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Acknowledgements
Many thanks to Anthony Smith and the team at Delifrance for their support and assistance in preparing this service audit report.

Executi Summar ve y
Delifrance operates in a highly competitive environment and must meet and ex ceed customer value ex pectations if the business is to have a long-term future. To improve customer perceptions of value, both pre and post-purchase, Delifrance must focus on the five dimensions of service quality: reliability, responsiveness, assurance, empathy and tangibles. The Service Audit conducted by our team reveals that Delifrance needs to rectify a number of service shortcomings that directly influence customer perception of value and satisfaction. These areas identified include: reducing customer waiting and queuing times; of appropriate directional signage and cues for lack customers, including pricing information; of behind-counter process for coffee ordering and delivery lack to customers; and, the general cleanliness of the store.

Si tuati Analy s on si
Delifrance is located on Bourke Street in Melbourne, close to RMITs city campus and opposite the Target Shopping Centre. This French-style cafbakery is situated in a highly competitive environment, densely populated with numerous alternative providers. All of these businesses compete for the lunchtime crowd that is the main staple of the city cafbusiness. Subway, Delifrances main direct competitor is located nex door. This franchise business prides itself in t its healthy Eat Fresh image and has well-developed production processes, customer and service provider role scripts. Laurent Bakery has a very similar product offering to Delifrance and competes as an upmarket French cafbakery. The main direct and indirect competitors are outlined in Appendix1 . Customer ex pectations of service quality at all cafand fast food environments have increased significantly in the past decade, largely due to the emergence of franchise fast food businesses and their process driven service factories. Recently two social cultural trends have strongly influenced competitive actions in the fast food industry: i) ii) healthy eating; and Cof sp ii t n1. fe ohsc i e ta o

Food service businesses have had to modify their product offerings to respond to cultural trends. Concerns over rising rates of obesity have shifted customer preferences away from highly processed fast

foods and towards freshly prepared meals and j bars. Following the successful introduction of coffee uice super-chains, Starbucks, Gloria J eans and Hudsons to the Australian market, customer expectations of coffee and caf standards have risen considerably. For further detail of the SW OT Analysis see Appendix 2.

Customers
Target M arkets
Delifrance has three discrete customer segments that purchase in one of two modes. Customer segments i) ii) iii) Mod es i) ii) Take-away Dine-in University students Business people Shoppers and tourists

Figure 1 Segmentation v ariables

Benefits sought Univ ersity Convenience students Healthier alternative to fast food Comfortable venue to meet with friends Relatively inexpensive food and beverages Business people Quick satisfaction of hunger Sophisticated product offering Comfortable place to eat lunch Place to take time out Frequenc of y use Variable, up to several times a week. Demographic s Predominately Asian students aged 18 3 . Lives in inner 0 suburban Melbourne or the CBD. Studying commerce related field. Typically aged between 21- 5 . 0 W orks in the city, typically in a professional or quasi-professional role. Likely to be university educated. Lives in suburban Melbourne. Predominately female. Aged 18 6 . Lives in outer 0 suburbs or regional Victoria. Buying c onditions/situations Before and after class Group meetings Breakfast and lunch

Once a week or less.

Breakfast, morning tea, and lunch. Hunger and restricted tyime for meals

Shoppers & tourists

Comfortable place to sit down and rest Drink and a snack Relaxation

Less than once every three months.

Needs a rest stop.

Take-away customers expect a very fast and simple service experience. They predominantly seek functional benefits, good value for money, a quick transaction ( than five minutes) and quality food. less Convenience is of key importance.

Coffee sophistication describes the customers preference for ordering highly tailored hot drinks.

Dine-in customers value functional benefits, but also seek social and emotional benefits. Social value equates to choosing a venue that is socially acceptable to friends and colleagues. Emotional benefits relate to the customer feeling comfortable in the dining environment. See Figure 2 for a description of customer traffic by market segment.

Figure 2 Traffic by market segment

Day/Time 7 .00am 8 .00am 9 .00am 10.00am 11.00am 12.00pm 1.00pm 2.00pm 3 .00pm 4 .00pm 5 .00pm 6 .00pm Monday BP Uni, BP Uni Uni, BP, S&T Uni, S&T Uni, BP, S&T Uni, BP, S&T Uni, S&T Uni Uni, BP Uni, BP Uni Tuesday BP Uni, BP Uni Uni, BP, S&T Uni, S&T Uni, BP, S&T Uni, BP, S&T Uni, S&T Uni Uni, BP Uni, BP Uni W ednesday BP Uni, BP Uni Uni, BP, S&T Uni, S&T Uni, BP, S&T Uni, BP, S&T Uni, S&T Uni Uni, BP Uni, BP Uni Thursday BP Uni, BP Uni Uni, BP, S&T Uni, S&T Uni, BP, S&T Uni, BP, S&T Uni, S&T Uni Uni, BP Uni, BP Uni Friday BP Uni, BP Uni Uni, BP, S&T Uni, S&T Uni, BP, S&T Uni, BP, S&T Uni, S&T Uni Uni, BP Uni, BP Uni Saturday Uni, S&T Uni, S&T Uni, S&T Uni, S&T Uni, S&T Uni, S&T Uni, S&T Uni, S&T Uni, S&T Uni, S&T Uni, S&T Sunday S&T S&T S&T S&T S&T S&T S&T S&T S&T S&T S&T

Uni = UniversityS tudent

BP Business P e = eopl

S T= S & hoppers and Tourists

Service Product Strategy

Delifrances product/ service offering lies in the middle of the Good-Service Continuum (Shostack: 19 7 7) due to the moderately high tangibility and search qualities of its final product and service environment. Intangible elements of the service include the quality of the ingredients used, the recipe and preparation methods used. The customer can only learn of these elements after a Delifrance experience making them experience qualities. Service encounters are likely to be simple episodes.

Figure 3 Delifrance Positioning on the Good-Service Continuum

The G ood-Service C ontinuum

Salt Delifrance

I ntangible Dominant Tangible Dominant

Teaching

Modified from Shostack (as cited in McColl-Kennedy, 0 3 p.7 to reflect Delifranceposition on the Good-Service 20. ) s Continuum. The Delifrance experience is highly heterogeneous/divergent due to the role staff play in the service encounter. Delifrances product offering is tailored to the customer and is therefore relatively complex. The moderate complexity and divergence of the product have implications for the reliability of the Delifrance service experience. Inseparability is not a significant issue for Delifrance due to high tangibility of their offering (customers walk away with a product), however customers perceptions of the quality of the product will be closely linked to their satisfaction with the service encounter. All cakes and pastries are pre-made, however customers can order a custom made sandwich which will be prepared for them at time of order. Pre-made products help to increase efficiency in high demand periods. Pre-made bakery items may be kept for a maximum of one day. Custom made baguettes, sandwiches and beverages have a perishability element as they can only be made at the time of the customers order.

Figure 4 Delifrance Offering Core and Peripheral Elements

Delifrance Offering
P eripheral elements
Al fresco dining E ating on the run

Core elements
Fresh bakery produce

Somewhere to relax Office catering

Custom made products Convenience Coffee

Benefits offered to customers include: Quality freshly prepared food Value for money Comfortable, low cost dine-in location Convenience

Recommendation: Reduce complexity for a more standardised service process

Delifrance offers a range of made-to-order baguettes that compete directly with the Subway product. Delifrance prices the baguette lower than its competitors despite the ability to customise the product to the customers specifications. Laurent another competitor offers ready made baguettes priced much higher. The rapid turnover and repeating pattern of customer preferences in the main lunch peak period are excellent conditions to support the introduction of ready made baguettes in popular combinations as an extension of Delifrances fresh range. While some customers may choose to have an item custom made, the time saved by limiting divergence in meal ordering and preparation will optimise the opportunity for Delifrance to please more customers (Haskett, Jones, Loveman, Sasser, & Schlesinger, 1994 Further promotions by bundling products such as a Cold beverage and Ready-made baguette will ). further enhance the fresh and fast image Delifrance wishes to promote.

Buyer Behaviour
Delifrance uses servicescape cues, such as professional signage, look and feel of the caf and food presentation to increase the tangibility of its offering and reduces customer perceptions of risk. Perceived

risk is a function of uncertainty and consequence. The most significant risk factors for customers are temporal risk (will I get my coffee quickly? sensory risk (will my lunch taste good? and financial risk ), ) (will it be worth what I pay? Given the relatively small sums of money involved, financial risk should ). not be significant for the target markets involved. However, Delifrances failure to adequately communicate the price of its products to customers (see Critical Incident #1, Figure 10) has a negative effect on the customers ability to assess financial risk. Temporal risk is the biggest challenge for Delifrance based on observations and experiences outlined in the Critical Incident study (Figure 10). Business people are likely to be most sensitive to temporal risk, while it forms a baseline concern for all customer segments. At present there are no strategies in place to assist customers assessment of temporal risk. Improved queuing practices, especially around the coffee service area will help to manage customer expectations around wait times.

Positioning Strategy
Owner Perspective s
An interview with the owner revealed that his objective was to position the business as a competitively priced French style caf bakery, less expensive than direct competitor Laurent, and higher in quality than its neighbour Subway. A description of Delifrances relative positioning is illustrated in Figure 5.

Figure 5 Owner Perspective of Delifrance position relative to competitors s

Owners Perspective Position in Market

7 6
Delifrance Starbucks Gloria Jeans Laurent

Quality

Subway

3 3 2 1

Price Consumers Perspective

A sample of 10 customers were interviewed in-store on September 21. The purpose of the interview was to gain a customers view of Delifrance on a number of key criteria relative to its major competitors. The interview questions and results are contained in Appendix 3.

Figure 6 shows the overall customer assessment of Delifrances competitive position.

Figure 6 Overview of Customers Perspective of Competitive Positioning

Delifrance Quality of the food and service offered Price you paid Speed of the service delivery Convenience of store location, trading hours, and interior Overall Service Quality score 5.2 4.1 4.6 6 5.0 Starbucks 6 6.4 5.5 6.5 6.1 Gloria J eans 5.7 5.8 5.3 4.4 5.3 Laurent 6.3 6.5 5 6.2 6 Subway 4.9 5.8 6.4 3.6 5.2 Average 5.6 5.7 5.4 5.3 5.3

While customers rated Delifrances food service and quality within the midrange for food and service quality, Delifrance scored lower for price. We can infer that Delifrance customers perceived greater value than from direct competitors for a similar quality position. Figure 7 shows Customers Perception of Delifrances market position.

Figure 7 Customers Perspective of Delifrance position relative to competitors

Customers Perspective Position in Market

7 6 5
Starbucks Laurent Gloria Jeans Subway

Quality

Delifrance

3 3 2 1

Price
The strength of Delifrances convenient location was reflected in customer feedback; however, in terms of speed of service (responsiveness) Delifrance performed the lowest amongst its direct competitors. Given Delifrance competes in a fast-food/convenience market, this is concerning. Customer feedback indicates that the current Delifrance positioning favours the needs of dine-in customers over the take away segment. Overall, Delifrance was rated lowest for service quality, well below the managements positioning objective.

Figure 8 Customer Perspective -Speed of Delivery vs. Convenience

Speed of Delivery vs. Convenience

7 6
Starbucks Laurent Delifrance

Speed of delivery

5
Gloria Jeans

3 3 2 1

6 Subway 7

Convenience

Service Blueprint
Delifrance employees play a key role in service production and delivery. While tasks and responsibilities are clearly allocated between employees for each shift, each member is trained across the production and service delivery areas to enable a rotation of duties between team members to respond to the varying periods of demand. The Manager or Team Leader monitors the flow of customers and may alter the allocation of duties during a shift. Delifrance front-line staff are responsible for the direct provision of service to customers. They perform meal and beverage preparation to satisfy customer requests, manage the payment processes and maintain a tidy environment for the dine-in customers. Additionally, a team provides backstage support services: the ordering and receiving supplies; the preparation of baked goods and sandwich fillings to ensure fresh quality ingredients are available for the complete business day; clearing waste from the space-constrained kitchen; and washing and replenishing dishes and cutlery. The cleaning of the dining and kitchen areas is outsourced to a cleaning service to minimise stress on the Delifrance team and is conducted outside trading hours. The level of customer participation follows a pooled service design (Larsson and Bowen, as cited in McColl-Kennedy, 2003). Delifrance employees perform the service production. The customer is engaged in part of the service delivery by following a standardised script. The scripts allow for the customer to communicate their choice of food, and filling as required, and their beverage choice to the Delifrance staff. The same Delifrance employee who initiates the first customer contact of taking a food order follows the customer through the service process through to the payment and beverage collection

processes. Depending on the customers ability to follow this script, staff may also follow a sequential standardised service design, whereby the customers navigate themselves to the next area of service once their meal is prepared. These steps are identified in Figure 9 Service Blueprint. A separate employee is responsible for the hot beverage preparation. Our service blueprint indicates that his area is highly divergent. The conveying of the customers order from the order taker to the coffee maker can be complex. Depending on the location of the order maker in the service area, variables can be misheard, orders can be duplicated and delivery of hot beverages are often out of sequence from the placement of orders. Customers often dont know if the drink ready for collection is theirs due to the poor ordering and delivery system. This was an area where bottlenecks were observed in periods of low, moderate and high demand and where most critical incidents occurred. The service blueprint identifies three areas where customers wait tolerance time was routinely exceeded. These areas are: Time to collect hot beverages Time to clear rubbish and dishes from tables Time to wipe/clean tables Each of these issues identified requires immediate improvement in order to enhance customer satisfaction and customer perceptions of service quality.

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Figure 9 Service Blueprint

Customer ex its

Customer enters Take away

Av. 1.5 min Tol. 3 min. Av. 0.25 min Tol. 1 min.

Seated in DineIn Area

Customer browses food and signs

Av. 0.5 min Tol. 3 min.

Food Order taken

Meal is prepared

Meal is collected

Pay for order

N Order a Hot Beverage with meal? Y

Av. 0.5 min Tol. 1 min.

Bread & Pastries baked

Self service for cutlery, napkins and sugar. Dishes and rubbish cleared from tables

Hot Beverage Order taken Line of visibility

Av. 1 min Tol. 2 min.

Hot Beverage prepared

Hot Beverage collected

Av. 15 min Tol. 10 min.

Tables wiped

Ordering and buying of supplies

Baguette fillings prepared

Dishes washed Legend

Y = Yes Kitchen Staff Customer N = No Service Staff Divergence Av. Average time taken Tol. Minimum tolerable time for customer

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Critical I ncidents and Problems I dentified

Figure 10 - Critical I ncidents Observed
Customers Description Critical Incident #1 A baguette with egg salad and ham, and a hot chocolate, last week was $ 8.90, this week as $ 9.90. And apparently prices havent changed in three years! Customers response The staff are great, very helpful. But it is so damn confusing how they work out the price. There are no prices written anywhere. I always have to make sure that I have more than enough money in my purse. Delifrance employee response Prices are determined by the fillings in the baguettes, and what size baguette they choose. We have it pre-programmed into the cash register. Managers response We have a price list. We have prices marked for our baked goods. We do not use the boards. Most customers have a fair idea of what they want to order. Effect on business Customers become confused and frustrated. Likely to cause uncertainty and may not return, especially for those who are price conscious) The increased perceived risk may lead to negative disconfirmation. Customers may seek alternatives as a result. Customer may or may not return. Incident likely to damage True Loyalty.

Critical Incident #2 I had ordered a Latte to go, had been waiting for the girl to make it. She called out, Latte! and someone else took it (who ordered after me). I had to wait another couple of minutes for another one to be made. Critical Incident #3 But it is difficult to find a clean table even when the shop isnt full. They are very slow in clearing away plates and rubbish after people go. In the end I shifted some cups to another table. The cups were still there when I left about 20 minutes later.

The coffee they make is nice. I like that I can sit down to wait for my order. They need to get some sort of system, as this one is very unfair.

Someone else takes the order. I am unaware who each order is for. My responsibility to ensure the right thing is made and it is hot. The person who takes the order should follow through with their customer. We are very busy all the time. Usually we take it in turns to clear the tables but if we get a flow of people wanting to order meals and drinks, it is almost impossible to get out of the Food Area.

We rely on our customers to b fair and honest w e ith other customers, it is difficult to enforce this.

I like Delifrance because I can sit down and eat by myself It is a shame that they dont keep it nice inside. The staff are great, but you hardly see anyone come up to the tables to clear them.

I have a good team of staff. I trust them and in general, I am happy w the w ith ay they manage themselves. We dont really get any customer complaints.

Increased stress on employees from unhappy customers. Customers perceived the caf to be poorly managed. Negative impact on ambience. Damage the imagecustomers may view it as employees not responding to the needs of service i.e. keeping area nice, clean and presentable

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Discussion of Critical Incidents

Critical Incident #1 - Pricing Critical incident #1 indicates that Delifrance needs to take action to rectify to two key dimensions of service quality: reliability and tangibles. Reliability in this context refers to the ability to produce the agreed services at the agreed or implicit price. Tangibles refer to the physical cues and to the communication materials and information available to customers. The critical incident indicates that Delifrance is not adequately communicating price information to its customers. A search for price related evidence at the site showed prices are only listed on the tag associated with the product and are often too small to read, missing or faded. There is no price information available for sandwich or baguette fillings. The failure to adequately communicate price information to customers will impact customer satisfaction and purchasing propensity as prices are often used as a heuristic for quality. Failure to communicate a product price to a consumer before purchase may lead to: Customers being unable to adequately assess Delifrances product offering in the pre-purchase phase due to lack of price information. Customers being unable to assess risk factors associated with a future purchase due to inadequate information about financial risk. When perceived risk is associated with uncertainty, customers will opt for an easier alternative (Sheth & Parvatiyar, 1995, p258). Increased social risk, as some customers may be concerned about potentially embarrassing themselves if they have insufficient money to complete their purchase. Customer perceptions of unreliability of service as prices change without notification. Lowering of customers perceptions of control over the service exchange Heightened customer mood states due to uncertainty and uncertainty avoidance behaviours (resulting in lost sales). Reduced intention to repurchase. Making price information readily available to customers in an easy form is a simple way of minimising customers perceptions of risk and increasing the probability that the customer will make repeat purchases. Application of the managers response to the critical incident and the service quality model indicates that there is a significant difference between customer expectations and management perceptions of customer expectations (Gap 1). This management perception gap is likely to be attributed to the lack of upward communication from boundary spanners. Critical Incident #2 Service Delivery Failure Critical incident #2 illustrates that the process for taking coffee orders and delivering the coffee product to customers needs to be revised. The current process shortcoming is likely to lead to customer dissatisfaction due to: Perceived unfairness of process and customer need for equity

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Customers assessment of time risk Role and script confusion Customer frustration with process and uncertainty of outcome (Will I get my coffee in time?) Heightened customer mood states due to uncertainty and uncertainty avoidance behaviours. Negative disconfirmation of service quality and reduced intention to repurchase. This service delivery gap (Gap 3) is largely due to poor process, role ambiguity for both customer and employee and inappropriate supervisory control systems. Many other caf environments have systems capable of managing multiple coffee orders and customers. Starbucks for example writes the customers name and order on a take- away cup or on a sticky order note for dine-in. When the order has been filled in the customers name is announced. Obtaining the customers name also creates an opportunity for the service provider to develop rapport with he customer, creating greater social value for the customer and employee. Critical Incident #3 Lack of servicescape maintenance Critical incident #3 (Figure 10) is an example of a service delivery gap (Gap 3). Employees did not clear tables at the rate required by customers and management, resulting in a failure to meet the prescribed service standard. These types of problems are most likely to occur during peak hours, as demand can exceed optimal supply levels. Staff are pushed to the limit to meet excess demand, failing to complete some duties. However, these problems were observed in periods of low, moderate and high demand. The Service Delivery Gap is not due to a shortage of service workers available to meet the demand in peak periods; it is due to poor task allocation. The main problem identified is role ambiguity, when each employee has insufficient specification of tasks to perform in their role. While multitasking creates flexibility and varied job roles occur to minimise employee boredom, it may not be the most efficient strategy when levels of demand exceed supply. Lack of direction and monitoring from management increases role ambiguity and uncertainty for employee performance expectations.

Recommendations and areas for further development to improve service quality

Encouraging teamwork within the organization. Training for contact personnel in customer service Greater communication to staff of minimum service standards and performance expectations by management Allocation of tasks for peak periods, and a separate allocation for non-peak periods Improve directional signage to lead customer scripts Improve communication of critical information, such as pricing through the use of price boards or lists.

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The Role of Physical Evidence

Delifrances servicescape is important as it helps to mould the organisations image, which in turn influences customer expectations, perceived value and satisfaction. The servicescape is also a facilitator in the service factory, allowing and supporting the creation of products to customers specifications. The role of the Delifrance servicescape is to: entice customers (students, business people, shoppers and tourists) into the store indicate, through sensory cues a level of level of quality and develop customer expectations about the product offering and services available inform customers of the role and script they should follow inform customers of the product offering and services available deliver customers to service counter transition customer through the service factory, from order taking to payment and service delivery provide a comfortable place for people to enjoy their food and beverages.

External Elements
There are two important external physical elements of the servicescape: 1. Location 2. External look of the shop. The convenient location of the shop and professional signage ensures that it is easily accessible and identified in middle of the business and shopping areas. The shop is recognisable as a caf as the arrangement of tables can be seen from outside of the shop. The business logo outside the shop also shows type of the business. The external signage on the shop looks very professional and is likely to help draw customers into the cafe. Likewise, it is likely to influence new employees initial perceptions of the work environment.

Internal Elements
There are five important internal physical elements of the servicescape: 1. Service counter 2. Queuing area 3. Sitting area 4. Music and ambience 5. Interior, signage, symbols, and decorative objects

Figure 11 shows the layout of the store. There are 5 main areas that have impact to the service. For a full description and photos of each area see Appendix 4.

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Figure 11 Store Plan

3 6 1

Legend
Zone
1 2 3 4 5

Description
Pastry display Baguette/Sandwich orders and payment Payment area and Coffee collection Baking area Ground floor dining stools Ground floor dining tables and chairs Upper floor dining and lounge Undercover Outdoor dining tables and chairs

Fridge

4
7 8

2 5

Customers generally respond favourably to the physical evidence in the store, however, we have previously mentioned that the failure to provide pricing information on key products has discouraged some customers, leading them to exit the store without making a purchase.

Customers tend to choose a seating area that corresponds with their needs. There are four seating areas (see Figure 11). Customers on the upper floor and outdoor areas normally stay for more than 30 minutes for reading, studying and chatting. There are two couches on the second floor that help to convey to customers that it is appropriate to stay in this area for longer periods of time. Customers in the area close to the service counter tend to stay for shorter periods of time, around 15 minutes.

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The smell of baking bread and pastries is appealing to most customers. To improve customer perceptions of service quality pre and post-purchase Delifrance could: provide easy to read pricing information refresh the store with fresh paint replace chipped tables and improve seat comfort dedicate a larger area to lounge style activities move the coffee production area away from the stairs reduce the noise level during peak periods by turning down or choosing more appropriate music and ensuring the dishwasher does not run during these times ensure that tables are cleared and wiped every 15 minutes introduce more French themed decoration on walls By introducing additional tangible cues, customers can be taught to assist further to improve efficiencies and the experience for others (Laroche, Bergeron, & Goutaland, 2003; Bitner, 1992). By increasing customer involvement in service delivery, they will perceive more control over the outcome (Taylor, 1994), and increased customer participation will further reduce pressure for service staff to clear areas difficult to access from the food counter. These changes are also likely to affect employees perceptions of Delifrance. The slightly pre-loved look of the current store, along with inadequate management supervision is most probably partially responsible for employees failure to adequately clear and wipe tables. The physical set up of the store means that people behind the service counter cannot see up to the second level of seating. To improve the cleanliness of this area Delifrance could: reconfigure the service counter to allow a line of sight up stairs reallocate tasks so that someone is always clearing and cleaning tables provide a rubbish bin provide a dish trolley for dirty service equipment. If Delifrance were to implement these changes, the physical evidence could be used as a means of competitive advantage in the caf industry. Having a distinctive look and feel, while meeting the target markets needs will help to make the service encounter more memorable, and is likely to cause customers to rate the service experience more highly, leading to higher customer retention. While these elements create an advantage it is unlikely that they will create a long-term competitive advantage, as the environment is easy to imitate and replicate.

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Current Pricing Strategies

Delifrances current pricing strategy is to position the business as a medium priced caf, supporting their product offering of French style bakery products. Delifrances prices are similar or below most competitors in the area. They are somewhat cheaper than Laurent, their nearest direct rival in terms of product offering. Delifrance uses a fixed pricing strategy that reflects expected costs. Delifrance do not differentiate through price. Given the market strength of key competitors, including many franchiseoperated business, this is a good strategy. The customer interviews revealed that Delifrance scored lower for price paid (or higher perceived financial value), relative to its competitors. This may indicate that customers are interpreting positive quality cues from the mid-range pricing. Delifrance managements decision to alter the pricing structure in the past three years has further enhanced customer perceptions of value.

Current Promotional Strategies

Current promotional strategies include: a breakfast deal communicated to customers by placing a sign on the counter in the morning coffee club program buy 5 get 1 free. In the past Delifrance have used limited press advertising in CBD based publications. Given that the majority of Delifrances customers are based around foot traffic they work, study or shop close to the store, advertising is not likely to increase the number of customers in store each day. Beyond their current sales promotions, improving the physical evidence within the store is likely to generate greater returns than additional promotional campaign.

Managing Supply and Demand

Recommendation: Implement a peak operating procedure when demand is high
Adjusting levels of supply in labour is a strategy already utilised by Delifrance through the rostering from a pool of casual staff. We have identified the inefficiencies through the Service Blueprint. While staff are trained to manage a range of service tasks, ideally it would be more efficient for them to specialise in one job role when demand is very high (Lawley & Dagger, 2004). A person allocated to bus and maintain the cleanliness in seated areas will optimise the comfort levels for dine-in customers. A staff member should be delegated to be solely responsible for hot beverage preparation. A separate staff member would manage cash register duties, while other team members manage orders and food preparation. By limiting the degree of divergence in various stages of service, faster and more consistent service quality will result (Shostack, 1987). Staff will have clearer expectations on their performance and experience greater satisfaction from improved productivity (Mahn, Jai & Tae, 2004; Zeithamel, Berry, & Parasuraman, 1998). While most customers will wait longer periods when they perceive the eventual product received is of high quality, and during busy periods given resource limitations (Bateson, 2002; Davis & Vollmann, 1990), the

18

relationship between waiting time and customer satisfaction are often influenced by many other situational factors- reiterating the importance of consistent levels of customer service.

Customer Quality and Satisfaction

Currently Delifrance has very little in place to manage customer quality, satisfaction and retention. It is not a management focus. Customer complaints are escalated to the manager who deals with the complaint as he sees fit. Recommendations have been made throughout this report that will improve customer satisfaction and service quality. Given the size of this business more detailed measures of quality and satisfaction are not likely to be adopted. The coffee club offer referred to in promotional strategies section is a loyalty program of sorts. This program of offering one free coffee after five coffee purchases should encourage local regular customers to continue coming to Delifrance for coffee. It is likely that these customers purchase more than just a coffee and that revenue from each customer involved in the loyalty program will increase.

I nternal Marketing
Customer Orientation The current organisational culture does not support a customer orientation (see evidence in the critical incident reports, Figure 10), as it is not a goal of the manager and owner. Until these key stakeholders believe it is critical to the businesses success it is not likely to become a part of the culture. Employee reward program There is no employee reward program offered by the company. Effective/productive workers are indirectly rewarded with more shifts. There is no link between customer satisfaction or loyalty and employee rewards at Delifrance.

Conclusion
In a highly competitive environment, the business must adopt a service marketing orientation to further enhance its competitive position for sustainability. This service audit highlighted the importance of implementing a peak operating procedure in high demand periods, reducing complexity of product offerings to improve quality deviations and increasing tangible cues to ensure greater customer participation in and satisfaction with the service encounter. Our recommendations are based on the improvement of service processes and service quality for customers and Delifrance employees within the standards currently set by management.

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References
Bateson, J. (2002). Consumer Performance and Quality in Services. Managing Service Quality 12(4), 206-209. Retrieved October 20, 2004, from ABI/INFORM , Global Database. Bitner, M.J. (1992). Servicescapes: The Impact of Physical Surroundings on Customers and Employees. Journal of Marketing, 56(2), 57-71. Davis, M.M., Vollmann, T.E. (1990). A Framework for Relating Waiting Time and Customer Satisfaction in a Service Operation. The Journal of Services Marketing, 4(1), 61-69. Dibb, S., Stem, P., & Wensley, R. (2002). Marketing knowledge and the value of segmentation. Marketing I ntelligence and Planning, 20(2), 212-219. Heskett, J.L., Jones, T.O., Loveman, G.W., Sasser, W.E., & Schlesinger, L.A. (1994). Putting the Service-Profit Chain to Work. Harvard Business Review, 2, 164-174. Laroche, M, Bergeron, J, Goutaland, C. (2002). How intangibility affects perceived risk: The moderating role of knowledge and involvement. The Journal of Services Marketing, 17(2), 122. Retrieved October 20, 2004, from ABI/INFORM Global Database. Mahn, H.Y., Jai, H,S., & Tae, S.Y. (2004) Effects of contact employee supports on critical employee responses and customer service evaluation. The Journal of Services Marketing, 18(4), 395-412. Retrieved October 20, 2004, from ABI/INFORM Global Database. Sheth, J., & Parvatiyar, A. (1995). Relationship marketing in Consumer Markets: Antecendents and Consequences. Journal of Academyof Marketing Science, 23(4), 255-271. Shostack, G.L. (1987). Service Positioning Through Structural Change. Journal of Marketing, 51(1), 34-43. Taylor, S. (1994). Waiting for service: The relationship between delays and evaluations. Journal of Marketing, 58(2), 56. Retrieved October 20, 2004, from ABI/INFORM Global Database. Zeithamel, V.A., Berry, L.L., & Parasuraman, A. (1988). Communication and Control Processes in the Delivery of Service Quality. Journal of Marketing, 52(2), 35-48.

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Appendix 1

Competitor Analysis
Competitor Subway Location Bourke Street, 10 metres. Offering Eat fresh. Healthy American style sub sandwiches. Service Experience Customer/service provider role and script well developed. Directional signage informative and leads customers. Looks clean and professional. Freshly baked bread smells great. Highly standardised processes and customer experience across a number of stores. Due to advertising and personal experience, customers are likely to have a favourable view of service quality at Subway. Competitor Status Direct

O Sushi Caf Tono

McDonalds

Russell Street, 150 metres Cnr Bourke and Russell Street, 130 metres Bourke Street, 100 metres

KFC

Bourke Street, 80 metres

Sushi and drinks. Convenience packaging. Licenced Caf, small business owner operated. Cooked meals. American style hamburgers, fries, drinks and desserts. Targeted at children and teenagers as convenience food. Offers meal packs. Southern style chicken and side orders. Convenience. Offers very large meal packs European style caf offering hot and cold food. Street caf seating only. Small business, owner operated. French baguettes, cakes and caf style food.

Indirect Indirect

Customer/service provider role and script well developed. Directional signage informative and leads customers. Store generally clean. Store located in undesirable part of Bourke Street due to drug, crime and alcohol problems associated with public bar and game parlours located nearby. Customer/service provider role and script well developed. Directional signage informative and leads customers. Store generally clean. Store located in undesirable part of Bourke Street due to drug, crime and alcohol problems associated with public bar and game parlours located nearby.

Indirect

Indirect

Sweet Mamas Caf

Bourke Street, 50 metres

Direct

Laurent Bakery

Little Collins Street, 200 metres

Directional signage and queuing behaviours well established in-store. Service quality expectations high due to the cues from internal and external symbols such as logo, store fit out, French waiting staff etc. Premium priced.

Direct

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Appendix 2

SWOT Analysis - Delifrance

Strengths Product offering is a gourmet, offering a level of sophistication that is not matched by competitors. Product offering is broad, something for everyone. Store location is prominent and assists in drawing in foot traffic. Store location is convenient to large population of highly mobile students who study at RMIT. External signage is highly professional and develops customer expectations of a high quality service encounter. Significant floor space in store allows customers to relax and take their time. Highly tangible. High in search qualities the customer can see what they are purchasing before they purchase it. Weaknesses Lacking focus on the additional Ps of service marketing people, process and physical evidence. Service encounter not ideal. Lack of cues and directional signage for customers in store. Role and script not clearly defined. Behind counter processes do not seem to be operationally efficient. Long delays in service (10 minutes for a Coffee on a Sunday morning) led to customers directly influencing other customers service perceptions (loud complaints). Highly heterogeneous. Experience significant changes in demand dependant on time of day perishability. In-store appearance does not match professional image of external signage. Untidy appearance behind counter may lead to a negative customer perception of the service. Unlikely to entice unexperienced customers. Heavily reliant on student custom 6 months of the year. Threats Subway significantly increases the sophistication or gourmet nature of its product. RMIT moves location of business school. New entrants with similar gourmet market offering.

Opportunities Improve people, process and physical evidence to support unique product offering and core strengths.

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Appendix 3 Positioning Interview Questions & Results How do you find the quality of the food and service offered? 1= poor, 3= fair, 5=good, 7= exceptional What did you think in terms of the price you paid, and the relative value for cost? 1= cheap, 7= expensive In your opinion, how did you find the speed of the service delivery? 1= too slow, waited long time; 3= had to wait some time, 5= reasonable speed, waiting time; 7=fast service, very little waiting In terms of convenience, how do you find the store location and hours of trade, do you feel the interior of the shop is comfortable? 1=inconvenient, uncomfortable; 7= very convenient Interview results Delifrance Quality of the food and service offered Price you paid Speed of the service delivery Convenience in term of store location, opening time, and interior Starbuck Quality of the food and service offered Price you paid Speed of the service delivery Convenience in term of store location, opening time, and interior Gloria Jeans Quality of the food and service offered Price you paid Speed of the service delivery Convenience in term of store location, opening time, and interior 1 0 0 0 0 2 0 0 1 0 3 0 3 1 0 4 1 5 2 0 5 6 1 3 2 6 3 0 3 6 7 0 1 0 2 Avg. 5.2 4.1 4.6 6

1 0 0 0 0

2 0 0 1 0

3 0 0 0 0

4 0 0 2 0

5 1 0 2 0

6 8 6 3 0

7 1 4 2 10

Avg. 6 6.4 5.5 6.5

1 0 0 0 0

2 0 0 0 0

3 0 0 0 1

4 0 0 0 2

5 3 3 7 6

6 5 6 3 1

7 1 1 0 0

Avg. 5.7 5.8 5.3 4.4

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Laurent Quality of the food and service offered Price you paid Speed of the service delivery Convenience in term of store location, opening time, and interior Subway Quality of the food and service offered Price you paid Speed of the service delivery Convenience in term of store location, opening time, and interior

1 0 0 0 0

2 0 0 0 0

3 0 0 0 0

4 1 0 1 1

5 0 1 8 0

6 4 3 1 5

7 5 6 0 4

Avg. 6.3 6.5 5 6.2

1 0 0 0 1

2 0 0 0 0

3 2 0 0 4

4 2 0 0 2

5 1 2 1 3

6 5 8 4 0

7 0 0 5 0

Avg. 4.9 5.8 6.4 3.6

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Appendix 4 The Role of Physical Evidence Physical Layout The following diagram shows the layout of the store. There are 5 main areas that have impact to the service.

3 6 1

Fridge

2 5

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Area 1

Description This is the area where all the pastries are displayed. This is also the area where the service transactions occur. When customers enter the store, they will see the display counter immediately and they can order their food and pay from here. For example, if they want to get a croissant, the waiter/waitress will serve them from behind the counter.

This is the area where customers can order baguettes/sandwiches. The fillings are arranged so that they look fresh and tempting. Customers can pay service staff here.

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Area 3

Description This is the area where customers normally pay for their food and coffee. Customers also wait to collect their coffee from here. However, customers can also pay the waiter/waitress from area 1 & 2. Usually, there is a long queue in this area during peak hours as people are waiting to collect their coffee.

Customers can see the kitchen area behind the glass window. They are also able to see the bakers making bread and pastries.

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Area 5

Description This is the area where customers normally spend 15-30 minutes for eating. There is one long table facing the window and 7 stools.

This is the area where customers normally spend 15-30 minutes for eating. There are 2-3 chairs per table and 10 tables in this area. Customers who sit in this area during peak hours may not feel comfortable as this area becomes crowded with people waiting for food orders and coffees.

This is the area where customers normally spend 45-60 minutes eating; studying and socialising There are 2 couches where customers relax while consuming the food. There are also 15 tables with 2-4 chairs each.

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Area 8

Description This is the outdoor area where customers tend to spend more than 45 minutes.

Interior and atmosphere inside the store Component Ambient Music Temperature Description Mixed pop songs are played as the background music. It does not reinforce an image of a French caf. The temperature inside the store is set at a room temperature (21 degrees) during winter. However, it can be significantly warmer during the summer as there is no air conditioning. There is no heater for the outdoor area, and in winter it can be too cold for customers to eat outside. The fragrance of coffee and freshly baked bread can be smelled in the store. Looks old and tired. It does not look like a modern caf. There are couple pop-art photos on the wall. Other than those, there is nothing else that reinforces an image of a French caf. Delifrance logo consists of three main colours: red, blue, and white to symbolise the colour of France. The slogan is The authentic French bakery. Tables are pretty small and chairs are made from rattan. Some tables have dents on the edges. The table arrangement is shown in the physical layout diagram. Due to a limited line of sight between the lower and upper areas employees may not be able to visually check the upper area often from the lower floor. The food contained in the counter is not clearly labelled. Customers sometime may find it difficult to identify the name of the food.

Odour and air quality Signs, Symbols, and Artefacts Colour and painting Photos

Logo and slogan

Space/Function Tables and chairs Layout

Display counter

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Self-serve fridge Displays on the wall behind the counter

There is a self-serve fridge where the customers can choose cold bottle drinks and pay at the counter. There is a menu on the wall, but it does not show prices for specific items. Bread sticks are displayed on a shelf on the wall.

Kitchen

Customers can see the kitchen. Thus its cleanliness is of high importance to maintain an image of hygiene to customers. Customers are able to see the bakers making and baking the bread and other items.

Responses to the servicescape Cognition Employees Customers As most of the furniture has aged employees perceptions of the level and quality of service to be provided to customers may be affected. As the French theme is not carried throughout the store consistently there is only minor differentiation between Delifrance and other competitor cafes in the area.

Emotion Employees As most of the food presentation is transparent, employees may feel obliged to maintain the level of cleanliness and provide a hygienic service to the customers. Customers hygiene risk is reduced as: most of the food are displayed at the counter and customers can see clearly what they will get from the counter the kitchen can be seen by the customers and the cleanliness of the kitchen is maintained There are a lot of windows thus the customers may find it the store is spacious. This may create a pleasant feeling for customers. During peak hours, there are long queues of

Customers

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customers waiting for their coffee. The script here is that the waiter/waitress will yell out once the coffee is ready, e.g. latte or cappuccino. Thus a customer may become confused, uncertain or angry when multiple customers order the same thing. Physiology Customers A pleasant aroma from the bakery and coffee may attract more customers to come in to the store. Tables are quite small for more than 2 or 3 persons and the chairs are not very comfortable. The setting is consistent with fast food restaurants. Thus customers may find it not comfortable to stay for extended periods of time. Customers may also find the temperature in store too warm during summer, as there is no air conditioning.

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