Cold Stone Marketing
Cold Stone Creamery Marketing Leroy Dowdy Walden University Dr. Bari Courts 30 September 2011 Abstract Cold Stone Creamery operates approximately fourteen hundred stores worldwide. Their premium ice cream products have kept them at the apex of the ice cream industry. An audit of Cold Stone’s marketing approach revealed flaws in areas that are critical to organizations in today’s marketplace. A first person interview revealed Cold Stone’s lack of innovative technology and a failure to incorporate the recommendations of franchise owners.
Although Cold Stone has been successful utilizing low-tech marketing, today’s technology has the potential to solidify their market advantage. Cold Stone’s centralized control of marketing decisions has also created negative effects on local owners. The economic situation and the desire for customers to live a healthier lifestyle may have continued affects on the company. This student provided technology, market research, and branding recommendations that could improve the company’s market growth. Executive Summary Cold Stone Creamery was founded in 1988 in Tempe Arizona and is owned and operated by Kahala L.
L. C. (Cold Stone, 2012). Since inception, their philosophy has been to provide superior ice cream to consumers. They went as far as trade marking their products as Creations™ in order to brand a product that is limited only by the consumer’s imagination. Mr. Toby Douglas, Cold Stone Creamery franchisee, agreed to be interviewed to discuss Cold Stone’s marketing strategies. Cold Stone franchisees operate over 1400 high-end ice cream stores worldwide (Cold Stone, 2012). Their superior ice cream is made daily in each individual store and only uses fresh quality ingredients.
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Cold Stone consistently ranks high in customer satisfaction, company reputation, and product quality (T. Douglas, personal communications, September 25, 2012). Conversely, their pricing is ranked low when compared to their competitors. Their marketing plan is not very robust considering today’s technology venues. The plan consists of electronic and hard copy coupons, free in store samples, television advertising, partnerships with other business owners, and birthday clubs. The impending health care reform coupled with more health conscious consumers has the potential to threaten Cold Stone’s future profits.
Within the mandate, is a requirement for calorie count to be displayed on the menu by the end of 2013 (T. Douglas, personal communications, September 25, 2012). Mr. Douglas was the first Cold Stone franchisee to introduce yogurt in his product line. His store is located in a middle class suburb; therefore, he should be in a position to continue to thrive under the new mandates. By continuing to collaborate with the franchisor on decision-making, collecting, and analyzing consumer habits, Mr. Douglas should achieve continued growth in his customer base. Marketing Audit
Marketing has been defined as fulfilling the needs and wants of a prospect while remaining profitable throughout the process (Kotler & Keller, 2012). The role of marketing cannot be over stated. Cold Stone has done an exemplary job increasing demand for a product that some would argue sales itself. Successful marketing compliments other business operations such as administration, accounting, and finance (Kotler & Keller, 2012). Cold Stone’s marketing research determined the target consumer to be women aged 25-50 (T. Douglas, personal communication, September 25, 2012).
The background of their research is proprietary; therefore, this student has no data to support or refute the findings. Given their success, one can conclude that Cold Stone’s comprehension of Kotler and Keller’s (2012) demand states concept is mature. Marketers must consider eight possible demand states: 1. Negative demand – customers do not desire a product. 2. Nonexistent demand – product is unknown to the consumer. 3. Latent demand – current products cannot meet the consumer’s desire. 4. Declining demand – consumer purchases less or no product. . Irregular demand – purchases are influenced by variables such as seasonal changes. 6. Full demand – products are purchased upon introduction to the market. 7. Overfull demand – product supply cannot meet product demand. 8. Unwholesome demand – desired products are not socially acceptable (p. 8). Economics The current economic situation has affected Cold Stone franchisees, but not to a detrimental level (T. Douglas, personal communications, September 25, 2012). One of the largest economic influences to franchisees is the influx in the cost of sweet cream.
Sweet cream is the bases for Cold Stone’s made fresh daily ice cream. Corporate fees remain constant; therefore, an increase in sweet cream cost solely affects the franchisee. Franchisees attempt to offset the cost with low cost marketing campaigns. For example, franchisees may offer $1 off coupons for the duration of the sweet cream increase (T. Douglas, personal communication, September 25, 2012). Technology Technological advances seem to be passing by Cold Stone. Other that social networking, Cold Stone has not embraced a large portion of today’s technology. Mr.
Douglas is one of a small number of franchisees to have a touch screen cash register. Political Influences The Patient Protection and Affordable Care Act (PPACA), commonly referred to as ObamaCare, requires chain restaurants with 20 or more outlets to display calorie information on menu boards prominently (CSPI, 2010). With consumers attempting to become healthier, this mandate may affect Cold Stone’s bottom-line. Mr. Douglas attempted to get ahead of the implications posed by this mandate. In 2010, he became the first Cold Stone franchisee to offer a yogurt bar.
Cold Stone officially introduced yogurt to their lineup in 2012. Cultural Cold Stone consistently receives high ranking from consumers. Their product quality and reliability appeal to their patrons. One possible cultural threat to Cold Stone’s profit may be the desire for a healthier lifestyle. According to Griffin, Siegle, Lanpher, Khorramian, and Demirovic (2010), American consumers are making a conscientious effort to live healthier lifestyles. Task Environment Audit A struggling economy can have a debilitating effect on a company’s success.
The Small Business Administration (SBA) tracks the failure rate of companies that secure 50 or more SBA loan disbursements (BlueMauMau, 2011). BlueMauMau (2011) reported Cold Stone was ranked 25th with a 37% failure rate for franchise owners between 2001 and 2010. Markets The ice cream market is declining for large franchisees such as Cold Stone (T. Douglas, personal communication, September 25, 2012). As a result, marketers have to be more innovative to attract consumers. Cold Stone’s prices have always been higher than their competitors. The decline in market growth may prompt a better pricing strategy to offset the loss.
Customer Segment Realizing they cannot meet the demands of each possible segment, Cold Stone chose to focus on demographics, specifically, the 25-50 year old female. The rationale for this segment remains a mystery, but reputation and product quality continue to receive a vote of confidence from consumers. The buying habits of this demographic continue to be examined and altered as appropriate. Competitors In addition to other ice cream providers, Cold Stone must compete with Starbucks, Tropical Smoothies, and other dessert vending companies (T. Douglas, personal communication, September 25, 2012).
Their strengths, when compared to competitors, include product quality, brand reputation, premium ingredients, and store location (Griffin et al, 2010). These strengths are contributing factors to their main weakness – price. Although the majority of customers agree that Cold Stone pricing is an issue, they are not willing to give up their super premium Creations™. Distribution and Dealers The need for fresh ingredients limits Cold Stone distribution options. They receive fresh ingredients daily via a local ground distributor. Increased fuel prices have forced their distributor to institute a fuel fee for items delivered (T.
Douglas, personal communication, September 25, 2012). Marketing Information System Usage Marketing information systems (MIS) provides the necessary details about consumer purchasing habits (e. g. desires and preferences) in order to guide organization’s success (Kotler & Keller, 2012). The MIS captures marketing manager’s requirement (actual, perceived, and what is affordable) during the process of identifying consumer information (Kotler & Keller, 2012). Examples of data captured by marketing managers include the following: • Regularly made decisions • Required information for making decisions Any special studies requested • Desired information that is not being received • Periodicity of required information (i. e. daily) • Required data analysis and reporting programs (p. 69) Cold Stone franchisees have little to no input into franchisor MIS selection or data input (T. Douglas, personal communication, September 25, 2012). This does not preclude them from creating their own system locally. The issue becomes convincing the franchisor that their local data is useful to the corporate process. Function Audit Cold Stone’s product objectives are straightforward.
They proclaim, “If it has anything to do with ice cream, it has everything to do with Cold Stone” (Cold Stone, 2012). This simple yet bold statement is the corner stone belief that propels the franchise to the forefront of the ice cream vending market. Cold Stone’s premium ice cream comes in three sizes: Like it (5 oz. ), Love it (8 oz. ), and Gotta have it (12 oz. ) (Griffin et al, 2010). The addition of mix-ins such as Oreo pieces or M&Ms further increases the price; however, Cold Stone believes its customers are willing to pay the additional premium to experience their Creation™ products.
Integrated Marketing Communications Cold Stone uses various media outlets to conduct their marketing (T. Douglas, personal communication, September 28, 2012). Given that their current target audience is women aged 25-50, Cold Stone has created a commercial campaign that they feel caters to demographic. Thirty-second advertisements run on television shows that attract the target demographic such as The View, Good Morning America, and Rachel Ray (T. Douglas, personal communication, September 28, 2012). Cold Stone’s research could not be analyzed to determine the accuracy of the chosen programs.
Consumers also have the option to sample any of the flavors upon entering a store. The sample sizes are controlled by using one-time use sample spoons. Their direct marketing efforts include mobile phone and Valpak coupons (Griffin et al, 2010). Based on sales numbers, one could conclude that they are effectively using promotion tools to increase customer awareness. Strategy Audit Cold Stone’s mission statement is concise and stated in market-oriented language (T. Douglas, personal communication, September 25, 2012). Their website highlights the first five words of their mission statement – We will make people happy.
Their commitment to customer happiness is seen immediately upon entering their store. Customers are met with a cheerful greeting and even offer a song to any customer who shows their appreciation by way of offering a tip. When interviewing potential employees, Mr. Douglas seeks to find candidates with outgoing personalities who share in the desire to make customers happy during the Cold Stone experience. Marketing Objectives and Strategies Cold Stone takes their marketing efforts seriously, as evident by the corporate control of all marketing efforts.
Individual franchisees use to plan and execute local marketing strategies independent of corporate; however, that is no longer the case. The franchisee has input into the process, but the franchisor has ultimate authority over marketing decisions. Branding The objective of corporate branding is to create an image that is synonymous with an organization’s name (Mankani, 2010). Cold Stone’s brand equity or value added is evident by the rate of customer loyalty (T. Douglas, personal communication, September 28, 2012). Although their prices are higher than the competition, customers continue to prefer the Cold Stone experience.
According to Kotler and Keller (2012) customer loyalty is a great indicator that an organization has created a strong brand. Recommendations Kotler and Keller’s (2012) six-step marketing research process would serve as an excellent starting point for Cold Stone marketers. Mr. Douglas was not aware of this process and was eager to learn more about the concept. The first step is to define the problem. This student believes Cold Stone’s primary problem to be a lack of technology. Kotler and Keller (2012) suggest that technology “is the essence of market capitalism” (p. 81).
In order for Cold Stone to remain at the apex of the ice cream industry, technology must permeate their marketing and management efforts. It is not enough to equip franchisees with touch screen registers. Today’s information travels at the speed of light and requires proactive marketing such as search engine optimization, social media campaigns, and consumer interest mining. Consumer interest mining analyzes the customer’s website usage and creates market profiles based on their search habits (Woods, 2011). The marketer targets the consumer with tailored products and services.
Next is to develop the research plan. Cold Stone would need to develop a cost efficient research approach that includes qualitative, quantitative, or mixed approach research methods. Thirdly, the information is collected. Since this is normally the costliest step, Cold Stone should be proactive and maintain a hands-on approach to ensure they remain efficient. Fourthly, analyze the collected information. It is critical that Cold Stone looks at all the data before making assumptions about consumer demand. They would do well to study the New Coke blunder of the Coca Cola Corporation (IM CETYS, 2007).
Fifthly, present findings to the franchisor and franchisees. The franchisees have a vested interest in brand success. Finally, make decisions that will position Cold Stone to benefit from technology efforts that will solidify their competitive advantage in the ice cream market. In addition to adopting the marketing research process, Cold Stone could afford to make adjustments in their branding approach. Mankani (2010) outlines the following steps to consider when devising a corporate branding strategy. Branding strategies should be driven from the top down.
Without unity and direction from the executive level branding efforts may be disjointed and off the mark. Select a business model as the cornerstone for the branding strategy. A company’s needs and values should dictate which model is chosen. Solicit input from those with a stake in the company (i. e. , customers, shareholders, and employees). Mr. Douglas’s success as the first franchisee to add a yogurt bar has not been without glitches. The yogurt distributor that he initially used was not maintained by the franchisor because it offered no additional profits to the franchisor (T.
Douglas, personal communication, September 25, 2012). In order to create another stream of revenue, Cold Stone commissioned Kohler Dairy to produce a Cold Stone proprietary yogurt and mandated its sole use by franchisees. Mr. Douglas believes the decline in his yogurt sales is due to a less desirable yogurt; however, Cold Stone refuses to attribute the decline in yogurt sales to their proprietary yogurt (T. Douglas, personal communication, September 25, 2012). The franchisor’s response to Mr. Douglas fails to encourage employees to take ownership of the organization’s mission and vision.
If franchisees are to be advocates of the branding process, the franchisor must encourage and act upon the type of feedback that Mr. Douglas offered. Decisions, such as these, should seek to make lasting customer relationships by providing the best product or service. A well-planned and executed communications strategy will propagate the branding efforts to the intended audience. For example, following up with customers by making post-sales contact via email, social media, or text messages will enhance branding efforts. Finally, perform audits on brand performance.
Audits will assist in determining customer-based brand equity or the way a customer responds to the branding effort (Kotler & Keller, 2012). Conclusion Cold Stone’s marketing efforts are calculated and centrally executed (T. Douglas, personal communication, September 25, 2012). Although their current store inventory is not as numerous as the past, their product quality and business reputation continues to be superb among their consumers. Haag and Cummings (2008) noted that business intelligence enables an organization to make educated decisions based on compiled data.
Although there is no evidence of marketing information systems being utilized at the franchisee level, Cold Stone has an obvious grasp on demographic demand states. Cold Stone’s anemic technology model needs critical improvement. Today’s technology offers Cold Stone innovative solutions that can solidify their competitive advantage in the ice cream industry. Finally, Cold Stone’s stance on franchisee feedback is cause for concern. Although the franchisor understands and interprets marketing research nationally, it makes sense that the franchisee understands their local consumers. In the case of Mr.
Douglas, if Cold Stone made provisions for him to use the yogurt distributor preferred by his customer base this would result in a larger profit margin for all concerned parties. Customers will continue to crave Cold Stone Creations™, but it remains to be seen whether Cold Stone can increase their customer base through more robust marketing techniques. . References BlueMauMau. (2011). BMM reports 2011 SBA failures: Cold stone creamery – 37%. Retrieved from https://sites. google. com/site/coldstonefacts/news/bmmreports2011sbafailurescoldstonecreamery-37 Center for Science in the Public Interest. 2010). Health reform to deliver calorie counts to chain restaurant menus nationwide. Retrieved from http://cspinet. org/new/201003211. html Cold Stone Creamery. (2012). About us. Retrieved from http://www. coldstonecreamery. com/about/about_cold_stone. html Haag, S. , & Cummings, M. (2008). Management information systems for the information age (Laureate Education, Inc. , custom ed. ). Boston: McGraw-Hill/Irwin. IM CETYS. (2007). New coke: A “classic” marketing research blunder?. Retrieved from http://imcetys. files. wordpress. com/2006/12/caso-newcoke. df Mankani, Y. (June 30, 2010). Eight important steps for creating successful corporate brand strategy. Retrieved from http://savedelete. com/8-important-steps-for-creating-successful-corporate-brand-strategy. html Mentzer, J. T. , Myers, M. B. , & Stank, T. P. (Eds. ). (2007). Handbook of global supply chain management. Thousand Oaks, CA: Sage Publications Woods, D. (2011). How real-time marketing technology can transform your business. Retrieved from http://www. forbes. com/sites/ciocentral/2011/05/06/how-real-time-marketing-technology-can-transform-your-business/
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