A Service Concept for the Launch of a New Low-Cost Chain of Restaurants - Case Study Example

OPERATIONALIZING NEW SERVICE CONCEPT IN PRE-EXISTING FAST FOOD CHAIN OF RESTAURANTS Abstract The paper aims to design a service concept for the launch of new low-cost chain of restaurants of a famous restaurant chain. It explains the provisions of service concept which can be incorporated into the design to reduce the impact of poor customer review on existing brand image. The paper explains the significance of service concept at the design level, planning and integration level of the strategic planning of the company. In the end it suggests about service recovery, to improve the overall image of low cost restaurants. TABLE OF CONTENTS 1. Introduction 4 2. Background 5 3. Literature Review 5 4. Designing New Service Concept and Service Innovation 6 5. Research 6 6. Service Recovery Design 7 7. Recommendations 8 8. Service Strategy 10 9. Conclusion 10 10. References 12 1. Introduction Customers are significant for every business , however, for fast food companies , which offer food which are perishable, it is very important to retain customer, create customer loyalty and regulate customers to survive in the increasingly competitive environment, which has been elevated through the globalization of fast food chains. Brink and Berndt (2004) found that many companies spent a lot of their efforts, money and time to recruit new customers but a few companies took appropriate steps to retain customer and customer loyally. In 2011, the total revenue generated by Italian fast food market was $2.1 billion, which represents a negative annual rate from 2007 to 2011. The demand for fast food was high till 2007 and the market performance also reduced during this time period. The market volume in fast food is classed as the number of visits the customer makes to the same fast food restaurant. Fast food restaurant market can be broken down into- Take Away Quick Service restaurant Mobile Food Street The fast food restaurant at the leisure locations The fast food chains meet new competitors in the market and customer relationship is the marketing purpose which can keep customers from going to the competitors (Ramakrishnan, 2006). Customer retention is the method which helps to keep customers actively involved with the firm through optimal allocation of resources (Kotelnikov, 2006). Six economic benefits of customer retention as outlined by Brink and Berndt (2004)- It reduces the cost of customer acquisition and customer replacement. It guarantees base profits as the customers may follow the minimum spend for a time period. It promotes increased customer revenue. It reduces the overall operating costs as the companies spread the costs over many customers. It provides easy referral to new customers from the pre-existing customers and the customer can be charged premium price as they do not wait for discounts or price reductions. 2. Background The Italian restaurant operates a chain of 26 full-service restaurants close to shopping malls and high streets. The restaurant is known for excellent service and high quality Italian cuisine. The restaurant is looking for expansion opportunities and the management wants to launch new chain which will have following features 1. Low cost food 2. Limited menu The main issue is that the new outlets may lead to poor customer experience which can tarnish the image of the well established restaurant brand. Regardless of what the service industry perceive about their service and customers, the service should function for customers properly. It should be as per the perceived notion of service by the customer, even if in case, the customers have not experienced it previously (Johnston and Clark, 2001). Through word-of-mouth customer have a perceived imagination of the type of service, and during and after the service delivery the service should meet customers’ expectations related to the duration, notion and flexibility provided. Every organisation should focus on delivering the service concept. The paper explains how service concept is the key driver in service design decision at various levels of planning. In the given case, managing customers is important and the process involves branding, recruitment & selection, job analysis, education & training, motivation, appraisal and an ending. 3. Literature Review Service concept was used by Gummesson (1991) for explaining the concretization of service through the flowcharts, drawings and various other depositions. Mainly, the service concept is the concept or plan, the way, in which, the organization would like its customers, shareholder, employees and lenders to perceive the service. 8Ps of service concept was explained by Lovelock and Wright (1999) who named service concept as - place, service products, service process, physical evidence, productivity, people and quality. Additional concepts were of promotion and price, which were also included in these marketing elements. 4. Designing New Service Concept and Service Innovation New service development is the concept used for overall process of developing the new service offered by the company (Johnson et al., 2000). It is also concerned with the set of stages to launch the ideas (Cooper et al., 1994). The scope of new strategy development encompasses the culture, strategy and the service policy implementation and deployment. Edvardsson and Olsson (1996) explained how service concept can be designed as the detailed description of the activities which should be done for enhancing customer satisfaction. 5. Research The research in this regard involves examining the following: The service strategy to determine the steps for service design plan Understanding the market needs to create relationship at the service level and the relationship with customers and competitors Analyse the impact of chosen method of service delivery plan The service design was identified through four levels (Ballantyne et al., 1995) to integrate quality in the design of the service delivery system which involved Physical settings Job design Process design People The service system design is based on outcomes and issues related to staff selection, communication, training and support (Ballantyne et al., 1995) and Chase and Bowen (1991).The service concept should involve the strategy related to What to deliver to the customer through market positioning and the basis of customer’s relationship? What is the method for the implementation of strategy? How to plan the concept design or the service concept design will be used for service delivery system? The processes involved in designing the service delivery system involves technology, processes, people, equipments and the method, in which, the service will be created and delivered. 6. Service Recovery Design Service recovery design is the new concept which significant for research in service concept and service recovery may provide return of more than 100 % (Heskett et al., 1997). Mainly, the higher returns are due to improve customer’s satisfaction and customer loyalty (Spreng et al., 1995). Service recovery research can provide information regarding 1. The type of complaint 2. The significance of service recovery 3. The development of measurement instrument (Cooper et al., 1989) 4. Recovery strategies, impact on performance (Spreng et al., 1995) and impact on internal customers (Bowen and Johnston, 1999). 5. The research involves studying the experience of customers by collecting responders’ observations. Generally, the service recovery results in higher customers’ loyalty due to no customer expectation (Miller et al., 2000) 7. Recommendations McDonalds was at a leading position in fast food brand because to added local products to the menu and enhanced the overall interiors. The integration of café was an added benefit. The other large players in fast foods in Italy are Autogrill and Burger King. The design of restaurants, the selection of food and the added conveniences (such as Wi- Fi, drinks) can attract consumers to the new outlets. The service delivery system is, mainly, designed as a profit centres which set performance measure for measuring the delivery system, which is an important element of service design planning model. It assumes the service strategy is based on profitability, which is not true in many case (Sasser et al.’). In the case of Italian output the service concept and the service delivery should be designed to prevent the brand image from getting effected by the poor customer experience at the low cost fast food outlets. All the element of the previous model of fast food restaurants can be incorporated in the service concept ( Sasser et al., 1978; Chase and Acquilano, 1989). I. Introduce a pilot project A pilot projects can be introduced to start the outlets where new service concept, idea, products and services can be introduced. The pilot projects will provide the required customer feedback which can provide idea of the consumer preferences and II. Traditional low cost food The review of fast food restaurant indicates the demand for fast food increased in the decade. Italian consumers prefer traditional tastes and restaurant. The customer satisfaction can be improved by adding the traditional product on menu. III. Benefit from economic crisis The fast food operators can exploit the opportunities of the economic crisis by offering low cost food. The customers will shift from expensive options to these new outlets. IV. Branding services and experience The chain of restaurant can make use of separate standalone brand for the new chain of restaurant to Create brand promise Differentiate customer experience Measure and monitor Give employee support and deliver the promise Change the brand name by adding “Lite” for low cost outlets , which will reduce the negative brand image creation if any , due to service provided by the low cost outlets. V. Recruitment and selections Recruitment and selections is significant. Strong inter-functional coordination and cooperation is required in the organisation. The internal marketing staff should be educated to handle the service of the new chains. Fig. 2. Proposed Service Design Planning Model Service Delivery   Operations Strategy Service Concept     Market Segment Shared sitting arrangement Automatic system for order/payment Recruit new employees Change brand name which have suffix “Lite” to prevent negative impact on brand image caused by customer review Pilot project to test the plan - get customer response Cost reduction Offer low cost foods Meet the need for traditional taste Quick service Travellers and local customers Traditional customer Customer searching for low cost fast food options Customers searching for brand outlets 8. Service Strategy The service strategy should be based on market positioning in relation to the competitors and with the customers. Market positioning involves the decision regarding the service leader, service laggards and middle of the road. Relationship with customer can be on the basis of transactional basis or time bound agreement (Cash et al., 1994). The service recovery design can be prepared to reduce the impact of poor customer response. 9. Conclusion The challenges of opening the new restaurants are competition, labour regulations, product testing, salary costs and financial risks. The service delivery system provides the information regarding the role of people or the service provider, the equipment, the facilities, technology and the various processes which are created and produced through the service concept design. A market synergy plan should be prepared to create the service concept which should be a good fit between the firm’s image and new service. This aims to meet customer’s requirement and provide strong support. New branding strategy and introducing a pilot project are two mechanisms which will reduce negative impact of low cost chain of restaurants on the existing brand image. It will also help to understand customer purchase decision behaviour. Service concept is significant to attract consumers and the fast foods offered at outlets should be value priced for attracting new customers. The service delivery system is designed as profit centres, which sets performance measures for measuring the delivery system, which is an important element of service design planning model. 10. References 1. Brink A, Berndt A (2004). “Customer Relationship Management and Customer Service”. Lansdowne: Juta & Co. Ltd. 2. Bowen, D.E., Johnston, R., (1999). Internal Service Recovery: Developing a New Construct. International Journal of Service Industry Management 10, 118–131. 3. Ballantyne, D., Christopher, M., Payne, A., (1995). Improving The Quality Of Services Marketing: Service (Re) Design Is The Critical Link. Journal of Marketing Management 11, 7–24. 4. Chase, R., Bowen, D.E., (1991). Service Quality and the Service Delivery System. In: Service Quality: Multidisciplinary and Multi-National Perspectives. 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Service Recovery: Impact on Satisfaction and Intentions. Journal of Services Marketing 9, 15–23. Read More