Management 306

Mauna Loa Café (Example 2)

To: Mauna Loa Café Management
From: Drew Allensworth
Date: February 9, 2017
Subject: Proposal of New Strategies to Increase Sales and Customers

In the past seven years, Mauna Loa Café has become my ohana and I care deeply about its success. As such, I am truly grateful for the opportunity to present my solutions to our lagging sales. Consumers have a multitude of choices for coffee and Mauna Loa Cafés must stand out as places of particular benefit. To increase sales in current Mauna Loa locations and enlarge the customer base, I propose new product marketing, cost-effective cafe redesigns, and a new focus on food offerings. Implementing these three solutions is projected to expand our customer base by 14% annually and increase monthly profitability by 22%.

Marketing Mauna Loa's products as "Premium," "Hawaiian," or "Kona" is not enough. Currently, this core selling feature of Mauna Loa products is hurt by Starbucks and other coffee shops when they introduce coffees sourced from other "exotic" locations. The cafe's experience must be exclusive. Likewise, the beans should be viewed by customers as a fleeting commodity. Recent marketing studies show that consumers will pay 28% more for a product they perceive as having limited availability. Additionally, consumers are 42% more likely to purchase a "scarce" product over the highly-available one, regardless of actual scarcity. To take advantage of this tendency, Mauna Loa should introduce "seasonal, " "new crop, " and "small-lot" as key words with a harvest date mentioned for emphasis. Hand-crafted seasonal drinks should be offered with coffees named by a particular farm, dirt-patch, hillside, micro-climate, or other unique location (i.e. "Pilau Farm, February 2017 Limited Harvest: small-lot organic pulmeria-shaded Arabica and Robusta hybrid."). Customers should not be expected to care about the origin details. Instead, they must know that the only place that will ever offer the experience of these highly rare treats is Mauna Loa Café. With this strategy, sales of higher priced—and higher profit-margin—products are projected to increase dramatically.

My second proposal addresses the physical store locations. The general "warm, friendly atmosphere" of Mauna Loa's Cafés are bland, indistinct, and unfriendly to technology. Students are not catered to in the current cafe designs and the decor fails to resonate with the 18 to 29 demographic based on a recent customer survey. My proposed tactic has two benefits. First, younger customers who do not stay in the cafe will carry our branding to brand-conscious peers and college campuses. Second, students who choose to study in Mauna Loa cafés will attract friends and study groups. This provides both additional customers and a high probability of repeat sales as the study session progresses. To capture these customers, Mauna Loa should make three changes. First, purchase new tables, chairs, and couches to be arranged in a manner that gives groups places to work, and individual's private enclaves to study. The decor should embrace modern Hawaii, pop-culture, and a rotation of art from young artists local to the cafe location. Second, power outlets must be made abundant and easily accessible from every seat. Lastly, Wi-Fi should be upgraded to accommodate many concurrent users at speeds conducive to downloading files or gaming. This new focus will require an initial investment in new decor and cafe redesign, plus additional monthly internet costs. However, the increased monthly costs will be more than offset by additional daily sales. Likewise, the payback period for an average cafe's redesign is expected to be only four months, but the redesign will attract and retain new customers for years. In all three cases, the return on these investments is exceptionally high.

To expand market share, Mauna Loa must renew their focus on high-quality foods with a much broader scope of offerings. Current Mauna Loa food offerings are average in quality, have remained unchanged for several years, and focus solely on traditional breakfast pastries. In the lore of the company, the original cafe offered Hawaiian-influenced foods made from locally sourced ingredients in the kitchen of our founder, Joshua Kai. Mauna Loa has let down the vision of our late founder, and shows no financial benefits in its current food strategy. The contract with our current bakery is up for renewal in April, allowing Mauna Loa to renegotiate or change vendors without penalty. I propose starting a new search for bakeries that offer high-quality seasonal and organic breakfast, lunch, and anytime snack items. The items must pay homage to our Hawaiian heritage where possible, prove current with food trends, and be transportable in a frozen state to keep spoilage costs low while taking advantage of our current food storage methodology.

The goal should be to provide novel foods for customers that are readily available and reasonably priced for us. Our bargaining position for a new baker and food vendor gives the company an advantage when negotiating for prices. Additionally, new ovens should be purchased for serving hot items in every cafe-similar to Starbucks. The exclusive taste of Hawaii must be marketed heavily and vegan options should be available to cater to the higher proportion of college students. New limited-availability items should be test-marketed regularly and food stock should be kept ever-so-slightly low to allow for the perception of scarcity. In recent marketing analyses, flavor pairings of new drinks with the new foods has been shown to increase sales of both by 17%. The higher food quality, scarcity perception, and expanded selection will work to increase sales of food items beyond current offerings. This is based on the same marketing principles that should be used for our coffees.

With the changes of new marketing, redesigned cafes, and foods selected to appeal to current tastes, Mauna Loa Café will experience a revitalization of its sales and brand image. Marketing costs will remain similar, renovation costs have a strong return on investment, and food vendor renegotiations offer an opportunity to procure better items at acceptable prices. The legacy of Joshua Kai and his vision for Mauna Loa Café are at stake.

My detailed analysis is available as a report and I would be happy to answer any questions.