Towson University

Wendy’s Group Project

New Product Management

Bana AmareCasey O’NeillDiamond Ellis

Aaron DandreaNirav Patel

5/13/2013

Executive Summary

The millennial generation, born between 1981 and 2000, is coming of age, and businesses

of all types must develop strategies to market to this growing demographic. Wendy’s is a proven

innovator and product developer in the quick service restaurant (QSR) industry, and it is safe to

believe they will be among the first movers to appeal to millennials. Competing in the QSR

industry is no easy task, as the aggressive low-cost providers McDonald’s and Burger King use

Wendy’s innovations to their benefit. However, Wendy’s has managed to maintain their core

competencies: their reputation for quality, competitive prices and customer service, while

maintaining the second-highest market share in the burger industry1.

By introducing new products that are healthy, gratifying, and convenient, Wendy’s can

be the first to appeal to the target market of millennials. The Slider Combination and the Chicken

Chili side will provide consumers with quick, cost-effective products of superior quality, thus

keeping in line with Wendy’s core competencies. By using social media promotion, awareness

will be generated more swiftly among the target market. The product will be introduced using a

penetration pricing strategy in order to encourage more sales during the introductory phase of the

product. Finally, hours will be extended even later into the night in order to make the products

more convenient and accessible to millennials. Through this strategy, Wendy’s will once again

lead the drive for innovation in the quick service market.

1 "Top Burger Restaurants, 2009-2011." Market Share Reporter. Ed. Robert S. Lazich and Virgil L. Burton, III. 2013

ed. Detroit: Gale Group, 2013. 822 pp. 2 vols. Gale Directory Library. Gale. Towson University. 13 May. 2013 <http://find.galegroup.com/gdl/start.do?prodId=GDL>.

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Demographic Needs Analysis

In 1988, Wendy’s was the first fast-food chain to create a single price-point value menu

where all items listed on that menu were priced exclusively at 99¢. The menu was restructured in

2007 due to rising costs as the Super Value Menu with prices ranging from 99¢ to $2.00. In

2010, Wendy’s introduced the Every Day Value Menu with nine items at $0.99.

What attracts people to Wendy’s is their quality and Super Value Menu. Wendy’s likes to

believe they are ‘A Cut Above’. They stand for honest food and use words such as higher

quality, fresh, wholesome food. They don’t cut corners.When other restaurants were using frozen

beef and mass-producing food, Dave developed an innovative method to prepare fresh, made-to-

order hamburgers.

Every day the company honors the legacy of the late founder, Dave Thomas, and

continues to live through his values by using select, premium ingredients and serving food that’s

made fresh with every order.

Wendy’s provides innovative and quality upscale food in a quick-service setting at close-

to fast food prices for the adult consumer.

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As of May 1, 2012, the total U.S. population was 313,465,023.

Generation Birth Dates Number of People % of population

Mature/World War II

Generation

Born before 1946 40,267,984 13.0%

Baby Boomers 1946-1965 81,489,445 26.4%

Generation X 1966-1980 61,032,705 26.6%

Generation Y/Millennial 1981-2000 85,405,385 27.4%

Baby Boomers

·         Between the ages of 48-66

How they are targeted

·         Baby Boomers are more interested in customizing their orders

·         The other means may be in the name, Wendy’s Old Fashion Hamburgers, which suggests

that their style is more like how things used to be done, in terms of freshness and quality.

Generation X

·         Between the ages of 33-47

How they are targeted

·         Increase in healthy-menu options for both adults and their children

·         Extending location hours to serve the needs of adults working late

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Generation Y

·         Between the ages 13-32

Wendy’s has developed food choices to target three main market segments:

1.      Non-Restriction Diet: Customers who do not have any restriction in their diet

2.      Special Dietary Needs: Customers who “want to look and feel fit” or who “have dietary

restrictions for medical reasons” or who are controlling their weight

3.      Kids Choice: Customer group derived from Non-Restriction Diet customers and Special

Dietary Needs customers

Determination of Segments

Value

● Wendy’s is known as the innovator of providing new ideas and products like the 99¢

value menu, salads and high quality chicken sandwiches.

● Provides upscale foods at close to fast-food prices

● Recently introduced new value-menu items at $1.29 to boost profit margins

Service

● High customer satisfaction and customer focus

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○ Wendy’s has a “Build A Meal” section on its website to help customers make

informed meal choices by combining any menu items and reviewing their

complete nutritional make-up

● Wendy’s International Inc. first introduced its late-night program in 1996

● A major benefit of opening late, typically from 9 PM to midnight or beyond, is that it’s

fairly cheap. Most chains limit access during late-night hours to their drive-through

windows and can run with a skeleton crew of as few as three employees, with one taking

orders and the others working in the kitchen

● Wendy’s was 2nd place after Yum Brands in 2003, with 11% of the late-night business

Quality

● They are the pioneers of fresh fast food

● Wendy’s goal towards quality provides its customers with the option of customizing their

burgers

● Wendy’s strives to offer efficient service without affecting quality

Location

● In addition to the U.S. and Canada, Wendy’s operates about 7% of its restaurants in some

25 other countries and territories

○ During the late 1990’s the company exited the U.K. and Argentina markets to

concentrate on more profitable markets in Latin America and the Carribean, the

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Far East and Europe. The contribution of Wendy’s international operations to

systemwide sales in 2000 was 2%.

● Wendy’s doesn’t have a particular pattern of determining store locations but it tends to

use the following criteria:

○ High population concentrated areas such as malls, airports, colleges and

universities

○ Areas close to primary competitors such as McDonald’s and Burger King

Type of Food

● Diverse variety of food choices

● Wendy’s caters to those in a hurry and the “health-conscious”

● According to the General Guide to Calories (per serving):

○ Low: less than 40

○ Moderate: between 100 and 400

○ High: more than 400

Healthy Food Options

● Meals with less than 510 calories and containing less than 15 grams of fat or less:

○ Grilled chicken sandwich with a side salad and fat free dressing or cup of fruit

○ Junior hamburger with side salad and fat free dressing or cup of fruit

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○ Large chili with side salad and fat free dressing or cup of fruit

○ Plain baked potato and small chili

○ Mandarin Chicken Salad with half serving of dressing

○ Fresh Fruit Bowl with small chili or 5-piece nuggets

Medical Restriction Diet

● Wendy’s diabetic exchange list:

○ In order to serve a wide variety of customers, Wendy’s provides a diabetic

exchange list of its products to help customers select items for their medical needs

● Wendy’s gluten-free list:

○ Wendy’s provides a list of all its gluten-free items in order to help gluten

intolerant customers identify safe options in its menu

● Wendy’s ingredients list:

○ A list of the specific ingredients used in Wendy’s is available for customers

inquiring about specific food allergies or sensitivities

Major Customer Trends

Consumers have developed a health conscious diet largely due to the impact of obesity.

Two-thirds of U.S. adults are officially overweight. One-third of U.S. children and teens eat fast

food on a typical day. This problem increased the awareness of society to the obesity issue. In

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order to counter this issue, in 1999 Wendy’s started building a reputation of having a healthier

option and diverse menu to attract grownups and teens.

Perhaps the most important influence on future revenue growth for Wendy’s, and all

other firms in the fast-food business, is the continuing trend to purchasing meals and casual food

rather than preparing them at all times of the day and night. This trend is evident among all age

and geographic segments of the market. The roots of this phenomenon are generally traced to a

new lifestyle where people are too busy to prepare food for themselves and increasingly less

inclined to do so. This situation is in turn attributed to the emergence of the two-career family

which limits the availability of time to prepare meals while providing the money to purchase

them.

Products Mapping and Competitive Analysis

When looking at products offered by Wendy’s we are easily able to compare each

product to direct competitors like McDonalds and Burger King. Wendy’s is a quick service

restaurant that offers a range of products from burgers, to chicken sandwiches, and fries to chili.

Wendy’s offers quarter pound, half pound, and three-quarter pound “Hot ‘N Juicy” cheeseburger

topped with onions, pickles, ketchup, mayonnaise, lettuce, tomato and mustard. They also offer

two varieties of bacon cheeseburgers called the “Baconator” and the smaller “Son of Baconator”.

Their value burger options include the Jr. bacon, cheeseburger, hamburger, and cheeseburger

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deluxe, which offer a variety of toppings to various style burgers. There is also a “Double Stack”

which is similar to McDonalds double cheeseburger.

Wendy’s offers two chicken flatbread options as well as an asiago ranch chicken club,

spicy and homestyle chicken sandwiches, the ultimate grill chicken sandwich and three wraps

along with two sizes of nuggets. For more healthy options they offer three different style salads

with some protein, chicken or chili, in full and half sizes. Wendy’s offers side options like baked

potatoes, chili, fries and side salads. They also offer chili cheese fries and apple slices. For

dessert, Wendy’s is known for their staple “Frosty” which comes in chocolate and vanilla. In

recent years Wendy’s has tried to keep up with changing taste in food by creating products like

frosty shakes, Oreo frosty shakes, and frosty parfaits and floats.

McDonalds is also a quick serve restaurant that serves an almost identical main menu as

Wendy’s. McDonalds offers a large variety of both burger and chicken sandwich options. An

interesting point to notice is that after Wendy’s revealed the Chicken Flat Bread, McDonalds

quickly released the Premium McWrap, attempting to appeal to the same target audience who

look for a healthier alternative to traditional fast food options. McDonalds actually offers more

McWrap choices than Wendy’s wraps.

McDonalds is clearly trying to appeal to the masses by offering the most options, at all

dining times: breakfast, lunch, and dinner. By McDonalds choosing this strategy, they must have

extremely high economies of scale for their raw materials for their finished products. This

usually results in lower quality but allows the largest variety of options and most profitability.

McDonalds is also not well known for anything in particular other than the “Big Mac” and their

combination meals that you used to be able to “Super-Size”. Wendy’s is well known for their

quality food especially their chicken sandwiches, square fresh burgers, and their staple dessert

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the Frosty. McDonalds side menu is also very different from Wendy’s but more similar to Burger

King. Burger King is the only firm that offers onion rings and also loaded tater tots. Checkers

offers many burger and fries combinations as well as chicken options but offer more of a ‘drive

in’ style food, similar to Sonic. It is clear that Wendy’s is attempting to create quality products

that will last a long time that people trust and are willing to buy. Wendy’s strives to provide the

most value through quality and variety.

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Pipeline and Innovation Recommendations

- Pipeline

Wendy’s is committed to offering products that balance quality ingredients, fresh

preparation and customers’ nutritional needs. They are currently offering many low calorie meal

options that have 500 calories or less. Wendy’s is also committed to helping their customers “Do

the Right Thing” for themselves, their families and their community by providing them with

wholesome food and experiences that they can feel good about.

Recently, Wendy’s has come out with two of their new flatbread grilled chicken

sandwiches. There are two different varieties of these flatbread sandwiches, one is the Smoky

Honey Mustard flatbread and the other is the Asiago Ranch flatbread. Out of these two flatbread

grilled chicken sandwiches the Smoky Honey Mustard flatbread is the healthier option since it is

only 370 calories with 22g of protein. The Asiago Ranch flatbread is still healthy but it has 510

calories with 30g of protein. Millennials are very interested in these two new products because

they are healthier than some of the other items on Wendy’s Menu. Also, millennials are more

accepting of change and are willing to try new things, so these new items are very fascinating to

them. Millennials always want to go out and try the newest products when they come out

because they want to be the first to try it. Once they try it they tell all of their peers about the

product and the product gains more and more attention. Another reason as to why millennials

like these products is because they are very convenient to get and easy to consumer. These

products are also very affordable and accessible, which makes it even more popular for

millennials. Millennials can just walk into any Wendy’s location and know that they can get

these flatbreads at a very affordable price.

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- Innovation Recommendations:

As millennials, we have come up with a couple of ideas for Wendy’s to implement. One

of these innovative ideas is to create a chicken chili from leftover chicken from the day before.

By doing this Wendy’s will save money on food cost and will not have to waste so much

chicken. Also, by implementing this idea, Wendy’s will be able to generate revenue from

products they would have otherwise thrown away. The second innovative idea that we came up

with was to create sliders and have slider combos where customers can try three different types

of sliders. The three different types of sliders that will be available are: bacon cheeseburger,

spicy chicken, and regular chicken. By implementing this idea Wendy’s can gain more

customers since people will now have to option of trying three different sliders without paying so

much money. These two innovative ideas are something that will definitely boost the attention

that Wendy’s is getting and also will attract more customers, mainly more millennials to eat

there. Millennials are always looking for something new to try and these products are something

totally new for Wendy’s.

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Marketing Campaign

Product (Offering)

Since Wendy’s is known for having such classic sandwiches, we decided to combine a

few into one meal. The Wendy’s Sliders Combination includes three signature Wendy’s

sandwiches turned miniature: the Homestyle Chicken Filet, Spicy Chicken Filet, and the Jr.

Bacon Cheeseburger. These three sandwiches are different in taste yet all are very popular

choices. The Wendy’s Slider Combination also comes with the option of adding French fries and

a drink.

This bar-inspired meal is expected to appeal to the millennials. Having the option to

purchase sliders at a fast food restaurant during usual bar hours via drive thru makes it

convenient for customers.

The Chicken Chili product is designed under the same principles of the regular chili. The

extra chicken that is not used will be utilized to make the Chicken Chili. This product will also

give customers who don’t eat beef the opportunity to purchase and enjoy chili.

Placement (Accessibility)

As a nationwide restaurant, Wendy’s is scattered throughout the United States. This

makes it accessible for our target market, the millennials. Because the Wendy’s Slider

Combination is new, it would be best to make it available on the late night menu first. Launching

the new product during the late night menu times will attract the millennials, who based on our

survey typically purchase Wendy’s products during the “late night” menu.

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Price (Value)

Wendy’s Slider Combination will be offered at $5.49. For the Wendy’s Slider

Combination meal – which includes the three sliders, French fries, and a drink – it will be

offered at $6.99. If the Wendy’s Slider Combination becomes a permanent item in the menu, we

will implement a price penetration strategy. This is when we will increase the prices gradually, to

eventually reach $6.00 for just the sliders, and $7.49 for the combination meal.

The Chicken Chili will be offered on the value menu for $1.00 for a small, and $2.50 for

a large. This price will remain constant because it is on the value menu.

Promotion (Awareness)

The use of social media will be prominent in advertising the Wendy’s Slider

Combination. Twitter, Facebook, and Instagram will all be used to reach out to millennials.

These mentioned websites will bring awareness to the slider combination.

Twitter and Instagram will allow us to keep track of the buzz created through word of

mouth and photos. It’s a great way to see how customers feel about the sliders coming out, and

later we can use Twitter and Instagram to see if expectations were met.

We will use Facebook to introduce and promote the new products to those who’ve

already liked the Wendy’s Facebook page. This way we’re able to develop our products by

further reaching our current target market and possibly stealing shares from our competitors.

Facebook will also be another outlet for customer feedback.

Along with social media, we’re going to use radio and television advertisements. By

using channels, such as MTV, BET, local channels and targeted radio stations, we will be able to

reach the most saturation of our target market.

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For promoting our new products, we will use slogans to attract millennials. The Wendy’s

Slider Combination advertisements will use “Don’t let these sliders slide past you!” as a slogan.

“A new way of chillin’- Wendy’s Chicken Chili”, will be the slogan used to advertise the new

Chicken Chili. Both slogans will be used for radio and television commercials. Also, hashtags

“#ANewWayOfChillin” and “#DontLetTheseSlidersSlide” will be promoted via Instagram and

Twitter.

People (Consumers)

The consumers we’re focused on, millennials, are known for expecting quality along with

value. The Wendy’s Slider Combination and Chicken Chili give millennials what they’re looking

for: quality food that won’t hurt their pockets. The option of having miniature spicy chicken,

regular chicken, and a bacon cheeseburger is diverse and applies to the masses. For many

millennials that are somewhat health conscious and prefer to stay away from beef, the Chicken

Chili is a viable option.

The late night drive thru hours that Wendy’s provides for its customers is perfect for

millennials who are coming home late from an outing, leaving work late, or those looking for a

late night snack during their study break. This convenience paired with the value of our offerings

makes Wendy’s a prime choice for millennials.

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Millennial Research

One of the most important things to consider when attracting a new demographic group is

the set of factors driving their purchase decisions. We conducted a survey asking millennials a

number of questions concerning quick service restaurants. The top two reasons why the

respondents ate at Wendy’s were the great taste and the low cost of the products. Other decision

drivers affecting millennials were the quality of food and customer service. This explains why

places like Chick-fil-A and Chipotle are so popular with millennials, as they consistently deliver

high quality, low cost products. Therefore, new products introduced by Wendy’s to appeal to

millennials must also meet these criteria.

Wendy’s faces stiff competition in the quick service restaurant industry. The two largest,

most direct competitors are McDonald’s and Burger King. Both of these competitors are built on

a low-cost provider strategy, which can be viewed as a “strength” for them as they are able to

move vast quantities of units and attract customers with low prices. However, both have

sacrificed the quality of their product and service for speed and cheap prices, Burger King more

so than McDonald’s. All of our millennial respondents placed Burger King in the bottom half of

a list of quick service restaurants according to their overall opinion of them, and over half of the

respondents also put McDonald’s in the bottom 50%. This gives Wendy’s a competitive

advantage among millennials if they continue to offer better quality for low prices, due to

Wendy’s strategy of being a market innovator. This causes Wendy’s to spend more on research

and development of new products which are quickly adopted by the market “followers”

McDonald’s and Burger King. However, it allows Wendy’s customers to experience the “best of

both worlds,” receiving superior quality food at low prices.

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We found millennials’ appreciation of customer service over price surprising; in fact,

customer service was rated as the most important element of quick service restaurants. The

decision drivers are continually evolving. Accessibility may become a more important factor, as

consumers will be forced to eat elsewhere if Wendy’s is not open as late as they are hungry.

Convenience may also become a factor, and even quick-service restaurants may begin to offer

delivery service.

The “gold standard” of customer service among quick service restaurants is, without a

doubt, Chick-fil-A. Among our respondents, 92% put Chick-fil-A in their top three QSR’s, and

half ranked it first overall. Great customer service was the overwhelming answer to the question

of why the respondent chose Chick-fil-A over Wendy’s. For accessibility, Taco Bell is best

known for being open late, and some Subways are open 24 hours a day.

It remains to be seen what rituals millennial buyers have at quick service restaurants.

Rituals are developed over long periods of time, and these simply have not had time to develop

yet in much of the target consumer group.

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