Making Dough: Getting it right and wrong in pizza market positioning.

Getting A Pizza The Action

Most of us love pizza and Italian food, whether this is sitting lakeside in Garda with a glass of wine or munching through a New York style pizza at 2am, it is amazing how such a simple dish has traversed the globe and is eaten by all members of society. In the UK the pizza market has been dominated by several large brands. Allegra Strategies report that the UK Pizza market (2013) breaks down as follows:

	Outlets	Restaurant Market Share
Pizza Hut	650	10.90%
Pizza Express	406	8.60%
Prezzo	198	3.80%
Zizzi	130	2.60%
Strada	68	1.50%

The product is pretty generic but Pizza Hut, the market leaders, successfully differentiated their own product over the past 15 years developing a total market strategy. Pizza Hut offered salads, pasta and a full range of pizza bases and shapes catering to all members of the family. The UK brands – Pizza Express, Prezzo, Zizzi and Strada also followed the total market maxim with pizza at the core, plus salads and other broad menu items.

So what we effectively see is a market dominated by two large players and three smaller players offering a similar offering, but more interestingly, there are several insurgents and niche operators which are challenging the big boys as a credible alternative.

In order to capture market share, these new operators have segmented the market and have focused on targeting customers with what they want.

There is Franco Manca, which is targeting the casual dining crowd featuring a smaller menu with a focus on ingredients, differentiating mainly on the sourdough base, which should appeal to the younger customer and not the family dining space.

This is closely followed by Pizza Pilgrims, which has evolved from a market stall and focuses on heritage and authenticity of the pizza in the modern age, again targeting the individual or social diner.

Sunday Lunchtime

Over the recent holidays I visited two of the London based pizza challengers aimed at the family pizza market, which is dominated by the big five above.

In each, the intention was to have a nice family lunch and enjoy the food.

Prior to the holidays I had not been to either of these restaurants before. I was unaware of the menus, history or ownership, but as an MBA with a curious mind, I have given some thought to my experiences – and indeed the follow up.

For all students of marketing, finance and strategy, this is a very interesting case study.

Pizza East

Pizza East is owned by Soho House Group and has four units, in east, west and north London, and Chicago. We visited the Shoreditch unit in Derwent’s Tea Building.

We went on a Sunday lunchtime, expecting to be part of the Shoreditch hipster set, but were surprised to be surrounded by lots of families eating good food and an amazing family friendly menu. So whilst the marketing and positioning of the brand and content is for the “hip” crowd, the family crowd are happy to buy into this, especially in the day time.

The key conceptual differentiators are the environment and experience; there is more exposed concrete in Pizza East than on Derwent’s current development on the other side of Old Street and the informal engagement with friendly servers and the easy going nature worked just so well. But the winner was the food. This was first class pizza and very well done sides.

We live nowhere near Shoreditch, which is why we hadn’t been since the place opened, but would we make the effort to drive 40 minutes through London for pizza – yes, and we have done subsequently.

Here you have a successful strategy, which has a concept, several defined markets and is executed well. The owners have not sought to rapidly exploit at a pace that dilutes the brand and the experience, and for long-term sustainable success, this is a strong proposition.

Rossopomodoro

The UK restaurant market is dominated by institutional and private equity backed investment. I have a little bit of knowledge in this space and once met Luc Vandevelde, the Founder Chairman of Change Capital Partners who have invested heavily in Sebeto, the Italian group that owns and operates Rossopomodoro both in Italy, and in the UK.

The PE investors in the restaurant sector have both done very well in terms of investment return, but also have enabled the expansion of the sector to grow, although some would say that the ‘Pizza Expressisation’ of the high street is not such a good thing for independent restaurateurs, it has forced under-par operators to shape up and give customers what they want

The premise of Rossopomodoro is this; casual restaurant concept focusing on a menu of genuine Neapolitan pizza and Neapolitan recipes aimed at targeting the family customer, so all parts of the family can order something different.

Having read the franchising pack, the brand premise is based on visible attraction and to target people who are not looking to travel “too far” on an average expense mission.

So the basic strategy of Rossopomodoro is to position a similar offering to the mainstream market, at the exactly the same customer segment as Pizza Hut, Pizza Express, Zizzi, Prezzo and Strada.

The rationale, I assume, is that if you think that this is an established market, by creating an offering on par with the market, you will achieve a natural proportion of market share.

The problem is that based on my experience Rossopomodo is a real mess – in so many ways.

Here are my thoughts:

You are in a competitive space, if you are going to make food your differentiator, try and get it right:

1. If you are advertising burrata on your menu, sell burrata, not mozzarella. There is difference.
2. If you are selling focaccia, it shouldn’t thud when knocked against a table – the bread was so stale, Churchill could have built his garden walls at Chartwell with it!
3. Pizza – and even Neopolitan pizza – is not served with a pool of olive oil on it. Poor.
4. Finally, when you point this out to the manager – after waiting some time – the customer doesn’t like to be told that he “doesn’t know what he is talking about and clearly has no idea what Neapolitan food is like.” We don’t like being insulted very much.

Becoming A Brand Terrorist

If you are not seeking to have food as your differentiator it isn’t that important what the food is like. The likes of Hard Rock, Planet Hollywood and Rainforest Café do not make the food the key aspect and they survive as they appreciate the key is the experience to the customer.

Yum! Brands realised this some times ago. I have discussed this before in my blogs, but only too happy to do so again as I cannot believe how few restauranteurs are aware of these principles which have been around since 1994- when social media was sharing a newspaper. Heskett et al. talk about the Service Profit Chain, where customer loyalty drives profit and growth.

When customers are happy they remain loyal, when customers are very unhappy, they become “terrorists”. Today, more than ever, your customers are the key to your business.

Just as Pizza East has become popularised through word of mouth rather than unit proliferation, companies have to give disaffected customers the ability to address their issues.

When these complaints continue to fester, customers can become brand terrorists, which I fear Rossopomodoro would consider me to be – with some merit! I repeatedly asked them on twitter to contact me, tried in vain several times to contact head office to alert them to my experience (as a marketing academic, and social science undergrad I strongly believe in “voice of the customer” programmes and am always happy to informally feedback) but there is no way of contacting the head office.

Having asked Rossopomodoro several times to contact me on twitter, they have blocked me; so in trying to feedback without success, I am now, as Heskett would say, a very dissatisfied customer. Not only is the food bad and the staff insulting, there is no way to complain about it!

(FYI – this isn’t the pizza in question!)

Conclusions

So here are my pieces of advice to all students of marketing and branding – and a special piece of free advice to Change Capital and their investors.

1. Pizza East have done it, Franco Manca have done it, Pilgrims Pizza have done it. Rossopomodoro have failed. This is an evolved market, unless you can deliver something different and better than the existing offering, you have no purpose.

2. Deliver. Irrespective of your ingredients, if you have rude employees, locals will be gone and these businesses cannot grow sustainably on tourism alone. For sustainable growth and success you need loyalty. By alienating potential customers into brand terrorists is the worst kind of customer service; indeed it is criminal in this day and age that a customer complaint is just ignored.

3. When developing a brand or concept define your customer’s needs. If nobody needs your concept, don’t waste your time and money. It is now 55 years since Marketing Myopia and people still don’t get it!

And for Change Capital, the outcome of a balanced menu concept of Italian food aimed at the mass market – anyone for a Sbarro?

OL Jan 2015

The Final Days Of The BBC

The Final Days Of The BBC

Peter Capaldi opens the door and steps out of the TARDIS onto a shining modern piazza in central London.

“This is must be 2014!” he exclaims. “The final year before the BBC collapsed. A once great institution brought down by apart by institutional avarice, arrogance, and malfeasance. Where Daleks failed, the BBC Executives managed to kill it off.”

 Fantasy Or Reality?

In August, the Telegraph reported,

“More than 180,000 people – almost 3,500 a week – appeared before the Magistrates Courts, accused of watching television without a valid £145.50 licence.

The figure has been steadily rising as TV Licensing, which is responsible for catching and prosecuting non payers, improves its ability to identify those responsible and becomes more determined in its approach.

But with Magistrates handling a total of 1.48 million cases last year, it means that around 12 per cent of their workload is now being made up of TV licensing offences.”

I love many of the programmes and experiences that the BBC produces; how generations can share Doctor Who, how parents and children emulate the Great British Bake-off at home or how we allow our children to learn the wonders of the world through the window of the BBC is part of the national fabric. Even with the programmes that I don’t watch and content I do not consume, I appreciate how other elements of society relate to and require such information and entertainment to manage and assist with their lives.

The BBC is part of our national heritage and for the licence fee I truly believe we get great value, but it is totally wrong to criminalise people for non-payment if there is just reason.

I wrote to the BBC and licensing authorities and offered part payment in protest of the management of the Corporation. Apparently I have no right to complain and I have no ability to take action without being criminalised.

How can this be right?

Decisions Without Consequence

Strategists have to decide whether to take a bottom up or a top down approach to their customers. The bottom up method is by researching and understanding your customers and offering them what they want. In the case of Sky, this was professional sports coverage and the station flourished. ITV closely monitors trends and customer behavior in developing content, as do most modern focused businesses.

Contrary to this, the top down approach is seen in many private and State owned businesses. In the case of TV Channels, the State appointed controllers decide what is good for the public, and whilst we in the UK laugh at the propagandists of North Korea or some of the Middle Eastern content that flies in the face of fact, we in the UK receive a much worse deal; we have no say, and have to pay a premium!

Executives must be aware that top down strategies only work when consumers choose to supply their custom to the company and have faith in those making the decisions. Likewise the decision-makers have to respect their customers.

With the modern BBC, this is clearly not the case as 1.5m people object to paying their license enough to be criminalised.

This is gilded decision making – whatever they do, the BBC executives are protected from market reality or consequence, and boy, have the BBC Executives made some bad decisions.

Rewarding Ineptitude

I sat with a former senior executive of a US television network and global media business when in the US a couple of weeks ago. We spoke extensively about the Corporation, and I was defending it conscientiously, however, when reviewing my arguments, past management decisions are truly indefensible.

Given that the National Audit Office calculates unwarranted, non-contracted payments to staff at over £1m, part of over £25m in severance payments to senior management, leads me to believe that there was either a culture of institutional fraud throughout the BBC, or mutual complicity by management in seeking to exploit the licence fee payer.

Either way, the checks and balances that we as licence payers would expect from an organisation handling public money were absent or deliberately breached. As an executive of a business, if I behaved in this way, I would be fired for gross misconduct; it seems that at the BBC, I would have my exit managed with a severance settlement at a significant multiple of my salary.

I could also point to strategic incompetence in Digital, the business comedy of the Lonely Planet investment (heads would roll on other organisations) and the bigger question of why on earth is the BBC seeking to issue a commercial bond, rather than offer an overseas web based subscription service as a means to reduce debt? What are the business qualifications and commercial experience of the management?

Poor Editorial Decisions

The complicity and ineptitude to the Savile and subsequent Lord McAlpine reports is well documented and I have alluded to the grossly generous payments made to those responsible for such unacceptable errors as they faced discipline, in what in any other industry or workplace would be misconduct.

Also I am mature enough to accept that despite my opinions, the BBC has a right and responsibility to broadcast a divergence of views, some of which I disagree with. Irrespective of the ongoing suppression of the Balen report and the many hundreds of thousands of pounds spent by the Corporation in continuing to avoid the publication of this (and the immediate hypocrisy that this presents to any journalist seeking to expose light from the shadows) shows that the BBC has something to hide in it’s reporting of the Middle East.

Giving A Voice To Extremists

After Tony Blair called for Al Muhajiroun to be banned after followers committed one of the UK’s most heinous terrorist attacks, on the 7th July 2005, and David Cameron having conveyed similar sentiment, what on earth possessed Newsnight to give such prominence to Anjem Choudary on the BBC’s key news and analysis show, in the aftermath of the slaying of a British servicemen by his associates?

From an editorial point of view, if Anjem Choudary is banned from most, if not all, university campuses in the UK under NUS decree against racists, banned from many European countries who have laws on hate speech, with all major politicians calling for his groups to be banned, what possibly gives the BBC the insight (or arrogance) to judge better?

“Because he had something interesting to contribute to the debate” is in the school of “at least the trains ran on time” levels of justification to excuse the inexcusable, and has no validity in the grown up world of information, education and entertainment.

The fact that Mosques are being burned and innocents murdered because of their race or religion is not done in isolation, and the BBC by offering prominence and validity of such advocates of hate, bares some responsibility for inciting this blood lust.

Civil Disobedience and Direct Action

I am one of the 1.5 million who are deeply uncomfortable paying my licence fee this year, which I have done without complaint for the past 20 years. This year I proposed to make a discounted settlement, but the authorities refused this.

Civil disobedience is not my modus operandi, however throughout history, from biblical tales to great revolutions, the call of “No Taxation Without Representation” rings as a constant.

In business, if I had invested in a company that was as mismanaged as the BBC, I would have divested some time ago.

Likewise if our politicians or public figures behaved in such way (which sadly they have done) they can be removed at the ballot box (without recompense) and face the force of the UK judicial system, incurring imprisonment.

Whilst one can always turn off or unsubscribe from commercial television, to have a compulsory obligation to continue to fund the Corporation without legitimate recourse (as Balen has proved) is immoral and improper.

Like repressive regimes, direct protest against the BBC equals criminal behaviour.

2015. The End Of The BBC?

The BBC has lost my trust, and the trust of millions more.

I hope the BBC survives, but it must realise that:

• Decisions without consequences must end
• Commercial management must make commercial sense
• Managers that have committed malfeasance must face prosecution
• Poor editorial decisions must not be rewarded
• The corporation must be accountable for editorial decisions (and publish the Balen Report)
• Broadcasting extremists as part of normal discourse is not acceptable
• The public must have greater representation at decision-making levels

Overall, the cynical view that the general public will take a commercial view that a combination of the threat of criminalization and some decent programming will outweigh the occasional acts of malfeasance, arrogance, or ineptitude, must stop, or the BBC will need to be exterminated.