Services Marketing Triangle: A Key Concept for Marketing Intangibles

This is a copy of the remarks given to the City of Austin Seminar on Marketing a Restaurant. The concepts are applicable to any service-based company.

Good afternoon and thank you for having me here. In my remarks today on marketing a restaurant, I’m going to come from three perspectives. First and foremost as a veteran marketing professional who has worked for several services companies. Second and just as important is as an entrepreneur. I co-founded VisionEdge Marketing in 1999. Let me see the hands of those of you who own your business. And lastly, as a educator having taught marketing for many years at educational institutions such as UT, St. Edwards, Purdue University and Stanford University.

I hope that my remarks today will provide you with some practical guidelines to consider as you build and market your restaurant.

How many of you know what type of restaurant you plan to open? Having decided to become a restaurateur, you have chosen both an important industry and a challenging one. It’s an important industry, because according to the National Restaurant Association, restaurants are a cornerstone of our nation’s economy. On a typical day this year, the restaurant industry posted average sales of more than $1.1B, which is equal to 4% of the US GDP. The restaurant industry is our country’s largest private-sector employer, with nearly 9% of those employed in the US working in the industry.

Challenging. Those of you from within the industry know the success rate for a new restaurant is very low. According to the National Restaurant Association, 90% of new restaurants fail within five years. I’m here to try and help keep this from happening to your venture.

The Intangible Nature of Services Impacts Your Marketing

In addition to your hard work, discipline and creativity, several factors impact your success. First, you need a solid business plan. On top of that you will need excellent operations capabilities. And of course, superior marketing. A restaurant is a service and as such is part of the services industry. It seems obvious that you in the service business. But what exactly does that mean? It means, that you are providing a product that is consumed a the time it is produced. When what you provide adds value in forms that are essentially intangible, you have a service. Welcome to the Services Marketing!

The intangible nature of services necessitates a different approach to your marketing. Unlike products, services cannot be inventoried or displayed, returned or resold. Delivery and satisfaction depend significantly on employee action. Customers play a key role in the transaction. There is no sure knowledge that the service delivered matches what was planned or promoted. These differences impact the way you need to market your restaurant.

I wouldn’t be surprised if many of you think marketing is about how you’re going to advertise and promote your restaurant. True, that’s going to be important. In this industry though, repeat business and referrals will be extremely critical. So marketing is actually will take more than only advertising on the internet, radio or in the newspaper, or sending out coupons.

The Three Sides of Your Services Marketing Triangle

To begin marketing your restaurant, you need to think of marketing in three parts – like three equal sides of a triangle. We’ll call the parts external, interactive, and internal.

Through your external marketing efforts you are making a promise to your customers on what they can expect from you and how you will deliver this promise. These efforts will include your advertising, sales, promotions, the design and décor of your facility, the service process itself, and your pricing strategies. Consistent and realistic promises are made through your external communication vehicles. Your first important step is to decide what it is you’re promising. Is it local fresh quality ingredients, fun place to eat, affordable healthy meals?

Interactive marketing is the next side of the triangle. This is where you keep the promise. It’s vital that you look at your business from your customer’s point of view. No surprise here, for a restaurant, the promise is kept or broken by the employees you hire. When a customer interacts with you or your staff, there’s what’s known as a moment of truth. That moment, when the promise is kept or broken. Remember, promises are tested every time the customer interacts with your organization.

I’ll tell you a quick story about a small family-owned and operated bistro here in town that my husband and I began to eat at the day they opened several years ago. The bistro serves lunch and dinner during the week, and added a breakfast and brunch on the weekends. We haven’t eaten there for over 3 months. We use to eat at this bistro 3-4 times a week. We were regulars on a first name basis.

Are you in suspense as to what happened? Well, I don’t eat meat. In Austin this is relatively common. And for all the years we’ve gone to this restaurant, I ordered non-meat dishes, requested vegetarian specials, and asked for meat sides to be left off. One day, we went there for brunch with the extended family, 12 of us. Our server on this day is the owner, someone who has taken our food requests many times.

Here’s the scenario. I ordered the pancakes sans bacon and to be grilled in margarine. The food began to arrive.

First, the warm food arrived cold.
Second, while we realize not everyone can be served at the same time, the time of delivering meals was extensive with folks completely finishing their meals before others had even received theirs.
Third, my food arrived with the bacon. When I reminded our server of my order, she took the plate back. As soon as I took a bite of the food when they brought it back, I knew that all they had done was remove the bacon from the plate. Bacon has a distinct taste. I brought this to the attention of the server, and said “for past three years since we’ve been coming here and you’ve been our server, have you noticed that I never ordered a meat dish?” She said yes. I said, “I know we have a large group today and it might have been easy for the cook to mess up the order. When you brought the dish out to me, didn’t you wonder about the bacon on the plate?” She said no. I said, “This still tastes like bacon, so I’m pretty sure these are the same pancakes that were brought out originally. Is that correct?? She said yes. This is the best they could do, because they were busy.

This is a moment of truth. We haven’t been back and we no longer recommend the restaurant. Which leads me to the last side of the triangle known as internal marketing. Internal marketing is about enabling your staff, ALL your staff, from bus staff, to host staff, to serving staff, to kitchen staff, to deliver the promise. In the service business, people are a key part of your marketing mix. The customer has an expectation of service.

If you don’t know what the customer expects, don’t create service standards, don’t deliver on the service standards, and/or the service performance doesn’t match the promises made, you will have what’s known as a gap. These gaps can put you out of business.

It’s Critical to Know Your Market and Customers

If you’re opening a new restaurant you must believe that you have something better to offer and can better serve some customer need or want. Today more than 50% of meals are consumer outside the home and this number is growing. Be sure you’ve done your market and customer research; it’s the only way to expose opportunities for growth. Common questions you want to be able to answer include:

What are today’s hottest food trends and cuisines? When you read about major consumer trends, such as local, or gluten free, or organic, do you use this data to understand the impact these trends have on your business and how can you capitalize on these trends?
How will these trends influence the way you design, process, package, merchandise, and promote your restaurant.
According to US demographers, the most significant changes in the upcoming decades will be an upsurge in the number of Hispanic and Asian Americans and the tidal wave of aging baby boomers. What will shifts in income levels in our city, changes in the level of education, new occupations mean to your restaurant? How will the local economy affect consumers and the business community?

Even though money may be tight, you can conduct your own fact gathering. Read the food section in newspapers and magazines. As an aspiring entrepreneur in the restaurant industry, consult guides from Mobil, Frommer’s, Zagat Guide and AAA, and epicurean magazines such as Gourmet, Food & Wine, Bon Appetit, and Wine Spectator. Turn to trade publications such as Restaurants & Institutions, Restaurant Hospitality, Food Arts, and Nation’s Restaurant magazine, the National Restaurant Trade Association, and our own local food critic. Take time to analyze who’s doing what in your restaurant category in the area.

After you’ve done your research on existing superior businesses and restaurants and have a model for your restaurant, go similar to restaurants, whether here in Austin or some other city and see what they do. Know what the best means in your industry. Go to the best, model after the best.

The first critical step in marketing your restaurant is to know what the customer expects. Once you understand the expectations, you stand a better chance of being able to deliver to them. Start by carefully picking an appropriate target market. This is the group of customers most likely to respond favorably to your restaurant. The target group you identify needs to be large enough to provide enough sales to make your restaurant viable. To define your target market you will need to segment the market. You can segment markets a variety of ways: demographically (income, age, gender, occupation), psychographically (activities, hobbies, opinions), purchasing behavior and usage rate, geographically, and by needs (economic, social, physiological).

Think through the answers to questions like these.

What income level responds most favorably to our type of restaurants?
What age groups?
What specific professionals or occupations?
Do singles, large, medium, or small families respond more favorably?
What levels of education?
Does our target market perform or take part in certain activities more than others? If so, which ones?
Are our target customers more likely to have certain hobbies? If so, which ones?
What advantage might you gain from targeting consumers according to lifestyle?
What needs does your restaurant fulfill? Is it just a quick meal? A nutritious meal? A romantic evening out?

Once you answer these questions and others, you can develop a profile of your target and then tailor your marketing campaign and messages to this group. Read everything you can about the target market for your restaurant. Join a restaurant association. Subscribe to restaurant publications. Use your information to convey your marketing message to your target through the use of public relations, advertising, direct marketing, sales or promotion.

We all know the importance of location, menu and food quality, your atmosphere. We’ve all seen restaurants who addressed these remarkably well, but they still went out of business. We’ve also seen restaurants that are thriving and we wondered how, given the food, location, and décor. So as you think about your restaurant, and the marketing for your restaurant, remember that your primary objective is to develop and provide an offering that will satisfy your customers needs and wants, thereby ensuring your survival.

I’ll close with what we started. Welcome to the services industry and marketing intangibles. Use the services triangle to create a restaurant that is the most appealing to your target market and sets you apart from your competition. Be clear in your promise and never lose sight of those moments of truth.