The market can be divided into three target markets, individuals, families and take-away business. Please see the next session for an intricate analysis of the different segments.
Sigmund's expansion strategy is to further penetrate the existing markets by opening an additional store (or stores) in Eugene in 2004. This clustering approach enables Sigmund's Gourmet Pasta to increase brand awareness and improve operating and marketing efficiencies. For example:
Clustering allows Sigmund's to negotiate a fixed percentage contract with the food wholesalers.
Marketing expenditures can be spread over multiple revenue centers. This strategy reduces risks involved with opening new restaurants given that Sigmund's better understands the competitive conditions, consumer tastes, and spending patterns in the market. When the Eugene market is saturated with one or two additional stores, then Sigmund's intends to look at new markets.
4.1 Market Segmentation
The market can be segmented into three target populations:
Individuals: people that dine in by themselves.
Families: a group of people, either friends or a group of non-nuclear relatives dining together.
Take away: people that prefer to eat Sigmund's food at another location.
Sigmund's customers are hungry individuals between the ages of 25 and 50, making up 53% of Eugene (Eugene Chamber of Commerce). Age is not the most defined demographic of this customer base; all age groups enjoy pasta. The most defined characteristic of the target market is income. Gourmet pasta stores have been very successful in high rent, mixed-use urban areas, such as Northwest 23rd in Portland. These areas have a large day and night population consisting of business people and families who have household disposable incomes over $40,000. Combining several key demographic factors, Sigmund's arrives at a profile of the primary customer as follows:
Sophisticated families who live nearby.
Young professionals who work close to the location.
Shoppers who patronize the high rent stores.
4.2 Service Business Analysis
In 1999, global pasta sales reached $8 billion. Pasta sales are estimated to grow by at least 10% for the next five years. The big four, Pastabilities, PastaFresh, Pasta Works, and Pasta Perfect contribute $2 billion in combined 2000 revenues. The rest of the market is primarily made up of independent restaurants. Though the barrier to entry into the pasta market is low, due to insufficient capitalization, most entrants fail within their first six months.
4.2.1 Competition and Buying Patterns
Pastabilities. This restaurant offers consumers their choice of noodles, sauces, and ingredients, allowing the customer to assemble their dish as they wish. Food quality is average.
PastaFresh. This company has a limited selection but the dishes are assembled with high-quality ingredients. The price point is high, but the food is quite good.
Pasta Works. This company offers pasta that is reasonably fresh, reasonably innovative and at a lower price point. The company was sold a few years ago, and consequently the direction of management has been stagnant lately and has resulted in excessive employee turnover.
Perfect Pasta. This company had medium-priced pasta dishes that use average ingredients, no creativity, and less than average store atmosphere. Sigmund's is not sure how this company has been able to grow in size as their whole product is mediocre at best.
(name omitted)- This is an upscale Italian restaurant that has a limited selection of pasta dishes. Although the selection is limited and pricey, the dishes are quite good.
(name omitted)- An Italian restaurant with a decent pasta selection, however quality is inconsistent.
(name omitted)- An upscale restaurant with a large wine selection and good salads. Everything else is mediocre at best and over-priced. Service can often be poor.