Reference no: EM131462700

Question: Finagle A Bagel's Approach to Marketing

Round, flat, seeded, plain, crowned with cheese, or cut into croutons, bagels form the basis of every menu item at Finagle A Bagel. "So many other shops will just grab onto whatever is hot, whatever is trendy, in a ‘metoo' strategy," observes Heather Robertson, the director of marketing, human resources, and research and development. In contrast, she says, "We do bagels-that's what we do best. And any menu item in our stores really needs to reaffirm that as our core concept." That's the first of Finagle A Bagel's marketing rules. In addition to its retailing activities, the company wholesales its bagels in bulk to hospitals, schools, and other organizations. It also wholesales a line of Finagle A Bagel-branded bagels for resale in Shaw's Market stores. Whether selling wholesale or retail, the company is always hunting for new product ideas involving bagels.

PRODUCT DEVELOPMENT: MIX, BAKE, BITE, AND TRY AGAIN

To identify a new product idea, Robertson and her colleagues conduct informal research by talking with both customers and employees. They also browse food magazines and cookbooks for ideas about out-of-the-ordinary flavors, taste combinations, and preparation methods. When developing a new bagel variety, for example, Robertson says that she looks for ideas that are uncommon and innovative yet appealing: "If someone else has a sun-dried tomato bagel, that's all the more reason for me not to do it. People look at Finagle A Bagel as kind of the trendsetter." Once the marketing staff comes up with a promising idea, the next step is to write up a formula or recipe, walk downstairs to the dough factory, and mix up a test batch. Through trial and error, they refine the idea until they like the way the bagel or sandwich looks and tastes. Occasionally, Finagle A Bagel has to put an idea on hold until it can find just the right ingredients. For example, when Robertson was working on a new bagel with jalapeno peppers and cheddar cheese, she had difficulty finding a cheese that would melt during baking but not dissolve and disappear into the batter. Ultimately, she found a supplier willing to cook up cheese formulas especially for Finagle A Bagel. The supplier would send a batch of cheese overnight for Robertson to incorporate into the next day's test batch of bagels. After baking, Robertson would send some of the bagels overnight to the supplier so that the two of them could discuss the flavor, consistency, and other details. The cheeses and bagels flew back and forth for eight months until Finagle A Bagel hit on a recipe that worked well. "When we finally got it done," Robertson says, "we shipped test batches to our stores, three stores at a time. And we just gave the product away. We'd make several batches during the week, and guess who would come back wanting to buy dozens of these bagels?" That's when she knew the new product was going to be a hit. Not every new flavor becomes popular, however. Dark chocolate bagels with white chocolate chips sold poorly, as did pineapple-mango-coconut bagels. Today, plain bagels remain the best-selling flavor, followed by sesame.

SAMPLES AND COUPONS SPARK WORD-OF-MOUTH COMMUNICATION

The story of the jalapeno-and-cheese bagel illustrates another of Finagle A Bagel's marketing rules: Spend nothing on advertising. Many quick-serve food companies use television and radio commer cials, newspaper advertisements, and other mass-media messages to build brand awareness, promote products, and attract customers. However, Robertson and her colleagues believe that the best way to build the Finagle A Bagel brand and whet customers' appetites for a new menu item is to give them a free taste. Consider what happened when Finagle A Bagel used samples and coupons to build lunchtime sales by promoting bagel sandwiches in one of the suburban stores. Instead of placing an ad in the local newspaper, Robertson and her staff went to the store and prepared 100 bagel sandwiches. They cut each in half and wrapped the halves individually. Then they set up 200 Finagle A Bagel bags, put a half-sandwich into each, and added a coupon for a free bagel sandwich without any risk. They piled all the bags into a big basket, attached a sign reading, "Free Bagel Sandwiches," and headed to a large intersection just a block from the store. "Every time the light turned red, we would run out into the middle of the street and throw a bag through someone's car window," Robertson recalls. "We got a lot of strange looks. A few people would roll up their car windows . . . but a lot of people just thought it was hysterically funny. They would be motioning, waving us over, saying, ‘What have you got?' And then they'd go back to their office and tell their coworkers, ‘Hey, you know what happened to me today? Some crazy lady threw a bagel through my car window, and it was great. You should check it out.'" The entire effort cost $100-and convinced a large number of customers to look around the store, try a sandwich risk-free, and talk up the experience to colleagues, friends, and family. The popular Finagle A Bagel headquarters tour has become an effective public-relations tool. Community groups, students, and bagel lovers of all ages can visit the "World Headquarters" building and walk through exhibits representing the company's successes and mistakes. In the factory area, visitors watch through a huge window as hundreds of pounds of dough are mixed, cut, and shaped into bagels. The window is set low so even the youngest visitors can get a great view of the process.

BUY A BRANDED BAGEL-AGAIN AND AGAIN

Although some restaurant companies want each unit to look distinctly different, Finagle A Bagel uses consistency to reinforce the brand image-another of its marketing rules. "We believe the stores should have a very similar look and feel so that you can walk into any Finagle A Bagel and know what to expect," says copresident Alan Litchman. For example, every Finagle A Bagel store sports an eye-catching burgundy-and-yellow sign featuring an oversized bagel with a few bites taken out. This bagel icon is repeated on posters highlighting menu items as well as on other store decorations. Still, the suburban stores are not exactly like the downtown stores. Many of the suburban stores have children's furniture and cushiony chairs so that families can sit and relax. Free weekly concerts by the "Music Man"-a local musician-make these stores decidedly family friendly. The city stores have no children's furniture because they cater to busy working people who want to be in and out in a hurry. The Harvard Square store is unique: It has a liquor license and attracts a large student crowd, which means it is busier on weekends than on weekdays.

One of the most effective sales promotion techniques the company uses is the Frequent Finagler loyalty card, which rewards customers for making repeat purchases. For every dollar customers spend on bagels or other menu items, they receive Frequent Finagler points that can be redeemed for free coffee, free sandwiches, and so on. Customers are pleased because they receive extra value for the money they spend-and Finagle A Bagel is pleased because its average sale to loyal customers is higher.

PRICING A BAGEL

Pricing is an important consideration in the competitive world of quickserve food. This is where another of Finagle A Bagel's marketing rules comes in. Regardless of cost, the company will not compromise quality. Therefore, the first step in pricing a new product is to find the best possible ingredients and then examine the costs and calculate an approximate retail price. After thinking about what a customer might expect to pay for such a menu item, shopping the competition, and talking with some customers, the company settles on a price that represents "a great product for a fair value," says Robertson. Although Finagle A Bagel's rental costs vary, the copresidents price menu items the same in higher-rent stores as in lower-rent stores. "We have considered adjusting prices based upon the location of the store, but we haven't done it because it can backfire in a very significant way," copresident Laura Trust explains. "People expect to be treated fairly, regardless of where they live."

1. Does Finagle A Bagel apply all seven phases of the new product development process when working on a new menu item such as the jalapeno-and-cheese bagel? Explain.

2. Do you agree with Laura Trust's assessment that adjusting prices based on store location can backfire? What arguments can you offer for and against Finagle A Bagel raising prices in higher-rent stores?

3. Finagle A Bagel is both a wholesaler and a retailer. Which of these two marketing intermediary roles do you think the company should develop more aggressively in the next few years? Why?

4. Should Finagle A Bagel continue to spend nothing on media advertising and rely instead primarily on sales promotion techniques such as samples and coupons?