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Kuang-Jung Chen
thriving ground of intense competition among the players in the industry. Prior
and during the current financial crisis that hit the Asian region, patronage of
fast-food establishments continues to grow while there is perceived slow down
in other business sectors (HRAP, 1998). Foreign-based fast-food chains joined
the already tight roster of fast-food establishments operating in the country.
How does the competitive structure of the industry now appear?
Introduction
Fast-food restaurants have their own benefits, which their customers perceive.
These perceived benefits are the primary reasons why they are patronized.
Consumers rate these benefits or the values that they see in the product.
Detailed information on the preferences of these consumers is revealed through
representative samples of how they rate the importance of such benefits.
Certainly, most people would like as many benefits as possible. However, the
relative importance they attach to individual benefits can differ significantly
and these can be used as effective barometers in segmenting the markets.
Astute marketers have long realized that in addition to brand image, their
company image can strongly influence consumer's behavior toward their
enterprise and its products (Kasulis and Lusch, 1981). A company's image is
the perception consumers have of its character as a result of their experience
with it and their knowledge of and beliefs about it. Similarly, consumer
patronage of a particular retail store can also be significantly influenced by
their perception of its image or personality. Store image may be defined as the
way in which the store is defined in the shopper's mind, partly by its functional
qualities and partly by an aura of psychological attributes (Pessemier, 1980).
This definition implies that the fast-food restaurant image could be derived
from the so-called functional attributes of price, convenience, and selection of
menu. Variables such as architecture, interior design and advertising could
influence a restaurant's image as well. Therefore, consumers can develop
images of fast-food restaurants regardless of whether management consciously
attempts to project a specific image or not. For this reason, it is important for
management to understand their image, as consumers perceive it. If the
consumers' criteria for selecting a particular restaurant from among other
competitors can also be identified, then management can determine how the
restaurant is evaluated or measured.
Markets consist of various buyers, and buyers differ in one or more respects.
They may differ in their wants, resources, geographical locations, buying
attitudes, lifestyles, and buying practices. Any of these variables can be used to
segment a market. Market segmentation reveals the potential market
opportunities facing the establishment. The establishment now has to evaluate
the various segments and decide on which segment or segments to serve. The
question of how many segments to serve can also be addressed, either to
increase market share or develop niches, as a competitive strategy. The
establishment, in evaluating different market segments, must look at factors
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find the right fast-food restaurant. It appears that the use of a fast-food
restaurant is attached to the urgency of the need for food, either physiological
or social (NRA 1994).
Saavedra (1983) cited various menus being offered by fast food restaurants
as the main reason, aside from excellent service and ambience, that make one's
meal truly worthwhile.
Kotler (1994) opines that atmospherics affect purchase behavior by acting as
an attention-getting, message-creating, or emotion-creating medium.
Understanding a buyer's needs and buying behavior is better achieved by
knowing the reasons why people dine outside the home. Records of the
Philippine Hotel and Restaurant Association indicate that Filipinos commonly
cite the following reasons for dining outside their home.
.
A treat.
.
Business requires it.
.
Celebrate special occasions.
.
Change of pace.
.
Convenient.
.
Enjoy good food.
.
For food not usually available at home.
.
Good way to entertain guest.
.
Good way to relax.
.
Nobody has to cook or clean up.
.
Prices are reasonable.
.
Spouse requests to eat out.
.
Whole family enjoys themselves.
Lovelock (1983) cited that the restaurant's nature of service delivery is
considered as a discrete transaction. The marketers tend to be less informed
about who their customers are and what use each customer makes of the
service. The extent to which service characteristics are customized is high.
However, the extent to which customer-contact personnel exercise judgment in
meeting an individual customer's needs is low. The extent of demand
fluctuation over time is wide and peak demand regularly exceeds capacity. To
complicate things further, the purchase and consumption situation exerts an
influence on consumer decision making.
Belk (1974) identified five groups of situational influences:
(1) Physical surroundings the most readily apparent features of a
situation. These features include geographical and institutional location,
decor, sounds, aromas, lighting, weather, and visible configurations of
merchandise or the material surrounding the stimulus object.
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restaurant was done using the beta coefficients as a basis for the clustering
procedure. The first restaurants joined by the clustering procedure were treated
as a single unit in the succeeding step.
Social surrounding variables (alone, with friends, with clients) were included
in the next regression analysis of the individual restaurants, including the
joined firms in the previous stage, now taken as a single restaurant. Again,
with the beta coefficients as a basis, another hierarchical clustering was
undertaken. The foregoing steps were repeated in the inclusion of task
definitional (socialization, business, celebration) variables.
The data used in the forgoing analysis was generated through a survey
using flash cards. A total of 1,365 respondents were randomly selected in
different fast-food restaurants situated in Metro Manila using the list taken
from the Department of Trade and Industry and Hotel and Restaurant
Association of the Philippines as reference.
The importance of the product-service mix variables in the choice of fastfood restaurants was elicited by the first set of cards shown to the respondents.
In the second set of cards, the respondents were requested to identify (write) at
least five fast-food restaurants they usually patronize. Thereafter, these cards
were used in assessing choice when a particular situation was present. The
respondents were requested to arrange the cards in descending priority when a
situation was given. A total of 156 fast-food restaurants were identified. In the
final analysis, however, only 26 brand names were used. Fast-food restaurants
that did not meet the necessary number (50) needed in the regression analysis
were dropped from the list. Likewise, similar franchised brand names located in
different places were consolidated as one brand.
Results
Individual regression was done on each destination and the coefficient served
as inputs in the hierarchical cluster analysis undertaken using average
linkage between groups as criteria. Agglomeration normally results in the
reduction of the amount of variation explained by a model. To determine the
appropriate tradeoff level, regression analysis was done for each stage of
agglomeration. The fast-food restaurants appearing in the Cluster 2 column
or Table I were not included in the analysis for the specific stage. Estimated
R-squared values were transformed into unexplained variances and plotted to
visualize the location of the ``elbow'' point (Hair et al., 1995). The elbow
occurred at nine clusters, equivalent to the 17th stage of the agglomeration
process (Figure 1).
At the cut-off point, six fast-food restaurants remain unattached and the
other three clusters were generated as results of the tie-up of several fast-food
restaurants. Cluster 1, 3, 4, 6, 8, and 9, contain only one fast-food restaurant and
all of them are franchised brands and have branches inside shopping malls. It
appears that loyal customers patronize these fast-food restaurants. The
importance attached by the customers to fast and quick service, music and
noise level, attractive decor, atmosphere and ambience, promotional gimmicks
Stage
Clusters combined
Cluster 1* Cluster 2*
Coefficient
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
120.1679
152.1355
431.7078
1,003.4598
1,460.0529
2,961.1577
3,436.3215
3,751.3496
4,470.4849
6,146.7056
6,155.7632
8,440.8389
8,930.8828
10,430.2549
14,278.8408
14,600.7510
15,968.3545
17,593.6543
20,504.8047
21,242.9102
27,486.2246
32,641.5996
44,443.8281
54,835.1797
88,964.8516
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
0
0
1
0
3
0
0
2
0
6
0
0
11
13
8
0
0
0
17
16
0
19
0
0
23
3
8
5
5
6
10
9
15
17
12
13
14
14
15
18
20
19
20
22
21
22
23
25
25
0
Notes: * For consistency actual names are disguised because of the request of the firms
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Table I.
Agglomeration
schedule using average
linkage (between
groups)
Elbow point
0.4
1-R2
0.3
0.2
0.1
0
1
11
13 15 17 19 21 23 25
Number of Clusters
and items, friendly and pleasant staff, and cleanliness and neatness changed in
various directions depending on the situational context that entered the model.
However, good value for money, food taste/flavor and variety of food offerings
practically remain unchanged. It does appear that the perception of the
customers relative to these three attributes provides a unique identity for the
franchised group of fast-food restaurant. This perception remains unchanged
regardless of the situation context present.
Figure 1.
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A look at
fastfood
competition
Brand 24
Brand 25
Brand 11
131
Brand 4
Brand 26
Brand 10
Brand 2
Brand 15
Brand 9
Brand 14
Brand 7
Brand 16
Brand 17
Brand 6
Brand 13
Brand 8
Brand 21
Brand 23
Brand 5
Brand 22
Brand 12
Brand 20
Brand 3
Brand 18
Brand 1
Brand 19
Elbow point
the clusters increases and the degree of substitution between groups becomes
weaker. The number of fast-food restaurants in a cluster however also
increases, making direct competition among these restaurants within the
cluster tighter.
Figure 2.
Product-market
structure of Philippine
fast-food restaurant
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Further reading
Anonuevo, M.V.E. (1984), Principles of Marketing Management, National Book Store, Manila.
Backus, H. (1977), Designing Restaurant Interiors: A Guide for Food Service Operators, LebharFriedman, New York, NY.
Dickson, P. (1982), ``Person-situation: segmentation's missing link'', Journal of Marketing, Fall.
Dillion, W.R., Madden, T.J. and Firtle, N.H. (1984), Marketing Research in Marketing
Environment, Times Mirrow/Mosby College Publishing, Richard D. Irwin, Homewood, IL.
Firnstahl, T.W. (1989), ``My employees are my service guarantee'', Harvard Business Review, July
and August.
George, W.R. (1977), ``The retailing of services a challenging future'', Journal of Retailing, Fall.
Heskett, J.L. (1987), ``Lesson in the service sector'', Harvard Business Review, March-April.
Kotler, P. (1974), ``Atmospherics as a marketing tool'', Journal of Retailing, Winter.
Lambert, C. (1981), ``Environmental design: the food-service manager's role'', The Cornell Hotel
and Restaurant Quarterly, May.
Leigh, J.H. and Martin, C.K. Jr (1981), ``A review of situational influence paradigms and research'',
in Enis, B. and Roering, K. (Eds), Review of Marketing, American Marketing Association,
Chicago, IL.
Milliman, R.E. (1986), ``Influence of background music on the behavior of restaurant patrons'',
Journal of Consumer Research, September.
Philippine Agribusiness and Food Market (1996), Green Pages Publishing Corporation.
Schmenner, R.W. (1986), ``How can service businesses survive and prosper?'', Sloan Management
Review, Spring.
Surprenant, C.F. and Solomon, M.R. (1987), ``Predictability and personalization in the service
encounter'', Journal of Marketing, April.
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fastfood
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