Strategies for the Recession - Insights from Six Restaurant Group CEOs

I came across a super series of CEO interviews in Restaurant Magazine’s online edition whilst doing some research yesterday.  Its real gold standard material for anyone wanting to gain some real-life insights into how businesses focus their strategy during a recession.  I’ve highlighted some of the key quotes, issues and ideas below, together with links to the interviews themselves if students want to take a more detailed look.  My emphases are in bold.

Looking through the interviews one more time, I picked up the follow key lessons for strategy:

* A recession is no time to allow quality standards to fall - customers expect the same or better quality for the same or a lower price.  Customer expectations are rising.
* In consumer-facing markets, value-for-money is what customers really want
* Early, decisive action is key - as is management’s ability to hold their nerve in uncertain times.  Leadership is therefore key.
* Customers will remain loyal - but they expect a business to do even more to earn their loyalty!  Constant two-way communication and feedback with/from customers is vital
* Don’t cut back on investment in innovation - if the brand is built on innovation, keep investing
* Focus on the three P’s of management in a recession: people (training), promotion & product
* Pricing - keep it reasonable and accept a slightly lower profit during the downturn
* Drive costs down - but don’t throw the baby out with the bathwater

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Breakfast for $1 tests price elasticity of demand

McDonalds is taking no chances on an economic recovery in 2010 - it is pushing ahead with an aggressive sales promotion offering popular breakfast items for just $1.

BOGOF becomes BOGOFL (or BNFNT)

BOGOFL hasn’t quite got the same ring to it has it - but it’s a development that is being used in the latest round of supermarket wars.

BOGOFL stands for “Buy One Get One Free Later”, and involves the customer receiving a voucher at the till which entitles them to a second product free at a later date.  It is also referred to as BNFNT (Buy Now Free Next Time)

The idea was first announced by Tesco in October as a response to criticism that BOGOF offers created waste as many of the foodstuffs were going off before customers could use the free product.  However, today Tesco’s arch rival Sainsburys, which has seen some positive signs lately, were able to implement the idea before Tesco and launched the offer on two products.

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Video case study: battling for survival in the restaurant trade

The consumer downturn has hit the UK restaurant trade particularly badly and record numbers of establishments are failing according to data for the first half of 2009.  In the battle to survive, restaurant owners are taking risks by diversifying into the cafe trade and also looking to boost demand through aggresive sales promotion.  This BBC video highlights the attempts of one restaurant entrepreneur to stay in business.

Download student worksheet (including video link)

Q&A - What is repeat business and why is it important?

Getting a profitable customer to buy from a business for the first time is often difficult and expensive.  The key to a successful business is to persuade that customer to buy again, and again.  That is what is meant by repeat business.

The never-ending sales promotion proves a winner

A great article in The Times describes how retailer TM Lewin runs a series of never-ending sales promotions - a super example to use with students

Sales promotion in action - great examples from the UK tourism industry

There is a new group of consumers out there who will do anything to take advantage of a sales promotion.  Step forward the vouchinistas!