, locally and internationally.

6. Lesson 9: Sales and Marketing9.3 Marketing opportunities and strategies Marketing research, mapping your market:(chapter 9 – pp. 164-165). • what information does the bar need, market size, segments, consumer behaviour, market feasibility for new product launches • where will the information be collected, (primary research, secondary research, outside the organization • how will the information be collected, sampling and interviewing techniques, consumer panels, interview methods • how will the information be analysed, depends on how the information is collected • how will the information be utilized, information should be used creatively to target offering products, eliminate poor selling products • and focus on more effective promotion for your market. SWOT analysis: (chapter 9 – pp. 165). • SWOT (strengths, weaknesses, opportunities and threats) a form of analysis, • Strengths and weaknesses are often referred to as internal, opportunities and threats as external. • S.W.O.T analyzing helps bars to innovate rather than react, Strengths (pub features distinguishing it from others, personal). Weaknesses: (lack of car parking, poor toilets, bad visibility from the road, late bars), Opportunities (new housing areas, factories), Threats (identify changes, closing of factories, competition).

7. Lesson 9: Sales and Marketing9.4 Positioning for competitive advantage Bars cannot appeal to all purchasers in their markets, or at least not all consumers in the Same way. The bar owner must carefully design their marketing plans to ensure that they complement their bar capacity, capabilities and financial constraints. Market Segmentation: (a) studying customer’s characteristics using demographic and geographic criteria: customer’s age, sex, religion, occupation, income, etc, (b) studying customer’s behaviour, why do they buy our bars products? What attributes of our product are important to our customers, why do they buy our products instead of other bars, or indeed vice versa. The target concept: Once the segmented groups have been identified for your bar, market targeting evaluates each market segment’s attractiveness and suggests one or more segments to enter. Much depends on company resources, products and its competitive marketing strategies Market positioning: Once a company has decided which segment to enter, it must decide on its market positioning strategy – on which positions to occupy in its chosen segments. Objective for the bar’s marketing message, using AIDA:Attention, interest, desire, action Further information: (Chapter 9 – pp.166-167)

8. Lesson 9: Sales and Marketing9.5 The marketing mix for your marketing strategy The different elements of your marketing strategy can be divided into seven basic decision areas that bar owners may use to devise an overall marketing strategy for a single product or the complete bar. This is often referred to as the, seven Ps; • Product: tangible and intangible features. • Place (distribution): location. (Chapter 9 – p. 174) • Promotion: informing your customers (advertising, merchandising and public relations). (Chapter 9 – pp. 171-173 Figures 9.4 / 9.5) • Price: most flexible element, pricing policies, tiered pricing (house, up-sell and premium brand) • Process: internal and external procedures, mechanisms for service delivery. • Physical evidence: interior and exterior appearance (menus, floor plans etc) • Participants: the staff These seven decision areas are applied to bars the following way; (chapter 9 – Figure 9.4)

9. Lesson 9: Sales and Marketing9.6 Sales in the Bar Macleod (1994) contends that ‘pleasing the customer, is a tall order, as all customers are different with varying interests, ideas and demands’. Telling is not selling: communicate with the customer to ascertain their needs, and personalize the sales pitch to take their expectations into account and demonstrate the benefits of the product or service to them. Selling techniques:conversation selling, over-selling, related selling, suggestion selling, selling up, silent selling.(Chapter 9 – p. 175) Personal selling:selling – preparation, sales play, the follow-up. (Chapter 9 – p. 176) What motivates customers to buy?:customer’s buy for many different reasons.(Chapter 9 – p. 176) Staff communication, rules of selling, nature of persuasion:(Chapter 9 – pp. 176-177)

10. Lesson 9: Sales and Marketing9.7 Food costing Trying to control your food costs is very challenging because of the perishability of the product, the unpredictability of the business and customer’s selections, the yields obtained from food products, your staff and your equipment. • Portion cost and plate cost: These come from the price we pay for our products, the yield on the product, the recipe cost, portion size and cost, garnish and labour must also be considered. How many choices do you offer ? Dopson & Hayes (2011) contend this answer depends on ‘the operation, the skill level of employees, and the level of menu variety management feels is necessary to properly service the guests’ • Food cost percentage: (To establish the relationship between cost and price). Food cost percentage for individual menu items or the overall food sales: Formula: Food cost % menu item = cost of Food / menu price x 100. e.g Irish Stew: Cost €3.75, menu price €12.50 Food cost % = 3.75/12.5 x 100 = 30%. Food cost percentage to project a food sales price:Sales price = cost of food / cost % . e.g Irish Stew: cost €3.75, cost % = 30%. €3.75 / 30% = €12.50. • Projecting food selling prices: (using a multiplier to project food items sales price includes VAT)Chapter 9 – p. 179 Table 9.1

11. Lesson 9: Sales and Marketing9.8 Control and calculation of costs to achieve profit margins The pricing of the food and beverages is perhaps one of the most important mathematical functions we perform in the bar, consider initially; • your bar companies formation and the owners philosophy, ability to drive the best deals through purchasing power, value and beliefs of the company founder in supporting certain local or national food and drinks companies • scale selling prices to different areas of the bar premises to achieve performance yields, late bars, restaurant, night clubs, private bars • low yields from recommended retail price items • vat levels on drink, food, and cigarettes • price discounts from companies given to major key account holders • free goods, deals for bulk buying or new goods.

12. Lesson 9: Sales and Marketing9.8 Control and calculation of costs to achieve profit margins (continued) Generating costs and sales prices to calculate profits (the formulas) It is crucial to update regularly the cost of the goods, which your bar sells to achieve profit margins acceptable to the business. (Gross profit method chapter 9 – pp. 180-181 Figure 9.6) Calculating your cost price (formula: total unit price divided by the amount of units divided by amount per service will equal the cost price) Calculate the sales price while excluding the vat price (formula: remove the vat, to do this simply divide the sales price into vat level this equals the sales price excluding vat) Calculating the gross profit and the gross profit percentage for your stocks when the sales price and cost price is supplied or not known (formula: subtract the sales price from the cost price this equals the gross profit, then divide this gross profit into the sales this equals the Gross profit percentage (calculating your gross profit percentage is also useful for working acceptable profit margin which you would require for your individual bar products) Calculate the sales price when a gross profit percentage is also required (formula: set the target or margin you wish to achieve then subtract it from 100 this equals the cost percentage then multiply the cost price by 100 and divide the result by the cost percentage this equals the sales price excluding vat. Multiply the vat level by the sales price this equals the sales price required.

13. Lesson 9: Sales and Marketing9.9 The mystery shopper Mystery shoppers pose as your normal customers behaving in a certain way to create real life scenarios, mystery shoppers at a restaurant may pretend they are lactose- intolerant, celiac or unreasonably disruptive. Not all mystery shoppers include a purchase. Mystery shoppers provide detailed reports or feedback about their unique experiences to management The mystery shopper diagnostic auditing tool for bars - Appendix III pp. 220-221) Some of the areas which the mystery shopping team will explore include; • date and time of the pre-visit phone call, name of the bar visited • number of employees in the premises on entering • how long it takes before the mystery shopper is greeted • name of the employee, whether or not the greeting is friendly • the questions asked by the shopper to find a suitable product • types of products shown, if or how the employee attempted to close the sale • whether the employee invited the shopper to come back to the bar • cleanliness of the bar and the other service staff, speed of service • compliance with the agreed company standards relating to service, bar appearance, and grooming/presentation.

14. Lesson 9: Sales and Marketing9.10 Loyalty schemes ‘Loyalty programs are structured marketing efforts that reward, and therefore encourage loyal buying behaviour – behaviour which is potentially beneficial to the firm’ (Sharp & Sharp, 1997). • Loyalty schemes and cards are a system of the loyalty business model. • Cards typically have a barcode or magstripe for scanning some are even chip cards. • Small key ring cards (keytags) serve as key fobs used for convenience in carrying and ease of access. The five most common kinds of loyalty schemes (are as follows) Rewards:award points for purchases,unrelated to brand, used to differentiate your brand and attract new customers, used with limited product lines, administration can be complex – needs special equipment, cards and database systems to optimize the benefits. Members expected to track and redeem their points on-line (i.e frequent diner programs). Rebate:awards a gift certificate redeemable for the next purchase, when guest reaches a certain spending level. Wide selection of products, this reward program good for motivating new incremental purchases, increase store traffic. Department stores use this to increase additional sales from existing guests. (i.e. Coffee Cards, Clubs and casinos where card holders have a swipe card which accumulate points from gambling spends towards F & B purchases). Appreciation:Goal is to increase your customers’ LTV (lifetime value), not to acquire new guests. Also used to get good customers to sample more of your products. Airlines, hotels, phone companies used this to accumulate points for additional services within their own brand (seat upgrades, free tickets, hotel stays at different locations). Partnership: rewards a guest’s accumulated purchases with a partner’s products or services. Primary goal is to acquire new guests where you have a partnership arrangement to use the partner’s extensive guest database. Airlines use this frequently when they give you points for renting cars and sleeping in hotels. Works well in small rural areas with businesses (shop local concept, local loyalty rewards). Affinity: Used where rewards are no longer needed to cultivate a long term relationship. Offers special communications, value added benefits and bonuses and recognition as a valued guest.

15. Lesson 9: Sales and Marketing9.10 Loyalty schemes (continued) Loyalty coupons • Offered as a component of an overall reward scheme where customer is rewarded for dining and drinking in your bar or local establishment. • Encourages customers to become a VIP member to get valuable coupons, offers and event information delivered straight into their computer or mobile phone. • Customers either print a hard copy or to display a digital copy for presentation upon arrival at your bar to take up offers. • Livingston as cited in Anderson (2012) contends that ‘some businesses use them as a distraction from the fact they are not price competitive’ Loyalty Coupons – types and usage(chapter 9 – pp. 185-186) Buy one get one free / Catalinas / Coupon insert / Double or triple coupons / Extra care bucks (ECBs) / Loss leader / Manufacturer’s coupon (MFC) / Peelie / Store coupons / Your Mileage May Vary (YMMV). Top trends in loyalty schemes to consider:(chapter 9 – pp. 184-185) Uniqueness is expected / APIs and easy connections are required / Develop your brand’s signature insight / Game mechanics fuel today’s loyalty programs / Payments is the new PLCC / Invisible payments are replacing POS / Traffic is everywhere / Real-time is the real deal.

16. Lesson 9: Sales and Marketing9.11 Social media Social Media: ‘Refers to a group of internet-based applications that build on the ideological and technological foundations of Web 2.0 and that allow the creation and exchange of user-generated content ‘(Kaplan & Haenlein, 2010). • Social media depends on mobile and web based technologies to create highly creative platforms which individuals and communities share, co-create, discuss and modify user generated content. • Differentiates from tradtional / industrial media such as quality, reach, frequency, usablity, immediacy and permanance. • One of the hottest marketing tools today for bar owners. Attracting and retaining customers for your bar using social media Geolocation platforms: lets customers use the GPS in their smartphones to ‘check in’ at your bar, customers can also check in on Facebook or foursquare, when friends see where their friends are socialising it motivates them to join. Encourage customers to check in by offering promotions and discounts (i.e. free drink, meal discount). Be creative: look for check in rewards that are likely to get shared. Review sites:Monitor your reviews, check sites daily, respond quickly to negative reviews, personalize your comments whenever possible, ask customers and reviewers if you can feature their review on your website or marketing materials. Reviews are a (free) opportunity to learn what your bar’s services and products need to improve. Social media sites (i.e. Facebook, Twitter, Pinterest): attracting attention with their visually oriented focus, works well for your bar with timely information (i.e lunch special tweet at 11am, 3.30pm tweet free happy hour appetizer. Pinterest uses mouthwatering photos of food and drink, themed boards. Consider the following: Be visual / engage / have fun / track results / cross promote. Further information: Chapter 9 – pp. 187- 188. Managing social media / Pros and Cons of usage: Third party apps and tools to simplify things include (NutshellMail – monitors your bar’s Facebook and Twitter activity and emails you a summary of events and activities. Mediafeedia - for Facebook helps schedule posts, manage multiple pages, get email notifications about page activity. Tweetdeck – for Twitter sorts incoming Twitter data, schedule tweets and manage multiple Twitter accounts). Pros = marketing and sales tools are free, uniquely tap into the social nature of the bar experience. Cons you have to invest time and money maybe hire (part-time) somebody with IT skills.

17. Lesson 9: Sales and Marketing 9.12 QR codes for marketing • QR codes are similar to the standard bar codes, except these codes contain much more information . • QR codes in advertising and promotions provide paper based hyperlinks that connect the physical world with the on-line world. • Works by simply scanning the code with a mobile device that is equipped with a camera and QR code reader application, which can downloaded for free on popular smartphones platforms (i.e. iPhone and Android). • QR code - once scanned translates code into actionable information (i.e. text message, mobile web page). • QR codes can be integrated into many types of printed materials, conferences, print advertisments, business cards, brochures, flyers etc. Other ways to strategically bridge offline and online media with QR codes (examples include). • QR code with a link to the bar’s Google places page with customer reviews and coupons • QR code next to the bar’s main products to view product demonstrations and reviews • QR code on a food, beverage, cocktail takeout menu, which links to a mobile bar and restaurant website for online reservations, orders and interactive directions.

18. Lesson 9: Sales and MarketingConclusion • The first rule of marketing is always about knowing your consumers. • The location of the bar and its crowd is a crucial factor in determining where consumers feel comfortable to eat, drink, socialise and stay for longer periods. • Identify what you sell best food, drink, music or the atmosphere, you must then find out about the market place. • Identify your customers needs when they come to your bar. • Identify the local competition for their disposable income • Deciding on what products and services your bar can promote better than others to give your business ‘a competitive advantage’. • Ensure that people know about you through advertising, publicity and sales promotions. • If you also want to generate more money from existing guests train your management and staff to use selling skills and techniques. • Bars must keep a tight control on costs, portions and profit margins. • The sustainability of any bar is based on its ability to generate profits, consider the formulation of a proper costing structure (updated regularly) for your bar which focuses in detail on the individual and collective cost and sales prices plus the gross profit margins achieved by your bar. • Bars can adopt loyalty schemes and rewards programs which include the use ofcoupons, social media siteswith third apps and monitoring tools, geolocation platforms, QR codesto strategically bridge offline and online media about your bar and its products and services to actively encourage local buying behaviour. ‘

19. Lesson 9: Sales and MarketingReferences • Anderson, G. (2012) Publix to Test Digital Coupons Sans Loyalty Card, available at www.retailwire.com/discussion/15978/publix-to-test-digital-coupons-sans-loyalty-card [retrieved 2/3/13] • Croner. (1998)Croner’s Management of Public Houses, Croner CCH Group Ltd: Surrey. • Dopson, L. R., Hayes, D. K. (2011) Food and Beverage Cost Control, 5th ed, New Jersey: John Wiley & Sons. • Lesonsky, R. (2012) Bar and Restaurant going social, accessed at www.score.org/resources/bar-and-restaurant-going-social [retrieved 10/1/12] • Macleod, S. (1993) Food & Drink Service in the Restaurant, Hodder and Stoughton, Edinburgh’s Telford College: UK. • Murphy, J. (2009) ‘Strong merchandising can Drive Sales’, July Issue, Licensing World, Jemma Publications Ltd: Dublin. • Murphy, J. (2009) ‘Promoting Bar Sales’, November Issue, Licensing World, Jemma Publications Ltd: Dublin. • Murphy, J. (2010) ‘Improving Customer service through mystery shopping’, Licensing World, Jemma Publications Ltd: Dublin. • Murphy, J. (2009) ‘Customer Relationship Management (CRM) in the Licensed Trade Industry’, Licensing World, March Issue, Jemma Publications Ltd: Dublin. • Murphy, J. (2013) Principles and Practices of Bar and Beverage Management, Goodfellow Publishing Ltd, Oxford: England. • Kaplan. A, Haenlein, M. (2010) Users of the World, unite ! The challenges and opportunities of social media, Business Horizons, Vol. 53, Issue 1. • Kotler, P. and Armstrong, G. (2001) Principles of Marketing, 9th edn, Prentice Hall International Edition: USA. • Sharp. B, Sharp A. (1997) Loyalty Programs and their impact on repeat purchase loyalty patterns, International Journal of Research in Marketing, 14 (5), 473-86. Web resources • http://www.mcmullens.co.uk/businessplan.pdf McMullen Brewers (UK Company), Business and marketing plan for tenancy. • http://m.wpi.edu/Pubs/E-project/Available/E-project-121909-212418/unrestricted/GoatsHead IQP.pdf Goats Head pub marketing plan. • http://www.morningadvertiser.co.uk/Opinion/The-Guv-nor/A-marketing-plan-can-really-help-your-pub Case study Marketing Plan.