Pizza Hut strategic plan Essay

Executive SummaryThis proposal describes pizza pie pie hut and the cosmos of a vernal produce c each(prenominal)ed The original. A picture biography of pizza pie field hut is provided at the beginning of this proposal along with an digest of the fast forage indus exertion. Current drives in demographics and releaseing habits ar included.A SWOT analysis has been d wholeness to identify pizza hovels competencys, flunkes, opportunities, and threats so that these agentive roles kitty be taken into con inclineration in deciding whether or non to launch the impudent extreme point pizza pie. Some of the get word elements of our merchandising protrude basic describe the Extreme pizza. It get out be the largest pizza on the mart, with double the cheese and double the toppings. We go out hind end the X and Y contemporariess, which is the fastest growing element in the States. This fragment has been victorfully crossed before using the ingrained angle. This a tom is has been a sh be that hasnt been scrapeed to the aim that they should in this industry and we plan on changing that. We impart employ ultimo financial data to establish bonnie inclinations for the return and energize set limits on promotional sinking. We volition be using a laid-back/ crushed footing dodging, price this untried pizza at $9.99.Our principal(prenominal) gross sales promotions will be oblation the Extreme pizza constrictd with set Dew to fool propagation X and Generation Y. We will be using study channel distribution as well. This pizza will be avail sufficient through dine-in, carry-out, deli genuinely, and stationing on the network.1)Introduction pizza pie chanty was started in 1958, by both br differentwises in Wichita, Kansas. abrupt and Dan Carney had the idea to open a pizza parlor. They borrowed $600 from their mother, and opened the very first pizza pie chantey. In 1959, the first franchise unit opened in Topeka, Kansas . Almost ten years later, pizza chantey would be portion unitary one million million clients a week in their 310 locations. In 1970, pizza pie hovel was put on the New York Stock Exchange beneath the ticker symbol PIZ.In 1986, pizza pie hutch introduced delivery service, something no other eating house was doing. By the 1990s pizza chanty sales had reached $4 billion worldwide. In 1998, pizza pie hutch celebrated their fortieth anniversary, and launched their famed labour The Best pizza pies Under One Roof. In 1996, pizza pie Hut sales in the United States were over $5 million. expose of all the existing pizza chains, Pizza Hut had the largest mart sh ar, 46.4%. However, Pizza Huts commercialise sh ar has slowly eroded because of penetrative disceptation from their rivals dominos, Little Caesars and sensitive write outr Papa derrieres. Home delivery was a driving force for success, e particular(a)ly for Pizza Hut and eye masks.However, this forced competitor s to look for invigorated methods of increasing their customer bases. numerous pizza chains decided to diversify and oblation brand- latefound non-pizza items such as buffalo wings, and Italian cheese bread. The afoot(predicate) trend in pizza chains to twenty-four hours is the same. They all try to come up with some newer, bigger, better, pizza for a low price. Offering special promotions, and new pizza variations be habitual today as well. For practice session, moaner is now a common topping found on pizzas.In the past, Pizza Hut has al paths had the first inspirer value. Their merchandising system in the past has al charges been to be first. One of their main strategies, that they mum follow today is the diversification of the increases they offer. Pizza Hut is everlastingly adding something new to their menu, trying to reach new commercialises. For example, in 1992 the famous buffet was launched in Pizza Hut eaterys worldwide. They were trying to offer umpt een a(prenominal) different food items for customers who didnt necessarily want pizza.another(prenominal) strategy they used in the past and atomic number 18 still using is the diversification of their pizzas. Pizza Hut is perpetually trying to come up with some innovative counsel to take form a pizza into something slightly different different rich that customers will think its a whole new harvesting. For example, lets look at some of the pizzas Pizza Hut has marketplaceed in the past. In 1983, Pizza Hut introduced their Pan Pizza, which had a guarantee of being fructify to eat in 5 minutes when dining at Pizza Hut restaurants. In 1993, they introduced the BigFoot, which was ii square feet of into 21 slices. In 1995, they introduced Stuffed perkiness Pizza, where the crust would be filled with cheese. In 1997, they marketed The Edge, which had cheese and toppings all the way to the bounds of the pizza. Currently, they are moveing The Big NewYorker, trying to bring th e famous New York style pizza to the whole arena.Lastly, Pizza Hut has always valued customer service and satisfaction. In 1995, Pizza Hut began ii customer satisfaction programs a 1-800 sum up customer hotline, and a customer call-back program. These were implemented to make sure their customers were happy, and always wanted to return. In our plan, we will first set in a situation analysis of current and relevant environmental conditions that affect our plan. Next, we will give a brief analysis of the current fast food industry, and whatever trends or changes that tycoon occur in the future.Also, a SWOT analysis of Pizza Hut will be included. Identification of current and potential competitors will be discussed in the SWOT analysis as well. Next, we will list our market objectives for this plan and our rationale for the selection of these objectives.2) Situational AnalysisA number of demographic and societal trends in the United States contributed to incrementd demand for f ood watchful outside the home. The divorce rate is almost 50%, and there is a growing trend showing that wad are choosing to get get married later in life. Because of these factors and some others, the atomic number 53-person household re infixed about 25% of all U.S. households in 1998, up from 16% in the 1970s. thither has excessively been a trend in the 1990s showing that separates are choosing to eat out to a greater extent than often than eat at home. Another factor to consider is the increased number of women working outside the home. In 1998, 59% of all married women had careers. As a result of more women in the workforce, household incomes are now combined and are much(prenominal) steeper(prenominal)(prenominal)(prenominal) than previously. According to Restaurants and Institutions magazine, more than one- 3rd of all households had incomes of over $50,000 in 1996.The cabal of higher incomes and dual-career families resultin less clip in the home, wherefore less time to cook food at home. Also delinquent to higher incomes, consumers let more disposable income, allowing them to eat out more often. However, in the early 1990s, the growth of traditional fast food restaurants slowed rectify because the U.S. market had become saturated. The slowdown in growth intensified competition for market share and lead to consolidation. Many chains found that their market share could be increased by buying an existing corporation rather than building new units. Mergers and acquisitions had a powerful effect on the fast food industry. The top ten fast food restaurant chains controlled over 60% of fast food sales in the U.S.3)Industry AnalysisAccording to the National Restaurant Association, food service sales were $320 billion for the 500,000 restaurants in the U.S. in 1997. The U.S. restaurant industry grew 5.2 percent in 1997. Six major atoms make up the fast food fragment of the food service industry. Sandwich chains, like McDonalds and Wendys are the number one constituent, followed by dinner houses, such as Applebees and Red Lobster. Pizza chains are ranked third. Out of all the pizza chains, Pizza Hut has the largest market share, 46%, followed by Dominos with 21.7%. International sales have become more and more important to the fast food industry. In 1998, Pizza Hut was the number one global chain with units in 88 different countries.In 1990, Pizza Hut opened two restaurants in Moscow where 20,000 customers were served a week, about the bill serviced by 10 the Statesn Pizza Huts. As profitable as the fast food industry is, there has always been one problem that many fast food companies cannot square upm to overcome. Because of Americas large aging population, greater awareness and interest in health issues have resulted. Nutritional value of fast food is a huge problem. For many people, fast food mechanically kernel low nutritional value. As a result of this, many chains have introduced items that are low calorie and low fat. Despite their efforts, many critics and consumers savor that their efforts were not satisfactory in providing a healthy meal.4)SWOT AnalysisPizza Hut has many different strengths. Name recognition is an obvious strength for Pizza Hut. Pizza Hut has been approximately for a long time, and consumers bop the name well. Another big strength and even a combative advantage is the fact that they have a full service restaurant as well as delivery services. to the highest degree of Pizza Huts competitors do not have restaurants. Because of the restaurant, Pizza Hut can market to many different fractions that other pizza chains cannot. For example, Pizza Hut can market to families much easier than Dominos or Little Caesars. Pizza Hut offers a sit-down, conversational emblem restaurant where families can take their children for birthday parties for example. Pizza Huts great selection of products also makes it easier for them to market to different market segments.However, the fact that Pizza Hut does have a restaurant to run is also a weakness. Pizza Hut has higher overhead costs, due to the restaurant that other competitors dont have to distribute with. Another result of higher overhead costs is higher prices Pizza Hut must charge. Obviously, Pizza Hut is not the low cost producer. They rely on their woodland pizza and good service to account for their higher prices.An indirect weakness that Pizza Hut has is that they have lost a lot of their customers and market share due to such intense competition with competitors. Pizza Huts opportunities are almost endless. They can increase revenue with their new innovative pizzas, and increase bulls eye loyalty with good customer service.Another opportunity that Pizza Hut has is their new ordering online system. Anyone with Internet approaching can order whatever they wish and get it delivered to their house without even speaking to someone. This program has just been started, so we do not have any numbers to support whether or not it will be a success.Pizza Huts number one threats are from their competitors. Currently, their closest competitor is Dominos Pizza. Dominos main matched advantageover Pizza Hut is their price. It is generally unhorse than Pizza Hut. Also, Dominos was very profitable when they ran the promotional deal of delivering a pizza within 30 minutes. However, many lawsuits have been filed against Dominos in the past for reckless driving by their drivers, so Dominos withdrew the promotion. Little Caesars is another one of Pizza Huts competitors, right behind Dominos in market share. Little Caesars is famous for fling large quantities of pizza for less property. Other competitors include Papa Johns, Sbarro, and Pizza Inn.A problem facing all of the pizza chains is that each of their individual competitive advantages are pretty much bothones competitive advantages. Most if not all the top pizza chains offer deliver delivery, and always have some sort of promotional deal oblation large pizzas at reduced prices. Other competitors to take into consideration are frozen pizzas and make-it-yourself pizzas that are purchased in grocery stores. Some examples of these are key Pizzas, Boboli, and DiGornio pizzas.5)Marketing ObjectivesBeing that Pizza Hut holds the most market share in the pizza industry, the perceived quality and service of the association will dish up to ensure a better than come chance at a successful knowledgeableness of a new product. The pizza industry firms are famous for introducing new products to spark short-term sales. Pizza Hut as stated earlier has been very successful at accomplishing this. The introduction of a product that keeps with todays trends is also important to reduce the find of failure. In recent years there has been an increase in the marketing of products with an extreme twist to them. Mountain Dew, which is a brand name have by Pizza Huts parent company, Pepsico, has been very successful at dis tail end itself to this segment of the market, which has sparked new interest in the soft drink. Many other imitators have followed in there footsteps and have been successful as well. Pizza Hut has the resources available to research and implement a new product with great success.Pizza Hut is the leader in innovative products and this new product that weare proposing will surely be a success, assumption Pizza Huts track record. With high competition from the other top firms in the industry, the introduction of a new product is necessary to keep one step ahead of the competition. We propose that Pizza Hut introduce the Extreme Pizza. This pizza will be larger than the competitors at twenty-inches and have double the toppings that the competitors have. Pizza Hut will market this product along side other extreme products such as Mountain Dew, to help Pizza Hut capture part of this new segment of the market.The selection of pizzas offered by the competition have been significantly less ye asty than that of Pizza Hut in the past and Pizza Huts reputation of offering high quality, new products will allow this new product to move into the market as other new offerings have in the past. With the introduction of a new product, one of our main objectives is to create recognition for our product. Our goal is to reach 85% recognition of the new product in our target market.As with all businesses, the most important goal of a company is to increase revenue and profits. With the introduction of this new product we hope to increase the overall sales of the company by 7%. If we can in fact reach our goal of 85% recognition of the product, through a successful promotions mix, then the increase in sales should be substantially acquired.6)Target MarketsWith the introduction of the Extreme Pizza from Pizza Hut, the name itself is an indication of the target market sought. In todays world of adrenaline junkies and extreme sports, a products affiliation with the world of the extreme has grabbed the attention of the younger propagations. These generations bunk from the age of 12 to 30. These generations are affectionately referred to as the Y and X generations. For many years marketers ignored this segment and simply stereotyped them as slackers or losers. However, this has not been the case in recent years. With extreme sports devising an entrance into pop culture in the early 90s, many companies have realized the potential for high returns by targeting this highly diverse segment of the market. In America today, there are 71 million Americans that fall between the ages of 12 and 30, making generations X andY the two fastest growing segments of society.The overall spending power of this segment is ccc billion dollars a year, with a large percentage of that money washed-out on non-essential items. The reason for the high amount of spending in this segment has been associated to the times that they have grown up in. Unlike the baby-boomers, there has been no times of risk or economic depression in their lives. This is a generation with a spend now, pay later attitude, which has made for high spending averages on a per person primer coat. In 1997, The National longitudinal Survey of Youth, found that the median amount of cash that children sire from their parents for appurtenant spending is $50 dollars a week. This kind of spending money that children are given is what Pizza Hut wants to target with the Extreme Pizza. However, children living at home are not the only o nes to have plain money to burn.A study on the spending habits of college freshmen also indicates a high percentage of money being spent on non-essential items. The results showed that an average of $56 is spent monthly on eating out. This information on this segment of the market, gives Pizza Hut a window to offer a product that will attract these customers who not only have the money to spend on such things as pizza, but who have do so in the past. In the past Pizz a Hut has not specifically targeted the younger generations with products. They have created a more generic marketing plan, to attract a wide variety of customers. In order for this marketing strategy to work, Pizza Hut needs to target this one segment of the market. The advertize and promotion needs to be very specific to their needs, in order for the money spent on advert to be worth eyepatch. Many products have failed in this segment because they have tried to treat the segment as one group.This segment is made up of many groups and many individuals. This is part of the reason for society labeling generation X and Y members as losers and slackers. So with this in mind our advertising campaign must follow the same ideas by realizing that even within this segment there are many other segments. One characteristic of these two generations, that makes them a prime target for our new Extreme pizza, is the amount of time that these age groups spend with friends in groups. With the lac k of responsibilities that teenagers have, and the lack of home cooked meals while away at college, pizza is aquick alternative for dinner, and a fun way for friends to eat together. Pizza has long been targeted to families, because of the convenience that is present when serving pizza to a group.Teenagers and young adults spend quite a bit of time with friends in groups, whether it be in a mansion house room or at parties. This gives Pizza Hut an outlet to sell a pizza that will fulfill the needs of this younger generation with a product that is designed just for them. With the totality number of Generation X and Y members being so high and the money they spend on non-essential items being as much as it is, this segment could make this product a huge success. However, this is a hard market to target since everyone is so different, but they all have one thing in common, there love for pizza. The most important factor in making this a success will be to design advertising that is a ble to attract all of the individual segments of these generations.7)Marketing MixA)Product Pizza Hut should offer a new product called The Extreme pizza. The Extreme is a twenty-inch pizza with twice as much cheese and toppings as Pizza Huts other pizzas. This new pizza will have many different competitive advantages. The first competitive advantage of The Extreme is that it is the largest pizza on the market. No other pizza restaurant offers a twenty-inch pizza. The second competitive advantage is that it has more cheese and toppings than any other pizza on the market. Another competitive advantage is the Pizza Hut brand name. Pizza Hut has built a brand name that means quality products and services. Since Pizza Hut will be introducing The Extreme, customers will automatically think this is a high quality product. The final competitive advantage is that this product will be the first pizza to target Americas youth.The Extreme pizza will target Generation X and Generation Y or peo ple between the ages of 12 and 30. This market purchases a lot of pizza each year, but very hardly a(prenominal) pizza restaurants actually target them. The Extreme will be introduced on Super Bowl Sunday, 2001. During the introduction stage of the product life cycle, Pizza Hut will try to establish a market for the product and persuade early adopters to buy. During the growth stage, Pizza Hut will try to build sales and develop a preference for the product. Pizza Hut will try to seekdifferentiation during the maturity stage. The Extreme is judge to begin to decline after one year on the market.B)Price In the past, Pizza Hut has successfully used the high/low pricing strategy when setting the retail price of its products. The high/low retail pricing strategy allows Pizza Hut to charge a price that is above the competition, but also promote frequent sales to dismount the price under them. The retail price of The Extreme pizza should be set at $9.99, which is higher than Pizza Hut s competitors. some(prenominal) sales promotions and coupons will be used to lower the price below those competitors. Since both Pizza Hut and the beverage Mountain Dew are Pepsi subsidiaries, bundle pricing will be used. Customers can purchase The Extreme for $9.99 and receive a two-liter bottle of Mountain Dew for save. Pizza Hut will be able to sell two products together at a single price to suggest a good value.The high/low pricing strategy has several advantages. First, this pricing strategy will help segment the market. Different groups of customers are willing to pay different prices for the same product. Pizza Hut can sell The Extreme to the customers who will pay the higher price to be the first to buy and also to the bargain hunters. The high/low pricing strategy will also create excitement. Customers will be able to try something new when they purchase The Extreme and this kindle experience may bring those customers back to purchase other products. Finally, this strat egy will emphasize product and service quality. Pizza Hut sets a high initial price for its products to send a signal to customers that its products are quality and the service is excellent.C)Promotion The main theme that will be used to promote The Extreme is youth. Fun, excitement, danger, and even the term extreme all woo to our target market. Mountain Dew, which has already successfully appealed to this target market, will be included in The Extreme promotions. The main promotion will be a coupon to purchase The Extreme for $9.99 and receive a free two-liter bottle of Mountain Dew. The objectives of this promotion are to introduce a new product, stimulate demand, change the short-term behavior of the customers, and encourage repeat or greater usage by current customers. This promotion will be distributed mainly by mail, but also byfliers on college campuses around the country in order to reach the target market. The Extreme will be introduced on Super Bowl Sunday, 2001, in a v ideo recording commercial.Although Super Bowl television ads are expensive, Pizza Hut has generous financial resources for one. This commercial will be similar to the current Mountain Dew advertising campaign. Several young people will be execute exciting, high-risk activities such as snowboarding, rock climbing, and bungee jumping. The young people will then eat The Extreme and drink Mountain Dew. There will also be similar ads in magazines that are popular with the target market such as Surfer, Snowboarding, YM, and Maxim. This advertising campaign will create awareness of the new product in our target markets.D)Distribution The type of distribution channel used by Pizza Hut is the direct channel. The direct channel is successful when there is an extremely large market that is geographically dispersed. The direct channel is also useful when there are a large number of buyers, but a small amount purchased by each. Pizza Hut uses three different methods of selling its products st raight to the market. The first method of distribution used by Pizza Hut is delivery. Customers can call Pizza Hut ahead of time, place an order, and the order is delivered to the customers home. Another method of distribution is for customers to dine-in. Customers can go to the nearest Pizza Hut, place an order, and either leave with the order or eat at the restaurant. One of Pizza Huts largest competitive advantages is its restaurant style facility. Pizza Hut offers a clean place to sit down and enjoy the variety of pizzas, salads, and sandwiches in a fun, family atmosphere. The third method of distribution is online ordering. Customers can now go on the Internet and place an order. This method is useful because it allows customers to view the entire menu, download any special coupons, and order without having to disclose any credit card numbers. The market pay offage for The Extreme will be nationwide. Customers all over the country will be able to order The Extreme by one of th e three distribution methods.8)Control StageFirst, we will address who will be responsible for the control measures we plan to take. The Marketing Vice President in the Corporate Headquarters, the local/regional Marketing Vice Presidents and the Pizza Hut restaurant managers will all play a role in being responsible for the control. Our success or failure will be determined in a couple of ways. One main way is to compare results to our objectives. If our objectives are not met, steps to meet them will be taken in the future. We will also look at profits, sales revenue, unit volume of the Extreme Pizza promotions used. If our budget allows, perhaps we could give a survey to our customers and get some direct feedback about our new pizza. On sack research is essential for our success. Since our plan is for one year, we feel that every 3 months we should do some type of evaluation and control to see how we are doing. Also, during the maturity state of the product life cycle, we will pu rify the quality and distinguish ourselves well from competitors. Hopefully, this process of control will be monitored on a monthly basis.9)Summary and ConclusionPizza Hut has a successful history of introducing new products to increase sales and reach new customers. This introduction of new products to the market on a regular basis is what makes Pizza Hut the leader in their industry. The level of success that the Extreme Pizza will bring Pizza Hut depends heavily on the correct promotions mix. As we had stated earlier, the segment of the market that we have targeted is a very diverse group. This means that the promotion of the product must be done in a diverse fashion. This will result in a more expensive advertising campaign than in past campaigns, but the potential for a successful product will cover the costs and bring in substantial profit.The advertising campaign is going to be budgeted to use 8% of projected sales. We are forecasting that the introduction of the Extreme Pizz a will increase sales by 7%. This forecast is based upon other new products that Pizza Hut has introduced and the mend that they have had on Pizza Huts revenues. A 7% increase in sales for Pizza Hut will bring a total of $547 million dollars in revenue, making the advertising budget $43.76 million.This kind of advertising budget will allow for a mass media blitz of promotions featuring our new Extreme Pizza. Our target market spends many hours a day in front of the TV and computer, so the constant messages being vie will allow our product to generate a high level of awareness.The advertising of the product is very important but the promotion of this product along side Mountain Dew will help to put our product in a more specific category. Mountain Dew has targeted our target market for several years and is by far one of the leaders in this market. With this in mind promotions with Mountain Dew will be crucial to the success of the Extreme Pizza. With competition being so strong in this industry the threat of imitation products will surely be a problem to be dealt with. Pizza Hut will however have the first mover advantage with this product. With the entry of imitation products into the market, Pizza Hut will have to adjust its mixes to accommodate change. The promotions may have to be bigger and better than the competition, or the product may need to be altered to give it that little bit of an edge over the competition.For example stuffing the crust with cheese or giving a free topping with the purchase would help give Pizza Hut an edge over the competition. Basically, Pizza Hut will need to remain limber in the maturity stages of the product life cycle in an sweat to continue to be the market leader. Overall, this is a product that is not much unlike any of the other new pizzas that Pizza Hut has introduced. What makes this new product so exciting is the marketing plan that is directing the product at a new segment. We are winning a large pizza with a lot of toppings and marketing it as an Extreme Pizza to a generation of younger adults that are consumed by this marketing tool. This is what will make this a success. The mix of promotion and advertising we will be using will target a very profitable, sometimes overlooked market segment known as generations X and Y.