‘Why are fast food companies like Jollibee into many other businesses?’
Q: In your past two Friday columns, you talked about banks extending their marketing to life insurance, and then to real property and shopping malls. What about the fast food companies? Jollibee now has a chicken restaurant business, hamburger, pasta, Chinese cuisine, ice cream and pizza. Why is Jollibee into many, many food service businesses?
Why is it also duplicating in the chicken fast-food business? It already has a very large (or maybe the largest) business in chicken with its Chickenjoy. Then it acquired “Mang Inasal” for an unbelievable sum of money. How do you make marketing sense out of that acquisition?
We were told “that’s the best way to kill a threatening competitor.” But is it? Please tell us how to make believable marketing sense out of these expansion moves.
A: It’s both easy and hard to do what you’re asking, i.e., make credible marketing sense out of Jollibee’s expansion moves. This is particularly true when you don’t have the market research and data to support your diagnosis and conclusions.
But making marketing sense out of Jollibee’s expansion does not only depend on market research and data. You can also gain that understanding from the pertinent “marketing theory” or what we now call “marketing business model” or “marketing business framework.” Over the years, the marketing community as well as the larger business community have increasingly shunned the use of the “theory” concept and word.
Since we don’t have access to the relevant market research and data, we will answer your question by referring to the “pertinent marketing business framework.” This is the framework in the latest thinking about the market segmentation process. This latest thinking is presented in the senior MRx-er’s 2010 book, “Market Segmenting, Self-Segmenting and Desegmenting.”
From both market survey research data and actual cases, this book concluded that “the ultimate source of growing your business is market segments.”
What about products especially new products These are also business-growing sources but not “ultimate.” With the support of market research, data and cases, the book tells us why: “Products and new products are only secondary sources. That’s because even if you get from R&D an interesting or even the technically best product, if there is no market segment in need of it, you will obtain zero sales.”
So the marketing sense in Jollibee’s expanding into many other businesses is business-growing via participation in many market segments. This is just as true in the case of its acquisition of Mang Inasal, which you consider as a “duplication.” From a product category standpoint, since Mang Inasal’s product and service category domain is chicken and chicken fast-food restaurant, it is duplication. But from the market segment angle, it is not.
The primary and actual market segment for Jollibee and its Chickenjoy is different from the primary and actual market segment of Mang Inasal and its Chicken Inasal. The Chickenjoy devoted consumers love Chickenjoy’s crispiness outside, its tender meat inside, and the Pinoy ambiance of the place. On the other hand, the Mang Inasal frequent consumers love Mang Inasal’s value-for-money Chicken Inasal, its meal-size serving, and the unassuming, ordinary character of the place. There are of course overlaps in the market segments. Several Jollibee customers also eat at Mang Inasal and similarly for Mang Inasal customers eating at Jollibee. But the difference is much more than the overlap.
So in acquiring Mang Inasal, Jollibee was just growing its chicken business by acquiring another market segment, an ultimate source of business-growing.
Is acquiring another chicken resto the best way to participate in another chicken market segment? Let’s see and understand the alternative way.
That other way is to put up one’s own Mang-Inasal-like chicken fast food. Jollibee had tried that market-segment-based business-growing strategy before. Many years ago, Kenny Rogers introduced to the Pinoy consumers fast-food roasted chicken. When Kenny Rogers looked like it succeeded in creating a roasted chicken market segment that was there to stay, Jollibee opened a Kenny-Rogers-like fast-food roasted chicken resto, “Mary’s Chicken.” A year or two after its celebrated opening, Mary’s decided to close. Putting up one’s own Kenny-Rogers-like fast food did not work.
Jollibee must have learned from that market-segment owning strategy. It was taking too long to work things out and the strategy’s success was too uncertain. So this time for participating in the Mang Inasal market segment, why imitate? Why not just buy the fast food that already and successfully “tested the waters?” And that’s exactly what Jollibee did.
Whether Jollibee will be able to sustain the success of Mang Inasal under its system is another question. In a previous Friday column, we have in fact diagnosed this issue and made our appropriate MRx.
So there’s your sought-for marketing sense. How reality and the future will confirm or disconfirm this market-segmentation-based understanding and strategy for business-growing and expansion will be there for all of us to witness soon.