KFC Corporation, or KFC®, also known as Kentucky Fried Chicken, is a chain of fast food restaurants based in Louisville, Kentucky. The peculiar history of KFC® – Kentucky Fried Chicken started between 1952 and 1964 when Colonel Harland Sanders (born on September 9, 1890), a politically appointed Kentucky colonel convinced the owners of 600 restaurants in multiple states to pay him a nickel for every chicken they prepared using his secret recipe seasoning. The seasoning is a blend of 11 herbs and spices and sold with his name on it (kfc 2010).
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In 1964 ‘The colonel’ as he was popularly called sold the franchise system to John Y. Brown and his business partner Jack Massey for only $2 million. In 1966 Brown and Massey took their company public and increased efforts towards system development with the help of franchisees and Sanders himself who was a marketing icon by all rights, owing to his entrepreneurial success story and image. The company was listed on the New York Stock Exchange on January 16, 1969. Since KFC Corporation went public and registered tremendous growth over the years, it has been acquired by a couple of other multinational corporations. The latest acquisition of KFC® was by PepsiCo, Inc. in October of 1986, from RJR Nabisco, Inc. for $840 million (Liddle 2010).
In January 1997, PepsiCo, Inc. made KFC® and a couple of its other small quick service restaurants into an Independent entity known as Tricon Global Restaurants, Inc. And subsequently changed the corporation’s name to Yum! Brands, Inc. in May of 2002. Yum! Brands, Inc. also owns A&W All-American food Restaurant, KFC® , Pizza Hut, Long John and Taco Bell restaurants making it the world’s principal restaurant corporation in terms of system units and spread, having over 32,500 units spread across over 100 countries. While its primary focus is fried chicken, KFC® also offers a line of roasted chicken products, side dishes and desserts (kfc 2010)
This report will be looking at KFC® in Nigeria; with the aim of investigating and analyzing their main marketing activities and operations in general. KFC® looking to develop and extend the volume of their market started operation in Nigeria by opening the first Nigerian KFC® restaurant in December 2010. According to Keith Warren, Yum!’s general manager for Africa, “We always knew a 150 million people… eating chicken on the bone as their primary protein, had to be a good thing for KFC®, but we didn’t quite know how good a thing it was going to be”. They have six stores in Nigeria now and they plan on building 20 more stores in 2011. They also forecast that by 2020 KFC® will have 300 restaurants doing business in Nigeria (kfc 2010).
This report is particularly interesting because KFC® in Nigeria is a new venture for Yum! Brands, Inc. This means that KFC® is a well known global brand in a new market environment, therefore, the implementation of its market orientation is still taking shape. In other words, the way that KFC® has decided to do business in Nigeria is still taking shape. Their market orientation, marketing mix and strategies etc will depend on their perception of the new Nigerian market, so we will be looking at KFC’s Marketing strategy. In general terms, especially multinational firms use a different strategy in Nigeria than they do in other markets. We are hoping that KFC® will follow the same trend.
2. KFC’S ORIENTATION
A business can be Product Orientated, Marketing Orientated or Sales Orientated; but businesses can develop new products based on either a marketing orientated approach or a product orientated approach (Tutor2u 2010). Organization’s orientation refers to its familiarization with and approach to the market. A firm can develop new products either based on what it thinks is the best for the market in order to maximize sales or what the customers think. Sales orientated approach fits the profile of market orientation because it uses such skills as selling, pricing, promotion and distribution except it pays little attention to customer needs, priority being sales maximization (Jobber 2007). Market-orientated approach is popular among most successful businesses as opposed to product orientated approach where firms develop products based on their competencies and capabilities rather than the customers’ needs (Tutor2u 2010).
However, (Tutor2u 2010) cited that some products are argued to create a need or want in the customer/consumer, especially products that have high technology content. E.g. Mobile phones have moved from being a business accessory to being a big consumer brand item, with many additional gadgets, such as pictures, video and Internet access. Innovations create the need rather than the customer being able to second-guess how new technology is going to develop. Most technology driven products that requires high level innovation fall within this range because the products create customer needs and market segmentation takes care of the rest. KFC as an organization is Marketing Orientated because it tends to tailor its products and services to the needs of customers in a particular market.
2.1 KFC’S MARKETING ORIENTATION:
According to Kaur and Gupta (2010:88) Market orientation is a business culture that ensures a set of behaviours needed for generating, disseminating and responding to both internal and external market information for creating superior customer value through superior organizational skills and competencies which ensures long term profitability by continuously identifying and managing limitation in the system that prevents market-orienting culture in an organization. This is a wholesome definition of what market orientation is all about, in that it takes into consideration the business environment, competences, constraints, activities, strategies, implementation and results/targets of marketing orientation, A market orientation needs to be balanced with creativity and a deep understanding of the firm’s unique capabilities, competencies and objectives (Houston 1986; Sharp 1991; Hamel and Prahalad 1994). Alternatively, the definition of market orientation acknowledges the understanding and acting upon the dynamics of the markets in which they operate and concentrating on critical relationships (Povey 2000). The market dynamics he is referring to may range from the needs of the customers, to what influences their buying decision.
There are positive relationships between market orientation and business performance (Pelman and Wilson 1996; Ruekert (1992). As is the case with KFC, their technique of market specialization (i.e. simply put, giving the customers what they really need and importantly not giving them what they don’t need) has made them effective in Nigeria. Market orientation is a popular approach especially for a product/service organization like KFC. The need to gain customer preference over major competitors makes them react to the needs and wants of the customer, in order words, they are customer/consumer focused. KFC in Nigeria takes feedback from customers seriously, and they use feedback from customers/consumers to alter or change their standard products according to the customer specifications.
The major characteristics of KFC as a Marketing Orientated business is outlined in Table 1 below according to the compilation of Jobber (2007)
Business Function Activities
Identifying Customer/Consumer needs and wants. Marketing Research
Developing Products to meet customer/consumer Research and Development/Production
needs and wants
Deciding on the value of the product to customers Pricing (Sales and marketing department)
Making the products available to customers at the Distribution
right time and place
Informing customers.consumers of he existence of Promotion
the product and persuading them to buy it
2.1.1 CUSTOMER NEEDS:
In KFC Nigeria, customer needs are primary. The business decisions that KFC make in Nigeria are mainly based on the needs or otherwise complaints or feedback from the end consumer. The advantage of this approach to KFC is that it gives them an edge (competitive advantage) over their competition in terms of meeting and exceeding customers needs. Because a satisfied customer is a happy customer, a happy customer is a loyal customer and a loyal customer is an additional ‘word of mouth’ promotion for the company; thereby maintaining and increasing KFC’s market share. This approach is also growing in popularity mainly because the average consumer has now become knowledgeable and can have very easy access to information, therefore, rather than just working on making their products and services more appealing to the target consumers, KFC is now paying more attention to the customers’ wants and needs. This approach enables KFC to not only attract customers, but also to satisfy and more importantly retain them.
Groucutt (2005 6-10 and 60) cited that an organization can achieve this by first identifying and selecting their target customers and learn their needs and desires by building relationships that will enable them ‘key in’ to the customers’ real needs and develop products or services that can be sold at a profit in conformity with customers desire. He further stated that there must be some form of dialogue between the firm and the customers, where customers state their personal needs and wants, and this may be direct or indirect. Through marketing research a customer may communicate directly with the firm, where the firm seeks feedback on particular market issues. He goes on to say that on the other hand, customers may communicate indirectly with the firm by switching brands, and this is to inform the firm that there is a problem with the product (could be price or quality or both) Groucutt (2005)
Groucutt (2005 335) The real needs of customers depends on a hierarchy of motives/motivators ranging from Psychological, Safety, Love and belongingness and self-esteem to self-actualization. KFC uses this approach as well, however, with business profitability as the needed end result. This means that they keep the needs of the customers in focus, while they aim at maximize their profit in general. A good implementation of this approach by KFC® in Nigeria is evident in the way they tailored their menu for different parts of Nigeria. For instance, their menu in the Northern parts of Nigeria does not contain pork because customers in those parts are predominantly moslems who prohibit the eating of pork, and because the case of belongingness is a huge determinant on what people eat. In the southern parts of Nigeria where you have a high density of educated families who tend to be more safety and health conscious when it comes to what they eat, KFC drafted their menu according to diet specifications, making it appear heathy and diet packed.
2.1.2 MARKETING RESEARCH:
Groucutt (2005) defines Marketing research as the process of designing, collecting, analyzing and reporting of information that may be used to solve a specific problem in a firm’s marketing. The marketing ‘problem’ he refers to can range from the market for a new product, new market for product (as is the case of KFC® in Nigeria), to lack of patronage for an existing product. Groucutt (2005) cited that Organizations need to narrow down their targeted segment i.e. who they want to appeal to, before undertaking a proper marketing research. It is only when you know who to appeal to that you devise means to appeal to them. He further said that after understanding their targeted segment, firms must have a clear objective as to what the firm aims to achieve – both marketing wise and corporate wise. This is because for KFC to have a competitive advantage, they must be able to successfully tailor customer satisfaction with their objectives and end target. KFC Nigeria use feedback from customers as a major marketing research tool.
According to Groucutt (2005) When efficiently and effectively used, marketing research can benefit the organization in the short-run and long-run. It can give the organization a complete understanding of the market, which includes understanding their current customers, current competitors, potential customers and the impact of macro environmental forces. Organizations can be proactive or reactive to changing conditions only through understanding these diverse groups, according to Groucutt (2005). Market research is important for KFC® to understand the behavior of a typical Nigerian customer, by analyzing both current and potential purchasing habits, tastes and influences. Marketing research is both a communication tool and a means of communication for KFC, because they use it to get needed information about current market conditions; on the other hand, customers give them feedback on their products and services.
Forsyth (2007) cites market research as the planned problem analysis, model building and fact finding to enable better decision making and control in the marketing of goods and services. This implies that marketing research in addition to being an information tool, also enables the organization to guild their internal activities effectively for better results in the market place. According Forsyth (2007) market research contributes to the management of the marketing mix as well as used to help decide on: the marketing strategy needed to better exploit new opportunities; which market discontinuity to tackle; and the key interest areas for future marketing strategy. In application to KFC’s activities in Nigeria, the information they get from market research helps them to better adapt to the Nigerian business environment. For instance, the ‘no camera’ policy in KFC stores is a way they decided to curtail the excesses of some tough local competitors, because there is no limit to the extent a competitor will go to beat business competition in Nigeria.
2.1.3 RESEARCH AND DEVELOPMENT/PRODUCTION:
Effective and efficient use of marketing research creates more information for the organization to potentially undertake research and development of new products; this entails developing products based on customers’ wants and needs. Ideally, this is should be a continuos process. According to Groucutt (2005). The development of new products and services is usually the key to the beginning of new firms, or the continuation of an existing one. Organizations undertake constant research and development of new products in order to be innovative and stay competitive.
Firms engage in New Product Development for various reasons like: To replace a product, to modify a product, to develop products in support of the firm’s long-term strategic objectives, the adaptation of an existing product, unexpected occurrence leading to unexpected innovation and product and in response to societal, including demographic factors. Societies change and so does their needs, according to Grouccut (2005). The average Nigerian customer is more aware and has easy access to information about different products; therefore his needs and preferences are no longer the same with the last 10 years. KFC® capitalized on this by rolling out products and services that appeal to Nigerian customers. The important thing is making the products available to the customer when, how and where they want it. For instance, KFC® incorporated a special type of local chicken seasoning called ‘Suya’ into their menu in Nigeria because people tend to prefer their chicken made in this way with a lot local pepper spices, different from the rest of the world. KFC also made their chicken a lot spicier because approximately 85% of Nigerians love spicy food and eat spicy food three times in a day.
“Price is an inherent part of the product/service and must be used as an element of the marketing process” (Forsyth 2007) This means that pricing needs to be set carefully because not only does it reflect quality, it ensures that the financial objectives of KFC are met and also creates good image and feeling of value for money by the consumers (Forsyth 2007). Pricing is particularly a sensitive and delicate issue in Nigeria because to most people the price is the first impression about any product. This means that just the mention of the price of a product determines if the average Nigerian customer actually buys a product or not without further inquiry about the quality of the product. Groucutt (2005) thinks that customers may be particularly sensitive to either the set price or increases, even if the increase are marginal. People usually associate this price sensitivity to economic class i.e. lower income groups, but anybody could be price sensitive depending on different factors like economic environment or volatility (high growth or low growth).
However, price sensitivity in Nigeria can easily be linked to the higher population or high density of lower income people in the population. People work hard and earn relatively less, so it makes sense to want higher value for as low as possible price. Moreover, for most people in Nigeria eating out is a luxury and if that comes with a high price then it is obviously targeted at the higher income groups. This is also a sensitive part of KFC’s marketing orientation and it is interesting what they came up with, bearing in mind that they had the objective to penetrate the market and also meet their financial objectives. According to Groucutt (2005) there are different types of pricing tactics that firms use and depending on the objectives/targets and external factors, firms could use some or all of these pricing tactics during the life of a product or service.
KFC Nigeria uses Penetration Pricing (Predatory Pricing). Penetration pricing is all about finding a way to access a market by cutting through the existing pricing structures or strategies (Groucutt 2005). Grocutt (2007) also goes on to say that Penetration Pricing can be used to attain entry into an existing market by introducing and maintaining low prices set against the existing average price for that product or service. KFC Nigeria deliberately maintained low prices for most of their products, while at the same time matching the price of competition for some other products. The use of both penetration pricing and Price matching tactics by KFC in Nigeria is very effective, but the use of Penetration Pricing is particularly very important because it was what people mainly responded to and are still responding to. With these pricing tactics, KFC was not just looking at penetrating the market and making sales, but to also create a long lasting impression and customer loyalty in the long-run. KFC achieved relatively easy entry in Nigeria mainly because of their pricing tactics because the average Nigerian consumer is very price sensitive and care about quality a lot more than status.
(Brassington & Pettitt 2003) “Distribution ensures availability and service” The availability they are referring to incorporates timeliness as an important factor. It is good enough that customers chose you and not your competition, but it is very important to provide the needed product or service when it is needed on time. Forsyth (2007) cites that distribution is the process that enables products and services to be delivered to customers/consumers in the market. Distribution process typically involves intermediaries but for a fast food franchise like KFC intermediaries are highly unlikely, but for KFC accessibility is vital. Making sure their stores are located strategically to allow easy access by customers when they need to. Therefore, to ensure that customer get timely access to their products whenever they wanted, KFC strategically located their stores in specific parts of Nigeria, depending on the city or area or state. They located stores primarily in areas where customers/consumers live (suburban and urban locations), close to schools, companies and markets.
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KFC opened 6 stores in Nigeria in December 2010 in the most populated cities in the country including Lagos city, which is the highest populated city in Nigeria and the 4th highest populated city in the world. KFC also plan to open 20 more stores located strategically in 2011. This also says a lot about KFC’s strategy in Nigeria. Currently, KFC does not provide home delivery service which is more convenient for most customers, but they are not the only one in the market who doesn’t provide this service. Some of KFC’s top local competitors do not provide home delivery service as well because of lack of infrastructure that enables home delivery like good roads etc.
A firm must Promote itself, in other words, it must communicate, clearly and persuasively to let people know what is available and encourage them to buy (Forsyth 2007). There are various promotion tactics like advertising, direct mail, sales promotion e.t.c. Firms decide whether to use some or all of them depending their target audience, the advantages and disadvantages of the promotion tactics, available budget, and level of effectiveness of the promotion tactic (Forsyth 2007). KFC uses advertising effectively in Nigeria as their main promotion tactics. The most effective form of advertising by KFC in Nigeria are electronic and billboard advert by Movie stars and musicians for KFC. KFC takes advantage of the fact that the average Nigerian emulates these stars and follows what they do to some extent.
Another promotional tactics that KFC uses in Nigeria and is probably the best at it is ‘Selling’. This involves a one-on-one communication with the customer and sometimes forms a final and important, link in the chain of different methods that link a firm to its market, according to Forsyth (2007). KFC is very good at this because they already have standard staff training specifications for all their staff and employees. This is one of KFC’s global brand qualities that it brought to the Nigerian market. KFC’s competition in Nigeria cannot match this quality at the moment, because they rarely train their staff and even when they do they are not as meticulous as KFC in training their staff and making sure they perfect customer relations. For instance, It is not strange to walk into a fast food store in Nigeria and see a receptionist arguing with a customer, but just few seconds with KFC staff, you will immediately notice that they are different in the way they interact with the customers. They sort of draw you in and make you feel special and appreciated, and for a typical Nigerian customer that respect and appreciation is almost everything.
3. KFC’S FOUR Ps OF MARKETING MIX
Jobber (2007) suggests that an effective marketing mix matches customer needs, creates competitive advantage, matches corporate resources, and is well balanced. According to Brassington and Pettitt (2003 1105) Marketing Mix is the blend of the 4Ps that creates an homogenous and stable offering to potential customers to satisfies their needs and wants. This means that there must be consistent synergy or balance between these four basic tools of marketing to meet potential customers need and wants. For instance, a good product with bad communication will not work, and so is a bad product with good advertising. This is simply because the elements of the Marketing mix rely on each other and if they lack consistency with each other in what they are saying about the product, then the customers will reject it all because they not stupid. Brassington and Pettitt (2003 25)
The 4Ps is a widely recognized concept in marketing and it provides a central organized structure or foundation for marketing activity,which manager can relate to and easily understand, The 4Ps include Product, Price, Place and Promotion.
PUT DIAGRAM HERE
3.1 KFC’S PRODUCT
The product is at the core of marketing exchange. If the product does not deliver the benefits the consumer wanted or if it does not fulfill the expectations created by the other elements of marketing mix, then the whole exercise will be useless. (Brassington and Pettitt 2003 267). A product is a physical good, service, idea, person or place that can offer tangible and intangible qualities that individuals or firms consider necessary, worthwhile or satisfying and are willing to pay for it or exchange any other valuables for it (Brassington and Pettitt 2003 268). This means that for a customer/consumer, the benefit of a product is everything because they buy these products to meet needs, so when a customer/consumer exchanges money, patronage or any other unit of value for a product what he/she is doing is simply paying to get the benefits of that particular product to meet his/her needs. It also means that a product could be anything or place that offers needed benefits and customers/consumers regard as beneficial.
A product (tangible or intangible) is like a personality, and just like a personality there are some characteristics that makes it essentially appealing to the buyer like branding, packaging and labeling, design, style and quality e.t.c. The product and price are the two main parts of the marketing exchange that interests marketers Brassington and Pettitt (2003 268). Alternatively, Groucutt (2005 158) considers products as a collection of features and benefits that provide customer satisfaction. All these different perspectives have two things in common, which is that a product must be beneficial and must provide customer satisfaction. KFC promotes their wide range and varieties of fried, smoked and roasted ‘Suya’ chickens in Nigeria as nutritious, convenient and even healthy in some parts according to their adverts. According to Doyle (2002) Product decisions comprises of Product variety,product performance, product features, product design, product presentation, product packaging, sizes and brand name.
KFC’s specialty is fried chicken served in various forms. KFC’s primary product is pressure-fried pieces of chicken made with the original recipe. The other chicken offering, extra crispy, is made using a garlic marinade and double dipping the chicken in flour before deep frying in a standard industrial kitchen type machine (Scribd 2011). KFC in Nigeria offers non-durable products and Service products as well. They offer wide range of fried, smoked and roasted chicken in Nigeria, as well as side dishes with fish, port and beef, desserts and ice creams. These are all tangible but non-durable products because the can only be consumed once. KFC’s service products in Nigeria represent intangible products such as activities, benefits or satisfaction that customers/consumers derive from their relationship with KFC. KFC menu in Nigeria contains three different segments namely: Family Meals, Individual Meals and Sandwiches. Family Meals comprises of Family Meal, Party Meal and Economy Meal. Individual Meals comprises of Snack Box, Strips Light Meal and Dinner Box. Sandwiches comprises of Suya rap, Suya Burger, Fish rap, beef rap, Chicken fillet supreme, Pork Supreme. They also give customers the chance to make up their own variety box comprising of some or all available products. All the fried Chicken Meals are prepared in the traditional KFC style of frying in oil with the colonel’s range of spices. All the Meals also have ‘Suya’ variety, this means that customers/consumers can either chose between the locally prepared ‘Suya’ or the traditional KFC fried Chicken. KFC also have the same strategy for the beef, fish and pork meals. For the sake of simplicity, this report shall be discussing Fried Chicken.
3.1.1 MARKET SEGMENTATION
KFC in Nigeria segments the market demographically by dividing it into groups based on age, gender, family size, income, occupation, religion and ethnicity. KFC segments the market demographically in this way:
Age: Between 6 – 65
Gender: Males and Females
Family Size: 2 – 4, 4 – 6, 6+
Income: 500Naira and above
Family life style: ALL
KFC’s typical customers/consumers in Nigeria are adults between 18 to 58 who live fast paced lives, and therefore considers convenience when deciding what to eat or drink. This convenience is the totality of what KFC offer in Nigeria.
188.8.131.52 PSYCHOGRAPHIC SEGMENTATION
Entails dividing a market into different groups based on social class, lifestyle, religion or personality characteristics (Scribd 2011). KFC in Nigeria divides the market based on psychographic variables like: Upper and Middle class, Life style (not specific) and Personality (ambitious and authoritarian), role expectation of the sexes, reference groups, customs and traditions KFC is concerned about the potential effects of these variables on the sales of its products. This is precedes target market. Psychographic segmentation enable KFC tailor their products or menu content to the specific needs of the target customers in different parts of Nigeria.
184.108.40.206 TARGET MARKET
This is the process of evaluating each market segment’s attractiveness and selecting two or more market segments (Scribd 2011) The two main factors usually considered when selecting a target market segment are the attractiveness of the segment and the fit between the segment and the firm’s objectives, resources and capabilities. KFC in Nigeria targets upper, middle and a group known as Upper-lower class in Nigeria. KFC’s main target are the upper and middle class, but due to the pricing system they initiated, they widened the net to take in this special group known as the upper-lower class, who can afford to take advantage of the KFC’s penetration pricing system. KFC’s target in Nigeria depends on
-Size and growth rate of the segment
-Competition in the segment
-Brand loyalty of existing customers in the segment
-Attainable market share given promotional budget and competitors’ expenditures
-Required market share to break even
-Sales potential for the firm in the segment
-Resources and structural attractiveness of market segment
-Expected profit margins in the segment
The market research and analysis discussed before is instrumental in obtaining the above information. (Scribd 2010)
220.127.116.11 MARKET PRESENCE
According to Brassington and Pettitt (2006 862) It is a reasonable objective, especially for a small company or a new entrant into an industry/market, to create awareness, both of the firm and of the products offered. According to Jobber (2007) in the communication effects pyramid, 90% Awareness leads to 70% Knowlegde/compreehension, to 40% Liking to 25% Preference, to 20% Trial and 5% Use. This means that to generate more than 5% actual usage which is tantamount to sales of a product, a firm must be more than 90% effective at creating awareness. Even well know brands could have some blind spot relative to a particular market or a new market environment. KFC created awareness in Nigeria through pre-campaigns and promotions, while already gathering potential customers’ feedback on what they would like to see in KFC eventually. KFC utilized this and tailored their product to popular costumer specifications and needs and this allowed them a relatively easy entry and penetration into the market. The position of KFC products in the minds of target consumers/customers is also important. KFC uses all these attributes to position its products to occupy a clear, distinctive and desirable place relative to competing products in the minds of target consumers/customers. KFC in Nigeria takes feedback from customers and then improve their products. KFC pays more
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