Pizza Hut Marketing Dynamics - Essay Example

PIZZA HUT MARKETING DYNAMICS By Presented to Academic Location Pizza Hut has been in existence for the past 50 years. It was America’s first national pizza chain. The first restaurant opened on May 31, 1958 in Wichita, Kansas. The following year, the first franchise unit opened in Topeka, Kansas. By 1966, there were 145 restaurants and by 1971 it was number one in the world both in sales and number of restaurants. The following year, 1972, Pizza Hut goes international with its first restaurant outside the United States in Costa Rica. By 1976, the 100th restaurant opened in Australia. Today, after 50 years, Pizza Hut has 6,200 restaurants in the United States and more than 4,000 restaurants in 100 other countries. This paper takes a look at the marketing dynamics that made Pizza Hut a success (Pizza Hut, 2008). Marketing Dynamics Marketing dynamics looks at marketing as a value creation process. It analyzes market opportunities and risks, identifies customer needs and strategises on acquiring and retaining customers. It analyses buyer behavior and studies the buying decision process, determining the needs and wants of existing and prospective customers using research techniques for understanding customers and prospects. It carefully selects the target market and plans on how to positioning the product and develop the market mix. It looks at advantages and disadvantages of market segmentation, standardization versus customization. All these are inputs to the development of an integrated marketing program to generate maximum customer value. It also looks into designing products and services that deliver meaningful customer value. It goes on to plan marketing communications including budget and what appropriate media to use. It determines distribution channels, their design and management. It takes a look at new technologies, like the internet, and how to use them. It develops profitable pricing practices. It develops a comprehensive marketing plan which anticipates and can adapt to change, while being mindful to ethical and legal issues. (Harvard, 2008). When Pizza Hut opened in 1958, the idea of a pizza parlor was relatively new at the time. College students Frank and Dan Carney identified a business opportunity from a customer need. With only $600 capital, they limited the risks of their start-up operations by buying second hand equipment and rented a very small space in a busy intersection in Wichita, Kansas. The space was so small that they decided to just add the 3-letter word “Hut” to their Pizza name because anything longer will not fit. According to Recipe Pizza (2008), Pizza Hut used diversity as its main strategy for success. Menus and recipes are not standardizes in their huge franchised operations. Different locations use different suppliers and different toppings according to customer wants. This must have been the product of long years of analysis of buyer behavior, product positioning and market mix. Pizza Hut has opted for customization within a market segment rather than standardization, which has been proven successful. As early as 1959, one year after it started, Pizza Hut had already identified franchising as its method of distribution. Ten years later, in 1969, it adopts the distinctive red roof as a mark of its brand. Pizza Hut continues to effectively design and manage its distribution channel. In 1994, when Pizza Hut became the first national food chain to offer pizza delivery on the internet, and in 2008, when it introduced ordering via mobile phone text messaging, Pizza Hut took advantage of new technology to enhance its business. The company has successfully been implementing marketing strategies through the years, not only mindful of ethical and legal issues but taking advantage of them as well, such as in its 1984 reading program, support of sports like football and basketball, humanitarian work in 1992 after Hurricane Andrew, support of space exploration in 2000-2001 and low-fat products launched in 2003. Segmentation Market segmentation is identifying parts of the market that are different from one another. Members of a segment, therefore, necessarily exhibit the same characteristics as one another making them a homogeneous group. Since the marketing concept requires satisfying customer needs, and different customers may have different needs, market segmentation plays a role in the formulation and implementation of marketing plans. Consumer markets are usually segmented based on geographic, demographic, psychographic and behavioralistic factors (NetMBA, 2007). Pizza Hut has taken advantage of different forms of segmentation to grow its business. It has used geographic segmentation factors such as country, size of metropolitan area and population density in setting up its restaurants. It awards master franchises per geographic segment, thereby making use of the franchisee’s familiarity with the segment in developing the territory. Using both demographic and psychographic segmentation within a geographic segment, Pizza Hut develops and implements product design and marketing strategies to address the segments. Pizza Hut India has Punjabi Pizzas while Pizza Hut Japan has Crab & Shrimp Mayo. Local celebrities are used to endorse products using messages appealing to the culture and values of the target market. Market Research Consumer market research is research to understand consumers in a market-based economy, their behaviors and preferences, in order to understand the effects or impact of marketing campaigns. Market research in general, is the systematic and objective identification, collection, analysis and reporting of information in aid of decision making that will take advantage of opportunities or solve problems related to marketing (Marketing Research, 2008). According to Planman Consulting (2005), Pizza Hut has become synonymous with ‘best pizzas under one roof’, worldwide. This is because for each territory, product creation and innovation is motivated by the desire to serve the best product for the intended market. This can only be achieved through effective market research which includes a mystery shopper program to ensure compliance with stringent standards for product quality and services. Market research, too has allowed the company to implement customer service initiatives unique to each territory. In India for instance, “crewmembers at Pizza Hut break into a Boogie at restaurants in Delhi and Mumbai and do the Bhangra in Chandigarh and Amritsar” (Planman Consulting, 2005). The Environment The marketing environment consists of three perspectives – micro, macro and internal. The micro environment is what influences the company directly. It includes stakeholders, consumers and suppliers. The company can exercise direct control within its micro environment. The macro environment includes all other factors which can influence the organization but are out of the sphere of the company’s direct control, such as laws, competition and technology advances. The internal environment consists of factors that are internal to the organization – manpower, machines, financial resources, materials and markets (Marketing Teacher, 2008). An example of how Pizza Hut handles its internal environment, the company implements CHAMPS as far as evaluation of its personnel and store operations are concerned. CHAMPS stands for cleanliness, hospitality, accuracy, maintenance, product quality and speed of service (Planman Consulting, 2005). Already previously mentioned are examples of how Pizza Hut deals with sectors of its micro environment. Consumers and customers are catered to in a customized way through product offerings and media messages that appeal to specific customer segments. Since Pizza Hut products are not standardized across its restaurants worldwide, necessarily suppliers are localized to provide specific materials as well as to manage production costs. Macro environment factors such as prevailing laws in the territories where it operates are observed by Pizza Hut. Business ownership guidelines and franchising regulations are strictly observed in each territory. Also previously mentioned are examples of how Pizza Hut has taken advantage of evolving technology and business practices in the way the company has made use of franchising as a method of distribution, pizza delivery, ordering through the internet or via text messaging from a mobile phone for customer convenience. Consumer Behavior Studying consumer behavior helps companies develop effective marketing strategies. It allows companies to looking into how consumers think in order to select between different alternative products or brands; how the consumer’s culture, family or media influence purchasing decisions; consumers’ purchasing behavior, where and when they are likely to buy; and how consumer motivation and decision processes differ between products. Understanding consumer behavior allow marketers to adapt or improve marketing strategies to more effectively reach the consumer (Perner, 2008). Pizza Hut’s use of its research on consumer behavior has spelled successes for the organization. It has designed different products to cater to its customers varying needs in different parts of the world, mindful of cultural differences and differences in purchasing behavior and appreciation of media. It has successfully launched marketing campaigns at strategic times to support significant events in the lives of its customers, such as an important football game, the launch of a space probe and even the growing concern for healthy food. Pizza Hut’s effective use and management of its marketing dynamics has indded worked to make the organization what it is today. According to Pizzahut.com, “the worlds largest pizza restaurant company with 6,200 restaurants in the United States and more than 4,000 restaurants in 100 other countries, Pizza Hut’s 50-year legacy of leadership and innovation has made it the recognized leader in the $37 billion pizza category.” Reference List Harvard Business School, 2008, ‘Strategic marketing management’, Harvard Business School, Executive Education, viewed 15 August 2008, ‘Marketing research’ Wikipedia: The Free Encyclopedia, 31 July 2008, viewed 15 August 2008, Marketing Teacher, 2008, ‘The marketing environment’, Marketingteacher.com, viewed 15 August 2008, Net MBA, 2007, ‘Market segmentation’, Netmba.com, viewed 15 August 2008, Perner, Lars, 2008, ‘Consumer behavior: the psychology of marketing’, USC Marshall, viewed 15 August 2008, Pizza Hut, 2008, ‘Our story’, Pizzahut.com, viewed 15 August 2008, Planman Consulting, 2005, ‘Pizzaz!’, Planmanconsulting.com, viewed 15 August 2008, Recipe Pizza, 2008, ‘The history of Pizza Hut’, Recipepizza.com, viewed 15 August 2008, Read More