Trish stood at
the window of The Head Room, overlooking the harbour of St. John's,
and wondered how much longer she and her partner Glenda would
operate their business from this location. Their lease was coming up
for renewal and they had the option of either staying, or purchasing
an older home in an area of the city where professional offices,
business associations, and consulting companies had located. They
would be also within walking distance of two of the major hospitals
in the city. They had been in their present location since 1987 and
had seen their hair salon business grow substantially during that
time. They now felt, however, that in order to continue to grow they
needed to expand their services and products to their clients.
However, this decision would also mean that they would be required
to make a significant financial investment in the purchase of the
new building. It was very important that they not lose many
customers by this move and be able to maintain the same
volume of business. They felt that they had established good
relationships with their clients and that they provided them with
the services they required. But how could they be sure? There were a
number of well-respected salons in the downtown area that clients
could alternatively choose to patronize, should The Head Room leave
the area. It was now July 1992 and they had been given two months by
the owners of the building before they would officially list the
sale with a realtor. What should they do?
Trish and Glenda
were working at different salons in 1987 when they decided to branch
out on their own. They knew there was a real niche to be filled for
the type of salon that would provide a total service package to
clients and one that stressed customer
This case was prepared by Bette Anderson for the Atlantic
Entrepreneurial Institute as a basis for classroom discussion, and
is not meant to illustrate either effective or ineffective
Copyright © 1993, the Atlantic Entrepreneurial Institute.
Reproduction of this case is allowed without permission for
educational purposes, but all such reproduction must acknowledge the
copyright. This permission does not include publication.
general. They chose a corner location, at a busy intersection of the
downtown area of St. John's, where their visibility was excellent.
This location also reinforced the image they wished to create of an
upscale, sophisticated, quality salon.
The Head Room
opened with six stylists, who had established their reputations for
innovation and quality by consistently winning regional and local
competitions. After six months they added aesthetics to their line
of services. A qualified aesthetician was hired who provided
cosmetic consulting, waxing, manicure, pedicure and facials. They
now employed ten stylists, who performed all aspects of hair care:
colour, perm, and styling. No specialization of staff occurred. They
had a very low turnover of their stylists, with only one of the
original six having left the salon to work outside the province.
They also employed staff who provided support in the reception and
The Head Room
offered their clients a wide range of salon quality hair care
products as well as hair accessories, jewellery and small gift
items. A line of quality cosmetics by Clarins was offered for sale
in the aesthetic area.
The Head Room
recently installed a computerized customer data base. This provided
management with client addresses and allowed them to access
information on the frequency of appointments, the client's choice of
stylist and what products were purchased. The database had
approximately 3000 names on file. In addition, from a recent survey
of clients they were able to determine that 89% of clients were
female; 75% of this group were from the ages of 25 to 50, with 62%
being employed in professional /executive occupations; 40% of the
females were from two-adult families, with dependent
The hair salon business in St.
John's was divided into three categories:
- Small owner/operator salons
which generally operated as home-based
- Discount salons employing
larger staff which focused on pricing each service independently.
These tended to be franchised operations.
- A small number of salons who
promoted themselves as being on the leading edge of style and
The Head Room was
in the latter category with their main competition being The Hair
Factory, who operated two salons, one in a large convention hotel
and the other in a small upscale shopping centre. The Hair Factory
also offered aesthetic services and was located in a convention
hotel within 15 minutes walk from The Head Room's present location.
Both The Head Room and The Hair Factory priced their services and
products in a similar range and tended to be more expensive than
most of the salons in the city.
Trish and Glenda
must decide quickly whether they would take advantage of the
opportunities offered by the new location. They felt that the
economic conditions in the city and the province did not pose
any real threat to them at this time. Negotiations on Hibernia were
very positive and all indications were that St. John's would benefit
substantially from the developments associated with the offshore.
Many office complexes were being built in the
What was of the
most concern to them was that they not have to spend a great deal of
time establishing a client base for the new location. Financially,
The Head Room was doing very well. Their sales were increasing
steadily and they were pleased with the profits the business was
generating. However, investing in their own building meant that
their monthly cost would increase slightly. Being able to estimate
how many of their customers would move with them would allow them to
predict more accurately their sales and consequently the short term
financing they would require from their bank. The Head Room must be
able to determine therefore, within the next two months, the level
of satisfaction of their customers and therefore gain some feeling
as to their loyalty.
must decide is how best to measure this level of satisfaction. What
type of analysis is required and what is the best way to administer
it? They will be looking at the costs involved, but this will not be
the determining factor in the method that they chose. More
importantly they wanted to be able to have confidence in the results
obtained in that they really did represent the feelings of the
majority of their customers.
- In the past when you have
had your hair cut, what has made the difference for you in being
very pleased or very disappointed with the experience? Give
reasons for the way you felt. List at least six
- Do you think the age of
customers would influence how they would like their hair styled?
List some differences.
- Given the information in the
case, how would you describe The Head Room customer? What do you
think would be important to them in assessing the services
provided by The Head Room? Give reasons for your
- What are the ways that The
Head Room could use to determine the level of satisfaction of
their customers and suggest some advantages and disadvantages of
each? Based on your own experience, which methods do you think
would be the most expensive to implement?
- Which method would you
choose and why, considering that cost is not the most important
factor when evaluating the alternatives?
The Head Room
The Head Room
decided that they would conduct a customer survey to determine how
well they were presently meeting the needs of their clients. A
mail-out survey was chosen so that the clients would feel that their
responses could not be directly attributed to them, and hopefully
they would be more honest. From their customer data base of 3000
names, The Head Room randomly selected 800 for mailing. Of these,
they received 218 completed questionnaires, providing a 27% response
rate, which is high for this type of survey.
asked clients to respond to questions addressing many features of
their service delivery. Customers were asked to rate their
satisfaction with these features on a scale of poor to excellent.
Certain questions allowed them to respond with comments and
suggestions. Some of the key findings relevant to the decision to be
made were in the areas of delivering a quality product, the pricing
strategy in relation to value received and how the customer viewed
them in relation to their competition.
asked customers to rate how important were specific features to them
when choosing a salon. They were asked to rate on a scale from "very
important" to "not-at-all important". They were given six
alternatives from which to select a response: quality of service,
availability of appointment, reputation, location, price and having
multi-services provided from the one location. Later in the survey,
they were asked to rate The Head Room's performance on each of these
The Head Room was
most interested in what customers considered to be "very important"
to them when making their choice. When choosing a salon, quality
service was considered to be "very important" to 98% of people who
completed the questionnaire, with the second highest category being
able to have the desired appointment time for 77% of customers. The
ranking for the other features listed as being "very important" are