HBS CASE #2: THE COOP MARKET RESEARCH DUNG NGO 1.

What is the size of the loss at the Coop? What could have been attributed to this loss If Coop were able to maintain the annual growth rate of 10% in 1995, it would reach total sales of $64,790,000 (76 x $775,000 x (1+10%) = $64,790,000). However, due to the decline in sales in 20 stores, the real sales in 1995 is $62,310,000 (20 x $775,000 x (1-6%) + 56 x $775,000 x (1+10%) = $62,310,000). COOP lost $2,480,000 in sales in 1995. There are several factors which could result in this disappointed sales decline. First, deteriorating food quality may drive the customers away from the restaurants. Second, subpar customer service could also contribute to the lower sales. The rapid growth in recent years required the COOP to hire more new staff to accommodate the expansion in a short period, which potentially led to inadequately trained staff. Third, the COOP s current marketing (me-too communication message, not employ the promotion tools while the trend in quick service restaurant industry (QSR) is towards discounting) was unlikely to produce the desirable results (attract new customers and increase restaurant traffic). Furthermore, customer tastes and preference may change (they may want something more than purely chicken-based items, or become more health-concern and reduce fast-food consumption) but the COOP s offerings have not been adapted to these changes. Another possible reason lay at competitors movement. The COOP s competitors like Burger King or KFC may have new offerings that better satisfy customer s taste. There may be more new restaurants opening in those areas where sales declined. Or the economic situation in certain areas deteriorated, which affected the discretionary income of people. 2. Analyze the dynamics between McMichael and Wallace. Are they looking in the same direction? Why, why not? McMichael and Wallace both recognize the lack of customer sight and market insight but they approach the market research in different ways which are heavily affected by their narrow functional perspective. Two VPs attribute the sales slums to different causes. McMichael thought the problem is in operation either customer service or food quality (which are under her responsibility). On the other extreme, Wallace thought tackling the brand image and marketing activities (which are of his supervision) are the ways to solve problems. In terms of growth opportunity, these two VPs follow different paths. While McMichael saw the future growth in offering home delivery service, Wallace placed a bet in co-branding. Again, their different view is because they see things though the lens of their functional area. 3. Evaluate each of the initiatives proposed by Buckmeister, Wallace, and McMichael. McMichael suggested Quality Inspection Program (QIP) and the Taste Test Quality Inspection Program (QIP), which are conducted by either internal external inspectors, aims to assess the food quality, customer service and facility. The plus points are the reasonable cost (basically include only the cost of hiring inspectors), assessment being carried out on a periodical basic (which provides updates over the time). However, reliability of inspection results is highly subject to the capability of inspectors which are not set up yet. This program just gives the insight of current situation and provides no useful information about kitchen operation, customer taste, preference and competitors. The taste test is suggested to compare the Coop s menu items with its competitors. This option may provide useful information on customers taste and ideals for potential product offerings. However, the Coop may encounter some problems if they decide to undertake this initiative. The sampling method (convenient sample of loyal customer) may commit sampling error because the loyal customers may not fully represent the whole market. Cost for each test is high ($6,000) while the number of testers is as low as 8 -12 customers (the smaller the sample size, the less reliable the results). If the test is conducted in all 20 problematic restaurants, the cost will go up to as high as $120,000. Further, the existing facilities (R&D lab) are not well equipped to give desirable results ( honest reactions from testers). Wallace suggested to undertake series of focus group, Brand Image Monitoring Survey (BIMS) and Series of Customer Experience Studies (CES)

HBS CASE #2: THE COOP MARKET RESEARCH DUNG NGO Brand Image Monitoring Survey (BIMS) provides quantitative data to assess the COOP s brand image vs. competitors . Benchmarking with competitor is the bright side of this initiative. Having clear idea about our competitive position relative to rivals from the customers perspective (reports submitted by research agent) is helpful in improving the menu and services and adjusting the strategy if needed. The large sample size (450-900) gives more reliable results. The flip side, however, resides in the contact method telephone interviewing. The research results validity is in question because of possible interviewer bias (different interviewers may interpret and response differently) and the resentment from respondent (promotion-harassed consumers) and the knowledge of respondents (have ever tried COOP s food or not?). And the cost (total of $20,000 50,000, $15-17/ interview) is considered as being relatively expensive. Series of Customer Experience Studies (CES): The instrument used in the research questionnaire is useful to help COOP explore what customers think about Coop s food and service, promotion, price, etc in comparison with other restaurants. The research results are clear and easy for interpreting later. The sampling method quota can help to reach the right target customers, which increase the reliability and validity of the study. The study being carried out during the whole year will help the COOP keep updated with any changes in the customer s taste and preference and any emerging trend. The cons is that whether the sample size (about 30) is large enough to give representative results and the cost climbs up to about $45,600. Buckmeister suggested Customer Feedback Cards. This method is cheap. However, it is a passive way because it totally depends on the willingness of customers to leave comments. Many customers just walk away without leaving comments even when they are not satisfied with the service of food. 4. Which one(s) would you support and why? I think the best market research must be the one that helps COOP obtain customer insight and market insight in order to address the possible problems with menu items, food quality, customer service, price and promotion in comparison with rival s. Among alternatives, I give CES the first priority. A well-designed questionnaire (not too many questions, requiring not much time to response, using simple, direct and unbiased wording to create interest, covering a wide range of topics), customers being chosen among QSR users (tried items on COOP s menu and competitors ) and customers being trained to do the evaluations will ensure the representativeness and credibility of the research. The Coop may recruit customers by itself (not using vendors service) to keep the cost down. In addition, Quality Inspection Program (QIP) could also be employed. The Coop may use internal inspectors who have special knowledge about the QSR industry. These inspectors may expand their work by paying visits to competitors restaurants to have better comparison and evaluation. As being mentioned above, this program cost nothing except regular salary paid to staff. Customer Feedback Cards could also be used but the cards have to redesigned by adding more scale questions and open-ended questions The taste test is suitable when the Coop has identified cause of sales slump being the food quality. It can be conducted later when the Coop wants to revamp its menu and has sufficient financial resources. 5. What would be the total cost of your selected market research and is it well justified? CES: The Coop recruits customers (15 customers/ 1 Coop restaurant & competitor s restaurant) to visit restaurants once a month during 6 months: $12/ visit x 15 customers/ restaurant x 20 restaurants x 6 months + $5,000 logistics (training) = $ 26,600. This amount is well below the estimations of Buckmeister (for all initiatives taste test, BIME, CES) and acceptable for a pilot program. R&D expense is usually listed under Admin and General Expense which was 8.6 millions in 1994. I think Coop can afford this additional G&A expense (it accounts for less than 1% of last year s total G&A expense (26.6/8,600 = 0.3%))