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"Welcome to McDonald's what can I get for you today?" A very warm saying that might sound similar to many consumers, who attend fast food restaurants on a frequent basis. Have any one ever wondered why we keep on going back to McDonalds week after week? This is mainly because of McDonalds advertising and marketing. McDonald has an image that is more than just food; it is a place for the families. Over 9500 restaurants in nearly 45 countries is the strength of McDonalds. None of the single brand name has ever matched McDonalds marketing budget. McDonalds approximately spends more than $800 million dollars each year on their marketing and promotion. McDonalds began a major advertising campaign in the year 1987 that aimed to neutralize the misconception of junk food about their good food. This marketing strategy of theirs did not last long as newspapers started to write that the food in McDonalds is not so nutritious and people do not come to McDonalds for nutritious food. From then onwards McDonalds started to offer only a nourishment card rather than trying to stamp their food products as nutritious one. According to Mr.Peter Cox, a former consultant of marketing belonging to the vegetarian society, did quotation from the book, "Behind the Arches", the reason why Japanese people are small and have yellow skin, because they have consumed only fish and rice for the past 2000 years. McDonalds soon came out with the marketing slogan that if you eat Hamburgers and potatoes for nearly 100 years then you will grow taller and have a white skin with blonde hair" this slogan was ruled out. However, their marketing to children was not ruled out. Most of the McDonalds marketing are aimed towards children. According to the researchers, they say that when a child looks at Ronald he or she thinks only of French fries and hamburgers. Researchers also say that many children admire Ronald and want to be like him, as Ronald loves McDonald and so will they. According to the Children's thinking it doesn't matter how much fast food they should be eating because Ronald says it's always good and fun. In the 1980's Children's love towards Ronald went haywire and the major man Geoffrey Guillano, Ronald, give up and apologized for his actions. He personally believed that he brainwashed the children into doing things that are wrong, he also admitted that he was sorry to the children everywhere for selling out to concerns that make millions by killing animals. In the UK McDonald's also does marketing to young children, aged between 2 and 8. Their McDonald's adverts contained a simple song that was easy to remember for children. According to John Hawkes, the McDonald's United Kingdom Chief Marketing Officer their song was to reach each family through their children. He said the song was stored in the front position of the brain of the children's mind. This made children to attach hunger with McDonald's and inquire their parents to take them there. McDonald's also tried to target young adults, ages 16-25. McDonalds took a new move toward to target young adults, where they used discounts and coupons. McDonalds offered twenty nine cent and thirty nine cent hamburgers and cheeseburgers. McDonalds never make cash off the price the customers pay to these burgers but rather they did from the soda they bought and the fries they bought. This leads to the subliminal marketing, also known as the trade-off result. For example, when the customer went to pay money for a small coke they usually end up buying a large one. This is mainly because the small one is $1.09, the medium $1.24, and the large $1.29. A customer looks at the prices and tries to figure out the most excellent deal possible for their money. The medium sells for $0.15 cents more than the small that gave the customer 5 more ounces of drink but the large sells for $0.05 more cents than the medium one and the customer will end up getting 11 more ounces for their nickel. This makes the customer to buy their soda that is two sizes larger than what they originally planned to buy. Even though the customer spends $0.20 more than their usual, however McDonalds spends close to nothing. The customers will also do the same process for their french fries. A medium portion of fries costs $1.29, large is $1.59, and a super is $1.79. The large sells for $0.30 more than the medium but the super are only $0.50 more than the medium and $0.20 than the large. The customer in their mind will think, that if they spend the extra $0.30 to get the large fry they might as well spend $0.20 more cents and get the best value possible for their dollar. In conclusion, everyone are targeted for something. Whether it is for McDonald's or or some other fast food chain. Marketing is what makes one store better than the other, and McDonalds are very good in that.
This is a research about McDonalds and their marketing strategy under the credit crunch situation. In this research I aim to explore on the below mentioned objectives. First of all I am going to start with the research background, where I will go through McDonald's history, their hold in the market, their main competitors etc, that will hold as a base to this particular research. Next I will talk about the different literatures that, regarding where research has been done on the similar topic. According to my though previous literatures will not have much information on the effect of credit crunch, however my literatures will include more on the marketing area involving fast food chains. After the literature review I will give the methodology for the research, where the research methodology for the purpose of the research will be discussed based on the research objectives and the type of the research. In the next section I will do the main research, where the primary data will be collected relevant to the research that is based on the research methodology. After doing the primary research the findings will be analyzed and possible results will be arrived at before conclusion.
- Effect of tight economic condition on the food industry.
- What do people perceive about McDonalds even in the tight economic condition?
- McDonalds brand management
- Marketing strategies adopted by McDonalds to attract people keep coming towards their shop.
With over 35,000 locations in hundred countries, McDonald's (NYSE: MCD) is the world's largest fast food restaurant chain. McDonald's operates its own restaurants and franchises its brand to local businesspeople (about seventy percent of the world's McDonald's are franchised.) The company experienced a theatrical turnaround in 2003, driven by a two-pronged plan. In countries such as the US and the UK., McDonald's focused on rising sales at existing locations by renovating their stores, increasing menu options and also extending store hours. Globally, McDonald's expanded aggressively, opting to franchise rather than operate its new locations which provide new income with little overhead.
Both strategies have paid dividends- despite its dimension, sales have full-grown by a 3rd since 2003 Domestically, McDonald's continues to do strongly in spite of a pullback in customer spending and is even benefiting as customers trade-down from more expensive eating options. During this same time, global operations were driving profit growth. A rising global middle class, particularly in emerging markets like China, India and Latin America, is a massive opportunity for McDonald's. McDonald's violent efforts to get bigger its global presence- most notably in 2008 Beijing Summer Olympics- have produced strong similar sales and profit growth.
McDonalds Business Strategy
McDonald's has pursued 2 strategies since 2003. To be in the run with the fast changing customer preferences, demographics and spending patterns, McDonald's has introduced novel items in their menu including angus beef burger and premium chicken sandwiches and does campaigns to create more healthy foods including salads on the side. This strategy basically reflects the beliefs that innovation as opposed to reliability to traditional products is the key determinant towards success in the fast food industry.
They have also focused more on increasing their sales at their current restaurants instead of opening new ones. To do so, McDonald's has redesigned many of their restaurants, kept their stores open till late and increased menu options. Nonetheless, new restaurants are still getting opened around the world at a rapid pace - the company plans to open nearly 1,000 units in 2010, and continues to produce its new restaurants at a 1%-2% rate each year.
Size of McDonald's has three main advantages:
- McDonalds has a strategy of uniform menu offerings that can be accumulation produced, lowering production costs.
- Bargaining power with their suppliers reduces input costs with improved margins.
- Large advertising costs mean lots of exposure towards domestic and international market.
McDonald's is well-established in Europe, the Middle East, Asia/Pacific Islands, and Africa. Its enlargement in Europe is dominated mainly by Germany, France and the UK. In Asia, the general management has indicated that there is important potential in the China market. McDonalds have adapted its menu items to different local cultures, such as the Teriyaki Mac in Japan, Filet-O-Fish in China, and using lamb instead of beef in India.
Although McDonald's is the obvious leader of the fast food industry in terms of revenues generated and restaurants recognized, it faces rivalry from other fast food chains, which are introducing new products themselves.
Major direct competitors in the (hamburger-based) fast food industry include:
- Burger King Holdings is the 2nd largest hamburger fast food chain. Although more of their restaurants are franchised than McDonald's restaurants, revenues of Burger King Franchise fall behind that of McDonalds, mainly due to the their size advantage.
- Wendy's is the 3rd largest hamburger fast food chain. They have a lower operating margin than that of McDonald's, hence it is more likely that they suffer negative impacted during a recession.
- Yum! Brands runs Kentucky Fried Chicken, Taco Bell, Pizza Hut, Long John Silver's, and A&W All-American Food Restaurants. Currently, Yum! Brands are dominating the Chinese market, posing a threat to McDonald's in their attempts to enter the market. Where McDonald's Corporation focuses on its core brand, Yum! divides its resources among a wide variety of different restaurants.
- In addition to the above competitors, McDonald's also competes with non-hamburger-based fast food restaurants (such as Panera Bread Company (PNRA), Panda Express and Qdoba), local and national dine-in restaurants (such as Red Robin's and Shari's), pizza parlors, coffee shops (Starbucks), street vendors, convenience stores and supermarkets.
McDonald's revenue decreased by 7% to $5.65 billion in Q2 09 (ending March 31st, 2009), a decrease from $6.08 billion the previous year. However, operating income increased 2% over the previous year, from $1.65 billion to $1.68 billion. Much of the decline in revenue can be attributed to company-operated restaurants, whose revenue numbers decreased by 10% from $4.3 billion in the previous year to $3.8 billion. Revenue from franchised restaurants, on the other hand, actually increased 1% from $1.78 to $1.80 billion Since the margins on franchised restaurants are higher than those of company-operated restaurants, the higher contribution from franchised restaurants in the revenue mix positively impacted McDonald's operating margins (from 27.2% to 29.8%).
McDonald's also noted that McCafe, which they labeled as a "long-term home run", had met sales expectations and has benefited from the high level of advertising that McDonald's has committed to it. Coffee sales now make up 5% of McDonald's total sales.
The effect credit crunch has driven a record numbers of consumers from across different social spectrum to buy food under the golden arches of McDonald's.
The fast-food giant is serving close to 100 million customers every month at its 1,200 restaurants in Britain, revealed in the recent times. That is about 12 million more than its own previous record last December, which is typically the busiest month. The UK chief executive Mr.Steve Easterbrook, in the recent times have said that it is the 10th consecutive quarter of growth for them in the UK,Which s a real momentum in the business.
McDonald's UK delivered like-for-like sales growth, taken from restaurants open for 12 months or more, of more than 8 per cent for the three months to 30 September. Mr Easterbrook declined to provide a specific sales figure for McDonald's UK, but said it was above the 8.2 per cent underlying growth at the American company's European division. He said the sales figures were a further testament to the changes McDonald's had made over the past few years, with improvements to its menu, extended opening hours and new restaurant formats.
It also illustrated that companies perceived to offer value for money were attracting more middle-class customers, he added. Mr Easterbrook said: "Those people who are coming back to McDonald's, and who have not been there for a while, are finding a whole new McDonald's."
Discount retailers, such as Aldi and Poundland, are also profiting as hard-pressed customers seek out bargains. Mr Easterbrook said: "We have always had a very broad appeal and we are picking up more people across the board, but some people are trading down. A family of four can come in and have a meal for £15.
"We are seeing growth across the menu from the Extra Value Meals to our Rainforest Alliance coffee and premium burgers."
McDonald's is also reaping the rewards of extending the opening times of its restaurants. Some open at 5am and 200 British branches trade for more than 24 hours at weekends.
Mr Easterbrook said early opening was having a positive effect because if had increased the numbers of people coming into its stores throughout the morning. Sales of its coffee were up by more than 20 per cent, he added.
Globally, McDonald's operating income rose by 20 per cent over the three months to 30 September to $1,823.7m, and its total worldwide sales increased by 7.1 per cent.
Marketing at McDonalds
McDonald's is one of the best known brands worldwide. Through marketing, McDonald's establishes a prominent position in the minds of customers. This is known as branding. Branding develops a personality for an organisation, product or service. The brand image represents how consumers view the organisation. Branding only works when an organisation behaves and presents itself in a consistent way. Marketing communication methods, such as advertising and promotions, are used to create the colours, designs and images which give the brand its recognisable face. At McDonald's this is represented by its familiar logo - the Golden Arches. In all its markets, McDonald's faces competition from other businesses. Additionally, economic, legal and technological changes, social factors, the retail environment and many other elements affect McDonald's success in the market. Marketing involves identifying customer needs and requirements and meeting these needs in a better way than competitors. In this way a company creates loyal customers. By identifying their target audience McDonalds
Marketing department will determine the correct marketing mix.
- Which products are well received
- What prices consumers are willing to pay
- What TV programmes, newspapers and advertising consumers read and view
- Which restaurants are visited
Accurate research is essential in creating the right marketing mix which will help to win customer loyalty and increase sales. As the economy and social attitudes change, so do buying patterns. McDonald's needs to identify whether the number of target customers is growing or shrinking and whether their buying habits will change in the future.
By Doing SWOT analysis on McDonalds
E.g. the brand, and detailed market research to create the right marketing mix.
McDonald's has been around for a long time. (therefore important to keep innovating).
E.g. increasing numbers of customers looking for food that is served in a quick and friendly way.
New competitors, changing customer lifestyles.
According to Nazlin Imran(1999), in one of his works says that the study of consumer perception regarding food quality and acceptability is complex and interdisciplinary, encompassing scientific disciplines including food science and technology, nutrition, psychology, physiology, marketing and hospitality. Food having possessed with physicochemical characteristics arising from ingredients, processing and storage variables resulting in the sensory characteristics of the food product. These sensory properties are detected by consumers using the human sense organs producing experiences of the taste, appearance, smell and texture of the product. The basic study of the interaction between these human senses and the physicochemical properties is known as psychophysics. In food science, sensory evaluation is nothing but applied forms of psychophysics. The sensory attributes of a food product interact with consumer physiological, behavioral and cognitive factors within the consumer experience to exert influence on consumer perception. Context and background also affects this interaction, e.g. cultural setting and psychosocial influences in which the consumers encountered the food product which also affects the consumer hedonic response, i.e. the individual feeling of like or dislike, of the consumer. Sensory and hedonic experience interacts with post-consumptional experiences to produce responses that feed-back into the consumer physiological state, the learning process and memory building. Consumer expectation is in turn affected by this process. Expectation can be generated from cues such as packaging, labeling, product information and stereotypes. Thus, consumer food choice is determined by many factors as shown in the below figure. Food choice factors were being individually studied in the past by other disciplines, e.g. psychobiology, social psychology, cognitive psychology, nutrition and marketing. However, in the recent times, the the factors involved in the perception and acceptance of the food quality food quality are being studied collectively in sensory science. Sensory science has been described as a place of meeting in science, bridging the gap between humanities and the pure sciences.
It has been shown that many individual factors affect the perception of a food product. These factors include taste, odor, information from labeling and images, attitudes, memory from previous experience, price, prestige, nutritional content, health belief, familiarity and brand loyalty (Krondl and Lau, 1978, 1982; Raats et al., 1995). Sensory attributes have been known to play an important role in overall perception and acceptance of a food product. It has been well recognized that the intensity of food-related sensory attributes affect the level of pleasantness or unpleasantness of a food product (Cardello, 1994). Texture and flavor have been shown to have a profound effect on perception and acceptability (Szczesniak, 1972). However, ``the first taste is almost always with the eye'', i.e. visual sensations always help contribute to this perception since the first encounter with food products is often the contact of the eye and will affect subsequent willingness to accept a product. The effect of visual sensations should never be underemined. Human perception of quality is dependent on the visual image (Hetherington and MacDougall, 1992). It has been well established that color and appearance can have a halo effect which modifies subsequent flavor perception and food acceptability (Hutchings, 1994; Kostyla and Clydesdale, 1978). Appearance, flavor and texture are important quality attributes which characterize raw food materials and processed products (Schutz and Wahl, 1981). Kramer and Szczesniak (1973) use a circle diagram to describe the sensory quality of food. In this sensory circle, the perimeter of the circle is divided into three merging zones defined by appearance, flavor and texture. These zones are often regarded as an individual and seperate characteristic, however some properties do overlap indicating that the perception can be affected by more than one sense. However, the significance of different product attributes varies with the situation and time. For example, a product that is seen on a supermarket shelf may have different attributes affecting perception when compared to the same product seen on a plate. The same product on a plate would be affected by anticipatory and participatory attributes (Hutchings, 1977). In other words, at the point of consumption, anticipatory factors such as the initial product appearance and also consequent participatory factors such as product flavor and texture may dominate the acceptance level for many foods. Appearance encompasses several basic sensory attributes such as colour, opacity, gloss, visual structure, visual texture and perceived flavor. Of all these visual aspects, the effect of color is the most obvious and well-studied. The strong association between food and color was established as early as 1936 by Moir and 1939 by Dunker. Extensive research has confirmed the importance of color in taste recognition and intensity (Johnson and Clydesdale, 1982; Kostyla, 1978; Maga, 1974), in flavor detection and recognition, in food preference (Christensen, 1983; DuBose et al., 1980) and food acceptability (Johnson and Clydesdale, 1982; Maga, 1974). Consumer perception of an acceptable color has been shown to be associated with other quality attributes: flavor, nutrition and level of satisfaction (Christensen, 1983). Rolls et al. (1982) showed that manipulation of color in some products can be used to enhance intake and presumably to enhance sales. The effect can be achieved by manipulation of one or more variables: color within a formulation, incident light, packaging color and even color and appearance nomenclature and brand name (Martin, 1990) (Nazlin Imran, 1999)
Perceived service value has been a critical construct in marketing because it is assumed to have a significant influence on purchase or patronage behavior (Bolton and Drew, 1991; Zeithaml, 1988). Although value is an indistinct and elusive construct, service value as perceived by consumers has narrowly been defined as a trade-off between perceived quality (or the benefit component) and perceived sacrifice (or the cost component) regarding a service being evaluated (Dodds and Monroe, 1985; Dodds et al., 1991). Consumers would make their value judgment on a service by trading off the positive utility of the quality against the negative utility of the cost inferred from various service characteristics. Then, what specific aspects of a service imply the quality and the cost for the value judgment? This question is dealt with in the sections below.
Perceived service quality. Perceived quality is one of the major determinants of perceived service value. It is assumed that consumers consider various dimensions of a service to reach their overall judgment of service quality. Parasuraman et al. (1988), based on a survey with 200 consumers about five different service categories, have developed a standardized instrument called SERVQUAL, which can be used to measure customer perceptions of service quality. They then have retested and refined their original SERVQUAL instrument (Parasuraman et al., 1991). SERVQUAL consists of 22 items measuring customers' expectations and another 22 items measuring their perceptions of five dimensions of service performance. Specifically, they have suggested that when consumers make their judgment of service quality, they would generally consider the service provider's:
- Physical facilities and equipment (tangibles);
- Ability to perform promised service dependably and accurately
- Willingness to help customers and provide prompt service
- Knowledge, courtesy and ability to inspire trust and confidence
- Caring and individualized attention to its customers (empathy).
However, SERVQUAL is a generic measure; researchers have found that the relative importance of the five dimensions varies across different service industries (e.g. Crompton and Mackay, 1989; Johnson et al., 1988; Parasuraman et al., 1988, 1991).
Perceived service cost. Consumers compare service quality with cost to determine service value. Service cost is basically what consumers have to give up or sacrifice to obtain a desired service. Since it has a negative impact on consumers' budgets, it would have a negative influence on their perceptions of service value. The concept of cost can be extended to include nonmonetary cost such as service time (see Murphy and Enis (1986), for a detailed review of time costs). Service time is the amount of time during which a service is provided. Since most customers would like to have faster services, service time would affect perceived service value in the same way monetary cost would. Some services require customers to be present physically where the services are provided (e.g. hairstylists, hotels and motels, restaurants, etc.). For such service categories, service locations, like service time, are an important cost/benefit factor determining service value because the more convenient the locations are, the fewer amounts of time consumers need to get there, and vice versa. (Moonkyu Lee, Francis Ulgado, 1997)
The UK fast-food marketplace is value an estimated £7.82 billion annually (Keynote, 2003), an average amount spends of twenty pound per month per adult (McDonald, 2003). Due to busier client lifestyles and dual-working families with children, stress is increasingly being placed on fast meal solutions (Atkins and Bowler, 2001). This has resulted in a market enlargement of more than 18 per cent in fast food since 1998 (Keynote, 2003). United Kingdom customers tend to look upon expediency and wholesomeness as polar opposites, rather than a balancing type of food value (Jack et al., 1997, 1998). These researchers found that convenience is likely to be associated with wide food processing, as in the example of manufactured snack foods; such snacks are apparent as suitable but unhealthy, while natural "fruit as a snack" are perceived as healthy but inconvenient. Fast food meals based on burgers and fried chicken (e.g. MacDonald's, KFC) also tend to be perceived as suitable but unhealthy. There has been a sustained increase in the demand for expediency foods and snacks over a number of years (Traill, 1994; Keynote, 2003). Moreover, a better volume of fast food is enthused in the United Kingdom than in any other country in Europe (Schlosser, 2001). Recently, the thought that processed convenience foods are contributing to a fatness epidemic has led to litigation proceedings against McDonald's. At the same time, a figure of fast-food companies and food manufacturers have reviewed the fat and sugar contents of their manufactured goods ranges, and reconsidered the dimension of the portions they offer. New "healthy options" (e.g. pasta salad, fruit bags,) can now be purchased from fast-food outlets next to customary burger and chicken meals. Another new innovative strategy by McDonald's and KFC enables nutritional information for each meal to be accessed via nutritional calculator tools on each company's web site (see www.mcdonalds.co.uk and www.kfc.com). From the early stages of post-war nourishment policy in the UK, food manufacturers have responded to nutritionists' calls for better products to some degree. However, they have also asserted there are no "good" or "bad" foods - only good or bad diets (Richardson and Brady, 1997). In the meantime, the UK Food Standards Agency's (FSA) present diet and nourishment strategy emphasizes a key role for the food manufacturing in helping to get better the nutritional excellence of dietary intakes (Scottish Food Advisory Committee, 2002). For caterers, this means offering a greater option of healthier tableware, and for manufacturers and retailers, rebalancing foodstuff ingredients, in particular, reducing the attendance of fat, salt and sugar and rising that of fruit, vegetables and complex carbohydrates. Health branding initiatives, such as the Department of Health's "5-a-Day" campaign promoting fruit and vegetable eating, have clearly helped to lift the profile of nutrition targets (Department of Health, 2003; Parker, 2003). Food companies desire the logo but obtainable processed foods may not meet its strict supplies (Laurance and Mitchell, 2003). As a result, manufacturers and retailers have begun to open their own logos and claims. Customer value plays a vital role at the heart of all advertising activity as it refers to things of worth that have been created for a specific marketplace (Holbrook, 1999). Customer value is a highly multifaceted concept in that it integrates a collection of possible product excellence attributes, process-related attributes and less touchable sources of value, in particular, brand image (SchroÂ¨der, 2003). For fast foods, manufactured goods attributes may be further broken down into dietary, sensory and clean quality. The nature of food production and processing is becoming more significant to customers (Baltas, 2001; Bredahl et al., 1998), even if these aspects cannot be established through the real consumption of the food (credence attributes). Ethical manufacture in terms of animal and human welfare, and environmental guard are key issues here (Wier and Calverley, 2002;Harper and Makatouni, 2002; Grankvist et al., 2004). Holbrook's (1999) typology serves as a mapping tool for generic customer value and is highly applicable to the food background. For example, it highlights both functional customer value (which might be interpreted as food security and dietary make-up) and ethics. However, business image is only partially built on touchable product and process attributes. Equally significant is the manner in which company's converse with stakeholders through their marketing strategies, including CSR initiatives. CSR may be defined as an organization's rank and activities with admiration to perceived communal obligations (Brown and Dacin, 1997). Through the Business Excellence Model (British Quality Foundation, 1998), the crash of an association on society has been highlighted alongside the require for worker and customer satisfaction. Clearly, the better the perceived power and influence of an association the more likely it is to draw the attentions of campaign groups. The activities of influential organizations will be improved understood by the community and have an effect on more customers than those of smaller competitors. When campaigners single out such organizations for inspection or even assault, they can wait for more media interest for the issues they want to make public. It is therefore not surprising that worldwide players in the fast-food sector, such as McDonald's, be inclined to find themselves in the dismissal line of groups concerned with the a variety of aspects of food quality. (Schroder & McEachern, 2005)
According to Peter Jones & et al (2002) there are a wide variety of elements in the UK's retail catering industry but fast food are perhaps the most prominent, the most dynamic and the most rapidly growing. While there are variations in the specific styles adopted by the fast food operators a number of general defining characteristics can be identified. Fast food outlets offer a simple and fairly restricted menu within a carefully controlled operating system. A variety of burgers in a bun, fried chicken, French fries and to a lesser extent pizza and baked potatoes provide the main course. Typical desserts are ice cream and fruit pies and the drinks range includes milk shakes, fizzy drinks and tea and coffee. Customers queue up to be served at a counter, the aim being to serve a large number of people with the minimum of waiting time and most operators look to serve customers within three minutes of their entry onto the premises. The food is sold in disposable packaging without cutlery. Some operators offer facilities for customers to consume their food on the premises while others tend to cater more for the take-away trade. The fast food revolution essentially had its origins in the US in the mid 1950's and this style of catering has continued to grow there and to spread to most of the rest of the world in the decades since then. Schlosser (2001) has suggested that within the US the impact of this revolution has been seen to be particularly pervasive. He argues, for example, that during a relatively brief period of time the fast food industry has helped to transform not only the American diet but also our landscapes, economy, workforce and popular culture. More generally fast food can be seen as a powerful symbol of globalization and of post-modern society and few countries of the world seem immune to its apparent attractions. McDonalds, for example, claim to serve 45 million customers every day in 30,000 restaurants in 121 countries around the world. Branding has been a central and vital element in the introduction, growth and successful development of fast food in the UK. According to Mintel (2001) branding is seen to give consumer reassurance and confidence in terms of the quality of the food, the service, menu pricing and overall standards, which effectively create a sense of 'knowing what you are going to get'. Thus brands are seen to take the guesswork and uncertainty out of choosing somewhere to eat, so long as they are operated within strict guidelines to ensure that the brand offer is identical. This uniformity is seen to bring benefits not only to the customer but also to the operating company through economies of scale. Bulk buying and marketing strategies are identified as two major areas where significant cost savings can be made. Thus Mintel (2001) argue that the "success of branded operators is largely owing to their aptitude to provide formula food, that is, utilizing relatively contemptible ingredients, being reliable in their quality and with quick service". In a similar vein the large branded chains are seen to be able to carry out national advertising campaigns and hence to reach a nationwide audience. In 2001 branded fast food outlets within the UK were estimated to account for some £2,966 million of sales with burger and fried chicken sectors taking an 85% share of this spending and McDonalds, Burger King and KFC were identified as being the three most popular fast food brands (Mintel 2001)
Customer waiting time for service typically represents the first direct interaction between customers and most service delivery processes, so the importance of properly managing waiting times is of significant interest to most service operations. In recent years, service managers have made efforts to reduce customer waiting times and, and in some cases, totally to eliminate waits by improving processes or by adopting faster service technologies. Customer reactions to waiting in line, whether they are good or bad, can color the customer's perception of the service delivery process. For example, customers in a restaurant who are unhappy about their long wait for seating may complain about the quality of the food, even if the food is totally acceptable. Chebat et al.'s (1994) study of bank customers supports this notion of a "halo effect", concluding that a customer's evaluation of service quality was affected not only by the end service received, but also by the service delivery process itself, which includes waiting time. It is therefore critical, in situations where waiting is inevitable, that service managers attempt to provide a high level of satisfaction with the waiting portion of the service experience. Previous research on customer satisfaction with respect to waiting in service operations has tended to parallel the broader research issue of customer satisfaction in services. Customer loyalty, as demonstrated in the form of repeat business, has been shown to be a key determinant of the success of many service companies (Reichheld and Sasser, 1990). While a high level of customer satisfaction does not necessarily guarantee customer loyalty, dissatisfaction will cause customers to take their business elsewhere. In other words, customers who are dissatisfied with the level of service they have received will be less likely to return in the future, or if they do return, they will most likely do so with less frequency than they did in the past. Conversely, customers who are extremely satisfied with their service experience with a given firm will most likely continue to return to that firm at the same frequency or even more frequently. The customer's experience with the service firm is also likely to be multiplied through interactions with other prospective customers via word of mouth: when customers are satisfied with the service they receive they influence the expectations of other customers (or potential customers) with whom they interact; when they are dissatisfied with service, customers are even more likely to "spread the word" and influence the expectations of others.
Defining customer satisfaction in service operations has been approached in two general ways:
- Satisfaction as a function of disconfirmation; and
- Satisfaction as a function of perception.
Satisfaction as a function of disconfirmation
One line of research has attempted to define satisfaction in terms of disconfirmation, that is, the difference between customer perceptions and expectations (Anderson, 1973; Parasuraman et al., 1994; Swan et al., 1981), as illustrated in the below equation.
Satisfaction = f (Perception - Expectation) (1)
Customer expectations of service are set in two basic ways:
- Prior to the customer's first encounter with the service firm, via advertising and customer word of mouth; and
- After a previous encounter (or encounters) with the firm, from personal experience.
Early work in this area proposed that there are two dimensions to the expectation construct: the level of service desired by the customer and the level of service predicted by the customer (Anderson, 1973; Swan et al., 1981)
The disconfirmation model, however, has been questioned by some researchers who have used another approach to measuring customer satisfaction. Goode and Moutinho (1995), for example, state, "The disconfirmation of prospect model has been more and more criticized in recent years and, as a consequence, standards other than prospect have been suggested" (p. 33). Teas (1994) in particular, argue that the multiple definitions of expectations and the resulting difficulties with measurement operationalization undermine the value of models incorporating expectations. An alternative approach that appears to be gaining acceptance is that satisfaction depends primarily on the customer's perception of service performance rather than on the disconfirmation between perception and expectation (Cronin and Taylor, 1994; Teas, 1993).
Satisfaction = f (Perception) (2)
Perception, of course, means the customer's perception of actual performance, implying that perception and "objective" actual performance are not one and the same. Parasuraman et al. (1994), for example, argue that, while perception alone may be a better predictor of satisfaction, it offers less understanding of the underlying phenomena than the disconfirmation model, suggesting that the question is a fruitful area for future research. (Mark M. Davis & Janelle Heineke, 1997)
Social research is an invention of research methodology by early scientists, in practice for nearly 2000 years from the past. Greek authors such as Socrates have investigated the causes of social problems in the pat and produced a very impressive record of the social lives and the society, through social research. According to him social research is a means by which one can explain the social life existing in the world, critically evaluate it and empower the people to overthrow it.
Some of the aims of social research include:
- To make predictions, develop theories and test it.
- To offer a means by which the social reality is critically evaluated.
- Understand humans, their behaviors and actions etc.
Main paradigms of social sciences include:
QPR is a set of methods and techniques that let IS researchers to reply research questions about the interaction of humans and computers. In this approach to research there are basically 2 corner stones. Emphasis on quantitative data is the first corner stone. Emphasis on positive philosophy is the second corner stone. With respect to the 1st cornerstone, these methods and techniques tend to specialize in quantities in the sense that the numbers come to stand for values and levels of theoretical constructs and concepts and the understanding of the numbers is viewed as strong scientific proof of how a phenomenon works. The attendance of these quantities is so predominant in QPR that arithmetical packages and tools are an essential element in the toolkit of the researcher. Sources of information are of less importance in identifying a move toward as being QPR than the fact that empirically derived numbers lie at the core of the scientific evidence assembled. A QPR researcher may use archival information or gather it through structured interviews. In both cases, the researcher is motivated by the numerical outputs and how to derive meaning from them. This emphasis on numerical analysis is also key to the second cornerstone, positivism, which defines a scientific theory as one that can be falsified.
It seeks to give details the stability of performance from the individual's viewpoint. They are most interested in understanding the subjectively shaped world "as it is" in terms of ongoing processes. It emphasizes the religious nature of the world. Philosophers like Kant formed it's basis, and Weber, Husserl, and Schutz furthered the ideology. This paradigm hasn't generated much organizational theory.
The early form of research originated in the natural sciences such as biology, chemistry, physics, geology, etc. and was concerned with investigating things which we could watch and measure in some way. Such comments and measurements can be made objectively and repeated by other researchers. This process is referred to as "quantitative research".
Some of the characteristics of quantitative research include.
- There is only one reality in nature, which is objective, positive and simple.
- As the naturalistic world is governed by fixed laws, likewise the human beings are also determined by their social world in a similar manner. They are subject to fixed pattern, which are empirically observable.
- Facts are kept apart from values and social scientists should not make any value judgment.
- Natural and social sciences share common logical and methodological foundations.
- Philosophical reasoning, metaphysics and speculations are mere illusions and offer no verifiable and reliable data, since they employ no clear procedures, which can provide scope for any retesting.
- Logical form of a theory is deductive.
- Explanation is derived from experience and is purely restricted to positive phenomena.
Much later, along came the researchers working in the social sciences such as psychology, sociology, anthropology, etc. They were interested in studying human behavior and the social world inhabited by human beings (Morgan, 1983). They found increasing difficulty in trying to explain human behavior in simply measurable terms. Measurements tell us how often or how many people behave in a certain way but they do not adequately answer the question "why?." Research which attempts to increase our understanding of why things are the way they are in our social world and why people act the way they do is called "qualitative research" (Marshall & Rossman, 1999).
Some of the characteristics of qualitative methodology includes
- It goes with an assumption that the social world is a human creation and not a discovery(Smith, 1992)
- It uses no measurable variables
- Tries to capture reality in interaction
- Studies small number respondents
- No random sampling techniques are employed
- Attempts to capture the meaning and regularities of social actions.
- It aims at not measuring people, but to understand them.
- Aims at studying the reality from the insider point of view.
- Aims at interpreting human actions that are meaningful, that people give of themselves.
- Approaches reality independently and directly without any preconceived thoughts.
- Respondents are not seen as measurable variables, but as a whole in a research where the researcher and the researched are deemed as two important elements of the same situation.
- According to Smith (1992), it leads to an interpretive enquiry, which is ultimately a moral enquiry.
The above mentioned characteristics are accepted and mentioned by famous authors including Berger et al., 1989: Crabtree and Miller, 1992; Lamnek, 1988; Patton, 1990; Vlahos, 1984.
The above research will involve both qualitative and quantitative research methodology. It is qualitative in terms that its purpose is to understand the social life. It is idiographic as it describes the reality as it is. It is open and flexible in all respects. The research process is influenced by the respondants. The researcher is close to the respondents and uses a dynamic approach. It is holistic as it studies the whole units. The research places priorities in studying the similarities. It employs a low level of measurement. The research is quantitative in terms that it aims at theory testing. The research is etiological as it is interested in why things happen. The research process involves a closed approach as it is strictly planned. The research employs a random sampling. The research also places priority in studying the differences. The research employs a reductive data analysis. The research employs a deductive approach. Hence, the research involves both qualitative and quantitative research methodology for the good of the research.
Primary data collection methods
- Under natural setting
- Conducting field experiment
Advantage - minimizes response bias
Disadvantages - incomplete to measuring behavior, time consuming, topic to investigator bias
- Personal interview
- Telephone Interview
- Self-administered Questionnaire
Advantages - permits detailed in-depth questions & responses.
Disadvantages -interviewer bias, costly, investigator bias, interviewer cheating
Advantages - suitable, relatively inexpensive, saves time, less interviewer, investigator bias than personal interview
Disadvantage - non-coverage, limited length in deepness of questions and responses
Advantages - cost effective for large areas, promotes accurate answers, minimizes interviewer bias,
Disadvantages - low response rates, unanswered questions, incorrect answers, lengthy transit time
Secondary data collection methods
Secondary data isdata that is neither composed directly by the user nor specifically for the consumer, often under conditions not known to the consumer. Examples include Government reports. Secondary information has already been collected for some other purposes. It may be obtainable from internal sources, or may have been collected and published by another association. Secondary data is cheaper and more rapidly available than primary data, but likely to need processing before it is helpful. For example, secondary sources of marketplace penetration of an association are data collected already for accountancy and operational purposes. Total industry sales may already been collected and published by some outside body such as the government, trade association as secondary source of information.
A corporation who wants to know the users of its products may have following secondary sources:
- Government statistics
- Published reports
- Company's financial statements
- Scientific and technical Abstracts
- Banks reports
- Trade AOP's
The research involves both primary and secondary data collection techniques. Secondary data collection is done regarding McDonalds, their history, operations store locations, profit etc. In order to show that McDonalds is highly successful in their operations even under a credit crunch situation, financial data of McDonalds will be collected both in the pre credit crunch situation and under credit crunch situation, which will be done by getting the data from company's house. This will include their most recent financial statement and the previous year's financial statement. These two statements will be compared to show the performance of McDonalds under the credit crunch situation. Primary data collection will include distribution of questionnaires to the customers regarding their view on McDonalds and its offerings. This will be done by requesting the customers who come out of the outlet to fill up the questionnaires for the purpose of the research. Nearly 4 major outlets will be covered to collect the questionnaires including north, east, south and central London. Based on these data analysis will be done to know the customer perception on McDonalds. Mostly data collection will be done where in I will be requesting the customers to answer these simple questions based on the questionnaire design, rather than requesting them to fill the questionnaire by themselves and give back. This will help me to get a better response for the purpose of my research. I would like to collect at least 100 responses from the 4 outlets selected and there is no restriction to the maximum number of responses to be collected.
Since the data collection will involve both numerical as well as qualitative data, my data analysis will engage both qualitative as well as quantitative data analysis. The qualitative data collected will be coded into themes and interpreted in order to get possible explanations of people's perceptions regarding McDonalds and its offerings. The quantitative data collected in the form of variables will be organized and coded in a spread sheet from which possible explanations will be derived using logical thinking. All the data collected will be coded in excel spreadsheet with respect to age and ethnicity and gender, and these coded data will then be used to draw pie graphs from which possible explanation will be derived regarding consumer perception on McDonalds.
DATA COLLECTION AND ANALYSIS
Data collection for the above research has been done by distributing questionnaires to McDonalds customers in a particular out let in central London. Overall 100 responses has been collected. The below table shows the respondents report. From the below table it is very much clear that each and every individual has been grouped based on their age and gender. There were more female respondents than the male respondents as the number of female respondents was found to be more in the store. While collecting the data it was made sure that no partiality was given to particular age band and all the 5 age bands are concentrated equally as far as possible as part of equal opportunity approach and towards satisfying my criteria in order to fetch better results for the purpose of my research.
Do you replace McDonalds
When asked to the customers regarding if they will replace McDonalds in case of its non availability, the below chart shows that 61% of the respondents said that they will never replace McDonalds will other alternatives as it is their favorite restaurant. However 39% of them said that they will not mind going to other similar restaurant in the case of its non availability. Hence, 39% of the people who said yes consider McDonalds as a really good restaurant compared to other similar ones, but in case if McDonalds is not an option they will not waste any time looking for McDonalds instead will go for other alternatives.
With respect to the above responses 49% who chose burger king, majority of them are either below 20 yrs of age or in their early 20s. Respondents who chose wimpy, in that most of them are in their mid 30s or 40s. All the respondents who chose KFC are in their 30s and all the people who chose others are in their 40s and 50s. From the above statistics its is clear that mostly young audience prefer Burger king as their other alternative and hence are more burger liking people and hence McDonalds should target them and make sure that they keep visiting McDonalds.
When asked the customers about the size of their family as a whole they attended McDonalds
10% said 2 members, 47% said 3 members, 31% said 4 members and 12% said more than 4 members. Hence, majority of the family strength of the McDonald's customers are between 3 and 4 members as shown in the chart below. Now the amount of money the family as a whole spends in the restaurant is high contributing towards the profit of McDonalds. McDonals also advertises themselves as a family restaurant and each and every ember of the family will advocate the message about McDonald's popularity to their friends and colleagues and hence the brand is getting marketed through advocacy.
Next when asked to the customers regarding the increase or decrease of the family income in the last year as a result of credit crunch situation. The chart below shows 68% of the respondent's income hasn't changed, 21% said that their income has increased and mere 11% said their income has decreased. Hence, nearly 89% of the respondents are not unhappy about their income and hence would not bother coming again and again to he store to dine. The remaining 11% who said their family income has decreased in the last year are still happy to visit the store. However majority of the customers in this category has decreased their number of visit. Hence, McDonalds under the credit crunch situation should adjust their offerings in such a way that they reduce the expense of the food and keep attracting people from all financial backgrounds.
When asked to the customers regarding their satisfaction towards the varieties of offering McDonalds provide, from the below chart it is clear that 72% of them are satisfied and only 28% are unsatisfied. Hence, McDonalds has been very much successful over the years in satisfying majority of their customers and continue to do so under the credit crunch situation.
Out of 28% who said no 17 of them are above 50 years of age and the rest 11 is scattered equally and with respect to gender there are more male customers who are not satisfied than the female customers.
36% of the unsatisfied customers thought that they should increase the seating capacity in the store, since many a times the crowd is too much that they have to walk out without a meal. 25% said that they should increase the varieties of food offering, 11% said that there should be seasonal changes in the menu and 28% thought that improvement should be made in all of the above 3 areas. Hence, McDonalds should keep in mind the above queries of their not so satisfied customers in order to make them visit their restaurant on a more frequent basis.
Nearly 8 out of 10 customers who said increase in the seating space were above 50 years of age and are almost the same people who chose wimpy as their other alternaive.
Is McDonalds really cheap then having food at home?
When the customers were asked if it is cheaper having food at McDonalds than at home 69% said No and only 31% said yes. Hence, I feel that though 69% said it's costlier having food at McDonalds than at home they do visit McDonalds because it's a feel good factor for them and less work having food at McDonalds than at home. Even the 31% who said yes might not have said it financially but have said it keeping in mind the overall comfort and happiness they derive by visiting McDonalds. Therefore, McDonalds has been very much successful in attracting their customers with their brand image.
Impact of credit crunch on McDonalds
Comparing the above two we can say that less than half of the respondents including both the genders accept that credit crunch has affected their number of visits to their favorite restaurant. However McDonalds has managed to attract more than 60% of its customers to keep attending the store despite the financial crisis. This shows McDonald's popularity and its strong brand image.
From the above data collection and analysis my findings are listed below:
- Irrespective of the gender and age of the customers many of them still keep visiting McDonalds as it is still perceived as the cheap and best food chain among its lovers.
- Though McDonalds target audience is people in the age group between 15 and 35 yrs of age, however people from other age groups also visit the restaurant as McDonalds market themselves as family restaurant where the target audience is accompanied by kids and older people.
- Though McDonalds is considered as the cheap and best food chain yet it's not cheap in its offerings. Many customers visit McDonalds keeping in mind the quality of its food and the taste that is unique.
- The effect of credit crunch situation on McDonald's sales is very minimal as even McDonalds claim that many cash-strapped customers chose McDonalds to dine out under the credit crunch situation because of its comparative low cost of service. Along with it even some of the cash rich individuals chose McDonalds for a quick lunch as they trust the brand.
- McDonalds has a very strong brand image and the effect of credit crunch has hardly put any impact on them in comparison to their competitors as people continue to visit McDonalds on a regular basis irrespective of any crisis.
- As per the customer recommendations regarding improvement by McDonalds, majority of the respondents are towards increasing the seating capacity of many of its stores. Though most of the McDonalds in UK have a good seating capacity, however during busy timings customers find it difficult to find space inside the store and if there is no space some customers walk out of the store looking for something else as they want to sit and eat. Hence, McDonalds should focus on that apart from their brand image.
From the above analysis it has been known that irrespective of their gender younger generation seems to be more brand savvy towards McDonalds and the older people would not actually mind going to other similar restaurants in case there is no option for McDonalds, hence I feel McDonalds should not waste any time in attracting them but target the younger generation instead.
The above research has given me a very good insight on understanding the different stages involved in marketing strategy with respect to fast food industry and McDonalds in particular. I must say I was successful to a great extent in my attempt to understand the consumer psychology in the fast food industry and how does different company work on strategies to keep themselves ahead in the market. McDonalds is seen as a clear market leader in the fast food industry, despite different competitors giving tough competition over the years. With the recent credit crunch effect many companies are facing a bad time with loss of business, however McDonalds is said to have found this credit situation to their favor. According to the company's chief operating officer in the UK many people are coming back to McDonalds for refuge as they think it is cheaper having food at McDonalds than having at home. A family of four can have a meal for £15. McDonalds, which spends nearly $800 million on their marketing campaign every year has created a huge brand name for themselves and this popularity of theirs is also one of the reason for their continual improved performance even under the credit crunch situation.
In this particular research I have done a primary research involving questionnaires that was distributed in one of the McDonalds outlet in central London. I had collected 100 responses, where the customers were divided with respect to their age and gender. The data collection was done in two days for my own convenience and the collected responses were analyzed individually. The collected data was recorded in the form of a pie chart with respect to the age and gender division. Based on these pie charts different statements were arrived at in the form of findings. These findings summarize the purpose of my research. Through this research I have learned that marketing is one of the most important areas for any business operating under any field and a tool that provides a division between the top companies and other mediocre companies.
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