The Head Room

The Head Room

Part A

Trish stood at the window of The Head Room, overlooking the harbour of St. John's, and wondered how much longer she and her partner Glenda would operate their business from this location. Their lease was coming up for renewal and they had the option of either staying, or purchasing an older home in an area of the city where professional offices, business associations, and consulting companies had located. They would be also within walking distance of two of the major hospitals in the city. They had been in their present location since 1987 and had seen their hair salon business grow substantially during that time. They now felt, however, that in order to continue to grow they needed to expand their services and products to their clients. However, this decision would also mean that they would be required to make a significant financial investment in the purchase of the new building. It was very important that they not lose many customers by this move and be able to maintain the same volume of business. They felt that they had established good relationships with their clients and that they provided them with the services they required. But how could they be sure? There were a number of wellrespected salons in the downtown area that clients could alternatively choose to patronize, should The Head Room leave the area. It was now July 1992 and they had been given two months by the owners of the building before they would officially list the sale with a realtor. What should they do?

Background Information

Trish and Glenda were working at different salons in 1987 when they decided to branch out on their own. They knew there was a real niche to be filled for the type of salon that would provide a total service package to clients and one that stressed customer

This case was prepared by Bette Anderson for the Atlantic Entrepreneurial Institute as a basis for classroom discussion, and is not meant to illustrate either effective or ineffective management.

Copyright © 1993, the Atlantic Entrepreneurial Institute. Reproduction of this case is allowed without permission for educational purposes, but all such reproduction must acknowledge the copyright. This permission does not include publication.

service in general. They chose a corner location, at a busy intersection of the downtown area of St. John's, where their visibility was excellent. This location also reinforced the image they wished to create of an upscale, sophisticated, quality salon.

The Head Room opened with six stylists, who had established their reputations for innovation and quality by consistently winning regional and local competitions. After six months they added aesthetics to their line of services. A qualified aesthetician was hired who provided cosmetic consulting, waxing, manicure, pedicure and facials. They now employed ten stylists, who performed all aspects of hair care: colour, perm, and styling. No specialization of staff occurred. They had a very low turnover of their stylists, with only one of the original six having left the salon to work outside the province. They also employed staff who provided support in the reception and shampoo areas.

The Head Room offered their clients a wide range of salon quality hair care products as well as hair accessories, jewellery and small gift items. A line of quality cosmetics by Clarins was offered for sale in the aesthetic area.

The Head Room recently installed a computerized customer data base. This provided management with client addresses and allowed them to access information on the frequency of appointments, the client's choice of stylist and what products were purchased. The database had approximately 3000 names on file. In addition, from a recent survey of clients they were able to determine that 89% of clients were female; 75% of this group were from the ages of 25 to 50, with 62% being employed in professional /executive occupations; 40% of the females were from twoadult families, with dependent children.

The hair salon business in St. John's was divided into three categories:

1. Small owner/operator salons which generally operated as homebased businesses.

1. Discount salons employing larger staff which focused on pricing each service independently. These tended to be franchised operations.

1. A small number of salons who promoted themselves as being on the leading edge of style and products.

The Head Room was in the latter category with their main competition being The Hair Factory, who operated two salons, one in a large convention hotel and the other in a small upscale shopping centre. The Hair Factory also offered aesthetic services and was located in a convention hotel within 15 minutes walk from The Head Room's present location. Both The Head Room and The Hair Factory priced their services and products in a similar range and tended to be more expensive than most of the salons in the city.

Problem Statement

Trish and Glenda must decide quickly whether they would take advantage of the opportunities offered by the new location. They felt that the economic conditions in the city and the province did not pose any real threat to them at this time. Negotiations on Hibernia were very positive and all indications were that St. John's would benefit substantially from the developments associated with the offshore. Many office complexes were being built in the city.

What was of the most concern to them was that they not have to spend a great deal of time establishing a client base for the new location. Financially, The Head Room was doing very well. Their sales were increasing steadily and they were pleased with the profits the business was generating. However, investing in their own building meant that their monthly cost would increase slightly. Being able to estimate how many of their customers would move with them would allow them to predict more accurately their sales and consequently the short term financing they would require from their bank. The Head Room must be able to determine therefore, within the next two months, the level of satisfaction of their customers and therefore gain some feeling as to their loyalty.

What management must decide is how best to measure this level of satisfaction. What type of analysis is required and what is the best way to administer it? They will be looking at the costs involved, but this will not be the determining factor in the method that they chose. More importantly they wanted to be able to have confidence in the results obtained in that they really did represent the feelings of the majority of their customers.

Questions for Discussion:

1. In the past when you have had your hair cut, what has made the difference for you in being very pleased or very disappointed with the experience? Give reasons for the way you felt. List at least six reasons.

1. Do you think the age of customers would influence how they would like their hair styled? List some differences.

1. Given the information in the case, how would you describe The Head Room customer? What do you think would be important to them in assessing the services provided by The Head Room? Give reasons for your answer.

1. What are the ways that The Head Room could use to determine the level of satisfaction of their customers and suggest some advantages and disadvantages of each? Based on your own experience, which methods do you think would be the most expensive to implement?

1. Which method would you choose and why, considering that cost is not the most important factor when evaluating the alternatives?

The Head Room

Part B

What Actually Happened

The Head Room decided that they would conduct a customer survey to determine how well they were presently meeting the needs of their clients. A mailout survey was chosen so that the clients would feel that their responses could not be directly attributed to them, and hopefully they would be more honest. From their customer data base of 3000 names, The Head Room randomly selected 800 for mailing. Of these, they received 218 completed questionnaires, providing a 27% response rate, which is high for this type of survey.

The questionnaire asked clients to respond to questions addressing many features of their service delivery. Customers were asked to rate their satisfaction with these features on a scale of poor to excellent. Certain questions allowed them to respond with comments and suggestions. Some of the key findings relevant to the decision to be made were in the areas of delivering a quality product, the pricing strategy in relation to value received and how the customer viewed them in relation to their competition.

The questionnaire asked customers to rate how important were specific features to them when choosing a salon. They were asked to rate on a scale from "very important" to "notatall important". They were given six alternatives from which to select a response: quality of service, availability of appointment, reputation, location, price and having multiservices provided from the one location. Later in the survey, they were asked to rate The Head Room's performance on each of these features.

Results

The Head Room was most interested in what customers considered to be "very important" to them when making their choice. When choosing a salon, quality service was considered to be "very important" to 98% of people who completed the questionnaire, with the second highest category being able to have the desired appointment time for 77% of customers. The ranking for the other features listed as being "very important" are listed below.

Benefit / %
Quality of service / 98
Availability of appointment / 77
Reputation / 72
Location / 52
Price / 50
Multiservices / 35

From this, therefore, it can be seen that price and location are only "very important" to approximately 50% of customers.

When clients were asked how well they felt The Head Room was providing its service they indicated the following.

Customer Satisfaction: Service Quality

The Head
Room / Excellent / Good / Average / Poor / Very Poor
Quality of
Service / 51.5% / 41.7% / 6.2% / .6% / 0

A comparison of the service provided by The Head Room with other salon produced the following results.

Customer Satisfaction: Service Quality

In Relation to Competition

The Head Room / Better / Same / Worse
Service Quality
vs Competition / 75.2% / 22.3% / 2.5%

The second highest rated "very important" feature for clients was the ability of a salon to accommodate them at the time that was convenient to them. They rated the Head Room's performance in this category as shown below.

Customer Satisfaction: Availability

The Head
Room / Excellent / Good / Average / Poor
Having
Requested
Appointment
Time / 52.9% / 30.3% / 10.7% / 6.1%

Customers listed reputation as the third highest "very important" reason they chose a salon. This can be viewed as another aspect of a quality product. Clients were asked to rank The Head Room on innovative styling, knowledge of staff, and consistency in delivering quality service. How well customers felt The Head Room was living up to its reputation is listed below.

Customer Satisfaction: Reputation

The Head
Room / Excellent / Good / Average / Poor
Innovative
Styling / 41.3% / 48.0% / 10.7% / 0
Staff
Competency / 53.2% / 37.6% / 9.2% / 0
Reliability / 51.3% / 37.6% / 10.0% / 1.1%

Approximately 50% of customers stated that location was "very important" to them in choosing to patronize a salon. Were The Head Room customers, therefore, pleased with their present location?

Customer Satisfaction: Present Location of The Head Room

The Head
Room / Excellent / Good / Average / Poor
Convenience
of
Location / 21.5% / 29.2% / 29.2% / 20.1%
Availability of
Parking / 5.2% / 22.8% / 29.8% / 42.2%

In Part A of this case, it was noted that the services of The Head Room tended to be higher priced than most salons in St. John's. Management felt that clients would equate price in terms of the value they felt they were receiving. As price was indicated as being "very important" to approximately 50% of clients, they were interested in determining whether their pricing policy was a concern to clients and how clients rated value received from The Head Room in relation to its competition. The results obtained from both questions are as follows.

Customer Satisfaction: Price

The Head
Room / Excellent / Good / Average / Poor
Rating on
Value / 15.6% / 57.8% / 23.4% / 3.2%

Customer Satisfaction: Price in Relation to Competition

The Head Room / Better / The Same / Worse
Position in
Relation to
Competition re
Value / 33.8% / 50.0% / 16.2%

Finally customers indicated that being able to access many different services under one roof was "very important" to 35% of clients. How well The Head Room performed in delivering this benefit to them is displayed in the following table.

Customer Satisfaction: MultiServices

The Head
Room / Excellent / Good / Average / Poor
Rating on
Variety
of Products
Offered / 45.9% / 48.7% / 5.4% / 0

Questions for Discussion:

1. Given the results of the survey, would you recommend to The Head Room that they move to a new location? Give reasons for your answer.

1. What suggestions would you make to The Head Room on how they could improve their services?