Emily C.

Martin

IMC 616

Final Project

Lettuce Entertain You Enterprises Inc.

< LEYE >
Emily Martin IMC 616 West Virginia University Final Project

Emily C. Martin

IMC 616

Final Project

Introduction
Today, Lettuce Entertain You Enterprises (LEYE) is a highly successful culinary idea factory. When Richard Melman and Jerry Orzoff opened their first restaurant in 1971, R.J. Grunts, they set out to introduce a quirky ambiance with a healthful menu offering of items that other restaurants simply did not offer. While R.J. Grunts started slow, within two months, the company took off and Melman and Orzoff continued from there, until Orzoffs death in 1981. Melman continued the tradition of success, boosting LEYE into a $350 million a year business by 2009. (Ravneberg, 2009). Melmans business theory of running LEYE with 20% creativity and 80% teaching, he pushes his employees to form new ideas to fill voids in the restaurant industry. From this approach, LEYE currently operates nearly 80 restaurants representing over 30 brands.

As LEYE continues to expand, the company continually looks to their customers and employees for inspiration. Located in the Chicago, Illinios area, LEYE faces unique seasonal challenges. Weather-related obstacles face LEYE in their promotional posture as the company continues to evaluate their marketing programs. As Melman and Orzoff set out to create innovative and unique eateries, they innately provided themselves with a challenge: Each of those 30 unique brands has assumed a very unique personality, which attracts their own unique market segments. Going forward, LEYE must evaluate its marketing program to either find a central ground that will appeal to all of the concepts (or at least a majority) or the company must segment targeted niches to reduce the cost of their marketing nets being too widely cast.

Quite a unique problem: Success is an obstacle!

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Customers choose LEYE for the atmosphere and dining experience in addition to the food.

Richard Melman views the dining experience as the sum of the entire experience, maintaining the company focus on providing value to guests. (Vosper, 2007). As the chain keeps the experience fresh, they change small things weekly, even if only the salt and pepper shakers. Customers return as a result of the exceptional service experience as well as the tweaks and fun atmosphere. LEYE is obsessed with finding a need in the industry and pursuing that void. A former employee of LEYE explains, Lettuce is very good at identifying what the public wants before the public knows they need it. (Buchtal, 2005). Accordingly, LEYE restaurants offer an amazing variety. Cuisine offerings include American, Asian, BBQ, Chinese, crepes, French, fine dining, Italian, Mexican, Nuevo Latino, pizza, sandwiches, seafood, Spanish, steaks, sushi, Thai, and Thai/French. In addition to variety of foods, LEYE focuses on the mood to enhance dining experiences. Moods offered in LEYEs restaurant suggestion service include: Casual, Formal, Fun, Lively, and Romantic. (LEYE.com, 2010).

The scratch-off card promotion is good to attract a customer to the LEYE casual brands.

The same promotion is not spectacular to attract patrons to the fine-dining establishments. The feel of the promotion is contradictory to the fine dining experience. The target market segments for LEYE are general as there is a cross-over between those customer segments that enjoy both types of cuisine. As marketing trends evolve within the restaurant industry, smart marketers will target the customers based upon their desired experience. LEYE would benefit from a more diverse marketing plan. The singular scratch off card does a mediocre job of attracting attention; while it does not speak to the entire list of targeted niches. Diners who prefer a refined and less

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involved method would benefit from an attractive marketing plan based upon their desire for services and added perks within the Loyalty program.

The scratch off program found success, generating positive responses. Since the projects initial launch, results have shown a decrease in response. The promotion may have seen its saturation and diners may desire newness. To keep LEYE intriguing, a fresh marketing tactic must be used, indicating innovation and novelty. Creating a highly interactive (two-way) program would involve the customer more than bringing the card to the restaurant for the server to reveal savings. If LEYE wants to continue the scratch off theme, they could introduce a program where the customer scratches off the card at home to reveal a promotion code, directing them to OpenTable.com or LEYE.com to make a reservation. The code will reveal the perk when entered online or a surprise will be ready for the customer upon arrival for their seating. The perk could be a free beverage, appetizer or dessert, or a percent savings. Further creating a highly-specific customer experience, based upon Loyalty Program database information, the promotion could relate to customer history of preferences.

Initially it seems Gamers and Gamblers (G&Gs) would be vastly different from the

traditional LEYE segments. Upon further investigation, G&Gs share similar characteristics: The Diamonds-To-Go segment (D1), Cash-To-Carry (C2 and C1), and Easy Street (E1) niches all report a household income over $70,000, are above 35 years old, and enjoy gaming, lottery use, computers, and digital interests. Even Cash-To-Carry (C3) and Diamonds-To-Go (D2) indicate an interest in stocks and bonds, which are in essence a gamble itself, further providing similar traits to the G&Gs. (P.I. Reed School of Journalism, n.d.). Investors and gamblers share traits including financial conservatism, material resource needs, and competitiveness. Findings show 4

Emily C. Martin

IMC 616

Final Project

that to market to the high-function gamblers and gamers, marketers should focus on the adrenaline rush, numbers and money. (Jadlow & Mowen, 2010). According to this research, LEYE should focus on the excitement and financial gains that could be accomplished through the scratch off program.

Segmenting the G&Gs based upon income, age, location, and interests Thurman created an

appropriately compiled list. The direct mail campaign allows LEYE to communicate directly with potential customers, intriguing the G&G with the scratch off card, drawing them in with the allure of a mysterious discount. Supportive emails allow LEYE to remind consumers of the offer and keep the chain at the top of their mind. An intriguing subject line and inclusion of the LEYE name will attract consumers to open the reminder email, increasing the chance of a positive response by 12%. (Mediaweek, 2009). It is important for LEYE to send a maximum of three reminder emails, creating a similar feel for the company, as the first three emails a company sends to a prospect will define the relationship between receiver and company. (Parmar, 2008).

In order for the G&G scratch off campaign to be deemed effective, specific measurement criteria must be established. LEYE will expect a significant return on investment over the break-even point over the $200,000 budget. Important statistics examined should include: household response rate, coupon redemption rates, percent of sales versus marketing costs, and increase in year-to-year Loyalty Program participants, especially during the summer months. To be successful, comparative year statistics would show an increase to households attracted to the restaurants (13,534), coupons redeemed (21,478), and new Loyalty Program participants (4,126).

Emily C. Martin

IMC 616

Final Project

As LEYE has used the scratch off promotion before, primary data has been analyzed. Although a decrease has shown since its inception, initial response was positive. LEYE must determine different offers. The promotion would be the independent variable while the response to those promotions would be the dependent variable. Testing would be derived from sending two types of promotions to randomly chosen niche members within a specified zip code. The response to each promotion would be measured and analyzed using key codes to match-back the most effective coupons. (Spiller & Baier, 2010). This would determine the best offer with which to move forward. Following up with the customers and Loyalty Club members via email or online survey would be a viable method of collecting primary data to determine which would be best continued and reasoning.

The scratch off card is not appropriate for all of LEYE venues. The strategy is fun,

whimsical, and interactive; however it is not suitable for the higher-end restaurants under the LEYE umbrella. The scratch-off card would be an effective promotion to continue for the casual and quick-dining LEYE restaurants. Coupons provide an incentive to purchase a product due to a price reduction, motivating diners to either try a new venue or increase the number of visits from occasional to frequent. (Spiller & Baier, 2010). LEYE needs to produce more frequent visits to all of their venues. LEYE restaurants are all uniquely and do not necessarily share the same target markets or demographics. In order to increase traffic to LEYE venues, Thurman should cluster the LEYE restaurants based upon specific nuances: fine dining, casual dining, theme, cuisine, etc. By doing so, targeted clusters could be identified and marketed to in order to create highly relevant messages, promoting each restaurant to the niche with the highest chance of positive response.

Emily C. Martin

IMC 616

Final Project

Block Party Customers who live within a five mile radius of the LEYE restaurants A

majority of LEYEs most loyal customers live in the immediate area. (Perley Isaac Reed School of Journalism, n.d.). The ability to attract and retain customers in the vicinity should be a focus. Promoting loyalty beyond the Rewards Card, LEYE will reach out to the immediate neighborhoods of each restaurant. Geographic and habitual factors should be considered: repeat patronage, Rewards Card status, and Zip Code +4 to directly target potential increased business. Based upon this, LEYE restaurants will hold Block Parties to ring in the summer season, promoting the local LEYE to reinforce eating out during the season while promoting preference for the unique personality. This will tactic will promote LEYE heavily through a targeted direct marketing piece formed as an invitation to a block party, designed in an intimate and casual style, extending special offers for Rewards Card members and additional savings for bringing a friend who signs up for the program.

The Block Party concept is justified by the Birds of a Feather behavioral segmenting and spurred from the super-niche clustering tactics based on block groups. The people who live within a given area will share similar interests and demonstrate similar psychographic features and behavioral traits (P.I. Reed School of Journalism, n.d.). Since these individuals share interests and find each other in similar circles, they share information and experiences, which is where LEYEs targeting will aide in word-of-mouth brand awareness.

Late Summer Points Expiration Established Rewards Card Customers Designate the points program to rollover in September. Before unused points expire, a marketing blast will be sent to the full customer file to increase traffic to convert points into rewards. The late summer

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expiration will increase urgency to visit the restaurants when the business is in need of the added traffic, instead of the rush to redeem and accumulate points before the end of the calendar year. Under the current program, participants must accumulate 1,400 points before December 31 or redeem those points. Otherwise, the unused points are automatically redeemed and credited to the Rewards Card. (Leye.com, 2011). Since the award points are automatically rolled over at the end of the period, the customer would not be losing points or services earned regardless. However, simply the wording of the change will promote a sense of urgency to accumulate those precious points.

Lifestyle centers are popping up all over the nation. Considering the shopping and dining

opportunities, LEYE has taken advantage of the trend and introduced concepts particularly French themed restaurants such as Mon Ami Gabi. LEYEs Kevin Brown, describes the French bistro-style trend as polished casual, allowing guests to feel comfortable while shopping and eating well. (Murdock, 2005). This industry trend allows LEYE to focus on retail shoppers with a location-based partnership. Adding relationships with retailers within the centers will allow for cross-promotions with complimentary entities. Opportunities may include offering additional points for presenting receipts at each location, or offering a discount at the retailer for dining a set amount of times at an LEYE chain within the center.

The beverage industry has skyrocketed in sales over the past three years, citing the economic crisis as a major player in the trend. (2008, Jennings). Within the industry, 30 percent of all sales are generated from beer and wine. In 2008, Alpana Singh, LEYE director of wine and spirits, worked with suppliers to promote events that focused on value and quality as well as special prices and menus available. Beverage selection within the LEYE restaurants varies. LEYE 8

Emily C. Martin

IMC 616

Final Project

purchases some wines in bulk to cut costs among the entire company, while others purchase specialty selections based upon the restaurant personality (i.e., Big Bowl chain includes organic and sustainable wines in their selection to coincide with its green mission). (2008, Jennings). LEYE could maximize upon people using restaurants as an escape the world, promoting heavily toward the IRA Spenders and Loose Change niches who are interested in dining out, enjoying libations, health and wellness. (Equifax, 2006). Additional trends to appeal to the LEYE beverage customer include: exotic cocktails, great presentations, nonalcoholic specialty drinks, and premium wines by the glass, flavored adult sodas, and tequilas. (Henry, 2005).

Corporate events are bouncing back after the economic bust. Between 2008 and 2010, companies cut-back on their corporate events and holiday parties. However, in 2010 a bright spot for the hospitality industry emerged when corporate event and party bookings surged throughout Chicago, signaling confidence in the economic recovery. LEYE saw a 5% to 15% increase in event reservations and 10% to 15% increase in small gathering reservations. (MacArthur, 2010). This is an excellent opportunity for LEYE to promote corporate relationships and encourage events throughout the year. A promotional posture, including a mix of direct mail and personal selling can increase large-spend transactions at chains throughout LEYE.

Kyle Kieper identified industry trends that hold potential to impact the restaurant industry: 60% of all U.S. households have no kids, and thats expected to grow. Traditional families make up fewer than 25% of all households. Women make more than 80% of all buying decisions. The next decade will host a $1 trillion transfer of wealth in the U.S. Nontraditional housing The internet-induced I want it now, and I want it customized for me attitude (Restaurant Hospitality, 2005).

Emily C. Martin

IMC 616

Final Project

Open Table has gained popularity among diners within the past year, accounting for

slightly fewer than 10% of the 700 million dining experiences in America every year. In some metropolitan areas, the service accounts for over one quarter of reservations. Within two years, Open Table has generated just under $100 million and accumulated 20,000+ establishments to its roster. (Manjoo, 2011). Considering its statistical success, one would imagine Open Table is infinitely beneficial. However, the company maintains high fees: restaurants are charged a fee of $199 per month for each terminal used for table management and customer tracking, $1 for every diner booked through the site and $0.25 for diners who use the widget on the restaurants home page. With a low profit margin in the food industry, restaurants question the need for the service, while continued concern for slower periods keep clients with Open Table. Benefits of the service for the restaurants include customer tracking, saved revenues in employment costs for answering phones and tracking reservations. Detailed diner information including preferences, profiles, and contact information is collected, allowing restaurants to compile a database of past clients. This factor alone would allow for increased and highly targeted marketing campaigns that would alleviate the cost of purchased or rented lists.

Open Table has the capability to compile client information, track their preferences and tastes, and assemble a highly sectioned frequent-diner program from the restaurant-goers. LEYE currently has this ability to track and monitor Loyalty Program participants within their own databases. Until this time, Open Table has not released the capability to add value to the site in so far as birthday or anniversary reminders for reservations, menu reminders, or other maitre d services. However, it is speculated that the service will add those capabilities in the near future, further adding to the value of an Open Table partnership. (Manjoo, 2011). 10

Emily C. Martin

IMC 616

Final Project

Airline points programs are a marketing venue that is not necessary at this time. Considering the customers must register for an airline program and track their information to take advantage of rewards, it may be seen as an inconvenience rather than a service. LEYE offers the opportunity to redeem Loyalty Program points on non-food and dining awards. There is no need to compete with those partnerships already formed between LEYE and companies such as Red Door Spas, Kimpton Hotels, Ritz Carlton and the Phoenician Resorts. Airline loyalty programs allow the airline to highly segment and target their customers based upon their purchases. (Compart, 2010). While the database-driven marketing efforts would be highly applicable to customers, offers would be specifically devised to appeal to the individual. Unfortunately, many of these programs are affiliated with competing restaurants, as this continues to haunt the airline programs even in their internal workings, pinning individual airlines against web-based travel sites such as Orbitz. (Compart, 2010). Airlines have picked up retailers including gas stations, groceries, home improvement and drug stores and of course the airline itself. These locations and services are widely available throughout the programs geographical reach. Considering LEYE is concentrated within select states, the benefits for the customer may not be enough of a draw to attract LEYE customers to the program.

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Emily C. Martin

IMC 616

Final Project

References
Buchtal, Kristina. (2005, May 2). Lettuce teach you how to run a restaurant. Crains Chicago Business, 01496956, Vol. 28, Issue 18. Retrieved May 9, 2011 from http://web.ebscohost.com. Compart, Andrew. (2010, November 15). Airlines get personal. Aviation Week & Space Technology, 00052175, 11/15/2010, Vol. 172, Issue 41. Retrieved May 8, 2011 from http://web.ebscohost.com. Equifax. (2006). Introducing Niches 2.0. Retrieved May 9, 2011 from http://graphics8.nytimes.com/packages/pdf/business/20081022_equifax_niches.pdf. Henry, Patrick. (2005). Boosting bar business. Restaurant Hospitality, Dec 2005, Vol. 89 Issue 12. Retrieved May 12, 2011 from http://web.ebscohost.com. Perley Isaac Reed School of Journalism. (n.d.). Final Project: Lettuce Entertain You. Retrieved May 1, 2011 from https://ecampus.wvu.edu/webct/urw/lc5116001.tp0/cobaltMainFrame.dowebct Jadlow, Janice, & Mowen, John. (2010, April 1). Comparing the traits of stock market investors and gamblers. Journal of Behavioral Finance, 2010, Vol. 11 Issue 2. Retrieved May 10, 2011 from http://web.ebscohost.com. Jennings, Lisa. (2008, October 27). Raising the bar. Nation's Restaurant News, 10/27/2008, Vol. 42 Issue 42. Retrieved May 9, 2011 from http://web.ebscohost.com. Leye.com. (2011). Retrieved May 10, 2011 from http://www.leye.com. MacArthur, Kate. (2010, November 15). Company shindigs staging a comeback as dark mood lets up. Crain's Chicago Business, 01496956, 1Vol. 33, Issue 46. Retrieved May 10, 2011 from http://web.ebscohost.com. Manjoo, Farhad. (2011, May). As OpenTable booms, who gets the dough? Fast Company, 10859241, May2011, Issue 155. Retrieved May 8, 2011 from http://web.ebscohost.com. Mediaweek. (2009, August 31). Email creative that works. MediaWeek, 8/31/2009, Vol. 19 Issue 31. Retrieved May 11, 2011 from http://web.ebscohost.com Murdock, James. (2005, May 1). Hungry for new restaurants. Retail Traffic, May2005, Vol. 34 Issue 5. Retrieved May 8, 2011 from http://web.ebscohost.com. Parmar, Arundhati. (2008, February). First impressions. Marketing News, 2/1/2008, Vol. 42 Issue 2. Retrieved May 10, 2011 from http://web.ebscohost.com.

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Emily C. Martin

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Final Project

Raveneberg, Christi. (2009, October 5). Richard Melman. Nation's Restaurant News, 10/5/2009, Vol. 43 Issue 37. Retrieved May 12, 2011 from http://web.ebscohost.com. Restaurant Hospitality. (2005, December). Learning to grow. Restaurant Hospitality, Dec2005, Vol. 89 Issue 12. Retrieved May 12, 2011 from http://web.ebscohost.com. Spiller, L. & Baier, M. (2010). Contemporary Direct & Interactive Marketing (2nd ed). Upper Saddle River, NJ: Prentice Hall. Vosper, Robert. (2007, March 1). Five-star service. InsideCounsel, Mar2007, Vol. 17 Issue 184. Retrieved May 9, 2011 from http://web.ebscohost.com.

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