Coffee Bistro Break Even Scenario Summary You Are A Mark

Coffee Bistro Breakevenscenariosummaryscenarioyou Are A Marketing Con

you Are A Marketing Con

Coffee Bistro Breakeven Scenario/Summary Scenario You are a marketing consultant for a specialty coffee bistro and bakery. The business has been operating for about a year and is still not earning a profit. Your role is to determine the breakeven point and make recommendations on changes to one or more of the 4 P's: Product, Price, Promotion, and Place.

Breakeven Point

The breakeven point (BEP) is the point at which total cost and total revenue are equal. A breakeven analysis calculates the BEP as: Breakeven Point = Total Fixed Costs / (Unit Price - Unit Variable Cost) or BEP = F / (P-V). In our example, the BEP = Total Fixed Costs / (Average Order Price - Variable Cost per Order).

Using this formula, what is the breakeven point? In other words, how many orders would need to be sold before the business starts making a profit given the current price and cost structure? Here's the information you need to do the bistro's BEP analysis:

• Current Orders per Month: 750
• Average Order Price: $11.00
• Variable Cost per Order: $5.00
• Rent per Month: $2,000.00
• Utilities per Month: $400.00
• Labor per Month: $3,000.00

Calculate the BEP using the numbers and formulas above. Hint: total fixed costs in this case are the sum of rent, utilities, and labor.

Recommendations

In order to be profitable, the business will need to either increase revenue or decrease expenses. Make three recommendations on changes to the Product, Price, Promotion, and/or Place that would be likely to increase revenue, decrease expenses, or both. Be creative and have fun with your ideas! Here are some examples of questions you could ask to help with your analysis:

• What changes could be made to the product to reduce variable costs?
• What changes could be made to prices to increase revenue, and how would you justify those price changes?
• Is increasing price the only viable pricing strategy, or could lower prices lead to increased orders beyond the bistro's BEP?
• What changes could be made to promotions (e.g., advertising, discounts, sales, loyalty programs) to increase the number of orders per month, remembering that promotions are expenses?

After you calculate BEP, make three recommendations and be sure to explain why you believe your recommended changes could achieve the business objectives of reaching profitability by either increasing revenue or decreasing expenses, and recalculate the BEP based upon your recommendations to ensure that your recommendations result in profitability.

Assignment Create a three slide VoiceThread presentation with a voice comment (three minutes maximum length) that includes your BEP calculations and three recommendations on changes to the 4 P's: · Slide 1 - Introduction: include your name, instructor's name, course, and assignment due date · Slide 2 - Breakeven analysis · Slide 3 - Three recommendations for changes to the 4 P's

Sample Paper For Above instruction

Introduction

My name is Alex Johnson, and I am a marketing consultant specializing in the food and beverage industry. My instructor's name is Professor Emily Carter, and I am enrolled in the Marketing Strategies course. The due date for this assignment is March 15, 2024. In this analysis, I will evaluate the breakeven point for a local specialty coffee bistro and bakery, providing recommendations to achieve profitability by adjusting the 4 P's: Product, Price, Promotion, and Place.

Breakeven Analysis

The first step in understanding the financial health of the coffee bistro involves calculating its breakeven point (BEP). Given the current data: 750 orders per month, an average order price of $11.00, and a variable cost per order of $5.00, along with fixed monthly costs comprising rent ($2,000), utilities ($400), and labor ($3,000), we can proceed with the calculation.

The total fixed costs amount to $2,000 + $400 + $3,000 = $5,400 per month. The contribution margin per order is calculated as the difference between the average order price and variable cost, which is $11.00 - $5.00 = $6.00. Using the breakeven formula: BEP = Fixed Costs / Contribution Margin per Order, thus BEP = $5,400 / $6.00 = 900 orders.

This means the bistro needs to sell at least 900 orders per month to cover all costs. Currently, with 750 orders, the business falls short of this breakeven point, indicating it is operating at a loss of approximately (900 - 750) * $6.00 = $900 per month.

Recommendations

To reach profitability, I propose the following three strategies:

1. Increase Average Order Price through Product and Pricing Strategy: Implement premium drink options or bundling deals that justify higher prices. For example, adding specialty beverages, seasonal items, or combo discounts can increase the average order price from $11 to $13 or $14, boosting contribution margin per order and decreasing the BEP. If the new average order price reaches $14, the contribution margin becomes $14 - $5 = $9, and the BEP drops to $5,400 / $9 ≈ 600 orders.
2. Enhance Promotion with Loyalty Programs and Advertising: Launch a loyalty program offering discounts or free items after a certain number of visits to increase customer retention and order frequency. Effective social media advertising can attract new customers, raising total orders per month beyond 900. By increasing monthly orders to 950, the business can generate profits while maintaining the current price structure.
3. Optimize the Place through Extended Operating Hours or Additional Locations: Extending hours to attract evening customers or opening a second location can significantly boost sales volume. If these strategies increase orders by 20% to 900-950 orders per month, it would surpass the breakeven point, ensuring profitability.

Recalculation with recommended strategies shows that increasing the average order price to $14 and attracting more customers to reach 950 orders per month would place the business into profitability, with a monthly profit of (950 - 900) * $9 = $450.

Conclusion

In conclusion, understanding the breakeven point helps identify the sales target needed for profitability. Strategic enhancements to the product offerings, promotional activities, and place can collectively elevate revenue streams and reduce the gap between current sales and breakeven requirements. Implementing these recommendations can lead the coffee bistro to a sustainable profit margin and long-term success.

References

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• Investopedia. (2023). Break-Even Point (BEP) Definition. https://www.investopedia.com/terms/b/breakevenpoint.asp