Kinko's

To get an overview of the situation in which Kinko’s is operating a segmented look at the customers should be useful. The focus is the revenue potential, the customer expectations and how Kinko is serving these. Consumer Revenue pot.  600 mio. $ Revenue ~ 30% total revenues  Shrinking by about 6%  Technology substitutes at home office  Customer visits 15x per year  Share loss to competitors (better store locations, prices and customer approach) Customer exp.  Convenient locations  Quality  Low prices Capabilities to serve  Store locations -3,7% (1990-2000)  Customer service complains(26% of customers experienced confusion while in store/ 46% need assistance)  Competitors have lower prices Local Business Revenue pot.  Customers visits 45x per year  1 Billion ~50 % of total revenue  Declining by 5%  Technology substitutes at offices  Share loss 1-2% per year  Customer values (similar to consumer market) convenient locations, service, quality and price Customer exp.  Convenient locations  Quality and speed  Variety of products  Low prices Capabilities to serve Similar to consumer market  Locations not matching demand  Price to high in the eyes of clients  Quality not satisfying. Negative Customer experience while visiting shops  One size fits all approach is not working Commercial Revenue pot.  Served by direct sales force  $350 mio. Revenue ~ 20% of revenue  Growing by 5% per year Facilities Management business (outsourcing in-house operations) Non-Facilities Management business (drop-in jobs)  Growing market (1-3% per year)  Less than $30mio. Revenue (Market potential $12-$15 billion)  20 customers  30 locations  Sales force 500 reps (incl. Non FM)  Market size $2-$5 billion  $300mio revenue  Substitution is also relevant. But declining. Customer exp.  Cost/expense control  Competitive pricing  Quality  Speed  expertise  Speed  Price  Customer service Capabilities to serve  Various shortcomings relative to competitors  Requires significant investments  Save 35% vs. in house production  DocStore service (online)  Offer is competitive and feature-rich What are the main points which we see after this analysis' First of all we see that nearly 80% of Kinko’s revenues are generated from the consumer and local business customers. But these segments are shrinking markets. Decline in the consumer market is 6% and in local business 5%. There is no wondering why Kinko has also declining overall revenues by 3% from 2002 to 2003. Knowing that FedEx is about to buy Kinko these numbers has to be tackled in order to be an attractive buy and strengthen Kinko’s position in the negotiations as well as afterwards as part of the FedEx family. So the key question is on which customer segment Kinko should concentrate to generate revenue on the short run: Retail or commercial business' A deeper look at the capabilities (strengths), the gap between capabilities and customer expectations (weaknesses) and the revenue potentials (opportunities) should help. Total revenues of nearly $2 billion and 1200 sales locations in nine countries shape a good background for a large company. Furthermore the company beliefs to have a “competitive and feature-rich” product and service offering. But Kinko’s has not always the capabilities to fulfill the customer expectations. These have unique needs and requirements. The “one size fits all” approach is not working well. The “ease of process” was least positively regarded by the customers. This included a poorly designed signage, not well structured self-service an a poor staff allocation. Especially the services for the commercial customers provide poor service and are inefficiently run. Not wondering that Kinko’s is losing $25 million per year on that customer segment. Also Kinko’s has a smaller market presence an sales force compared with its direct competitors. Overall the service offerings in the commercial segment are not really favorable over those of the competitors. Mentioned these weaknesses there are some opportunities. Commercial solutions market is expected to grow by 10% per year. E-Business services and products should grow by 40%. The greatest threat I see is technology substitution especially by printers. This is already eroding the business in the consumer as well as in the local business market. Kinko’s also facing new completion from superstores (Copy Revenue +43% from 1995-2000). Talking all the details together: Should Kinko’s focus on their commercial business or radically overhaul their retail business' My recommendation would be to overhaul their retail business. It impacts more than 80% of its revenue. Surely the commercial segment shows a faster growth but Kinko’s position in this market is weak so that huge investments must be done. Furthermore FedEx will not see this as a step in the right direction. Detailed action recommendations will be part of answer 2, using the GAPS model. QUESTION 2 (15POINTS) What are Kinko’s current weaknesses in providing service quality through their retail outlets' Please use the GAPS model of service quality for your analysis and make suggestions where improvements seem particularly urgent to you. Using the GAPS model the analysis should focus on the four main gaps described in the model  Knowledge Gap o Company not knowing what customer exepts  Design Gap o Service design and standards  Performance Gap o Not delivering to service standards  Communication gap o Not matching performance to promises Starting a more insight view on the Knowledge gap. The knowlede gap is associated with a lack of market research orientation, insufficient relationship focus and a weak service recovery. For me all this can be found at Kinko’s. Lack of market research orientation Kinko’s knows that the “ease of process” is regarded as not satisfying by its customers. 26% experience confusion while in store. 52% of the self service customers require assistance while in store. Insufficient relationship focus Weak for commercial business – Managers are not used to this type of customers Weak for the consumer market Good with local business Weak service recovery Waiting Time for customers to get assistance Deficits in the service design and standards are described in the Design Gap. Weak performance when it comes to signage in the stores. Customer get lost and confused when in stores. Employees at the service desk have to handle orders and question of customers at the same time. A lose/lose situation. When the company is not able to deliver to service standards a performance gap exists Employees have no time for customers who need assistance in self service Insufficient employees in self service area Suggestions for improvement What should be Priority 1 is the re- engineer of the whole store experience. New and better Signage, separated areas for self service customers with easy to handle jobs and business customers with complex orders. To get more attractive especially for the normal consumer Kinko’s should invest in an up to date machinery park. Customers need a good reason to see kinko’s instead of doing the print job at home: Better quality, higher speed, sizes of prints or automatically binded prints. A Loyalty program should be installed as soon as possible. With that tool Konko’s will be able to get in touch with its customers and create a greater customer binding to the brand. Last but not least an investment in new products should be made. As Kusin already mentioned investing in retail supplies, digital photo services and partnerships with wireless internet providers will enhance the customer experience.