Day 1 Preparation Assignment

Essentials of Marketing and Strategy

Keuntae Kim (Kevin)

1. Analyse the barber industry around the time of the QB House launch. What are the
characteristics of the industry?

There are three main characteristics of the barber industry around the time of the QB House
launch:

a) Exhibit 1 shows that the number of barbershops has been in a constant (but not sharp)
decline while the number of beauty salons has been increasing steadily. According to the
main reading, most people who go to barbershops are male customers looking to get a quick
haircut in their neighbourhood. This implies that a growing number of male customers are
moving on from local barbers to beauty salons.

b) According to the survey conducted by the Ministry of Health, Labour and Welfare stated in
the main reading, most of the barbershops (over 90%) are privately owned businesses, and
many shops (60.3%) are located in residential areas. Although they used to have a very high
percentage of regular customers (95% in the 1990s), the repeaters have been declining
sharply in recent years (74% in 2013). This shows that there is a growing trend where
people who used to get their haircut in the local barbershop are starting to look for places
outside of their neighbourhood.

c) The barber industry is a good example of fragmented business. It’s relatively easy for
people with barber’s licence (which takes 2-3 years of training to obtain) to open up
barbershops, and the regulations made by Zenriren are not too hard to meet. This means
that the threat of new competitors entering the industry is high, making more than 90% of
them privately owned shops. The bargaining power of buyers is also high since product
differentiation in the industry is difficult and there is no business or shops holding exclusive
status to dominate the market. Thus it can be analysed that the barbershop industry is highly
fragmented and quite competitive in nature.

2. What are the customer needs of a typical barbershop? What are the key success
factors (KSFs)?

Based on the main reading I have identified 3 main customer needs of a barbershop:

1. Price - Barber industry is highly fragmented with a large number of small companies with
no large scale players dominating the market. In this case price can be the key element in
the customer’s decision making process.

2. Convenience and accessibility - The fact that many barbershops are located in residential
areas and that they have a high percentage of regular customers suggest that most
customers tend to visit shops that are easily accessible. At the same time, there is also a
growing number of people moving out to find substitutes outside of their close
neighbourhood. Thus it will be vital for the business to set up locations where they can
attract not just the locals but also the walk-ins in order to be successful in the industry.

3. Service and effectiveness - Even if we assume that customers would value price and
accessibility over service quality, the barbershops would need to meet an adequate level of
service quality to create repetitors. This will require the business to acquire skilled and
experienced barbers by providing appealing conditions and bonuses.

3. What was the reason for QB House’s success?

QB House successfully met all the KSFs analysed in answers to Question 2.

1. Price - QB House charges around 1,000 yen for each haircut, which is way cheaper than
the average price of a barbershop which is between 3,000 and 5,000 yen. If there’s no big
difference in the accessibility and the quality of service, customers will choose to go QB
house over any barbershop.

2. Convenience and accessibility - The analysis from exercise 1 shows a growing trend
where people are more willing to get their haircuts outside of their residential areas.
According to the main reading, QB House has opened their outlets inside or in front of train
stations, and in shopping centres, where there’s a lot of foot traffic. While many barbershops
are located in residential areas, QB house has smartly escaped the competition in those
areas and located themselves in places where they can attract walk-in customers who are
commuting by train or just shopping in the mail.

3. Service and effectiveness - In order to provide good quality service QB house has
implemented policies that will attract skilled barbers. Those policies include an annual salary
raise, full social insurance coverage, sufficient break time at work, and regular holidays and
vacations. The fact that QB house has achieved a stylist retention rate of 85% proves that
those policies were successful in keeping skilled stylists in the business, allowing them to
keep providing high quality service to the customers.