Services Marketing Group Assignment Sector: Food & Beverages (Quick Service Restaurants) Company: KFC, India Operations
Section B | Group 5
Lagan Mongia (116 (116)) Naina Agarwal (121 (121)) Sahil Avi Kapoor (136 (136)) Shilpi Srivastav (141 (141)) Shreya Chowdhury (144 ( 144))
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1. Find information about the industry as a whole (no of players; billings; contribution to GDP; market size; Key trends; market leader/s; key stakeholders (customers, bankers, endorsers)
INDUSTRY INFORMATION Headlines
14% value growth in 2013 for the Indian Fast Food Industry
5% growth in the number of outlets in 2013; Total number reaching re aching 83,173
Multinationals expand the indigenous, ‘Made for India’ menu offerings
Latin American fast food records the highest growth in 2013, followed by chicken based fast food McDonald’s McDonald’s remains the Number 1 brand for fast food in India with a 2% value share overall and a 29.7% share in chained fast food Expected CAGR of 2%, to reach Rs. Rs . 1001.4 Billion in 2018
Trends
Multinational chains such as McDonalds and KFC continue to add increasing number of Indianized offerings in their menu. Example; McDonalds recently launched the Masala Grill as well as a range of kebab inspired grilled food items. In fact 70% of the menu at McDonalds is said to be tweaked to Indian tas tes and preferences Latin American fast food lead by recently launched Taco Bell, recorded 50% current value growth. This was followed by chicken fast food, mainly driven by KFC, recorded 36% growth. KFC opened 76 outlets in 2013 Bakery fast food lead by Subway is connecting well with Indian consumers, mainly driven by the health conscious. Other bakery brands such as Dunkin Donuts also increased its footprint in India Ice cream fast food increased phenomenally in popularity. Several high end brands such as Haagen Dazs and Magnum entered the country. Category leader of ice cream fast food, Baskin Robins also increased footprint with 100 new outlets, taking its total count to 630. Frozen yoghurt is slowly gaining pocket share in the Indian consumers. Main players in the business include Pinkberry, Red Mango, KiwiKiss, Yoghurt Hub and Cocoberry.
Competitive Landscape
Fast food is a highly fragmented market in India and McDonalds with a mi niscule 2% value share is the market leader, le ader, followed by KFC and Subway.
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Among the Top 8 brands KFC recorded the highest growth in 2013. The brand has been exceptional with its innovations such as the Tough Guy Gu y burger and the Rockin’ Burgers. Franchising remains the most popular business strategy in the industry. New players include Burger King, which has come in with a franchisee agreement with Everstone. Companies are mostly looking to launch products in the value for money segment. KFC was a leader among new launches, offering a hot chicken meal at Rs. 25. Subway which has initially struggled due to its high cost and pricing, introduced the toasties. Chained Fast Food Company Shares (% Sales Value): 2010 – 2010 – 13 13
40 35 30 25 20 15 10 5 0 McDonalds Corp.
Yum Brands Inc.
Doctor's Nirulas Corner Dunkin Brands Un Uniile leve verr Grou Group p Ka Kama math thss Associates Inc. House Ltd Inc. Ourtimes Ice Cream 2011
2012
2013
Chained Fast Food Brand Shares (% Sales Value): 2010 – 13 13 40 35 30 25 20 15 10 5 0 McDonalds
KFC
Subway
Nirula's
2011
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Baskin Robbins 2012
2013
Swirl's
Natural
Marrybrown
Forecasted Forecasted Sales Growth in Fast Food (By Category): 2013 - 2018 20
15
10
5
0 Asian
Burger
Chicken
Ice Cream
Latin American Middle Eastern
-5 Forecasted % CAGR
A1. Identify 7Ps for the chosen company and how it compares across competitors, elaborate on how challenging it is for the company to formulate the 7Ps given the extent of its intangibility, inseparability, variability and heterogeneity.
7 PS COMPETITIVE ANALYSES
Criteria PRODUCT Physical features Quality level Accessories Packaging
Product line
Branding
good
KFC
McDonalds
Fried Chicken
Burgers
Subway
Healthy Submarine sandwiches High High High Happy Meal toys Big buckets, Reusable trays, paper Reusable trays, paper Reusable trays, paper packaging packaging packaging pressure-fried pieces Essentially Burgers Submarine of chicken made with sandwiches, Salads the original recipe Kentucky Fries Quick Service, happy Health Low carry Fat Chicken Old original Price Menu, Ronald food recipe Mc Donald
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Criteria PLACE Outlet Location
Channel Accessibility
PROMOTION Advertising
PRICE Flexibility Price Strategy Price Level
PEOPLE Employee
Customer
KFC
McDonalds
Subway
Multiple outlet in cities across India essentially metros and tier 2 cities 1st level Channel High
Multiple outlet in cities across India essentially metros and tier 2 cities 1st level Channel High
Multiple outlet in cities across India essentially metros and tier 2 cities 1st level Channel High
OOH, in store, TV, OOH, in store , TV, OOH, in store, TV, print print print
High, Combo Deal, special offers Cost Based Low- Medium
High, Combo Deal, High, Combo Deal, special offers special offers Cost Based Cost Based Low- Medium Medium
Training Incentive based targets Recognition for good work Performance based bonus Employee benefits to keep them motivated Upper and Middle class
Training Incentive targets
Training based Incentive targets
based
All income classes, Upper and Middle targeted towards class youth
PHYSICAL EVIDENCE Name , logo, tag line Name , logo ,tag line Name , logo ,tag line Signage Uniform with name Uniform with name Uniform with name Employee Dress tags tags tags
PROCESS Flow of activity Level of customer Involvement
Order, Preparation, Order, Preparation, Order, Preparation, self service self service self service Low Low High
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CHALLENGES IN FORMULATING THE 7 Ps Intangibility
Service cannot be inventoried, as the peaks and lows of order are unpredictable Not a purely an intangible industry as the final product product is tangible
Heterogeneous
Expected Service quality can differ from actual service quality as it depends on on many uncontrollable factors , could vary from outlet to outlet , this includes interaction with staff and food preparation Service delivered may not match what has been promoted via external communications
Inseparability
KFC is highly decentralized as the service has to be delivered directly to the customer,
Because of which economies of scale due to decentralization doesn’t occur.
Employee effects the services final outcome
Variability
Service given to the customers will vary as the quality, training and ability might differ. Customer expectation varies which makes it difficult to give them the optimum level of service as per their individual i ndividual needs.
A2. Identify the customer segments and how the service is accordingly differentiated to the benefit of the company and customers
KFC has divided its market into four segments and has taken necessary measure to attract four segment: 1. Children below 12 years of age: love to get free toys with their meal 2. Young adults between 12 to 25: love their Fried Chicken and burgers within their budget 3. Families: have affordable mini Bucket Combos, place bulk orders 4. Budget Customers: prefer the A la carte, and real saver Menu
Pricing is done according to the segmentation, so the value perceived is as per the target market. Service given is of high quality keeping time and efficiency in consideration for the ease of the customer Customers benefit from the quick service and take away options. Also, the standardize menu helps KFC fill the gaps between customer c ustomer expectation and company’s company’ s perceived customer expectation. The company gets a lot of traffic because of the ease of ordering and use of manpower is decreased because of the self service practice. 6|Section B; Group 5
A3. Identify the buying behavior of your customer segments. Chart out the buying process of customers from Identification of need to consumption of service to post BUYING PROCESS
A4. How are customer expectations formed? How can your company control customer expectations? expectations? Explain with relevant illustrations.
Customer expectations are formed mainly by the advertisements, communications sent out by the company which forms expectations regarding the quality of food and level of service promised and delivered by KFC India. India. The other sources of expectations are: Derived service expectation: It is driven primarily by word-of-mouth recommendations and reviews given by family member, friends, etc. Also includes open sources available on the internet, like forums, reviews, and blog posts.
Perceived service alternatives: It is based on the service and product quality level provided by other market competitors which deliver comparable/similar services. Example: McDonalds, Subway etc.
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The way KFC markets its range of product offerings, i.e. the advertising and positioning as well as other integrated communication methods that involve customer interaction, can be leveraged to reduce the gap between customer expectation and service offered. As a result, the company can successfully control customer expectations.
Example: The print ad by KFC for its budgeted “WOW Menu” Menu”-- where it shows youngsters drooling over food which the people are eating inside KFC, but they can’t have it since they are out of money. Introduction of the new range starting at Rs.25 which is called the “WOW” menu .The youngsters are then seen eating at KFC and saying “WOW”. “WOW”. It ends with them saying “SO Good”. This forms the expectation with the customer that they can get a high quality- low price KFC food without any compromise in the taste and quality. A5. Identify any situation where the company has achieved a service recovery or has instituted a service recovery recovery program successfully
KFC India has been frequently subjected to complaints and criticism, both online and offline. KFC India being proactive on the digital platform has been quite successful in handling consumer complaint and feedback. Being backed by a management that runs international operations, KFC India has an efficient feedback system, quick action, systemized response mechanism and zero tolerance policy towards service failure. According to a recent article in India Today, Today, the manager at KFC Bangalore was caught clicking pictures of a customer without her permission. The offended customer seized the manager’s phone and complained to the mall authorities who did not take any immediate action, post which she complained to the KFC India Management, who initiated action against the accused manager. The company spokesperson also issued a statement to the press where they expressed their views of maintain a zero tolerance policy against any form of misbehaviour or harassment. They said 8|Section B; Group 5
that they had investigated the complaint and had taken a strong stand by firing the guilty manager and made sure that this would set an example across all outlets and emphasize on their stand against any form of harassment at the workplace. A6. Identify the service around tangible product offerings of the chosen company if applicable
KFC India primarily specializes in an array of chicken offerings, customized for the Indian palate and serves in the food services sector. As a dominant player in the fast food industry, they have carved a niche positing for themselves and they operate on the franchise model. Their target audience is the youth, pre teens, families families and the budget customer. The management pays a lot of attention to the cleanliness quality, customer service aspect, food quality and hygiene, delivery and logistics, and pest control management. With the rise of quick service restaurants on demand, KFC is also facing stiff competition from McDonalds, Subway, etc. As the fast food industry is highly competitive, quick and high quality service is essential to maintain and increase market share. A7. Identify the hard measures and soft measures that can help identify the service performance at each stage of customer touch points. HARD QUALITY MEASURES
KFC defines its quality measures to identify identif y service performance using
The QSC (Quality, Service and Cleanliness) Evaluation
Operations Facility Review
The QSC Evaluation is a rigorous process that includes:
Service Quality
Total Service Time (Time Spent at the Customer Window during Order Taking + Time Spent in Order Preparation + Time Spent in Order Delivery); Total Service Time will vary for Take Away, In Restaurant Consumption and Home Delivery Attention, Energy, Warmth and Courteousness of Customer Service Appearance and Professional Appeal of Staff Uniform and other related Physical Attributes
Accuracy in Order Taking, Preparation and Delivery
Degree of Helpfulness and Assistance while Order Taking; Suggestive Selling
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Product Quality Product Quality Measures are measured for products across categories - chicken dishes (hot and saucy chicken, hot and crispy chicken, fiery grilled chicken, hot wings, chicken strips, chicken popcorn); veg sides (veg strips); burgers; rice bowls; twisters as well as all beverages. Temperature of Food at the time of Order Delivery with respect to Standard Temperature
Absence of any visible short or improper breeding of chicken
Colour, Aroma, Texture and Overall Appearance of delivered food
Food quantity delivered with respect to standard quantity measures
Proper shape, appearance and closing of food containers
Cleanliness
Cleanliness of windows and entrance/ exit doors
Clean and optimally equipped rest rooms
Clean and neat service desks and counters
Clean seating area for customers
Clean and well landscaped exteriors
The Operations Facility Review entails the following:
Product and Process Quality Each product is evaluated using the following standard measures:
Quality and Freshness of ingredients used
Hygiene maintained in storage and handling of ingredients
Maintenance of consistent cooking procedures as regards to time, hygiene and temperatures Hold and waiting times for specific menu items
Facilities Cleanliness, Neatness, Maintenance of interiors, exteriors and fixtures
Sanitation and Operations
Frequency and Process of cleaning seating areas, service desks, kitchen and rest rooms Maintenance and cleaning of equipment used
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Critical Areas of Concern
Presence of rodents or insects
Cross contamination between separate menu items
Sale of rejected and unapproved products
Employees suffering from communicable diseases
SOFT QUALITY MEASURES
Soft Quality Measures for KFC has been developed by Human Touch Consulting and contains behavioural drivers of business, including customer retention, customer satisfaction, hospitality, accuracy, service speed and sales volumes. These measures are explained in detail as follows:
Welcoming and Greeting the Customers
Presence of Team Members in the designated Customer Service Counter
Eye Contact with respective customers
Operate with a friendly smile
Appropriate and warm greeting
Focused attention on the customer
Taking the Customer Order
Offer appropriate enhancements to the meal ordered
Confirm order with the customer
Usage of ‘Please’ while asking for money and ‘Thank You’ on receiving the bill amount Focused attention on the customer throughout Order Taking process
Completing the Order
Ask for customer’s name to add onto customer database
Add appropriate friendly comments
End the Order Taking invariably with a ‘Thank You’
Use customer’s name
Focused attention on the customer
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Order Delivery
Call out customer’s name on order completion
Repeat and confirm order
Offer condiments
End Order Delivery invariably with a ‘Thank You’
Focused attention on the customer
A8. Identify the pricing strategy for one of the product/service offerings in as much detail as you can with suggestions and recommendations recommendations or why you think the pricing strategy is the best strategy
PRICING STRATEGY
KFC is known to adopt various different types of pricing strategies to cater to different customer segments at different points of time. Like it has done around the world in the past, KFC initially adopted the Market Skimming strategy in India as well. 1. Competitive Pricing
KFC prices its core differentiated products such as fiery grilled chicken and hot & crispy chicken at a relative premium. At the same time its burgers, French fries and beverages that compete with other fast food chains are priced at almost the same price points as its competitors such as McDonalds. 2. Market Skimming
Across the globe, KFC is known to enter markets riding on the ‘High Priced High Quality’ tag. Their products, hugely differentiated from the other offerings in the fast food industry needn’t rely on price points to be their core USP. Thus, they target the middle to higher segment of customers looking for good quality and superior taste. Gradually, as they mature and build themselves a loyal customer base, KFC is known to trickle down the price to attract customers from the middle and lower segments as well, and thus managing to penetrate the entire market dimension.
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The new ‘WOW’ menu starting at Rs. 35 is an example of KFC trickling trickling down the prices after having entered with a range of premium, relatively high priced products. Apart from the aforementioned, KFC utilizes a range of other pricing strategies as well. 3. Optional Pricing
For customers who don’t wish to order meals, KFC also offers ample choice of picking menu items as per their own choice. There’s a wide gap between the lowest priced menu items (Soft Serve for Rs. 20 and Potato Krisper for Rs. 35) and the highest priced item (8 pc. Chicken for Rs. 559), thus offering ample options to the customer. The chicken bucket can also be ordered in a wide range of variety, such as 2 pcs, 4 pcs, 6 pcs and 8 pcs. Further options are provided in the menu as ‘add ons’.
4. Mixed Bundling Pricing
KFC, just like others in the industry actively utilizes mixed bundle pricing by selling a wide range of ‘meal’ options.
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‘KFC Specials’, ‘Lunch Meals’, ‘Rice Meals’ and ‘Box Meals’ are examples of the mixed bundle pricing as followed by KFC.
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A9. Identify use of new media by the company to promote and communicate service/ product offerings to their respective TG. Do you think the company can attain better marketing marketing ROI by calibrating investment judiciously across online and offline ad and marketing spend?
KFC India has been extensively utilizing the digital space and interactive new media tools to promote its wide range of products. Apart from conventional digital campaigns which most other brands also use, KFC has used Facebook-Integrated apps, Mobile apps as well as microsite models to launch as well as promote a variety of new additions to its Indian menu. It has resorted to aggressively focussing on the digital platform of communication for easy access to its younger tech-savvy target audience. The high return-on-investment apart from accurate targeting through social data mining and search engine optimization got KFC to channelize its resources on social media.
Some examples of KFC India’s India’s innovative innovative usage of new media are: 1. KFC India WOW@25 Digital Campaign – A A campaign designed to break the myth about KFC being an expensive brand and reach out to the younger customers who have budget constraints constraints while eating out. Included a very popular Augmented Reality app with which which a user could scan any currency note note on the mobile app or microsite microsite and check which KFC WOW Menu delights they could purchase using that money . The app got 35,000 downloads making it the No.1 app in the F&B section on the AppStore while the site received 1.5 lac hits. Blink Digital, the agency whose brainchild this campaign was, won the People’s People’s Voice award at the Webby Awards 2014 for this genius idea. 2. Radio KFC RJ Hunt – An attempt to promote KFC along with KFC’s in– house in– house radio channel, this campaign got 3000 participants from around 30 Indian cities to
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record their voices using the FB app in mock analog radio experience and send in their entries. entries. 3. Currycature – A creative campaign where users user s selected select ed either male or female caricature characters and made personalized quirky Indianized versions of them. them. 4. K rusher’s Komic rusher’s Komic – An An innovative campaign for creating comic strips on a FB app which included user-integrated snapshots of themselves in a comic story conceptualized, designed and scripted entirely by the users to spread the Krusher motto of living in NOW.
Crowd-sourced designing of the trademark KFC bucket using 5. Design Your Bucket – Crowd-sourced inbuilt tools available in the app, this challenge also cashed In on the retirement of cricket legend Sachin Tendulkar accepting Sachin-themed customized buckets
6. Web Ordering – The provision to place an order online, through the KFC site has helped make KFC a part of the very busy lifestyles lifest yles of its target customers.
The engagement levels on KFC India’s India’s FB FB as well as Twitter pages are very high and interactive maximising its potential to maintain customer interest, announcement of schemes and discounts as well as promptly address complaints and grievances. But to make better use of other upcoming new media avenues, they should also focus on active engagement through their YouTube channel and Instagram portfolio.
The current marketing mix that KFC India has been using has worked well in terms of ROI because these digital campaigns increased their engagement rate to 3 times the industry average and put them amongst the top 5 fastest growing social media brands in India. Hence, it should judiciously invest more in online advertising as opposed to offline marketing (TVCs, print ads and OOH) to keep up with the changing digital trends and catch the nerve of its TG to attain better marketing ROIs.
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A10. Identify key investments in the company which have helped improve service quality. Elaborate each investment conceptua conceptually lly and with approxima approximate te quantitative details wherever possible.
Following the economic liberalization policy in India in the 1990s, KFC seized the opportunity to foray into the Indian markets thus, becoming the first fast food multinational to enter the country. It targeted the upper middle class consumers and opened its first outlet in the city of Bangalore after getting a permit per mit to operate in 30 outlets across the t he country. Despite initial opposition regarding non-conformity with Indian food regulations, protests by PETA and the surrounding debate about procurement and preparation of its chicken offerings as well as presenting a possible threat to indigenous brands, KFC invested a lot to make its foothold strong in the Indian fast food market. They invested heavily in R&D to come out with dishes that suited the Indian taste buds and were spicy enough for the tandoori chicken loving population. They continue to do so, launching Indianized offerings like Rice Bowls and Aloo-patty burgers. They even launched a Paneer-based version of their flagship Zinger Burger to broaden the relevance of KFC and attract different types of consumers. KFC, despite having strong chicken-based brand equity, created a special vegetarian menu for the vast majority of Indians who are vegetarian. Also, since vegetarians are largely averse to eating out in a restaurant that has fried chicken as its specialty, they launched a recent campaign to ensure they had separate kitchens and preparation equipments for the vegetarian as well as non-vegetarian products. The campaign called ‘So ‘So Veg, Veg, So Good’ Good’ put put to rest any apprehensions their loyal customers might have had regarding violation of their cultural sentiments.
Even though vegetarian items contribute only 10% to the overall revenue, this investment plays a large role in the overall strategy of KFC India to establish establis h itself in India and provide best quality service to its customers.
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A11. Identify gap/s in i n the company’s operations and marketing and suggest how your company can overcome the same using Gaps model of service quality GAP 1 – 1 – The The Listening Gap
Lack of human interaction – Since Since Indians are more accustomed to the conventional dining experiences, self service restaurants loose on the human and emotional connection and convert the eating experience into a transaction. Brands like Starbucks have tried to overcome this barrier by making their employees interact with the customers. KFC could adopt a similar mechanism.
GAP 2 – 2 – Service Service Design and Standards Gap
Limited delivery compass – The outlets are not always systematically placed and accessible. Care should be taken to strategically maximize reach. Lack of resources – resources – There There are times, when not ample staff is available on call to cater to the customers or the service is very slow. Inter team coordination should be efficient to avoid any delays.
GAP 3 – 3 – The The Service Performance Gap
Self service – The self service concept, where customers have to place the order themselves, stand in a queue, collect and dispose their order is not very popular with the middle aged and elderly. KFC should try making the process more customer friendly, by incorporating some on the queue orders during busy days.
GAP 4 – 4 – The The Communication Gap
Communication gap between customer and the manager during placement of order – There have been instances where the customers may not be able to clearly convey their order to the KFC employees, who are already always crunched on time and are not very cooperative. KFC should have ample outlets to manage the crowd at all stores to avoid overcrowding.
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KFC - NICE TO KNOW
1. KFC was started in Corbin, Kentucky, in 1930 by “Colonel Sanders”, who was actually a gas station manager, called Harland Sanders. 2. The first KFC outlet was opened outside a gas station and called Sanders Court & Cafe. 3. The original secret recipe for KFC chicken was invented in 1940 and is kept in a safe in Louisville, KY. 4.
KFC is consumed by close to 8 million people daily in the US alone.
5.
The first ever KFC chicken bucket was sold in 1952.
6.
Starting 2007, KFC uses a different type of oil for f rying the chicken to remove Trans - Fat.
7. Yum! Brands Inc owns KFC India. 8. KFC’s Rice Bowl is part of a customized Indian menu, launched specially to cater to the Indian taste palette of rice ri ce and chicken curry as a combo.
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Fast Food in India, Euromonitor International, 20 Oct, 2014
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from http://www.cham http://www.champscast.c pscast.com/customer_ om/customer_standard.pdf standard.pdf
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Marketing91, Marketing Mix of KFC ; Retrieved from ‘
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http://www.marketing91.com http://www.ma rketing91.com/marketing-mix-kfc /marketing-mix-kfc//
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http://blinksolution.com/proje http://blinksolut ion.com/projects/kfc-india-wow25 cts/kfc-india-wow25-digital-camp -digital-campaign/ aign/
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http://blinksolution.com/proje http://blinksolut ion.com/projects/kfc-india-augm cts/kfc-india-augmented-reality ented-reality-facebook-app -facebook-app//
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http://www.socialsamosa.com http://www.soc ialsamosa.com/2014/05/social-media/2014/05/social-media-strategystrategy-review-kfcreview-kfc-india/ india/
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http://articles.economictime http://artic les.economictimes.indiatimes.com s.indiatimes.com/2012-09-09/news/33 /2012-09-09/news/33697731_1_kf 697731_1_kfccindia-colonel-harland-sanders india-colonel-har land-sanders-vegetaria -vegetarian-food n-food
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