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Business Memo ASSIGNMENT 1: BUISINESS MEMO 2/13/2014 MEMO TO: Papa John’s Pitch Account Executive FROM: Carli Ackerstein SUBJECT: Market Situation for Papa John’s Market research shows that there are only a minimal amount of problems with the Papa John’s Pizza brand, which means that the opportunities for growth can be achieved hopefully by next year or so. The customer satisfaction and product quality have hit their peak, which has caused a stagnant period where there has been no improvement. Also, sales and the number of units in the market are causing Papa John’s to be placed at 3rd overall for top pizza and pasta brands in the quick service industry. For over a decade, Papa John’s has been the one to come out with all of the new tricks that draw customers towards their brand, but with the lack of promotions used compared to the other competitors out there, these tricks can only get the company so far. By addressing these problems, company improvement is one step closer to reaching that number one spot. Product Prices According to Forbes, Papa John’s was a big supporter of Mitt Romney, and when Obama won the election, “Papa” John Schnatter (CEO) knew that the health care reform act would hurt business. Obama’s Affordable Care Act caused prices of pizzas to increase by around 11 to 14 cents per pizza in order to make up for the loss (Melby 2012). In addition, Papa John’s does not initiate discounting and price promotion like its competitors, but instead relies on their slogan of “Better Ingredients, Better Pizza”. By not discounting, Advertising Age states that the competitors have gained a huge advantage over Papa John’s (i.e. Domino’s fourth-quarter same- store sales grew 6.8% and Pizza Hut’s grew 6%) (Morrison 2012). If no consideration goes into adding discounts then all pizza and pasta brands in the quick service industry will begin to surpass Papa John’s, for they will be making more revenue. Having quality pizza at affordable prices is just the ticket to growing the business, but the challenge is to be able to add discounts while raising prices (to counteract Obamacare) and still make a profit. As long as the customers know why the prices are rising and what that extra money goes towards, there will most likely be less of an outrage when paying for a pizza (Creamer2012). Market Share and Media Today’s society has become a mass media circus, and the ultimate goal of a circus is to entertain. Papa John’s has not been placing as much effort into their advertising compared to their competitors. Also, the percent market share is lower than competitors. As reported by Advertising Age, “Papa John's spent about $119 million on U.S. measured media in 2012 and has 7.3% market share, (while) Pizza Hut spent $239 million in 2012 with a market share at 17.1% (and) Domino's spent $197.2 million with a market share at 10.5%” (Morrison 2013). Ranking lowest in market share and in amount spent on advertisements gives the public a negative perception of the product compared to others. More time, effort, and money needs to be placed into the advertising department, because more creative and entertaining ads the customers can become better acquainted with your product and in turn will hopefully cause an increase in market shares. To continue on the factor of promoting, make sure that the promotions are not a nuisance to the customer or a problem with the government. The Papa John’s company was previously sued for sending promotional text messages to their customers without consent, which goes against the federal Telephone Consumer Protection Act (Tode 2012). While Papa John’s has been innovative with getting their name out to the public since 2001, when they were the first national pizza company offering online ordering for all delivery restaurants, to their 2010 nationwide digital rewards program, they must be careful with their out-of-the-box thinking (2014). One thing to begin focusing on, based on the research found from Adweek, is the testing of the “HipLogiq's SocialCompass platform, which searches Twitter based on keywords. Examples include the following phrases within tweets: love pizza; need something sweet; ordering pizza; want breadsticks; want some pizza; want wings; and craving breadsticks. When highly targetable Twitter users are identified, Papa John's pitches them offers such as 20 percent off or buy-one-get-one-free” (Heine 2013). The only thing to be cautious of is how you will pitch the offer, because you do not want another lawsuit against the company. Franchises vs. Online Even with more and more people being drawn into social media, online orders could not be possible without the franchised stores that create the pizza. The Wall Street Journal states that “40% or more of sales (come) from digital orders” (Jargon 2014). This fad of “online ordering is putting corner pizzerias in new peril” (Jargon 2014). It is important to find a quick way of solving this problem in order to prevent Papa John’s stores from closing, so that the delivery routes will not take more time resulting in a longer wait for the pizza. If store begin to close and pizzas are taking longer to deliver the customer satisfaction will decrease. With happy costumers comes a thriving business. It is already a fact as based on the data from QSR magazine that Papa John’s ranks 4th behind Little Caesars, Pizza Hut, and Domino’s in the total number of units they have open and operating in 2012. The average number of sales per unit is $829,000, and if more franchises were to open the more profitable the company would be (Oches2013). To summarize, Papa John’s is in desperate need of a creative yet fiscally responsible idea to help place its brand on top. By finding advantageous ways of pricing the products, placing more emphasis of their marketing and advertising strategies, and increasing their franchising unit, Papa John’s can break through its 3rd place plateau and rise above even our greatest expectations. If you happen to have any questions regarding this research or any of my suggestions, I will gladly meet with you to discuss these points further. Sources Big Pizza Chains Use Web Ordering To Slice Out Bigger Market Share, Julie Jargon, http://online.wsj.com/news/articles/SB10001424052702303743604579350710633713786 , 2/6/2014 Breaking Down Centi-Millionaire 'Papa' John Schnatter's Obamacare Math, Caleb Melby, http://www.forbes.com/sites/calebmelby/2012/11/12/breaking-down-centi- millionaire-papa-john-schnatters-obamacare-math, 11/12/2012 Duane Reade and Papa John's Sales Data Show Promise for Twitter Commerce | Adweek, Christopher Heine, http://www.adweek.com/news/technology/duane-reade-and- papa-johns-sales-data-show-promise-twitter-commerce-152483, 9/17/2013 Papa John's Health-Care Remarks a Missed Marketing Opportunity, Matthew Creamer, http://adage.com/article/campaign-trail/papa-john-health-care-hero/238343/, 11/15/2012 Papa John's Launches Creative Review, Maureen Morrison, http://adage.com/article/news/papa-john-s-launches-creative-review/245309/, 11/15/2013 Papa John’s SMS practices could cost it over $250M in damages, Chantal Tode, http://www.mobilemarketer.com/cms/news/legal-privacy/14234.html, 11/15/2012 Papa John's Tries to Hold the Price of Its Pies, Maureen Morrison, from http://adage.com/article/news/papa-john-s-hold-price-pies/233109/, 3/5/2012 Top Fast Food Pizza Restaurant Brands In United States, Sam Oches, http://www.qsrmagazine.com/reports/qsr50-2013-pizza-segment- breakdown?sort=2012_sales&dir=desc#chart, August 2013 .
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