Marketing plan for In-N-Out Burger

Marketing Plan: In-N-Out Burger

In-N-Out Burger (in-N-Out) is quick service food restaurant chain operator based in the United States. The company was established in the year 1948 by Harry and Esther Snyder. As of August h 2011, the company operated 252 restaurants across the United States (Oches, 2011) the restaurant fills a void in the restaurant industry between low end fast food and a complete sit down meal by making food from scratch and providing excellent customer comfort and care. However, it does not have tremendous market saturation, so that while it is ranked among the top 50 quick service restaurants, it is number 45 on that list (Oches, 2011). The company also owns and operates a patty making facility in California. In addition, the company provides catering services to various events like parties, corporate picnics and other custom events in its own mobile units including vans. in-N-Out Burger started as a mom-and-pop operation and slowly grew with, at its core, a very strong and committed client base. Furthermore, it has done so by separating itself from its competition. in-N-Out Burger is not a traditional fast-food chain, though it is certainly a quick-service restaurant, and it also defies the pattern of even the most casual sit-down establishment.

"Unlike its fast-food competitors, in-N-Out Burger has no Happy Meal clones, no children's menu, no salads, no deserts; instead it offers a mere six items on a menu that hasn't changed in decades" (Moon, 2010) the plan for the future is to develop the novelty of the "secret menu" and provide customers more interaction through social media. It is impossible to overstate the importance of the "secret menu." "Just like the 8th grader in Algebra, knowing a secret also makes you want to share it because it shows off that extra knowledge in the process…Consumers love to discover things that make them feel part of an exclusive club"

(Davenport, 2011). This is exactly what in-N-Out Burger has accomplished with its secret menu; the goal is to engage the customers and create awareness of the brand to lure customers away from run of the mill fast food or quick service restaurants.

2.0 Situational Analysis

In-N-Out Burger has been in existence for many decades and it firmly sits in a category and niche that it carved out for itself. While there are many restaurants that are conceivably competition for the business, there are only two restaurant chains that truly occupy the same niche: Five Guys and Smashburger both occupy a zone between fast food and sit down service, and the offer menus that are similar, though not identical to in-N-Out Burger's menu. Controlled expansion with the goal of avoiding oversaturation of the market has been its key to sustainable growth of its customer base.

2.1 Market Summary

In-N-Out Burger has built a good reputation and has developed a cult-like following because of its simplistic approach to the burger business. The menu only has six items. While the much-touted "secret menu" adds a substantial number of offerings, the total menu is still much smaller than the menu one would find at a larger fast food service chain such as McDonalds or Burger King. It has focused on maintaining and nurturing this reputation as its key to further its business objectives. Founders Esther and Harry Snyder began the business with the philosophy, "Give customers the freshest, highest quality foods you can buy and provide them with friendly service in a sparkling clean environment" (in-N-Out Burger, 2012). That philosophy has proven to be the key to in-N-Out Burger's success. "These principles have worked so well over the years that they are still the company's fundamental philosophy" (in-N-Out Burger, 2012). in-N-Out Burger has a number of very successful competitors in the industry. Therefore, instead of putting itself into direct competition with other fast food businesses, such as McDonald's, it has not tried to expand into various market niches, but, instead, concentrates on a basic burger approach. This has served to differentiate it from its competition in a marketplace where many restaurants have tried menu expansion as a key to success.

SWOT Analysis

Strengths: In-N-Out Burger has several strengths. The first strength is the quality of the food. They serve fresh made-to-order food. The freshness makes the food healthier than many fast-food alternatives, though it is certainly not health food. The simple menu is another strength, as it speeds up the ordering and production processes. The secret menu is another of the restaurants strengths, as it has contributed to its reputation and allows customers more options beyond the basic 6-item menu. The company's cult-like following, which drives its word-of-mouth (WOM) marketing campaign is another one of its strengths. The WOM campaign has resulted in a tremendous amount of free advertising as in-N-Out Burger is mentioned on TV shows, in movies, and by celebrities on a regular basis. They also offer store merchandise, which results in free advertising. One of their lesser-known strengths is that they treat their store employees well. A beginning employee can begin at ten dollars an hour and "store managers who attend the in-N-Out University can easily earn six figures" (Vargas, 2011). This is far above the industry standard and leads to a reduced employee turnover rate and greater employee loyalty than one would expect to find in a quick service restaurant environment.

Weaknesses: One of the company's primary weaknesses is related to one of its greatest strengths; the company simply does not have enough locations to compete with the major fast food service chains. It cannot take market share from those competitors because it does not have the same presence. The simple menu, which is considered another of its strengths, can also be a weakness when viewed from the perspective of market saturation, because a group looking for a diverse dining experience would choose a competitor over in-N-Out Burger. However, the biggest challenge facing the company may be that it is family owned. For years, Esther Snyder, now in her 80s, remained at the helm of in-N-Out. Her sons took over the business, but one of them died, and there is really no third-generation heir with the desire to run the business. "The lack of third-generation family to run the business, however, left many industry observers wondering what would happen to the chain in the years to come. Nevertheless, company executives maintained that in-N-Out would continue to operate as a privately run entity and had no plans to go public or to franchise the chain" (Fujinaka, 2012). Another weakness is that the chain is known for its affordable pricing, but has been hit by the increase in prices that have come with the latest economic recession. It has had to increase prices twice since 2008 (Luna, 2010). These price increases have been small, between 5 and 10 cents per item, which seems negligible. However, it is important not to underestimate the impact of price increases on customer perception. "While 5 to 10 cents doesn't seem like a lot of money, I think some diners might be a bit surprised by the increase. it's all about the consumers' perception of price. Before the price hike, you could get a cheeseburger for under $2 or $1.99. Now it's $2.05. A Double, by the way, is now more than $3. The iconic burger now sells for $3.05 instead of $2.99" (Luna, 2010).

Opportunities: The company's greatest opportunities exist in expansion, specifically outside of the Southwest. It has an opportunity with menu expansion, but if that opportunity is not handled carefully, it could weaken the brand. Expansion out of the area should be accompanied by some type of social-media campaign that shares the secret menu in a way that preserves its cult status.

Threats: The major threats to in-N-Out Burger are two other burger retailers, Five Guy

and Smashburger, which also fill a space between traditional fast food restaurants and sit down service. Another threat is steadily increasing prices from providers; the company has to maintain a balance between quality products and affordable products.

2.2 Competition

Like all restaurant establishments, in-N-Out Burger faces three different levels of competition: low-end, mid-range, and sit-down service. At the low-end of the competition are other fast food establishments including Burger King, McDonalds, Jack in the Box, Sonic, Wendy's, Whataburger, and Carl's Jr. It is important to keep in mind that it is not only the burger joints that pose a threat in this range, because one of the predictors of fast food restaurant selection is quickness of service. Therefore, one must consider Popeye's, Taco Bell, KFC, and similar establishments as competition as well. In the mid-range level one has Five Guys and Smashburger. These two restaurants present the largest threat to in-N-Out Burger because they target the exact same market by offering burgers that are better than traditional fast-food burgers and faster than traditional sit-down burgers. In the sit-down segment, one has traditional burger restaurants such as Fuddruckers, Chili's, and other family chains, but the reality is that most restaurants offer some type of burger offering, making all restaurants potential competitors.

2.3 Product Offerings

In-N-Out Burger serves a very specific and limited menu of products, including hamburgers, cheeseburgers, French fries, soft drinks, milkshakes, Neapolitan shakes and grilled cheese sandwiches. This minimalistic simple menu keeps the ordering process quick and simple for both customers and staff. They have a much-touted secret menu, but the secret menu builds on the ingredients from the offerings on the traditional menu.

2.4 Keys to Success

The key to in-N-Out Burger's success is to provide excellent customer service, fresh cooked from scratch food, and a mystique generated from such items as a "secret menu," all of which garner it a large fan following. They have incorporated the following elements into their success: knowing and understanding their target audience; using strong branding elements, offering fresh made-to-order products, treating employees and customers well; managing growth; and attracting a loyal following (Kalb, 2011). They have also been able to successfully harness the power of a simple menu; it simplifies decision making for consumers, many of whom are actually overwhelmed by large menus with seemingly unlimited choices.

2.5 Critical Issues

The critical issues for in-N-Out Burger are that it maintain its cult-like following while engaging in expansion. This is important because in-N-Out Burger risks losing its current customer base if it gets too mainstream. At this point, everyone wants one nearby, but because the company is family-owned and operated it is difficult to be everywhere. The company is also careful to avoid unlimited expansion, because difficulty of access helps drive the brand's image. There is also some air of mystery when it is hard to find and "a company spokesman said, "…we are still expanding, but are always careful not to open a new location until we can guarantee the same quality food and service as we provide in our existing locations" and patrons like that about the company" (the Franchise Hound, 2011).

3.0 Marketing Strategy

In-N-Out Burger is positioned in the niche of the quick service market (QSR) between fast food restaurants and sit down restaurants and the marketing strategy is to lure customers from both of those categories into the quick service market. in-N-Out Burger can do this by using social media to expand upon its already successful marketing strategy, which has been based on a three-prong strategy: relationship building, uniqueness, and high quality customer service (Local Pulse Marketing, 2011).

3.1 Mission

In-N-Out Burger's mission is to provide a comfortable dining experience with good food and great customer service. The food and the emotions associated with a wonderful atmosphere create happy people.

3.2 Objectives

Maintain slow and controlled growth of additional restaurants.

Generate additional mystique with the "secret menu" and fan following in social media.

Achieve a steady increase in market share in the quick service restaurant category, and taking overall market share away from fast food and sit down restaurants

3.3 Target Markets

With the general public eating outside of the home more and more, there is an incredible surge in restaurant eating. Fast food and quick service restaurants are well positioned to provide a speedy service for the public's fast paced lives. The target market for the chain is older fast food consumers. They are not trying to take away market share for those who need happy meals and playgrounds for their children while they eat, but targeting people who want good quality, affordable burgers.

3.4 Positioning

In-N-Out Burger seeks to position themselves as the best quick service restaurant available, offering superior customer service, great food from scratch and catering to their customer's desires. Leveraging this goodwill and providing customers with a familiar and customized experience (with the "secret menu") provides an excellent word of mouth effect (Perman, 2009). Additionally, with the rise in social media's influence over the United States, in-N-Out is well situated to take advantage of the social commentary and be a continuous component in its customer's lives.