Developing a Strategic Marketing Plan for Bites Coffee Shop in Mississauga

The Problem

To develop a Strategic Marketing Plan focused on how to deal with serious competition that has come to Streetsville (Mississauga) over the past few years and the future trends in this industry.

The time had come for Franco Rissetto to face the reality of the significant changes to the coffee and snack shop industry over the past five years in the Mississauga area. Not only was strong competition a familiar threat, but so was the growth of a very diverse customer base, with their own unique cultural demands in the food they purchased and consumed. Franco was worried about what he needed to do with Bites in order to keep pace with the market’s expectations and challenges. Franco decided he needed to develop a Strategic Marketing Plan to map out the course of action for Bites to follow in the pursuit of delivering a unique customer experience while meeting his goals for the business.     

Industry Overview

Bites has been in the same location in Streetsville (an old town that is now part of Mississauga) for the past 25 years.

Sales have now hit $400,000 per annum with a profit margin of 7% after all expenses, rent, etc.   But for the last two years sales have gone down—5% the first year and 10% last year.  Prior to that, Bites had been very successful, with sales growing at 10% per year. They employ fourteen people; three family members, one manager and nine part time employees with a turnaround of a person leaving and being replaced at a rate of one per eight months. This employee turnaround in this business is actually quite good in this industry, as loyalty is evident. Franco had considered some kind of a bonus plan to motivate his employees responsible for customer interaction and sales performance, to specifically improve the sales aspect of their responsibilities, especially in the catering area.

The store is involved in the community: they donate to local charities, sponsor local sports teams and they run an annual ten kilometer race with proceeds going to feeding the homeless. Limited paid advertising and promotional communication tools have also been used to bolster sales and maintain pace with his competition who have much larger budgets.  

Franco sees the continued growth potential rising from both the growing population in the Greater-Toronto area, especially Mississauga; and the regular dining-out habits of the various age groups in the market place; but he also sees the serious threats they face on a daily basis. Fending off Tim Hortons and McDonalds was one thing but the arrival of Starbucks several years ago made their job even tougher. As well, the issues around meeting the diverse needs of the various cultural markets adds to their challenges.

Current Situation

Bites’ advertising has always been in local papers serving the Streetsville area, and they have done virtually nothing with social media as their clientele knows where they are and have been coming to them regularly. Promotion is sporadic, and is limited to what a customer might see as they walk by the store or what they may see in junk mail (flyers) deliveries or ads in the local paper.

Their clientele (local walk in business) averages thirty to sixty or seventy in age. The current customer base is mostly older with some families with young children.  At lunch some local workers at the paper company drop in but much fewer than in the past.  The majority of business, 80%, is conducted with this tried and true market. Their business is broken down into: 20% lunch and coffee business, 70% walk in for bakery and pastry products and 10% orders of over two hundred dollars for parties and special events. Franco’s one area he cannot penetrate much to his disappointment, is the drive-through market because of his downtown location. He has researched it and realizes it can be more that 60% of a busy store’s revenue.  How many commuters drive by his location on their way to and from work or the Go Train?  

Their largest expenses are rent, wages, and supplies; with little expenditure or focus on marketing since everybody knows their name Franco thought.

The problem in Franco’s mind is what should they do, so they do not end up like many other coffee shops? Something new is needed to expand their marketing mix: who should they go after, maybe different customer segments to target; price adjustments perhaps; or product offerings that are more applicable to the different cultures or younger target market segments. Maybe more emphasis on different distribution or place ideas is needed to reach the on-line or social crowd? How about the families looking to keep their young children occupied after a bite such as McDonald’s indoor playground.  Yes, I need to develop a Strategic Marketing Plan thought Franco.

The main goal is to reverse the declines, and return to Bites’ historic annual 10% growth in sales revenue. As his banker advised Franco, he needs to craft creative ideas for expanding his performance with existing and new products, into existing and new markets.  Franco knows he must now get to work on his plan around strategies for market development and penetration; as well as product development and even product diversification perhaps, as advised by a regular customer who also is a marketing manager for a local manufacturer.  

Industry Overview

Franco’s initial thoughts were around changing up the baked goods selection to meet some new cultural needs by offering Indian Sweets or Chinese choices.  They have also considered expanding the menu to offer more sandwiches or wraps –full size or snack.  Additional menu items could increase sales per customer and attract new customers. They have also thought of reaching out to market to surrounding Mississauga communities outside Streetsville including Meadowvale, Meadowvale Village, Erin Mills, Brampton or Milton. Expanding the catering business always was something he wanted to do but never found the time to figure out how to approach this aggressive sales plan. Perhaps it is time to re-brand, whatever that means, thought Franco?

Competitive Overview

In general, Canada’s Restaurant industry has been a growth industry (growing for the last 25 years with an estimated growth of 3.8% in 2016 to $62 billion (Restaurants Canada, 2015).

Like many successful small businesses, Bites is constantly facing threats.  The threat was Starbucks for the past few years. But it is unlikely that it will stop there. His main concern is the younger customers seem to drift away to the trendy place of the week with all the different names for their products. It is almost as important to be seen at Starbucks, or carry a Tim Horton’s large cup while you “roll up the rim” for instance.

Over the last five years, Bites has been able to fight back against the local Tim Hortons and McDonalds and the two other bakeries in town, but Starbucks added to his woes since their arrival three years ago; and are continuing to pose threats that could eliminate Bites as it now stands.

The total coffee and small bakery industry in this ten kilometer square geographic area is $800,000 a year and is expected to continue to grow overall, due to urban development.  But how much could I expect the market to grow and where would it come from, wondered Franco.  As you research a wider area covering surrounding other towns, the market could easily exceed $2,000,000 annually. More sales could be available beyond the Streetsville trading area in nearby Meadowvale (West) Meadowvale village (North East) and Erin Mills (South West), as well as Brampton or Milton - see useful stats at the end of this case.

The expectations for this sleepy downtown area of Streetsville is to become trendier, with more and more upscale chains moving into town. The Chamber of Commerce has already announced a beautification plan for Streetsville with the idea of creating a trendy, destination site for the younger Millennials and Gen Z’s to mingle and socialize on their smart phones and share their latest apps. A trendy place to work and play and socialize. Would Bites fit into that scene in its’ current state, as it has for years with the baby boomers and their young families? How do you even begin to trend on Twitter pondered Franco, who barely uses his smart phone other than telephoning or the odd text.

Competitive Overview

Demand for products such as bread and pastries (even Sandwiches/Wraps) and the availability of a sit-down area to have a coffee is growing.  Competition is increasing as people in the area can now buy these products and sit for a bite and coffee at such places as Tim Hortons, McDonalds, Fortinos and Metro grocery stores and of course the major threat Starbucks.

This new competition offers: larger selections, a more comfortable area to sit and relax and of course the draw of a familiar name that offers cache by their name alone. This is attracting a younger more professional consumer group versus the older demographic at Bites.

The problem is of course; how to not be driven into bankruptcy because of Starbucks and the rest of the big competitors?

Things to Consider

What is their unique selling proposition and who sees this as a uniqueness other than Bites

Who are they?

What do they offer?

What are their strengths, weaknesses; and what opportunities and threats do they face?

What is the reason customers now walk by them and go to the competition?

What are the buying habits of customers (consider; in store and take home purchases)?

What segments should they target to grow revenue and reverse the sales decline?

Who should they focus on ---keeping existing clientele from leaving or going after new clientele moving into the area or both?

Should they cut expenses to address the bottom line? And if so, how?

Is catering the future and if so how to go in that direction?

Is additional advertising and marketing the answer for a company that does not have money to throw around, as Starbucks does?

Why go to Bites when Starbucks is right there as an alternative?

What is estimation for growth for a ten kilometer area around Bites?

What are the demographic trends -today and in five years of growth?

This case shows the problems and issues facing Franco Rissetto.  Dealing with all of them will take time, but Franco knows it needs to start with a solid Strategic Marketing Plan; but a set of detailed Marketing Programs could help Bites get back on the path to growth.  Franco’s confidence begins to grow, as he thinks about the future.

Money of course is limited for an operation of this size.  Bites has $20,000 currently available annually. Would that be enough to fund his Marketing ideas?  Would that even allow enough for their marketing communications budget, let alone the technology required to support social media or digital marketing campaigns like their competition? Franco wondered out loud “who would even know where to begin with all this technology stuff?” He had been reluctant to go on line with a web site, but was persuaded by his staff to do so; but it is rarely updated since the product line doesn’t change that much; nor does the pricing. What else could I use it for thought Franco?   

1 What is the problem and why is it a problem?

2 Develop a marketing plan OR a marketing analysis plan (as per directions), that is feasible and workable.

Strong consideration should be given towards building a financially feasible marketing plan that can be implemented this year.