Types of Marketing Strategies Followed by Chick-Fill-A - Case Study Example

Marketing of information age Types of marketing strategies followed by Chick-fill-A The basic strategy that the company is applying is to create a brand image of an ethical organization with social consciousness that focuses on long term customer relationships. This can be seen from the fact that they offer free food each week to first 100 customers as a part of promotion of new stores. This creates brand loyalty and a rush to the new stores and hence increased sale. The leaders of the company also camp out with the customers to the personal touch to their relationship. It has also used aggressive marketing campaigns to move customers away from beef culture and follow the chicken culture. It has used cow as a figure to advertise its “prefer chicken” campaign which attracts the customers a lot, besides the food. Besides these marketing techniques, the company keeps innovating and introducing new products and targets non-traditional places (like college campuses, hospitals and airports etc.) for opening new outlets. Thus, it follows a product differentiation strategy. They also use sponsorship of collegiate sports to build their brand. Positioning strategy The company has positioned itself as a fast food restaurant with specialization in chicken products. Through its advertising campaigns which use cows that ask customer to go for chicken and not beef, they have tried to use the products of their rival restaurants (which offer beef) to advertise their own products and positioned chicken as a preferable product over beef. Sunday closing strategy The Sunday closing has definitely given the company a competitive advantage even as per customer surveys where many of the customers have appreciated this policy. This has created unique image of the brand by giving it a religious link. It shows that the company has a social conscience and respects people’s religious sentiments. Other retailers should not follow suit as they will be seen as followers of Chik-fil-A. This will put them at a disadvantageous position as the customers may not perceive them in a positive light. Computer aided problem Units 100 100 90 110 110 90 Percentage of market share 50% 50% 45% 55% 55% 45% Cost/unit Mediquip Lazertech Mediquip Lazertech Mediquip Lazertech Production 8000 7200 8000 7200 8000 7200 profit margin na na na na na na Per unit cost including margin 8000 7200 8000 7200 8000 7200 Cost for all units 800000 720000 720000 792000 880000 648000 Annual sales rep.cost 40000 140000 40000 140000 40000 140000 Total cost 840000 860000 760000 932000 920000 788000  Per unit cost 8400 8600 8444.444 8472.727 8363.636 8755.556 Assumptions: Per unit cost of production is $8000 for Mediquip (23% higher than costs achieved on high volumes @ $6,500) and $7200 (assuming 10% less costs) for Lazertech. Annual cost per sales rep is $10,000 for both companies. From the above table we can see that if Mediquip achieves 50% market share, it does have slight competitive advantage over Lazertech. This is mainly because of very low sales cost as the company is able to utilize its old sales force and doesn’t need to add much to it. When the market share falls down to 45%, there is a very slight competitive advantage. However, when it increases to 55%, the company is at a disadvantage on account of high per unit costs. Hence at the current production costs 50% or less market share will give the company a competitive advantage. Units 200 200 Percentage of market share 100% 100% Cost/unit Mediquip Lazertech Production 6500 5850 profit margin 1125 1125 Per unit cost including margin 7625 6975 for 200 units 1525000 1395000 Sales rep 40000 140000 Total cost 1565000 1535000  Per unit price 7825 7675 Looking at the above calculations, we can see that even if the company is able to bring its per unit production cost down by 23% on account of high volumes (by achieving 100% market share), its per unit price will be as high as $7825 to achieve a profit margin of $1125, which would be higher than Lazertech at 100% market share. Hence, we can conclude that Mediquip, should keep its share at 50% or less and look at other opportunities to take advantage of already existing setup and achieve economies of scale. Harrah’s Entertainment marketing strategy Harrah’s is an entertainment company from the gaming industry in the US. The company owns casinos in many cities of the USA. The company had a major task at hand – to increase its customer database and hence its sales. The problem with the gambling industry is that its expansion can only happen in places which have legalized the game. Hence, the competition to the same customers is immense. The company needed good marketing plan to increase its patronage, though it had good technological backup and excellent operational expertise The management started by changing the company’s strategy from focus on operations to that on aggressive marketing which was aimed at getting customers. They started focusing on ways to build customer loyalty so that their existing customers are tempted to only visit Harrah’s properties. Thus, to give the customers enough reasons to be loyal to Harrah’s, the management started by changing their brand image. The first step towards this direction was to advertise the organization as a place of high spirits and excitement. This communicated to the public that this place is the ultimate when it comes to experience the thrill and excitement of life. No other casino can offer that kind of experience. The second step was to improve customer service. In service industry, besides the quality of main service, customer service is the next most important thing that attracts a customer back. An employee training and reward system helped ensure that they took good care of the customers who started appreciating Harrah’s for its good service. The next step was to use the various marketing programs to attract the customers. Thus, gold membership program was started to encourage customers to spend more at the various outlets of Harrah’s. The customer would gain points based on the money spent, irrespective of the outlet at which he or she is playing. A very interesting outcome of using such loyalty programs was that the company now had a database of customers as well as their playing habits. Thus, based on their spending patterns, sophisticated computer programs were used to calculate the customer’s future worth. Based on this data, specially tailored marketing efforts were directed towards them. For example, a customer might have visited the property just once which on manual observation would suggest that the customer is not worth following. However, an analysis of the customer’s spend might suggest an entirely different picture. The customer might turn out to have a high future worth but might be spending in rival casinos. Such customers were then wooed by giving incentives to come back to Harrah’s. Some of these incentives were free coupons for the next visit, free stay at any property of Harrah’s on a spend of more than a particular amount and so on. They also used the customer data to perform marketing experiments to check whether the schemes they are running are bearing fruit or not. For example, they checked the spending of two groups of players. To one group (named A) they had given free night stay, $30 worth of free chips and a free steak. To the other group (named B) they gave $60 worth of free chips. What they found was, higher the offer, more was the spending and the free stay was not of much significance. Thus, they realized that they were actually wasting the room offer as it did not generate any extra spending by the customer. With the help of all these marketing schemes the company saw a 50% increase in revenue growth in 1999 and a 100% growth in the stock price and profits. Read More