Business Optimization Archives • Integrated Insight

Staffing Optimization: Re-Evaluating Labor Needs in a Post-COVID World

by Susan Dekker, VP, Integrated Insight

COVID-19 has impacted workforce economics drastically, particularly for service-based businesses. Reports from the Bureau of Labor Statistics are showing that the real hourly wage rate for leisure and hospitality was up 9% in December compared to the pre-pandemic level. This drastic increase in wage pressure puts emphasis on the importance of operational efficiency and staffing optimization measures in the industry.

Analytically assessing staffing levels is crucial to achieving a good customer experience while minimizing labor costs, particularly amidst heightened customer demand for post-COVID activities.

Developing workload models based on customer demand profiles allow businesses to staff and schedule locations efficiently.
These models will be most effective in operational, transaction-based roles, and include the following steps:

1. Identify customer demand.

2. Measure capacity required.

3. Understand business nuances.

4. Staff and schedule appropriately.

5. Maximize operational efficiency.

Let's take a look.

1. Identify customer demand.

How many customers do you expect? How does this vary by time of day, day of week, or time of year?

As with any operational business problem, always start with the customer and their needs.

Understand the volume of customers demanding the product or service at any particular time of day. For example, a restaurant may see sixty groups dining per hour during the busy lunch period, with less than ten groups mid-afternoon between meal periods.

There’s likely historical data that’s already available which can indicate demand such as historic point of sale transactions, wait times, customer entries into a venue, etc. Analyze how this demand changes based on different seasonal offerings or customer demographics.

While COVID has affected customer demand, comparing data from the past couple months with historical data from 2019 and earlier can provide useful context for the transition back to “normal.”

2. Measure capacity required.

How long does it take to process each customer?

Next, calculate how many resources are needed to meet customer demand. This is accomplished by understanding the amount of time it takes to process each customer or party, known as the transaction time. Be sure to analyze both the distribution of transaction times as well as the average. Understanding what creates a long transaction could be an opportunity for process refinement.

Ideally, transaction time would be tracked systematically – for example, recording the time the first item was scanned at a POS and the time payment was completely finished to represent the start and finish of the transaction time. However, in-person observations can be used if this information is not available, and also used to validate the system-based transaction times (e.g., bagging items may not be captured in the system transaction time but does require the employee’s time).

Apply these expected transaction times to the respective customer volumes to translate this to workload. Also be sure to capture any additional non-transaction-based workload, such as restocking or time pre-opening/post-closing.

3. Understand business nuances.

What business rules must be met? What service levels are desired?

There are typically external or business constraints that may affect staffing levels. This may include the minimum or maximum number of hours an employee can work, requirements on certain certifications, or minimum staffing levels. These nuances will vary by line of business, so ensure you seek counsel from operational leaders.

Service levels will also inform how much capacity is needed. What is an acceptable wait time for your customers? What is the maximum wait time customers will accept? Be sure the capacity noted can accommodate natural fluctuations in demand to avoid excessive wait times.

4. Staff and schedule appropriately.

Do the scheduled labor resources match the workload need?

After understanding the customer demand, required capacity, and business nuances, create a staffing plan and schedule.

Ideally, the staffing levels throughout the day should match the forecasted calculated workload. This may require a mix of part-time and full-time shifts to meet the peaks and valleys of the customer demand.

5. Maximize operational efficiency.

What pain points in the process can you reduce or eliminate?

Take the staffing model to the next level by optimizing the process. This could include opportunities like:

- Adjusting/shifting demand: Influencing customer demand can spread customers more evenly across resources or throughout the day.
- Reducing transaction time: Increase the number of customers that can be processed by a single employee by reducing the time it takes.
- Eliminate delays: Identify times where customers or employees are waiting for a process, and brainstorm ways to reduce or eliminate these delays.
- Modify facility layouts: Often, slight changes to a facility layout can make a process more intuitive for a customer, and then can result in a lower transaction time.
- Optimize communication: Add signage or increase communication to reduce frustration and ease decision making, creating a better experience for customers.

Ultimately, customer demand, expectations, and behavior will continue to evolve over the next year or so. As additional data becomes available and as customer volumes begin to stabilize to previous numbers, continually revisit staffing models so they reflect the most recent operation.

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Foundational Approaches to Achieve Operational Efficiency

How To Conduct An Efficiency Summit

Identifying Safe Reopening Strategies for Ski Resorts Using Agent-Based Simulation

Finding Operational Efficiency in a COVID-19 World and Beyond

Optimizing Restaurant Space To Increase Sales Post-COVID-19

Optimizing Restaurant Space To Increase Sales During COVID-19

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Solving Elevator Transportation During COVID-19 With Simulation Modeling

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How To Maximize Restaurant Throughput By Minimizing Table Turn Time

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How to Determine Operational Capacity in a Covid-19 World

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How Agent-Based Simulation Can Help Reduce Impact of Queue Management Post COVID-19

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Restaurant Happy Hour Pricing: How to Improve Profit Margins

Business Optimization, Pricing and Revenue Management

by Ryan Biesecker, Senior Consultant

Restaurants and bars already operate on razor-thin margins in a highly competitive industry. In order to survive, operators need to execute discounting tactics such as a happy hour thoughtfully.

Restaurants all over the world have offered discounted pricing on alcoholic beverages, and sometimes food, before dinner since at least the 1920’s. Today, a good happy hour pricing strategy will drive customers to bars and restaurants. The premise is simple: offer discounted prices at a quiet hour to attract customers. Just because the practice is common and straightforward, however, doesn’t make it universally profitable.

Here's How Restaurants and Bars Can Execute Profitable Happy Hours:

1. Identify Low Volume Days and Hours That Need Additional Demand

2. Assess Which Food and Drink Offerings to Discount and by How Much

3. Communicate the Offer to Customers to Bring Them In

4. Evaluate the Happy Hour Regularly and Adjust As Needed

1. Identify Low Volume Days and Hours That Need Additional Demand

In order to set a happy hour, restaurant operators need to first identify when it should be offered. A common period is between 5 – 6 p.m., but that doesn’t make it right for every bar and restaurant. A good happy hour pricing strategy is timed right for the location it’s offered in. Use the following tips to determine the “right” time is for a happy hour.

How to Measure Demand

Operators should gather date, time, and revenue of transactions from their POS system. Then, organize these transactions by the day of week and time of day. Some period of time should stand out as lower demand than others: these will be the best times for the operator to discount prices. Don’t forget to measure the average checks during these periods before choosing a time to discount. If many customers are already paying full price, discounts may hurt more than help.

If a happy hour is offered during busy hours, the restaurant may overflow with demand that operations can’t handle. Additionally, a happy hour during already busy times will likely dilute the profitability of those who would have come anyways.

Determine Length of the Happy Hour

With knowledge of the restaurant’s low-volume periods, operators should decide how long to run the offer. Contrary to its namesake, a happy hour should be exactly as long as it needs to be. If the location needs volume boosted for three hours leading up to dinner, so be it. Be careful not to offer for too long, however, as extended discounts can reset price expectations.

Considerations Vary by Location

Operators should also consider competition and environment when determining happy hour timing, and whether the restaurant needs one at all.

Competition can be healthy or harmful in this instance. A taco shop and a neighboring bar can partner up to offer a happy hour at the same time: one offers discounted food and the other offers discounted drinks, attracting customers to both businesses simultaneously. On the other hand, if multiple restaurants offer a similar happy hour within a few blocks of each other, their offers will directly compete, forcing customers to choose.

Consider the location’s surrounding environment as well. Is the restaurant in a banking district where employees get off work at 5p.m. sharp? Or is it in a neighborhood where families can walk to get a bite in the afternoon? For instance, take a restaurant located near a factory where workers are covering three shifts. That unusual labor market might create demand from 11PM-Midnight when the second shift is getting off work. Restaurant owners should rely on data and local knowledge to identify these areas by location.

Finally, operators should weigh the impact of not offering a happy hour at all. If a restaurant has lines out the door at all operating hours, discounting food and drinks is more likely to harm margins than help.

2. Assess Which Food and Drink Offerings to Discount and by How Much

Menu engineering is the best method to identify happy hour menu pricing decisions. See the article by Stephen Davis, Integrated Insight’s VP of Pricing and Revenue Services, for detailed menu engineering instructions.

Once the menu items are categorized as Stars, Work Horses, Puzzles, or Dogs, choose a diverse set of beverages that are mostly Puzzles. As a reminder, Puzzles are highly profitable but with low volume. The high profitability leaves room for these alcoholic beverages to be discounted and remain profitable for the restaurant. However, the offer might not be enticing to a large enough crowd if only disparate drinks are thrown on a happy hour menu. Don’t be afraid to bolster the menu with one or two Stars (popular items with high profitability) at less of a discount.

Not all locations need to offer discounted food during a happy hour. Cheap drinks may be enough to get customers in the door. Start by only offering discounted drinks, then add appetizers and other sharables if more volume is needed or checks are too small. Be sure to assess the food items’ menu engineering category as well and follow the same practice as with beverages for a strong happy hour pricing strategy.

3. Communicate the Offer to Customers to Bring Them In

A happy hour special will dilute profit margins if a restaurant offers discounted prices without messaging. Communicate the new happy hour outside the restaurant to pull in the volume needed. This response to discounted prices will need to come from existing customers visiting frequently and at quieter hours and from attracting new customers.

There are opportunities to market the happy hour offer to in-house customers without disparaging the value of full price menu items. Servers can message the offer when delivering the signed receipt with a warming, “come back next week for happy hour!” Additional opportunities include leveraging CRM to send follow-up texts or emails to restaurant guests with the happy hour promotion.

Outside of the restaurant, use organic online channels and word-of-mouth to attract new customers. Have employees encourage customers to bring their friends to generate word-of-mouth demand. Once launched, ask the occasional customer how they heard about the happy hour menu to better understand what works.

Wherever the communication is distributed, ensure the message is clear by sharing a takeaway detail beyond the name “happy hour.” For example, “$5 Draft Beers Every Tuesday!” states the price, product, frequency, and day of week in a memorable message that’s easy to memorize and fits on a receipt.

4. Evaluate the Happy Hour Regularly and Adjust As Needed

At the end of the day, the key to continued profitability is to ensure the happy hour pricing strategy performs as intended. Operators should set goals with several Key Performance Metrics (KPIs) and return to them on at least a monthly basis. While gross margin should be an ultimate metric for profitability, transactions/hour, revenue per hour, table turn time, total food cost, and operating expenses also play a key role.

Customers are often willing to share feedback as well, which can inform discounting decisions. Listen to their thoughts but be sure to take them with a grain of salt. For example, a regular might say there aren’t enough discounts, but return to purchase discounted items week after week. On the other hand, if customers complain their favorite item isn’t discounted for happy hour and food sales are low during that time, consider meeting them halfway.

Be prepared to pivot tactics as needed but be careful not to change too drastically or too often. Maintaining a strong value message with customers is key, and customers will be unwilling to keep up if the days, hours, and offers all change frequently.

Supporting Your New Happy Hour Strategy

Consider other operational support needed to support the new happy hour. Maintain staffing and inventory to handle higher volumes. The last thing a restaurant needs is to sell out of resources at a low price, leaving the full-paying customers with less options.

Identify the best happy hour times, choose profitable food and drinks to discount, message the offer, and measure performance. Restauranteurs can use these tools to confidently execute a happy hour strategy that works well for both them and their customers.

For more information on pricing strategy and how we partner with brands across the globe, please contact us at info@integratedinsight.com.

How the Burden of Choice Impacts Your Customers

Your customers can feel immobilized by the number of choices presented to them. The ultimate balance any company should aim to strike is the one between consumer appeal and higher sales and revenues.

How Hoteliers Can Optimize Revenue with Post-COVID Demand

As hoteliers look to capture limited demand and maintain yields during lingering COVID-19 impacts, optimizing yield on each guest is critical.

Customer Loyalty Programs: The Ultimate Guide

Loyalty programs have become commonplace for retailers in today’s market. Determining the correct program to implement can make a difference in the value of the loyalty program for consumers and your business.

How Can We Help?

Schedule a free consultation to discuss your business needs.

Schedule Consultation

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What We Do New Business Strategy Business Optimization Research & Consumer Insights

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How the Burden of Choice Impacts Your Customers

Business Optimization, Marketing

by Jessica Dreiling, Sr. Consultant, Integrated Insight

Choice is simultaneously a blessing and a curse. We all want options, but often become paralyzed by the number of variables present. In a similar fashion, your customers can feel immobilized by the number of choices presented to them. This concept of “choice overload” has been understood as a cognitive impairment in which people have a difficult time making a decision when faced with many options.

During a recent shopping trip to furnish a house, my husband became paralyzed by the endless choices needed to purchase a sectional: style, shape, design, upholstery, structure, and stiffness. He spent an entire weekend researching options. Several weeks later, he still hasn’t picked one.

I am certain that if I had presented him with two couch options and said, “Pick one; which do you like better?” He would have easily chosen one and felt happy about it.

While large purchases have significant trade-offs when making choices, choice overload impacts small purchasing decisions as well.

A recent consumer report discovered that 54% of consumers experience so much frustration that they abandon e-commerce sites if they can’t choose. 42% admitted to abandoning a planned purchase altogether because there was too much choice.

If consumers cannot make a decision, it is extremely unlikely that they will make a purchase.

Simplifying Products in Travel and Tourism

It is very easy for consumers to experience choice overload when planning vacations. Whether a customer is in market filling spare time or still planning a vacation, make it easy for them to choose your experience by simplifying the presentation of your products.

In most cases, we have found it beneficial for our clients to streamline products down to a few core options. We recommend presenting options in simple, predefined packages or bundles, in a progression of features and price. Simplifying the number of options will help to reduce the burden on the consumer and clarify the value proposition. A menu of three options is easy for customers to evaluate.

A regional tourist destination with multiple attractions illustrates this point. This destination offers a variety of attractions, themed experiences, retail, and food and beverage. The options to purchase an experience online were overwhelming, with dozens of varieties of attraction combos and upgrades being presented together. This contributed to a perilous cart abandonment rate.

By reducing the number of products presented in the e-commerce funnel to three of the most demanded product combinations, the customer was presented with a clear “good, better, best” value proposition that facilitated decision making and improved online conversion by double digits.

Simplification Can Improve the Bottom Line for Restaurants

In the face of the COVID-19 pandemic, restaurants were forced to simplify in order to reduce costs. Simplification involved fewer moving parts and the ability to be significantly more productive. This required less labor, fewer deliveries, lower waste, and improved execution. It also eliminated broad and complex menus that were difficult for restaurants to execute profitability and consistently.

Restaurants realized that a menu does not need to be complex to be compelling. By reducing menus down to the most demanded items, patrons spent less time deciphering options, which ultimately increased table turn time, throughput, and profitability.

Fast-food chain In-N-Out Burger has been deemed the master of simplicity with a menu offering comprised of four product categories: burgers, fries, shakes and drinks. Out of the four categories, only two (burgers and fries) require any real processing at the point of purchase.

Without a complex menu, the average order time per customer is reduced to around 60 seconds. Additionally, the burger chain does not have the typical variability in purchases, standardizing process flows and minimizing bottlenecks. Keeping the menu simple and streamlined has additional operational impacts, such as improved customer service, maximizing labor and machine utilization, and reduced waste.

Ultimately, trying to be all things to all people does not mean you will be more profitable.

Understanding Your Customer

So, how much choice should you provide customers? The ultimate balance any company should aim to strike is the one between consumer appeal and higher sales and revenues. Reaching that goal requires measuring what matters and taking action to improve those metrics.

faucet is leaking with cash because company is cutting way to profitability with their revenue strategy

You Can’t Cut Your Way To Profitability – Rethink Your Revenue Strategy

Business Optimization, Pricing and Revenue Management

In a downturn, many companies make severe cost cuts that sacrifice total revenue and profit margin.

Customer Loyalty Programs: The Ultimate Guide

Business Optimization, Marketing, Pricing and Revenue Management

How Can We Help?

Schedule a free consultation to discuss your business needs.

Schedule Consultation

About

Integrated Insight, Inc. helps organizations out-behave the competition with consumer insights and robust analytics.

What We Do New Business Strategy Business Optimization Research & Consumer Insights

Who We Are Our Team Testimonials

Contact (352) 988-3490 info@integratedinsight.com

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How Hoteliers Can Optimize Revenue with Post-COVID Demand

Business Optimization, Pricing and Revenue Management

by Stephen Davis, VP of Pricing and Revenue Services

As hoteliers look to capture limited demand and maintain yields during lingering COVID-19 impacts, optimizing yield on each guest is critical. Too often hoteliers act as facilitators, ensuring a great experience but not treating amenities as potential to capture additional revenue. From bundling vacation packages during the booking process, to making it easy for guests to purchase commodities while visiting, revenue optimization strategies that stretch beyond room revenue may make the difference between profit and loss during a potentially tumultuous year. Let's look at how hoteliers can optimize revenue with post-COVID demand.

1. State of the Hotel Industry Recap

2. Revenue Generation Strategies to Make the Most of Every Guest

3. Efficient Marketing Strategies to Drive Demand

4. Sales Channel Strategies for Sustainable Growth

1. State of the Hotel Industry

Though the recovery from COVID-19 is still ongoing, the U.S. recorded its highest monthly performance levels in May 2021 since the beginning of the pandemic, according to data from STR.

Gross operating profit for U.S. hotels reached 70% of the comparable 2019 level, according to STR‘s May 2021 monthly P&L data release. While demand, revenues and GOP continue to uptick, labor spending remained flat from the previous month at 64%.

Travel volumes are expected to be nearly fully recovered to pre-pandemic levels this Independence Day (July 1–5) as more than 47.7 million Americans plan to travel.

While the improvement is encouraging, many hotels are still experiencing financial difficulty, and even more are seeing staffing issues as evidenced by the stagnant rate of labor costs.

Hoteliers are seeing an increase in demand but need to optimize RevPAR potential by utilizing revenue generation strategies to make the most of every guest, particularly as there is an opportunity to capitalize on the pent up demand expected in the summer months.

2. Revenue Generating Strategies to Make the Most of Every Guest

The potential to drive revenue does not end once a room is booked. On-property revenue opportunities should be a focus for every hotel and resort. Not only does it improve the bottom line, it also enhances the guest experience. Opportunities include bundling, upgradable amenities, and food and beverage optimization.

Bundling

Packaging and bundling provide an excellent opportunity to create a holistic experience with added value. The package can be promoted with a savings message to the guest. Packaged vacations relieve travelers of decision making once their vacation starts, which can provide a more enjoyable experience as well as capture higher revenue per room night.

An example of a bundled package message may be, “book three nights and receive complimentary transportation from the airport to the hotel for just your immediate party.” The inherent savings of not having to pay for a taxi or shared ride service is clear to the guest.

Another example may be, “book three nights and receive 25% off one dinner meal at our restaurant.” This is also a clear savings message that may result in incremental meals served in the restaurant. Tickets to local activities (for which you receive a commission) are a great addition to vacation bundles and can be customized based on consumer segment. For example, a local food and wine tour could be appealing to a couple traveling alone. A family of four with young children may spark to the local theme park or children’s museum.

Upgradable Amenities

Once traveling, guests are often willing to pay a little more for added perks such as late check out, a premium view, or higher-speed internet access. Review your own amenity offerings which could be considered beyond the standard expectation to identify potential candidates. Where possible, bundle upgradable amenities to avoid the perception of “nickel and diming,” and keep the number of upgrades reasonable. If half the rooms in a hotel are a premium view, and you’ve categorized them into several buckets, it quickly becomes overwhelming to guests.

When adding upgrade opportunities, be sure to assess the cost and profit potential for every sale. Offering guided running tours may sound like a great idea, but if it costs more to operate than the revenue it generates, it won’t do much good for the bottom line. Most amenity upgrades are reasonably priced, but even a $10 upsell purchased by 5% to 10% of booked rooms can have a significant impact on revenue and profitability, given that most upgradable amenities typically come at no cost to the hotelier.

For example, offer guests an “Upgrade Your Stay” package when they check in that includes higher-speed internet access, late check out, and a free non-alcoholic drink with the purchase of any snack item from the pantry, per night. The first two have little to no cost to you and the free drink could entice someone who did not have an intent to visit the pantry to actually make a purchase, or repeated purchases, resulting in some incremental revenue to offset the cost of the drink. At $10 per night, this upgrade could be an easy decision for many travelers, but make sure you can still turn the rooms with late check outs.

Food and Beverage Optimization

Almost all hotels have some form of food and beverage sales, whether a restaurant, bar, or sundries shops in lobbies. Opportunities to optimize revenue from these outlets often fall to the wayside.

To start, you can implement menu engineering principles to feature the most profitable and popular items more prominently on the menu to sell more plates that earn high contribution margins. To learn how to implement menu engineering, read our article, Menu Engineering Strategies for Restaurants to Optimize Revenue.

3. Efficient Marketing Strategies to Drive Demand

With revenue down, marketing dollars need to be hyper-efficient. These strategies have proven to drive demand efficiently, increasing profit earned per guest.

Leverage Digital Channels

Digital platforms allow the flexibility for hoteliers to adapt marketing messages as consumer sentiment fluctuates in response to COVID-19. With revenue down, marketing dollars need to be hyper efficient. Targeted, direct communication to consumers can be a powerful asset for the hotelier looking to stretch their budget.

Target Past Visitors with a Return Offer

Past guests who had a good experience are already familiar with your product and more likely to repeat an experience than risk the unfamiliar. Target past visitors with a return offer as a “thank you” for past business with messages that make them feel appreciated and welcome.

Communicate Safety Messages

When selecting a hotel, enhanced cleaning and hygiene practices are still a high priority according to the AHLA State of the Hotel Industry 2021 Report. Guests also feel more comfortable when properties communicate these enhanced cleaning practices. Nearly seven out of ten travelers report wanting to hear directly from hotels what measures properties are taking to ensure safety.

4. Sales Channel Strategies for Sustainable Growth

Third party sales channels can be a boon for business, but they also pose risks. With COVID-19 impacting demand, now is the time to assess your channel strategy and whether it is providing a net benefit.

Over time, third party agreements have the tendency to get unruly. Agreements are made year to year and often new partners are added, but many hoteliers do not perform the due diligence to optimize their distribution strategy. Below are some steps to take to ensure your strategy is working for you and not against you.

Realign Commission Structure

Tie your commission structure to volume requirements by providing the most lucrative commissions to the channels that drive the highest volume.

Review Sales Volumes

Review volumes to ensure partners are performing according to their agreement. If you don’t already, create a report for third-party sales and the respective commissions to analyze if partners are living up to their end of the agreement. For channels with low volume and high commissions, consider ending those agreements.

Explore New Channels

New travel aggregators are being created daily and there are a multitude of companies regularly looking to provide value-added perks to employees such as standing discounts. Both of these options are worth exploring further and regularly looking for new players that could expand your reach.

Sales channels are often overlooked for optimizing revenues. Taking the time to assess your third party strategy could reveal significant opportunity to increase yields and drive incremental demand.

Get Started with Revenue Optimization

Unfortunately, the lingering impact of COVID-19 could continue to make profitability a challenge. Hoteliers will need every tool in their revenue management toolbox to be successful. While there may not be a silver bullet to demand generation, optimizing product, pricing, and marketing will drive revenue and set you up for success.

Menu Engineering Strategies for Restaurants to Optimize Revenue

In order to survive the upcoming economic challenges, restaurants need to implement menu engineering to improve the bottom line.

Why Focus on Pricing?

It is important to focus on pricing to achieve profitability. Increasing revenue will help alleviate some of the cost pain for business owners.

The Making of Magic Your Way – Walt Disney World’s Pricing Strategy

The principals of Integrated Insight, Inc. designed, developed, and implemented Magic Your Way, the most sweeping change in revenue strategy in Walt Disney Company history.

How Can We Help?

Schedule a free consultation to discuss your business needs.

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Integrated Insight, Inc. helps organizations out-behave the competition with consumer insights and robust analytics.

What We Do New Business Strategy Business Optimization Research & Consumer Insights

Who We Are Our Team Testimonials

Contact (352) 988-3490 info@integratedinsight.com

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Basic Guide to Process Improvement: A Structured Approach to Optimizing Your Operation

Business Optimization, Operational Efficiency

The most successful companies are those that can continuously adapt to meet the changing needs of the consumer and their business. Optimizing business processes can be overwhelming, and it can be difficult to know where and how to start. However, problematic and stagnant processes ultimately cost companies money.

Inefficient or ineffective processes result in many different issues: excess turnover because of employee frustration; increased production costs as a result of defects and waste; lost customers due to long waits, miscommunication, or poor quality.

Likewise, optimized processes have many benefits: higher employee engagement and productivity; a streamlined operation with lower inventory costs, fewer required resources, and minimal errors; improved customer satisfaction, transforming loyal customers into brand advocates.

We can look to lean manufacturing and Six Sigma for a wide range of tools, techniques, and methodologies to improve business processes. Two of the most well-known frameworks for process improvement projects are PDCA (plan – do – check – act) and DMAIC (define – measure – analyze – improve – control). These each take an analytical, structured approach to process improvement, with slight differences between the two methods.

Following is a guide to process improvement, leveraging the key steps within PDCA and DMAIC, as well as other methodologies. The key takeaway is that improving your business is a continuous process, and the more defined the process, the better.

Basic Guide to Process Improvement

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1. Observe

Decide which process you want to improve. Candidates with the most opportunity will typically have long lines or waits for customers, low profit margins, or a high number of customer or employee complaints. After selecting the process, the first step is to observe the operation in person. Create a process map or value stream map to document the process, including any possible variations. This ensures you fully understand the steps of the procedure and the required resources and people, as well as provides a document to ensure all team members are on the same page for which process is under review.

2. Aim and Define

Next, develop a SMART aim statement to define the scope of the project and articulate the mission. SMART stands for specific, measurable, attainable, relevant, and time-based. An example of a SMART aim statement could be “Reduce processing time for XYZ by 25 seconds by the end of Q3” or “Increase hourly throughput during peak hours by 10% at Restaurant ABC by May 31^st.”

3. Plan and Analyze

After clearly defining the business goal of the project, develop a list of possible causes for issues and challenges. This list should be formed through a combination of direct observation of the process, interviews with multiple front-line operators and available data to determine the relative impact of each. Host a brainstorming session with key stakeholders and select front-line workers to create a plan of modifications and solutions, focusing on changes that are the most feasible with the highest impact. Including front-line employees in the planning process will help with change management upon implementation.

4. Test and Check

Pilot the selected changes in controlled, small-scale scenarios to identify problems and work out the details. Simulation can also be used to test changes in a virtual environment, particularly if pilots are infeasible or cost prohibitive. Gather results from the piloted change to analyze the effectiveness of the tested solution(s). Make any tweaks based on feedback from front-line operators. If needed, re-test the solution. Compare the expected gains to the aim statement to ensure solutions are on track.

5. Improve

Roll out widespread implementation of the optimized solutions. Depending on the scope of the project, a phased roll out may be the least disruptive and allow targeted focus during each phase of the implementation.

6. Control

Process modifications are only useful if they are maintained. Develop controls to ensure any changes stick. This includes documenting the new procedures, updating training materials and standard operating procedures, and providing refresher training as needed. Continue measuring and reporting on the impact of the modification to keep it top-of-mind.

In Conclusion

Processes can become out-of-date quickly, so it is prudent to regularly revisit, reanalyze, and improve procedures. This allows for continuous improvement of the operation, enabling an efficient operation for the long term.

Improving business processes can be a formidable challenge. Using a structured and analytical framework can provide a repeatable and scalable approach to solving these issues.

How Can We Help?

Schedule a free consultation to discuss your business needs.

Schedule Consultation

Restaurant Happy Hour Pricing: How to Improve Profit Margins

Is your happy hour pricing strategy helping or hurting your profit margins? Here are important factors to consider when evaluating the profitability of discounting your food and beverage offerings.

How the Burden of Choice Impacts Your Customers

Your customers can feel immobilized by the number of choices presented to them. The ultimate balance any company should aim to strike is the one between consumer appeal and higher sales and revenues.

How Hoteliers Can Optimize Revenue with Post-COVID Demand

As hoteliers look to capture limited demand and maintain yields during lingering COVID-19 impacts, optimizing yield on each guest is critical.

About

Integrated Insight, Inc. helps organizations out-behave the competition with consumer insights and robust analytics.

What We Do New Business Strategy Business Optimization Research & Consumer Insights

Who We Are Our Team Testimonials

Contact (352) 988-3490 info@integratedinsight.com

Connect

LINKEDIN FACEBOOK INSTAGRAM

Foundational Approaches to Achieve Operational Efficiency

Business Optimization, Operational Efficiency

by Susan Dekker, Director, Integrated Insight

Operational processes can become out-of-date as customer expectations and technology continue to evolve. This inefficiency results in excess costs, unnecessary frustration for both customers and employees, and lower quality products or services. While operating efficiently is an obvious goal, front-line employees are often too busy fighting fires to dedicate time and resources to improving or are caught in a “this is how we’ve always done it” mentality.

The risks of operating inefficiently are too great to ignore:

Increased transaction times, longer waits for service: The longer it takes to process a customer, the longer all customers must wait.
Diminished quality: Processes prone to errors or rework ultimately result in an erosion of product quality.
Poor customer experience: Waiting longer for an inferior product usually results in lower customer satisfaction.
Poor employee experience: Inefficient processes are frustrating to all involved, employees included, as they strive to do their best.
Increased costs: Errors and delays cost real money, both in terms of wasted product and additional holding costs.
Decreased sales: The universality of online product reviews and social media means one poor customer experience can deter multiple future customers.

Identifying potential improvements can be done through structured observations and data analysis. Observe the process in person with key stakeholders to be sure they can visualize opportunities. Analyze historical system data to understand the impact of the issue. See “How to Conduct an Efficiency Summit” for more details.

Often companies focus on “big picture” initiatives, resulting in company-wide standardization or major organizational changes. But there is always opportunity to make incremental progress by optimizing lower-level processes as well. Types of changes, both big and small, could include:

1. Organizational: Align roles in the organization that can result in a streamlined process. For example, a centralized scheduling group may be more efficient than a dedicated scheduler within each business unit.

2. Transfer of responsibility/information: Often times the ball can get dropped as product fulfillment or customer service is handed off from one department to another. Clarify responsibilities and standardize communication to prevent issues.

3. Technology: Ever-changing technology may mean some processes are now obsolete and can be eliminated. Or, there may be newly-available software that can automate processes currently done manually.

4. Resources: Quantify the amount of both labor and physical resources needed to ensure there is sufficient capacity available to meet customer demand, at your targeted service level.

5. Facility: Optimizing customer or product flow may require adjustment to facilities. Quantify the cost/benefit of such changes to see if warranted.

6. Layout: Even minor layout changes can make big differences. Do employees have to walk 3 steps to pick up materials to finish a transaction? Is there an opportunity to move those supplies to within reach of the register?

7. Communication: Identify what aspects are currently confusing to customers, and improve communication through signage, mobile alerts, and how employees are trained to explain products and services.

8. Production/Inventory: Evaluate production levels to make sure the right amount of inventory is available at the right time.

Creating lasting change takes work, so be sure to set your company up for success from the start. Ensure front-line operators have buy-in from the beginning by including a representative on the project team. Pilot and test any changes before widespread implementation to work out all the kinks and avoid negative perceptions from the consumer or employee. Retrain all employees on the new process – and make sure they know WHY the change was made, not just WHAT the change is. Update any training documents or SOPs to reflect the new method so employees have the right information. And give them permission to STOP doing what is no longer necessary.

Achieving operational excellence doesn’t just happen from a one-time analysis. Regular maintenance is needed to avoid stagnation. Regularly revisit and observe processes and create forums where front-line employees can share their improvement ideas. Recognize and reward innovative ideas, as well as the employees who are advocates of changes. Measure and report out on progress, both so employees can see the impact of the change and also hold the right personnel accountable to the new standards.

proven approaches to achieve operational efficiency

Operating efficiently is not easy – it requires active work and input from all organizational levels. But the results are worth it: improved customer experience, minimized costs, and increased employee morale.

How To Conduct An Efficiency Summit

Business Optimization, Operational Efficiency

by Susan Dekker, Director, Integrated Insight

Improving operational efficiency is a team effort. One way to identify these potential improvements is through an “efficiency summit.”

What is an efficiency summit?

An efficiency summit is a gathering of key stakeholders with the specific goal to identify opportunities to improve operational efficiency. This is accomplished through structured observations and data analysis.

This is a concept found in “Lean” manufacturing under a slightly different name – a “waste walk.” The goal for a waste walk is to identify and eliminate any of the eight wastes: defects, overproduction, waiting, unused talent, transportation, inventory, motion, extra processing. But both “lean” and “waste” can have negative connotations among some, and this verbiage may act as a turn-off to front-line operators. While this concept comes from manufacturing, it can be applied to any system that services customers.

Who should be there?

Front-line operators are the most important representatives. Not only do they know the process better than anyone by living it day-in and day-out, but it will be crucial to eventual buy-in to have this point of view. Choose employees who are known for doing their jobs exceptionally well and open to change. Also include someone who knows the data systems well, as they can identify which aspects can be easily quantified with existing data.

Management presence emphasizes the importance of the initiative to the company, but make sure any leader joining has an open mind and is visibly engaged (put the phone away!). Including a different operator who is unfamiliar with this particular process can also provide a “fresh eyes” perspective.

What should you do?

The first step is to observe the operation in person. Walk through each step of the process as if you were the product or the customer and discuss as a group what you see. Draw out a process map so everyone is on the same page in regards to operational flow.

The next step is to collect data. Ensure everyone understands what the data means and how it will be used to identify issues. Example data could be transaction times, including noting if a delay occurred.

Throughout the observation, write down any observed inefficiencies, pain points, or delays.

What types of topics should be discussed?

1. What is most confusing to the customer?

Here at Integrated Insight, we always start with the customer perspective and understand the product through their eyes. Eliminating frustrations by changing the process or improving communication results in an improved customer experience.

2. What are the most common errors or delays?

This list can be used in a brainstorm session to ideate solutions both big and small.

3. What is most frustrating about the process?

Employees also get annoyed with an inefficient process. Identifying and reducing these frustrations can increase morale.

4. If you had $1M to make any changes, what would you do?

Too often we feel crunched by budgetary constraints, so we don’t even consider the major modifications that can truly transform a process. While the proposed change may appear to be financially unfeasible, the return on investment may determine it’s a viable option. Use the data collected previously to help analyze return.

5. What operational changes have happened across the past several years?

The operation has probably altered due to changes in technology, leadership, regulations, etc. Discuss how these adjustments have impacted operational efficiency and be sure to record the dates the changes occurred.

What happens after?

Use historical data to measure change, understand trends and see how productivity has improved over time. Compare this with the list of operational changes and dates.

Take the list of common errors and delays, and brainstorm different solutions. Analyze the transaction time data recorded during the efficiency summit to determine the impact of each solution and quantify the potential value if this issue was reduced or eliminated.

Create an action plan and report out on progress. Include multiple organizational levels on the communication to maintain visibility, emphasize importance, and ensure accountability.

How Can We Help?

Schedule a free consultation to discuss your business needs.

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Basic Guide to Process Improvement: A Structured Approach to Optimizing Your Operation

The most successful companies are those that can continuously adapt to meet the changing needs of the consumer and their business. Process improvement can be overwhelming, and it can be difficult to know where and how to start.

Foundational Approaches to Achieve Operational Efficiency

Focus on foundational approaches to operational efficiency to avoid excess costs, unnecessary frustration for both customers and employees, and lower quality products or services. Often companies focus on “big picture” initiatives, resulting in company-wide standardization or major organizational changes. But there is always opportunity to make incremental progress by optimizing lower-level processes as well.

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Customer Loyalty Programs: The Ultimate Guide

Business Optimization, Marketing, Pricing and Revenue Management

by Stephen Davis, VP of Pricing and Revenue Services, Integrated Insight

Loyalty programs have become pretty commonplace for retailers in today’s market. It’s estimated roughly 7-in-10 adults are a member of at least one loyalty program.¹ From simple punch cards to elaborate point structures, you can find them in just about every industry.

Loyalty reward programs are powerful tools for businesses. Offering perks for loyal customers improves retention and encourages new customers to engage.

Let’s first answer some common questions about loyalty reward programs. Then we’ll jump into tactical components and strategies to help make sure you’re getting the most out of it, regardless of the type of program.

What Is the Goal of a Customer Loyalty Program?

Determining the correct program to implement can make a difference in the value of the loyalty program for consumers and your business. There are three key goals loyalty programs aim to meet:

1. Increase Customer Retention

One of the key targets of a successful program is the ability to retain customers. According to a study by Marketing Metrics, the probability of selling to an existing customer is at least three times higher than selling to a prospective customer.²So maximizing retention means an easier sell.

2. Drive Incremental Purchases

A successful program should be structured to incent more purchases among loyalty members in a way that doesn’t “give away the farm.” More than 60% of loyalty program members report modifying their spending to maximize loyalty benefits.³ Achieving this goal is attainable with the right structure in place.

3. Better Understand Customer Behavior

Loyalty programs provide more than one “win-win” for businesses and consumers. In addition to providing more value for customers and more revenue for businesses, loyalty programs also provide critical insights on customer behavior. Convincing customers to participate in a program provides a way to learn more about them, including what they like and how they shop. Gaining clear insight on loyal consumers provides opportunity for meaningful engagement, which results in a better customer service experience.

It has become an expectation, not a differentiator, that companies put the wealth of data consumers share with them to work on their behalf. In a business environment that has become less personalized towards the consumer due to technology, tracking consumer habits presents an opportunity to engage customers on a personal level once again.

In recent years, companies have taken this a step further by tracking purchases of customers and creating customized offers for those who use services. For instance, the CVS ExtraCare rewards program tracks purchases and prints coupons on receipts based on transaction history. Data from Bond Brand Loyalty shows that 87% of participants in loyalty programs are interested in having purchasing behavior and activity monitored in order to receive personalized rewards.

What Type of Loyalty Program Should I Use?

Let’s break down a few of the most popular loyalty programs that businesses use to increase customer base and encourage incremental purchases. There are benefits and limitations to each, so certain types of programs may work better for your business depending on products sold and available technology.

1. Punch Cards

Punch cards are a tried and true loyalty program tactic. But the days of carrying around scraps of paper with unique punch holes are behind us. Today, nearly all consumers would much rather interact through modern technology.⁷In recent years, punch cards have gone digital as businesses have published apps. Even those companies that have not published their own apps have been able to use third-party apps for their rewards programs.

Going digital with punch cards offers a few advantages. In addition to eliminating the need for keeping track of paper punch cards, a digital approach can reduce fraud by eliminating the ability for a customer to punch their own card and take advantage of the business. Additionally, it can lower cost to businesses in the long run and allows business to collect data to profile customers – one of the key goals of a loyalty program. Digital programs provide real-time data with each use, whereas punch cards only provide insights once customers complete earn all punches and have earned a reward.

The goal of the punch card style program is to incent incremental purchases with the offer of a free or greatly reduced purchase in the future. However, setting a fence around those reward items can help make a punch card even more efficient. For example, rather than allowing a customer to get a broad discount on their 11^th purchase – create a structure so that the award after 10 purchases is an array of potential items, or discounts, fenced to specific products. A loyal customer is likely to use an indiscriminate discount on a product they’d already purchase. However, offering products that need a boost or are not frequently bought by customers can help incentivize trial purchases of other products you sell and avoid dilution.

2. Points

Points systems are one of the simplest loyalty reward structures. Customers spend X number of dollars to receive Y number of points, which can then be used as a currency at your business. The points system is great for capturing many types of customers because it is based on the dollar amount that is spent. This means that all customers receive the same incentive relative to the dollar amount spent.

The key to a successful points program is setting a structure that transparently communicates how customers earn points, what their value is, and what they can redeem. Being transparent about the entire structure upfront builds trust and helps customers see why the program is a benefit for them.

3. Paid Subscriptions and Memberships

Paid subscriptions and memberships create a system in which only people who participate (pay money) for a service or privilege can access products or deals offered by a company. Companies like Sam’s and Costco use these memberships and offer huge discounts for products by selling in bulk. Online retailers, such as Amazon, also use this system in which members have access to special benefits and services, such as free shipping. These memberships are often profitable because they have low cost for customer acquisition while giving substantial benefits to customers. This allows these companies to attract consumers to buy subscriptions or memberships at a high volume.

It’s easy to see how a paid membership could pay off for a retailer. Receiving money up front regardless of usage is attractive, but that’s not the end goal. Retailers with paid loyalty program memberships have to leverage the relationship to pull members into higher levels of spending, but when faced with strong savings, there is little benefit for customers to shop elsewhere.

Business Optimization

1. Identify customer demand.

2. Measure capacity required.

3. Understand business nuances.

4. Staff and schedule appropriately.

5. Maximize operational efficiency.

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Here's How Restaurants and Bars Can Execute Profitable Happy Hours:

1. Identify Low Volume Days and Hours That Need Additional Demand

How to Measure Demand

Determine Length of the Happy Hour

Considerations Vary by Location

2. Assess Which Food and Drink Offerings to Discount and by How Much

3. Communicate the Offer to Customers to Bring Them In

4. Evaluate the Happy Hour Regularly and Adjust As Needed

Supporting Your New Happy Hour Strategy

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Simplification Can Improve the Bottom Line for Restaurants

Understanding Your Customer

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Table of Contents

1. State of the Hotel Industry

2. Revenue Generating Strategies to Make the Most of Every Guest

Bundling

Upgradable Amenities

Food and Beverage Optimization

3. Efficient Marketing Strategies to Drive Demand

Leverage Digital Channels

Target Past Visitors with a Return Offer

Communicate Safety Messages

4. Sales Channel Strategies for Sustainable Growth

Realign Commission Structure

Review Sales Volumes

Explore New Channels

Get Started with Revenue Optimization

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1. Observe

2. Aim and Define

3. Plan and Analyze

4. Test and Check

5. Improve

6. Control

In Conclusion

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What is an efficiency summit?

Who should be there?

What should you do?

What types of topics should be discussed?

What happens after?

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What Is the Goal of a Customer Loyalty Program?

What Type of Loyalty Program Should I Use?

Conclusion

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Agent-Based Simulation Scenarios for Ski Operations

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