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7/28/2019 UOM - Pritee

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Table of Contents

Table of Contents..............................................................1

4 Literature Review...........................................................3

4.1.Introduction................................................................3

4.2.Evolution of Marketing.................................................4

4.2.1.The Production Concept............................................4

4.2.2.The Product Concept.................................................5

4.2.3.The Selling Concept..................................................5

4.2.4.The Marketing Concept.............................................5

4.2.5.The Internal Marketing Concept.................................64.3.Product Life Cycle........................................................7

4.4.The BCG Growth- Share Matrix.....................................7

4.5.Situation Analysis........................................................9

4.6.Marketing Mix...........................................................10

4.6.1.Product..................................................................10

4.6.2.Product Quality.......................................................10

4.6.3.Packaging...............................................................11

4.6.3.1. Functions of Packaging........................................11

4.6.4.Promotion..............................................................12

4.6.4.1. Sales Promotion..................................................13

4.6.4.2. Pricing................................................................13

4.6.4.2.1. Factors influencing the pricing Strategies..........13

4.6.4.3. Pricing Strategy..................................................13

4.6.5. Distribution...........................................................15

4.7. Franchising..............................................................154.8.Customer Relationship Management (CRM).................15

4.8.1.Shift from product centric to customer centric..........16

4.8.2.The shift from 4Ps to 4Cs ........................................16

4.8.3.Customer Retention................................................17

Hart and Johnson (1999), "... customers are loyal when theyhave been consistently satisfied over time". 5% increase incustomer loyalty can produce profit increases from 25 % to85 %. .............................................................................17

4.8.4.Pareto Principle: 80/20 Rule.....................................17


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4.9.Benefits of CRM ........................................................17

4.9.1.Importance of customer satisfaction leading tocustomer retention..........................................................19

4.10.Service Encounter....................................................19

4.10.1.Understanding Customers Service Expectations.....19

4.11.Customers Perceptions towards KFC and McDonald. . .20

4.12.Ways adopted by companies to maximize customervalue..............................................................................23

4.12.1.Branding...............................................................23


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4 Literature Review

4.1. Introduction

This chapter aims to focus on the importance of marketing strategies, which enable

organizations to stay ahead of competitors. The ability to develop effective and

winning marketing strategies is to become more responsive and adaptable to the

market willperhaps more than ever before, differentiates the winners from the losers.

The following are five key avenues that have been developed throughout theliterature.

To investigate how both companies are adopting product differentiation

strategies in order to increase market share.

To analyze how both companies are integrating customer relationship

management to retain customers loyalty.

To identify the ways adopted by both companies to maximize customer value.

To identify the service encounters between the employees and customers.

To examine the different perceptions of customers towards KFC and Mc

Donalds.

What about the research questions and hypotheses? You need to look for literaturefor these also.


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4.2. Evolution of Marketing

Kotler (1999), states that the competing concepts under which organizations canchoose to conduct their marketing activities are: -

Production Concept

Product Concept

Selling Concepts

Marketing Concept

Internal Marketing Concept.

4.2.1. The Production Concept

Kotler and Keller (2009, p.58), observed that the Production Concept holds that

customers will prefer products that are widely available and cheap. A research by

Khermouch (2003 cited Kotler and Keller 2009,p58) showed that Marketers also

use the production concept when a company wants to expand the market,(Lamb et

al. 1994,p.9) argues that a production orientation falls short because it does not

consider whether what the organization produces most efficiently also meets the

needs of the marketplace.


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4.2.2. The Product Concept

Armstrong and Kotler (2005, p.13) define the Product concept as efforts undertaken

by organizations to offer the most quality, performance, and features and that the

company should therefore devote its energy to make continuous innovative features.

Kotler (1999, p60) also adds that under the Product Concept, managers are so caught

up in a love affair with their product that they do not realize that the market may be

less turned on. This idea is closely linked to Levitt (1960) idea of marketing myopia

where companies are more preoccupied with the products that they produce rather

than the markets they serve.

4.2.3. The Selling Concept

The whole idea of the Selling Concept, as denoted by Armstrong and Kotler (2005,

p.13) that customers will not buy enough of the companys products unless it

undertakes a large-scale selling and promotion effort.

However (Lamb et al. 1994, p.10) observed that sales orientation, as with a

production orientation, is a lack of understanding of the needs and wants of the

marketplace. Sales-oriented companies despite the quality of their sales force, they

cannot sell goods or service if the market does not want them.

Gary et al (1998) further pointed out that the key to business success for an

organization adopting a Sales Oriented Approach lies in persuading potential

customers to buy your goods and services through advertising, personal selling or

other means.

4.2.4. The Marketing Concept

Denison et al (1995) ascertain that Marketing-orientated companies are talking not

just about satisfying present customer needs, but about anticipating the customer

needs of the future and delivering them today.


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Levitt (1960 cited Kotler and Keller 2009, p59) put forward that selling focuses on

the needs of the seller; marketing on the needs of the buyer. Selling is preoccupied

with the sellers need to convert his product into cash; marketing with the idea of

satisfying the needs of the customer by means of the product and the whole cluster of

things associated with creating, delivering, and finally consuming it.

Several scholars have found that companies that embrace the marketing concept

achieve superior performance (1990 cited Kotler and Keller 2009, p59).

4.2.5. The Internal Marketing Concept

In addition to Kotler (1991), Internal Marketing is the task of successfully hiring,

training, and motivating able employees to serve the customer well, internal

marketing must precede external marketing as it makes no sense to promise excellent

service before the company staff is ready to provide it.

According to Armstrong (2009, p.333) people are motivated is related to the strength

how people behave and the factors that influence behavior in people.

Gronroos (1981) noted that everyone in the organization has a customer and

internal customers must be sold on the service and be happy in their jobs before they

can effectively serve the final customer. (Berry 1981)

As mentioned by Armstrong (2009,p.33) the best practice approach are best in any

situation, and that adopting them will lead to superior organizational performance.

The best practice approach, which was produced by Pfeffer (1998 cited in Armstrong,

2009) namely:

1. Employment security;

2. Selective hiring;

3. Self-managed teams;

4. High compensation contingent on performance;

5. Training to provide a skilled and motivated workforce;


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6. Reduction of status differentials;

7. Sharing information.

4.3. Product Life Cycle

To Guiltnan et Al (1996), the product lifecycle represents a pattern of sales overtime,

with the pattern typically broken in four stages. The four stages are the followings: -

Introduction

Growth

Maturity

Decline stage

As put forward by Guiltnan (1996), in this stage, sales growth stimulates many

competitors to enter the market, and the increase of market shares becomes the major

marketing task.

During the growth stage, the challenge is to maintain supply and quality consistency

while establishing brand identification and market position. ; McDonald (1996)

4.4. The BCG Growth- Share Matrix

In one of his major works, B. Henderson (1970) has argued, "To be successful, a

company should have a portfolio of products with different growth rates and different

market shares. The portfolio composition is a function of the balance between cash

flows.

Armstrong and Kotler (2005,p.45) elaborates on using the Boston Consulting Group

(BCG) approach, a company classifies all its strategic business units (SBUs)

according to the growth-share matrix shown in Figure 1. On the vertical axis, market

growth rate provides a measure of market attractiveness. On the horizontal axis,


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relative market share serves as a measure of company strength in the market. The

growth-share matrix defines four types of SBUs:

Marketgrowth

rate

Low

High

StarQuestion

Mark

Cash cow Dog

High LowRelative market share

Figure 1: Growth-Share Matrix

As mentioned by Armstrong and Kotler (2005, p.45) strategic business units (SBUs)

are classified as stars, cash cows, question marks, or dogs. Therefore, they put

forward that:

Stars. Stars are high-growth, high-share business or products. They often need heavyinvestment to finance their rapid growth

Cash cows. Cash cows are low-growth, high-share businesses or products. These

established and successful SBUs need less investment to hold their market share

Question marks. Question marks are low-share business units in high-growth

markets. They require a lot of cash to hold their share, let alone increase it

Dogs. Dogs are low-growth, low-share businesses and products. They may generate

enough cash to maintain themselves but do not promise to be large sources of cash

According to (Lamb et al. 1994,p.708);

Stars: a star is a market leader and growing fast,

Cash cows: It is in a low-growth market, but the product has a dominant market

share


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Question marks: This strategy needs a great deal of cash. Without cash support,

they eventually become dogs

Dogs: A dog has low growth potential and a small market share. Most dogs

eventually leave the marketplace

4.5. Situation Analysis

Situation Analysis is also know as SWOT analysis. To Evans and Berman (1995),

Situation analysis investigates a firms strengths, weaknesses, opportunities and

threats.

Evans and Berman (1995) put forward that Situation analysis will recognise a

company strength and weaknesses relative to competitors, search the environment for

possible opportunities and threats, assessing the firms ability to capitalize on

opportunities and to minimise or avoid threats and anticipating competitors responses

to company strategies.


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4.6. Marketing Mix

Hills et al (1985) suggested, decision associated with product, price, distribution and

promotion need to be completely blended in all decisions to maximize use of

resources.

The marketing mix must be attractive to the target market so as to attract customers

Evans and Berman (1995).

In referring to the Marketing Mix, Gronroos (1997) argues, marketing in practice

has, to a large extent been turned into managing this toolbox.

4.6.1. Product

A product is anything that can be offered to a market for attention, acquisition, use,

or consumption that might satisfy a want or need (Kotler et al 1999).

KFC and McDonalds product mix or product assortment is the set of all products

and items it offers for sale (Kotler 2003). Lusch (1987) define a product as a bundle

of tangible and intangible attributes that a seller offers a potential buyer and that

satisfies the buyers needs or wants.

Convenience products are fast moving consumer goods that the customer usually

purchases frequently, immediately and with a minimum of effort Kotler (2003).

Being a franchise, both KFC and McDonald offer consistent standard and constant

quality.

4.6.2. Product Quality

Consumers have distinct goals in purchasing goods and services. To Evans ad Berman

(1995), these buying objectives are important for the consumer: availability of items,

reliability of sellers, consistency of quality, delivery, price and customer service.

Consistency of quality refers to buyers interest in purchasing items of appropriate

quality on a regular basis Evans and Berman (1995).


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Kotler et al (1999) define product quality as the ability of a product to perform its

functions: it includes the products overall durability, reliability, precision and other

valued attributes

4.6.3. Packaging

Packaging is the activities of designing and producing the container or wrapper for a

product; Kotler et al (1999).

As said by Brassington and Petitt (2003); Packaging not only serves a functional

purpose, but also acts as a means of communicating product information and brand

character

Mc Kenzie (1997) found that the packaging design was becoming a vital element in

developing a brand proposition to the consumer both in advertising and point-of-sale

promotion.

4.6.3.1. Functions of Packaging

To Evans and Berman, (1995); Packaging functions range from containment ad

protection to product planning.

Packaging is functional, it protects the product in storage, in shipment and often in

use; (Brassington and Petitt 2003)

Packaging also servers as promotional purpose. It needs to grab and hold the

consumers attention and involves them with the product; (Brassingtion and Petitt

2003)This involvement of the user makes the packaging an essential element in branding,

both in the communication of brand values and as an essential part of the brand

identity; Connolly and Davidson (1996).


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4.6.4. Promotion

Promotion is any communication used to inform, persuade and or remind people

about an organisations or individuals goods, services, image, ideas. Evans and

Berman (1995).

To Evans and Berman (1995), promotion planning focuses on a total promotion

effort- information, persuading, and reminding. Evans and Berman (1995)

highlighted that promotional is a key element of the marketing mix, for products

with some consumer awareness, the emphasis is on persuasion: converting

knowledge to liking.


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4.6.4.1. Sales Promotion

Dudley (1989) defines sales promotion as including all those activities and events

which companies use to encourage customers and distribution channel buyers into

making purchasing decisions other than by using advertising or personal selling

methods

4.6.4.2. Pricing

Price represents the value of a good or service for both the seller and the buyer

Evans and Berman (1995).

Price is the amount of money charged for a product or service, or the sum of the

values that customers exchange for the benefits of having or using the product or

service Kotler and Amstrong (1999).

4.6.4.2.1. Factors influencing the pricing Strategies

Stokes (1995) suggests that Small Firms are subject to a variety of influences such as

external factors relating to the specific industry and market situation, as well as

internal variables of costs and management policies will be taken into account

4.6.4.3. Pricing Strategy

Pricing may be based on costs, demand, completion or a combination of them. As put

forward by Evans and Berman (1995), the four broad types of pricing strategies are: -

Cost-based pricing

Demand-based pricing

Completion-based pricing

Combination pricing.


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Evans and Berman (1995) said under cost-based pricing; a firm set prices by

computing merchandise, service and overhead costs and then adding an amount to

cover its profits goal.


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4.6.5. Distribution

To Evans and Berman (1995), distribution planning is the decision making regarding

the physical movement of goods and services from the producer to the consumer. A

channel of distribution can be simple or complex.

4.7. Franchising

Franchising is a particular form of licensing of intellectual property rights (Adam

and Mendelson 1986).Ayling (1987) considers franchising as a form of marketing and distribution in which

the franchisor grants an individual or company, the franchisee, the right to do business

in a prescribed manner over certain period of time in a specified place.

According to Stokes (1995), this type of franchise goes beyond the supply of products

and trade names, and covers many other aspects about how the business is run.

4.8. Customer Relationship Management (CRM)

Picton and Broderick (2005); CRM is a view that emphasizes the importance of the

relationships developed between an organization and its customers. It involves the

strategic and tactical management tasks to achieve positive communications and long

term customer relationships.

Berkowitz (2006) defines customer relationship management (CRM) as the

organizations attempt to develop a long-term, cost-effective link with the customer

for the benefit of both the customer and the organization.

Gronroos, (2007) further elaborated CRM plays an important role in maintaining

existing or forming new relationships.


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4.8.1. Shift from product centric to customer centric

This is so because customers do not want merely quality product by equally, Service,

Price, Quality, Action and Appreciation (Raghunath & Shields 2001).

4.8.2. The shift from 4Ps to 4Cs

There has been a shift from four Ps to four Cs, this is so because the four Cs model

focuses on consumer and on satisfying customers, it fits better from focusing on mass

marketing to niche marketing (Roberts, J.H., 2000).


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Figure 2.Source: From 4Ps to 4 Cs of Marketing Dinesh Bakshi.

4.8.3. Customer Retention

Hart and Johnson (1999), "... customers are loyal when they have been

consistently satisfied over time". 5% increase in customer loyalty can

produce profit increases from 25 % to 85 %.

4.8.4. Pareto Principle: 80/20 Rule

80 % of company sales comes from 20 % of existing customers. The strategy for

sustained growth must focus on retention since as per Chattopadhyay (2001), when

you focus on new customer acquisitions while current customers defect, you get a

leaky bucket.

4.9. Benefits of CRM

From various researches carried out, it was found that CRM benefits varied by

industry as the process and technologies associated with CRM were tailored to

specific industry structures (Lemon and Zeithaml, 2001). However, Thomas and

Kumar (2004) refuted that findings in cross cultural, multi-industry study of CRM

conducted showed that CRM benefits do not vary across industries or cultures.


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(Richard and Jones, 2008) eventually associated CRM benefits with three components

including relationship, value and brand equity.

Seven core benefits were further identified by (Richard and Jones, 2008) to serve as

value drivers in Figure 3:

1. Improved ability to target profitable customers;

2. Integrated offerings across channels;

3. Improved sales force efficiency and effectiveness;

4. Individualized marketing messages;

5. Customized products and services;

6. Improved customer service efficiency and effectiveness; and

7. Improved pricing.

Figure 3.Conceptual model relating CRM value drivers to customer equity (Richards and Jones,

2008).

Similarly, Swift (2001) identified the benefits organisations gain from CRM:

1. Lower cost of gaining new customers, as focus will be laid on existing

customers

2. Increased in the number of long-term customers


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3. Reduced costs of sales

4. Higher customer profitability

5. Increased customer retention and loyalty

4.9.1. Importance of customer satisfaction leading to customer retention

Satisfying customers is essential and for that customer support is required. Various

researchers as (Armistead and Clark, 1992; Christopher et al., 1991; Davidow, 1986;

Lele and Sheth, 1987; Teresko, 1994) identified that customer support can provide

competitive advantage. (Loomba, 1998) stated, as product differentiation becomes

harder in many markets, companies are increasingly looking to customer support as a

potential source of competitive advantage.

It has been found that many organisations where there is a lack of management

attention in terms of customer support fails, to satisfy customers and thus are unable

to retain customers (Hull and Cox, 1994).

According to Berry (1983) when a customer pays a price, he expects some specific

thing with a specific quality and features.

4.10. Service Encounter

After making a purchase decision, customers move on to the core of the service

experience which usually includes with placing an order, requesting a reservation,

process of obtaining a loan etc (Lovelock, C and Wirtz, J 2007). (Shostack L, 1985)

puts forward that a service encounter is a period of time during which you, as acustomer, interact directly with a service provider.

4.10.1. Understanding Customers Service Expectations

Customers evaluate service quality by comparing what they expected with what they

perceive they received from an organisation (Lovelock, C and Wirtz, J 2007).


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However, if the service experience does not meet their expectations, customers may

complain about poor service quality, suffer in silence, or switch organisations in the

future. (Jaishankar.G et al 2000). In highly competitive service markets, customers

increasingly expect service organisations to anticipate their needs and deliver on them

(Karmarkar,U,2004).

The levels of both desired and adequate service expectation may reflect word of

mouth comments, and the customers past experience with this organisation.(Johnson

R and Mathews, P 1997 )

As mentioned by (Normann, R. 1991) say that the perceived quality is realised at the

moment of truth, when the organisations and the customer confront one another in the

arena. It is the skill, the motivation, and the tools employed by the organisations

representative and the expectations and behaviour of the customer, which together

will create the service delivery process.

Zeithaml,A,et al 2006) elaborates on the terms quality and satisfaction are

sometimes used interchangeably. Some researchers believe,however,that perceived

service quality is just one component of customer satisfaction, which also reflects

price/quality trade-offs, and personal and situational factors. According to Bitner

(1992), peoples reactions to an environment are dependent on their purpose for

entering.

4.11. Customers Perceptions towards KFC and McDonald

Consumer value plays a crucial role at the heart of all marketing activity as it refers to

things of value that have been created for a specific market (Holbrook, 1999).

Consumer value is a highly complex concept in that it integrates an array of possible

product quality attributes, process-related attributes and less tangible sources of value,

in particular, brand image (Schroder, 2003). For fast foods, product attributes may be

further broken down into nutritional, sensory and hygienic quality.


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The nature of food production and processing is becoming more important to

consumers (Baltas, 2001; Bredahl et al., 1998), even if these aspects cannot be

verified through the actual consumption of the food (credence attributes). Ethical

production in terms of animal and human welfare, and environmental protection are

key issues here (Harper and Makatouni, 2002; Wier and Calverley, 2002; Grankvist et

al., 2004). Holbrooks (1999) typology serves as a mapping tool for generic consumer

value and is highly applicable to the food context. For example, it highlights both

functional consumer value (which might be interpreted as food safety and nutritional

make-up) and ethics.

It is the beginning of a new era that the fast food industry has gradually breakthrough

the Mauritius lifestyle. Whether these fast foods have revolutionised Mauritius, today

these products form part of our lifestyle and culture. People rely on their convenience

to enhance their lives and productivity.

The number of the fast food joints has increased drastically in the last few years, and

today it is possible to find many international fast food chains such as: McDonalds,

KFC, Burger king, Pizza Hut, next to local fast food brands. We can find fast food

serving hamburgers, pizzas, Indian food, chicken, and many more. The price ranges

from 75 Rupees up to 200 Rupees.

Though many researchers and media report about the unhealthy nature of fast foods,

people have developed a taste for fast foods. They have an increased interest for

nutrition in fast food, as they have become more health conscious. Consumers want

low calorie and light and low fat menu items. In this situation, marketers who manage

fast food restaurants need to understand how their customers think of their menu

items. Thus, the first step marketers should go through is to investigate consumers'

perceptions of fast food menu items served by their restaurants. This is an important

step to respond to consumers' new demands with respect to the increased health

consciousness.

Delivering superior value to customers is an ongoing concern of management in many

business markets of today. Knowing where value resides from the standpoint of the


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customer has become critical for suppliers (Ulaga 2001). Hence the construct of

customer-perceived value needs to be first assessed.

In marketing, perceptions are more important than the reality, because its perceptions

that affect consumerss actual behavior. (Kotler and Keller, 2009) Perception is the

process by which we select, organize, and interpret information inputs to create a

meaningful picture of the world (Berelson and Steiner, 1964).

As such, fast-food restaurants have experienced intense competition in the recent

years due in part to the saturation of a fast-food restaurant market and the worldwide

economic downturn. With tighter profit margins and increasing competition, the fast-

food restaurants success depends heavily on its ability to retain customers (i.e.

restaurant patrons) by enhancing customer value or innovating service offerings (Min

2011). Indeed, the longer customers remained with a particular fast-food restaurant,

the more profitable they became to the fast-food restaurant (Reichheld and Sasser,

1990; Lovelock and Wright, 2002).

Fast-food restaurant enhance its competitiveness by relying on the customer

perception of its overall service quality in comparison to other competitors (Min

2011). The results of the survey carried by (Min 2011) revealed that there were a total

of 15 service attributes that were considered relevant to fast-food restaurant service

quality. These salient attributes were identified based on importance ratings provided

by the respondents who were being asked to indicate how important a given attribute

is to them in gauging the level of their satisfaction with service quality. Myers (1999)

suggested that importance ratings were one of the most straightforward but effective

ways of measuring customer satisfaction and determining the relative importance of

service attributes to service quality.

Among the 15 attributes the one, which is considered the most important in forming a

perception of fast-food restaurant service quality, is taste of food. The next four most

important attributes were cleanliness of the fast-food restaurant, service response

time, competitive price, and quality of prior service. These results are consistent with

those of other service quality studies such as Crawley (1993), Babin and Darden

(1996), Min and Galle (1996) and Miranda et al. (2005) indicating that facility

atmospherics such as cleanliness of the fast-food restaurant can lift the mood of the


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diners and may impel them to visit more. Similarly, Dijksterhuis et al. (2005) argued

that subtle environment cues such as cleanliness of the fast-food restaurant might

unconsciously affect the restaurant customers dining behavior. Also, as expected,

competitive price turned out to be a central influence on fast-food restaurant service

quality. This finding is congruent with that of Curry and Riez (1988) indicating that

the price paid for the food significantly influences the customers service experience.

On the other hand, word-of-mouth reputation, amenity, proximity to a highway/major

road, safety, and health food offering were considered relatively unimportant.

4.12. Ways adopted by companies to maximize customer value

4.12.1. Branding

In consumer behaviour research, considerable attention has been paid to branding;

indeed branding has been one of the most important marketing strategies in recent

years. Some would say that successful branding has the potential to increase gross

profit by up to 50% (Blumenthal, 1995).

While brands are popularly associated with consumer non-durable goods or fast food

(McDonalds), they in fact cover most if not all product types, including consumer

durables industrial goods and services. As defined by the American Marketing

Association, a brand is a name, term, sign, symbol or design, or a combination of

them, intended to identify the goods or services of one seller or group of sellers and to

differentiate them from those of competitors (Kotler, 1994).

Branding is a significant marketing tool and is used to differentiate an organizations

product(s) in the marketplace. Branding strategies are developed by the organization,

for the product, in order to position and identify the brand with positive product

benefits to attract potential customers, create brand awareness and to increase

profitability (Assael, 1985; Doyle, 1989; Harris and Strang, 1985; Kapferer1992).

The successful application of branding can create distinctiveness and value for the

organization, its product and the consumer. Many generic and undifferentiated


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consumer goods have been differentiated by means of branding and successful

branding can achieve high market share and sales for an organization (Kotler, 1994;

Shoebridge, 1993).

According to Aaker (1991, p. 16) a successful brand possesses five categories of

assets, which are:

1. name awareness;

2. perceived quality;

3. other proprietary brand assets;

4. brand associations; and

5. brand loyalty.

Aaker (1991, p. 271) suggested that a successful brand should possess name

awareness and this is defined as the ability of a potential buyer to recognize or recall

that a brand is a member of a certain product category.

Perceived quality is the customers perception of the overall quality or superiority of a

product with respect to its intended purpose, relative to alternatives (Aaker, 1991,p.

88). As the level of perceived quality held by a consumer increases, the consumer

would increase her confidence and understanding of the value of the product to her

needs.

Brand associations refer to anything that it mentally linked to the brand and this asset

affects the processing and recall of information used by the consumer in reaching a

purchase decision. The value of brand associations is that they can create positive

perceptions and reinforce differentiation for a product or service based on attributes

that are either tangible or intangible (Aaker, 1991).

I did not see the application of the guidelines, which I had sent. You are requested to

re-do your literature review according to the guidelines. A literature review is

definitely not a copy paste exercise of bits and pieces of marketing theories!

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