Marketing Plan for a New Business Venture
This marketing plan covers the research undertaken for a tea room to be situated in the Welham Green area of Hertfordshire. The tea room is a new venture to be undertaken by two principals with marketing qualifications and experience, utilising a small business loan of £32,000, repayable in instalments over three years.
The plan will cover the rationale for the business, it’s unique differentiation, which the principals believe is not only right and appropriate for the area in which the business will be situated but also sets it apart from other similar operations in the surrounding area.
In addition to this rationale, the targeting and positioning strategy will be outlined, along with the overall marketing strategy, communications and actionable marketing plan, including costings for advertising and promotion of the new venture.
The planned venture is a Tea Room, to be called ‘The Rede Room’. Whilst there are a number of cafes in both the Welham Green and Potters Bar area that serve tea, they are primarily either Coffee Shops, such as franchises like Costa Coffee (who have a premises in Potters Bar, the nearest large town), or cafes offering food as the primary income source.
The Rede Room is designed to appeal to the residents of Welham Green, as well as visitors to the area, offering a wide selection of natural teas such as Earl Grey, Lapsang Souchong, and herbal varieties as well as offering barista style coffee and cold drinks, including naturally made smoothies. In addition, there will be a selection of home made cakes, pastries and pasties. However, the emphasis will be on healthy, natural ingredients with a large selection of vegetarian options. It is intended that there will be approximately 25 seats on the premises, with a planned average spend per customer of £6.00 per visit. This average spend is based on the price for a hot drink and light refreshments and is comparable to prices in the area.
The lay-out and décor of the tea room is intended to be based around an old-fashioned antique style with sturdy oak furniture and willow screens with large mirrors to expand the room. As part of the approach, there will be paintings and antiques available for sale throughout the tea-room. The venture, location and the lay-out has been decided following market research into the profile of potential customers in the area using a variety of research approaches.
Market Research Approaches
Prior to commencing any research consideration was given to the following pertinent questions, (Reuvid)
- What and where is the main competition?
- What are the potential customers looking for?
- Where should the market positioning of the business be?
- What is the profile of the target customer?
- What approaches should be taken to achieve economic promotion of the business?
In order to answer these questions, both desk and field research were undertaken.
The desk research required accessing census information from government statistics on the preferred area to gain information about the population profile and their potential desires and preferred options for a business of this kind, based on the ACORN classification (www.caci.co.org) for the area.
In addition to this demographic and geographical profiling, government databases on applicable legislation were also accessed to ensure that all areas were covered, specifically in relation to new business start-up, food hygiene regulations and health and safety risk assessments for a venture of this kind.
Property agents from the local area were also contacted to establish pricing for retail premises as well as availability and running costs. Whilst Welham Green is a small village, it has a thriving high street and local community which could benefit from the addition of a tearoom in its heart.
Finally assessments of similar businesses in the surrounding area were undertaken through telephone calls requesting information on the services/products they offered as well as their pricing structure and opening hours. This was done to ensure that the pricing structure and product offering of The Rede Room could be set within the parameters of what was feasible from both a cost perspective and a perceived value by the customer perspective (Eggert & Ulaga, 2002).
In order to back up the desk research carried out a level of field research was also undertaken. This element of the research involved visiting other tea rooms and cafes in the surrounding area, to assess their lay-out, pricing structure, customer service and customer profile from a first hand basis and summaries of each were analysed and the results applied to the approach being considered for the venture.
In addition, questionnaires were produced and potential customers in the surrounding area were asked to complete these to gauge possible interest and desire for a venture such as The Rede Room. A copy of the questionnaire is attached at Appendix I.
The aim of this questionnaire (Parasuraman et al 2009) was to establish whether there was:
- a need / desire for the new venture;
- how popular the approach of combining a tea room with a small off-sales of antiques and paintings would be in the local area and
- to gain an overview of what would be an acceptable and realistic pricing structure for the core products being offered.
- to try and evaluate frequency of visits from both local people and visitors to the area
The questionnaires were completed in the Welham Green area by shoppers and other visitors and also along the Boreham Wood Walks, the users of which are a potential market for the venture. The aim of approaching the completion of the direct questionnaires in this way was to ensure a representative sample (Hinkin, 1998) of both static traffic for the venture (i.e. the local population) as well as passing trade from visitors to the area who are taking advantage of the many country walks that pass through and by the Welham Green area as noted in the research results.
A final element of the field research was visits to potential suppliers for fresh produce supply chains and delivery options, as well contacting local tradesmen for lead times on creating the right look and feel for the business. The tradesmen were sourced through Trademark (www.trademark.com) a government-sponsored database for approved tradesmen in specific areas. By using this source of information, it can be assured that the tradesmen and suppliers used are reliable and value for money, which in the opening stages of a business can be a make or break element of achieving goals and deadlines (Hougaard, 2005).
Market Research Results
A socio-demographic profile of the Welham Green area from the 2001 census (www.neighbourhood.statistics.gov.uk) suggests that the residents are likely to be wealthy commuters who have an ACORN (A Classification of Residential Neighbourhoods) (www.caci.co.uk) classification of 3. In addition, they will are likely to have an interest in antiques and will be working towards a healthy, natural lifestyle. In addition, this ACORN classification tends to be reserved for individuals who are over 40, with a high disposable income, and who have a large amount of leisure time which they choose to spend in high quality, up-market establishments, which is the positioning choice for this venture.
The further strength to the rationale for selecting this approach is that the population of Welham Green, currently just under 4,000 (www.upmystreet.com) has a demographic profile which suggests that there is a strong market for an establishment such as the Rede Room. Indeed, Welham Green has an outside catering firm called ‘Veggie Bites’ which does 100% vegetarian and vegan catering (www.merrydowncontrolware.co.uk) which has been thriving for a number of years.
In addition, as Welham Green has its own train station and is close to Hatfield House and the nearby Galleria shopping centre, offering an alternative place for refreshments will allow for passing as well as local trade. Furthermore, Welham Green is situated on several walks that pass through Brookmans Park which covers an 8.25km area and is a popular route for ramblers and casual walkers alike (www.brookmans.com), and these individuals provide a further potential customer base for the venture.
Overall, whilst Welham Green is a small village, it is currently expanding with new housing developments, and as part of a wider rural area in the St Albans/ Potters Bar area would benefit from a high quality tea room providing natural and healthy refreshments for both walkers and shoppers in the area.
With respect to nearby competitors and their product offering, there are two café style businesses in the AL9 postcode area, (www.aboutmyarea.com) however both of these operations focus more on coffee than tea and the food that is offered is very similar to that of other ‘barista style’ chains such as Costa Coffee, for example, paninis and subway style rolls.
This will be in direct contrast to that offered by The Rede Room, which will have a focus on teas and cakes and the food offerings will be fresh sandwiches made with unsliced bread or rolls, and quiches and salads that will enhance the natural, organic feel that is planned for the premises.
In terms of specific legislation and regulations, the venture will come under the UK SIC (92) of 55.30 (2) Unlicensed Restaurants and Cafes. (www.ons.gov.uk)), which means that the operation can serve food and non-alcoholic beverages.
As a result of this classification there are certain legislative areas that will need to be adhered to including health and safety law for both customers and employees, this will be in tandem with standard fire safety regulations, food hygiene regulations and training adherence for all employees and general legislation covering food law in the UK, (Stranks, 2007). in particular as the venture will be making some the cakes etc. on the premises, there are specific hygiene and preparation rules in terms of space and environmental health issues that will need to be complied with (Peters, 1996) and these will need to be incorporated into the main planning stages of the business plan and initial budgetary considerations.
The questionnaires provided to potential customers indicated that there was both a desire and a need for a venture such as The Rede Room, although it seems likely that the majority of the trade would be from walkers and visitors to the area, with a smaller percentage of the local population choosing to frequent the venture as they preferred to go further afield to places such as Hatfield or Potters Bar.
Application of Research Results and Formulation of Marketing Plan
Following the field and desk research, the initial questions from the Research Brief were reviewed in the light of the results achieved in order to formulate an actionable marketing plan containing a distinct set of goals regarding segmentation, positioning and targeting strategy. (Wansink, 2000).
The issue of competition suggests that in the chosen geographical area there are no direct competitors although as part of the target customer base comes from walkers through Brookmans Park, it was necessary to consider similar ventures in these areas. However, the results suggest that most of the Cafes available in that area focus more on a streamlined, coffee shop approach, rather than the relaxed, natural, homely feel which is the aim of The Rede Room.
From the customer surveys the customers who would frequent the area are looking for a well laid out, comfortable and value for money café but one which has an atmosphere of quality and old fashioned values, combined with a strong sense of providing natural, healthy, home-grown foods in an environment which is aesthetically pleasing and appeals to their other interests of art and antiques.
In order therefore to consider the positioning for the venture, a perceptual map (Schmalensee, 1985) was produced to illustrate the show the results of the questionnaires in terms of customer responses regarding their preferred reasons for visiting a tea shop or similar cafe.
The positioning map above, suggests that natural, old fashioned premises with a perceived intrinsic value are of higher concern to the questionnaire respondents than value for money and a modern/standardised premises. These responses suggest therefore that the aim of the venture is appropriate and that the positioning for the tea room should be at the higher value end of the market, offering natural, more traditional surroundings and fare.
With regard to segmentation, there are a number of elements that can be applied to this venture to consider the targeting of the venture to potential customers: these are shown in the table below which is based on Cohen’s 1986 segmentation table.
|Visitors to Area||Local Community|
|Healthy home cooked food||x|
|Old fashioned surroundings||x||x|
|Variety of Tea Choices||x||x|
|Potential for art /antiques sales||x||x|
|On walking routes||x|
The targeting of the venue should be one that aims to appeal to customers sensory/ experiential needs, a fact borne out by the elements noted in the table above. However, due to the unique nature of the planned venture in this particular location, there will be a need to look at niche or concentration marketing, which is ideal for a small business venture such as this with relatively small overheads, although there is a slower growth potential than might be achieved with other approaches. (Dalgic, 2006).
Actionable Marketing Plan
In reviewing the original business concept, the research that has been collated both at the desk and in the field appears at this stage to bear out the original plans and aims for the business and strengthens what is the core product offering i.e. a high quality, naturally based tea shop, providing both aesthetically pleasing surroundings for home cooked, healthy foods and an opportunity to look at both art and antiques in the area.
The evolution of the marketing plan required to ensure the success of the business incorporates all the elements of the original concept, the research carried out into the geographic profile of the chosen site and the socio-demographic profile of the target customer base. However, the plan will need to be consistently reviewed and evaluated over the first few months of trading to ensure that the approaches taken are still valid and pertinent to the business aims.
In terms of a promotions and advertising strategy the intention is to apply advertising, sampling, publicity and discounting both before the initial opening and in the first few weeks of trading.
The advertising will be in the form of both newspaper advertisements in the local publications such as W.E.B., The Really Useful Guide to Welham Green, Essenden and and Brookmans Park residents, (www.findlocalmagazines.co.uk) which is delivered free on a monthly basis to over 3,600 homes in the local area, and provides local residents with information about businesses in their area. It is also planned to contact the editors of this publication to arrange for an editorial piece to introduce The Rede Room and outline the aims and values of the venture to encourage local visitors.
There will also be advertising carried out through a door to door leaflet drop to all homes in the Welham Green area, offering discounts and free offers in the first few weeks of trading, encouraging them to come in and try the range of teas and foodstuffs that will be on offer.
In addition, it is intended to contact nearby Hertfordshire College which has a strong art and design department to offer their students the opportunity to display their art works for specified time periods in the tea room (www.herts.ac.uk). Utilising this resource will not only widen the scope of potential customers but will also ensure that the art on the walls of the tea room will be constantly changing and provide opportunities for local and other students to display their work publicly.
In terms of budgetary and pricing considerations, It is proposed to begin pricing using a skimming price strategy (Broadbent & Cullen, 2003) with a slightly higher price due to the superiority of the business offering that is proposed. This means that as the demand increases and the business grows, the price can be reduced over time and offer cost advantages to the customer relative to the growth of the business and its potential to negotiate improved discounts with suppliers as demand increases.
Some cost assumptions have been made as follows:
- Rent costs are predicted as £300 per week, based on current market rates in the chosen location
- Rates costs are based on information from the local council regarding potential rates for the proposed areas
- Wages are based on £200 per week for each of the two Principals
- Insurance and utility costs are based on costs to Performing Rights Society (PRS) as well as building/ contents and Public Liability Insurance costs.
These assumptions have been built into the draft first year financial forecast included at Appendix I, which gives illustrations of forecasts based on 30% take up of covers, and 40% take up of covers.
The two scenarios suggest that a profit can be made in the first year with careful handling of the costs involved and with an achievement of 40% occupancy of the tea-room, each week opening for 8 hours a day, six days a week.
Following the research that has been carried out in the local area and tying this in with the original vision for the Tea Room, it is felt strongly that the proposed venture has a place within the selected geographical area and that the marketing plan of adopting a guerrilla approach to the marketing is, using strong entry points to the market such as door to door leafleting and targeting specific groups of potential customers such as the walkers, both casual and serious in the surrounding areas. This is an aggressive marketing strategy (Levinson et al), which would allow the company to use a mix of promotional approaches, to maximise publicity for a venture that is aimed at tapping into the consciousness of potential customers as a desirable place to go and spend their income.
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