1. Analyse the benefits to Juan of undertaking market research before he opens his new business. [7 marks]

Market research involves gathering and analysing information about a market to understand customer preferences, competitor offerings, and market trends.

Undertaking market research before launching Juan’s business is crucial for several reasons. 

One: Preferences of Customers

Firstly, it would allow Juan to gain insights into the preferences and expectations of the local community and tourists regarding food and dining experiences. By understanding customer tastes and preferences, Juan can tailor his menu offerings and restaurant concept to better meet the needs of his target market.

Two: Gaps in the market

Moreover, market research can help Juan identify any gaps or opportunities in the market. By analysing the competitive landscape and assessing the offerings of existing restaurants and food establishments in the area, Juan can uncover areas where his restaurant can differentiate itself and fill unmet customer needs. For instance, Juan has noted the absence of Spanish-based restaurants and takeaways in the area, presenting an opportunity for him to introduce authentic Spanish cuisine to the market.

Three: Business Model Decision (Takeaway or restaurant)

Additionally, conducting market research can inform Juan's decision-making process regarding the business model and operational aspects of his restaurant. For example, by gathering insights into customer preferences for dining out versus takeaway meals and their packaging preferences, Juan can determine whether to offer both dine-in and takeaway options and the most suitable packaging materials to use.

Four: Target market

Furthermore, market research can provide valuable input into decisions related to branding, decor, and ambiance. Understanding the demographic composition of the local population and their preferences regarding restaurant atmosphere can help Juan create a dining environment that resonates with his target customers (target market). Whether to decorate the restaurant with loud pop music to attract a younger crowd or opt for a more traditional Spanish ambiance can be determined based on customer feedback and market insights.

2. Distinguish between Primary and secondary research (4 marks)

Primary market research involves the gathering of new data and information through direct interaction with the target audience. In Juan Sanchez's case, primary research could involve conducting surveys, interviews, focus groups, or observations to understand the preferences and expectations of locals and tourists regarding Spanish cuisine and dining experiences in the coastal resort. By directly engaging with potential customers, Juan can obtain firsthand insights that are specific to his business context and target market.

On the other hand, secondary market research involves the collection of data and information that already exist and have been gathered by other sources. In the case of Juan Sanchez, secondary research could entail analyzing market analyses, academic journals, government publications, and media articles related to the hospitality industry, food trends, and consumer preferences in coastal resort areas. By leveraging existing data and information, Juan can gain broader insights into market trends, competitive dynamics, and potential opportunities without the need for fieldwork.

3. If Juan was to set up a restaurant, evaluate his decision to launch his business using Premium pricing instead of penetration pricing. (10 Marks)

Penetration pricing involves setting a low initial price for a new product or service to attract customers and gain market share rapidly. In Juan's case, he could offer his Spanish cuisine at lower prices compared to competitors in the area to quickly establish his restaurant and attract a large customer base. 

Pros:

Attracts price-sensitive customers: Lower prices appeal to budget-conscious customers who are looking for value for money.

Rapid market penetration: Lower prices can lead to increased sales volume and market share in a short period.

Competitive advantage: Penetration pricing can deter potential competitors by making it difficult for them to enter the market or match the low prices.

Cons:

Profit margin concerns: Lower prices may result in lower profit margins, especially if operating costs are not adequately covered.

Perceived quality: Customers may perceive products or services offered at lower prices as lower quality, potentially affecting brand image and reputation.

Difficulty in raising prices: Once customers become accustomed to low prices, it can be challenging to increase prices in the future without risking customer backlash.

Premium pricing involves setting a higher price for a product or service to position it as a high-quality offering in the market. In Juan's case, he could price his Spanish cuisine higher than competitors to convey a sense of exclusivity, authenticity, and superior quality. This approach could appeal to customers seeking a unique dining experience and willing to pay a premium for it.

Pros:

Higher profit margins: Premium pricing allows for higher profit margins, as customers are willing to pay more for perceived value and quality.

Brand differentiation: Premium pricing helps differentiate the restaurant from competitors by positioning it as offering high-quality, upscale dining experiences.

Perceived value: Higher prices can enhance the perceived value of the restaurant's offerings, attracting customers who equate price with quality and prestige.

Cons:

Limited market reach: Premium pricing may limit the restaurant's appeal to a niche market segment consisting of affluent customers willing to pay higher prices.

Price sensitivity: Higher prices may deter price-sensitive customers and limit the restaurant's ability to attract a broader customer base.

Competitive pressures: Competitors may undercut premium prices or offer similar quality at lower prices, posing a challenge to the restaurant's pricing strategy.

Recommendation:

Considering Juan's goal of establishing his restaurant in a small coastal resort with limited competition and his specialisation in Spanish cuisine, the recommendation would be to implement a premium pricing strategy. Given that there are few other restaurants in the area and no Spanish-based restaurants, Juan has an opportunity to position his restaurant as offering high-quality, authentic Spanish cuisine at premium prices. Additionally, targeting tourists who may be willing to splurge on unique dining experiences could further support the premium pricing strategy.

However, it's essential for Juan to carefully consider the local market dynamics, customer preferences, and competitive landscape before finalising his pricing strategy. While premium pricing can yield higher profit margins and enhance brand image, Juan should ensure that the perceived value justifies the higher prices and that the restaurant delivers on its promise of an exceptional dining experience. Monitoring customer feedback and adjusting pricing strategy accordingly will be critical for long-term success.

Analyse the promotional strategies used in the second stage (Launch) and last stage (decline) of the Product Life Cycle (8 marks)

The Product Life Cycle (PLC) is a concept that outlines the various stages a product goes through from introduction to decline in the market. These stages include introduction, growth, maturity, and decline. Different promotional strategies are required at each stage to effectively market the product.

Launch Stage:

During the launch stage of the PLC, a new product is introduced to the market. For Juan's restaurant specialising in Spanish cuisine in the coastal resort, this represents the initial opening phase. This stage typically involves low sales volumes and high promotional expenditures aimed at creating awareness and generating interest in the product.

Promotional strategies used during the launch stage may include:

• Above the line (ATL) promotions:

  • Advertising: Utilising various channels such as local newspapers, magazines, radio, and social media platforms to reach a wide audience and generate awareness about the restaurant's grand opening.

• Below the line (BTL) promotions:

  • Public Relations (PR): Engaging with local media outlets, food bloggers, and influencers to secure coverage and positive publicity for the restaurant's launch, creating anticipation and excitement among potential customers.

  • Launch Event: Organizing a launch event or tasting session where customers can sample Juan's signature Spanish dishes, allowing them to experience the restaurant's ambiance and cuisine firsthand.

  • Special Offers: Offering promotional discounts or freebies during the launch period to incentivize customers to visit the restaurant and try out the menu.

Decline Stage:

In the decline stage of the PLC, the product experiences a decrease in sales and customer interest. For Juan's restaurant, this could occur due to changing market conditions, shifting consumer preferences, or declining tourist numbers in the coastal resort.

Promotional strategies used during the decline stage may include:

• Above the line (ATL) promotions:

  • Rebranding Campaign: Juan could consider rebranding the restaurant or updating its image to appeal to new customer segments or revitalise interest among existing customers. This could involve launching a new advertising campaign emphasising any changes or improvements made to the restaurant.

  • Collaborations: Partnering with local businesses or events to co-promote each other's offerings and attract new customers.

• Below the line (BTL) promotions:

  • Customer Loyalty Programs: Implementing loyalty programs or offering special deals for repeat customers to encourage repeat visits and build customer loyalty.

  • Community Engagement: Engaging with the local community through charity events, sponsorships, or participating in local festivals to maintain visibility and goodwill.