‘How can we compete against cheap food stalls?’

Q: We’re a group of five convenience stores and we’ve decided to informally get together.  We’re surrounded by small food stalls parked along the streets where our convenience stores are located.  Some of these food stalls are semi-ambulant.  They suddenly spring up whenever a condo construction starts and disappears when it’s done.   We’ve learned that they simply relocate in some other streets where another condo construction has started.

At first, we didn’t bother about them.  We saw that they had a different kind of customers.  That was true until we actually found that some of our own customers were eating there.  When they returned to us, those we talked to, gave the same reason for eating at one or two of those food stalls.  They said it’s about how delicious or how much more tasty the food was in addition to being cheaper.

In response, we talked about cleanliness and sanitation.  But many customers actually got annoyed and a few even told us (almost in defense of those food stalls) that they’ve never gotten sick.  Those few said something like, “yang dumi kelangan din naman ng katawan natin to boost our immune system” (actually our body needs dirt to boost our immune system).

So will you please tell us how we can more effectively compete against these cheap food stalls?

A: In competing against price competitors, the natural tendency and common practice of most marketers is to respond in kind.  That means to lower price.

A quick check with marketing history tells you that price competition is the worst way to compete.  It does not only risk the biggest nightmare in marketing, namely, a price war, but it also gets you into damaging your profitability for quite a while and, sometimes, if you run out of luck, permanently.  So competing on price continues to count as one of the more (if not the most) ignored Rx in competitive marketing: “The worst way to compete is on price.”

A popular alternative is to compete as Unilever and P&G do it.  Recall the rivalry between their two brands, Clear versus Head & Shoulder, in the anti-dandruff shampoo category.

That was an advertising and EDSA poster war.  Most marketers felt both brands were enjoying each other’s ad copy and promo creativity.  And so did the consumers who watched with amusement how the non-price competition brought out the best in each of the two brands.  So your informal group of convenience stores may want to  test and try competitive in-store ad and promo in place of price competition.

An even better alternative is to be a food stall yourself.  If you decide on this option, do first a good check on the market segment that those food stalls serve.  If customers in that market segment feel not just a fleeting need for the menu items from those stalls but a more enduring need, then seriously consider this option.

There are at least two ways to go about doing something with this option.  The first is to do a Jollibee-on-Mang-Inasal approach.  That’s to buy two or three Jollijeeps (or food stalls).  Then, in addition to matching those stalls’ food taste, lend to your acquired two or three food stalls your cleanliness and sanitation superiority.

Here’s a side trivia to test your competitive instinct.  If the market segment of the food stalls is here to stay and is likely to grow, why hasn’t Jollibee extended its pacman-like acquisition arm here?  What is it waiting for?  Eventually, having mastered its business growing marketing, Jollibee will extend.  When they do, you’ll be facing a much more formidable competitor.

The second just as good an approach as the Jollibee-on-Mang-Inasal maneuver is to do what has become popular in the US, or more specifically, Los Angeles in California.  This is the “food truck revolution” that Kogi Korean BBQ started.  Mark Manguero, a young 30-year old Filipino-American entrepreneur founded Kogi BBQ (its shortened brand name) in early 2009 with the right timing and in partnership with his wife, a Korean immigrant.

Kogi BBQ catered to the food needs of office workers for cheaper but with enough variety and good food taste.  This was during the near-peak period of the US recession when many office workers who accepted pay cuts just to remain employed searched the streets for a safe source of their changed food meal needs.  Kogi BBQ offered a food menu that combined Korean with Mexican food.  Those hungry office workers found the Kogi BBQ menu as fitting into their food meal needs.

Being a mobile food truck, Kogi BBQ resorted to the Internet (especially Twitter) and the mobile phone to announce its changing daily location.  By mid 2009, Kogi BBQ claimed to have gained 26,000 Twitter followers.  As it earned more and more buzz from the social network, Newsweek in 2010 proclaimed Kogi BBQ as “America’s first viral eatery.”  It won other popular awards including a Bon Appetit Award in 2009 and “Best New Chef Award” from Food & Wine in 2010.

So here’s another option your “informal” group of convenience stores can explore.  It’s not exactly to equal to participating in the food stalls’ market segment via the Jollijeep way.  But it’s bringing you into a higher level Jollijeep, namely, a “Jollivan” of sort.  If you wish to try this option, you probably should act quickly.  Having been reinforced with its Mang-Inasal acquisition, Jollibee’s entrepreneuring instinct must be just around the corner in also considering this business and market growing option.

Keep your questions coming.  Send them to us at [email protected] or [email protected]. God bless!