This case involves Pizza USA, a small independent chain restaurant operation that offers both dine-in and carry-out services for customers that has received feedback for a potential change that will require the implementation of design process to add services. Currently, customers have indicated that they are pleased with the food offered by the restaurant but they would increase pizza purchases if a delivery service was available. This dilemma ties into two separate issues. First, in order to remain competitive within the industry, customer wants and preferences need to be heard. After all, if you cannot please your customer base, you will lose them. Secondly, the changes required must be done in a manner that combines data gathering and analysis and implementation of a plan that best suites this particular type of business in order to maximize success.
Customer service has been a recurring theme in many discussions regarding business operations and management in recent weeks. The prevailing thought is that in order for your business to grow and be successful, you must identify what your customers want and find a way to deliver it. This paper will analyze and discuss how process design can be implemented to assist this business to achieve its goals. Within the process design analysis and discussion, several factors will be reviewed to include: identification of what customer satisfaction means to the business and how we can identify the things that are most valuable to customers, the potential net yield of achieving a high level of customer satisfaction and efficiency, and the characteristic of developing an efficient pizza delivery (from stove to door) system. The paper will also assess creation of market “advantages” to not only maintain
but grow the customer base.
Pizza USA: An Exercise in Translating Customer Requirements into Process Design
In the last five years leading up to 2012, the Pizza Restaurants industry has experienced the results of a downturn in economy. Restaurants have been directly affected by changing market conditions such as changes in intense competition, decreasing consumer spending and an increase in overall health consciousness (Kalnins, A., & Mayer, K., 2004). However, despite such overwhelming odds and challenges, businesses were able to overcome economic hard times by reinventing themselves through creative marketing and adjusting their menu’s to adapt to customers preferences (Kelso, 2012). This allowed the industry to recover effectively and consumer spending and market growth returned in 2010.
As more consumers returned to the restaurants, overall demand increased. The U.S. Pizza industry averages about 410 million pizzas per year (Kelso, 2012). In 2012 alone, pizza sales are expected to reach an incredible $36.1 billion in revenue which is a 3.8 percent increase from the previous year (Kelso, 2012). This growth is expected to continue at a rate of 2.9 percent per year through 2017. Based on gathered data, 97 percent of U.S. consumers have ordered food from a pizza restaurant or establishment within the past 12 months (Kelso, 2012). No matter how you look at it, pizza consumption is on the rise and creates an exceptional opportunity for success in this industry.
According to Gregory Badishkanian, a CITI Analyst, the big three of the pizza industry: Pizza Hut, Domino’s, and Papa Johns are currently in position to increase market share. (Bloomberg, 2012). Although the big three comprise of 30% of the total pizza market, the remaining 70% comprise largely of other large chains with less market coverage and of course the smaller independent chains (Kelso, 2012). While the larger chains are improving profits independent chains are struggling to stay afloat amidst the fierce competition among the larger more established companies such as the big three (Kelso, 2012).
Understanding this dilemma, it would be most prudent for any independent restaurant operator to maximize operations by insuring that internal process design enables not only efficient productivity but generates a process that is customer friendly and focused on customer’s needs and preferences (Kalnins, A., & Mayer, K., 2004). This would be critical in the business’ ability to survive in such a monopolistic type market. Successful operation within a smaller independent chain restaurant faces challenges that may not be as apparent to a larger and more established national chains.
Pizza USA is a small chain operation that currently provides two services: dine-in and carry-out options. Customers have commented that if delivery services were added to the restaurant offerings, they would potentially buy more pizzas (Jacobs & Chase, 2011). Based on this information, it is apparent that the owner needs to assess his business operations and consider a process design that would include adding this service to current operations. The addition of delivery services would potentially require additional capital to finance changes and may involve the hiring of additional staff. However, revenue increases as a result of the added service would off-set the costs associated with these additions.
Near and long-term implications would include survivability within such a competitive market. As a customer, the primary focus of my satisfaction with this type of business relates primarily to efficiency and the level of customer service provided. If delivery service was provided, the two areas that would be most prevalent in my mind would be the delivery time and the state of the pizza once received. Far too often, I’ve received delivered food that was warm and in some cases cold. Needless to say, I never contacted that restaurant again.
The thing that would create a unique experience would be the restaurant’s ability to not only deliver within an exceptional time period but also to provide a pizza that is piping hot as it would be while dining in. Another aspect would be an incentive to order delivery by way of discounting or some type of rewards service. These are experiences that have not been typical in my experience with pizza deliveries. Method
The perceived situational analysis are as follows: Strengths-Due to the smaller nature of the business, It could potentially create a more personal experience for the customers thus increasing customer satisfaction; Weaknesses-As a smaller business entity, they have less resources and limited options in implementing changes to meet customer demands. Also, the business would be less tolerant of negative impacts that may result from changes compared to larger established chains with additional resources available; Opportunities-A stronger customer relationship tends to allow more flexibility due to stronger loyalty among satisfied customers. Loyal customers are willing to wait changes out rather than making an initial determination and moving on to another business;
Threats-The primary threats are of course the larger and more established chains such as the big three. Again, due to resourcing issues, these smaller and independent operations have less flexibility and opportunity if changes become less than desirable. The primary causes and effects are business survivability and customer satisfaction. Although these two areas are mentioned separately, they are in fact one. If changes are not made to meet customer needs and preferences, the business risks losing clientele and eventual closure. The term customer loyalty has been described as a process of capturing how well an organization is performing in three critical market measures: customer retention, share of wallet, and price sensitivity relative to competitors (Jacobs & Chase, 2011).
Studies have shown that customer loyalty relates directly to business success and survivability. There exists a major distinction between product design from the user’s standpoint from what may have been intended by the manufacturer (Jacobs & Chase, 2011). The main difference deals primarily with the intended versus perceived usefulness of a given product. In short, if the customer’s input is not considered, product or process design could potentially be a major waste of time on the from end of the planning cycle with even a worse outcome once in the market.
Table-1 below indicates quick-serve satisfaction rates among the top companies in the market to include the big three (Verma, R., & Thompson, G., 1999). As you can see, each of the larger chains has high overall scores in customer satisfaction. Albeit, this is only one of many areas that could potentially be assessed. The independent chains can learn something from this data. The large chains didn’t survive the market and become who they are today without success in this particular area (Verma, R., & Thompson, G., 1999). Table-1
Although the case situation described is consistent with most other business operations, “what can be done to be more profitable?” it is unique in itself due the detail andlevel of changes discussed. There are probably 100 areas that could be looked at that deals with efficiency and customer satisfaction. However, for the purpose of this paper we will only analyze the above mentioned areas.
If assessing profitability and customer satisfaction is an everyday occurrence, which is the case in most businesses, then this case could most certainly be considered as a preexisting situation. However, this paper has little to do with assessing a documented loss in profits or revenue streams so the evolution is unknown at best. There are many course concepts that can be applied to understand this situation. However the two most prevalent areas of operations philosophy that comes to mind are: Chapter 3-Product and Service Design and Chapter 5-Process Analysis. Quality Function Deployment (QFD) in chapter 3 discusses the process of getting the customer’s “voice” involved in design specifications (Jacobs & Chase, 2011). This concept and application relates to any and all industries and organizations.
It is directly related a process of studying and listening to customers to improve upon a product or service (Jacobs & Chase, 2011). Measuring Process Performance in Chapter 5 primarily deals with how well a particular process is performing. This is accomplished by assessing many different types of metrics such as: productivity, efficiency, flow time, throughput, and value added time to name a few (Jacobs & Chase, 2011). In order to adequately analyze whether your operation is running efficiently, a system of measurement is required to assess the performance. Results/Discussion
The problem of addressing the customers’ needs and preferences are easily solved. Immediately implement planning to accommodate your customers’ request for the added feature of delivery service. Consider the most efficient manner of transition to minimize disruption to current business operations while planning the change. Insure that additional feedback is solicited and gathered from customers to re-validate the need to add the additional service and proceed with design process reviews and analysis to achieve goals. This satisfies the earlier discussion regarding identification of what the customer really wants and prefers. The task of developing and implementing the plan is what is the most difficult.
Recommend that the owner begins with data gathering methods such as GAP Analysis. This method is used to assess the business’ performance relative to the expectations of its customers (Jacobs & Chase, 2011). An additional form of Gap Analysis includes the benchmarking of certain industry standards and measures the business ‘performance against established standards within the industry (Jacobs & Chase, 2011). Questions to be asked would be: What are other smaller independent chains offering? Is delivery service a value added service or just a waste of money?
What are the industry standards in regards to delivery times and what is considered acceptable to customers? Do have the resources to provide that type of service or will it require additional equipment, supplies, vehicles and staff? This will allow the owner to see where his restaurant is versus where he wants to be. Moreover, this would be an ideal tool to gather additional information from Customers to obtain additional feedback. It can be accomplished in many ways such as through paper or email mailers and in store surveys. The method selected would primarily depend on the owner’s available resources and preferences and of course size of targeted population
The follow-on recommendation is to conduct a cost impact and payoff analysis using a decision tree or what some would call a consequence diagram. This process allows the planner to map out several alternatives with different end results to assess risk (Jacobs & Chase, 2011). In essence it is a risk matrix. When planning or considering restaurant equipment purchases or even additional staff hires, this process could be beneficial in assessing the risks involved with each decision (Jacobs & Chase, 2011). Table-2 is a representation of a typical decision tree used to make informed decisions. As you can see, it is a process of identifying the problem (or situation) and working through several COA’s to determine what works best for you. Table-2
Implementation is the next step. I would recommend the utilization of responsibility charts to organize and manage tasks. Again, this particular tool is a type of matrix that lists all the projects and tasks to be completed while identifying certain responsible parties or stakeholders (Jacobs & Chase, 2011). In such a small business environment, it would probably be most beneficial for the owner to get all staff involved with the design process to obtain full buy-in. this can be accomplished through the use of this tool.
Of all the steps involved with planning and execution, this is probably the most labor intensive due to the potential resourcing required. After plans are implemented, the owner needs to assess the customer reactions to the added service. Anticipating a given response and getting the actual response are sometimes two different things. Again, the same process used during the Gap Analysis can be used to capture post-implementation feedback from customers (Jacobs & Chase, 2011).
The bottom line is that as a small business, you more reliant on customer loyalty than larger chains and operations. As a result, you must pay attention to any feedback received regarding your products and services, In this case we’re talking about pizzas but it applies in many other situations and industries as well. Once the feedback id obtained develop a smart and affordable plan and implement the plan. Once you have transitioned fully into your new plan, solicit additional feedback from customers to see how things are going. You may find other areas of your business operations that require attention. Customer feedback has to be a part of your daily operations. Without it, your business is at serious risk.
Kalnins, A., & Mayer, K., (Dec 2004), Franchising, ownership, and experience: A study of pizza restaurant survival. Management Science Journal, Vol. 50 Issue 12, p1716-1728, 13p, 3 Charts. doi: 10.1287/mnsc.1040.0220 Kohli, A., & Gupta, M., (Apr 2010), Improving operations strategy: Application of TOC principles in a small business. Journal of Business & Economics Research, Vol. 8 Issue 4, p37-45, 9p Verma, R., & Thompson, G., (1999), Managing service operations based on customer preferences. International Journal of Operations and Production Management. Vol. 19
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