Pranav New York – An Analysis
By Ivan Lee, R080230
Situation Analysis
Karlo Nisce, Mark Orbos and 2 other partners were finishing their MBA at Asian Institute of Management when they opened Pranav New York at Robinson’s Galleria Mall in 2003. Pranav New York is a one-stop shop for male grooming and wellness services. The idea came to Karlo one day when he was told by a friend of a similar concept which he enjoyed when he went to New York. The idea caught Mark Orbos too and soon, both and two other partners were on their way to finalizing and opening Pranav New York, a male oriented one stop shop spa-grooming-wellness centre. The idea was to open the first such store offering the service here in the Philippines. For Karlo and Mark, it was both a business venture and an academic exercise for their Development of Enterprise course at AIM.
The Concept
Pranav New York was both the brand and the name conceptualized by the partners for their venture. Pranav coming from the Indian language meaning life force of human beings while New York was added as both symbolic from where the idea came from and to make the enterprise sound more sophisticated. They argued that the Filipino male market is hungry and is in need of an integrated grooming and wellness service establishment in the country and that Pranav will be the answer to that. It will be a seamless fusion of modern amenities, ambience and style of a full service salon and spa with the masculine atmosphere and experience of a barbershop. In short, they envisioned it to be a holistic barbershop-spa rolled into one offering superior customer service as it will provide the best service in the grooming and relaxation market for men, being the group’s target market. The partners thought that it was a unique business prospect for the Filipinos as there was no one else that was offering the same novel idea and service that Pranav New York has and will offer. This was reaffirmed by their professors and classmates at AIM when they presented the idea.
The Market Study
They proceeded with their business venture cautiously and as scientific as possible. The partners first organized a general scanning of the market where they checked the records of DTI for grooming industry in the Metro Manila area. With 363 registered hair establishments in the mega city, 82 percent were salon while 18 percent were barbershops. Noting that the population of female to male ratio in the metropolis being 1.03:1, they inferred that more males are going to the salons for their grooming services rather than the more masculine barbershop. This is because although the ratio of female to male is not that big, the ratio of salon (normally for women) and barbershop (normally for men) were an astounding 8:2. This conclusion bodes well for their business plan as it supports the idea that men are starting to be more conscious of grooming and other personal care services, at least for Metro Manila. Second, the partners held focus group discussions with industry experts where it was confirmed that there was indeed an increasing number of male customers who goes to salon for contemporary hair styling and other services. It was also shared with them that there are still male clients who are still hesitant to go to salons because these outlets connote a female-based motif. Spa industry experts other hand also shared that there was an increasing number of male clients availing of their services with numbers going up to as high as 52 percent of their clientele. Most were working professionals who want to relax and de-stress. Finally, styling and personal care experts shared that there is an increasing male customer base that puts value on grooming and wellness although it will take between 2-5 years still for it to be fully developed. Third, another FGD was organized, this time to test the acceptability of the Pranav New York male spa concept which was an astounding success with some 75 percent taking part saying that they are willing to patronize such a concept. Fourth, the partners chose and observed various barbershops, salons and spas in Metro Manila. The different establishments were chosen on the basis of location convenience and perceived market prominence which the partners deemed to be important success factors for the industry they were trying to get into. After the observation, the partners further verified industry experts’ claims that there was indeed a market for a more sophisticated male grooming and wellness services centre which are not being fulfilled by the barbershop while the same clientele are hesitant still to try and patronize female-centric salons and spas. They inferred that those male who shifted to female-centric salons was only because of the lack of alternative venue for them. With these findings, the group finally concluded that there is indeed a market in Manila for Pranav New York to capitalize on.
Starting the Business
Once the viability of the business concept was established, the partners went on to finally begin realizing their dream business venture. They began with their vision-mission statements that somehow summarized the aspirations of their business concept. Second, they began looking for a business location where they can put up the first branch of Pranav New York. The locations were based on several factors that the partners thought of as having the highest possible prevalence of the target market[1]. They then submitted proposals to 4 chosen malls located in Ortigas Center and Makati CBD area. Of the 4 malls, only Robinson’s Galleria approved their application for the business venture saying that it was a unique and promising concept whose value proposition can become one of the main features of Body Senses section which the mall was trying to develop. Before accepting, the partners then proceeded to study the location first being offered to them, a 153 square meter commercial space at the front of Body Senses section on the 3rd floor of Robinson’s Galleria West Wing. Despite objections and disapproval from their AIM professors, the partners felt that the location being offered right on the main walkway of the West Wing mall provided them with a strategic location. Furthermore, their study on Robinson’s Galleria Mall’s proved to be positive with the following findings:
a.) Adequate foot traffic for a mall numbering 90,000 to 110,000
b.) A 60-40 female to male ratio mall goer. Although this was detrimental to their business concept as their PTM are male, the partners felt that 40 percent is still a good enough possible-market percentage.
c.) Unique business concept of Pranav New York versus existing possible competitors inside the mall.
d.) A market study inside the mall indicating that the male segment at Robinson’s Galleria were from the working professionals who either goes to barbershop or salons for their grooming needs.
e.) A market study inside the mall indicating that the male segment at Robinson’s Galleria were moving to the spa from the barbershop for their regular massage services.
f.) A market study inside the mall indicating that the price tolerance of the mall goers inside Robinson’s Galleria was 250-350 pesos for a haircut and 200-600 pesos for massage services.
g.) A market study inside the mall indicating that mall goers may be receptive to the male spa concept of Pranav New York.
It should be noted here though that one of their findings in this study is that their PTM – male working professionals, are mostly concentrated on the East Wing and center position of Robinson’s Galleria rather than on the West Wing where they are being located. This was however ignored by the partners saying that effective marketing of Pranav New York should overcome this negative parameter.
The Opening
Prior to the opening, the partner’s professors visited the site and made some valuable comments and points regarding Pranav New York. These were not heeded by the partners though (perhaps due to lack of time already) and the store finally opened by November 2004.
The Result
The 3-month operation of Pranav New York was not as bright as the partners thought it would be like. By the end of the third month of operations ending January 2005, Pranav New York had already incurred 825,568 pesos net loss on top of just 303,428 sales. Total customer served was only 830 for the 3 months of operation. The partners decided to do various studies of their operations and sales to determine the cause of their losses. They concluded the following facts:
a.) In general service offerings, haircut services made up bulk of Pranav sales accounting almost half of monthly customer base. Spa services came in second although growth rate was declining month on month. Auxiliary services like hot oil treatment and nail services were growing month on month although these covered just a small fraction of total customer base. Spa-salon package was only at 6 percent of total customer base.
b.) The dominant age group going to Pranav was the 20-29 age bracket with 47.6 percent share followed by the 30-39 age bracket with a 35.6 percent. Third was the 40-49 age bracket at only 9 percent. This shows that Pranav New York was actually targeting the 20-39 age brackets which are considered to be the working professional brackets. The 20-29 bracket was cornering more of the salon services while the 30-39 bracket was cornering more of the massage services.
c.) In the salon business of Pranav New York, those who availed of the styling cut (as opposed to the classic cut) also availed of the auxiliary services. Of those who availed of the auxiliary services, 50 percent also availed of the massage services. This meant that those going for the styling cut were more likely to avail of other services Pranav has to offer thereby increasing total company sales. Styling cut however comprises only about 28 percent of total customer base but had the bigger proportionate of sales in the 20-29 age bracket. Furthermore, this lead the partners to believe that the classic cut male customers were more or less akin to the barbershop customers who want no-frills services. The styling cut customers were more or less akin to the salon goers who put a premium on grooming services.
d.) In the 3 months of operations 13.5 percent of the total customer base could be considered loyal customers (roughly about 112 customers). 60.5 percent of the loyal customer base returned twice to Pranav (roughly around 68 customers), 20 percent returned thrice and around 19 percent returned four times or more (roughly about 22 customers each). The loyal customer based also exhibited varying degree of differences as oppose to the total customer base of Pranav New York in terms of services availed although haircut services remained the top service availed. The partners concluded then that the dominant loyal customer profile of Pranav New York was that of the male working professional, aged 20-39 who valued sophistication and image, extending this to his overall wellness needs.
e.) The spa segment of Pranav was not as successful as the salon segment in attracting the PTM of Pranav as evidenced by their share of the loyal customer segment.
f.) Pranav New York was not making enough sales to finance its operations. Further analysis showed that the spa segment was in a worse position than the salon segment. The spa was generating more sales revenues but revenue per square meters was significantly lower and is also far from the break-even levels. This is in contrast to the salon services whose break-even levels on revenue per square meters turned positive from December onwards.
Restudy Analysis
With the store losing money, the partners in danger of losing their investment and worst, failing their course, the partners decided to evaluate again their market study to try and figure out where they went wrong. The first phase was to conduct a study of one of the industry leaders akin to their concept of targeting the male working professionals. They chose Roberto’s Barbershop and analyzed 4 of its outlets – two independent and two in-mall branches. Their studies yielded the following results:
a.) Majority of the clients were male comprising of almost 95% of total customers observed.
b.) Majority of the age group comprises the 40-49 age bracket (26% versus 10% for Pranav). Second is the 30-39 age bracket at 25% (versus 27% for Pranav) and third is the 20-29 age bracket at 18% (versus 54% for Pranav).
c.) The most important factor for customers is the convenience in location followed by consistency of haircut and speed of service.
d.) In-mall outlets had twice the number of customers versus independent stores.
e.) In-mall outlets were decidedly bigger than independent stores.
f.) The partners drew up 4 key success factors which include location, accessibility, volume/value driven services and economic comparison.
With these new findings, the partners concluded the following:
a.) Pranav New York Galleria branch lacked critical commonalities which drove the success of male grooming and wellness establishment such as a barbershop. This was derived from the fact that their location at the 3rd level was not an area of high foot traffic, thus less accessible to its prospective clients.
b.) Pranav New York Galleria branch did not have the essential equipments or processes to maximize revenue. This was derived from two facts: absence of barber chair inside Pranav New York constrained their ability to offer wider array of services to customers efficiently and the predominant fixed cost structure that the partners employed for their staff (versus the variable cost structure for their staff in most key competitors) constrained their working capital and did not motivate employees to up-sell high value service more aggressively (high value services are the auxiliary services that Pranav offers such as hair treatments, pedicure and manicure).
c.) Pranav New York Galleria branch was targeting the 20-39 age brackets with the 20-29 age group accounting for the biggest chunk of customer base. This is different from their competitors whose biggest market was the 30-49 age brackets.
Ultimately, the partners decided that it was not only the share of the male market that matters but also the size and viability of this market relative to the immediate location of the branch. Hence they decided to do a micro market study of Robinson’s Galleria. Their study yielded the following results:
a.) Female spending level is 90% more than males inside the mall.
b.) Test market for Pranav for female clients yielded 23 percent of its total customer base for the duration of the test market. Female clients generally reflected the same age bracket and services availed as the male market of Pranav New York.
To further back their study, they also analyze competitors within Robinson’s Galleria. The study yielded the following results:
a.) Female clients were the dominant clients of unisex salons. This reaffirmed their initial study that the foot traffic in Robinson’s Galleria was dominated by the female gender. Furthermore, there seems to be a lack of critical mass for the male gender in the store to effectively target.
b.) Pranav was only getting a 1.72 percent market share for the female gender clients while the leader was accounting for close to 27% of the female gender clients. Also, it is important to note that there seems to be skew on Robinson Galleria’s customer towards being price sensitive as price leader stores account for the bigger market share in the mall as opposed to high-end positioned stores.
c.) Females aged 20-39 was the dominant age group and most availed haircut, manicure and hair coloring services, in respective order. Males were the dominant customers for spa accounting for 60 percent of total customer base and their competitors averaging around 8 clients per day which was double of what Pranav New York has.
d.) Loyalty to stylist and technical expertise were the two most important factors for customer motivation to go back to the same salon. For spas, convenience in location and price were the two most important factors.
Conclusion
With the study and the restudy of the partners, they decided that Spa operation of Pranav New York is not sustainable as there is a lack of male critical mass in their location. They therefore decided to discontinue this service and instead focus on salon operations and reduce their lease space. Furthermore, the partners decided to realign the original concept of Pranav New York to better suit it to the findings of their market and micro-market studies.
Problem Analysis
Backed by market data, the partners wants to do away with Pranav New York’s spa segment and realign their whole business concept to better suit the market. The question now is what will now be the business concept of Pranav New York? Once you take away the spa segment, what compelling uniqueness will Pranav New York now offer its clients that will set them apart from other salon? We know that Pranav New York Galleria branch is losing money, but is it really the business concept that they have to realign? From the facts given above, the partners have singled out both the spa segment and the lack of critical mass for male customers as the culprit. How should Pranav New York respond to this and be on its way to profitability?
Alternatives Generation
Karlo, Mark and partners have several options they can take:
a.) Proceed as plan and cut the spa segment of Pranav New York. Revaluate the business concept of Pranav New York and concentrate on salon services. Perhaps they can find their competitive advantage in certain hairstyles like contemporary cut, punk cut or the American look. Make sure to build a loyal customer base based on the results of the study above.
b.) The partners can still maintain the business concept of Pranav New York by maintaining the spa segment. They can close down the Galleria branch and relocate to some other place where they can achieve critical mass for male customers. Consider new malls in and around the city. Serendra and Bonifacio High Street seem to be good candidates where there is a prevalence of both working professionals and health conscious individuals. Make sure that the partners study the new location first and not just settle on a questionable place just because it’s the only mall or place that approves them.
c.) They can refocus the PTM of Pranav New York to unisex instead of just the male gender and still maintain its business concept of offering an overall wellness and grooming service center. This way, they generate enough clients, target the gender that spends higher for the services that they are offering and somehow maintain their competitive uniqueness.
d.) Close down Pranav New York and think of a better concept since if you take out the spa segment and target the unisex market, then Pranav New York will just be another high end salon service.
Decision Analysis
The best alternative for Pranav New York is to take alternatives B and C. They can cater not exclusively to male clients but promote themselves as a unisex wellness and grooming center thereby targeting a wider customer base clientele. They should also rethink their strategy of setting up at Robinson’s Galleria and consider other locations where their PTM of working professionals who are conscious of wellness is abundant. Finally, they should rethink how they run their operations and make it as efficient as possible. They should consider revenue per square meter as a barometer of introducing products and services. Efficient maximization of space is one of the keys to maximizing sales and profitability in the wellness and grooming industry.
If the partners decide to take option A, then they effectively give up what has made them compelling. It is true that they compete as just one of the many salons out in the market or they can even master a certain unique characteristic for their brand but is it sustainable? Take Toni and Guy for instance who pioneered the Korean look in the country. They are still unique in their own way despite the influx of “I am a Korean brand too” salons because they keep Korean hair artists inside their outlets which in turn make them more authentic.
Taking just option B does leave out one of the most glaring conclusions the partners came across in their market study – that women are more incline to avail of wellness and grooming services and that they tend to spend more (about 90% more!) than men. Leaving this possible customer base can be a life threatening issue to any business establishment in the industry.
Taking just option C locks them in the micro-market clientele of Robinson’s Galleria which has proven to be not so conducive and receptive to their type of business concept. This is reflective of their findings that the mall does not generate enough foot traffic versus the PTM that they are after, that the clientele of Robinson’s Galleria is more skewed towards the price sensitive bunch, and that their present location in Robinson’s Galleria is not highly accessible – all negative points versus the key success factors that the partners have identified in their industry.
Option D is a last resort and it just means that they are giving up on the idea. I for one find the idea of a male-based grooming and wellness center kind of appealing – and it seems that I am not the only one as their market studies have shown that it is.
By taking a mixture of option B and C, the partners are able to positively mix the findings of their study, their experience with Pranav New York and the uniqueness of their business concept. There are tweaks that were made, true, but the essence of all three are still addressed. Some key factors that they have to consider in their market study that will ultimately help them craft a viable action plan to implement this decision are:
a.) Hair styling is the dominant service that they are known for.
b.) Spa segment is a losing business but has been doing well for others. Managing how it is operated maybe the key to its success.
c.) 20-39 is the dominant age bracket that avails of Pranav New York services with 20-29 accounting for the biggest chunk. These people are the working professionals.
d.) Women tend to frequent wellness and grooming services more often than males, plus they are more willing to pay more than men.
e.) In-mall outlets tend to have more customers due to higher foot traffic and it being more accessible than independent outlets.
f.) Sales maximization per square meter is very important in the business.
Action Analysis
In pursuing this strategy, Karlo and Mark will need to redefine first their concept for Pranav New York as a male grooming-wellness-spa business. The reality is that as good and as unique the idea is, it is not catching up fast with the target market and the female segment that avails of the service is too good to pass up. Pranav New York then should also consider trying to attract this segment without losing much of the uniqueness it has in its essence. They can in fact position the company as a unisex grooming-wellness-spa all rolled into one but with specialize services catering to men (such as shaving, men styled pedicure, etc...). With this, they retain their unique qualities and offerings but the same time, not pass up on the female segment of the market. The spa segment will thus be retained.
With this business strategy, Pranav New York should revisit how they market their services and how they operate to ensure that sales and profitability is maximized. A complete revamp of their product and services should be put into place to consider the female market segment. The look of the old Pranav New York should be changed to accommodate a more unisex type look as oppose to a barbershop type ambience. To counter the losing spa business segment, the partners should think of a way to maximize the space that will enable them to do multiple services in one location – much like how a barber’s chair is optimized in its use to deliver better revenue per square feet. Perhaps a customized chair that easily retracts to become a massage bed. Thus, it becomes the main tool of Pranav in offering its customers all around grooming and wellness service. A retractable divider can be installed on certain area to ensure privacy for those wanting massage services. Other marketing initiatives to change how people perceive Pranav as well as to get people to know Pranav should also be implemented (I.e. in-mall advertising, flyers, coupon discounting promotions). The partners should next look into how they operate in terms of manpower. Do they have more than enough manpower or short of manpower? How do they realign their salaries to reflect the industry way of compensation? Perhaps they can pattern their pay and reward system much like how salons do theirs – more variable than fix which then gives their employees the drive to up sell and cross sell Pranav’s multi services and at the same time, hedge the company during slow down in business.
Lastly, the group should re-evaluate other areas that are more conducive to the type of service that they are operating. Proper location and micro-market study should be done first prior to choosing to relocate. Important factors to consider are high foot traffic of PTM (now it is just working professionals aged 20-39 who are conscious about their overall grooming and wellness), accessibility to the store, cost of space and demographics of area customers (not price sensitive).
With this, Pranav can re-launch itself anew. True, additional capital and investments will be required of the partners but it is nothing compared to the possible success they can get out of Pranav New York. This is a good business model to just go to waste and further time and investments are needed to sharpen the business venture. If the partners give up now, either with the business or the concept itself, then it will just be another case of a unique idea presented the wrong way and targeting the wrong customers.
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