Marketing Assignment 2:

Tim Hortons

GROUP H
Isabella Nicoletta Miyashiro
Jamie Bezemer
Jane Rose
Orlando Castillo Hurtado
Richard Conway

Marketing 341
March 2, 2011
Table of Contents

Table of Contents.............................................................................................2
Introduction.....................................................................................................2
Product Summary............................................................................................3
Pricing..............................................................................................................6
Perceptual Maps....................................................................................6
What we learned............................................................................................16
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Executive Summary

We are going to include Hot-dogs and Hamburgers as a part of the Tim

Hortons product portfolio. It will contain fewer calories than the ones sold by

their competitors. The Low Fat Double Burger will have two 1.2 oz. beef

patties, fresh green leaf lettuce, tomatoes, mayonnaise, processed cheese,

and an egg patty.

The product sales are expected to grow at the same rate that Tim

Hortons grows overall, 4.9% (Tim Hortons Inc., 2010). We expect to sell 67.5

million units in the first year. Tim Hortons will use a penetration pricing

strategy, and set prices lower then the competition in order to be successful.

The market is not expected to change, and fast food sales are not typically

affected by a downturn in the economy, therefore at this time we feel no

need for a price adjustment strategy.

We recommend that Tim Hortons develop a “three-channel”

distribution system, which allows it to ship goods over longer distances in

refrigerated transports (Kotler, 2011). Tim Hortons should acquire several

additional intermediary distribution stations, allowing for shorter shipping

distances and the ability to deliver fresh products, specifically the new

burger and hot dog products.

Promotions for new products are essential. With the launch of our new,

affordable, low fat burger, we’ve created a strategic plan to bring awareness

to customers in a budgeted manner, using television ads and billboards to

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stimulate trial of our new product to our target customers.

This project has been a lesson in the benefits and struggles of group

work. But also, it is a unique opportunity that has enabled us to use the

material of the course in a practical sense. The idea of generating a new

product for a real company and incorporating it into that company’s product

portfolio uses many aspects and marketing perspectives, only some of which

are able to outlined in this paper.

Introduction

The chosen company, Tim Hortons, initially offered two main products

– coffee and donuts. They quickly expanded their portfolio to a wide variety

including muffins, sandwiches, soups, bagels, and many more. Tim Hortons

has become a leader in the fast food industry with some of its major

competitors being McDonald’s, Subway, Wendy’s, and Starbucks. The fact

that Tim Hortons is a Canadian company is the major cultural factor that

consumers value, coupled with the very competitive pricing strategy they

employ. Tims Army is the current and primary target market of Tim Hortons.

Most consumers can be identified by their brand loyalty and user rates. By

adding additional products such as hamburgers and hot dogs, Tim Hortons

will be able to effectively improve its positioning in the lunch and dinner

daypart market.
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Product Summary

We are going to include Hot-dogs and Hamburgers, as a part of the restaurant product portfolio.

It is worth mentioning that these new items will be added as a new product line and will be

served specially during lunch hours, afternoons and evenings. What it will make our new item

special is the fact that it is going to contain fewer calories than the ones sold by their competitors

such as McDonalds, Burger King and A&W.

We are including the “Low Fat Double Burger (LFDB)”, which is a new

product in this category.

This product will be able to serve our desired market; on account of the fact

that it will have an affordable price that will be aligned to Tim Horton’s

product portfolio costs. This product will form part of new combos so this

packaging will provide customers satisfaction, especially when they want

fast food to be served as a meal. Our new product added value will be given

by the low amount of fat it will contain, which means fewer calories than

competitors’ similar hamburgers. The high quality attribute of our product

will be perceive of the customers of our target market and will differentiate

our product from our competitors.

Low Fat Double Burger (LFDB)

This hamburger will consist of two 1.2 oz. (34.1 g) beef patties, fresh green leaf lettuce,

tomatoes, light mayonnaise, processed cheese, and a seasoned egg patty. It will be served on a

two part whole wheat home-style soft bun.

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This product contains 480 Calories, which is less than similar hamburgers sold by McDonalds:

Big Mac, 540 cal. (McDonald's, 2011); and Burger King: 670 cal. (Burger King, 2011).

Moreover, customers can substitute LFDB Light Mayonnaise (5g fat), for one of the following:

Ranch (3g fat), Honey Mustard (0g fat), Mustard (1g fat), BBQ (0g fat) or Caesar (8g of fat).

This will give customers the choice to get the flavour they want or even decrease the total

amount of calories of this Hamburger. Another benefit is to include Tim Horton’s LFDB in a

combo in order to complete a meal. For instance, we are going to create two new combos:

Hamburger Combo, which will consist of a LFDB hamburger, a donut of customer choice and

a medium coffee; and the Soup and Hamburger Combo, which will consist of a soup, a LFDB

Hamburger and a medium coffee (Sandwiches & wraps, 2011).

It is important to consider the same factors regarding to packaging and labeling than those that

are being considered with the “Sandwiches & Wraps” category since the Low Fat Double

Burger will be served using the same paper wraps. This means that this product will increment

the amount of packaging generated by the chain. And also it will comprise more work in order to

accomplish one of Tim Horton’s waste reduction goals: “5% reduction in packaging within our

supply chain and manufacturing operations by 2012” (Environmental stewardship: our

commitments, 2011). Another factor that is being currently considered is the recycling and

composting programs in their restaurants in order to recycle paper products like sandwich paper

wraps.

About the design of the hamburger it will take and egg patty in the middle of the hamburger,

between the two beefs patties so that it will stabilize contents and prevent spillage. This provides

a better user experience while eating the product.

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Our new product in relation to Tim Horton’s service provides customers to customize the content

of the LFDB. For example they can skip some ingredients like the mayonnaise, the egg patty or

even the processed cheese according to their preferences. Another element is the speed for the

product to be served. There is an estimated time of 3 minutes to cook the hamburger: Taking the

order takes 30 seconds, each burger side takes one minute to cook and constructing the LFDB

takes 30 seconds more. It is important to keep this average time to avoid consumers to become

impatient.

One of the eco-friendly attributes of the hamburger is that its paper wrap is a recyclable material.

Tim Horton’s also have partnerships with their waste haulers across Canada, so that they divert

food from local landfills. In addition, they have a program to compost organic hamburger

waste.

We are planning to use the new product brand strategy since it has to with the development of

this new brand (Low Fat Double Burger). Moreover, one of the project`s purpose is to provide

analysis of the company and recommendations on a new product. This final report is focusing

on the new product development process. We took into consideration the following stages inside

this process (Kotler, 2011):

• Idea Generation: We used internal (research and documentation) and external sources

(competitors, customers and suppliers).

• Idea Screening: We evaluated many ideas against criteria, so we chose the richest one.

• Concept development: we created a detailed version of the idea stated in meaningful

consumer terms.
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• Marketing strategy development: we discussed the target market, and how to position and

differentiate the product inside this market.

There is one important thing to consider with this new product regarding existing brands within

Tim Horton’s. We made sure that we are out target is composed for potential customers that are

used to attending to fast food restaurants and eating hamburgers (Burger Barons), focusing on

this segment we are avoiding product cannibalism between Low Fat Double Burger (LFDB)

and existing Tim Horton’s sandwiches like BTL or Turkey Caesar, on account of the fact that

these products have already their own market (Tim’s Army) composed by loyal customers.

Pricing

Perceptual Maps
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Tim Horton’s Consumers value speed and taste and are less concerned about the way the

food was prepared. McDonalds in this perceptual Map is the biggest competition.
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Tim Hortons consumers value a low price, as do most fast food consumers. Price wise

Tim Hortons needs to be lower then the leading fast food restaurants. As Tim Hortons is a classic

restaurant, their hamburgers and hot dogs need to be the same.

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As of right now Tim Hortons is only offering the one style of Hamburger and one style of

Hot Dog. Tim Hortons products have always been a reasonable size; they feel no need to sell a

colossal sized burger.

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Year 1 Year 2 Year 3 Year 4 Year 5

Net Sales 135 million $141 million $148.5 $155.8 $163.5million

Value million million

Fixed Costs $56,250,000 $25 million $5 million $3 million $500, 000

Variable $56,531,250 $59.3 $62.2 $65.3 $68.5 million

Costs million million million

Marketing $3,750,000 $1,000,000 $350,000 $200,000 $100,000

Costs

Incremental $18.47 $55.7 $80.9 $87.3 $94.4 million

Profit million million million million

Cum Profit $18.47 $74.2 $155.1 $242.4 $336.8

Contribution million million million million million

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This chart reflects the profits that the new products are expected to make over the first

five years of release. The product sales are expected to grow at the same rate that Tim Hortons

grows overall, 4.9% (Tim Hortons Inc., 2010). The fixed cost includes the price of the grills

required for the new products. They are expected to be $15,000/store for 2 grills. Depending on

the success of the first year, additional grills may be required for heavier volume stores. The

variable costs here not only include the raw ingredients and packaging, but also additional costs

in electricity that the production will require, and the extra labour that the products will require.

Each store will need 2.5 extra employees for the addition of the new products. We expect to sell

67.5 million units in the first year.

The new product idea of Tim Hortons – Hamburgers and Hot Dogs are breaking into an

already established and mature market. This greatly affects the pricing strategy of the product.

Because there is an existing market, there are many competitors Tim Hortons has to go up

against. This is a determining factor of the pricing. Tim Hortons will have to use a penetration

pricing strategy, and set their prices lower then the competition, in order to be successful. The

Tims segments as we discussed earlier are all of a medium to low income that value convenience

and speed, there a low price point for the new items is the most favourable for business.
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Tim Hortons already has loyal consumers, as they dominate the quick service food

market with a 41% share of traffic. (Tim Hortons Inc., 2010) Which works very well in the

development of their new products.

The way that we came to the pricing strategy is as follows:

The leading competitor for Tim Horton’s Hamburger and Hot dogs is McDonalds. One

McDonalds sells on average 6466 sandwiches per month. (McDonalds, 2011) An average Tim

Hortons sells about 2200 sandwiches per months and 24,000 cups of coffee per month. (Tim

Hortons Inc., 2010)

They are expected to sell about 1500 Hamburgers and Hotdogs per month in their first year (one

hot dog to every 2 hamburgers). This means 50 hot dogs and Hamburgers sold per day (24 hours

because Tim Hortons is open 24/7). One Tim Hortons’ Low Fat Double Burger including

packaging costs $0.90 to make and one Tim Hortons Hot Dog with packaging costs $0.65 to

make. McDonalds has a double cheeseburger that they charge $1.69 for and a double quarter

pounder with cheese that they charge $5.29 for. (McDonalds, 2011) .Wendys has a double junior

cheeseburger for $2.39 and a double ½ lb burger for $5.89. (Wendys, 2010) We felt that our

pricing should fall somewhere in the middle of that. Tim Hortons wants to keep a low price,

while still creating a strong competition and making a profit. As of now the decided price for the

Low Fat Double Burger is $2.25. This puts a 60% profit on the Burger.

When it comes to the Tim Hortons Hot Dog, the biggest competition is 7-11. 7-11 has a Smokey

for $2.89 and a regular beef dog for $1.99. (7-11, 2011) Hot dog vendors on the street typically

charge $3.50 or more. We decided to go with $1.25 for the Tim Hortons Dog, setting our price

much lower then the competition to really get those consumers looking for a quick fix to come to
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Tim Hortons. This gives a 48% profit. As far as indirect competition goes, Tim Hortons needs to

go up against any food vendor that could satisfy the hunger of potential consumers. This is also

why the price point is low. Why go and buy groceries or pick up a bag of chips to quash your

hunger when you can go through the Tim Hortons drive thru and pick up a Low Fat Double

Burger for just over two dollars.

The market is not expected to change, and fast food sales are not typically negatively affected by

a downturn in the economy, therefore at this time we feel no need for a price adjustment strategy.

Tim Hortons’ prices are set low and already have a heavy competition.

Place

Distribution Strategy

Tim Hortons operations were built on a regional warehouse distribution structure to ensure that

food offerings were fresh (Handelman, 2007). Five warehouse distribution centers were

established in Guelph, Kingston, Calgary, Nova Scotia and Aldegrove, B.C. This limited

potential expansion in the U.S to locations that were a no longer than a few hours south of the

border, until a coffee roasting plant was opened in Rochester, N.Y. in 2002, and a new

warehouse established in Dublin, Ohio (Handelman, 2007).

We recommend that Tim Hortons develop a “three-channel” distribution system which allows it

to ship frozen foods, fresh foods and baked goods over longer distances in refrigerated transports

(Kotler and Armstrong, 2011). With the development of the new LFDB, shipping products

quickly and efficiently over long distances will become even more critical.

Distribution Challenges and Recommendations

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Even in established markets like Canada, expansion and supply problems may cause issues for

Tim Hortons “always fresh” philosophy, particularly with the new LFDB and hot dog products.

We recommend Tim Hortons acquire several additional intermediary distribution stations,

allowing for shorter shipping distances and the ability to deliver fresh products, specifically the

new burger and hot dog products, to Tim Hortons locations across Canada and the U.S.

Further, in order to effectively expand Tim Hortons locations and the new LFDB to target

markets such as the U.S, we recommend that Tim Hortons blanket a target area with a number of

stores to take advantage of economies of scale in marketing and supply before moving to a new

region, rather than opening single outlets simultaneously in different markets. Confining the

expansion to the northern areas of the U.S. for example, where coffee is already an attractive

buy, and which are within easy reach of the company supply chain, will ease some of the growth

and distribution plans.

Just as challenging is the effort to sell the Tim Hortons brand and burger products to a market

already satiated with well-known fast-food names. A successful strategy would combine both

technology and the development of new value adding partnerships and products. In the area of

products, we are recommending our LFDB Hamburger and Tim Hortons Hot Dog, products

more readily identifiable in the fast food familiar U.S market. But technology and innovation

will clearly be crucial. The “three-channel” distribution system will enlarge the company's

supply capability. In the area of technology, the new debit card system called the “Tim Card,”

(Tim Hortons, 2011) will add convenience and return buying power, a value adding innovation

to the Tim Hortons brand. Tim Hortons is also borrowing a page from McDonald's, having

opened outlets in seven Canadian Wal-Mart stores. This may offer an opportunity to enter U.S.
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Wal-Mart locations, also making Tim Hortons products readily available for our identified target

markets.

Promotion

Tim Hortons is a very well known business corporation. Having mastered their ideal

marketing strategy, Tim Hortons has become one of the most successful businesses in the quick

service/ fast food chain in Canada. Tim Hortons has been consistently named a top brand in the

Canadian marketplace being awarded with “Marketer of the Year” by marketing magazine (Tim

Hortons, 2011). Their promotional events, such as roll up the rim, sponsorships and their

environmental concerns and events have continuously attracted a variety of customers into their

stores; targeting not only adults but kids and young adults as well. Tim Hortons has a variety of

TV ads, reaching out to different areas and groups of people. Whenever Tim Hortons rolls out a

new product they assure that it is followed with tons of advertisement to create awareness of the

product. Using billboards, catchy slogans and TV advertisements they allure new and repeated

customers to come try new items or favoured original products.

Our new product is a low fat double burger, and seeing as we decided to bring a new

item into our product line, marketing is essential. A huge part of this is to build relationships

with our channel partners. We’ll need to do so by staying loyal, trustworthy, keeping

involvement with partners and to value opinions of our partners. We’ll need to motivate and

manage our distributors creating win-win scenarios. Our end customers are the ones were

delivering to, saying so it is key to maintain a positive relationship with suppliers, thus leading to

successful production and delivery so we can ensure customer satisfaction.

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Our strategic plan to promoting our new low fat double burger is to use advertisement

such as billboards and commercials that reflect our products quality characteristics. Our target

market is fairly broad seeing as everyone loves burgers. The upside on our new product is that it

is lower in calories and more affordable then our competitors, giving us the opportunity to

market to parents about the healthier choice not only for themselves but for their children as

well. In our advertisements we seek to create the image of a high quality burger with low calories

and a low price. Commercials will bring awareness to our customers, stimulating trial of the new

product. Billboards will remind them of our great new product triggering their minds to the trial

of the product or simply setting a reminder of old products. Tim Hortons website will be updated

with further details on our new product having it featured on the homepage as well. A form of

personal selling will be used in our launch as well by having someone at stores handing out

samples of our new product, for example in line ups. While doing so further knowledge of the

product will be explained while customers get the chance to taste the new product. This could

trigger customers to want to purchase the item from having the enjoyable taster. This will

allocate from different promotional tools because they’ll be quick easy ways to draw attention

from our remaining and new customers. Our slogan for the launch of our new product would be

featured in our advertisements which is, Have your Burger and eat it too! Our key message from

this is pulled from the expression you can’t have your cake and eat it too, where as our product

offers you a delicious burger but with low calories and low in cost so you can have your cake

and eat it too only with a burger.

What we learned
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This group project has been invaluable in terms of being a learning experience and it has

been so in several different ways. First and foremost, it has been a lesson in the benefits and

struggles of group work. But also, it is a unique opportunity that has enabled us to use the

material of the course in a practical sense. The idea of generating a new product for a real

company and incorporating it into that company’s product portfolio uses a great number of

aspects and marketing perspectives, only some of which are able to outlined in this paper.

Formulating an idea to introduce a new product into the Tim Hortons product portfolio

has been an exercise that allows the use of a plethora of marketing concepts learned in lectures.

Beginning with the basics such as company structure, analyzing the micro and macro

environment, performing a SWOT analysis, and being able to segment the market. These are all

essential tools in understanding marketing as a whole. The case studies reviewed in class have

allowed us to better analyze and understand the marketing process for Tim Hortons. Starting the

second part of the assignment, which deals with the marketing mix (product, place, price,

promotion) of our new product idea to be introduced by Tim Hortons, helped to focus in on

specific concepts. Several different methods for one aspect need to be considered for our product

on each topic. For example, what type of pricing method should we use? How should we

position our product to stand out from similar competitors’ products? And how are we going to

successfully distribute our product to our very specific target market? All these questions and

many more have been discussed in varying applications in class and need to be transferred and

applied to our new product for Tim Hortons. This goes to show that, after having learned these

concepts in a classroom setting, we now know what kinds of questions to ask when considering

the marketing of a product and we also have a good idea of how to answer those questions when

applied to different situations.

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Working in a group presents itself with many benefits, but also comes with much

difficulty. One major benefit is that the group can learn much more from each other’s efforts

while physically doing less work. It allows you to be able to read other people’s work and ideas,

while still being able to incorporate your perspective into the writing process. Furthermore, there

is an added benefit that the rest of the group can act as a critic for both the quality of the English

writing, the content, and the way it is communicated. This enables the paper to be proofread and

hopefully outputs a better overall product. However, there are also many difficulties that come

with working in a group.

With our group, the first problem was finding a time where we are able to meet. We were

never able to schedule a meeting where all group members were able to attend. This was not due

to lack of effort on anyone’s part, but more to do with conflicting schedules. One group member

works full time and others have several part-time jobs, along with the regular full-time class

loads. This was not something that should bring a group down or make it be less effective, but it

just means that the communication between group members needed to be exceptional in order to

get the work done well and on time. It took a while before we were all emailing regularly and the

first part of the project was rushed for time, including the editing process. This taught us to make

sure to schedule meetings and delegate responsibilities earlier for the second part, which is what

we did. Two of us met, divided up the parts, and told people what needed to be done over email,

and it was done. All the while, we made sure to start planning for a last meeting with everyone to

make sure we were all on the same page and heading in the same direction in terms of the

marketing aspects of our new product for Tim Hortons. I believe that we were able to overcome

this major obstacle and successfully complete the marketing report. One other small obstacle that

presents itself during group projects is keeping the flow of the paper. Everybody has different
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writing styles and it requires that one person be selected to read through and adjust the style and

flow of the content so that it does not seem like five different people separately wrote five parts

of the essay in sections.

Overall, the skills involved in successfully coordinating and getting along with other

people to complete a project are essential. It is very rare in the work world to be responsible for

individually completing an entire task. Usually, you either have help, input from other

departments, or a team of colleagues that have a say and you need to know how to work as a

team. This project was no different.

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References

7-11. Menu. (April 10th 2011)

Armstrong, G., Kotler, P., Cunningham, P. & Buchwitz, L. (2010). Marketing an introduction.

Toronto: Pearson Canada.

Burger King Canada menu items nutrition facts as of June 2010. (2010, June 1). In Burger King–

have it your way. Retrieved April 2, 2011, from http://en.burgerking.ca/cms/en/us/cms_out/

digital_assets/files/pages/NutritionInformation.pdf

Environmental stewardship: our commitments. (2011, March 8). In Tim Horton's - sustainability

and responsibility report. Retrieved April 2, 2011, from

http://sustainabilityreport.timhortons.com/planet_env_steward.html

Handelman, Stephen (2007). Tim Hortons. Retrieved April 8, 2011, from

http://www.portalfornorthamerica.org/sites/files/Handelman%20-%20Tim
%20Hortons.pdf

Interview with Brad Godin, Earls Bankers Hall Head Chef. (April 6th 2011)

Kotler, P., & Armstrong, G. (2011). Marketing principles (14th ed., pp. 258-280). Upper Saddle

River, NJ: Prentice Hall.

McDonalds. McDonalds Annual Report 2009. (February 26th 2010)

McDonald's Nutrition Facts for Popular Menu Items. (2011, March 28). In McDonald's.

Retrieved April 2, 2011, from

http://nutrition.mcdonalds.com/nutritionexchange/nutritionfacts.pdf

Sandwiches & wraps. (2011, March 1). In Tim Horton's - In our restaurant. Retrieved April 2,
2011, from http://www.timhortons.com/ca/en/menu/2386.html
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Tim Hortons. Tim Hortons Annual Report 2010. (January 2nd 2011)

Tim Horton's nutrition guide. (2011, March 1). In Tim Horton's - nutrition. Retrieved April 2,

2011, from http://www.timhortons.com/ca/pdf/nutrition-guide-can.pdf

Tim Hortons. Organization Structure. 2011. Retrieved April 8, 2011, from

http://www.timhortons.com/ca/en/join/structure.html

Tim Horton's Tim Card. (2011). In Tim Horton's Tim Card. Retrieved April 8, 2011, from

http://www.timhortons.com/ca/en/timcard/

Wendys. Wendys Annual Report 2010. (January 21st, 2011)