Case study: Refocusing Sharon's Bakery

In September 2007, Sharon was made redundant from her job at a leading London-based investment bank. She decided to take the opportunity to pursue something she had always enjoyed: baking and decorating cakes. She undertook a series of specialist courses, rented business premises and equipped them to a high standard.

Initially, orders came from family and friends and their close contacts. She slowly built a good reputation locally for high quality birthday and wedding cakes that were spectacular but fairly priced. She regularly undertook price comparisons against five of her direct competitors and ensured her prices were at the median price point.

Sharon prided herself on using the finest ethically sourced ingredients and building close relationships with customers so that she delivered exactly what they wanted. She identified two dominant customer groups: professional women aged 30-50 with children, who were the sole decision maker, and women aged 25-35 who were usually making a wedding cake decision with their parents and/or partner. The wedding cake customers were more widely geographically dispersed, being resident in the county, or in neighbouring counties. The birthday cake customers were nearly always located within four miles of the bakery premises.

Sharon would always visit customers in their own homes and delivered the cakes to them directly. Customer feedback was excellent, and Sharon quickly gained a positive reputation. The volume of orders increased steadily, and Sharon employed Keira, an apprentice, to ensure she could keep up with the demand. By 2014, over 60 per cent of her revenue was from wedding cakes, the remainder from birthday cakes, special occasion (e.g. office leaving) and seasonal baking (e.g. Christmas/Easter cakes). The mean price for a wedding cake was 400; in contrast, the mean price for a birthday cake was 70.

Her style of baking and decoration - traditional, with a modern twist - was well suited to birthday cakes. Tastes for wedding cakes were, however, quickly changing, with customers wanting to emulate the elaborate cakes they were seeing in popular magazines. Specialist wedding cake bakers were quickly entering the local market and Sharon found that she was unable to match their creative designs or compete with them on marketing spend. Sharon's orders for wedding cakes were dropping 5 per cent per year and she knew she needed to refocus her business.

She turned to a local small business support advisor, who undertook desk and primary research on the changing market. The insights gleaned from the research were very helpful and pointed to potential market opportunities in the following areas:

• An increasing willingness for parents to buy personalised birthday cakes rather than baking the cakes themselves or buying them from the supermarket. Parents were willing to spend a little bit more for a special cake for their child, especially if it was a customised design.
• An increasing number of businesses were now reliant on external sub-contractors for their catering rather than having an in-house catering firm.
• Mail order cupcakes and single cake slices were growing in popularity.
• Small independent traditional bakeries were closing in the region and were often replaced by national bakery chains.
• There has been a sharp rise in niche bakers within the county. These bakers would focus on cupcakes, speciality breads and continental baking.
• Garden centres were predicting a 15 per cent increase in the volume of sales of occasional cakes through their outlets within the next 2 years.

Sharon knew she had to make a decision soon on the direction of her business, but she was adamant that she wanted to continue with her passion to bake, decorate and deliver celebration cakes.

What business orientation do you feel Sharon is adopting?