Red Chair Case Study

Abella, Marita Isabel T.                                                                  MARKET1 K47

11507748                                                                                 Mr. Encarnacion

1. RED CHAIR hopes to attract a Target Market, describe the need that it hopes to tap into to get it’s main Customer base. What is it’s positioning.  

• RED CHAIR offers classic cuts and modern styling by barbers who are specially trained to cut young men and adults’ hair. It is also perfect for guys who are looking for a place to relax and unwind in a pleasant, welcoming atmosphere, which is a far cry from the sterile environment of most salons.

1. Apart from this need, there are other possible market segments that it can target. Describe the other market segments it can attract or needs that may not be currently satisfied that RED CHAIR can tap into.  

• Women who cannot afford an upscale salon. Salons usually offer customers complicated hairstyles that come with expensive prices. RED CHAIR can provide women, who are only looking for a trim or a simple cut, with the same service minus all the cost.

• Young men or adults with children. Most young children are notoriously difficult when it comes to getting haircuts. RED CHAIR is a more laid-back place that allows the children to play, possibly in the game room, or even get a haircut together with their dad.

1. Benchmark RED CHAIR with the existing barber shops in the area. Make a simple S.W.O.T. based on this comparative framework.  

1. Estimate each market segment size using the population spread within a three (3 – 5 kilometer radius of its current shop.  

Customers from UP Village, University of the Philippines, City Hall, Neighborhood

Young men and adults         65%

Men with children                30%

Women                         5%

1. What do you think is the main Opportunity Strategy of RED CHAIR?  

• The good thing about barber shops is that it is not just a place for hair cuts and styling—it is also a place for socializing and unwinding. The main opportunity strategy of RED CHAIR is that it can provide its customers with other services other than the regular haircut. It can provide them with a separate bar room, that can double as a waiting room. It can offer customers artisanal coffee and hair products such as wax, pomade, hairspray, razors, etc. It can also provide customers with spa services such as a quick massage, manicure and pedicure. The barber shop can be an all-in-one place for men; and if the other services does not work out well, then it can always fall back to the old but reliable haircut service.

1. The current price of a haircut is at (Ph150.00) for a standard haircut. Is this a value proposition? Why or Why not?  

• The price is certainly valuable for the kind of service and comfort that the barber shop provides for its customers. The ambiance of the place alone gives the customers a kind of nostalgia and a feel of the classic barber shop that we see in movies and old shops – black and white tiles, red comfy chairs and vintage razors. Customers are ensured that they are offered with the best, well-trained, barbers and are given the haircut that best complements their features.

1. In each of the stages of the product life cycle, how can RED CHAIR get ahead for the 1st year.

        Introduction Stage

• Promote the barber shop as much as possible- through facebook, flyers, word-of-mouth
• Establish service branding and quality level
• Build product awareness and educate the potential customers about the service

        Growth Stage

• Maintain service quality and pricing
• Promote the service to broader audience

        Maturity Stage

• Lower pricing because of new competition
• Enhance products – look for new and improved products that other competitors do not have
• Promotion should emphasize on service differentiation

        Decline Stage

• Add new features and find new uses for the product and service
• Reduce costs
• Discontinue low-selling products

1. Do you think there is an opportunity for government workers to be part of their key customer care? Why do you say so?  

• Yes, the location of the barber shop is within close proximity to a City Hall. Hence, there is a huge possibility that government workers be their customers. Moreover, the shop is also near a state university where housing for faculties and staff are provided inside the campus; this can ultimately lead customers to their barber shop for its location.

1. Detail a complete Marketing Information System for this Business model.  

        Information Sources

• Finding the best products
• Researching about the current trend in hair styles and products
• Training the barbers and receptionist
• Learning about the competitions

        Questions and Answers

• Who are our competitors?
• What do our customers want and need?

        Decision Maker

• Buying the products in the right price and quantity

        Results

• High sales / profit
• Good customer feedback
• Customer loyalty

1. If you were to rewrite this case, which part would you rewrite, Why ?  

• For me, the case should be more precise. The case failed to mention some important details such as the shop’s competitors and customer feedback for their services. The case also did not mention the prices for their other services, which would have been helpful information in answering some of the questions in the case.

1. What would RED CHAIR do to multiply its current revenue stream?  

1. Cut down on production cost

• Buy products in bulk
• Conserve water and electricity use
• Keep workplace clean and neat to prevent renovation costs

1. Provide other services

• 30-min Massage
• Manicure and Pedicure
• Game room
• Bar lounge

1. Detail how you would plan their loyalty program.  

1. Pre-paid Loyalty Cards

• Since getting a haircut is something that is needed to be done on a regular or monthly basis, it is easier to provide customers with a pre-paid loyalty card so that they would not need to shed out cash every time they visit.
• Pre-paid loyalty cards, similar to gift cards, offer customers with a quick and easy way of paying for the services they have been provided with. Moreover, this method of paying will surely keep them coming back to the shop to use up the remaining credits they have in their cards.
• Each customer will be given an option to pay in cash or avail of the loyalty card every after their visit.
• If customers will avail of the card, they are suggested to load a minimum balance of 300. The card comes with several benefits and rewards such as every P50 worth of load will be equivalent ot 5 points or P5. Meaning, if they have loaded P1,500 (or 10 haircuts) in the card, they will be given a free haircut service after.
• This loyalty program will not only help the shop raise capital quickly but it will also ensure them that their customers will come back.

1. Based on the description of RED CHAIR , what would their P & L look like next year? Please detail your assumptions and computations.  

Assumption: Financial progress based on realistic sales to minimum sales against highest expenses.

Revenue

Haircut Revenue        250 haircuts / month                        P450,000

Other Services                                                        P100,000

Total                                                                                        P550,000

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