PASTAS R US, INC., EXPANSION CRITERIA

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Introduction

            In the competitive marketplace an organization must craft and execute effective strategies that will increase its market competitiveness and overall profitability (Fraser, 2019). As such, Pastas R Us, Inc., should strategize to increase its customer base through opening new outlets that will serve customers in other regions, preferably within 3-mile radius. Further, it must target a specific customer segment that will form the highest part of its customer base.

Scope and Descriptive Statistics

The objective of this report is to determine the effectiveness and efficiency of the current expansion criteria. This was accomplished through analyzing the effect of Loyalty Card marketing strategy which will enable the executive team identify potential marketing opportunities. However, more factors that affect the restaurant’s sales were analyzed. The considered variables were the average sales per customer, year-on-year sales growth, sales per sq. ft., loyalty card, median income, median age, and bachelor’s degree. Sales per sq. ft. was used as the dependent variable. MS Excel was used in the analysis of the data. The descriptive statistics of the variables of interest were as shown below:

Analysis

1. BachDeg% versus Sales/sqft

The scatter plot depicts an increasing relationship between bachelor’s degree and the annual sales per sq. ft.  Therefore, customers’ level of income positively impacts the annual sales per sq. ft. This implies that the restaurant should include education level among its demographic segmentation in the new market areas within 3-mile radius.

1. MedIncome versus Sales/Sqft

            Based on the distribution of the dots in the plot, there is no relationship between the median income and the annual sales per sq. ft. Therefore, household median income above the national average income is not a factor to consider in the new target market areas.

• MedAge versus Sales/sqft

            The scatter plot shows a negative relationship between the median age and the annual sales per sq. ft. this implies that the younger aged customers in the targeted age group form the highest part of the consumer base. Thus, while setting new outlets in the targeted market areas, the younger population should be prioritized.

1. LoyaltyCard(%) versus Sales/Sqft

            The scatter plot shows a negative relationship between loyalty cards and sales per sq. ft. This implies that issuing customers with loyalty cards and discounts after 10 purchases has a negative impact on the annual sales per sq. ft.

Recommendations and Implementation

Of the considered expansion criteria, considering the criteria that at least 15% of the target population have college education is effective. This is because it positively impacts the annual sales per sq. ft. Further, the new targeted market areas should prioritize on regions with younger populations because higher annual sales per sq. ft. are increased by the young aged customers compared to the old aged customers. The demographic segmentation to consider in the new target market areas is level of education and age.

Median income above the national average income should be eliminated as a criterion to be considered. This is because it has no impact at all, and thus the restaurant’s target market areas should not be limited to median income of the customers. On the other hand, loyalty cards decreases the annual sales per sq. ft. Since loyalty cards can be used to determine customers’ loyalty, the restaurant should consider changing this strategy to be more effective. For instance, rather than offering some free food after ten purchases, offer unique rewards. This will attract customers to shop using their loyalty cards.

More data are required to evaluate the effectiveness of the two recommended strategies. These should specifically be about collecting information regarding customers’ level of education and age. The information should be collected using customer surveys administered through customers’ emails. Customers should be notified of the confidentiality of the information they give, and that the surveys are meant to improve service provision.

References

Fraser, C. (2019). Business Statistics for Competitive Advantage with Excel 2019 and JMP: Basics, Model Building, Simualtion and Cases. Springer.