INTERNATIONAL MANAGEMENT INSTITUTE Marketing of Services Case Analysis: Kinko’s Submitted to Prof. S. Garimella Submitted By Amit Aggarwal Biswadeep Sahoo Debayan Mukherjee Prakhar Singh Somil Joshi Varun S. Pilla Kinko’s value proposition in the 1970’s Value Proposition illustrates why a target consumer should choose to buy or consume a product or a service over other alternatives, and which makes a customer confident that this product or service will add more value and benefits to him or better solve his problem than other similar offerings.
Orfalea started Kinko’s in 1970 near UCSB by selling school supplies and photocopying services to college students when he noticed that the only place for getting photocopying service was at school library and realized that photocopiers were not easily accessible to many people. He observed that there was an increasing demand on these services and decided that this business is going to exist for long time. Orfalea decided to offer his customers, who were college students, products and services they need, he decided to provide his customers with a consistent high quality services in a timely and reliable helpful manner, at a reasonable price.
Moreover orfalea made this service available and handy for his customers, which was of a high value to them. Reasons for the Kinko’s success There were many reasons for the brand’s success and the most important were: 1. The location of Kinko’s stores near schools which was easily reached to get the needed service or product was of the most important reasons for the brand success. 2. Kinko’s started to expand its services and to provide a much needed services which gave another incentive for customers (students) and increased their loyalty to Kinko’s. 3. Lack of competition. 4. Taking initiative to meet customer needs and expectations. . Developing a long term relationship. Kinko’s was a “Cool” company had Fans not only customers, they were in a business of solving customer problems that customers couldn’t solve for themselves and relieving their anxiety. Workers at Kinko’s were university graduates and experience of making business so they Kinko’s were considered as a business resource as the worker were talking with the customers and students about their experiences, students get the benefit of sharing experience and communication which creates a fun relationship building and developing a counter-culture experience. . Encouraging employees to take care of customers and to build emotional bonds with customers and managing customers emotions. Value Proposition evolution Kinko’s value proposition evolved over time by expanding their services and expansion of business to serve new customer segments. Kinko’s continued opening new stores and increased its retail footprint and broadened its focus to serving small office/ home office market. Kinko’s enhanced their value proposition by introduction of self-service computers and photocopiers working areas, in addition to the introduction of 24/7 service.
Kinko’s built a reputation for providing its customers access to the latest office technologies, introducing public teleconferencing rooms, Fed-Ex drop boxes, color copiers and printers, high-speed internet and email access. Later in 2001, they incorporated online and in-store services and introduced “Print to Kinko’s” and “DocStore” which enabled customers to store, edit, and print their documents at Kinko’s. Target market in the 70’s and 2003 Kinko’s target market in the 70’s was college students. Kinko’s target market in 2003 grew into three distinct segments: 1.
Consumer Segment: consumer customers used Kinko’s for personal use, including anything from printing posters for lost pets to generating banners for birthday parties to photocopying tax returns. 2. Local Business Market: walk-in clients Kinko’s have no formal business relationship they used Kinko’s as a second office to satisfy their copying, printing and other document needs. 3. Commercial Solutions Segment: comprised of business customers, who were served by Kinko’s via a direct sales force. Characteristics of Kinko’s 3 segments
The 3 segments have in common: The three segments valued convenient location, speed, price, quality and customer service. Competitors in the 3 segments are the same and consisted primarily of Mom and Pop stores and superstores except for FM sub-segment of commercial solutions segment where the competition was including Xerox Global Services, IKON…etc. Differences: Consumer segment Needs: Personal use including anything from printing posters for bake sales and lost bets, generating banners for birthday parties to photocopying tax returns. Purchasing criteria: customers spent less than $50 per visit and Average No. f visits 15 visits per year. Size: Industry wide market was estimated between “$3-$5” billion, declining by 2%. Decline factors technology substitutes and share loss to competition. Profitability: 2003 generated approximately $600 mil, equivalent to 30% of Kinko’s revenues declining by 6% yearly. Customers served by branch personnel in 1200 locations. Local Business Market Needs: Walk-in clients used Kinko’s as a second office in order to satisfy their copying, printing and other document needs. Purchasing criteria: customers visited Kinko’s over 45 visits per year.
Size: Industry wide market was estimated between “$5-$7” billion, declining by 4%. Decline factors technology substitutes and share loss to competition. Profitability: 2003 generated approximately $1 billion, equivalent to 50% of Kinko’s revenues declining by 5% yearly. Customers have no formal sales relationship depend on branch manager who establish contacts with local business. Commercial Solutions Segment Needs: Business customers, the set of customer needs fell into two distinct lines of business each having different products, competitors and financial characteristics: a.
Facility management business (FM): suppliers managed the firms’ duplicating and printing requirements directly on the customers’ premises. b. Non facility management business (Non-FM): consisting of large and small branch jobs and drop-in projects requested by smaller nearby smaller businesses and by large firms’ mobile professionals. Size: Market for FM was estimated to be between “$12-$15” billion and was growing between 1-3%. Commercial Non-FM industry was estimated to be between “$2-$5” billion. Profitability: 2003 generated over $350 million, equivalent to 20% of Kinko’s revenues was growing by 5% yearly.
Kinko’s revenues from FM were less than $30 million and from commercial Non-FM were over $300 million. This segment was served by a sales force of over 500 reps. Observation by Kinko’s market research firm Kinko’s offered its customers a wide range of services and products, and to provide these services and products, Kinko’s stores were divided into a variety of discrete areas. A staffed service desk and other self-service working areas which were stocked with the needed stationery and office supplies, self-service computers and photocopiers and areas for other machines… etc.
These self-service areas at the stores where crowded with customers with almost nobody helping them, while the retail areas were the least crowded with customers and Kinko’s sales associates habitually located themselves heavily around the staffed service counters. Customers were uncomfortable with the self-service areas and they found these areas complicated and they couldn’t figure out how to use Kinko’s selfservice machines without the help of the sales person so they have to wait for long time to get help. Obviously it was difficult to get help and direction when customers were uncertain to how to navigate through Kinko’s store.
Even though there was a plentiful signage at Kinko’s, it was poorly designed and did little to direct customers. Self-service areas were understaffed which led customers to spend long time searching for solutions for their problems. All these experiences made the customers unsatisfied, confused and frustrated of the service and treatment they encountered inside the store which was clearly confirmed by the market research, as despite that the customers rated their overall experience at Kinko’s store very high, “ease of process “ was the quality least positively regarded.
Moreover, the frustration existed among employees as well as they were unable to get their work done because of the frequent interruption by confused customers. The commercial customer segment was often extremely loyal to Kinko’s. Level of loyalty was uneven and highly dependent on account manager, service quality, and in some cases the price. When customers experienced excellent service they speak positively about their experience and continued business conversely poor service quality caused customers to defect to competition or to bring their printing operations in-house. Course of action for Kinko in 2008
For Kinko’s to be successful in 2008 the following should be considered: 1. Develop a new signage system which allows better utilization of resources. Management should consider re-designing Kinko’s stores to be more convenient and 2. comfortable to the customers. 3. They have to halt the “one size fits all” model, and start to differentiate treatment between customers according to their needs, as each segment has its own needs and requirements, and they have to start providing a tailored experience to its customers. 4. Take initiatives of cutting cost and reduce expenses to improve their margins. 5.
Increase the utilization of machines and decrease the fixed costs of machines, labor costs and improve productivity of employees by re-locating them to other more busy locations, and by introduction of training programs on customer service for their employees as needed. 6. Effective vendor negotiations and realize economies of scale especially with hardware vendors. 7. Introduce a consistent pricing strategy and reduce variation of prices between different branches to maintain credibility among their customers, and continually compare prices with competitors. Introduce a loyalty program to reward frequent customers. . New marketing and advertising plans, reduce prices for certain jobs, offer discounts to which will increase market share and provide opportunity for growth,introduction of new services and products. Choosen alternative for Kinko Kinko’s should choose the second option as they have to consider the type of people working with them. Kinko’s was not equipped to deal exclusively with the commercial solutions segment with the staff it had since Kinko’s branch managers were used to developing relationships with their own environment, same levels and cultures, not with a Fortune 100 companies.
Besides Kinko’s was not sure of how would FedEx interpret this move to reduce Kinko’s investment in retail footprint. Another important issue the culture of Kinko’s was based on it is a cool company and a business resource it has a culture of encouraging building relationships and exchange experience with its customers which built Kinko’s reputation as a culturecounter company. So to maintain its culture, values and identity and despite the facts that it customer segments are project to minimal growth or remain flat over the coming years, Kinko’s can expand and grow via new products and services in its branches and expand into new industries.
Kinko’s could re-invent its retail value proposition to realize share gains which would entail the following improvements and developments re-engineering the store experience from the top to bottom which will include re-design signage realignment of in-store personnel and self-service areas to be more user friendly and relocating self-service help desk so that employees can greet and direct customers upon arrival and help customers to do their work.
Kinko’s could also add value by introducing loyalty program and reward those frequent customers to encourage them to be loyal for them or by revamping its pricing policies which might help to increase its market share and provide an opportunity for growth. Re-invention for kinko Every product has to pass through a life-cycle of four stages, introduction, growth, maturity, and decline stages. The majority of products are in the maturity stage of their life cycles which makes the marketers’ job a night mare as they have to find out the correct ways by which their company can reinvent itself at this stage.
Marketers usually look for the reasons behind the decline of a superior product, and they found that when a significant market shift occurs allowing other alternative solutions to generate a value in new different manners than the firms product and the product lose appeal due to social, economic, or technological trend changes. Marketers assure that there are lots of ways for companies to re-invent themselves and these include: • Recommending a new product aspect that increases its appeal to an existing segment. • Give mature product a new position in the customer minds by carefully and correctly introducing changes in its attributes.
Reposition existing mature products to create new segments. • Making radical modifications and enhancements in the product, or migrate the product to another segment. • By re-inventing mature product the firm can confirm and improve loyalty of the existing customers and/or attract new customers and allow this product to reemerge with a new presence, a fascinating promise and a new approach. • • • Propel a new product segments based on customer needs. Expand a product segment based on technological development. Create a new segment by using changing technology.