Baking Up Business

It’s already the 1^st of December! To retailers, today may signify more than just the beginning of the holiday season. Countless companies rely on holiday sales to make the bulk of their annual profits, and the Bakery is no exception. After all, who can resist fruity Christmas stollen, chocolatey yule logs, delicious gingerbread everything, and scrumptious sufganiyot? Personally, I even love fruitcake (the more candied fruit and marzipan on top, the better)!

What makes these items special is their availability, or lack thereof, during the other eleven months of the year. In a way, these holiday treats function as a sales promotion, since they are offered only for a limited time and used to stimulate consumer demand. Integrating these limited-time offers with other sales promotion elements in a pull strategy opens the opportunity for a substantial surge in sales. At the Bakery, free samples and premiums (gifts with purchase) are also used to drive sales. Butter tart, anyone? 

As always, but perhaps even more so at this time of year, personal selling remains an important element in the Bakery’s promotional mix. There is likely to be resistance from a customer when trying to convince him or her that a $75 gingerbread house would make the perfect coffee table centerpiece. To address objections, I find that describing specific uses or suggesting food pairings work best in moving the customer towards making the purchase.

Describing Uses: “You can let the children eat away at the gingerbread house after dinner while the adults enjoy drinks together. It keeps the kids happily occupied and they can take home pieces after the party.”

“You can wrap up our decorated holiday sugar cookies individually and attach them to presents with the name tag – so cute – or give them out as party favours at the kids’ table.”

Suggesting Pairings: “Our Italian focaccia bread goes wonderfully with roast turkey or chicken and makes an easy, flavourful side that you only need to cut into smaller pieces and serve.”

“Our cranberry orange loaf pairs well with both sweet and savoury brunch dishes and coffee or tea, or could even be used to make a really special bread pudding with sultanas added in.”

I tend to follow a long-term relationship focus when performing personal selling, simply because I prefer to tell the customer the truth. For example, if a customer asks if our cinnamon bread is moist, I reply that in my honest opinion, it isn’t (because it really isn’t, unless you use it to make French toast, which I usually suggest). Following up with an item better suited to the customer’s needs then works brilliantly, thereby incorporating problem-solving into the sales process. The customer has never failed to thank me for my honesty and usually makes an alternate purchase, either at that moment or in the future.

As I have often mentioned, the Bakery is relatively weak in the areas of advertising, public relations, and direct marketing, but model solutions and competitors’ strategies have already been the topic of previous entries.

To end my final marketing post, I’ll sign off with some spectacular feats of engineering, design, decoration, and artistry in the form of my favourite sign of the holidays: gingerbread houses. I would move into any of them tomorrow.

And finally: how they managed to bake a perfectly spherical roof, I will never know.  

I was thrilled to finally read a post written by a fellow classmate that discussed my favourite topic – you guessed it – bakeries!  In My Le’s post on differentiated products, she introduces a friend’s company named Bridal Cookies, a bakery that specializes in making exquisite wedding-themed cookies. Upon visiting the company website, http://www.bridalcookie.com/, I instantly fell in love with the incredible detail, creativity, and craftsmanship that goes into every single cookie design. All it takes is a single glance to realize that these decorated, sugary treasures could really just sell themselves.

That being said, Bridal Cookies has established an extremely impressive online presence that is perhaps the most important factor in their growing success. Since the company is an e-Commerce retailer, they have implemented a number of services to reduce the risk of making high-volume and thus relatively expensive online purchases. They offer a 100% Satisfaction Guarantee and 24/7 customer support. Customers are able to chat either online or over the phone with a knowledgeable service representative at any time from any country in the world.

As for the cookies’ prices, I find them quite reasonable, even surprisingly so, for such labour-intensive products of astounding uniqueness and quality. Customers are also able to order free samples of their choice, and although shipping costs are not covered for the free samples, 50% of shipping fees are covered by Bridal Cookies for any regular purchase. There are several other free services available to customers, including free wrapping or packaging with ribbons, personalized cookie writing or monograms, and personalized thank-you tags. Customers also have the option of sending in their own customized designs or printing actual photos on the cookies, creating an edible wedding favour that is truly one of a kind.

The website has pages dedicated to positive testimonials from satisfied customers from all around the world, and it’s no surprise, seeing as how Bridal Cookies has managed to mitigate almost every area of potential concern. For example, the cookies can even be made using Halal ingredients upon request. In addition, they ship their products worldwide and provide order confirmation and tracking information. The cookies are able to stay fresh for up to nine months (convenient for any last-minute changes), but orders are nonetheless shipped 24 hours after the cookies have been made. Issues of product breakage are addressed swiftly; however, breakage is claimed to be an extremely rare occurrence.

Bridal Cookies has a Twitter account, a corporate blog, a YouTube and Flickr channel, and a significant following on Facebook, with over 9,000 “Likes” on their Facebook page. Not only that, but customers can also sign up to be on their e-mailing list in order to receive more promotions, special offers, and regular updates. Product, promotion, price, and place – this company has nailed them all.

Oftentimes, the pricing of a product is the most visible indicator of quality. A loaf of bread will look like any loaf of bread, but how else are you to know that the loaf had been hand-kneaded, made of stone-ground, organic flour, and baked in a wood-fired, hand-forged German brick oven?

The prices at the Bakery often elicit a response of shock, confusion, dismay, or in the best of situations, curiosity. “Just why are your breads, pastries, cookies, and cakes so expensive?” This opens up an opportunity for us to give a winning sales pitch, which usually consists of culinary catchphrases along the lines of “decadent, creamy, melt-in-your-mouth heaven.” Unless we catch a hint that the customer is a bakery buff, he or she would rather accept that our levain bread costs $5.79 because of its chewy, heavily aromatic interior and crisp, caramelized onion crust, not because we let our dough starter pre-ferment in a two-stage process involving wild yeast cultures and lactic-acid bacteria. The idea of consuming bread brought to life by rarely-used bacterial cultures is too much to handle for some; all they want to know is that the bread tastes fantastic.

An alternative explanation I could technically give customers is an analysis of the 5 Cs of Pricing. In terms of company objectives, the Bakery follows a profit orientation, as the mark-up on our prices are quite high. It is possible that the Bakery may also be engaging in premium pricing, but seeing as how employees often change prices at their own discretion, this is perhaps unlikely (or poorly implemented).

Customers generally find our prices too high due to their existing reference prices. Grocery store bakeries, Asian bakeries, small, independent bakeries, and even expensive specialty bakeries all charge lower prices relative to the Bakery, even if their prices are still above average.

I would categorize the Bakery as operating in a monopolistically competitive market since product differentiation is one of our key strategies. We rely on our quality ingredients, hand labour, and unique creations to allow us to charge higher prices.

Costs also play an important role in pricing; however, my knowledge of the Bakery is limited in this area. I’m certain the Bakery’s costs are more than covered though, as the cost of inputs in baked goods is not particularly expensive. I would be interested in seeing a break-even analysis, but we sell so many different items that I doubt anyone could tolerate calculating more than one.

The manufacturer of our goods owns all of the Bakery’s locations, as well as the other retailers. The larger Bakery location occasionally acts as a wholesaler, but is not involved in any contracts. The delivery agents who transport the goods from the plant to the retailers also work for this same company, meaning the entire supply chain is vertically integrated. Pricing orientations should therefore be aligned. 

Now, I highly doubt a customer would stand around long enough to hear all this, and I also highly doubt that he or she would find the price of our goods any more reasonable afterwards, but hey, at the very least, I’ll sound smart and the offending complainer will walk away.

We all do it, all the time. We ask ourselves, “Is this (insert indulgence here) really worth the money?” Take the dessert above, for instance. Do I really need a US$25,000 frozen hot chocolate sundae made from 28 different cocoas, 14 of them being the most expensive and exotic in the world, infused with 5 grams of visible, edible gold, and served with a diamond-encrusted gold spoon? Maybe not. This magnificent creation named the “Frrrozen Haute Chocolate” is the masterpiece of New York restaurant Serendipity 3, whose US$1,000 Golden Opulence Sundae does appear on the regular menu and is routinely ordered.

The Golden Opulence Sundae was created in celebration of Serendipity 3’s 50^th anniversary in 2004. However, the menu item remained so coveted among the rich and status-conscious that it became a mainstay on the restaurant’s menu, although you do have pre-order it two days in advance.

What began as a publicity move has actually achieved much more for Serendipity 3. Their restaurant has now been elevated to being a “destination,” a place on people’s lists. There are even online articles outlining “How to Get a Table at Serendipity 3.” The pricing of their entire menu indicates an extremely high level of product quality and a clear profit orientation.

As if the restaurant’s popularity wasn’t assured enough, having Oprah announce in an “Oprah’s Favourite Foods” episode that Serendipity 3’s frozen hot chocolate makes her want to “dance on the chandeliers” sent online sales of Serendipity 3’s hot chocolate mix through the roof. Being put in the spotlight even convinced Serendipity 3 to share the real recipe with Oprah on her daytime talk show, and consequently, with the rest of the world. Take all that and throw in two Guinness World Records, and Serendipity 3 has some serious marketing ammunition that has cemented their long-term success in stone.

Speaking of Oprah, who will fill her shoes after she leaves her immensely popular daytime talk show next year? The “Oprah Effect” refers to the dramatic increase in sales a company experiences after receiving even the most casual of mentions on the Oprah show. Her show has become one of the most powerful marketing vehicles in existence, and virtually all companies dream of receiving such automatic fame and popularity simply by earning Oprah’s stamp of approval.

Is there anyone currently in the public arena other than Oprah who can influence audience’s perceptions on a product (or person) almost entirely on the basis that this public figure is perceived to have incredibly good taste? Is there anyone else whose main audience already consists of primary purchase decision-makers and trend-conscious suburbanites? Consumer behaviour may be easily influenced, but it takes an especially influential individual to get the job done right. Love her or hate her, Oprah is the one.

Product innovation plays a crucial role in keeping a firm relevant to its target market and allowing the firm to continually create and deliver value to its customers. The needs, wants, and interests of customers often change over time, so product innovation becomes the key to long-term customer satisfaction. Offering new products or repositioning existing products also keeps current customers hooked to the firm and maintains loyalty.

But what if the firm is a bakery? Product innovation is rarely seen in most bakeries; after all, most customers enjoy their favourite childhood treats and flavours that are familiar to them the best. Bakeries will, of course, offer their own take on classics such as fudge brownies and lemon tarts, but “new-to-the-world” baked goods are not easily produced or seen.

 Here is where the latest “it” factor bakery comes in: Bonchaz Bakery Café in Downtown Vancouver (on W Hastings St. between Richards and Homer St.). In addition to their regular café menu that offers coffee, soup, and sandwiches, they serve up a “new-to-the-world” product: the Bonchaz.

The Bonchaz is a delicious marriage between a Mexican concha, a French brioche, and a Chinese pineapple bun with filling. This soft, light pastry combines the cookie-like shell of the concha, the mouthfeel of brioche, and the concept of a filled pineapple bun into one. Available in five flavours and fillings, each bun costs less than $2. The location of the bakery is ideal too; SFU students and other downtown commuters are always drooling right outside.

Another remarkable aspect to Bonchaz Bakery Café is their primary means of promotion. The bakery’s website is their frequently updated Facebook page, and Bonchaz is also active on Twitter. Using this form of communication is uncommon for a small bakery with only one location, but they have been successful in using it to their advantage. Their booths offering free samples at a variety of local destinations, such as EAT! Vancouver 2010, the Coquitlam Farmer’s Market, Lonsdale Quay, and the Chinese New Year Celebration at Dr. Sun Yat Sen Garden have also helped establish followers and fans all over Metro Vancouver. 

Is there the possibility for Bonchaz, a first mover, to be overtaken by a second mover? It is possible, but in my opinion, the prospect seems unlikely. I believe Bonchaz will follow in the footsteps of Japadog and Beard Papa’s – firms that offer food products so unique and distinctive to that firm that all imitations would be perceived as inferior. However, even though Bonchaz has been creating buzz over the past year, the opportunity still exists for a new bakery with an even fresher “it” factor to open up shop right around the corner.

After checking out the latest post on my fellow classmate Amelia Lak’s blog, I’ve hit a few conclusions on her topic of choice – whining – of my own.

She makes a strong point: “To save the reputation of your product once it has wronged a consumer, marketers need to contain the whining. More whining leads you to noticing even more negative aspects about the good, whether conceived or actual, who knows – it doesn’t matter. When you pass it on through word of mouth, it progressively becomes more exaggerated and far worse than what it first started off with.”

This could not be any truer. At the Bakery, we hear our fair share of whining from our customers, from our “stay-away-from-the-diet-buster” never-will-be customers, from other employees, from cranky children nearby, from their fed-up parents also nearby – you get the idea.

The most damaging form of whining, however, comes from our customers. Or more specifically, the customers we have lost. Picture this: a customer, after paying an exorbitant price for a small slice of diet-busting cake, eagerly tucks into the baked delight, expecting the advertised “moist, tender, buttery crumb” and the irresistible “zesty lime and refreshing coconut” flavour to bring intense satisfaction to her afternoon. Instead, she bites into a dry, stale, crumbly cake with no pronounced lime or coconut flavour to speak of. Enraged at this realization, she does what many modern consumers today do: rant online.

Bakeries, restaurants, cafés, and the like all face a similar problem in that online reviews could make or break their business. There are a ton of websites solely dedicated to reviewing food (and oftentimes service and location) and a ton of people who read them. Since the Bakery’s products are pricey and are often considered a shopping good, many consumers choose to read online reviews before coming out to make a purchase.

There are admittedly perhaps more negative reviews online of the Bakery’s goods than positive, but there is a possibility that customers who were satisfied with the Bakery’s products never felt motivated enough to share their experience. But what can be done to address all the negative reviews? How can this kind of word of mouth be contained?

It is my view that word of mouth online cannot be contained. Nothing can be done about that – people have unlimited access to the Internet and the right to express their opinion. However, I believe that one of the best ways to address negative reviews is to reply to them. It always impresses me when the owner or manager of a restaurant or business takes the time to go to these websites and thank customers for their review and respond to the concerns or issues that they had by posting comments of their own.

This shows exemplary, albeit a new form, of customer service, and can help reduce post-purchase dissonance and customer dissatisfaction. And what business couldn’t do with a little less whining?

Take a look at the photo above. Can you recognize and name that specific type of bread? If your answer is no, don’t feel bad. Hardly any of our customers can either. In fact, most of them can’t even pronounce it.

It’s ciabatta, an Italian white, yeast-risen bread known for its elongated, flatter shape and soft, porous interior. “Ciabatta” is also the Italian word for “slipper.” However, the only thing our customers are interested in is why this “squashed loaf” has so many gosh darned holes in it. Let’s see…because it’s supposed to?

This brings me to my main point. At the Bakery’s tourist trap location, our artisan bread line does extremely well. The location is a prime stomping ground for serious gourmands, chefs, and foodies alike. There are overpriced cheeses, meats, sauces, produce, seafood, and pastas abound. Our breads may also be expensive, but an identifiable market segment exists in that location for people desiring high-quality levain, spelt, semolina, and other unique loaves.

But at the Bakery’s location in the mall, sales of the artisan bread line are consistently flat. When my manager first informed me that the Bakery was launching their artisan breads at the mall, I was skeptical from the start. Her reasoning was that there was no current retailer of artisan breads anywhere nearby. I wonder if it ever occurred to her (or the marketing department, if one even exists) that there is, in fact, a reason why.

There is a Safeway meters away that sells loaves for a third of the price of our breads and a neighbouring, well-known Chinese bakery that rakes in enormous sales of Asian-style bread everyday. If you’ve ever had Asian-style bakery bread, you’ll know that it has nothing in common with crusty, dense, hearty European artisan breads.

If the manager (or marketing department) of the Bakery evaluated the segment attractiveness of our intended target market in relation to the mall’s geographic area and the demographics of the mall’s primary clientele, it would be realized that the market segment for those wanting artisan bread, especially in this area of Vancouver, is not attractive at all. The segment is not identifiable, substantial, reachable, responsive, or profitable.

There is no identifiable need for “fancy, made-to-impress” bread in this area. The number of customers who do purchase one of our loaves is dismal; it is not uncommon for us to sell less than ten loaves a day. Reactions to free samples of our bread vary, and some customers are even dissatisfied with the different taste and texture of our nothing-like-Asian-style breads. Reaching customers is difficult when we’re forbidden to leave the shop, and the Bakery’s online presence is near non-existent. As for profitability, the Bakery’s profits are clearly made from the sale of our other items.

I won’t be surprised to see the ciabatta go in the next few months or so. But if the Bakery was smart, it would be gone tomorrow.

Click on this link: http://sethgodin.typepad.com/. It may just be the most worthwhile thing you do today.

In addition to all that he already does and did, Seth Godin, a well-known American entrepreneur and marketing guru, keeps a blog. In this blog, he shares his insight on different aspects of the marketing world in the form of short but powerful quips that can inspire even the most energy-drained university student to do some hard thinking at the crack of dawn.

In his post titled “Loyalty,” Godin makes some thought-provoking remarks on the topic of customer loyalty:

“Loyal customers understand that there’s almost always something better out there, but they’re not so interested in looking. We’re loyal to sports teams and products (and yes, to people) because being loyal makes us happy. I think there’s no doubt that some brands and teams and politicians and yes, people, attract a greater percentage of loyal fans than others. Not because they’re bigger or better, but because they reinforce the good feeling some people get when they’re being loyal.”

So how can this message apply to a business like the Bakery? Well, the Bakery is certainly doing one thing right. It charges sky-high prices.

Think about it: charging the lowest price is not the way to attract loyal customers. As Godin puts it, “If your offering is always better, you don’t have loyal customers. You have smart ones.” If the customer knows he or she is buying the cheapest product available and getting a great bargain, any good feeling he or she might have felt for supporting the same business on a long-term basis would be negated.

So what is the best way to reward customer loyalty? If Godin’s definition of customer loyalty holds true, reward systems such as points programs only add to the original product’s value, thus making the product itself a more attractive offering. According to Godin, this detracts from the customer’s feeling of loyalty.

In my view, the best way to reward customer loyalty is to provide great customer service. By building a friendly rapport with a loyal customer and treating him or her with the highest amount of respect and appreciation, he or she would feel compelled to return because of something other than the products for sale, something that could be uniquely offered to that customer alone.

As usual, the enormous, freshly baked tray of the most temptingly gooey cinnamon buns arrives at the Bakery, ready to be sold and joyfully consumed. Just then, a customer steps up to the counter. “I need a cinnamon bun,” he says. Luckily, I had already begun to carefully separate the buns from one another, starting logically from the bottom corner. “And I want…the fifth row from the left, sixth one down.” Just my luck – it’s one of those customers.

Getting these customers’ desired sticky buns is no easy feat. By the time their bun is packaged to go, at least three other surrounding sticky buns look like they’ve been partially put through a grater, and I am covered in more caramel goo than Lady Gaga has on in makeup. It’s no joke – these buns are seriously gooey.

But what can I say? The customer will always get what he or she wants. For some customers, what they purchase at the Bakery are indeed specialty goods. The Bakery’s primary location is in a tourist trap, so serving customers who announce they “came all the way from Texas” or “made their annual summer road trip here” just for a heavenly taste of the Bakery’s cheesecake is not uncommon at all. Forget the fuel costs – these are specialty goods they’re here for! There is no way these customers are leaving the Bakery without exactly what they want in tow.

For some customers, but especially the ones ordering a pricey customized cake, the Bakery’s goods are a shopping good. They want a beautiful, high quality product for the best possible price, so comparing all alternatives is important to them. Believe me, cake shopping for a certain special occasion one day will awaken your inner Nancy Drew too.

Last but not least are the customers who purchase the Bakery’s products as convenience goods. And more often than not, it’s an impulse buy. Why? It’s simple. Nothing draws the immediate attention of a boyfriend/husband bored out of his mind from shopping all day than the sight and smell of food.

The other day, a woman who looked to be about in her early 40’s approached the counter. “Are any of your muffins low-fat?” she asked. I replied, “No, but all of them are delicious. My favourite is the bran muffin. And bran is healthy!” She pursed her lips and retorted, “I only eat low-fat muffins.” She continued to eye the attractive array of muffins for a few minutes longer, and then retreated into the crowd.

Less than ten minutes later, the same woman reappeared. “Oh, I really wish you carried low-fat muffins,” she said. “I can’t find any and everything looks so good!” At this point, I contemplated taking out a Sharpie and scribbling “low-fat” on the muffin signs, just so this woman could get over herself and buy the darned muffin. (The longing in her expression was truly the definition of obvious.)

After the woman finally left, I wondered what regulations existed that would prohibit me from labeling the Bakery’s muffins as low-fat.  Besides, none of our products even come with a nutrition label. Have you ever walked into a fancy bakery and seen calorie counts posted everywhere? I think not. However, I have walked into a fancy bakery and seen select goods labeled as low-fat. So who decided that?

In Canada and the United States, commercial goods with 3 grams of fat or less per serving are allowed to be labeled as “low-fat”. This has been stipulated by law. But in the case of these corner shop cafes/bakeries, have they really sent in their muffins for a professional nutritional analysis? Even if they’re, for example, substituting applesauce for some of the baking fat (i.e. vegetable oil), do they really know for sure whether there is less than 3 grams of fat per serving? I have my doubts.

I imagine there must be some kind of “low-fat label” police out there, cracking down on these sneaksters offering scrumptious, not-really-low-fat muffins. However, monitoring is only performed on companies whose products find their way into chain retailers located nationwide. So until labeling regulations are extended, the “low-fat” muffins available in your local corner shop bakery will undoubtedly continue to sell…and find their way to thighs near you.