Friday, April 17, 2009

Nair's Restaurant, story of Customer Perception Management

Nair's Restaurant, story of Customer Perception Management

Nair's Restaurant, story of Customer Perception Management

Krishan Nair has been running a small village restaurant in Kerala. Availability of cheap and tasty food stuffs made his shop very popular. Many of the nearby shop owners were jealous on his popularity. During market days, usually by 10 AM most of the items for breakfast will be finished. Occasionally Nair used to take up catering orders for marriages and other functions. One day Mr. Jose, a prominent businessman of the nearby village contacted Krishan Nair and requested to arrange Lunch for 250 people. Nair has not inquired anything about the party but quoted the usual price and Mr. Jose agreed the price and paid advance too. Things went fine and Nair was happy till he met one of his neighbors, Mrs.Kavitha, who has attended the said function. She was praising the taste of the food supplied by Jose and inquired him who helped Jose in his catering business. She also added that Jose was boasting off that for Rs.100 nobody else can arrange such a good feast. Nair learned that Jose has purchased lunch from him for Rs.25 and made 3 times profit by selling it for Rs.100. This information made Mr. Nair restless and was not able to sleep for next couple of days.

One fine morning Nair has decided to increase the price of food stuffs and has announced the new prices of snacks, breakfast items, lunch etc [50-100% hike in prices]. He displayed a price list in front of the shop [one can find such boards in any village restaurant]. Even regular customers, who used to flatter him for quality and taste, started complaining of price and over a period of time, his revenue reduced to 40%. Many of his friends and relatives pointed this as a result of Mr. Nair's greed and everybody suggested revoking price change.

Krishan Nair was aware of the potential of his food stuff and was sure that people are ready to pay more. So he has decided not to change his business decision. Nair has discussed this issue with one of his friends, Mr. Sajid Mustafa. Sajid is a retired chef from a reputed star hotel and one of his grand children running a hotel chain in Middle East. They spend couple of weeks and based on inputs from him, Nair has decided to renovate his hotel and redefine restaurant operations. On the same day, he has announced that restaurant will be closed for the next 2 weeks for renovation.

Nair has purchased new trendy tables and chairs, rearranged food hall, provided couple of cabins, purchased TV for the restaurant and took a cable connection too. Arranged some tables and chairs around the Banyan tree in his restaurant compound and managed to present outdoor café feel. He has modified the ambience with the help of one of his relatives, who has done Interior Decoration and being her first assignment she has done excellent experiments and all these made big difference to Nair's Restaurant. He has instructed staff to wear local ethnic wear [provided enough fund to buy clothes].

Next is menu and pricing. Instead of a drastic price hike, he has decided to create some slots for various classes of customers. During week days, most of his customers belong to labor class, local merchants and employees of nearby tile factory where as during holidays, Tourists to near by natural spring come in groups. So he has decided to run the restaurant with 2 different price charts.

Increased the price to 25% for regular stuffs from Monday to Friday on week days, 50% hike on existing stuff and new dishes with premium price tag for Holidays. To empathize with customer needs, he has announced 25% more quantity for the first one month. In addition to this, Nair started a specialty evening shop where he started serving 'Instant Food'.

This attracts 50% more business which otherwise would have been bagged by local fast food shops (Thattukada, a slang used in Kerala for 'food on wheels').

Nair has studied up to 10th standard only and he is not at all confident of his business negotiation skills, ability to communicate business to others etc. Also he was not in a position to hire people to sell 'stories of taste' to other villages. So Nair arrived at an understanding with Mr. Jose and agreed to supply food stuffs for party orders of Jose. Jose is getting party orders from nearby villages and town and he is taking care of transport, delivery and bill collection. Jose is paying 50% of total bill amount to Nair.

Today Krishan Nair is happy because he has retained existing customers even after introducing price hike and achieved more business with better profit margin.

What do you think about this story? Is this applicable to any business? .

Note: All names used in this story are fictitious.