IHOP and Applebee's face a number of rivals (IHOP: Cracker Barrel, Denny's, Bob Evan's; Applebee's: Rafferty's, Outback). With the number of rivals, these restaurants have to continuously keep coming up with new ways to keep their customers coming back to them. They can do this by differentiating their products, or by price adjustments (special offers, discounts). Both restaurants do this everyday. IHOP with their "Tooty Fruity" and Applebee's with their "2 for 20."
It appears that the rivalry is quite high in this industry. There are always specials and commercails being played that help differentiate their products. This means they are always thinking of ways to keep or steal customers. If you "fall asleep" you could lose your customer base.
Buyers have relatively high power. Their switching costs are low to eat somewhere else.
The substitutes vary: there are similar style restaurants (Bob Evans), and there are different style restaurants (McDonalds), and lastly, people can just eat at home (grocery stores). Therefore, differentiation and prices can be very important.
I love Applebee's 2 for 20 deal! I totally agree about the buyers having relatively high power. If I feel as though prices at a restaurant are getting too high, I choose another one to go to. Interesting...
ReplyDeleteIHOP is all about advertising and locations. Their comercials are so lame, but I find myself craving it every once in a while especially if I'm traveling out of town That when my buying power is shifted from the grocery and me cooking.
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