Crumbs Bakery Case Study

 

Case Overview

The Crumbs Bakery Case details past and recent activities, which have affected the performance of Crumbs bakery. Crumbs bakery is a chain renowned for its cupcake products in the United States. The case elaborates of the poor performance of the company that led to its bankruptcy. It was later bought by Marcus Lemonis and Fischer Enterprises. The case revolves around the diversification strategy that the new owners of the business aim to exploit to turn it around, and whether it will be feasible. Supporters of the strategy argue that it will triumph because of the infrastructure and real estate that is already available for the corporation. Moreover, they assert that the absence of a nationally recognized bakery chain provides Crumbs with an opportunity to thrive. However, critics cite the past failures of the firm as a factor likely to hinder its comeback. Secondly, the suitability of the cupcakes and the new offerings have not been tested and may not be compatible. Finally, the cupcake concept is declining because of the changes in consumer tastes towards healthy foods. This paper will identify the marketing issues in the case, isolate the main one, develop alternative solutions and explain the suitability, pros and cons of the chosen alternative.

Main Marketing Issues

The first marketing issue affecting Crumbs is the diminishing cupcake market. Cupcakes are among products that customers are avoiding because of their high calorie and sugar contents. Such products have negative health implications. The consumers have started changing their tastes and preference, and gravitate towards healthy food offerings. The change implies that the company’s concept may not work. The company under the new management has indicated that 50% of its menu items will be cupcakes while the rest will be a variety of other products sold by Marcus Lemonis’ other businesses. If the cupcake market is reducing, the corporation’s new diversification strategy will unlikely to work because cupcakes represent half of the menu items. Therefore, the sales that Crumbs are likely to derive from its current strategy will be short-lived. Thus, the management of the company should re-think its strategy by exploring the market through research to identify unsatisfied markets that have the potential for growth.

The second issue is the negative brand image created by the bankruptcy. The success of any business depends on brand recognition and trust that customers place on the brand. If a brand cannot attract customers and retain them, it will not be sustainable. The bankruptcy ruined the reputation of Crumbs among customers and potential investors. Customers prefer organizations that can sustainably provide consistent goods and services (Sengupta 44). Disruptions in the supply of commodities and services cause stress and emotional discomfort to clients. The former customers of the organization may not be willing to come back because they are unsure of the ability of the company to serve their interests. Therefore, Crumbs may be forced to seek new customers, which is time-consuming and costly process. The marketing budget might reduce the rate of growth of the company. As such, Crumbs may require investors to provide it with finances to support its ventures. Since it has a tainted reputation, few investors will be willing to finance its undertakings. The public associates the Crumbs’ brand with failure because of its earlier bankruptcy. Dissociating the failures from the current effort by the company is challenging. Customers will always look at the company from its previous performance, unless it makes drastic changes on its brand and products. However, the company has expressed its interest to focus on the cupcakes as their main products. An additional challenge for the brand is that its added offerings may not attract as many customers as expected. The brand is known for the cupcakes and no other products. Consequently, customers are unlikely to visit the company’s stores when they need other products that the company plans to include in its menu. The failure to attract customers for the added offerings will render the product mix unsuccessful because the pairing of the products is meant to increase their synergy. Therefore, the brand as it is may not provide any competitive advantage to Crumbs.

The third marketing factor is competition. The cupcake market has many small shops that compete with large companies like Crumbs. While it may have the economies of scale, the small shops and grocery stores have taken a big proportion of the market share. Consequently, Crumbs must design a vigorous marketing strategy that will help it increase its market share and dominance. Failure to counter the increasing competition will prevent it from realizing its goals and objectives. The past performance has been attributed to increased expansion. When a business expands too fast, it can lose focus of its products’ quality (Chan and Mauborgne 98). The high competition in the cupcake market requires differentiation that offers value to the customers. However, when a company focuses its attention on market development and not on the quality, it loses its customers. Crumbs can, therefore, gain competitive advantage by differentiating its products from those of other businesses. The difficulty that the company must overcome is to decide how to differentiate.

The Most Essential Issue

The most important issue is the declining cupcake market. It affects all the other factors and has the highest influence on the diversification strategy. The market to serve influences the marketing strategy and its success (Porter 32). When the wrong market is chosen, the strategy cannot be effective. For instance, no matter how aggressive the promotion of the cupcakes is, the market is diminishing. As a result, the health conscious customers cannot be enticed by the promotions, regardless of how creative they are. The dwindling of the market will reduce the effectiveness of the diversification strategy. Hence, when cupcakes have no customers, the other products being offered will not be bought as well. The whole Crumbs’ concept is based on the success of the cupcakes and other offerings are meant to complement them. Moreover, when the market does not have a long-term perspective, overcoming competition will only work for a short while. In a reducing market, sales volumes decrease because the products lose popularity among customers. Competition becomes stiff, which may force the company to reduce its price to attract the price-sensitive customers. The price reduction may reduce to a point where operations are no longer profitable. When the prices reduce to the extent that it is no longer profitable, the other products paired with the pancakes lose the benefit of the pancakes popularity. Consequently, the whole concept will fail no matter the money spent on marketing and popularizing the brand. Therefore, the issue of diminishing market is the most essential because it renders all the other issues obsolete when not seriously considered.

Alternative Solutions

The first alternative is to overhaul the brand, which will signify to the customers that the company has a new beginning. The overhaul should scrap off the cupcakes and provide customers with an assortment of baked products. One of the factors likely to reduce the attractiveness of the brand in its current state is the negative publicity created by its initial collapse. Unless the customers are convinced that the company has a new start, they will be skeptical of its future and may avoid getting attached to it. Consequently, it may fail to attract new customers while the old ones may disregard its products. The owners of Crumbs may have been motivated to buy the business because of its valuable brand in the cupcake operations. However, the bad publicity may have reduced the brand equity. Customers may not be willing to choose Crumbs products over others as a result of its brand equity. Therefore, a change in the entire brand can help create new attitudes and perceptions in the minds of the customers, and consequently repair the damaged image (Lymbersky 112).

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The advantage of implementing this alternative is that it alienates the company from its past and gives it a new perspective. The outlook replaces the negative and cautious attitudes in customers with new ones, which helps to establish new relationships. The second advantage is that the baked products’ industry is not contracting and has potential for growth. Therefore, the corporation can enjoy its initial and consequent successes for a long time. As such, it can recover all the costs incurred during the launching of the new products and marketing promotions.

  • The first disadvantage with this alternative solution is that it requires rigorous marketing campaigns that consume time, effort and enormous resources. New brands are expensive to market because they require repeated messages to reinforce the idea in the brand (Czinkota, Bob, and Ronkainen 54). These messages are disseminated through the paid media whose charges are high. Secondly, eliminating cupcakes denies the owners the advantage of cupcake’s fame, which was included in the price for which they paid for the business.
  • The second choice is to use the infrastructure and real estate owned by Crumbs to popularize and distribute dessert products of the other companies owned by Lemonis. In this case, the strategy involves distributing the dessert products to a large population, and maximizes sales volumes. The network can aid the business in reaching customers in regions that could not be reached using the initial supply chain.

The advantage with this solution is that the company can serve new markets using minimal costs, which would increase its profits and revenues. Its shortfall is that it would underutilize the brand equity created by Crumbs in its first operation before its liquidation.

A third alternative is to create new products by first conducting a market survey. Since the company does not require intensive investment in infrastructure, it can afford market research. The research is to identify new products that would suit the needs of an unsatisfied market. The absence of a nationally recognized brand in the baking industry provides a chance for Crumbs to explore. The current competitors are small bakeries that are regionally known. Creating a new brand of baked products can facilitate the emergence of the company from its financial crisis. Consequently, the products would flourish in meeting the needs because of their customization to match the customers’ expectations.

The merit of offering new products to an unsatisfied market is that it captures the current trends in preferences and tastes. Therefore, it can increase the company through the novel products that are at the growth stage of product life cycle. The second advantage is that this option supports the company’s long-term objectives because the products have a long life span. The business is assured of being in the market for a while before the products decline and exits the market.

The demerits include the high costs of production, marketing and promoting new products. Customers do not know the products, their functions and features. The company must inform them continuously until they sample and get acquainted with the offers.

The Best Solution

From the analysis of the three alternatives, the first one is the most appropriate. The main problem in the case revolves around the shrinking cupcake market in which Crumbs operate. There is no better solution than to seek new ventures that have a promising future, when the current market is shrinking. One of the approaches that organizations should adopt in declining markets is to reallocate resources to operations that have potential to generate increased revenues (Hooley, John, and Nigel 102). Such activities include development of new products to ensure continuity in the market once the current product exits the market.

The appropriateness of the first option to offer a variety of baked products to the market is the presence of an opportunity that has not been exploited. The available infrastructure combined with the company’s expertise can create an attractive brand nationally. The company can provide consistently high-quality products to people, who cherish baked products. The economies of scale gained through mass production empower the company to offer prices that are relatively lower than those of small businesses. In the supply of goods, Crumbs can capture the current trends by using organic ingredients. For instance, the grains used to make floor should be grown using organic methods. The increased costs that it may incur in its organic products can be leveraged through the large sales volume. Customers can form loyalty to the business because such a consideration would show that the company minds their welfare and not just their money (Kurtz and Louis 95). Since the company’s history has a great impact on the current operations, the brand overhaul can reduce the negativity.

Therefore, the expected outcomes from the implementation of this solution include building a customer base by capitalizing on current unmet needs (Luftig 87). Secondly, full engagement of the fixed assets of the establishment can assist in recovering costs that accrued from the purchase of the company.

On the other hand, negative consequences could arise. If the products offered do not reflect the market needs, the whole brand reputation could flop for the second time. Such an eventuality could make it impossible for the bakery to regain its foothold and trust. Therefore, its success depends on market analysis.

Recommendations

The company should adopt the first recommendation and move from the cupcake offerings. While changing the brand may be strenuous, its merits outweigh the demerits. The disadvantages of the brand change can be overcome by conducting a market survey to ascertain the actual unsatisfied needs. When the needs have been identified, the company can create positive publicity, increase its customer base and trust from the public. Eventually, it can regain its former glory and excellent performance. The customers will forget the problems the company has experienced in the past when they get high-quality product consistently. As a result, the brand will become strong and allow the corporation to identify ways of satisfying the different market segments in the baked products’ industry.

Conclusion

The main problem affecting Crumbs is a shrinking cupcake market. The alternative solutions that can solve the problem include an overhaul of the brand to offer a variety of baked products. Secondly, the company can use the infrastructure to distribute Lemonis’ other desserts. The final alternative is to create new products after a market research. The most preferred is the change of brand because it solves the publicity, market suitability and long-term objectives’ problems. Although it has shortcomings, there is a practical way of eliminating them and maximizing the benefits.

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