Pranav Case Analysis by Dr. Lorelie Perez-Miranda

PRANAV  REPORT

By: Loralie  Perez-Miranda

AGSB  MBAH  10B

Submitted March 6, 2013, 10:58pm 

Initially when the owners opened Pranav, they thought they had found an emerging market in Male Spas. Their innovation was to offer spa services in a masculine atmosphere. Services would be rendered by women offering haircuts, massages, manicure, pedicure, etc. Their set-up was completely different from the traditional barbershop which men have grown accustomed to.
 
Market research done by the owners was generally incomplete. And what they did have, they did not address all angles despite the suggestions of their mentors.
 
Location
 
Their location di not have enough traffic within the mall. It was placed on the 3rd floor, which would not encourage men from the outside to walk in. Based on their research, clients went to spas and barbershops based on accessibility. And since their target was men, this provided less visibility and accessibility. Men in general walking within the mall are usually accompanied by their wives / girlfriends or families and are rarely alone.

 Ignoring the Female Market

Since men are usually accompanied by their female partners, most of the time they would want to spend the time together. It is usually the women who direct a large part of spending power.

 But since their focus and objective was to open a spa for men inside a mall, they failed to consider the behaviour of the men.

 In addition, the female market spends more than the men on spa services therefore the possibility of this income has been lost. The business would have fared better as a unisex spa.


Removing Familiar Comforts

Although in general they wanted a "masculine" look for the spa, there were comforts men usually gain from a barber shop that were removed or taken for granted.

 Comfortable barber chairs that swivel and allows for more than 1 treatment to be done were replaced with cheaper and less versatile chairs with less space available. Women were placed to do all treatments with hardly any experience in shaving men and giving real barber type haircuts..


What happened next

 Eventually, the owners of Pranav had to close shop. Their cash flow was not enough to cover their expenditures.

Location and the untapped female market would have drastically turned their business around were they willing to change their strategy.


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Loralie E.M. Perez-Miranda,M.D.,DPAFP

Pranav Case Analysis by Dr. Dimaano

PRANAV CASE ANALYSIS

Ma. Elsie M. Dimaano, MD

MBAH 10B

Submitted to Prof Jorge Saguinsin

SITUATION.

The two articles about Pranav NY in Prof Jorge's casebook describes Karlo Nisce and Mark Orbos, both MBA students at the Asian Institute of Management, embarking on a salon-spa business, a one stop shop for grooming and wellness for the male market as part of their Management Research Report (MRR) which they had to complete prior to graduation.  Unfortunately, after three months of operation, it posted a PhP 825,568.00 loss instead of profits.

The status of the company was examined in detail in the articles and a number of problems were revealed.

PROBLEMS.

After conducting research, the following were identified as reasons why Pranav NY was losing:

1.  Pranav NY's PTM.
The micro- market analysis showed that focusing solely on the male market and neglecting the female market segment was not a good idea because it was this market segment that spends more (91%) on grooming services.  Adding to this, there is predominance of females in Galleria (61 females :39 males) hence there will be real difficulty in acquiring the critical mass of male customers.

2.  Location of Pranav NY in Galleria.
It was only Robinson's Galleria who approved Pranav NY's application in July 2004 because Galleria management found the Pranav NY concept unique, promising, and with a potential of becoming one of their main features in the Body Senses section of the mall.
Maybe Karlo and Mark got excited because of what Galleria management said or maybe they did not have any other choice but put up Pranav NY where management offered because they were pressed for time and wanted to graduate. 

They should have looked at the whole place first, observed, and gathered data on customer dynamics and demography.  In short, they should have done a meticulous micro-market analysis before they talked to Galleria management.
I was just wondering why they did not know that their PTM was on the opposite end of where they located Pranav NY.

3.  Pricing.
If the two entrepreneurs really did their homework well before they ventured into the business, they should have observed that there is a higher market share of establishments with lower prices and those with high-end positioning lagged behind.  This should have given them an idea about the price sensitivity of Galleria's micro-market.

4.  Cost Structure.
Pranav NY's cost structure was also flawed.  Their fixed cost was a whopping 96% of which 36% was attributed to fixed salaries.  As was explicitly said in the articles, this implied that Pranav NY had to shoulder the fixed cost regardless of customer volume levels thereby straining working capital and cash flow. 

Corollary to this, Pranav NY's employees will not really be motivated to sell the high volume services because whether they do or not, they will get the same compensation anyway.  Where is the incentive at that?

ALTERNATIVES.
1.  To put a stop to further losses, the two entrepreneurs can close the whole business entirely. 

2.  Discontinue the spa since it is incurring about PhP 24,270.00 monthly.  Maintaining it will mean additional losses because Pranav NY did not have the critical volume they need and has not established itself in the micro-market of Galleria.

3.  Re-evaluate the vision and address the loopholes or flaws seen after research and re-evaluation.

DECISION.

I can hear my FINMAN professor telling our class, closing shop is not an option if you come from AGSB.  We only need to evaluate and think of solutions.  We should not be disheartened by failures for they are learning experiences.  Make sure the first thing you do in the morning is look and analyze the balance sheet in the office so you will not be caught off guard and so that you can address problems even before they come up.

This being said, the best option then is number 3, re-evaluate and address the loopholes and flaws seen after research and evaluation.

ACTION.

The following are action plans, recommendations / suggestions to Mark and Karlo:

1.  Pranav NY should look back and re-evaluate their vision of catering to only the male market because the female market is too big and profitable to ignore. Corollary to this, they should not be too gender-specific with regards to staffing.  The entrepreneurs should provide equal rights to everyone so long as they have the technical expertise, right frame of mind, love of work, honesty, and other qualities employers look for in employees.  Who knows maybe getting blind people for the spa business will project a better image for them because they are helping PWDs to earn a living. 

2.  Relocating Pranav NY in Galleria where there is high foot traffic is ideal but I am not sure if there is a provision regarding this in their contract with Galleria.  They have to know the stipulations in the contract before deciding if they can shoulder relocation costs. If the entrepreneurs do not have any other option but to stay where they are, then Mark and Karlo should make sure that people know about them. Market! Market! Market! This maybe done through flyers, website, social networking media to cut on costs or probably redesign their place so people will get curious and would want to take a look. 
Maybe Pranav NY can differentiate itself from the rest and make people go to them through innovative promotions or gimmicks or value-added services like home service.
The owners might also gain from asking their staff who have been in the grooming and wellness business for quite some time for suggestions.

3.  Pranav NY's prices should be re-evaluated to make prices more competitive in a price sensitive market. Preparing bundle packages, student discounts, barkada or family packages might do wonders.
It is likewise advisable that Mark and Karlo think about ways to maintain and earn customer loyalty.  Loyalty cards, Pranav NY rewards card, gift certificates, buy 1 take 1 promos or sending customers e-greeting cards during special occasions are some examples of winning them.

4.  The current cost structure of Pranav NY should be restructured.  The variable compensation structure will help Pranav NY address two problems, namely: their high fixed costs and unmotivated staff/employees.
The variable compensation structure in which the staff/ employees are given a fixed percentage commission for the service customers avail gives incentive and motivation to the staff/ employees to push for the high value services because the more they are able to sell, the more compensation they will get.  This structure will likewise help Pranav NY minimize and lower fixed cost especially in times of low sales.

5.  Equipment evaluation and the floor area should likewise be assessed.
Salon chairs that were immovable and quite restricting were used in Pranav NY instead of barbers' chairs because they were cheap.  But, it should be taken into consideration that this is where you get customers in the mood to try out the other services Pranav NY has to offer.  I think they should just auction the salon chairs and buy barbers' chairs because the barbers' chairs are crucial for the business.  Or, they can have a custom-built chair-massage bed made exclusively for Pranav NY.  The custom built chair-bed can either be used in the salon or spa section, whatever section will be needing more and depending on what customers want.

In order to minimize costs and maximize profits, Karlo and Mark should start computing revenue per sqm.  Efficient use of space maximizes sales hence profits.  This does not mean putting more chairs per square inch because we now that that will mean narrow working areas in between chairs and customers will not like that.  We want our customers relaxed and the longer they stay in the establishment, the higher the probability that they will avail of other services.

I am not sure why the article said that the spa was too cold because this should not have been a problem in the first place if the owners are hands-on in the business. If they conducted market research before venturing to the business, they would know what kind of scent, ambience, temperature customers want.

6.  Partnership with another company for the spa business is another thing to consider if Mark and Karlo can no longer handle everything on their own.

In conclusion, Karlo and Mark can learn from one of the teachings of an ancient Chinese military general, philosopher, and strategist, Sun Tzu.  He said, "the general who wins the battle makes many calculations in his temple before the battle is fought.  The general who loses makes but few calculations beforehand."

The two entrepreneurs though should not be disheartened and should remember Steve Jobs when he said, "sometimes when you innovate, you make mistakes. It is best to admit them quickly and get on with improving your other innovations."


Sent from my iPad

Pranav case analysis by Dr. Yes

CASE ANALYSIS ON PRANAV NEW YORK

Pranav New York was the first male salon and spa in the Philippines that offered fusion of the modern ambiance, amenities and style of a full service salon and spa with the masculine atmosphere of a barbershop. The establishment was the project of Mark Obson and Karlo Nisce, both students of Asian Institute of Management (AIM) taking up Masters in Business Management (MBA). Together with their two partners, the salon and spa was formally opened to the public on November 2004 and was located at the 3^rd floor of Robinson's Galleria mall fronting the west wing along EDSA.

If one will look back to the groups' venture in putting up this business, we can say that they were able to do the proper procedures. First was the development of idea, then its conceptualization and preparation with viability verification processes like general scanning, interview with industry experts, exploratory focused group discussion and general immersion exercises wherein Mark and Karlo personally observed and experienced the service delivery of their would be competitors. After they gather the data and address the issues raised, they were able to formulate the groups' vision and mission. Finding the business location was not smooth sailing because their Management Research Report (MRR) mentors at AIM did not give them the approval because they did not have the proper location study. They also admitted that no sufficient market data was gathered on the customer dynamics even though they were able to do selected location analysis on the following: 1) foot traffic, 2) demographic mix, 3) micro-market competitors, 4) exploratory micro-market survey and 5) male market concentration. However, the partners push through with the plan so they could open Pranav New York to the public by December which they believe is a good month for opening new businesses. Just before the opening, one of the professors, Dr. Morato Jr. made several comments, 1) can an all female crew would appeal to the "macho" psychographic target customer of Pranav, if they are trained in shaving men? 2) The chairs are not barber chairs. 3) The spaces between the chairs are too narrow. 4) The spa was too cold. 5) The office space blocked some of the frontal window and 6) the location in the third floor did not seem conducive to an all male patronage.

The initial euphoria on the business results soon faded three months from its opening with Pranav New York losses amounting to Php825, 568. Analysis of the data on existing operations was mainly due to weak sales and not enough generation of the volume it needed to finance its operations. After realization that they were losing, Mark and Karlo did an analysis based on the data they have from the existing operations. These data includes their offered services to the customers as to what were mostly availed of as well as differentiation if the service was salon related or spa related. They also studied the demographics (age bracket and status level classification) of clientele and found out that they were gaining ground from the male customers' age 20-49years belonging in the working professional segment. It was also noted that from these data that the same age group of clients avail of both salon and spa services. Salon services were from males within 20-29 years old (53.63%) and spa services were from 30-39 years old (40.45%). Combined salon and spa segments services were most frequently rendered to the 20 – 29 year old bracket which made up 65.5% of the total number of customers. They also did a Customer loyalty assessment with a combined 13.49% (visit of two or more times) and could be the only factor that made an impact on the number of customers they had, that is through "word of mouth" campaign because no marketing nor advertisement was done after the initial survey or after the viability verification research as disclosed to them by the Leasing Officer of Robinsons Galleria. The profitability assessment also was not very good for it yielded a negative profit/cost ratio for the first three months which depleted the enterprises' resources. Initially, the given location of the enterprise was not frequently visited by their target market as noticed by their mentor. Personally speaking I would not go out of my way if I'll go to a mall for a haircut or a spa treatment. I'd rather go to a barbershop near where I live to be able to take a shower right away after the haircut because remnants of cut hair are itchy and very annoying. If a spa treatment is needed, I'll have it at home where I can relax very much longer in the comfort of my own room instead of having it in a shopping center and be stressed out again battling the traffic.

SUGGESTIONS:

1.      First and foremost, they should have listened to their mentors, but the damage has been done so….

2.      Relocating the shop to a more frequently visited area in the mall by the male population (if they will hold on to this concept) will help the business even if there is not enough marketing and advertisement done.

3.      Consider a mixed demographic clientele instead of targeting only the male population. After all, females spend more than males on grooming services by more than 90% on the average.

4.      The partners should consider on adjusting their prices to a sensitive level and not concentrate on the high end customers for them to be competitive in the micro- market at Robinsons' Galleria.

5.      If they would still hold on to the all male clientele, barber's chair should be placed instead of the narrow, immovable lounge chair. Together with this concept, they should drop the spa services mainly because it occupies much of the rented space and the profit/cost ratio on this segment of the business is not favorable.

ENTREPRENEURSHIP                                                                        Submitted by:

PROF. JORGE SAGUINSIN                                                                 Abel M. Villamayor

BUSINESSMAN / ENTREPRENEUR                                                 AGSB – MBAH 10B           

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