Delivering Customer Value

Delivering Customer Value

 Executive Summary

This report is based on the organization and environmental analysis of a high end restaurant Italy.  The analysis involves the use of the Pestle and SWOT framework, relationship strategies, customer pyramid, loyalty program, CRM tool. The analysis points towards the strong position of the organization in the high end restaurant industry, supportive social and technological factors as well as high competition and strict legal compliances for the restaurant. There is also opportunity for the organization to open more units and expand its target market to develop more loyal customer database. The accountability, loyalty and reliability are the core value to deliver customer value in relation to operational excellence, product leadership and customer intimacy and attain the competitive advantage. The service tier, loyalty program and CRM application is also analyzed for the organization. Based on the analyses, recommendations are made to improve relationship marketing for the organization.

Introduction

The core focus of high end restaurants is to deliver customer value to satisfy the demanding customers that look for unique experience in addition to quality food and restaurants services. To gain a competitive edge over others players in this highly competitive restaurant industry, it is required by the restaurants in particularly, high end  ones to create and deliver customer values as customers has anticipates high quality services  and experience from these restaurants.

The objective of this report is to determine how an organization delivers customer value and executes its relationship marketing strategies to delivering customer value and developing loyal customers. To meet this objective, a high end restaurant is chosen and analyzed for its relationship marketing strategies and based on the analysis recommendations are made to improve these strategies. The scope of analysis in the report is to analyze the company growth, markets, products, competitors, environmental analysis using PESTLE framework, customer relationship marketing strategies, 4 tier customer pyramids, and Customer Relationship Management tools. Based on the major findings from the analysis gaps are highlighted and recommendations are made for the organization in relation to relationship marketing strategies.

Brief description of the Company

Company analysis

Osteria Francescana is a popular high end restaurant of Italy origin in Modena. It is owned and run by an Italian restaurateur, Massimo Bottura. It was founded in year 1995. It is a three-Michelin-star restaurant and since 2011 the restaurant is listed under the World’s 50 Best Restaurants awards (The Guardian, 2016).

Achievements

2018Rated as the world’s best restaurant
2017Rated second best in the World’s 50 Best Restaurants
2016Rated as the world’s best restaurant
1st Italian restaurant to receive this award
2015Rated second best in the World’s 50 Best Restaurants
2014Rated third best in the World’s 50 Best Restaurants
2013Rated third best in the World’s 50 Best Restaurants
2012Got Third Michelin star (The Guardian, 2016)

 

The restaurant provides exquisite 10 and 12 course menu with range of wine pairing with the first and courses and eel dishes and camouflage dessert dish and signature dishes like The crunchy part of the lasagna, Five ages of Parmigiano Reggian, and Oops! I dropped the lemon tart. The restaurant serves Italian tradition dishes reflecting French style where the menu price ranges from 250 to 270 Euros for two person meal (Financial Review, 2018).

The focus of the restaurant is to creatively produce a perfect food of plate with innovate cooking practices encouraged by Massimo Bottura childhood memories. The centre of attraction is to enhance the customer senses and experiences by providing unique presentation of food, quality Italian cuisines food and delicious tastings to create more customer value to give a reason to visit the restaurant again.  Thus, the objective of the restaurant is to provide high quality Italian food and restaurant service to its customers, to continuously use innovative cooking techniques, to provide high standard service to the restaurant customers and maintain the restaurant standard as a Michelin star restaurant.

According to Ford (2018), the net worth of Massimo Bottura in year 2018 is $400,000.  Considering the growth perspective, the restaurant industry in year 2017 is worth 71 billion in Italy as there is increased food consumption in dining restaurants which has increased that value to 71.1 billion Euros as per the report of Italian Federation of public concerns (FoodCommunityNews, 2017).

The direct competitors of this restaurant are Ristorante da Danilo and Franceschetta58 operating Modena. These restaurants compete in traditional and contemporary Italian cuisines, wine pairing and seasonal tasting menu.

The target market segment is the upper income families and high earners as this tarhet segment are willing to spend on high end dining for high quality food, unique presentation of services and high restaurant services. The current market position of the restaurant is world best restaurant and it is well positioned as one of the best restaurants in Europe and positioned as a three Michelin star restaurant.

Environmental analysis using Pestle framework

Political factors: The political situation is improving in the country after the economic downturn of Europe, the Euro crisis and in the event of Brexit to achieve more political stability. The Italian government policies, laws and regulations for health, food quality standards, and nutrition disclosure and employment laws pose an impact on the restaurant industry. The tax reforms and regulation changes affect the business development of high end restaurant, Osteria Francescana in Italy.

Economic factors: The economic upturn, consumer spending on dining out and purchasing power are the key factors that affect the high end restaurant industry.

Social factors: The demographics feature such as income and age and psychographic features like lifestyle and interests of individuals affect the high end restaurant industry. It is stated that the people belonging  to 24 to 35 years age group are the most common and frequent visitors of fine dining and high end establishments (Ritchie, 2007).  The growing consumer spending and the trend of increase in household income in Italy as shown in below figures has a positive impact on the high end restaurants.

Delivering Customer Value

Figure 2: Average Annual Household Income (AAHI) in Italy (CEIC, 2017)

In addition, these trends presents opportunity for the high end restaurant to attract more potential high income earners and fulfill their preferences for freshly prepared high quality courses menu, exclusive a la carte menu, superior restaurant services and to deliver high customer value through their services to attract premium and develop loyal customers.

Technology factors: The technological progression required in high end restaurant for innovation in food menu, promote creative food techniques, to deliver high customer value and for the market competitiveness to encourage growth of the business in the highly competitive restaurant industry. The internet and app services are required to make reservations and payments and improve operational services by use of customer relationship management system.

Legal factors: The restaurants are required to meet laws/regulations, standards and policies related to food, quality, ingredients, health/hygiene and safety governed by the government which is challenging for the restaurants as it can attract fines and penalties and cancellation of licenses.

Environmental factors: The emphasis is on the carbon footprints, sustainable sourcing and social responsibility for long terms business sustainability.

SWOT analysis

Strengths

Strong restaurant reputation

High quality food and services

Cooking excellence

Innovation in the food menu and cooking techniques

 

Weaknesses

Limited seating in restaurant (Financial Review, 2018)

Confined target segment

Less focus on growing middle income segment

 

 

Opportunities

Growing household income

Increase consumer spending

Supportive social environment

Opening of more restaurant units

Gain market share of growing middle income segment

 

Threat

High competitive industry

Strict polices and regulation in restaurant industry

 

Analysis of customer relationship marketing strategies and Processes to convert potential customers and loyalty model

This section is analyzing the customer relationship marketing strategies that are used by the High end restaurant for targeting the large customer base of Italy. According to Ryu and Lee (2017), customer relationship marketing strategy is defined as a marketing strategy which helps in developing a strategic customer service. In respect to this, the three core value are identified which the company uses to deliver best services and that involves accountability, loyalty and reliability. These core values support the firm in attaining the competitive advantage as well as also support in delivering the best customer value in terms of operational excellence, product leadership and customer intimacy.

The core value is well positioned within the firm’s value proposition efficiently because value proposition is marketing statement which is used to solve the problem of the customer related to product or values (Peppers and Rogers, 2016). In respect to this, High End restaurant also used its core value to position the firm in the market by providing or offering the customers as per their demand and taste. According to Michael Porter, the competitive advantage is a concept which defines two different ways for an organization in order to achieve the competitive advantage over its rivals in terms of differentiation and cost advantages.

On the other side, Porter’s also defined that competitive advantage is combined with the activities scope for which company seeks to achieve those advantage and also lead three generic strategies for attaining average performance in the industry in terms of cost leadership advantage and differentiation advantage. The achievement of competitive advantage is a major challenge and objective for an organization in order to meet the large customer satisfaction level by delivering best customer value respectively (Kang et al., 2014). The concept of operational efficiency in terms of lowest price is considered as essential factor which attracts the numbers of customers to receive the organization services.

In like manner, product leadership is defined by Treacy and Wiersema that an organization needs to focus on the product leadership that will strive towards the product innovation and product development in order to become the market leader efficiently and effectively (Porter and Heppelmann, 2014). On the other side, Treacy and Wiersema also stated that an organization feel that its customers are playing an important role in an organization which focus on continuously working for meeting their requirements on time. However, these stated value disciplines by Michael Treacy and Fred Wiersema help in organization in determining the value position by collecting and reviewing the opinion of external parties i.e., customers and suppliers.

As per the study, an organization needs to focus more on managing and maintaining their customer relationship for which there is need to develop effective marketing strategies. In concern to this, high end restaurant is used two different types of marketing strategies for developing a customer relationship are social media support and reward customers (Trainor et al., 2014). In instance, High end restaurant has conducted a program for reward for about one week in which offers & benefits are provided to customer for achieving high returning and finding detailed information regarding their past and present experience. During that program, the manager identifies the customer that is regular customer of the restaurant and has loyalty towards them (Hudson et al., 2015). This strategy somewhere used for marketing the restaurant benefits and offers for attaining the high customer base and delivers the best customers value.

In addition, Wang and Kim (2017) also elaborated that an organization require to focus on the processes which help in converting the potential customers into profitable (loyal) customers.. In concern to this, the company i.e., High End Restaurant is also focusing towards attainment of the customer loyalty and satisfaction level. For this, the function which is prioritizing is offering the best food quality as per their taste and demand at a affordable price which makes them loyal customer of the company respectively. While analyzing, the function of the company is determined well but not that effective which affect the positively on the customer growth and achievement of the competitive advantage.

 

Least Profitable
Most Profitable

Delivering Customer Value

(Source: 4 tier Customer Pyramid)

The above stated figure clearly demonstrates that there are 4 tier of customer pyramid or service tier which is differentiate the organization customers on the basis of platinum, gold, iron and lead. The platinum customers are considered as top 255 of the customer which are least concerned about the price but the place and quality is more valued on customer service.  At the same time, Kumar and Reinartz (2018) also added that goals customer are other 25% of customer segment that are found o be more price sensitive and buy only significant amount from the retailers. On the other side, both iron and lead are remaining percent of customer segment which states that iron customer don’t deserve any kind of attention by the retailer and lead customers are those who don’t buy much products but demand more.

The organization manages its customer loyalty and value by serving their best quality of products and services with the best environment at a best price which attracts more numbers of customers. The customer loyalty program of the restaurant is defined on the basis of regularity and offers which is provided to customers for becoming the regular customers respectively. In respect to it, Kano model is developed by the professor Noriaki Kano which defined theory related to product development and customer satisfaction which is used by the organization for achieving the customer loyalty to a large extent (Dominici et al., 2015). On the other hand, the loyal customers are divided in the different tier on the basis of market segment which is decided in advance. Moreover, to retain the loyal customer for that company are required to provide them different benefits and offers in form of discounts, complimentary dishes or reward. The retention of the loyal customers found to be challenge for the customers respectively.

Application of Customer Relationship Management

CRM technologies are extensively used in the restaurant transactions to manage interactions with customers and analyze customer data and relations to improve restaurant service delivery, increase sales/profitability, strong customer relations, and to develop loyal customers. Thus, the use of CRM tool is influencing Osteria Francescana hospitality in understanding the restaurant customers, to provide personalized experience for each customer and delivering high value by getting insight on customer data and transaction history. The CRM system is used for expanding loyal customer base (Rahimi and Kozak, 2017), improve marketing strategies for premium customers, understand diner preferences, retain customers by loyalty program and continuously delivery of high value to its customers (Nyadzayo and Khajehzadeh, 2016). The use of ORACLE hospitality system helps in restaurant and point of sale management along with integration of loyalty program. This tool is used to manage customer database into one central customer database and provide information on meal preference, transaction history and adds up the loyalty points based on the spending habits. Also, email marketing is also used in the CRM system to keep customers engage with customized mails and greet on special occasion like birthday, anniversary, etc. to nurture and improve relationship with restaurant customers.

Conclusion and Recommendation

From the above study, it can be concluded easily that restaurant is somewhere facing challenges in dealing with the customer relationship marketing in order to sustain in the competitive environment. The major finding from the above analysis study is that High end restaurant is seeking to identify the better ways through which good customer relationship with existing and new clients are developed in terms of loyalty and values. The above study also helped in determining the current and past service quality related gaps which High End restaurant faced while serving to their customers. In respect to this, the service quality gap which is identified in the entire business operation of this restaurant was the standard gap which somewhere affected the competitive growth.

For every organization, it is very important to build their customer relationship for which High end restaurant is recommended to develop new effective strategies which help in enhancing the customer loyalty and customer base too. In addition, it can also be concluded easily that High End Restaurant has positioned itself in the market efficiently but then also company is required to develop more marketing strategy for targeting and achieving the high customer relationship in terms of value and loyalty. Moreover, the company is also required to focus on improving the customer relationship marketing strategies by developing more customer knowledge effectively.

The first recommendation to improve the communication skill with the customer is that provide the employees of restaurant with the effective training.  At the same time, the other way which is recommended to the organization for overcoming the issues or challenges related to company in concern to customer relationship marketing strategies. In order to overcome from current and past gaps, the organization require to focus more on developing a customer portfolio in respect to fill the standard gap which is identified by the customer in the restaurant itself.  On the other side, the other recommendation which is provided after analysis is that company should frequently bring changes in the marketing strategies as peer the change in the preferences of the customers.

References

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Dominici, G., Palumbo, F. and Basile, G., 2015. The drivers of customer satisfaction for academic library services: managerial hints from an empirical study on two Italian university libraries using the Kano model. International Journal of Management in Education9(3), pp.267-289.

Financial Review. 2018. World’s best restaurant in 2018 is Osteria Francescana. Here’s what it’s like. [Online] Available at: https://www.afr.com/lifestyle/food-and-wine/fine-dining/worlds-best-restaurant-in-2018-is-osteria-francescana-heres-what-its-like-20180625-h11tbz (Accessed: 6 October 2018).

FoodCommunityNews. 2017. Italy’s restaurant industry is worth 71 billion [Online] Available at:  https://foodcommunitynews.com/italys-restaurant-industry-is-worth-71-billion/ (Accessed: 6 October 2018).

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Peppers, D. and Rogers, M., 2016. Managing customer experience and relationships: A strategic framework. USA: John Wiley & Sons.

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The Guardian. 2016. Osteria Francescana: does the world’s best restaurant live up to the hype?  [Online] Available at:  https://www.theguardian.com/lifeandstyle/2016/dec/03/best-restaurant-world-hype-osteria-francescana-tanya-gold (Accessed: 6 October 2018).

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