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THINK OUTSIDE THE BRAND | Brand Audit for Taco Bell

October 17, 2013

Thomas J. Armitage

Week #6 – Brand Inventory

Thomas J. Armitage | IMC 613

Week #9

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Table of Contents Executive Summary…………………………………………………………… 3 The Industry…….………………………………………………………………. 4 Market Position…………………………………………………………………. 4 Brand Hierarchy………………………………………………………………… 6 Competitive Landscape……………………………………………………… 7 Market Leaders..……………………………………………………………….. 9 McDonald’s……………………………………………………………………….. 10 Subway………..……………………………………………………………………. 11 Brand Inventory……………………………………………………………….. 13 Brand Elements…………………………………………………………………. 13 Product……………………………………………………………………………….18 Place…………………………………………………………………………………..19 Price………………………………………………………………………………….. 20 Promotion…………………………………………………………………………..21 Points of Parity………………………………………………………………….. 22 Points of Difference………………………………………………………….. 23 Brand Exploratory……………………………………………………………. 24 Attitudes and Perception………………………………………………….. 25 Consumer Thoughts on Competitors…………………………………. 29 Brand Personality……………………………………………………………… 30 Brand Elements…………………………………………………………………. 31 Product …………………………………………………………………………….. 34 Place…………………………………………………………………………………..36 Price………………………………………………………………………………….. 36 Promotion…………………………………………………………………………. 37 Recommendations…………………………………………………………… 38 Conclusion………………………………………………………………………… 40 Sources……………………………………………………………………………… 41

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Executive Summary

Being a challenger brand in a saturated, competitive market poses a number of challenges,

especially when compared to strong market leaders. But, with strategic planning, brand

managers can identify areas for growth and key points of difference to capitalize upon.

Marketing expert and author Ove Haxthausen once described the many opportunities of a

challenger brand. “Building a challenger brand begins with a different view of your category—a

new way of segmenting the market…It will lead the challenger brand to develop an offering

that is new, typically in terms of the product, the positioning, the price, or any combination of

those elements to address an untapped need in the marketplace” (Haxthausen, 2004, pg. 2).

Taco Bell is one great example of a strong challenger brand. It has developed a unique

positioning in the marketplace by being fun, edgy and youthful while offering inexpensive, tasty

Mexican style meals. It also has opportunity for growth. By focusing on the right areas, Taco

Bell can strengthen its brand positioning and steal market share away from market leaders

McDonald’s and Subway in the very popular quick service restaurant (QSR) industry.

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The Industry

Taco Bell competes in a highly competitive

category: quick service restaurants (QRS). The

fast food industry, or QSR, comprises the

various quick-turnaround restaurants on the

market – including coffee shops, pizza places

and sandwich cafes. Although a trailblazer in

the Mexican style meal subcategory, Taco Bell

still finds itself fighting an uphill battle to steal market share away from category leaders

McDonald’s and Subway. Despite increased franchises, high profile sponsorships, massive

marketing efforts, and even new product offerings, Taco Bell still fights for less than 10% of

market share in the industry. There is room for growth, however. By understanding points of

parity and points of differences, and analyzing areas for growth compared to the market

leaders, Taco Bell can attract new customers and steal a percentage away from its competitors.

Market Position

Taco Bell has become quite well-known over the past 50 years with its Mexican-style fast food.

Items like tacos, quesadillas, and burritos fill its menu. More proprietary meals like the Cheesy

Gordita Crunch, Chalupa Supreme, and Spicy Buffalo Griller have become fan-favorites among

many ages and demographics (Food, 2013). The product names were specifically selected to

sound Mexican but appeal to an American audience.

Figure 1(Source: cdn.sheknows.com)

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Taco Bell was founded in 1962 by Glen Bell. It is

owned by Yum! Brands, based in Louisville, KY.

This parent company is the world’s largest

restaurant company in terms of system

restaurants with more than 39,000 to its name in 130 countries (also owns KFC and Pizza Hut)

(About Yum Brands, 2013). Yum! Brands was previously a PepsiCo brand which explains Taco

Bell’s longtime partnership with the soft drink company, which is currently ongoing. Today,

Taco Bell serves more than 35 million customers every week (About Yum Brands, 2013).

Taco Bell’s advertising as of late has focused around the slogan “Live Mas,” or, “Live More” in

Spanish. Their messaging has been edgy, youthful, humorous and quirky. Just last year, Taco

Bell partnered with Frito Lay, market leader in the dry snacks category, to develop a custom

menu item – the Doritos Locos Tacos®. In just 10 weeks, it became the fast food restaurant’s

most popular item ever (Doritos Locos Tacos, 2012). In addition, they’ve also held partnerships

with Pepsi, being the only restaurant location to serve the Mountain Dew Baja Blast flavor.

“Mountain Dew Baja Blast, which features a Mexican-inspired tropical lime flavor, marks the

first time an international beverage company and quick-service restaurant have collaborated to

create a proprietary beverage specifically designed to complement the chain's menu items”

(New Mountain Dew, 2006). Taco Bell has also held multiple sports sponsorships over the years.

Through its marketing efforts, its messaging and its products, Taco Bell has worked to reach out

to its target audience - young men and women who are not health conscious, enjoy cheap

Figure 2 (Source: groundfloormedia.com)

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meals and late night snacks, and are actively participants in sports and popular TV viewing. They

also focus on audience members who want an alternative to standard sandwiches and burgers,

found at many of their competitor restaurants. “[Taco Bell] seem to be aware that their target

market is those of us between 18-34 years old who know that eating healthy is important from

time to time but we also enjoy having a taco or two… or three (or five or six, this is a judgment-

free zone). Their ads further drive home this point by featuring this age group and demographic

to create a feeling of belonging” (Swanson, 2012, pg. 1). Just this past year, the chain

announced that they would discontinue all kids’ meals from their menu in an attempt to make

their positioning more clear. “‘We want to strengthen and be really clear and focused on our

brand positioning as the brand for millennials,’ [CEO Greg Creed] said. ‘And a kid's meal is just

inconsistent with the edgy, left-of-center millennial brand’” (Satran, 2013, pg. 1).

There certainly is a stigma that exists with Taco Bell products being unhealthy and low quality.

But Taco Bell sometimes embraces it – to a certain extent - a reflection of them understanding

their target audience who does not always pay close attention to the health benefits of their

fast food choices and places more value on convenience and

consistency.

Brand Hierarchy

Unlike some other QSRs, Taco Bell does not have other brands

within its banner. However, it does belong to the larger Yum!

Brands name. Along with Taco Bell, this conglomerate operates both KFC and Pizza Hut lines,

Figure 3 (Source: images.forbes.com)

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who also own significant market share. Yum! Brands is based in Louisville, KY and is the largest

restaurant company in terms of locations. The corporation is ranked #201 on the list of Fortune

500 with revenues exceeding $13 billion (About Yum Brands, 2013). With the financial backing

from Yum! Brands, natural ties to KFC and Pizza Hut, and a long-standing relationship with Pepsi

Co., Taco Bell is in a nice position for potential co-ops and aggressive spending.

Competitive Landscape

The QSR industry is a competitive one. Containing all types of restaurants that feature foods

and beverages with fast turnaround times, the category contains well-known brands like

Dunkin Donuts, Pizza Hut, Panera Bread and Sonic. Covering sub-categories like sandwich and

burger shops, donut and coffee shops, and pizza places, the QRS industry features fierce

competitors who have embarked on a number of different styles of marketing to better

compete in the marketplace.

According to QRS Magazine, the market leader of the category is ultra-popular burger shop

McDonald’s. Although there are hundreds of eateries that fit into the category, we will focus

(statistically) on the top 50. Based on this set, McDonald’s earns 34.7 billion annually and holds

22.8% market share. Subway, which follows in second, earns 7.6% market share. Conversely,

Taco Bell, coming in at sixth place, has 4.7% market share and earns $7 billion annually. The top

15 market leaders make up more than 75% of market share for the category (Oches, 2012). See

the chart below for a list of the top 10 market share leaders and their respective earnings.

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Figure 4 (Source: Oches, 2012)

Despite the still dull economy and increasing trends for healthier eating, the quick service

restaurant industry is slated to continue growing. “The restaurant industry as a whole—which is

larger than 90 percent of the world economies—is projected to bring in an average of $1.8

billion each day next year. Restaurant operators will purchase $237 billion in food and

beverages, with quick serves contributing $59 billion to this total” (Avant, 2012, pg. 1.).

Taco Bell is the number one restaurant in the sub-category of Mexican quick service. But it

doesn’t put its focus on this group. Posing as a challenger brand in the more comprehensive

quick service category, Taco Bell positions itself against the larger restaurant chains to

compete. According to writer Sam Oches, “Companies like Del Taco, Taco John’s, and Taco

Bueno, however, are not the fast feeders [Taco Bell CEO Greg] Creed considers competition;

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that would be companies like McDonald’s, Burger King, and Wendy’s, which Creed says Taco

Bell competes with on the convenience front” (Oches, 2011, pg. 1). Since these restaurants

have considerable market share, if Taco Bell even taps into a small percentage, it would

translate to millions of additional dollars annually.

Market Leaders

The fast food industry is filled with an assortment of restaurants, each with different offers and

serving distinct meals. McDonald’s leads the way with its famous set of items including Big

Macs, Double Bacon Cheeseburgers and Happy Meals. At $34.2 billion in revenue annually, they

are the market share leader. Trailing in second is Subway, the prevalent sandwich shop with

almost twice as many locations as McDonald’s. Subway brings in $11.4 billion in annual

revenue. Taco Bell sits in sixth place with $7 billion in revenue with its 5,670 locations

nationwide (Oches, 2012).

McDonald’s

McDonald’s: the beloved and long-standing American

brand tops the QSR category. They have led the

category for decades. Inexpensive costs, wide variety of

menu items, value meals, convenience, and consistency

are only a few reasons for their success. Another is the

ability to target youth. According to Time Magazine,

Happy Meals, McDonald’s kids meals, account for 10% of total sales. Conversely, Kids Meals at

Figure 5 (Source: thestamp.umd.edu)

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Taco Bell only accounted for 1% of sales before they dropped the items from their menu

(Tuttle, 2013, pg. 1).

There is a clear difference in positioning and product offering between McDonald’s and Taco

Bell. McDonald’s features good ‘ol American hamburgers, fries and similar products.

Meanwhile, Taco Bell boasts Mexican-style cooking. McDonald’s demographic spans

generations, with a keen eye on youngsters with its ever-successful Happy Meals and children’s

items. Taco Bell on the other hand has made it clear that they are focused on millennials and

wants their edgy marketing to resonate amongst 20-year-olds who want a tasty meal choice.

Taco Bell also is interested in fast turnaround times and a pleasant experience both in the drive-

thru and inside its locations.

One area where McDonald’s struggles,

however, is reaching out to millennials, or

20-year-olds. “McDonald's may be the

country's No. 1 fast-food chain and one of

its most-beloved brands, but when it

comes to millennials, the Golden Arches

says it doesn't even rank among the

demographic's top 10 restaurant chains…They're 80 million [people] but they're influencing the

next 80 million, both younger and older” (Morrison, 2013, pg. 1). McDonald’s believed that the

McWrap would be key to reaching this demographic and help them compete for the younger

Figure 6 (Source: appleridgestone.com)

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audience. Meanwhile, Taco Bell has been embarking on a campaign to own the millennial

market through its strategic efforts and offering. These few areas display the distinct

positioning between the two fast food chains.

Key points of difference for McDonald’s include:

- Well-known name

- Consistency and long-standing product lines

- Inexpensive meals with popular value menu

Subway

Unlike many of the other restaurants

on the QSR Top 50 list, Subway

positions itself by focusing on healthy

choices. It kicked off spokesperson

Jared Fogle’s weight loss advertising

campaign in 2000. “More than a decade later, the sandwich chain continues to reap the

benefits of launching a healthy marketing message before it was trendy. Subway ranked No. 1

overall in the 2011 YouGov's BrandIndex, which measures consumers' perceptions about a

brand, whether derived through the news, social media, advertising or word of mouth” (Kelso,

2012, pg. 1). To try and even the playing field, Taco Bell has begun to introduce more healthy

options on its menus. “Yum! [is] working to improve restaurant ergonomics and offering

healthier, higher-quality menu items such as the Cantina Bell line…In turn, they're able to more

Figure 7 (Source: lonelyconservative.com)

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effectively compete with up-and-coming fast-casual concepts like Chipotle Mexican Grill and

Panera Bread” (Symington, 2013, pg. 1). This move will try to cancel out Subway’s healthy focus

as a point of difference.

Subway manages the most restaurants, by far, among QSR chains. At almost 25,000, Subway

dominates the field in terms of franchises (Oches, 2012). Taco Bell is in the process of working

to offset this benefit. Taco Bell currently has 5,600 locations but plans to build another 2,000 or

so by the year 2020 (Brandau, 2013). Subway also has set a considerable budget aside for

advertising spend – but not nearly as strong as McDonald’s – while touching on a number of

channels and platforms. “Subway's advertising budget in 2010 amounted to about $400 million,

compared to about $837 million for McDonald's…Subway generates significant positive buzz

simply through word of mouth…They benefit from being a healthy but fast option, and they're

also aggressive on price points” (Kelso, 2012, pg. 1). Taco Bell spent $280 million in that time.

Key points of difference for Subway include:

- Healthier choice compared to other fast food restaurants

- Many more locations than competitors

- Multitude of options based on variety of meats and toppings

Brand Inventory

Taco Bell has a cool factor. It’s exciting, it’s young and it’s free. Speaking directly to millenials,

many of whom like to party on the weekends, their brand personality is reflected through the

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language in their social content, the messaging in their ads, the imagery across media, and

more. They love the fact that they do not serve plain old American sandwiches like their

competitors and instead boast items that are more fun. The brand makes it well-known who it

is looking to serve: 20-year-olds who want inexpensive meals in a hurry. One recent marketing

move that clearly indicates their audience is the removal of their Kids Meal items. “Taco Bell

decided to get rid of kids meals because they weren’t big money makers. Kid’s meals are not

part of Taco Bell’s long-term brand strategy and have had an insignificant impact on system

sales...The elimination of kids meals may also resound with Taco Bell’s core customers in their

teens and 20s” (Tuttle, 2013, pg. 1).

Brand Elements

Brand elements “are those trademarkable devices that serve to identify and differentiate the

brand. The main ones are brand names, URLs, logos, symbols, characters, spokespeople,

slogans, jingles, packages, and signage” (Keller, 2012, pg. 143). The Taco Bell name and logo

play perfectly into founder Glen Bell’s name. It helps to give the brand historic meaning while

also making for a cute and memorable logo. The URL and social media handles are easy to recall

based on the name and include tacobell.com, facebook.com/tacobell and @tacobell. The brand

no longer uses a spokesperson or character, although for several years they had a talking

Chihuahua who announced “Yo Quiero Taco Bell,” or “I want Taco Bell” in Spanish. Meanwhile,

the latest slogan “Live Mas” is the basis of recent ad campaigns and signage.

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Keller notes there are six criteria for successful brand elements. These include memorability,

meaningfulness, likeability, transferability, adaptability, protectability. The first three are

offensive strategies while the latter three play a defensive role in leveraging brand equity

(Keller, 2012, pg. 143).

Taco Bell has carried out many tactics over the years that can be deemed memorable. In

addition to their custom-named menu items (like the Crunchwrap Supreme), they have also

produced many ads and PR efforts that are worth remembering. One specific example is the

[now] famous publicity stunt that the

brand pulled in 1996. On April Fools’

Day, the company took out full-page

ads in six major newspapers and

announced that it had purchased the

Liberty Bell in Philadelphia – a fitting

purchase based on the brand’s name

and logo. They planned to rename the

American icon the “Taco Liberty Bell” but leave it on display still for public viewing. Many

Americans were outraged and called the National Parks Service to complain, before it was

revealed that it was all just in fun (Fletcher, 2011). The press alone garnered millions of

impressions, not to mention word of mouth traction. The event was a success and is still

remembered today. This is only one example of Taco Bell’s memorability shining through in its

marketing campaigns.

Figure 8 (Source: nsf.gov)

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More traditional ads play into Taco Bell’s ability to be meaningful, or ability to promote both

the brand’s offering and brand personality. One stand-out example is from last year’s Super

Bowl, the main event for big brands to showcase their best advertising work. “In a year where a

lot of companies swung and missed with their attempts at standing out from the crowd, Taco

Bell did something unique, and it paid off. It's hard not to laugh at some of the childish antics

throughout the spot” (Daniels, 2013, pg. 1). The commercial, dubbed “Viva Young,” featured

elderly folks escaping from their nursing home

to enjoy a night out on the town – partying,

dancing, drinking, and even getting tattoos on

a whim. The spot reinforced the message that

Taco Bell is fit for the young. But this

particular spot showed that they mean

“young at heart,” and that the brand is not

necessary bound by age restrictions. Many lists ranked it as one of the best and most effective

ads from the 2013 Super Bowl. The ad really demonstrated many of the perceptions that they

hope audience members associate with the brand: youth, fun, energy, partying, and just being

silly, while being memorable and meaningful at the same time.

Taco Bell loves to be humorous and light in its marketing campaigns. This enhances the overall

likeability of its brand. “None of those chains present quite the quick-serve offering that Taco

Bell does—not in product, not in value, and not in branding. The 49-year-old Mexican category

leader marches to the beat of its own drum, comfortable serving cheap food to a younger

Figure 9 (Source: Daniels, 2013)

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demographic” (Oches, 2011, pg. 1). The talking dog, the dancing grandpa and the first kiss over

a taco are only some examples of ads that are likeable. Another simple tactic that Taco Bell uses

is the phrases and sayings on its sauce packets.

They are cute, short and sometimes sweet.

“Ahhh…we meet again,” “Things just got real,” and

“Where are you taking me?” are only a few of the

many random sayings you might pull at your next

trip. The fortune cookie-like approach is a small way

of promoting the fun nature of the brand.

Although Taco Bell focuses its efforts on the U.S. market, it did launch plans to expand overseas

in 2008. According to the Wall Street Journal: “The challenge will be going to countries where

Mexican food isn't popular and persuading customers to try the Americanized version sold at

Taco Bell. [Chairmen David] Novak says the lack of authenticity in the chain's Mexican cuisine is

an advantage. ‘It owns its own category,’ he says” (Adamy, Abi-Habib, 2008, pg. 1). And in a

way, he’s right. The “special” taste of Taco Bell may not transfer across all overseas markets

(Mexican, for example), but areas that crave American style meals will certainly take notice.

Many of the simple ads that focus on partying and fun will also transfer well across foreign

markets, enhancing its transferability.

Taco Bell has been quick on their toes in many instances over the past 50 years, responding to

many changes in the environment and in media, while displaying their adaptability. The unique

Figure 10 (Source: grubgrade.com)

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partnership with Pepsi Co. to be the only retailer

to carry Mountain Dew Baja Blast and the co-op

partnership with Frito Lay to develop and serve

the Doritos Locos Tacos (most successful product

to date) are two prime examples of proactive

thinking (New Mountain Dew, 2006). Additionally,

their strategic and smart use of social media has allowed them to speak directly with their

consumer audience and learn about likes/dislikes in real-time.

Protectability is an important criterion for a strong brand presence. In addition to having a

contract to be the only seller of Baja Blast, Taco Bell has a number of other terms laid out to

protect its brand entities. Its website notes items like its logo, slogan, font and images as all

being protected by law (Terms of Use, 2013). Throughout their ads, they maintain streamlined

messaging and keep to brand consistency in font, color and layout.

Product

Taco Bell is well-positioning in the QSR category and the only Mexican style restaurant in the

top 15. Capitalizing on this style of food which isn’t as readily available to the American

population (at least compared to traditional sandwiches), means they have found a niche with

an assortment of products.

Figure 11 (Source: images.wikia.com)

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Figure 12 (Source: tacobell.com)

Taco Bell has existed since 1962 when founder Glen Bell started the Mexican style restaurant in

California. Since, they have gone public, expanded nationwide and overseas, and have been

owned by Pepsi Co (prior) and now Yum! Brands. They serve more than 35 million customers

every week (About Yum Brands, 2013). Within the portfolio is a wide variety of quickly prepared

menu items. Here is a short list:

- Catina Bowl - Doritos Locos Tacos Supreme

- Cheesy Roll Up - Smothered Burrito Shredded Chicken

- Mexican Pizza - Cheesy Gordita Crunch

- Fiesta Taco Salad - Volcano Nachos

- Chalupa Supreme - Meximelt

- Crunchwrap Supreme - Churros

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The chain also offers a number of frozen beverages and soft drinks, including the proprietary

Mountain Dew Baja Blast, which stems from a unique partnership between Taco Bell and Pepsi.

In fact, the recipe was specifically designed to cater to the taste of Taco Bell products. They are

the only retailer to carry the custom-made drink (New Mountain Dew, 2004). Finally, Taco Bell

boasts one of the fastest drive thru services in the category (Oches, 2013, pg. 1). This helps to

satisfy customers who are in a rush and need quick turnaround time on their meals or snacks.

Place

There is a vast difference that exists in the number of locations between Taco Bell and market

leaders McDonald’s and Subway. According to QSR Magazine, Subway leads the market with

the most retail locations at almost 25,000. McDonald’s has 14,000 while Starbucks has 11,000,

in second and third, respectively (Oches, 2012). Taco Bell currently has 5,600, more than four

times less than Subway. “In the U.S., [analyst Andy Barish] noted that Yum's incentives for Taco

Bell franchisees to build restaurants units could end up taking away market share from

McDonald's Corp. and Chipotle Mexican Grill Inc” (Taco Bell seeing success, 2012, pg. 1). Plans

for building more locations to reach more customers are already in the works (Brandau, 2013).

See the chart below for the number of locations for the top 10 restaurants in the QSR category.

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Figure 13 (Source: Oches, 2012)

Price

Taco Bell’s low price point is a key point of parity for the company, to stay on par with other

fast food chains. “Yet [Greg Creed, CEO of Taco Bell] remains unwavering in his belief that Taco

Bell fits a special niche in the marketplace, one that is not in danger of succumbing to the

upgrades of the fast-casual industry. For starters, Creed says, some people just want to pay less

for Mexican food” (Oches, 2011, pg. 1). Oches also notes that many consumers do not want to

pay $8 for a burrito, the cost at some of Mexican restaurants. As a result, the low price point

works to Taco Bell’s advantage.

“With already some of the lowest prices in the industry, though, Taco Bell was not forced

to do what many in the restaurant industry rushed to at the height of the recession—

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deep discounting. The Yum! Brands concept was already offering about 10 items for $1

or less on its Why Pay More! menu, and the $2 Meal Deals unveiled in 2010 gave

customers four options that paired a burrito or taco with a drink and chips—a move that

marked the two-buck price point as a magic number across the industry. Still, now that

the economy is improving and many restaurant companies are laying off their price

slashing, Creed says that cheap food will continue to be Taco Bell’s strategy” (Oches,

2011, pg. 1)

Promotion

Taco Bell reaches its consumers on a number of fronts including both traditional and new

media. “To reach its targeted millennial audience, Taco Bell experimented with social media in

ways other companies in its category have not…You have to go to these other screens, because

in the end, kids in college dorm rooms don't even have TVs, they're using laptops…The brand

has also invested time into other new platforms like Vine, Pheed and Snapchat” (Morrison,

2013, pg. 1). Staying ahead of the curve on new platforms has allowed them to get in front of

millennials before their competitors do. Meanwhile, they continue to focus on mass media as

well. “The overall media mix hasn't changed dramatically. Taco Bell…spends 70% of its budget

on proven media like TV, 20% on newer media such as digital, and 10% on media [elsewhere]’”

(Morrison, 2013, pg. 1).

Sports sponsorships, heavy social media activity, and quirky messaging in traditional advertising

help display Taco Bell’s love for the 18-35-year-old demographic. Their recent slogan change of

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“Think Outside the Bun” to “Live Mas” played into the marketing strategy to embrace this

audience. Just in 2012, the “Live Mas” campaign was supported by a $280 million measured

media spend and attempted to position the brand as more of a lifestyle or experience, than just

a place to stop and grab a quick bite to eat (Morrison, 2013, pg. 1). Through this positioning,

the target audience can become more closely attached to the brand, purchase more often, and

promote through word of mouth efforts.

Points of Parity

According to author and marketer Kevin Keller, points of parity are benefits that “are not

unique to the brand but may in fact be shared with other brands” (Keller, 2012, pg. 84). In many

cases, this is how the company survives. They are the brand benefits that are only meant to

“keep up with the Jones’s” or simply even the score and cancel out points of differences for

competitors. These are benefits that consumers might find at a number of different competing

brands. For Taco Bell, they are meant to offset McDonald’s, Subway and others’ efforts so

consumers can enjoy the same benefits in all places.

One specific item here is the value menu. McDonald’s and Burger King are widely known for

their cheap dollar items. Subway caught quite a bit of traction several years ago with its $5 foot

long promotion which has become a permanent offering for some items. Just this past year,

Taco Bell began to follow suit. “Taco Bell is testing a new value menu that could put it in more

direct competition with the Dollar Menu at McDonald's….The Mexican-fast-food chain is testing

a ‘$1 Cravings Menu’ in two markets…If successful, it would replace the chain's current value

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menu, called "Why Pay More," with items priced at 89 cents and 99 cents” (Look out,

McDonald’s, 2013, pg. 1).

Besides the value menu, here are a few other points of parity for Taco Bell:

- Drive thru experience

- Inexpensive costs

- Many locations, nationwide

Points of Difference

From Keller, points of difference are “attributes or benefits that consumers strongly associate

with a brand, positively evaluate, and believe that they could not find to the same extent with a

competitive brand” (Keller, pg. 83, 2012). This is where a company thrives. It’s the areas that

should be focused upon in marketing to set the brand apart from the rest and give consumers

“reasons to believe” or purchase these products over others.

One specific point of difference for

Taco Bell is their “Fourthmeal”

offering, or the ability to order food

late at night. Taco Bell stays open

until 1 or 2 a.m., and even later at

certain locations. “[Taco Bell]

decided to emphasize its fourthmeal Figure 14 (Source: fool.com)

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because Americans are eating later than in the past. Nearly 45% of Taco Bell's key demographic

-- males ages 18 to 29 -- eat later than 7 p.m. Taco Bell also found in 2006 that about 40% of

Americans work a nontraditional schedule, meaning they put in hours late at night and on

weekends or work extra-long shifts” (Peterson, 2012, pg. 1). Although Burger King has tried to

copy the tactic by staying open until 11 p.m. and McDonald’s manages 24-hour service for 40%

of its locations, Taco bell still owns the late night market (Peterson, 2012, pg. 1).

In addition to their late night service, a few of Taco Bell’s other points of difference include:

- An Americanized version of Mexican style food and flavors which is unique

- Wide variety of menu items

- Proprietary products

- Speed of delivery

Brand Exploratory

Although Taco Bell may be making some big moves from a corporate perspective, consumer

perceptions are the only thing that really matter. A brand could invest time, money and

resources in its branding efforts, but having the public perceive the brand in the very way the

company is aiming, is a true way to enjoy success. Taco Bell fights an uphill battle when it

comes to both current and potential customers. Low quality product and its unhealthy effects

are only some of the perceptions holding back the brand’s growth.

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Attitudes and Perceptions

Taco Bell competes with a few different types of restaurants. On the forefront are some of the

top market share leaders in the quick service restaurant (QSR) category like McDonald’s,

Subway, Burger King and Wendy’s. But the taco chain also competes with other Mexican style

restaurants in this subcategory. Some chains include Chipotle, Tex-Mex, and Del Taco.

Taco Bell boasts a wide variety of products, serving to its target audience which consists of 20-

something-year-olds who are not health conscience and enjoy late-night eating. “I tend to think

that Taco Bell is best at targeting the late night crowd…I also see them targeting high school

and college students who can afford their food and don't mind the quality concerns that some

more mature target audiences have a problem with” (Lott, 2013). They are fast, inexpensive,

and consumers know what to expect when they patronize. Their tacos, burritos, and quesadillas

have been on the menu for years and some have become fan favorites.

Their “unique” taste, an American twist on Mexican meals, has some consumers craving

regularly while leaving others disgusted. “I would never choose Taco Bell over the others

because I would most often choose Wendy's or Subway as they have more vegetables that I can

see and recognize while I'm eating. Taco Bell food just doesn't make it easy for me to know

what in the world I'm actually putting into my body, and I'm not a big fan of that” (Lott, 2013).

But not all consumers think the taste of Taco Bell is unbearable. Many target audience

members enjoy the uniqueness compared to other chains and familiarity each time they visit.

One blogger writes: “The beef Crunchwrap Supreme is one tasty meal from Taco Bell. Its

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ingredients include seasoned beef, warm nacho cheese sauce, crunchy tostada shell, reduced-

fat sour cream, lettuce and tomatoes, and then wrapped up and grilled. The Crunchwrap

Supreme offers a nice surprise that your taste buds are sure to appreciate” (5 best value meals,

2013, pg. 1). The older demographic, who are concerned with making better health choices, are

often choosing other options rather than Taco Bell. However, they are also outside of Taco

Bell’s target audience.

Of feedback received of consumers’ thoughts of Taco Bell, a word cloud was created. The more

popular words are featured as larger and more prominent within the design. As one can see,

some of the most popular terms included: Late, fast, Mexican, craving, quiero, night, cheap,

young and craving.

- 27 -

Figure 15

- 28 -

Additionally, a perception map was created with some of the most important keywords from

consumer feedback. Using convenience and quality as the axis markers, the terms were

mapped out. Overall, Taco Bell has a very polarizing brand personality. Many terms fell within

the high quality/convenient area, while many others fell on the low quality side. It appears

audience members are very split on their feelings towards the brand. Those in the target

audience who purchase regularly think very highly of the brand and appreciate offerings like

late hours, consistency, and taste. While many others, those outside of the target audience and

those who do not frequent the chain, have negative feelings towards the brand and associate it

with keywords like gross, not real, unhealthy, and fatty.

Figure 16

- 29 -

Consumer Thoughts on Competitors

In general, there are also mixed feelings towards both market leaders McDonald’s and Subway.

The negative feelings displayed by consumers can be used by Taco Bell as an area to capitalize

upon and try and attract those consumers towards its own product offerings. One Twitter user,

Eddie, suggests that he associates McDonald’s with cheap, bad tasting, gross food. Meanwhile,

he stated that Subway reminds him of overpriced “fake” food (Hitti, 2013). Another user,

Michelle, has been significantly impacted by both brand’s advertising over the years. Her first

thought for McDonald’s was “Two all beef patties, special sauce, lettuce, cheese, pickles, onions

on a sesame seed bun,” referencing a famous McDonald’s ad from the 1970s. Meanwhile, she

immediately thought of “Eat Fresh” for Subway, their longtime campaign slogan (Michelle,

2013).

A few others associated McDonald’s with cheap, fast and familiar and Subway with healthy,

fresh and vegetables (Dellecese, 2013). Finally, Twitter user Daniel Berman enjoys McDonald’s

fries but stated he ties the terms “obesity” and “diabetes” closely to the brand. Similarly, he

knocked Subway for having cheap meat and “insulting” a traditional hoagie sandwich (Berman,

2013). Based on consumer feedback, it appears that Taco Bell can clearly succeed if it focuses

on a number of areas –primarily the healthy option – since many consumers have bad

sentiments towards the market leaders for producing poor quality goods.

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Brand Personality

Through marketing efforts, Taco Bell has been working to curate an image that is fun-natured,

happy and carefree. Some examples of promoting this perception include their advisements,

partnerships with athletic and music associations, and the cute quirky sayings on their sauce

packets. This image resonates well with their target audience who are young (either physically

or psychologically) and fun. From web feedback and word of mouth, it does seem the public has

taken to this image.

Taco Bell’s advertising in recent years has attempted to relate to the younger audience, while

messaging tries to emphasize the point that Taco Bell is fun and light-hearted. Consumers’

reactions to advertisements have been positive. The Super Bowl ad this past year, “Viva Young”

was a fan favorite. And their most recent Cool Ranch Doritos Locos Taco Commercial, dubbed

“The World’s Most Obvious Idea,” has attracted 1.7 million hits on YouTube to date with 600

likes and 215 comments (The World’s Most Obvious Idea, 2013).

Additionally, perceptions are improving with the development of a new product line that boasts

healthier items. The Cantina menu offers meals with vegetables, grilled chicken and fresher

items in various salads and wraps. The promotion is being supported by professional chef

Lorena Garcia as the spokesperson. The Cantina Bell offering is helping Taco Bell compete more

evenly with higher quality QSRs like Chipotle and Panera Bread whijle working to steal dollars

away from chains like McDonald’s, Subway, Wendy’s and Burger King.

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“People are changing their opinion of Taco

Bell's brand because of the Cantina Bell menu

…When the Cantina menu was introduced in

early July, Taco Bell’s quality score with

Mexican food eaters sat at 14, while Chipotle

was more than twice that score at 32…Fast

forward to October 1st: Taco Bell’s quality

score is now 25, even with the top national

QSR sector, while Chipotle is only a few points

higher at 28” (Lopez, 2012, pg. 1).

Brand Elements

Consumer feedback was also crowdsourced from Twitter to better understand perceptions of

the Taco Bell brand. Eric Armitage associated the brand with Mountain Dew Baja Blast. He also

noted the expectancy of becoming ill from the low quality food (Armitage, 2013). When

mentioning Taco Bell, one Twitter user named Brian thought of diarrhea, college, and foodfests

(Brian, 2013). A clear indication that the food is tasty but can also make you sick. A few users

noted the “Yo Quiero Taco Bell” slogan that was used several years ago (Wisniewski, 2013).

Another user noted that he associates the brand with words like hot, soft and delicious

(Dellecese, 2013). Finally, a few others mentioned specific proprietary products like the

Mexican Pizza and Volcano Burritos (Lesczinski, 2013).

Figure 17 (Source: dudefoods.com)

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From a memorability standpoint, many consumers clearly still recall the Chihuahua pup even

though that ad campaign only lasted for a few short years. This is only one example of how the

brand promotes messaging that is easily recognized and remembered among audience

members. The term “fourthmeal” is another example. Just in the past 24 hours, there were

more than a hundred people using the term “fourthmeal” or “fourth meal” in their tweets on

Twitter (Fourthmeal, 2013).

Figure 18 (Source: 4.bp.blogspot.com)

Both direct messaging like television commercials and more indirect messages like being open

late (which ends up serving late night partyers) both speak to the meaningfulness of Taco Bell’s

brand elements. From one consumer: “I think I am definitely in Taco Bell's target audience,

being in my mid 20's; the marketing resonates well with me. Associating the food to a fun

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experience and tying in the memories of fun times had while eating Taco Bell are great

strategies (Peterson, 2013).

The positive reactions in the comment boxes of Taco Bell ads or online videos showcase the

likeability of the brand. The “Viva Young” ad, for example, reaped loads of positive criticism the

morning after the Super Bowl. One consumer on Twitter noted: “Taco Bell ad wins the

commercial bowl. IT'S OVER.” Another posted: “Taco Bell hands down has the best commercial

so far” (Taco Bell Super Bowl, 2013, pg. 1). Much of feedback on Taco Bell’s Facebook wall is

also positive, praising the brand for its tasty meals and neat promotions.

Among the defensive criteria for brand elements, transferability comes into play since the

brand serves a variety of different markets. They serve both urbanites and those in more rural

areas, nearly all states in the U.S., as well as select markets overseas. Although some countries

do not prefer the Mexican-American style cooking, others are taking hold. “There are about 240

Taco Bells in 10 countries outside the U.S., with the majority in Canada and Puerto Rico”

(Adamy & Abi-Habib, 2008, pg. 1). The brand is already seeing a great deal of potential for

success since the markets aren’t saturated yet, like the U.S.

Taco Bell has displayed adaptability through its recent introduction of healthier food items.

“The chain announced…that it's exploring ways to offer more ‘balanced choices,’ marking just

the latest sign that the fast-food industry is trying to adapt to shifting tastes and upend the

conventional wisdom that it only offers caloric indulgences” (Choi, 2013, pg. 1). The changes

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stem from a recent study that proves many consumers are on the lookout for lower calorie

meals. Taco Bell has been quick to react to the recent trend.

“It shows just how much pressure the broader industry is under to recast its greasy-food

image as people increasingly seek out options they feel are healthier…A report by the

Hudson Institute earlier this year found that lower-calorie options were a key indicator of

growth at restaurant chains between 2006 and 2011. While chains that expanded such

options saw customer traffic rise by 11 percent, those that didn't saw traffic fall by 15

percent” (Choi, 2013, pg. 1).

Finally, regarding protectability, Taco Bell has maintained consistent branding practices over

the years so the Taco Bell logo, keywords like “fourthmeal,” slogans like “Think Outside the

Bun” and “Live Mas,” and the names of all the proprietary products are all associated with the

Taco Bell brand amongst many consumers.

Product

Taco Bell boasts a variety of product offerings include both foods and beverages. One particular

standout product in recent years is the Doritos Locos Taco. Just last year, Taco Bell teamed up

with Frito Lay to launch the product. The release of the Doritos Locos Tacos made a significant

improvement on consumer perception too. “The Doritos Locos Taco was a major restaurant

industry standout in 2012…The item won the 2012 MenuMasters Award for Best New Menu

Item…The quick-service brand’s ‘buzz score’ jumped from a low of 10.8 days before the March

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2012 introduction of Doritos Locos Tacos to a

yearly high of 20.2 the following December”

(Brandau, pg. 1, 2013). According to Forbes, it

has become the most successful product in its

history. This year, Taco Bell followed up the

traditional nacho cheese shell flavor with the

highly anticipated Cool Ranch flavor. Others will roll out in the future (Arumugam, 2013).

One consumer, Andrew Hansen, fits in Taco Bell’s target audience and has positive sentiments

towards the brand and its products. “If I'm craving food and really am feeling cheap, they're my

go-to. Additionally, they're a safe bet when it comes to Mexican food. I get a consistent product

every time. We have another fast food Mexican chain down here in southern California called

"Del Taco," but certain products just taste better at Taco Bell (Hansen, 2013).

Taco Bell is one of the leading fast food chains when it comes to speed within the drive thru

too. The drive-thru experience is a very important component for QSRs. In fact, USA Today

notes that most chains do roughly 60-70% of their sales through the drive thru window

(Horovitz, 2013). This is one area where Taco Bell thrives and where its customers place value.

A recent study showed that, among QSRs, Taco Bell ranked second, only behind Wendy’s.

“Wendy’s is fastest once again with an average time of 145.5 seconds, while Taco Bell is second

at 146.7 seconds and McDonald’s has the longest time [of the three] at 184.2 seconds” (Oches,

2013, pg. 1). A majority of Taco Bell’s locations have a drive thru option, with the exception of

Figure 19 (Source: media.salon.com)

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those in mall or plaza locations or the inner cities who can’t afford the space. Overall, the drive

thru experience, especially during its late night hours, helps improve the brand experience for

consumers and enhances its product offering.

Place

There are currently 5,600 Taco Bell locations in the U.S. and they have plans to open another

2,000 over the next decade (Ellin, 2013). They are available in both suburban and urban areas in

nearly all 50 states. Some of their top markets include: Whittier, CA, Corinth, MS, Lawrence, KS,

Odessa, TX, Beckley, WV, and the Bronx, NY (Taco Bell ranks, 2013). One consumer noted that

one of her main motivations for frequenting Taco Bell was its convenient locations. “We choose

Taco Bell over most of their competitors because they are fast, cheap and have a few healthy

choices. They are also located very near are [sic] home and it's the healthiest fast food

alternative that is less than 5 minutes away” (Matthews, 2013).

Price

Taco Bell is often known among the public as a cheap alternative to many other restaurants,

including others in the QSR category. “A core contingent of fast-food customers still loves

nothing more than a cheap, quick, loaded foodstuff that's inherently unhealthy in mass

quantities” (Notte, 2013, pg. 1). Many items on Taco Bell’s menu are less than $2.00 each.

Some items, within its value menu, are priced less than $1. “Taco Bell is considered a late night

fast food restaurant because it is usually open till 2 AM or later. Because it is open till late and

its menu prices are very low, it is thought to be one of the best ‘drunk foods’” (Taco Bell Prices,

- 37 -

2013, pg. 1). Using inexpensive prices, and offering a value meal, certainly caters to the younger

demographic (many times in college) who do not have the funds to splurge $20-30 on each

meal and who often drink.

But the cost factor can haunt the brand. The inexpensive nature can be seen in both its

packaging and the quality of its food. And that turns some customers off. Rachel Lott writes: “I

think of Taco Bell as cheap because everything about it screams cheap to me. From the super

thin paper wrappings to the even thinner plastic grocery-style bags they give you your food in

to the little sauce packets, everything about it is packaged in a way to minimize cost” (Lott,

2013). These cheap features likely further alienate those outside the target audience.

Promotion

Taco Bell has initiated many promotions in recent

years to reach their target audience – the 18-35

demographic. One recent promotion is through their

partnership with Sony to give away PlayStation 4

systems before their “official” release date. According

to Nation’s Restaurant News: “Taco Bell will give away

PlayStation 4 consoles as part of a promotion for its $5

Buck Box and Big Box meals…Dubbed “Play the Future

First,” the promotion will run for six weeks…The offer

intends to engage customers with ‘first look’ Figure 20 (Source: pmcvariety.files.wordpress.com)

- 38 -

opportunities for Taco Bell insiders” (Jennings, 2013, pg. 1). Feedback on Twitter and Facebook

has been positive. In fact, the Facebook post announcing the promotion a few weeks ago

collected 803 shares, 21,838 likes, and 752 comments so far (Taco Bell, 2013, pg. 1). Taco Bell

does not feature a loyalty program but does offer promotions and coupons at sponsored events

such as semi-professional baseball games.

Recommendations

Taco Bell sits at sixth on the market share leader list for the QSR category. Even small

percentages could translate to millions of extra dollars in revenue annually. As a result, Taco

Bell must analyze its strengths and areas where it can improve in order to nab market share

away from McDonald’s and Subway. Some areas that the brand should focus on in the near

term to try and compete more aggressively include:

1) Fosusing more on healthier options with additional product lines

2) Focusing more on breakfast items with early restaurant hours to tap into new crowds

3) Update advertising campaign still based on brand’s personality

Taco Bell is coming off a rough spell. In 2011, it faced a false advertising lawsuit that questioned

the quality of meat in its seasoned beef recipes. “[The lawsuit] ignited a rash of negative

publicity at least partly responsible for the brand’s 2-percent decrease in same-store sales for

the year. The suit was dropped in April without any settlement from Taco Bell” (Satran, 2013,

pg. 1). Based on these accusations, and the stigma that exists among the general public towards

- 39 -

unhealthy meals, Taco Bell has their work cut out for them. By introducing more healthy foods,

while maintaining the same “great” taste of the current menu items, it should open up doors to

new audience members, while maintaining current customers. From writer Steve Symington,

“Yum! has also followed McDonald's lead by both working to improve restaurant ergonomics

and offering healthier, higher-quality menu items such as the Cantina Bell line…In turn, they're

able to more effectively compete with up-and-coming fast-casual concepts like Chipotle

Mexican Grill and Panera Bread” (Symington, 2013, pg. 1). Subway, second in market share, has

been a driving force in pushing for healthier foods, basing its entire positioning and ad

campaigns around this concept. Healthier options for Taco Bell would act as a point of parity for

the two market leaders.

Previously, Taco Bell has focused its menu items on lunch and dinner. And through marketing

efforts, it has branded its style of food also for late night snacks, or “fourthmeal,” as they

fittingly dub it. But another strategy to better compete against their counterparts is adopting

breakfast items to open the doors to morning crowds. “For all you morning people, Taco Bell

will also be rolling out its new breakfast lineup nationwide by the end of next year…If all goes as

planned, then, Taco Bell may have a fighting chance at wresting away a significant chunk of the

morning market share from McDonald's” (Symington, 2013, pg. 1). Both McDonald’s and

Subway have breakfast items so this tactic would compete directly against both of these fast

food giants. Many consumers are rushed in the morning. Taco Bell could capitalize on its speed

of service and capitalize on this for its morning crowd. Marketing efforts should be reflective of

- 40 -

the new early morning hours to raise awareness and tap into target audience members who

need to a quick bite before work or early morning high school or college classes.

Finally, Taco Bell’s recent slogan “Live Mas” tries to focus on experience over product.

“According to the Taco Bell party line, the new slogan emphasizes the brand's ‘commitment to

value, quality, relevance and an exceptional experience.’ It signifies a move from the idea of

‘food as fuel’ to food as experience and lifestyle” (Kalb, 2012, pg. 1). A new (and improved)

campaign, focusing on both the product itself and the Taco Bell experience, can strengthen the

brand’s reputation and better craft its positioning compared to top competitors. The new

marketing campaign should reinforce the new offerings to raise awareness. At the same time,

the campaign should not take away from the current offerings that have seen success, most

notably the Doritos Locos Tacos. The first step was eliminating the kids’ meal to better segment

its target audience. Now that the customer base is more clearly defined, a strategic marketing

campaign to reach those members can be put in place. The effect should cut into the profits of

market leaders. Through all the collective efforts listed above, it would be realistic to aim to

steal 2-4% of market share over the next 18-24 months.

Conclusion

Fighting for more market share in the fast food industry is no easy task. Comprised of hundreds

of long-standing and well-positioned restaurants, Taco Bell should have a solid strategy in place

in order to fight for growth. Taco Bell has a strong reputation among loyal customers. The not-

so-health-conscious 20-year-old crowd will continue to embrace the taco brand as long as it

- 41 -

delivers on cost and convenience. But to grow “outside the bun” and increase volume, and/or

attract a whole new clientele, other tactics should be used. Taco Bell must acknowledge its

shortcomings and work to emphasize its strengths to grow the brand.

The QSR industry features many mainstream brands that consumers see on a regular basis –

whether driving down the street, engaging on social media, or watching commercials during

nationally televised events. Although the leader in Mexican style food, Taco Bell is a challenger

brand in the larger QSR category, directly competing with market leaders McDonald’s and

Subway. With its “Live Mas” marketing campaign, and joint partnership with Doritos, Taco Bell

has embarked on a campaign to wrestle market share away from each. To continue growing,

Taco Bell should look to offer healthier options, introduce and promote breakfast items, and

continue its aggressive advertising campaigns around fun and excitement, while focusing

heavily on these new products. There is still room for Taco Bell to grow and by way of strategic

marketing decisions, it can ensure increases in U.S. revenues in the coming years.

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