The Case Of Taco Bell Marketing Essay

An example of the service strategy used by the service managers and the challenges they face in the fast food industry using Schmenner’s Service Process Matrix

Introduction

Service is an intangible activity, which is provided by one firm to another. The exchange of such services benefits the counterparties, and does not involve ownership of anything. The intangibility of service makes it difficult to store and measure its quality and experience. It is particularly different from the product industry as the customers are an integral part of the service delivery process. For example, a customer who might want to open a bank account (input), will fulfill the formalities like submitting application form, providing identification, etc (operation) and will leave the bank with an opened account (output). The customer might give his/her feedback based on their experience, which might be used, by the bank to improve their services.

This report will assess the characteristics of a firm’s services. Using ‘Service Process Matrix’ derived by Schmenner, the report will analyze how a business is categorized based on their service operations. It will then evaluate Taco Bell’s service process and strategy used by the service managers. With the help of the matrix, the report will critically examine the challenges faced by Taco Bell’s service managers and the strategic solutions they have implemented to overcome these challenges. In the end, Taco Bell’s movement along the matrix in accordance with a ‘Revised Service Process Matrix’ the will be explored.

Service Process Matrix

Service firms are idiosyncratic in terms of operations and service delivery. In 1986, Roger Schmenner derived a ‘Service Process Matrix’ to classify these firms based on the characteristics of the individual firm’s service processes (Schmenner, 1986). This matrix helps us to investigate the strategic changes in the services provided by the firm and to analyze the challenges faced by the managers in a particular industry.

Characteristics of Service

Schmenner used two elements to derive the matrix- Labour Intensity and Degree of Interaction and customization. Labour Intensity can be defined as the labour cost incurred with respect to the capital invested in plant and equipment (which act as input resources). Here, the inventory is not taken into account (Schmenner, 1986) and reasonably the cost is added to service charge. Degree of Interaction and Customization is the degree to which the customer affects the nature of the service being delivered (Paton et al, 2011). It is based on two distinct dimensions- 1) extent to which customer intercedes with the service; and 2) extent to which the service is customized for the customer.

Quadrants of Service Process Matrix

Figure 1: Service Process Matrix

In accordance with Figure 1, the vertical axis is labour intensity and horizontal axis is degree of customization and interaction with range increasing from ‘low’ to ‘high’. Based on these elements; service firms can be classified into following categories-

Professional Service

Service Shop

Mass Service

Service Factory

In Professional Service, the customers require individual attention- for example, doctors or architects. Also, the labour intensity is quite high as the capital employed in plant and machinery is low as compared to labour cost. On the other hand, firms under Service Factory have high capital employment, less customer interaction and standard service, which allows service firms to operate in a similar fashion like a factory- hence the name ‘Service Factory’ (Inman, 2013).

Taco Bell

Taco Bell operates in 27 countries and territories worldwide with over 5600 units in United States (Yum! Brands, Inc, 2012). They are experts in Mexican style food products which includes various types of burritos, tacos, nachos and other related items in the industry. According to Orange County Business Journal, Taco Bell was ranked no. 1 amongst restaurant chains based in Orange County in 2010 (See Appendix 1).

3.2 Taco Bell – A Service Factory

Taco bell is an excellent example of a Service Factory. As mentioned earlier, labour intensity is the ratio of labour cost to the capital cost. Taco Bell has worldwide presence (See Appendix 2) with facilities and equipment installed at all of its locations. With a recent act of air lifting a truck full of 10,000 tacos to the town of Bethel in Alaska (Daily News, 2012), it is evident that Taco Bell has a substantial investment in delivery vehicles and transportation. These services account for a large fraction of the captial cost. Taco Bell uses many techniques, for example video technology (Coleman, 1987) and manuals, to train their thousands of employees to ensure efficient service and low labour costs. Ergo, as the capital cost is high compared to the labour cost, the labour intensity is quite low.

At Taco Bell, the customers have very little contact and interaction with the staff. They come, order their requirement at the counter and leave with the finished product. Notibly, the food quality and service provided is standard for every customer. This product is same throughout for every customer who has ordered it. Hence, the degree of customer interaction and customization is very low.

3.3 Challenges faced by Taco Bell Managers

In accordance with the Service Process Matrix, Roger Schmenner proposed that there are a lot of challenges for firm’s managers which are innate in a firm’s position within the matrix. For example, for firms with high labour intensity, it is important to monitor the recruitment, training, development and management of employees. On the other hand, firms with high customer interaction and customization, it is challenging to maintain the quality of service and satisfy the customers. Figure 2 gives a pictorial representation of the challenges faced by the managers in the four types of service firms identified in the previous section.

Figure 2: Challenges for Service Managers (Schmenner, 1986)

Taco Bell is a firm with low labour intensity. Hence the choice of plant and equipment at a particular location is a challenge for the managers. Since there is a low customer interaction, it is important for Taco Bell to market themselves efficiently and be flexible enough to manage their demand. Also, since the customer is intervening the service for a very short period of time, it is difficult to leave a positive mark on the customer in order to retain them. Thus, it is quite important to pay minute attention to aesthetics and the quality of service.

3.3 Strategic Solutions to Challenges

In 1980s, Taco Bell implemented a concept called Kitchen minus, also known as K-minus strategy. They transfered the chopping and cooking work to the corporate headquaters and made the kitchen a heating and assembly unit making more room for the customers to dine in. It also helped them to make the surrounding pleasant. Thus Taco Bell inverted their space configuration from 70%kitchen/30% customer service to 70% customer service/30%kitchen (Delong et al, 1998). As mentioned earlier, the managers give priority to training their staff using videos and manual. This helps them improve their efficieny and quality of service. The company not only keeps an eye on the upcoming technology but also focuses to continue innovation in the future. For example, a testing centre called ‘Restaurant of the Future’ was developed near the HQ of Taco Bell (Delong et al, 1998).

4.0 Theory of Swift, Even Flow- A Revision of Service Process Matrix

With an urge to analyse why some service firms are more productive than other, Roger Schmenner revised the Service Process Matrix (Figure 3.0) to imprison the reasons for productivity of a company using the matrix (Schmenner, 2004). According to Schmenner, productivity of an organization can be linked to the speediness of the materials flowing through the process. Throughput time, which is defined as the amount of materials passing through the system per unit time, thus gives a measure of the efficiency of the system process. Schmenner states that:

“Throughput time is indicative of the waste in a process. The longer the throughput time, the more likely waste of all types bogs down the swift ¬‚ow of materials. The classic seven wastes of Shigeo Shingo: overproduction, waiting, transportation, unnecessary processing steps, inventory, unnecessary motion, and defects, apply here.”

Figure 3.0: A Revised Service Matrix

5.0 Taco Bell’s Movement across the Matrix

With increase in globalization and technology, it can be said that Taco Bell moved along the matrix from mass service to service factory. Initially when Taco Bell was founded in 1962, it had less money invested technology as compared to that in labour (Delong et al, 1998). They were located at a few locations with fresh raw food delivered at each location by the suppliers. Cooking was done on-site (Delong et al, 1998) which increased the effort and time spent. As a result, the labour intensity was ‘high’. Over the years as Taco Bell expanded its branches worldwide, investment in facilities established at various sites increased. They bought trucks to commence their delivery services thus speeding the process of flow of materials. Focus on research and development was one of the primary goals- Taco Bell’s R&D facility is operating in California (Yum! Brands, Inc, 2012). The employees were trained in order to improve the quality and efficiency; and to decrease the labour costs. Thus, the capital cost as compared to labour cost increased, moving Taco Bell to ‘Service Factory’ quadrant of Service Process Matrix. This lateral movement is depicted in Figure 3.0.

Conclusion

In accordance to the previous section, Service Process Matrix classifies the firms based on the services they provide. The matrix can be used to investigate the measure of labour cost incurred by a firm as compared to their capital cost. These firms can alter the service based on the customer requirements and improve their quality of service depending on the feedback given by the customers. This matrix gives a clear distinction as to how the firms can be differentiated from each other as per the services they provide. Further, it gives a comprehensible understanding of the challenges faced by the service managers and what methods and practices they use to overcome these challenges. It can be noted that, the challenges faced by the managers of a firm belonging to the same quadrant face similar problems.

Service Process Matrix can be used to examine the strategic changes a firm is planning to incorporate in the future. Also, the firms might strive to move across the matrix. As seen in Taco Bell, the firm instituted a low labour cost with K-minus strategy with a speedy flow of materials to meet the customer demand while maintaining the quality. Such a movement might lead to increase in the productivity of the firm.

7.0 References

Coleman, LG 1987, ‘Technology Today 8mm video is put to use in training, communications’, Marketing News, 21, 19, pp. 2-31, Business Source Premier, EBSCOhost, viewed 19 February 2013.

Daily News, (2012, July 4). Daily News. [Online] 
Available at: http://www.nydailynews.com/life-style/taco-bell-responds-hoax-airlifting-10-000-tacos-alaska-article-1.1107879
[Accessed 9 February 2013].

Dave Delong, L. A. L. S., (1998). Taco Bell Inc. (1983-1994). [Online] 
Available at: http://srprojects.free.fr/desgest/downloads2/Taco_Bell_and_Frito_Lay.pdf
[Accessed 9 February 2013].

Inman, R. A., (2013). Service Process Matrix. [Online] 
Available at: http://www.referenceforbusiness.com/management/Sc-Str/Service-Process-Matrix.html
[Accessed 9 February 2013].

Schmenner, RW, (1986). How Can Service Businesses Survive and Prosper. [Online] 
Available at: http://umairbali.ekalaam.com/Business%20Process%20Workflow%20Analysis/Week6/SMR-ServiceBusiness.pdf
[Accessed 9 February 2013].

Schmenner, RW (2004), ‘Service Businesses and Productivity’, Decision Sciences, 35, 3, pp. 333-347, Business Source Premier, EBSCOhost, viewed 9 February 2013.

Weisburg, E. (2010, July 5). Orange Country Business Journal. Retrieved Febuary 9, 2013, from Orange Country Business Journal Online: http://www.cbjonline.com/a1ocbj/lists/List-2010-OC_RestaurantChains.pdf.

Yum! Brands, Inc. (2012, April 4). 2011 Yum! Brands Annual Customer Mania Report. Retrieved February 9, 2013, from Yum! Brands Inc: http://www.yum.com/annualreport/pdf/2011_AR.pdf.

Appendices

Appendix 1

Source: Adapted from Orange Country Business Journal by Weisburg, E (2010)