Customer retention in Fast food industry

Eating is observably a daily action and necessity for all human beings. Depending on individual’s reason for eating at restaurants, individual intentionally or instinctively assess a multifarious set of attributes ahead of choosing a restaurant. The significance involved to these restaurant attributes is ultimately evaluated in the customer’s mind, leading to a decision of purchasing. Some factors, like age, company and even social division come into take part in to amplify these attributes as the customer makes a decision of dining (Johnson and Champaner, 2004).

The restaurant industry has undoubtedly not been free from either augmented competition or from increasing customer expectations regarding quality. In the greatly competitive food industry, large operators chain have a propensity to gain competitive gain in the course of cost leadership, likely only due to standardization and economies of scale beginning from large market shares, while smaller, independent restaurants on the other hand endeavor to gain benefit through differentiation (Lowenstein, 1995).

Branding keeps on gaining importance in the marketing of restaurants services and marketers have spent lot of money to create and give support to brand images. This have seen in the marketing of strong and well defined brands like Mc Donald’s and Kfc fast food restaurants which attracts the customer through their marketing , service and by making brand loyal customers of their products. This increases the retention rate due to satisfied and loyal customer. Particularly, there is lot more to discern about customers perceive restaurant brands and the comparative weight these links get during purchase decision as there is lot more to discern about customers perceive restaurant brands and the comparative weight these links get during purchase decision. According to the Kaplan and Norton (2001), the importance of the perceived quality in order to get the retention effect in restaurant industry is always considered as a main element to retain in the customers and the business. The main reason behind that in this industry entry barrier are usually low and any one can easily enter due to investment required that is not on the higher side. So the point is that when ever consumer is satisfy from the arrangement by the management, the quality of the food provided by the staff members with the positive attitude than this result in increasing the loyalty towards the particular restaurant and increases the retention intensions of the customers.

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1.2 Problem Statement

To identify the process to gain customer retention to the services and what are the factors that influence the customer retention.

The primary problem is to identify the customer retention in the detail that includes factors of dining attributes and customer satisfaction in context to Food restaurant industry. Thus these factors leads to consumer behavior and customer revisit the restaurant

1.3 Research Hypothesis:

Assessment of service quality has a significant effect on the customer retention.

1.4 Outline of the study

The purpose of study fold in two parts: one suggests that how important is dining attributes in term of Re-patronage intentions and second part suggest the customer satisfaction which leads Re-patronage intentions in restaurants. The role of dining attributes and customer satisfaction is very important for knowing the customer intentions, would they will visit to that restaurants again or not. There has been a strong support for the espousal of consumer retention in restaurants as one of the key performance indicators. It has found that there is a high association between customer retention and the profit earn by the industries. The fragmentation of media choices and the active nature of the marketplace, tied with an enlarged number of additional demanding and prosperous consumers, brought bigger challenges to marketing practitioners in keeping hold of their regular customers.

Customer satisfaction is regularly used as a sign of whether customers will come back to a restaurant that shows the customer retention. Whereas there is no agreement of a satisfied customer’s repeat visit, it is nearly certain that a not satisfied customer will not return. The majority of the preceding customer satisfaction researches are mentioned in the literature that has pay attention on recognizing the resource of customer contentment such as characteristic and attributes and on determining useful ways to establish consumer’s desires, wants and needs. On the other hand, significant dissimilarity comes out in the level of specify of the characteristic investigated (Eileen and Berry, 2007).

1.5 Definition:

Customer satisfaction is defined as the consumer’s fulfillment response. It is a judgment that the service or product features, its attributes provided a delightful level of consumption associated achievement including levels of under fulfillment or over fulfillment (Eileen and Berry, 2007).

Service Quality is defined as a nil defects doing it right for the first time. Information and knowledge about goods quality is inadequate to recognize service quality (Eileen and Berry, 2007).

CHAPTER 2

LITERATURE REVIEW

Whether human live to eat or eat to live, food always plays a fundamental role in the lives of human being. The significance of foodstuff cannot be overstated from the physiological viewpoint; food gives us sustenance; while on the other hand from a psychological point of view food is classified as a basic need. Food can also characterize a product used to describe self-actualization. Therefore, individual can quarrel that above and beyond provided that nourishment food plays a variety of roles together at individual and group level (Lowenstein, 1995).

The food industry is highly aggressive and customers have also become more demanding due to sufficient knowledge and information they have about the different trends in restaurant industry which causes increase the significance of effective marketing strategies to get the competitive advantage in order to understand the wants and needs of the customers (Bateson and Hoffman, 1999). Numerous Fast Food restaurants are paying attention in studying, assessing and implementing the marketing strategies with the aim of gaining maximum market share of customers and improving customer retention in analysis of the advantageous effects on the monetary performance for the organization. Customer satisfaction, contentment, quality of the service, excellence and retention are global matter that influences all organizations (Lasser and Winsor, 2000).

Customer satisfaction is vital to the restaurant management for the reason that it is normally assumed to be a noteworthy determinant of replicate sales, customer loyalty and affirmative word of mouth. The more pleased the customers, the larger are their retention (Almanza and Jaffe, 1994). The impacts of customer satisfaction on customer retention are bringing into being to be momentous and positive. Specially, the customer satisfaction will influence the re customer retention intentions (Reece, 1999).

In customer’s mind when there is no defect in the overall dining service, then they consider the quality of the food is good enough for them (Bitner, 1992). Quality is all about eliminating internal failures that means all shortcomings before the product leaves from the factory and the external failures are the defects after usage of the product (Eileen and Berry, 2007). In Early research and study efforts in measuring and defining quality were mainly centred in the tangible goods, whereas the apparently more complicated services products was ignored. Products quality was conventionally correlated to the technical stipulation of products, with the most description of quality coming up from the manufacturing goods sector where excellence and quality control has inward drawn out awareness and research (Raajpoot, 2002).

Quantifying service quality is a difficult task because the idea of service quality is intrinsically insubstantial in nature and complicated to define (Kincaid, 2009).The concept of service quality comprises the tangible and intangible fundamentals most essential to consumers. Service quality has been related to customer satisfaction, contentment and loyalty as well as the business performance, success and profitability (Raajpoot, 2002).

Branding and its orientation have been wicker strongly into the contemporary act of consumption in restaurants. Undeniably, the previous century will be considered as the century of brands in marketing (Johnson and Champaner, 2004). Edifice brands have become a key focus of restaurant managers. Furthermore, restaurant managers are relating brand management theories and practices which have done so far, and lots of restaurants are redesigning their business missions to imitate branding orientation rather than they go for product orientation. There is also an influence of brand recall on consumers intensions in choosing a restaurant for dining due to the different discount offers through different mediums of advertising that mostly include the below the line activities that makes restaurants brands that diminish the perceived risk of pay for the food and also indicate the quality of the product that creates their willingness to make wider positive word of mouth, recommendations, and complaint intention (Lowenstein, 1995).

Researchers have acknowledged customer satisfaction, service quality and the loyalty to be similarly important for marketers, because they are responsible for determining dining satisfaction, and they must know the important of dining that must position restaurant functions competitively in the current and future marketplace (Kaplan and Norton, 2001). Customer satisfaction and the quality of food have long been acknowledged as a essential function for success and endurance in competitive marketplace that have been connected to consumer behavioral intentions as purchase and loyalty intention, their willingness to widen positive word of mouth, recommendation, and complaint intention (Olsen, 2002).

Purchase behavior of the consumer in restaurants can be pretentious by the surroundings in different ways. Researcher consider atmosphere, which is an attention-building medium that can make restaurant inkling. The center of attention is based on the collective possessions of those clues on customers idiosyncratic through design, sound, motion, and color. Customers are delimited by true rock and roll memorabilia (Supphellen 2000). As a meaning- generating medium, the environment gives discriminative motivation to buyers that facilitate them to identify a restaurant’s divergences as a source for select that restaurant. For instance, snowy white linen tablecloths, the soft lighting, and crystal chandeliers of a chic restaurant communicate the level of service and a kind of food to customers that create a fine-dining experience (Palmer and Neill, 2003).

The indication of Service in selecting by means of restaurant services, customers frequently act like detectives as they investigate for information and standardize their opinions into a set of mind-set regarding the resultant service (Kincaid, 2009). For example, the whole thing about the dining attributes of a restaurant or café starts from the dining table potential communicate to the customers, with the table top used, if practical sign concern the technical excellence of the service, mainly concerning to whether the service is carry out proficiently (Raajpoot, 2002).

Fundamentals such as surface and texture, smell, color, sound, and texture inducing intuitive reactions in restaurant atmosphere that persuades purchase likelihood known as the mechanical clues (Eileen and Berry, 2007). Food and drink quality is an imperative dining attributes to diners representing restaurant management should certify an aggressive quality control agenda is in place to make sure food and drink quality must maintained (Reece, 1999).

This increases in the restaurant business revenue as well and this increases the word of mouth publicity (Almanza and Jaffe, 1994). Evaluating quality awareness and price elasticity related to quality, suggested that buyers are generally steady in their evaluations of quality. The results of their study showed that there was a strong association between a product’s attributes and the quality perceptions of the customers (Lasser and Winsor, 2000).The research also highlighted that customers who pay for high quality foodstuffs also had a low acceptance for deviations from predictable quality. In the Fast food restaurant perspective, this entails that customers who want superior dining quality are more sensitive to quality fluctuations and possibly will be less price sensitive but, for example in relation to the relative higher pricing of the menu items and marketing strategies that put together the quality image of the restaurant, ambience and service (Raajpoot, 2002).

Another attention-grabbing finding was that a product’s higher volume rate like for instance, fast food restaurants resulted in a lower sensitivity side to quality. This shows that management of restaurants must segment the market based on the food usage rate includes the repeat purchase of the particular item and quality preferred (Jochen and Rachel, 2000). The previous research shows the effect of physical quality construct on behavioral intentions for restaurant consumer and finds that influence is a strong moderator between tangible quality constructs and behavioral intentions when cognition affect actions archetype is applied to the restaurant location (Bateson and Hoffman, 1999).

It was found that tangible quality has a bigger circumlocutory effect than the straight effect indicates from a theoretical point of view; affect was a fractional mediator, facilitating the association among tangible quality and behavior (Lasser and Winsor, 2000). One more factor for the customer retention which really brings customers back is that the customer likes to have a positive attitude of employee throughout the dining as a support for the disputation that employee approach is strongly linked with customer satisfaction. Ease and the location of the restaurant is also considerable and also the other factor influence customers to select that particular restaurant which satisfy their needs and wants regarding quality of the food and the restaurant environment. This leads in the increase of the retention rate and the loyalty of the customers towards that restaurant diners have an effect on restaurant (Bateson and Hoffman, 1999).

The convenience of location includes the parking space, seating availability in the restaurant; the nearness to roof-tops like people’s residence, hotels, and motels is significant for the accomplishment of restaurants all through the dinner mealtime duration (Reece, 1999). The consequences of well-situated parking must not be the lost upon restaurant management. Often the cost of attaining parking near to a restaurant is sighted as a non-revenue generating expenditure. This specifies the value of given that well-located parking along with the direct consequence it has on consumer intentions to patronize a restaurant (Lasser and Winsor, 2000). The significance of the physical excellence raise of foodstuff and service and convenience to restaurant administration is to facilitate these constructs that have an affirmative association with influence which is completely linked with customer intentions to retention a restaurant. The objective of most restaurants is to obtain and maintain customers; restaurant administration organized with the information get that will be better prepared to accomplish their aim (Reece, 1999)

There is a intense deficient in understanding about dining satisfaction and pleasure and post-dining behavioral intentions in the customer literature reviewed studied so far away, and up till now, according to the literature allude to, aspects concerning to customer satisfaction and return customer are elementary when put together business and marketing strategies of the organization (Reece, 1999). It is suggested that commonly and normally used indicators of customer satisfaction comprise repeat customer behavior, brand loyalty and reliability and at last word of mouth recommendation (Lowenstein, 1995).

Professed service quality may perhaps be improved if customers are support with the mauve list and bill of fare and if a worker responds suitably to a customer’s asked for quick service. Customer always feel admire and important if they get the best service and respect from the overall management of the restaurant specially from the behaviour of the front line staff that increases the comfort level of customers and at the same time makes them brand loyal to that particular restaurant (Reece, 1999). In case of large restaurants franchised group, this kind of relative study and positioning might be important. Besides, while the performance of anyone of the outlet can impinge on the reputation of a whole network, identifying and recuperating those outlets that have a delicate association in the series can be vital. Valuable curriculum in marketing, human resource and man oeuvre be capable also be learnt as of those outlets where service exceeds or meets expectations of the customers (Kuo and Kao, 1999).

The one of the fact is that business like restaurants is considered as a low credibility service and that is one of the reason that quality of the services are complicated to prove until consumers revisit the restaurant. Furthermore, the service quality that customers come across may be dissimilar apiece time they visit that particular restaurant, thus persuading the level of contentment and ultimately upsetting their retention intentions (Kaplan and Norton, 2001). Both service value and customer retention is extensively acknowledged as practices of repurchase intentions. Though, it is understood that restaurant possessor would like to identify the strongest influence on retention intentions. A recent study divulges that customer satisfaction is the better predictor of intention comparing to service quality to repurchase. Increasing trend in retention is always due to service quality which is provided by the management to the customers and at the same time customer should be satisfied. Any of the factor missing may cause the decrease in loyalty of the customer towards that particular restaurant and customers are unwilling to re-visit for dining to the same restaurant (Olsen, 2002).

In researches, results found that managing for most select customer satisfaction necessitates so as to satisfaction statistics be used in previous researches advise implement the positioning strategies with the intention of helping a business whittle a niche. Each restaurant has its own strategies to get the competitive edge in the market. Such information is able to facilitate to modify the restaurant service so that it congregates the desires of the target market segment. Supporting a firm’s competitive benefit and enduring productivity and profitability possibly will better rely on the incorporation of customer satisfaction into the service organization’s strategies and operations that helps the restaurant management to look their positions in the long run completion in the industry (Olsen, 2002). There may possibly be a countervailing competitive consequence to enhance in product differentiation. Revelation of restaurant sanitation grades may serve up to decrease search costs for customers. Positive completion always ends in setting new ideas and innovation in the mind of the management of the management that makes them superior and differentiated in the industry in between the existing market players (Kaplan and Norton, 2001).

In some countries like Germany, there is a system of Grade cards according to the quality differentiation in restaurants what decrease the expenditure of learning whether an individual restaurant has high-quality hygiene, and possibly will give confidence to customers to go to restaurants they want or else would not have. This may perhaps encourage competition among restaurants, by making customers not as much of incarcerated to any particular restaurants providing inducement for lesser prices, improved food quality, or better hygiene quality food provided and if this result is there, still amongst restaurants with the identical sanitation quality ranking, compulsory revelation may cause lesser prices or enhanced food quality (Johnson and Champaner, 2004). In Chinese and French restaurants, customer view of service quality by the side of all proportions drop short of customers’ expectations, even though an evaluation of the unprejudiced quality scores shows that the French restaurant is nearer to summiting the prospect of its consumers along all extent of service quality than in the Chinese business. It is evident that compassion and consistency are the two extents which plunge the largest part of below customer prospect inside the French restaurant (Palmer and Neill, 2003).

CHAPTER 3

RESEARCH METHOD

This study find out the relationship between dining attributes, customer satisfaction and customer’s Re patronage intentions and this execute particularly in restaurant industry, how customers decide to revisit the restaurant and what are those factors which influences the customer for returning back to restaurants again and again.

3.1 Method of Data Collection:

The constructed instrument was pre-tested, where 5 to 6 sample questionnaire to be filled, to know if there are any problem with the instrument and therefore it was simple to understand and figure out the questions or not. Through pre-testing it was found that all respondents felt at ease in responding and instrument was interested to them.

3.2 Sampling technique:

Sample size selected for the study was fast restaurants on the basis of their Dining Attributes, customer satisfaction and Customer’s Re-patronage Intentions that included expectation and performance. The sampling technique selected in the study is convenience sampling method.

3.3 Sample Size:

The total number of Respondents is 165; they are those customers who seated in Fast food restaurants of fast restaurants operating in Karachi.

3.4.1 Reliability Test

Reliability refers to the property of a measurement instrument that causes it to give similar results for related inputs. The Reliability Analysis procedure calculates a number of commonly used measures of scale reliability and also provides information about the relationships between individual items in the scale. Infraclass correlation coefficients can be used to compute inter-rater reliability estimates. Cronbach’s Alpha is the model of internal consistency, based on the average inter-item correlation. Here the value of Cronbach’s Alpha is 0.916 which indicates that the data is consistent (Multivariate data analysis, sixth edition Joseph F. Hair).

Reliability Statistics

Cronbach’s Alpha

N of Items

.916

36

3.5 Statistical tool used:

I this research, Optimal Scaling used as a statistical tool. The reason to choose the optimal scaling as a statistical technique is that the responses that were taken from the respondents were in the form of ranking (a nature of ordinal variable). Respondents on the basis of their experiences they observed while their visit to the hotels were collected in the form of structured question having a ranking of 1 to 5 (Strongly Disagree to Strongly Agree). Optimal regression is preferred over the other regression techniques when the dependent variable is categorical (Ordinal or Nominal) by nature and predictors are also in the form of categories (Ordinal or Nominal). The Ordinal variable is also the other form of Nominal variable and Optimal Scaling/Regression works best on the categorical data/Ranked data.

CHAPTER 4

RESULTS

4.1 Analysis and interpretation

Ho: Assessment of service quality has a significant affect on the customer retention.

TABLE 4.1

The above table explains the total no of sample size that is used for the analysis. For concluding the results the sample size selected for the analysis was 165 (N=165).

TABLE 4.2

The above table explains the model summary of the applied model. The Adjusted R Square value of the model is 0.842 or 84.2%. It means that the 1 unit change in the independent variable set will bring the 84.2% change in the variation of dependent variable (Customer Retention). The apparent prediction smaller value indicates the sampling accuracy of the data set that was collected for the analysis. In simple words our sample size portrays the behavior that is closer to the behavior of the population.

TABLE 4.3

The above ANOVA Table significant value is less than 0.05 that is 0.000. It means that the above model of optimal regression is appropriate to apply on the data set.

TABLE 4.4

The above coefficient table explains the relationship of the Assessment of service quality with respect to the customer retention. The Assessment of service quality was measured through the SERV QUAL model. As it can be observed in the above table that there are multiple factors of SERV QUAL that has a significant value of less than 0.05. It means that there is significant affect of assessment of service quality on the customer retention therefore; our null hypothesis is not rejected.

4.2 Hypothesis assessment summary

According to the above table the variable T1.3 (Neat appearing of the employees) has a beta value of 0.118. It means that the appearance and cleanliness of the restaurant staff is a significant factor and plays an important role in increasing the retention rate of the customers. The other significant variable is R1.1 (Restaurant fulfill their promises within a given time) it means restaurant that shows commitment towards their customers and provide prompt services has a higher chances of customer retention rate. A restaurant that is high on commitment level with their customers has higher chances of having higher customer retention rate. The behavior of the restaurant staff is another most important factor that helps in increasing the customer retention rate as the beta value of the variable is 0.335.The restaurant should focus on the way their staff welcome and acknowledged their customers on the board. The better the way they deal with their customers the higher will be the retention rate. The last variable that is significant in the analysis is E1.2 (Employees give personal attention to customers) once again the way restaurant staff behaves with their customers. In servicing industry the appearance and behavior of the employees is most important therefore, manager should focus these aspects with high priority.

CHAPTER 5

CONCLUSION

5.1 Discussion

In today’s fast rapidity and progressively more competitive market, the base line of a firm’s promotion and marketing strategies, tactics and procedure is to make profits and add to the growth of the company. Customer satisfaction, contentment, quality of the service, excellence and retention are global matter that influences all organizations. This include all type of organizations, it can be large or small, global or local profit or non-profit, services provider.

The significance of elevated quality service given to business success, there are various prospective benefits for the management of restaurants from performing a customer-based assessment of the service quality veteran at their organization. In restaurant industry, the intangible nature of services means that particular specifications for the homogeneous quality of service are complicated if at all probable to set. This sometimes put together it difficult for restaurant managers, workforce and customers to calculate, measure, assessment or confirm service productivity and service quality.

A restaurant service engages a route or a performance in which customers are involved in the overall service production process. This happens due to the interaction of the consumers with the service surroundings and personnel throughout the utilization experience, understanding consumers’ sentimental response become vital in replicating satisfaction in a service locale. Study indicated that the affective processes throughout the consumption phase might play a straight, unmediated role in determining customer retention.

5.2 Recommendations and Implications:

Customer satisfaction is a key element for the planning of the marketing in view of the fact that satisfaction does sway customer’s intention to re-patronage the restaurant in fast food industry. Therefore, marketers are supposed to look into the issues that would have an effect on customer satisfaction intensity. Besides, as customer prospect are altering over time and it is advised to determine the customer satisfaction and expectation on regular basis and grip complaints timely and effectively.

In order to provide the value addition to know the needs to the consumer and to satisfy them then managers and restaurant administration should understand what customer’s value and must understand how consumers perceives their restaurant’s products and services. So to have a study that divulges consumer perception of all brands is necessary. A study of this type should generate an accepting of how customers appraise main brands in order to get better both managerial and the academic understanding in the customers’ assessment process.

Restaurants should invest in the training and development of their employees as they are the one who in actual are dealing with the customers, their presence and approach will create an image in the customers mind. Customer retention is important in the current competitive environment; restaurant manager should need to take care of the factors that have a direct impact on the customer retention rate.

5.3 Future implications

A study of the basics or attributes of customer satisfaction be supposed to give indication concerning what action a restaurant service manager must take to raise the probability that customers will appear back. It appears that study is not often concluded that the remarkable rate of malfunction in the restaurant service industry advices that the management can find the targets of converting customer satisfaction into financial achievement a vague one. Research accept as true that restaurant failures are partially a consequence of management’s lack of strategic direction in determining and focusing on customer contentment, satisfaction and at last most importantly retention.

5.4 Conclusion

Testing customer demands indicated that management of the restaurant must make an effort to deliver not only quality food stuffs and services, but at the same time a high level of dining satisfaction that will lead to increased customer return results in re-patronage of customer and greater market share. The consequence of customer satisfaction and contentment in relation to possession rates, return rates and equally management researchers and experts in the generosity field have long urged profitability. The behavior of the restaurant staff is another most important factor that helps in increasing the customer retention.

The restaurant should focus on the way their staff welcome and acknowledged their customers on the board. The better the way they deal with their customers the higher will be the retention rate. As an outcome, the restaurant’s whole environment of service, the atmospherics of feelings of the surroundings is always very imperative in seminal both customers and front line staff attitude about the procedures and se