Peapod Service Quality: Gap Analysis and Recommendations Essay

One of the pioneers of online grocery delivery service, Peapod LLC was founded in 1989 even before the dot-com era by brothers Andrew and Thomas Parkinson to cater to people who wanted a more convenient way of shopping for groceries. (Peapod LLC, 2008) In its modest beginnings, Peapod’s founders were deeply involved in the business, even using their own cars to deliver costumer orders. (Ibid) Peapod then partnered with Jewel Food Stores, Safeway, Stop & Shop, Giant, and The Kruger Company before it was fully acquired by Royal Ahold in 2001. Today, Peapod is touted as a leader in the online grocery delivery service with over 120,000 registered customers. (Lunce, Lunce, & Maniam, 2006, p. 60) Management and Consumer Expectations Clearly, the Peapod’s success in a highly competitive internet-based marketing can be attributed to a management that is knowledgeable about consumer expectations. (Ibid) There is a good fit between management and consumer expectations. Undoubtedly, Peapod appeals to consumers because it enables them to â€Å"more efficiently screen alternatives so that they can focus on alternatives that match their preferences. (Andrews & Currim, 2004, p. 43) Online shopping is also associated with convenience, as it allows consumers to look for and order products â€Å"almost instantaneously using electronic agents that use information about an individual consumer’s specific preferences and the alternatives available. † (Ibid) At the same time, the internet platform allows Peapod to know more about consumer expectations and to use this information to improve operations and processes. Peapod’s Commitment to Service Quality Peapod’s business model itself speaks of the managements’ awareness about the behavior and preferences of its target market, and its commitment of quality service delivery: an online grocery store that delivers grocery products right into â€Å"higher income, higher opportunity cost of time, and time-starved† (Andrews & Currim, 2004, p. 43) households who conveniently order these online. Peapod has ensures that it maintains its captive consumer base through advertising and marketing strategies. The Peapod website, for instance, allows the company to communicate its main purpose of being more of a â€Å"time-saving service and not merely a shopping service† (Lunce, Lunce, & Maniam, 2006, p. 59) to consumers and also depends heavily on word-of-mouth advertising. Actual Service Quality Delivery and Communications Lunce, Lunce, and Maniam (2006) observe that Peapod has maximized the use of the internet to â€Å"change the shopping experience altogether. † (p. 0) This means that Peapod was able to fully automate customer service processes through its main website, including providing customers with the ability to compare product specifications, maintain a list of their preferred brands and types of products for faster transactions. Likewise, Peapod clearly tries to maintain a sense of quality through its employees, especially Peapod drivers involved in the delivery of the orders who are at the frontline of Peapod’s operations and customer interaction. (p. 61) Unfortunately, Peapod is not free from weaknesses. This is evident in Peapod’s logistics system, particularly on its ability to achieve timely deliveries, which could make the company suffer from an erosion of customer confidence in their services. Holmstrom, Tanskanen, and Kamarainen (1999) argue that the â€Å"weakness in Peapod’s service is receiving of the products† (p. 2) by the costumers, which is related to the company’s difficulties in working with tight time windows for delivery and receipt by the ordering household. For consumers, the concept of an online grocery also carries higher service quality expectations. For an online grocery delivery business, â€Å"it is likely that the narrower the time window and the more prompt the delivery is, the higher the customer satisfaction is, which has a positive influence upon the repeat purchase. † (Lunce, Lunce, & Maniam, 2006, p. 56) Based from the author’s personal experience, it has become more difficult to schedule a delivery in Peapod’s system because of the increased number of consumers who order groceries from the company. The encounter with difficulties in scheduling for the delivery was unanticipated, as a customer expects Peapod service to be as good based from company promotion and as attested by some of its customers. This reflects a gap in the Peapod’s actual service delivery vis-a-vis the concept of convenience that the company tries hard to communicate, which affects the consumers’ perception of Peapod’s overall service quality and customer responsiveness. If left unaddressed, this could result to a decline in repeat purchase from customers. Analysis and Recommendation At the core of Peapod’s delivery problems is the level of integration in the company’s operations from the online ordering process to delivery booking and scheduling. It should be noted that Peapod operates only in five key cities in the United States, using a hybrid distribution system wherein Peapod utilizes its own warehouse and distribution center in Chicago while exploiting the infrastructure of its brick-and-mortar supermarket partners Stop & Shop and Giant in other areas. Holmstrom, Tanskanen, and Kamarainen (1999) argue that while Peapod’s hybrid distribution network allows it to lower operating costs, Peapod still has to maximize this distribution network to make more prompt and efficient deliveries. (p. 3) Peapod currently offers two modes of delivery: attended and unattended delivery wherein customers have the option of personally receiving their orders or having their orders delivered although they are not home. (Lunce, Lunce, & Maniam, 2006, p. 6) However, both mechanisms pose constraints in terms of cost efficiency as â€Å"attended delivery requires a certain density of customers to reside within the target market† while unattended delivery requires a â€Å"high initial investment cost† but has a â€Å"low utilization rate, and slow growth of demand. † (Lunce, Lunce, & Maniam, 2006, p. 57) To address customer complaints about delivery difficulties, Peapod can enhance its existing delivery systems by increasing the number of its delivery personnel and transportation in order to better manage the increased bulk of orders. The company can also evaluate its existing employee training program to address gaps in the company’s human resources ability to meet higher customer service quality expectations and demands. Likewise, Peapod can also upgrade its service features to enable automatic order replenishment aside from the deliver-on-demand system. This would enable the company to integrate its business with the household economics of its target market and facilitate better delivery schedule planning. Holmstrom, Tanskanen, & Kamarainen, 1999, p. 2) The replenishment system, which is focused on grocery stock replenishment of Peapod’s loyal customers, would reduce the stress put on the delivery system by random orders and ensure that the company is able to meet consumer expectations. Clearly, the main gap in Peapod’s business is its inability to meet customer expectations on prompt delivery, which is caused by weaknesses in its distribution process. This affects the consumer perception of Peapod’s service quality, which in turn could have an adverse impact on company sales and profitability. Thus, the company needs to examine the efficiency of its existing distribution network and enhance its capacity to meet consumer expectations either through restructuring or improving the current distribution fleet, or develop a new mechanism which lessens random delivery pressure and enables the company to focus on its most loyal patrons.