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Case Analysis: Pizza Hut - A Customer Loyalty Program List of Facts In 1958 the Carney brothers opened their first Pizza Hut restaurant. The company was so successful that by 1977 it had more than 3, 200 restaurants. Further it was acquired by PepsiCo. The quantity of restaurants increased to 12, 300 and Pizza hut became the worlds largest pizza restaurant chain. In 1986 Pizza Hut implemented the delivery service in order to improve customer service initiatives. Simultaneously, the company consistently searched for new ideas, products and services that could improve the companys performance.
By 1996 Pizza Huts sales exceeded $ 7. 4 billion. However, despite of a record sales figure the company still experienced problems with customer loyalty level. In 1995 Pizza Hut started implementing customer satisfaction / loyalty programs. In order to force store managers placing high emphasis on loyalty programs, they were qualified for bonuses (Seidman, 371).
The bonuses were ranged from 0 to $ 4000 per store manager a quarter (Seidman, 371). The store manager had to obtain a minimum of 60 % of bonuses in order to run for a quarterly bonus. Those who qualified for a bonus were provided with a flat dollar rate for each loyalty percentage they received (Seidman, 372). The objective of the program was to improve guest satisfaction and unit-level execution. Additionally, the customer loyalty initiative consisted of two other components: a customer service toll-free number and a customer satisfaction / loyalty survey.
A customer service toll-free number. The number was visibly posted inside individual pizza boxes. Additionally, the toll-free number was placed inside each restaurant unit. The customers had an opportunity to call and to share their opinions, ideas, questions, and / or complaints concerning Pizza Huts services and products. This initiative was quite successful. Firstly, the hotline was operated by n outside marketing agency.
In such a way, the managers didnt spend much time on answering the complaints and were able to dedicate more time to restaurant operations. Besides, one of the positive aspects of the toll-free hotline was the fact that many customers didnt like to complaint face-to-face to the managers. Those customers who normally didnt like to complaint were provided with an opportunity to share the opinion concerning quality of services and products. According to the results of the initiative, Pizza Hut managers founded out that approximately one half of the customers, who are not satisfied with the product, do not complaint.
Moreover, nine out of ten will not continue buying and will probably start buying from a competitor. Finally, in cases when the customer decided to complain, one out of two is not satisfied with the companys attempts to solve the conflict. A customer satisfaction / loyalty survey This part of the program was also important, as far as identifying loyal customers became a necessity for many service businesses (Seidman, 369). It is a common knowledge that a satisfied customer is more likely to continue using products and services.
There is also a probability that he will bring other customers along (Seidman, 369). In such a way, customer loyalty survey was a perfect instrument for Pizza Hut to reveal approximate quantity of loyal customers. Loyalty surveys were conducted in the delivery and in the dine-in restaurants. The customers were asked questions concerning their last purchase, level of satisfaction, etc.
Dine in restaurants also proposed the customers to call a special toll-free number to take part in a loyalty survey. The customers participation was rewarded by a free order or a free soft drink. The only difference was that dine in restaurants asked the customers calling the toll-free number, whereas the delivery customers were engaged by the survey companys calls. Fact Analysis Lets analyze the case study. The main stakeholders here are Pizza Hut the company, and the customers. Pizza Hut implemented the customer loyalty incentive in order to improve the level of customer loyalty.
The customer loyalty incentive seems to provide Pizza Hut with many positive inroads. According to Phil Crimmins, vice president of customer satisfaction and founder of the loyalty program, the customer loyalty program contributed to identifying underperforming units and to developing a blueprint for success. However, there are some negative aspects of the program, as far as high loyalty scores are not synonymous to high-performing scores. Moreover, there are Pizza Huts low loyalty units with high profitability rate. In such a way, the system seems to be not very effective. Problem Statement The case details experience of Pizza Hut, the chain of restaurants on pizza delivery and its strategy concerning customer service / customer loyalty programs.
It provides a detailed description of Pizza Huts strategy based on a customer service toll-free number, a customer satisfaction / loyalty survey and the system of bonuses. The central issue is that despite of some positive results, the program of customer loyalty is not very effective. The central problem is to choose the best strategy in order to improve the level of customer loyalty by customer added value. Alternative Solution As far as a customer service toll-free number, loyalty surveys and managers bonus incentive are not very effective, an alternative solution may be taken into consideration.
One of such solutions may imply re-shaping the companys marketing strategy by focusing attention of emphatic attitude to the customers. Direct emphatic interaction and communication with the customers will be able to impart positive emotional background to the customer relationships with the company. In addition, new customer loyalty programs will assist in prioritizing the key customers, improving customer service levels and increasing productivity by assuring that Pizza Huts business processes serve the context of the consumer interaction. Customer loyalty programs will help delivering more personalized service, thereby enabling Pizza Hut handling effective customer support.
Pizza Hut should also improve the level of motivation among its workers, as far as loyalty bonus system seems not to recompense the efforts done. Recommendation Customer loyalty, when estimated properly, is an index of the strength of the customers attitude to the company. In such a way, it is a dynamic measure of the customers loyal relationships with the company. It is highly recommended to fix attention on value-added sales, as far as implementing value-added philosophy will help Pizza Hut increasing the level of customer loyalty. The sales managers should take into account that the customer service must be of the primary priority.
They should undertake all efforts to surpass the customers expectations and to ensure that Pizza Huts business processes function faultlessly. The company may be recommended to implement new customer loyalty programs based on improved service, faster delivery, gift cards, loyalty awards, etc. Pizza Hut should also consistently trace the competitors loyalty programs and initiatives in order to be one step forward by offering best possible products and services. Finally, the company should implement different customer-oriented activities in order to gain better understanding of the customers buying preferences and patterns that can be crucial to the companys success.
Implementation of new customer loyalty initiatives and development of existing strategies based on positive and friendly relationships between the customers and the company will improve the level of loyalty and enhance purchase frequency while reinforcing Pizza Huts brand. Bibliography Seidman, A. Case 14: Pizza Hut - A Customer Loyalty Program. North Miami, Florida: Johnson and Wales University.
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Research essay sample on Case Analysis Pizza Hut A Customer Loyalty Program
