INSTITUTE OF MANAGEMENT

NIRMA UNIVERSITY
2014-2019

SERVICES MARKETING
GROUP ASSIGNMENT
TOPIC: COFFEE HOUSE
SUBMITTED ON: MARCH 23, 2018

Submitted To:
Prof. Tejas Shah
Submitted By:
Aayushi Ostwal (147101)
Prakriti Dutta (147131)
Shivam Patel (147142)

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 Table of Contents

Sr. No. Topics Page No.

1. Introduction 3
2. Category of Service Mix 4
3. Continuum of Evaluation 5
4. Characteristics of Services 6
5. Product – 8

o Four Broad Categories of Service- A

Process Perspective

o Developing Services Products: Core and

Supplementary Elements

6. Pricing Strategy 14
7. Place 17
8. Promotion – Five Challenges and Approaches to 23
Overcome
9. Service Quality 27
o Gap Model
o SERQUAL Model
12. References 32

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Introduction

The cultivation of coffee and tea was described as a drink of the Europeans, before it percolated
to the emerging Indian middle classes, and in some places, to the working class. When coffee came
to be patronized by a class educated in modern schools and worked in jobs created by colonialism,
it gained new cultural connotations, and came to be perceived as ‘modern’. Naturally, this modern
drink came at a price because unlike tea which brews better in water, coffee was brewed in milk.
And milk was expensive. As far as one can tell, Indians will evidently drink anything if it comes
in milk, and coffee was no exception.

The love for tea in India is being challenged since the last few years by the rise of home-grown
Western style coffee bars and the Indian middle class love affair with the café latte. Stopping for
a latte, cappuccino or mocha has been common place in many western cities for some time, but
more recently it is a frequent occurrence in many Indian cities which are experiencing a growth of
cafés and as part of developing café culture. In a country traditionally associated with the
production and consumption of tea, coffee drinking and western style café culture has been
growing rapidly. The idea of meeting over beverages didn’t come with cafes. It has been prevalent
in India for ages and it was tea that most people have been meeting over. But now, coffee shops
are also social hubs for people with time and money to spend, mainly students or company
executives. While students could gather to discuss assignments or simply hang-out, the executives
try to slip business in between sips of coffees and bites of brownies. In the early 90's, going out of
the house with family was to either watch a movie or to have food at a restaurant. But now people
go out to meet friends or hangout with family at coffee shops.

Coffee culture in India is still a relatively new thing. It is continually maturing and evolving thanks,
in large part, to India’s youth choosing coffee houses as places to meet up. The caffeinated
beverage is slowly but surely making a name for itself in Indian culture as a whole, with a steady
5% increase in consumption each year.

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In the early 1940s, a small group of dismissed Indian Coffee Board members created the “Indian
Coffee House” brand that exists till today. In 1957, the Indian Coffee House was the first coffee
shop to open in the country. It still serves loyal patrons at over 400 locations.

Cafe Coffee Day is the said to be the pioneer in bringing organized café culture across India which
in past was limited to southern and eastern parts of India. With over 1500 stores across the country,
this convenient café and coffee shop chain provides a place for people to meet up while
simultaneously opening the coffee market to a widespread audience.

Category of Service Mix: Hybrid

A great Coffee House has both fabulous food and an excellent service. Coffee House has an equal
importance of both goods as well as services. It is hybrid in nature. Companies operating in this
industry have to build trust among customers and it is the responsibility of the host or the person
providing the service as they are the first point of contact there. An excellent service may be
sometimes enough to cover up the things which go wrong in the kitchen. Both tangibility and
intangibility aspect play role in this industry. Some of the tangible aspects in the Coffee House
includes the food or the coffee which is provided, the menu, various equipment used to make
coffee, display of crockeries (coffee cups), food items, varieties of coffee, furniture, waiting area
and parking facilities provided to the customers. Intangible aspects present in a café includes

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ambience (the look and feel of the outlets), hospitality (behavior of the staff towards customers),
overall experience of the coffee house, customer service.

Continuum of Evaluation

Coffee House is high in experience quality. We cannot search for it beforehand but we can only
feel it there itself and cannot evaluate it before visiting the place. Customers have to experience
the service before they actually evaluate the attributes. As we move towards the right side of the
continuum, it becomes difficult to evaluate. Coffee House lies in middle of the continuum as it
gives equal importance to both goods as well as services. In a Coffee House, you cannot actually
know how much you will like the taste of the food, the aura of the café and the service quality till
you experience the service by yourself.

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Characteristics of Services

1. Intangibility: This is the one of the prominent characteristic of a service that differentiates
it from products. Intangibility basically refers to not being able to see, feel, taste, smell or
hear before actually buy the service, which makes it difficult for customers to expect what
they will be getting. This makes buyers look for tangible
evidence like cleanliness, decoration and ambience, staff appearance and
behavior, which provide the information of quality of intangible service. The people
responsible for marketing of the café should identify the feelings they want their visitors
to experience as a result of their service. The communication should stress on the unique
aspects of their services and depict the positive elements of tangibility in the service. This
should be effectively communicated to the customers.
2. Inseparability: Unlike products, services cannot be separated from the service provider.
The process of rendering and consumption of the service occurs simultaneously. When you
place an order in a coffee house, the time of waiting for your order, delivery of the meal
and the service provided by the coffee house employees are all a part of the service delivery
process and inseparable from one another.
The coffee house employees play a significant role in the delivery of the service process
because of the inseparability aspect. The food and coffee served is important for the
customers but with that service has attained the same importance. Hence it becomes
necessary to create a blueprint of the service delivery process such that the quality of the
services provided to each customer remains consistent.
3. Variability: The quality of services differ according to who provides the services, and
when, where and how it is provided. As cafes rely heavily on humans to provide services
except one or two aspects like a coffee brewing machine, the more susceptible is this
business to variability. Hence, in coffee houses, the management should focus intensely
on the training of front line staff as they are the first moment of truth. They have to be

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 empathetic, cooperative and responsive to the needs of the customers in order to maintain
the higher standards of service delivery.

4. Perishability: A coffee house might have all tables occupied during public holidays and
festivals while it may receive less footfall during other days. If the coffee house functions
with an inflexible staffing model, the same fixed expenses are incurred each day. However,
each empty table in the café is revenue lost forever due to the perishable character of
service. This challenge can be dealt by managing the supply and demand effectively and
use demand side strategy and/or supply side strategy. For a supply side strategy, a café can
be operated with fewer staff during the week when the demand is low and hire additional
staff during weekends and holidays when it faces a surge in demand. This will allow the
café to provide the same level of services during the peak and off peak periods without
causing a loss in revenues. For a demand side strategy, various pricing and promotion
strategies can be used to stimulate demand during the off periods.

High Moderate Low

Intangibility 
Inseparability 
Variability 
Perishability 

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4 P’s of Services Marketing:

1. Product

Four Broad Categories of Service- A Process Perspective

Services are categorized on the basis of what is being processed. Nature of the services processing
can be both tangible and intangible and it can process people, physical objects, as well as intangible
assets. Tangible actions are directed towards the people’s bodies while intangible actions are
directed towards the mind of the people. So, the services are divided into four broad categories:
People Processing, Possession Processing, Mental-stimulus processing and Information
processing.

Coffee House: A People Processing Service

Coffee House is a people processing service. It is the one in which services is directed to the
people’s bodies and it actually involves the end customer directly. When a customer goes to a
coffee house, he/she is served the coffee or food to satisfy the hunger. So, the service in the coffee

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house involves inputs as customers and the food which is served to him/her is tangible in nature.
So, as the customer has to be physically present to avail the service in the coffee house, it is a
people processing service.

Developing Services Products: Core and Supplementary Elements

A service product includes all of the elements of the service performance, both tangible and
intangible, that create value for customers.

The value proposition must address and integrate three components:

 Core Product
 Supplementary Services
 Delivery process

Core Product: Core products are those which gives the core set of benefits and solutions that is
delivered to the customers. The main focus is on the principal and problem solving benefits.

The core products provided in Coffee House includes Coffee, food items and beverages. People
mainly go in a Coffee House because the main thing is the quality of coffee it is offering. The
café may provide an excellent experience but if the taste of the coffee or the food items is not good
after paying a high cost for it, than the customers will be dissatisfied and will not find it value for
money. So, coffee is the core product of a coffee house.

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Supplementary services: These services augments the core product, facilitating its use and
enhancing its value and appeals to customer’s overall experience.

The eight groups are appeared as petals encompassing the center of a flower and is called as flower
of service. The petals are in the clockwise manner, in the way they are said to be experienced
however the experience may not be in the similar order.

So, supplementary service has eight factors divided broadly into facilitating and enhancing
services. Facilitating services includes information, order taking, billing and payment and
enhancing services includes consultation, hospitality, safekeeping, and exceptions.

In a Coffee House, the facilitating services includes:

 Information: Customers can gain the information from the website and applications,
advertisements such as on newspaper, social media, flyer, television, etc. Information in a
coffee house mainly includes the menu items, menu prices, service descriptions,
availability of seats, locations of various stores, about store designs, details about
wireless Internet and how to use it, customer care number, home delivery numbers,
email-ids, warning and reminders to using the facilities, operation time of coffee house,
combo offers or discounts.

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  Order Taking: Once customers look through all the information, companies must
develop an effective process to handle the order taking. So, order taking in a coffee house
includes two forms:

 Order Entry: Coffee Houses nowadays are moving towards new ways of taking
orders which gives comfort as well as customization to the customers. Customers can
order directly through the application either after coming to the coffee house or even
beforehand to save the time. The order taking in this industry has now become very
flexible and more of self-service technologies are used for this purpose. So, order can
be now placed through three of the ways:

o On-site order fulfilment

o Mail/telephone order placement
o E-mail/Web site order placement

 Reservations and Check-in: Customers can reserve a table in a coffee house through
the traditional methods like calling to the stores. But, these days coffee houses have
developed SSTs (Mobile order and pay) in which customers can visually see the
layout of the coffee house and can get to know about the availability of the tables,
traffic in the store house, what type of the table they want to book and for how many
people. Instead of coming to the café directly and then booking a table and wait in the
waiting area, one can choose his/her own table and plan accordingly. Customers who
are coming alone can even choose the option of sharing the table with somebody.
 Billing: Customers receives the bill invoices directly through the mails or on their
applications if they have downloaded it. Invoices for individual transactions are sent to the
customers. Some Coffee houses use the traditional method only, i.e. through printed
invoices but if the coffee houses are of self-service than it wastes a lot of time for customers
as they have to wait in the lines. The concept of self-billing is also there. Self–billing is a
commercial arrangement between a supplier and a customer in which the customer
prepares the supplier's invoice and forwards a copy to the supplier with the payment.

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  Payment: Customers need convenient ways to make payments. So, there must be various
options in which a customer can pay. There are various payment methods available for the
customers includes e-payments, credit/debit card, payments through cash/check,
coupon/voucher redemption, Customers expect to be easy and convenient when make
payment. Coffee Houses have now new ways of making payment which have made
customers life a lot easier. Some of the new ways includes: Shake to pay (will be discussed
in SST) and mobile payment.

In a Coffee House, the enhancing services includes:

 Consultation: Coffee Houses gives customized advice and menu suggestions to the
customers. Customers can select from various ingredients to include in their drink or
coffee. They can choose that they want more or less foam, even they can select the type
of milk they want (skim, soy, cream, lactose free, etc.), varieties of coffee (Espresso,
Mocha, Latte, etc.). The staff consults the customers if they have any type of confusion or
if they want to know about the various flavors. Customers can even create their own
menu options. Advice is also provided that which coffee gives what health benefits and
what the customers should prefer.

 Hospitality: Hospitality is that how the staff behaves with the customers, how they greet
them and how they solve their problems. For every company in which service part
matters a lot, hospitality is the major factor among the satisfaction and dissatisfaction
among customers. In a Coffee House, hospitality includes greeting, waiting area, security,
clean toilets and washrooms, Wi-Fi connectivity, ambience, parking facilities, food and
beverages, free welcome beverages, books, magazines and newspapers, I-Tunes free
download, comfortable seating, take-away options, etc.

 Safekeeping: Coffee Houses have security personnel, valet parking (vehicles are safe),
coat rooms, etc. are available so that customers feel safe and can enjoy the services
without any worries.

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  Exceptions: It includes handling of special communication (complaints, suggestions),
restitution (compensation for unsatisfactory service) and problem solving by the
companies. Coffee Houses wants to give a better overall experience to the customers and
these days coffee houses are focusing on the feedback given, handles the complaints of the
customers and compensate them by providing better hospitality. It brings to the whole new
concept of co-creation which companies are using to engage the customers in bringing new
products and ideas and solve the issues if any.

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 2. Price

a) Image Pricing

Café Houses uses image pricing. In this, a firm brings out an almost identical version of its
current product with a different name and a higher price with an occasional few added services.
CCD uses this type of pricing by using:

CCD Store: Coffee parlors where people can enjoy the coffee, have eatables and hang out with
friends.

CCD Square: Premium Café from CCD targeted towards selected people

CCD Lounge: A unique café where variety of single origin coffee brews from coffee growing
countries are available.

b) Premium Pricing

Premium pricing is increasing the value in current and start charging higher prices. Cafes like
Starbucks use this strategy. It charges premium because their brand image revolves around
luxury. Starbucks differentiate from its competitors with the experience it provides to the
customers. The design of its coffee houses, the kind of products it sells and the ambience it gives,
all revolves around luxury.

c) Periodical Discounting

Café Houses provides discounts and special offers during various festive seasons like Valentine’s
day, Christmas, Woman’s day, Diwali, etc. This discount is given by almost all cafes as there is
stiff competition. This type of discount is already forecasted by the cafes.

d) Second Market Discounting

The primary market of the services is willing to pay full price for the services; however, other
secondary demographic markets may lack the willingness to pay due to higher costs and no
personal income sources. To bring the cost down to their purchasing power cafes can offer certain
discounts to students. With this technique, the coffee houses can provide discounts to enhance the

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sales and its image of being socially responsive without putting hurting its margins which can be
attained from the primary markets.

e) Price Signaling

When information on quality is low and the importance of quality is high, consumers infer the
level of quality. The price signal acts as a conveyor of information as it is easy to get information
on price than on quality. Also, customers who like visiting premium coffee outlets want to buy the
high-quality coffee with higher prices and enjoy the experience, even if the quality is uncertain.
There is a positive correlation in their minds that a higher price will result in a better-quality coffee
and an overall better experience.

f) Flexible Pricing
Some of the Cafes make use of spreadsheet or some software to identify that what prices they
should levy to reach break-even. They increase or decrease the prices of certain menu items to
achieve the profits they require. In this type of pricing, if the café has a format of menu which can
be easily changed, they can frequently change the prices to cover their costs. So, by altering the
prices in small increments and also showing the highest profit item as their daily specials, cafes
can device the prices to increase the sales of some items.

g) Price Bundling
Price Bundling is popular in cafes these days. Cafes bundles many items together or in combination
with each other. Example: Suppose the price of the cappuccino is Rs.120 and sandwich is Rs.150,
café can offer this at around Rs.230 instead if the prices are seen independently the price comes at
Rs.270. This can help the cafés in increasing the sales as customers find these type of deals
attractive. But cafes should determine what customers are ready to pay. If two competitors are
offering almost similar items that they are required to charge very similar prices or have to give
high quality to provide value for money to the customers.

h) Usage Discounting

This type of discount is offered on the basis of service consumption. This strategy develops
loyalty among consumers and repeat business by providing customers discounts or free offers.
Every time the customer uses the service, he/she gets the discounts towards future consumption

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by the same service provider. Some cafes even give cash backs to the customers if their
consumption level is high.

i) Geographical Pricing

Cafes charge different prices as per different counties, states, cities, etc. It is the strategy in
which price is charged as per the geographic location of the buyer.

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 3. Place

Flows in Distribution in Coffee House

1. Product Flow: The physical movement of the coffee and other food items takes place from
the café employees to the customers. It is just a forward flow.

2. Money Flow: Money flow can be both reverse and forward.

o Forward flow is when customers make payment to the café personnel

o Reverse flow is when customer gets cash back from for the purchases.

3. Information Flow: It can be again backward as well as forward.

o Forward Flow: It includes the promotional activities done by the cafes. Customers can
gain the information from the website and applications, advertisements such as on
newspaper, social media, flyer, television, etc. Information in a coffee house mainly
includes the menu items, menu prices, service descriptions, availability of seats,
locations of various stores, about store designs, details about wireless Internet and how
to use it, customer care number, home delivery numbers, email-ids, warning and
reminders to using the facilities, operation time of coffee house, combo offers or
discounts.

o Backward Flow: It includes the value co-creation done by the company. Co-creation
is engaging customers in the idea-generation process. It means engaging the customers
in bringing new ideas and products. Starbucks is actually doing co-creation and taking
opinions from the customers for bringing innovations.

4. Negotiation: Coffee Houses may negotiate with the franchise buyers by reaching an
agreement on the service features and the terms of the offer so that a purchase contract can
be closed.

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Type of Distribution:

Consumer will go to the service provider: In coffee house, customer goes to the cafes and enjoy
the cup of coffee there itself. Customer himself goes to the location where the store is opened. Café
Houses have multiple outlets in the urban areas which provides ease of access and convenience.

Role of Distribution Channel:

1. Spatial: Helps reduce the distance between the producer and the consumer. It fulfills
inseparability aspect of the service. Coffee Houses like Starbucks are using various
technologies to reduce the gap between them and the consumer. With the new technologies
they have developed, customers can beforehand know about the traffic in the coffee house
and can also visually look at the seats which are empty and can book them. So, it has
reduced the gap with the help of the technology. Also, Café Coffee Day is a large retail
chain and has around 1500+ stores across in the country and that to in the main city area.
So, it is reducing the distance by the convenience of its stores. Customers can search for
the nearest stores with the help of store locator, the customers can see that weather the
amenities are available at each store.

2. Temporal: Helps speed up in meeting the requirement of the consumer. It fulfills

perishability aspect of the service. Starbucks have save the time of the customers with the
Starbucks application customers can save their time by checking out the traffic in the coffee
house and also can pre book the seats they want. This saves a lot of time, customers even
do not have to call the coffee house to reserve the seats. They also saves the time with the
help of Shake and Pay app where customers can just shake the mobile and automatically
payment is done. If the order is booked through an online application then the customers
can directly pick up their orders from the cafes which helps the customers to save time and
does not have to wait in the long queues.

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 3. Break Bulk: Reduces large quantities into acceptable lot sizes for the customers. It fulfils
intangibility aspect of services. This can be done by creating a basket of services.
Franchises create various basket of services to offer to the customers. They also provide
combo offers to break the bulk.

4. Assortment: Provides variety to the consumer to choose from. So CCD, Starbucks and
even Hard Rock café provides a wide menu to the customers. They give varieties of coffee
like espresso, mocha, latte, etc. They also have an array of offerings in their side menu like
sandwiches, shakes, muffins, etc.

5. Financial Support: Helps fund the activities of reaching the product to the consumer.
Starbucks uses various new type of technologies to help customers’ payment method easy.
They have done this by E-cards, Shake and pay, mobile application and digital tipping
(Customers are given the option to provide a tip through the application)

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Self-Service Technology in Coffee Houses

Self-Service Technologies (SSTs) are technological interfaces allowing customers to produce

services independent of involvement of direct service employee. In most of the cafes Self
Service Technology is used as an application. This application can be operated on both android
and IOS software platform. In majority of cafes, Internet based or online connection systems are
mainly used.
Self Service technology in Coffee House
This application is very much helpful and user friendly to the customers in many ways which are
as follows:

• This application will help the customer to make simple and fast payment for their favorite drink
and food. Order the beverages and food of your choice with the help of Mobile Order and pay
application.

• With the help of the Self Service technology the customers can make orders online and does not
require any help from the direct service employees. If the order is booked through an online
application then the customers can directly pick up their orders from the cafes which helps the
customers to save time and does not have to wait in the long queues.

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• The Self Service Technology enables the customers to choose the table prior to their arrival.

• If the customer register themselves in the application then the customers are provided with the
E-cards through which the customers can make a direct payment.

• Shake to Pay feature has been introduced, which will allow the customers to shake the phone
once they have opened the app, automatically bringing up their favorite card to use for
purchases. This feature will certainly help the customer to cut down on the time.

• Reload - Customers can refill their Starbucks Card balance directly from their mobile device
with customer’s debit/credit card. Customers can even set up automatic reloads.

• Store Locator – Customers can search for the nearest stores, the customers can see that weather
the amenities are available at each store.

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• Digital tipping-Customers are given the option to provide a tip through
the application.

Objectives of SSTs - Organization

1. Enabling direct transactions: Customers order, buy and exchange resources with the firm
without any direct interaction with the firm’s employees. These sort of SST include mobile
order and pay application, shake and pay, digital tipping, store locator, reloads, etc.

2. Educational: Customers can gain the information from the website and applications,
advertisements such as on newspaper, social media, flyer, television, etc. Information in a
coffee house mainly includes the menu items, menu prices, service descriptions,
availability of seats, locations of various stores, about store designs, details about wireless
Internet and how to use it, customer care number, home delivery numbers, email-ids,
warning and reminders to using the facilities, operation time of coffee house, combo offers
or discounts.

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 4. Promotion

Five major Challenges & Approaches to Overcome Service Communication

Channels

1. Address Service Intangibility: It is difficult to convey to customers benefits derived from

the service as they are performances rather than the tangible objects. Intangible aspects of
a coffee house includes the ambience (the look and feel of the outlets), hospitality (behavior
of the staff towards customers), overall experience of the coffee house and customer
service which is difficult to communicate as they do not involve tangible actions. Each
problem has implications for communication made by coffee houses.
 Challenges of Service Intangibility and Approaches to Overcome them
a) Incorporeal Existence: Services are innate in nature; it is neither made out of physical
matter, nor occupies physical space. It is difficult to make it visualize to the customers.
Cafes faces difficulty of incorporeal existence as both tangible and intangible aspect has
equal importance in a coffee house. So, coffee houses faces difficulty in making the
services (ambience, experience, hospitality) visualize to the customers.
Approach to overcome the challenge: Cafes should make use of some tangible cues
whenever possible so that customers can relate it more and can visualize it. It is helpful to
include vivid information and make it visually appealing which captures the customers’

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 attention and produces a strong impression on the senses. For instance, Hard Rock Café
uses a distinctive theme of the café setting – from the building exterior to decoration of
rock music memorabilia to table and menu design which overall creates a memorable and
distinguished experience for the customers.
b) Abstractness: Services are not standardized and it is difficult to define what service
architecture is all about because of intangibility. Because the abstract concept does not
have one-to-one correspondence with physical objects, it is challenging for service
advertisers to connect their services to those concepts.
Approach to overcome: Cafes can make use of service consumption episode to the
customers. Cafes can capture and show the customers who are benefiting from the service
that what all experiences and services they are providing. As there is no physical objects
to show the experience which cafes are providing, they can show some ads like customers
smiling in satisfaction at a staff going out of his way to help. Example: Starbucks tries to
portray its experience in the ads capturing the whole café and how customers feel happy
by availing their services.
c) Generality: It is difficult for cafes to show the unique value proposition they are providing
as mostly all cafes position themselves by either best quality coffee or a hangout place.
If a café promises of a good quality coffee, it is not specific as to just which aspect of the
coffee is good, in what manner is it better from the competitors and which aspects are being
compared with them. Such a general claim made by vague advertising leads to create a
differentiated identity.
Approach to overcome: This challenge can be overcome by using:
 System Documentation: Starbucks documents facts and statistics about the service
delivery system. They state that they have a total of 17,572 stores with 10,924 in
the United States alone, there are more than 300,000+ Starbucks Employees in the
world. So, through these facts and statistics cafes can show that how they are unique
and become more specific and it build more trust among consumers as well as it
builds a strong brand name.
 Performance Documentation: Starbucks documents and cite past service
performance statistics such as using 2.3 billion paper cups per year, the average

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 Starbucks customer visits 6 times per month with loyal customers attending an
average of 16 times per month.
d) Non-Searchability: It refers to the fact that many of the service attributes cannot be
searched or inspected before they are purchased. So, physical attributes in café like
appearance of the cafe, its location, and the types of coffee making equipment installed can
be checked in advance but the experience of enjoying the coffee while sitting at the café
can only be determined through extended personal involvement.
Approach to overcome: This challenge can be overcome by using:
Consumption Documentation: Some cafes are obtaining and presenting testimonials of
customers from customers who have experienced the service. Example CCD
e) Mental Impalpability: It is very difficult for the cafe to structure what services is all about
in minds of the customers. Café customers also find it difficult to expect what the service
entails and what could be the possible benefits could be derived.
Approach to overcome: Cafes like Starbucks are involving the customers in self-service
technology. They make the customers go through the whole process using their application.

2. Manage service promises: This challenge is due to Gap 4 and Gap 5.

Gap 4: This is the difference between management of service marketing communication
and actual service delivery.
Gap 5: This is the difference between what is actually delivered and what customers feel
they received.
For instance, on its inception, CCD wanted to create an identity of superior café chain
providing premium quality coffee but customer perceived the café chain as a place for
social connect. So, there was a gap.
Café also face this challenge due to lack of accurate estimation of demand and supply,
incomplete information and difficult to predict the footfall.
Approach to Overcome: In the above example, CCD managed this gap by changing its
identity from the superior coffee experience place to a social hub. Cafes can also do that
by creating a strong service brand by making impression that their brand wants to create

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 among its target customers i.e. brand identity and coordinating the external
communication.

3. Manage Customer Expectations: Marketing should make realistic promises so as to not

raise expectations above the level of which a café can perform or it should make the
customer expectations downward. What happens in the actual service encounter must be
accurately reflected in the communication.
Approach to Overcome: Café should offer service guarantees, provide various choices,
they should not overpromise and make over the top advertisements about the food and
service quality.
4. Manage customer education: It is necessary for the café houses to educate the customers
that how they gain the information, order, use the applications or self-service technologies
so that the delivery process becomes efficient. They should clearly make the customers
aware about the whole process so that there is no confusion. Café houses must also teach
the customers that how they can evaluate the quality of coffee or the services which they
are providing.
Approach to overcome: Cafes can manage this challenge by taking proper feedback and
clarifying the expectations after the transaction is done. Cafes can also overcome this
challenge by continuous innovations in menu items and the recent use of co-creation which
means engaging the customers in bringing new ideas and products.

5. Manage Internal Marketing Communication: There are various challenges related to

bad communication between staff responsible for promotional activities and people
responsible for handling operations; differences in policies between different branches of
the same company.
Approach to overcome: Communication between the café staff and managers needs to be
effective which allows the café to be flexible enough to promptly respond to the needs of
its customers and employees. Cafes should coach employees to practice effective
horizontal (peer to peer) as well as vertical (employee to manager) communication. They
should also align the back office employees, kitchen staff to the external customers so that
the communication will be more effective.

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Service Quality

Gap Model

1. Gap 1-Knowledge Gap: It is the difference between what senior management believes
customer expects and what customers actually need and expects. This gap mainly results
due to incorrect interpretation of customers’ expectations, lack of market research
procedures performed by the café and also poor management of customers’ complaints.
Coffee houses for instance, must know and comprehend what their customers expect from
the café, including all the tangibles (food items, varieties of coffee, amenities) and
intangible aspects (ambience, overall experience, customer service).
Established cafe chains like Café Coffee Day and Starbucks manage this gap by conducting
extensive market research, regular feedback from customers, continuous innovations in
menu items and the recent use of co-creation which means engaging the customers in
bringing new ideas and products.

2. Gap 2-Policy Gap: This is the difference between management’s understanding of

customer expectations and service standards they set for service delivery. In a coffee house,
the management perceives that the current kitchen staff available for serving the customers

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 during the peak hours is adequate. However, the customers are suffering from delay in
receipt of orders. So, there is a gap in what management understands about the expectations
of the customers and what standards the management sets. Hence, the coffee chains should
clearly define their service design from the aspect of customers, there should be procedural
management which focuses on the customer demands and sets up the adequate quality
standards.

3. Gap 3-Delivery Gap: This is the difference between specified service standards and
service delivery teams’ actual performance on these standards. In a Coffee House, the
management sets up the standard that a specific order needs to be delivered within 20
minutes but the waiter delivers the same order after the period demanded. The possible
reasons for delay can be poor coordination between the kitchen and the staff, conflict
between management and customers, unskilled staff, old-fashioned kitchen equipment,
lack of motivation for prompt service, poor management of the café crowd, etc.
The delivery gap can be managed with role clarity of each employee, proper training and
rewarding for keeping them motivated to perform as per the standards. Management must
ensure that performance meets standards.

4. Gap 4-Communication Gap: This is the difference between what company

communicates, and what customer understands and subsequently experiences.
Some Coffee Houses faces communication gap because of the following reasons:
 Overpromising in communication will create this gap. Promises made by coffee
houses through its media advertising, direct marketing, sales promotion techniques and
other tangible cues raises customer expectations which sets up the standards that
customers use to assess the service quality. So, companies must take care while
promising the customers otherwise it will lead to dissatisfaction if the expectations are
not met.
 Lack of integrated services marketing communication: Tendency to view each
external communication as independent results in poor quality service perception.
 Inappropriate pricing: High Prices acts as a signal of quality and raising the bar of
expectations among customers. If coffee houses are communicating higher prices then

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 they must remember that they also provide that much quality so that customers will feel
that they are getting value for the money they are paying. Also, the prices need to be in
line with what is being charged by the competition.
 Inadequate horizontal communications: This gap may arise due to the following
factors:
a. Bad communication between staff responsible for promotional activities and people
responsible for handling operations;
b. Differences in policies between different branches of the same company.

So, communication gap is managed by café chains by making use of advertising, sales promotion
direct marketing techniques, Internet and web presence, service guarantees, customer education
and servicescape and other tangible cues to inform, persuade and remind customers about its
products and services. Showing aesthetically designed café layout, freshly brewed coffee and
enticing food items in an advertisement communicates the service quality to the target customers.

5. Gap-5-Perception Gap: This is the difference between what is actually delivered and what
customers feel they received. For instance, when CCD was introduced in 1996, it wanted
to create an identity of superior café chain providing premium quality coffee but customer
perceived the café chain as a place for social connect. So, there was a gap. CCD managed
this gap by changing its identity from the superior coffee experience place to a social hub.

6. Gap-6-Service Quality Gap: This is the difference between what customers expect to
receive and their perceptions of service that is actually delivered. So, if the coffee house is
able to close Gaps 1 to 5 then it will meet the customer expectations consistently.

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SERQUAL Model

 Reliability:

Reliability is the ability to perform the promised service dependably and accurately. Cafes must
promise all the services as promised by them. If they fail to deliver the services they promised to
the customers, than customers will be dissatisfied. So, cafes must perform the services right the
first time, maintain error-free records and handle the customers’ services well. This will help
them to build a good reputation and trust among the customers and a strong brand image. The
services which are promised can be managed with role clarity of each employee, proper training
and rewarding for keeping them motivated to perform as per the standards. Management must
ensure that performance meets standards.

 Assurance:

Coffee houses nowadays are giving assurance to the customers by conveying that they are
providing the best beans of coffee which have undergone through several tests and researches by
the well-known scientists. It is also conveyed that the coffee they are providing to the customers
are prepared naturally and no artificial preservatives are added to the coffee beans. They also
assure that the coffee beans directly comes from the farms. Some of them also state that they
pick the coffee cherries when they are at their peak. In most of the coffee houses all the
employees are given training and information regarding their products so that the employees can
effectively answer to all the questions of the customers. This would enable the customers to gain
trust and confidence on the coffee providers. The cafes provide hygienic beverages and and food
items which makes the customers feel safe about their consumption.

 Tangibles

Appearance of physical facilities, equipment, personnel and communication materials. Some of

the tangible aspects in the Coffee House includes the food or the coffee which is provided, the
menu, various modern equipment used to make coffee, display of crockeries (coffee cups), Layout,
food items, varieties of coffee, furniture, waiting area and parking facilities provided to the
customers. In most of the cafes the employees are neatly dressed up. The crockeries of many coffee
houses are very attractive and appealing to the customers e.g. cups of Starbucks and Cafe Coffee
Day.
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  Empathy
Most of the coffee houses realizes that just by only providing products is not important but
creating an experience for the customer is very essentials for every coffee houses. They provide
personalized services to the customers that makes them feel special and important e.g. In some of
the coffee house they serve coffee to their customers by their name. If the costumers feel that the
services provided by them are not up to the mark then they make sure to correct it and ask how
they can make your experience better. They take the feedback regular from their customers so
that they can improve their services and make the customer feel that they are very important to
them.
 Responsiveness
Responsiveness can be defined as willingness of service provider to help the customers and
provide prompt service. It is compulsory for all the coffee houses to be very responsive to their
customers. There is a positive relationship between responsiveness and customers’ retention. If the
responsiveness of any coffee house is high then the customers will be satisfied with the particular
brand, so this would lead to customer retention. The coffee houses should maintain their high
standards which is promised to the customers earlier. In coffee houses responsiveness can be
measured in terms of:
o Providing good quality of coffee and good experience of the ambiance to the customers as
promised to them earlier.
o If anything goes wrong then the cafes should be prompt enough to deliver the additional services
for covering up unpleasant experience of the customers.
o Top management should take personal care of their customers and make them feel that they are
very important to them. E.g. a customer complained almost every week about the mistakes made
on his order by his nearby Starbucks cafe. The cafe used to offer a free drink coupon each time
he complained for the mistake and did not take any steps to rectify their mistakes. Tired, the
customer finally called the manager to share his concerns. Within a very short time, the
Retention & Referral Department Manager directly called the customer and assured him that
they had decided to take action to replace the store management due to the shared complaints
made by other customers. She also shared her contact details with him so that future troubles
could be addressed more quickly. The effort to put the customer experience first and to take the

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 extra mile effort by efficient and quick redressal of issues is what sets Starbucks apart in the
Coffee chain industry.

References:

o https://www.starbucks.co.uk/coffeehouse/mobile-apps/mystarbucks

o http://www.coffeeday.com/

o https://news.starbucks.com/news/starbucks-accelerates-mobile-payment-leadership-with-release-
of-enhanced-io

o http://www.hardrock.com/

o http://www.starbucks.in/

o http://smallbusiness.chron.com/cafe-pricing-strategy-2722.html

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