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Customer Service and Retention in Fast Food Industry

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Published: Mon, 12 Feb 2018

Abstract

This study investigates the relationship between dining attributes, customer satisfaction and customer’s retention in the fast food industry. In short this research paper is to describe & analyze why customers come back to the same restaurant when there are several options available to them. What influence their decisions? This research has brought out how to gain customer retention to the services and the factors that influence the customer retention. For this research qualitative approach is used. Data collection method is questionnaire and interviews to clarify what is their real mean of filling the options; sample size of 100 consumers from different fast food restaurant has been taken randomly on the basis of convenience sampling. Results obtained from the statistical analysis corroborate using the optimal regression as a statistical tool which shows that research can be used by marketers especially by the managers of the restaurants for better understanding, and assessing what influences customer how they behave and why they come back to the restaurant. Managers can also use our findings to increase the retention rates by adjusting relevant service elements of the restaurants.

1. INTRODUCTION

1.1 INTRODUCTION

Eating is observably a daily action and necessity for all human beings. Depending on individual’s reason for eating at restaurants, individual intentionally or instinctively assess a multifarious set of attributes ahead of choosing a restaurant. The significance involved to these restaurant attributes is ultimately evaluated in the customer’s mind, leading to a decision of purchasing. Some factors, like age, company and even social division come into take part in to amplify these attributes as the customer makes a decision of dining (Johnson and Champaner, 2004).

The restaurant industry has undoubtedly not been free from either augmented competition or from increasing customer expectations regarding quality. In the greatly competitive food industry, large operators chain have a propensity to gain competitive gain in the course of cost leadership, likely only due to standardization and economies of scale beginning from large market shares, while smaller, independent restaurants on the other hand endeavor to gain benefit through differentiation (Lowenstein, 1995).

Branding keeps on gaining importance in the marketing of restaurants services and marketers have spent lot of money to create and give support to brand images. This have seen in the marketing of strong and well defined brands like Mc Donald’s and Kfc fast food restaurants which attracts the customer through their marketing , service and by making brand loyal customers of their products. This increases the retention rate due to satisfied and loyal customer. Particularly, there is lot more to discern about customers perceive restaurant brands and the comparative weight these links get during purchase decision as there is lot more to discern about customers perceive restaurant brands and the comparative weight these links get during purchase decision. According to the Kaplan and Norton (2001) the importance of the perceived quality in order to get the retention effect in restaurant industry is always considered as a main element to retain in the customers and the business. The main reason behind that in this industry entry barrier are usually low and any one can easily enter due to investment required that is not on the higher side. So the point is that when ever consumer is satisfy from the arrangement by the management, the quality of the food provided by the staff members with the positive attitude than this result in increasing the loyalty towards the particular restaurant and increases the retention intensions of the customers.

1.2 Purpose of the study

The purpose of study fold in two parts: one suggests that how important is dining attributes in term of Re-patronage intentions and second part suggest the customer satisfaction which leads Re-patronage intentions in restaurants. The role of dining attributes and customer satisfaction is very important for knowing the customer intentions, would they will visit to that restaurants again or not. There has been a strong support for the espousal of consumer retention in restaurants as one of the key performance indicators. It has found that there is a high association between customer retention and the profit earn by the industries. The fragmentation of media choices and the active nature of the marketplace, tied with an enlarged number of additional demanding and prosperous consumers, brought bigger challenges to marketing practitioners in keeping hold of their regular customers.

Customer satisfaction is regularly used as a sign of whether customers will come back to a restaurant that shows the customer retention. Whereas there is no agreement of a satisfied customer’s repeat visit, it is nearly certain that a not satisfied customer will not return. The majority of the preceding customer satisfaction researches are mentioned in the literature that has pay attention on recognizing the resource of customer contentment such as characteristic and attributes and on determining useful ways to establish consumer’s desires, wants and needs. On the other hand, significant dissimilarity comes out in the level of specify of the characteristic investigated.

1.3 Research Objectives

To identify the process to gain customer retention to the services and what are the factors that influence the customer retention.

The primary problem is to identify the customer retention in the detail that includes factors of dining attributes and customer satisfaction in context to food restaurant industry. Thus these factors leads to consumer behavior and customer revisit the restaurant.

1.4 Research Methodology

This study find out the relationship between dining attributes, customer satisfaction and customer’s Re patronage intentions and this execute particularly in restaurant industry, how customers decide to revisit the restaurant and what are those factors which influences the customer for returning back to restaurants again and again.

To find these reasons we used quantitative approach for this research. The constructed instrument was pre-tested, where 5 to 6 sample questionnaire to be filled, to know if there are any problem with the instrument and therefore it was simple to understand and figure out the questions or not. Through pre-testing it was found that all respondents felt at ease in responding and instrument was interested to them.

Instrument:All the information is collected through a questionnaire containing closed ended, structured and unstructured questions. This method was chosen primarily due to ease in handling and recording information.

Procedure:The research study is conducted to examine the outcomes and responses of our sample targeted (Local Industry) in order to conclude the impact of customer service on customer retention.

Sample size: 100

2. LITERATURE REVIEW

2.1 Literature review

Whether human live to eat or eat to live, food always plays a fundamental role in the lives of human being. The significance of foodstuff cannot be overstated from the physiological viewpoint; food gives us sustenance; while on the other hand from a psychological point of view food is classified as a basic need. Food can also characterize a product used to describe self-actualization. Therefore, individual can quarrel that above and beyond provided that nourishment food plays a variety of roles together at individual and group level.

Edifice brands have become a key focus of restaurant managers. Furthermore, restaurant managers are relating brand management theories and practices which have done so far, and lots of restaurants are redesigning their business missions to imitate branding orientation rather than they go for product orientation. There is also an influence of brand recall on consumers intensions in choosing a restaurant for dining due to the different discount offers through different mediums of advertising that mostly include the below the line activities that makes restaurants brands that diminish the perceived risk of pay for the food and also indicate the quality of the product that creates their willingness to make wider positive word of mouth, recommendations, and complaint intention (Lowenstein, 1995)

In our research we find that since the last few years the trend of dinning out and fast food restaurants has been increasing with the increasing rate. Now you will find (at least one) fast food restaurant in every society, whether it is high profile or low profile people society. The culture has always significant impact on the society’s emerging trends. It is also observed though people don’t consider fast food a healthy meal, yet they go for it over again. Due to availability of too many options to the customers, their behavior is more towards variety seeking instead of going for one meal second time. Especially the Pakistani youth seems that they are fond of entertainment and they find only fast food restaurants the best to be visited whenever they go for entertainment (Syed Kamran, 2010)

The food industry is highly aggressive and customers have also become more demanding due to sufficient knowledge and information they have about the different trends in restaurant industry which causes increase the significance of effective marketing strategies to get the competitive advantage in order to understand the wants and needs of the customers (Bateson and Hoffman, 1999) Numerous Fast Food restaurants are paying attention in studying, assessing and implementing the marketing strategies with the aim of gaining maximum market share of customers and improving customer retention in analysis of the advantageous effects on the monetary performance for the organization. Customer satisfaction, contentment, quality of the service, excellence and retention are global matter that influences all organizations.

This increases in the restaurant business revenue as well and this increases the word of mouth publicity (Almanza and Jaffe, 1994). Evaluating quality awareness and price elasticity related to quality, suggested that buyers are generally steady in their evaluations of quality. The results of their study showed that there was a strong association between a product’s attributes and the quality perceptions of the customers.

It was found that tangible quality has a bigger circumlocutory effect than the straight effect indicates from a theoretical point of view; affect was a fractional mediator, facilitating the association among tangible quality and behavior. The consequences of well-situated parking must not be the lost upon restaurant management. Often the cost of attaining parking near to a restaurant is sighted as a non-revenue generating expenditure. This specifies the value of given that well-located parking along with the direct consequence it has on consumer intentions to patronize a restaurant (Lasser and Winsor, 2000).

In customer’s mind when there is no defect in the overall dining service, then they consider the quality of the food is good enough for them (Bitner, 1992). Quality is all about eliminating internal failures that means all shortcomings before the product leaves from the factory and the external failures are the defects after usage of the product (Eileen and Berry, 2007). In Early research and study efforts in measuring and defining quality were mainly centered in the tangible goods, whereas the apparently more complicated services products was ignored. Products quality was conventionally correlated to the technical stipulation of products, with the most description of quality coming up from the manufacturing goods sector where excellence and quality control has inward drawn out awareness and research. Quantifying service quality is a difficult task because the idea of service quality is intrinsically insubstantial in nature and complicated to define (Kincaid, 2009)

Branding and its orientation have been wicker strongly into the contemporary act of consumption in restaurants. Undeniably, the previous century will be considered as the century of brands in marketing (Johnson and Champaner, 2004)

Researchers have acknowledged customer satisfaction, service quality and the loyalty to be similarly important for marketers, because they are responsible for determining dining satisfaction, and they must know the important of dining that must position restaurant functions competitively in the current and future marketplace (Kaplan and Norton, 2001). Customer satisfaction and the quality of food have long been acknowledged as a essential function for success and endurance in competitive marketplace that have been connected to consumer behavioral intentions as purchase and loyalty intention, their willingness to widen positive word of mouth, recommendation, and complaint intention (Olsen, 2002).

Purchase behavior of the consumer in restaurants can be pretentious by the surroundings in different ways. Researcher consider atmosphere, which is an attention-building medium that can make restaurant inkling. The centre of attention is based on the collective possessions of those clues on customers idiosyncratic through design, sound, motion, and color. Customers are delimited by true rock and roll memorabilia (Supphellen 2000).

The indication of Service in selecting by means of restaurant services, customers frequently act like detectives as they investigate for information and standardize their opinions into a set of mind-set regarding the resultant service. For example, the whole thing about the dining attributes of a restaurant or café starts from the dining table potential communicate to the customers, with the table top used, if practical sign concern the technical excellence of the service, mainly concerning to whether the service is carry out proficiently.

The research also highlighted that customers who pay for high quality foodstuffs also had a low acceptance for deviations from predictable quality. In the Fast food restaurant perspective, this entails that customers who want superior dining quality are more sensitive to quality fluctuations and possibly will be less price sensitive but, for example in relation to the relative higher pricing of the menu items and marketing strategies that put together the quality image of the restaurant, ambience and service.

The concept of service quality comprises the tangible and intangible fundamentals most essential to consumers. Service quality has been related to customer satisfaction, contentment and loyalty as well as the business performance, success and profitability (Raajpoot, 2002)

Fundamentals such as surface and texture, smell, color, sound, and texture inducing intuitive reactions in restaurant atmosphere that persuades purchase likelihood known as the mechanical clues (Eileen and Berry, 2007)

Food and drink quality is an imperative dining attributes to diners representing restaurant management should certify an aggressive quality control agenda is in place to make sure food and drink quality must maintained The convenience of location includes the parking space, seating availability in the restaurant; the nearness to roof-tops like people’s residence, hotels, and motels is significant for the accomplishment of restaurants all through the dinner mealtime duration.

The significance of the physical excellence raise of foodstuff and service and convenience to restaurant administration is to facilitate these constructs that have an affirmative association with influence which is completely linked with customer intentions to retention a restaurant. The objective of most restaurants is to obtain and maintain customers; restaurant administration organized with the information get that will be better prepared to accomplish their aim.

There is a intense deficient in understanding about dining satisfaction and pleasure and post-dining behavioral intentions in the customer literature reviewed studied so far away, and up till now, according to the literature allude to, aspects concerning to customer satisfaction and return customer are elementary when put together business and marketing strategies of the organization.

Professed service quality may perhaps be improved if customers are support with the mauve list and bill of fare and if a worker responds suitably to a customer’s asked for quick service. Customer always feel admire and important if they get the best service and respect from the overall management of the restaurant specially from the behavior of the front line staff that increases the comfort level of customers and at the same time makes them brand loyal to that particular restaurant.

The impacts of customer satisfaction on customer retention are bringing into being to be momentous and positive. Specially, the customer satisfaction will influence the re customer retention intentions (Reece, 1999)

Customer satisfaction is vital to the restaurant management for the reason that it is normally assumed to be a noteworthy determinant of replicate sales, customer loyalty and affirmative word of mouth. The more pleased the customers, the larger are their retention.

Another attention-grabbing finding was that a product’s higher volume rate like for instance, fast food restaurants resulted in a lower sensitivity side to quality. This shows that management of restaurants must segment the market based on the food usage rate includes the repeat purchase of the particular item and quality preferred (Jochen and Rachel, 2000).

The previous research shows the effect of physical quality construct on behavioral intentions for restaurant consumer and finds that influence is a strong moderator between tangible quality constructs and behavioral intentions when cognition affect actions archetype is applied to the restaurant location.

One more factor for the customer retention which really brings customers back is that the customer likes to have a positive attitude of employee throughout the dining as a support for the disputation that employee approach is strongly linked with customer satisfaction. Ease and the location of the restaurant is also considerable and also the other factor influence customers to select that particular restaurant which satisfy their needs and wants regarding quality of the food and the restaurant environment. This leads in the increase of the retention rate and the loyalty of the customers towards that restaurant diners have an effect on restaurant (Bateson and Hoffman, 1999)

It is suggested that commonly and normally used indicators of customer satisfaction comprise repeat customer behavior, brand loyalty and reliability and at last word of mouth recommendation (Lowenstein, 1995)

In case of large restaurants franchised group, this kind of relative study and positioning might be important. Besides, while the performance of anyone of the outlet can impinge on the reputation of a whole network, identifying and recuperating those outlets that have a delicate association in the series can be vital. Valuable curriculum in marketing, human resource and man oeuvre be capable also be learnt as of those outlets where service exceeds or meets expectations of the customers (Kuo and Kao, 1999).

The one of the fact is that business like restaurants is considered as a low credibility service and that is one of the reason that quality of the services are complicated to prove until consumers revisit the restaurant. Furthermore, the service quality that customers come across may be dissimilar apiece time they visit that particular restaurant, thus persuading the level of contentment and ultimately upsetting their retention intentions.

There may possibly be a countervailing competitive consequence to enhance in product differentiation. Revelation of restaurant sanitation grades may serve up to decrease search costs for customers. Positive completion always ends in setting new ideas and innovation in the mind of the management of the management that makes them superior and differentiated in the industry in between the existing market players (Kaplan and Norton, 2001)

Both service value and customer retention is extensively acknowledged as practices of repurchase intentions. Though, it is understood that restaurant possessor would like to identify the strongest influence on retention intentions. A recent study divulges that customer satisfaction is the better predictor of intention comparing to service quality to repurchase. Increasing trend in retention is always due to service quality which is provided by the management to the customers and at the same time customer should be satisfied. Any of the factor missing may cause the decrease in loyalty of the customer towards that particular restaurant and customers are unwilling to re-visit for dining to the same restaurant.

In researches, results found that managing for most select customer satisfaction necessitates so as to satisfaction statistics be used in previous researches advise implement the positioning strategies with the intention of helping a business whittle a niche. Each restaurant has its own strategies to get the competitive edge in the market. Such information is able to facilitate to modify the restaurant service so that it congregates the desires of the target market segment. Supporting a firm’s competitive benefit and enduring productivity and profitability possibly will better rely on the incorporation of customer satisfaction into the service organization’s strategies and operations that helps the restaurant management to look their positions in the long run completion in the industry (Olsen, 2002)

In some countries like Germany, there is a system of Grade cards according to the quality differentiation in restaurants what decrease the expenditure of learning whether an individual restaurant has high-quality hygiene, and possibly will give confidence to customers to go to restaurants they want or else would not have. This may perhaps encourage competition among restaurants, by making customers not as much of incarcerated to any particular restaurants providing inducement for lesser prices, improved food quality, or better hygiene quality food provided and if this result is there, still amongst restaurants with the identical sanitation quality ranking, compulsory revelation may cause lesser prices or enhanced food quality (Johnson and Champaner, 2004).

In Chinese and French restaurants, customer view of service quality by the side of all proportions drop short of customers’ expectations, even though an evaluation of the unprejudiced quality scores shows that the French restaurant is nearer to summiting the prospect of its consumers along all extent of service quality than in the Chinese business. It is evident that compassion and consistency are the two extents which plunge the largest part of below customer prospect inside the French restaurant

As a meaning- generating medium, the environment gives discriminative motivation to buyers that facilitate them to identify a restaurant’s divergences as a source for select that restaurant. For instance, snowy white linen tablecloths, the soft lighting, and crystal chandeliers of a chic restaurant communicate the level of service and a kind of food to customers that create a fine-dining experience (Palmer and Neill, 2003).

3. FAST FOOD INDUSTRY

3.1 Introduction

Fast foodis one of the world’s largest growing food types which are growing with an increasing rate. The term Fast Food refers to many items that can be prepared and served quickly usually outside the home. While any meal with low preparation time can be considered to be fast food, typically the term refers to food sold in a restaurant or store which is rapidly prepared and served to the customer in a packaged form to dine out, take out or take away.

A typical fast food meal in the United States generally consists of fries, a burger and a soft drink.

3.2 Customer Preferences

People pick fast foods because it’s easy. They could just go to McDonalds, Mr. Burger or KFC and order a burger or sandwich with fries and soft drink, rather than spending hours in the kitchen for cooking food.

Another reason would be if they work for long hours, while they come back to home, they could just stop at the drive through and order something to eat. Through this they can save their time to get rest.

When an individual is rushing for next appointment after lunch or work, it is more convenient to pack fast food.

3.3 Significance of Service Elements

We believe that customer service elements have huge impact on customer retention. Many researchers have closely analyzed all the service elements of several service providers. But in our research we have tried to cover and analyze all the service elements of Karachi’s famous multinational and local restaurants.

7 ps of service marketing elements

Restaurant service elements associated with 7 ps of service marketing model

Product

Food

Price

Odd pricing offers

Place

Outlets

Promotion

Deals & discounts offers

People

Friendly & helpful staff

Physical Identity

Atmosphere (interior, music)

Process

Payment process

Easy table reservation process

Easy & fast order taking process

Researchers urge all service providers to pay attention towards all of the above service elements in order to improve and enhance the level of service & quality.Poor service quality leads to switching intentions of the customer. To satisfy customer the restaurants’ service elements should be more competent or should have an edge over competitors.

3.4 Brand Perception

When customers think or hear about any product or restaurant they start building perception about the brand. Sometimes it is based on observation or may be on the pat experience whether it is negative or positive. Most common methods of forming perception about brand are

  • Past experience
  • Interaction with sales staff or employees
  • Word of mouth (colleagues or friends)
  • Advertising
  • Reviews by reputable sources

Some researchers call brand image and brand perception are the two sides of a coin; brand image is how company want you to see them where as brand perception means how you see to the company.

In our research we believe that in Karachi people are very brand consciouses the impact of brand over people is very huge and their replies to our questions were little biased.

3.5 Strategies for Retention

In this chapter some theories are presented in the context of customer retention which was not discussed in the previous part, because these cannot be analyzed within our practical research. These studies are important part of the customers’ retention problem and can be used for advance researches.

n this chapter some theories are presented in the context of customer retention which was not discussed in the previous part, because these cannot be analyzed within our practical research. These studies are important part of the customers’ retention problem and can be used for advance researches.

The research of Fruchter and Zhang (2004) examine strategic use of targeted promotion for gaining and retention of customers. Authors stress that selection of strategy: defensive targeted promotions for retention and repulsive promotions for acquisition depend on market share of a company. Fruchter and Zhang 2004 highlighted that for companies with larger marketplace share offense promotions targeted on learning generate little knock on gross sales than defensive promotions. Therefore, researchers state that if market share of firm increases it should spend more on customer retention; if market share of firm decreases it should spend more on customer acquisition. This research highlights when marketers should put emphasize on retention or acquisition but it does not provide keeping increase strategies and reasons for keeping. (Fruchter and Zhang, 2004)

Hogan, Lemon and Libai (2003) discuss changes of the customer’s value during the product life cycle. Authors stress the value of retained customer and impact of the lost customer on company’s ability (Hogan, Lemon and Libai, 2003).

Kumar (1999) highlights that relationship oriented service firms have higher level of trust and more repeated service encounters with their clients, therefore, such firms get higher level of ability and lower expenses over time.

Desai and Mahajan (1998)argue that feeling based attitudes appeal to fillings wishes emotions etc. can takings component in a strategic part in small indefinite amount brands to obtain develop and retain customers.

4. CUSTOMER SERVICE AND CUSTOMER RETENTION

4.1 Introduction

For more than last couple of decades customer satisfaction is extensively discussed subject in different research areas like consumer behavior and marketing research. Since the mid-1970s many annual conferences on customer satisfaction were held, with proceedings being published since 1981 in the “Journal of Customer Satisfaction, Dissatisfaction, and Complaining Behavior.” During the past couple of decades more than 1300 articles have been published to discuss and understand customer satisfaction.

In recent era, customer satisfaction has gained new attention. Now it has been shifted from transactional marketing to relationship marketing , which refers “to all marketing activities directed towards establishing, developing, and maintaining successful relational exchange” (Morgan & Hunt, 1994, p 22). The key to retention is satisfaction of the customer and it has been treated as the necessary premise in many publications and research articles.

The link between satisfaction and the long-term retention of customers is developed by scholars and marketing practitioners in a rather categorical way, and is therefore treated as the starting point, rather than the core question of the analysis. “The assumption that satisfaction/dissatisfaction meaningfully affect on repurchase behavior underlies most of the study in this area of inquiry”. Consequently, only a few researchers have investigated the nature and to which degree the relationship between satisfaction and retention exist.

The number of studies in this area can be classified into three groups. Most of the researchers use monetary data as dependent variables, such as revenues or profit. In this procedure the investigation of the satisfaction-retention relation considerably limited for two reasons. First, the aggregation of data renders any analysis on the individual customer level impossible. Second, revenues and pro¬t are determined by a large amount of variables, which in addition are highly correlated. Therefore, a suitable assessment of the relationship investigated here seems barely accomplishable with this research design. A second group of studies on an individual level utilizes repurchase intentions of customers to investigate the link between satisfaction and retention (Bitner, 1990; Oliver, 1980; Oliver & Bearden, 1985; Oliver & Swan, 1989). This approach is also accompanied by two main limitations. Because satisfaction values and intention measures are usually obtained through the same questionnaire, the data are inherently correlated. This may lead to an


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