Cases In Marketing (Presentation) 7 Passage 1901 Marketing Failure Abstract This paper will attempt to analyze the failure of the mar

Cases In Marketing (Presentation) 7
Passage 1901 Marketing Failure

Abstract

This paper will attempt to analyze the failure of the marketing action of the restaurant called Passage 1901, located in the center of Baku. Once highly popular and predicted to one of the hotspot of Baku’s dining and food industry, Passage 1901 did not meet the expectation and failed miserably. To correct the mistakes and return the former profitability, the restaurant management did a marketing strategy from 2015 till 2016 that had mixed impact on the restaurant profitability. The paper seeks to dissect the marketing strategy into its constituent parts and analyze the mistakes and misdeed made during the implementation. Upon the incisive analysis of the marketing strategy, I will proceed to provide several recommendations in the framework of 4 Ps, product, price, place and promotion and explain how effective use of marketing strategy can help the company bring back the former profitability and customer base.

Introduction

Baku’s food and dining industry is one of the most vibrant part of the economy, generating millions of dollars and employing thousands of people. As a matter of fact, world’s most famous food brands have established branches in book to take advantage of the booming food and dining industry with local KFC restaurant branch being the largest of its kind in the world. The petrodollars flowing in and emerging middle and professional class have the main driver behind this exponential growth. The restaurant owner, in our interview, cited the same reasons for the opening of the restaurant in the city center. The growing purchasing power of the local population allowed international brands to move in and the owner of Passage 1901 wanted to carve out a niche for the restaurant and maintain a good position in the market.

Passage 1901

Founded in 2007, Passage 1901 restaurant is one the largest restaurants in the country that employed over 50 people at the height of business operations (Illustration 1). The food and drinks offered at the restaurant ranged from a variety of local foods to European, Asian and American foods. 2007 was a year of great excitement in Azerbaijan as the first money from oil started to flow in and increase the purchasing power of the local population, who could afford to dine at restaurants with an affordable prices. The lower prices set by the management did indeed allow the restaurant to attract large number of customers initially and gain a reputable position in the market. Another competitive edge of the company lied in its conducive location, which was close to the city center, office buildings, major highways and could easily be reached from any part of the larger metropolitan area, said the director of the Passage 1901. Combined with the increasing purchasing power, lack of market saturation and big players in the area, strategic and conducive location of the area and relatively cheap prices promised to make the Passage 1901 one of the most sought after and renown places in the city. Although this was not to be the case as the number of customers coming in to the restaurant in 2019 was the lowest figure over a decade, a factor which propelled the company management to downsize the operations and lay off some staff to be able to cover the increasing operating costs. Overall, the SWOT analysis for the restaurant could be summarized as follows: Illustration 1. Source: www.azerbaijan360.az

Strength

Weakness

Threats

Opportunities

Excellent and central location of the company.
Affordable and cheap menu prices and availability of discounts on terms and conditions.

Lack of innovative Business model and adherence to tradition model. Lack of exposure to the social media and other media mediums.

Changing landscape of the food and dining industry,
Entry of foreign and famous brands.
Emergence of new type of dining class

Lack of competitions and availability of market niche to be carved out.
Burgeoning food and dining industry and middle class in Baku.

Passage 1901 is located on one of the most historic and famous streets in the city. There was a special parking lot in front of the restaurant, so people had no problem parking. In addition, the Passage 1901 was very close to the subway exit, and there are many bus stations here. Therefore, it was very convenient for customers to go to the restaurant. In addition, in Passage 1901, both European and Baku cuisine took a very large place. Not only locals but also foreign guests come here a lot. One of the reasons why many foreign guests come here is that the walls of the restaurant are covered with a special history of Azerbaijan. Some people describe this restaurant as a museum. The restaurant menu is mostly cheaper than expensive restaurants, because this restaurant is designed for people from all walks of life.
Azerbaijani restaurants are a bit old-fashioned compared to other countries. Many restaurants in Azerbaijan do not advertise themselves. They expect only customers who know them or passers-by to come in and eat. Because our restaurant is very old and has a customer base, they don’t spend a lot of money on advertising. The Buddha shows us weakly in the market, when people see a restaurant, mainly on social media, they are interested in it and want to go there.
In my interview, director mainly focused on the threats and underlined its role in the failure of the business, In particular, the food industry in Baku since 2015 has been going through transformations and evolutions. There were several threats to the successful business operations of Passage, said the director. However, what has emerged as the biggest threat to traditional restaurants was the takeaway industry, especially with the entry of Uber Food, Wolt and other food take away companies that sought to erode the market dominance of the restaurant business. Another challenge to the restaurant was the branding problem. Although the management anticipated the impact that take away food companies would have on the general food and dining industry, their failure to incorporate it into their marketing strategy and business plan led to the fall in restaurant profits and resulted in the firing of several employees. Another threat to the company was the branding crisis that was becoming obvious in the food industry of Baku. By the time Passage 1901 was inaugurated, the food and dining industry was still at infancy and the customers uninformed and uninterested in restaurant branding. However, as the time passed time and many more restaurants popped up across the city, customers became much more conscious of the term brand and started to have a discriminating and highly selective attitude when it comes to restaurant. Long gone were the days when primary motive behind people’s restaurant decisions were location and the price and emergence of new type of urban sophisticate class with sophisticated brand awareness resulted in the decreasing customer numbers and threatened the viability of the Passage 1901, said the director.
No matter how many restaurants there are in Azerbaijan, our restaurant has the opportunity to bring itself to a better level by using the gaps. Our restaurant is far superior to many restaurants in Azerbaijan in terms of price, quality and service. Our weakness is that we only use social media like Instagram. However, if we use other social media in the future and allocate more budget for advertising, then we can increase our market share in Baku.

Marketing Plan and Actions Taken

As mentioned earlier, the restaurant management was not oblivious to the changing dynamics of the food and dining industry and seeing the decreasing customer numbers and falling profits, management decided to implement a specific marketing plan that would stimulate the customer interest in Passage 1901 and increase the profits. The way to achieve these was re-branding, thought the management. Within the process of re-branding, company also sought to incorporate the restaurant to the takeaway food industry by signing agreement with one of the transportation companies mentioned above. The management concluded that in order to rebrand the restaurant, there was an imperative for the fundamental overhaul of the business model of the company and the new mediums for communication and advertisement had to be put in place. The marketing plan was three-pronged, which will be explained below.

Changes in Menu and Prices: Ever since the restaurant become operational, the main modus operandi was to combine national and foreign cuisine and give the customers a variety of options to choose one from. The director said that the rationale for offering a combination of local and foreign food was the assumption that people would still want to taste a local food in a fancy restaurant and the emerging middle class would also want to have an option to choose a foreign cuisine. In the new business plan, the idea was to put more focus on the foreign food and decrease the number of the local cuisine. The new marketing plan also envisioned the mixing of foreign and local cuisine, cooking of local cuisine using foreign ingredients for local customers and dramatizing or maximizing the “Azerbaijaniness” of the local cuisine for the foreign clients. As a matter of fact, the change in menu has long been considered an integral and essential part of the rebranding in the restaurant industry (Egan, 2018). Another change in business model, said director, was to increase the previously low prices and end the daily, weekly and seasonal campaigns. The director said that the idea behind it was the assumption that no longer are people motivated by the low prices and furthermore, there is a stigma attached to the low prices and that is there is a popular perception that if the prices are low, then food must be of low quality. The director said that, taking into account the impossibility of dispelling that popular misconception, the restaurant management came to the conclusion that the only way to dissociate Passage 1901 from low quality cheap restaurant misconception was to increase the prices reasonably and end the discount campaigns once and forever with the uniform and stable pricing strategy applied across the year.

Lean operation and design changes: The Passage 1901 is relatively large restaurant with large tables suitable for the gathering of over 13-17 people (Illustration 2). Such design choice was justified on the grounds of Azerbaijani’s affinity for large gathering and chatty dinners. As the time passed by, this kind of structure created difficulties of its own. Long gone were the days when people dined with 10 other people and the occupation of large tables by groups of 2 and 3 people did not allow the table to be used by other customers. The director said that the problem was not obvious at the beginning, but the changes in mentality and emergence of professional class led to a situation where largest group of people did not exist 4 or 5 members. Therefore, the restaurant management decided to completely overhaul the both interior and exterior design of the place and make it leaner more operational by reducing the number of chair and making the communication between customers and waiter/waitress much smoother and effective. As a result of the design and operation restructuring, the number of chairs were reduced, the interior of the Passage 1901 was made much customer friendly and the ordering and bill payment became much more operational. No longer large table dominated the restaurant interior scene and the more focus was put on insuring that, no one feels threatened or petrified by the enormity and massiveness of the internal structure.Illustration 2, Source: www.seyyah.az

Although the interior of Passage 1901 was quite large, it used to be able to accommodate 10 guests when people gathered at large tables. When other guests came, we could not force them. In such cases, it leads to the permanent loss of our customers. But when we reduce the number of people at the tables, we will have a table opportunity for all our customers. When we always show a good place for the customer and the service is good, our customers bring in another customer.

New Communication Strategy: What comes last was the communication part of the rebranding, which is one of the most essential aspect of marketing plan. Unless a proper, appealing and at the same time ethic and authentic marketing communication tool is employed, all efforts at rebranding and re-designing would be futile (Azizo, 2018). At the beginning, Passage 1901’s main communication strategy was word of mouth, its visibility in the center of the city and occasional paid advertisements in the city high boards. However, with the advent and development of information technology and television, the landscape of the advertisement and communication had changed, something the restaurant management was painfully aware and as a result of the management deliberation, it was decided to change the scope of the communication and advertisement. The director said that the previous communication strategy was not a strategy in essence, but rather a byproduct of Passage 1901’s existence and operation, to put it blatantly. In the new communication strategy, it was decided that highway board signs and posters will be totally eliminated as it did not lead into higher numbers of customers and led to portrayal of the restaurant as a cheap one-time dining venue. Secondly, more focus was put on television advertisement as economic development allowed more people access to television and other public broadcasting avenues. Thirdly, by that time, the idea of celebrity endorsement was gaining traction in the country and the royalty paid for it was relatively small compared to the magnitude of the audience the celebrity endorsement allowed the restaurant to. The management though that a picture of celebrities dining at Passage 1901 in the city center would be appealing to thousands of people who are following these celebrities on social media and through other channels. Last, but not least, paid advertisement was conducted, especially on Facebook, YouTube, Vkontakte and Odnoklassik (: D), the most famous social media sites in the country at that time.
Until the last 5 years, billboards in Azerbaijan were very popular, and when people saw a restaurant or cafe on the billboard with great interest, they definitely wanted to go there. Billboards were the cheapest source of advertising in Azerbaijan, due to the presence of billboards every 100 meters. But over time, people lost faith in these boards, because 1-2 restaurants were advertising on these boards. However, the services were so bad that people realized that such advertisements are only for attracting customers.
In the very center of the city, our advertising agents began to inform people about our restaurant and gave them an advertisement, which contained detailed information about our menu, address, and working hours. However, such advertisements were very expensive for our company, because we paid our employees every hour. Such ads brought us 5 or 6 customers a day, but the daily cost was close to the profits of an average of 10 customers.
The best advertising tool for us will be silent TV and social media. The population of Azerbaijan spends their free time mainly watching TV. There are 2-3 habits that the population of Azerbaijan watches every day, such as “Ay Gonshu”, “Salam Zaur”, “Kimi Axtirsan”. Advertising our company in these programs will greatly increase the number of our customers. However, it is impossible to do these programs for a long time. Because they charge you an average of $ 800 for each program and only 5 minutes of advertising. However, it is possible to increase the number of our customers by advertising in 2-3 programs.
The most effective method of advertising is silent social media. Let’s start with Google, which is something that people use to search every day. The first step an enterprise must take is to open a business account here. Opening a business account makes it easier for people to find us on Google Maps and other maps. In the business account, it is necessary to provide detailed information about the company, and here it is necessary to record the daily working hours. When people type the name of our restaurant in the Google search network, they automatically display information about the company’s photos, people’s reviews, the company’s address, and business hours. If we use Google ADS, then when someone writes “restaurant” on Google, our restaurant network will appear first. But it is necessary to use proper SEO on all social media. This means that the company must be properly analyzed and the right target must be chosen. Our target is mainly men and women, we are 22-58 years old and, most importantly, we choose the very center of Baku. Google ADS is basically the most expensive type of advertising, charging an average of $ 1.5-2 per person per click. However, according to many marketers, it is the most effective marketing method. The most used social media in Azerbaijan is Instagram. The social media we spend the most money on advertising in our minds on Instagram. We will definitely sign a contract with any advertising agents to come and take pictures of our food on a daily basis and advertise it on social media for a fee.
Facebook is one of the most successful social media in Azerbaijan. However, on Facebook, mostly information about the company or a new discount campaign, people are more interested. One of the main differences that distinguishes Facebook from other social media is that if any ad fails, Facebook notifies you and sends you a notification to stop. Instead, it tells you what status you can advertise.
Our restaurant has been featured in many popular food shows in Azerbaijan. Almost every week, different cooking programs are filmed in our restaurant. That’s why our famous chefs were ready to cook under any camera. Youtube is one of the 4 social media used in Azerbaijan. People mostly like to spend their free time here watching videos. We want to open a YouTube account for our restaurant so that we can share our recipes or parties here in the form of videos every time. If you gather a crowd on YouTube, you will watch a lot of videos without paying for ads. In order to shoot on YouTube, we need to have the right camera equipment and know how to edit video.

Results and Discussion

The implementation period for the new marketing strategy was from 2015 until 2016 and according to the testimony of the director, the results from the new strategy was mixed, yielding benefits for some time and leading to the worsening of the situation in others, even though there were also at forces at work here. Starting with the 2015, falling oil prices led to the devaluation of the national currency not once, but twice (CESD, 2017). The fall in the oil price and decreasing income negatively impacted the purchasing power of the local population, who was willing to put the spending on hold and save money for the future in times of uncertainty and crisis. Second external factor affecting the performance of the strategy was the increased competition. Previously free and unsaturated, the food and dining industry in Baku experienced a boom right after the oil crisis with many famous foreign and local brands establishing branches in the country and squeezing the local restaurants in the country.
As mentioned early, the marketing strategy brought a mixed results. On the positive side of the story were initial enthusiasm and positive reactions by the customers to new strategy specifics and this reflected itself in the larger number of customers, more visibility on social media and more criticism, which is usually a result of more exposure to the market, said the director of the restaurant. However, gains of the marketing campaign was offset by its failure at reaching the objectives set at the onset of the campaign. Initial enthusiasm and customer flowing in led to the euphoria and complacency on the part of the management who was satisfied with the initial results and did not press on to gain further results. The increase in price had a reverse effect, stirring criticism and backlash online, leading to accusation of price gauging, said the director. Celebrity advertisement was also not as effective as it was previously imaged as the excessive amount of royalties asked by the celebrities made it untenable for the restaurant to pay such a huge amount of pay and pray for the hypothetical payouts in the future. However, the biggest blunder was the failure to incorporate the take away food within the new marketing strategy. The director told that even though there were plans to follow through and sign an agreement with one of the companies, the obsession of the management with the take away food industry being a transient hype of the day led to its dismissal by the management. That turned out to be ungrounded assumption as the emergence and development of the take away food industry a few years later would attest. In the end, the strategy did a little to alleviate the financial bottleneck the restaurant is facing and as a matter of fact, the number of customers coming to dine at Passage 1901 has never been lower, which has necessitated layoffs and downsizing the operations.

Recommendations for the Successful Future

As the case above illustrated above, the fate of the marketing strategy depends on several factors, some which are beyond our control, especially the control of a restaurant owner. However, that idea should not lead to general sense of complacency and the marketing strategy should be as much comprehensive as would allow for the marketing director to prepare for the contingencies and unforeseen circumstances. Using the marketing mix below, I will deliberate on how the restaurant owner can use the 4 Ps in order to increase the number of customers and take advantage of the booming food and dining industry in the country.

Product: The quality and the range of the menu should be extended with the focus put between the symbiosis of the national and foreign cuisine. One way to achieve that will be to invite foreign cooks and allow them freedom to make a variety of dishes. Training the capacities of the staff and increasing the operational abilities can also improve the quality and brand reputation. On the other hand, with regards to foreign cuisine, Passage 1901 will do itself a favor if it chooses to specialize in certain foreign cuisine. A place known for a specific foreign cuisine is much more appealing than a place serving a foreign food.

Price: Although the price was an important part of the initial marketing strategy, sudden increase did indeed spook the customers away and led to its criticism. The intention is to restore the reputation of the Passage 1901 to its former glory, not to be bombarded with accusative messages about price gauging. The way to go forward is to reformulate and revise the pricing strategy and chose the national income in the country as the guiding principle as it Passage seeks to become a place for middle class professionals.

Place: Changes and restricting of the interior and exterior of the design was one of the biggest contributors to the moderate success of the new strategy, confessed the director. However, the biggest mistake made in this regard was the dismissal of the take away mechanism. As the time showed, the take away industry was not a hype of the day, but a harbinger of the bigger and fundamental changes to come in food and dining industry. By moving in early and establishing agreement with the take away companies, Passage could relish first mover advantage and carve out a lucrative niche for itself. However, it is not late and the Passage can still reorient itself to serving customers remotely by establishing agreements with the companies mentioned above. Another advantage of this is the publicity and free advertisement.

Promotion: This is where the communication strategy of the company matters the most (Appelroth, 2015). The Passage 1901’s previous promotion strategy was adequate not up to date and it did underline the role that internet and online advertising was playing, it failed to fully incorporate it to its marketing strategy. Given the huge importance Instagram has played, Passage 1901 should invest in paid promotions in Instagram and increase its visibility in the platform. On the other hand, celebrity endorsement in social webpage is much worthy as the celebrities have much more followers. Passage 1901 should also open an accounts in Instagram, Tiktok and other famous social platforms. Finally, for the communication strategy to work to its full potential, a restaurant website will be particularly helpful as it will allow the potential customers a better understand of menu, prices and the place in general.

Conclusion

In this paper above, I analyzed the marketing strategy of the restaurant called Passage 1901 and underlined the mistakes and blunder made during the implementation. To increase the customer base and profits, I provided several recommendations to the restaurant including more presence on the internet, strategic pricing and menu reshuffling, better and tailored communication strategy and finally, opening of the restaurant webpage where visitors and customers can get full and up to date information on the offerings at Passage 1901.

References

Appelroth, E. (2015): Marketing Plan for a Restaurant, Tampere University of Applied Sciences, URL:
https://www.theseus.fi/bitstream/handle/10024/101013/Appelroth_Erica.pdf?sequence=2&isAllowed=y

Azizo, S. (2019): The Art of the Rebrand: Utilizing Strategic Communications to Obtain Employee Buy-in During a Rebrand Obtain Employee Buy-in During a Rebrand, City University of New York (CUNY) CUNY Academic Works CUNY, URL:
https://academicworks.cuny.edu/cgi/viewcontent.cgi?article=1089&context=bb_etds

CESD (2017): What to Expect from the Monetary Policy of Central Bank of Azerbaijan, Research Paper, URL:

What to expect from the monetary policy of the Central Bank of Azerbaijan?

Egan, B. (2016): Introduction to Food Service and Menu, Pennsylvania State University Creative Commons, URL:

Chapter 4 – Menus

Online Sources

www.seyyah.az

www.azerbaijan360.az

Note: The company data and analysis of the marketing strategy was possible thanks to the participation of the company director in online interview.

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