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Rich Gang

Marketing Management 55434-01


April 20, 2016

Content Index
Situation Statement/Executive Summary..3
Situation Analysis4
Current Marketing Plan...13
Recommended Marketing Plan....15
Summary....18
Reference....19
Appendix.20

III.
1.

Situation Statement/Executive Summary


Major marketing issues and opportunities: Based on our survey, we have found that
Applebees major marketing issues would be their confusing brand image. Customers
seem to have differing ideas on who Applebees is as a company. Another issue we
found was simply their marketing research methods and budget in general. They only
do research on a national basis, and local research is up to the manager. They also
have a very small budget- only 1% of sales. Some opportunities we think they should
capitalize on would be to focus on their game nights (their target market likes these)
and also, a big competitor, Carsons, is closing so they have an opportunity to take
their market share.

2.

Constraints: Their image as a company is a big constraint. They are having trouble
deciding who to be as a company, and this is costing them customers.

3.

Positioning statement: Provide high quality food at a lower price

4.

Key recommendations: Our main recommendations based on our results would be to


go back to their original plan and stick with the lower priced burgers and drinks and
make the interior design more casual. We would also recommend increasing their

advertising budget to fix the confusing brand image that customers have. Finally, we
recommend getting a professional team to properly analyze the local markets and
advertise accordingly.
5.

Time frame: We believe all of this should take about a year. With renovating, getting
a marketing team, and implementing a bigger advertising budget, this could take a
while.

IV.

Situational Analysis

1. Company Analysis:
Applebees is a growing bar and drill approaching 2,000 locations across North America.
This successful restaurant has garnered their success by implementing and sticking
with their business motto Good Food. Good People. this business motto all began in
1980. Two brothers, Bill and TJ Palmer, in 1980 in the state of Georgia piled funds
together and formally opened to what was the inception of Applebees. T.J. Applebees
Rx for Edibles & Elixirs was the original name but that was soon to change. After
three short years the concept of Applebees was sold to a company W.R. Grace and
Company but later were in contact with Bill Palmer to become an Applebees
Franchise. As 1986 came around Applebees formally changed its name to Applebees

Neighborhood Bar and Grill. Also following in the year of 86 two men from Kansas
City, Gustin and John Harma, obtained their first Applebees franchise. Two years
later the Harma brothers bought the concept from W.R. Grace & Co., seeing
potential, the company launched an IPO, Applebees International, Inc. (A.I.I.). These
are the inception years of Applebees.
As the early 2000s rolled around Applebees was running efficiently and growing day by
day. The locations grew over 1,250 and expanded into Latin America and the Middle
East. Julia Stewart is acquired by IHOP and Applebees is left without there
president. Applebees starts a fund called The Heidi Fund in honor of Kansas City
server. Applebees is starting portray the idea of working the restaurant as a family.
By the end of 2002, 1,500 locations were up and running. The 1,500th location was
coincidentally managed by Bill Palmer in LaGrange, Georgia.
As a shift in customer attitudes Applebees teamed up with a partner, Weight Watchers,
creating a low calorie meal without sacrificing great taste. It was also during this time
that the company introduced the concept of Carside To Go pickup, in summary a
drive-thru without a window. Both of these ideas appealed to different consumers,
time-crunched and health conscious. Change and awards highlighted much of the first
half of the decade for Applebees as they received an award for having excellent
investor relations. A few years later Applebees was named one of three finalist for the
Gartner High-Performance Workplace Excellence Award.
Again Applebees expanded borders into other international markets. The companys
Lloyd Hill moves from being a top-level manager to being on the board of directors.
In 2007 Julia Stewart enters the picture once again buying Applebees with the help

IHOP and creating the largest full-service restaurant company. Applebees and IHOP
become part of the DineEquity, Inc. Within the last years of the 2000s the company
seeks to become more socially responsible, Veterans Day free meal, and find a
collaborator with RealBurgers.
Applebees Culture:
Applebees company culture is easily defined by casual dining experience. This has been the
culture of along with providing a friendly neighborhood environment. From the top
level managers this has trickled down to their base employees giving Applebees a fun
to work for environment where employees are friends with each other and repeat
customers. Applebees has been at the butt of jokes for its laid back kind of lame
culture. Note the movie Hall Passwhere they joke about the restaurant being less
exciting. Julia Stewart has even embraced this image for her company. Critics have
translated the See You Tomorrow campaign to serving mediocre food to the same
people day after day (Coffee). A confusing mixture of a sports bar, family outing, and
a singles joint. Now the discussion will continue with how Applebees has come to this
image.
Directly from the Applebees website their values are integrity, excellence, innovation,
accountability, inclusion, trust, and of course community. These are all great values
that the company stands by and should be recognized for pursing these values.
Integrity is the ability to the right thing while committing to high ethical standards.
Excellence is holding oneself to higher standard. Innovation is the main ingredient for
creativity. Accountability is following through on ones words. Inclusion holds onto
the idea of diversity. Trust is having great communication and building on that.

Finally, community which of course is making a difference on the companies


surrounding environment or stakeholders. The mission statement and values are
closely related as they give sight to a companys future.
Current Corporate strategy:
Applebees in the past few years has tried to realign their image to more than being a
causal somewhat boring restaurant. A few key changes that have occurred in the
restaurant have been a remodels, tablets, and a location-specific menu (Lutz). These
three change have all been in the Maryvilles Applebees, tablets have given the
perception that the restaurant is edgy and excited for the changing times. These
tablets also allow for consumers to speed up the process of ordering and paying for
meals, though it may seem detrimental to their service as you have less interaction
between employees and customers, tablets have been positive. This is also related to
competitors as tablets have increased in the restaurant markets, especially in
Applebees casual dining segment. A regional menu allows for specialization and
higher assortment. This is particular important in areas where food does not align
with target market examples could taste and flavor vary from region to region.
Managers should address these issues and find good products to offer to the public.
Lastly, mixing up the atmosphere of the restaurant inside and out. This really does
help the image when things look dated people perceive bad quality. Applebees
recognized this and announced a companywide revamp of the current restaurants,
many chose to local routes such as Maryville sponsoring its sports lovers of the city
putting up sports pictures around the walls.
Current Products:

Applebees current offering a wide variety of products consisting of steaks, ribs, pasta,
seafood, chicken, and an assortment of sides that can be ordered. Applebees has been
consistent over the years with a several menu items but also added new products to
the menu as well. Low calorie meals were being offered in the 2000s that were a big
hit with consumers and have stuck with the menu over the last decade or so. Drinks
are also highlighted here as Applebees has tried to add new cocktails and be
innovative in the process. A new happy hour special here in town has been a recent
change to the menu including new drinks and food items. The company is in the
process of trying to make a large menu item addition that requires new cooking
stations. Steaks, and lots of them being added to the menu. By offering a greater
variety of steaks Applebees will venture into a new market that it has been somewhat
in but not both feet. Another example of how Applebees has kept current is its Carside offering to pick up food you order. It could damaging to the image but is essential
to offer to hit another time-crunched market of consumers. Its been successful and
Applebees sees the value in having a drive-thru.
2. Target Market:
Based on our survey results, we found our main target market to be college students who
are between age 18-25. With this type of customer, we also found out that they
generally go to Applebees to hang out with friends and socialize late at night- 9 P.M.
to closing time.. When they go to Applebee's, they typically order some type of burger
(as opposed to steak or chicken), and they are generally looking for simply good
quality food and drinks in a fun atmosphere with their friends. We found that
customers were pretty satisfied with the value and quality of the food and drinks, but

that prices were a little steep and that they generally did not the idea of Applebees
being a sports bar. They said that it was very overdone, they didnt like sports, and
that Applebees was mainly used for a casual dining and socializing. After our
customer analysis we found a few problems. One problem is that Applebees is
currently trying to be more upscale with fancy steaks and nice light fixtures, but the
target market seems to just want a burger and drinks with their friends late at nightNot quite another sports bar, however. Another problem we found after the customer
analysis is that, though price wasnt the main thing they wanted in a restaurant (the
main things being quality food and drinks and a good atmosphere), they still did
mention a higher price a lot in the survey, and this is probably also due to Applebees
trying to become more upscale. In general, Applebees customers want quality food
and drinks in a fun atmosphere with friends- though they seem satisfied with the
quality of the food, we arent sure Applebees switch to a more upscale dining location
is what customers are wanting.
3. Collaborator Analysis:
Being a restaurant, Applebees has several collaborators on various different levels. One of
their main collaborators they have is Weight Watchers. They have collaborated with
them to put a lot healthier items onto the menu to help target that market. They first
introduced this partnership in 2004 when the United States first hit the health kick
trend. The restaurant has since started to phase out the Weight Watcher items, only
keeping a few on the menu and going more to an under 550 calorie section of the
menu with items produced by a hired chef, so this collaboration is not good enough.
Another collaborator that Applebee's has is the company that supplies them with their

food, Sysco. For the soft drinks Applebees collaborates with Coca-Cola, and they also
collaborate with several various brewing companies and liquor providers. These
collaborators for their food and drinks are good enough because people enjoy the food
and drinks that Applebees has to offer. Applebees also collaborates with a lot of
different charities. Some of the larger ones they donate to is Alexs Lemonade Stand
Foundation and the Make-a-Wish Foundation. Collaborating with these charities only
helps the company because it creates a great brand image and also brings customers
into their restaurant who want to donate to those foundations but wouldnt think of
going to a restaurant to do so, so these collaborators are good enough. They also have
a really good relationship with their parent company, Dine Equity. We could not find
any issues with their collaborators.
4. Competitor Analysis
The main competitors of Applebees here in Maryville are Carsons and A&G. These would
classify as the biggest competitors in the food market here in Maryville for the target
market Applebees is looking for. These two restaurants are both privately owned
companies that are owned by locals who live here in Maryville. All three of these all
offer the same items with the bar areas and the regular family sit down areas.
Although they offer the same surroundings they all three have different feels to them
with Carsons and Applebees having the closest resemblance of each other.
Applebees and Carsons are both bar and grills that offer the same sports bar type
menus with burgers, chicken, steak, and salad type menus whereas A&G on the other
hand offers Greek type foods like sandwiches, steaks, soups, and salads while offering
a more pricey menu compared with Applebees and Carsons creating a relatively low

bargaining power of buyers and suppliers when it comes to these three restaurants.
With these three restaurants being the biggest of the nice sit down restaurants the
market here in Maryville is about at its maximum capacity when it comes to being
able to sustain these types of family sit down restaurants. That being said the threat of
a new company that is similar to these would be very low. The indirect competitors of
Applebees would be the various other fast food and sandwich shops around town.
Although they do not directly compete with Applebees, fast food restaurants like
McDonald's and sandwich shops like Subway and Jimmy Johns all take away
business from Applebees and its main competitors because they offer the low price
and fast meal for the person that does not have the time or money to afford to go to a
nicer sit down restaurant all the time. These indirect competitors have a bigger buyer
bargaining power because they are able to target people both inside Applebees main
target market and the people who are outside of it who are looking for a cheap meal.
5. Context Analysis:
Political/Legal: Being a franchise, Applebees has many rules and regulations they must
adhere to in regards to how the store is ran.
Economy: Applebees Maryville target market is college students and families with lower
incomes so they are more frugal.
Social/Cultural: Applebees has been doing big things that make the community better.
They currently offer ways to help fundraise through the use of their restaurant to
serve pancakes, and sponsor events and local youth sports teams. This plays a big role
in how they are viewed within the city. Sponsoring is a great way for free advertising
but it also shows that they are willing to donate to help within the community.

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Technology: Without technology Applebees would not be able to send orders back to the
kitchen and pay the tickets through the POS systems (recently tablets on the tables).
Lastly they use the computer in the restaurant to manage the day to day operations
when looking at the sales and the comments people give on surveys so they can
improve the restaurant.
6. SWOT Analysis:
Strengths: One of the biggest strengths that we have found is their CSR. After the
tornado in Joplin, Applebees helped out a lot with that by donating money and
helping out their employees in that area. They also donated a lot to help with the
tsunami in Japan. Doing things like this creates a good brand perception in the eyes of
the customer and that is a big strength. Another strength of Applebees is the fact that
they are one of the biggest franchises world wide so they have a lot of buying power
and a big market share. Almost everyone knows who Applebees is, and they are even
featured in a lot of todays movies such as Hall Pass and Talladega Nights. As a
franchise they also try to locate their restaurants by highways so they are more easily
accessible to their customers which is a big strength as well. Their menu selection is a
pretty big strength as well, because they carry a wide variety of options to cater to all
sorts of people. For example, they have lower calorie options to accommodate more
health conscious customers, and they even have vegan and vegetarian options as well.
Weaknesses: We have found a few weaknesses of Applebees as well. One is definitely
their inability to figure out what image they want to convey. Throughout the years,
they have been a sports bar, a more family-style restaurant, to now trying to become a
more trendy and upscale restaurant. In our research we got many conflicting answers

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about how their customers see Applebees because of this constantly changing imageSome people still see it as more of a sports bar, and some people now think of it as a
more upscale place to go eat. Another weakness is the higher prices that come with
trying to be an upscale restaurant. Majority of our respondents said that they think
Applebees is a little overpriced, and this comes as no surprise considering their main
customer base is college students.
Opportunities: There are multiple opportunities for Applebees. One big opportunity
would be to capitalize on the fact that Carsons is closing. This gives Applebees the
chance to take their market share and become the main place to come and get a
burger and a drink. They also currently do lots of activities on week nights such as
karaoke night and trivia night and that is an opportunity for growth as well. They
need to advertise it more and do different activities like that because a lot of people in
our survey said that the main reason they go there is for the late night activities and
late night promotions like half priced appetizers. Customers want a fun place to hang
out with good deals and doing more activities like that can give them that.
Threats: Applebees has a few threats here in town. Since most of the survey
respondents said they mainly go to Applebees later at night to drink and hang out
with friends, a big threat would be all of the bars here in town (Mollys, Burnys,
Palms, etc.) that serve cheaper alcohol. Wal-Mart and Hy-Vee are also a threat for the
same reason. Direct competitors- La Bonitas, Carsons, and A&G- Could also be a
threat. One final possible threat would be the possibility of a new, trendy casual
dining restaurant with a more consistent image and cheaper drinks.
7. Summary statement of problems and marketing objectives:

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Applebees must address their pricing and brand image issue and use their game nights
and Carsons closing as leverage to gain more customers.We would like to see a 20%
increase in involvement in game nights, and a 25% increase in brand awareness after
fixing their brand image.

V.

Current Marketing Plan

1. Overview:
After talking to the manager and doing some online research, we found that Applebees has
quite a few issues with their marketing, aside from the brand image issue stated
earlier in the paper. We found that most of their research is done at the national level
(local research is all up to the manager), they dont really have a good way to measure
its effectiveness, and they dont have much of a local advertising budget- their main
tool is simply word of mouth.
2. Strategy and tactics:
Applebees current marketing strategy is to create a worldwide franchise by creating a fun,
young, hip atmosphere. They try to make a deeper connection with guests by hosting
game nights and they even call themselves a neighborhood bar and grill, implying
that their customers are all their neighbors. They are currently in the process of
revamping their image, however, to become more of a higher class, young adult
restaurant. They are creating this image by introducing more expensive fire-grilled

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steaks and updating the inside to a more modern image, meaning more upscale tables
and booths, dim lighting, tablets on all of the tables, and even a phone app.
A lot of Applebees advertising is done through TV. Their ads feature young, diverse crowds
eating together and having fun. Applebees franchises are required to spend .5% of
gross sales on local advertising and 3.2% of gross sales on national advertising- this
goes towards their TV ads, radio ads, and some print ads as well. Their biggest
weapon that they rely on, however, is good word of mouth. Getting good word of
mouth is easy for them since their marketing strategy is to create a superior fun and
friendly atmosphere. Being in 49 US states, it is hard to measure the vast reach this
gets, but the best part of this tactic is that it is totally free. Having good service,
friendly staff, and good promotions is all you need. We feel that word of mouth is a
good idea for Applebees to capitalize on, but they need to use other forms of
advertising more as well.
3. Research and measurement:
On the national level, they mainly just use sales to measure their marketing effectiveness,
which has been declining in recent years. In recent years, DineEquity has seen a
greater increase in gift card sales, which could also be used to measure marketing
effectiveness and brand awareness.
During our interview with the general manager of the Maryville Applebees, Dave, he said
that he currently has to do most of his local marketing research on his own. Majority
of their marketing is simply up to their national headquarters. He did tell us, though,
that they are about to enter into a contract with a regional marketing company
located in Iowa.

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4. Budget:
We were not able to get specific numbers for their budget, but Applebees franchises are
required to spend .5% of gross sales on local advertising- which based on last years
numbers would end up being roughly $2 million (including Dine Equitys other chain,
IHop). They also have to spend 3.2% of gross sales on national advertising as well.
This money go towards their TV ads, Radio ads, Print ads, sponsoring game nights,
etc.
5. Current problems or issues:
Marketing research in general seems to be a newer idea to the Applebees franchise. One
issue is that they have no real good way to measure their marketing efforts. Using
sales is not a good idea, as many factors can contribute to increase/decrease in sales.
Another issue that they have is their lack of marketing research. They need a
professional team to come in and do their research on a local level rather than just the
national research they have done. As we mentioned earlier, they also need to decide on
one single brand image that better caters to their target market. One final issue we
will cover is their way of creating a marketing budget, To us it seems like they have a
whatever we can afford type of strategy when it comes to marketing and research.
We think they need to make marketing more of a priority.

VI.

Recommended Marketing Plan

Our survey revealed to us that their customers are confused by Applebees current attempt
to become more upscale- they just want some drinks and a burger/appetizers with
friends. Based on this, ultimately our plan is to simplify and go back to their roots.

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With a low cost leadership strategy, demodernizing their restaurants, and offering
simpler menu items, Applebees will better be able to meet their customer's needs.
Our core marketing strategy we recommend is low cost leadership. Based on our research,
we found that our target market (families and college students) didnt like the recent
price hike and just want a fun, cheap place to hang out with friends. The average
household income in Maryville is only $28,000-$29,000 so lower prices would
definitely attract our target market and help us better compete with the bars in town
and even Walmart and Hy-Vee. Along with this, we would also recommend sticking
with a lower cost, family-style brand image and back off of the upscale image idea.
This will better appeal to their target market, and would fix the conflicting brand
messages that they are sending. We would also recommend increasing marketing
expenditures to at least 1%-2% so they can do more advertising so they stay relevant
and not just rely on word of mouth- people need to be aware of the game nights and
all of the promotions they do. Finally, we would recommend going through with
getting a marketing team. This would fix the lack of marketing research issue as well
as the issue in measuring the marketing effectiveness. This strategy guides our
marketing decisions because our marketing mix (which we will go more in depth with
later) will be based all on becoming more casual and having lower price.
Throughout the course, we discussed the importance of brand image many times- for
example with all of our case studies and the articles getting brand communities
right, and Conceptualizing, Measuring, and Managing Customer Based Brand
Equity. Applebees is an example of when it isnt done correctly. Consumers get
confused and arent sure who the brand is anymore as a company. This is why it is

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important for them to get their brand image right, and advertise it well so consumers
know who they are as a brand. A professional marketing team can do this for them.
Recommended Marketing Mix:
Product: We think that their products need to be focused on the basics- burgers, appetizers,
drinks, etc. Though fancy steaks are nice, their target market said they usually just go
for burgers and drinks- nothing fancy. It might even be possible to just offer their
fancier steaks during certain days of the week, like weekends when they have more
traffic.
Price: As mentioned earlier, they need to do some product development to come up with
cheaper ways to make their products without sacrificing quality. Their main
customers here are college students and families with around $28,000-$29,000 annual
income so they arent wanting to spend too much on food.
Place: The physical location of the stores is very good. Being located right off the highway
is very convenient for their customers. The inside of the facilities need to be redone,
though, to make it more relaxed and welcoming- not so modern and upscale. That is
what their target market is wanting.
Promotion: Word of mouth is a great tool to utilize, but even though they are such a big
company they need more than that. Customers are confused about the image
Applebees is trying to convey, and more advertising can help that. They need to make
sure people still remember them, and show them that they are still the place to come
hang out. This could be done by increasing the advertising budget to 1% instead of .
5%.

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With interest to our target market, we believe that lower prices and a more appealing,
casual atmosphere when paired with more advertising will increase sales by roughly
10%. This will increase both ROI and NPV when compared to their current plan they
are implementing, and it will save money by cutting down to simpler foods and less
upscale equipment. We think it will take roughly 6 months after our plan is
implemented to see results.
3)

Implications for the marketing ecosystem: We think our recommended marketing


plan will shake things up a little bit for the competitors. When Applebees decided to
become more upscale, it probably relieved a lot of their competitors because they were
now going to be attracting a different type of customer, leaving their old customers to
go to the competitors. Now that they are going back to their old ways, they will be
more in the running with their competitors again and they will be fighting for the
same target market.

VII.

Contingency Plan: If these strategies were to fail, we would recommend only trying
the more modern setup in their higher traffic city locations- their customers in those
areas will most likely like that more than in more rural areas. These customers
typically make more money, and want more expensive foods.

VIII.

Summary:

To summarize the problems, Applebees has created a confusing brand image by going
against what their customers want and trying to become more upscale. Their
marketing objectives and research methods are cloudy and unclear (because they
have no local marketing team). Our objective with our recommended marketing plan

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is to appeal to a younger, more frugal target market by creating a young and fun
environment. We plan to do this by redesigning the interior of the restaurants back to
a less fancy and more of a dive bar type feel, and serving cheaper, simpler foods and
drinks. Our recommend 4 Ps tactics are to find a way to lower the price of their
products, by offering not-as-fancy foods and less expensive liquor. They need to keep
their location (by the highway is good), but they need to up their advertising budget to
1% of sales instead of .5% and use that to help promote their new image and clear up
the confusing brand image.

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IX.

References

"Applebee's There's No Place like the Neighborhood." Applebee's Our History. N.p., n.d.
Web. 13 Apr. 2016.
Coffee, Patrick. "Applebees Makes the Most of Its Casual Reputation." PRNewser. N.p.,
9 Jan. 2013. Web. 13 Apr. 2016.
Lutz, Ashley. "Applebee's Is Trying To Shake Its Boring Image." Business Insider. Business
Insider, Inc, 06 May 2014. Web. 13 Apr. 2016.
"Shared Publication." DineEquity 2015 Annual Report. N.p., 2015. Web. 14 Apr. 2016.
Weisbaum, Herb. "Applebee's Social Media Faux Pas a 'learning Experience' - NBC
News." NBC News. NBC News Contributor, 5 Feb. 2013. Web. 13 Apr. 2016.

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X.

Appendices

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Note: The main part of the Marketing Plan (III-VIII sections) should be 15 pages, in TNR 12
pt, double-spaced, with one-inch margins all around. There is no limit of the number of
pages of the appendices; but, only necessary appendices should be included in your
submission.)

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