EXECUTIVE SUMMARY The purpose of the study is to research the fast-food industry in India and identify both global and domestic food trends. Responses from independent and fast-food joints in India provided the statistical basis for analysis of operations and financials of the existing restaurant industry in the country. The meaning of service and service quality has been discussed elaborately. Market research study has been conducted in order to know about the customers’ preferences and hospitality that they want from the fast food joints. After this a comparative analysis along with diagrams and charts has been made to bring forward the overall picture of the market research. The study also deals the service quality level provided by the fast food joint McDonald's and its main competitors. The survey was conducted so as to analyze the service level prevailing in the fast food centre and the improvement that can be made upon it. Survey has been done with the help of self prepare questionnaires. Segmentation targeting positioning customer relationship management, 7P's of marketing mix and completes SWOT analysis has been done and explained in detail in all the chapters.
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EXECUTIVE SUMMARY
The purpose of the study is to research the fast-food industry in India and identify both
global and domestic food trends. Responses from independent and fast-food joints in India
provided the statistical basis for analysis of operations and financials of the existing
restaurant industry in the country.
The meaning of service and service quality has been discussed elaborately. Market research
study has been conducted in order to know about the customers’ preferences and hospitality that
they want from the fast food joints.
After this a comparative analysis along with diagrams and charts has been made to bring forward
the overall picture of the market research. The study also deals the service quality level provided
by the fast food joint McDonald's and its main competitors. The survey was conducted so as to
analyze the service level prevailing in the fast food centre and the improvement that can be made
upon it.
Survey has been done with the help of self prepare questionnaires. Segmentation targeting
positioning customer relationship management, 7P's of marketing mix and completes SWOT
analysis has been done and explained in detail in all the chapters.
CHAPTER.1 INTRODUCTION
1.1 Background of the study: Some of the emerging culinary trends internationally include
the popularity of health foods, use of fresh and authentic ingredients acceptance of new
fusion concepts and establishing of the chef entrepreneur. In India multinational restaurant
chains had to make a downward price revision and offer more vegetarian toppings to increase
sales volume. This led to dramatic improvement in their performance. They are also adding
more spicy items in their menus to satisfy Indian taste buds. International and domestic
multi-unit restaurant groups are expected to drive the expansion in the restaurant industry in
India. Among the leading trends in this regard would be the expansion of quick service Asian
restaurants, fusion concepts, restaurants with a focus on entertainment, and ethnic and
regional cuisine restaurants.
1.2 The Indian fast food market- An overview: Up to the year 1995 Indian food market was
predominantly dominated by the traditional food centres, potential restaurants in the customer’s
colony and some restaurants in a five star hotel. Having fast food i.e., burgers, pizzas etc., was
considered to be an option for eating out. It was not at all synonymous with the American
concept of fast food as a quick takeaway bite or a substitute for lunch. Apart from fast food being
available at the local colony restaurants and at some five star restaurants, Nirulas was the only
fast food chain existing in the country with its restaurants expanding with every passing year
since its inception. It has been almost 50 years now since its set up and there is hardly any one
who doesn’t know that Nirulas exists.
Nirulas was the first one to bring fast food to India back in the 50’s since then it has evolved into
an eating place with tremendous brand equity and brand recognition. It proved to be a perfect
eating place for an average middle class who wants to eat out at an affordable price that can’t
afford the five-star restaurants and would not want to go to the local food centres. Nirulas almost
had a monopoly for decades due to the way it has been placed. It is a place where a person from
an average middle class group to upper class group can go to eat out. Its popularity has increased
over the decades. With the trends changing and the incomes rising almost anybody who can
afford to eat out could go for a snack at Nirulas. However the year 1995-96 witnessed a drastic
change. 1996 is considered to be the year of India’s entry into the world food market.
International giants such as McDonalds, KFC, TGIF, Dominos and Pizza Hut all bombarded the
Indian food market. Before these, UK-based joint called Wimpy’s had established its chain in the
country in 1990. By year 1996 it had about three to four joints established in Delhi. However it
did not pose much of a threat to Nirulas reason being lack of variety and that Wimpy’s was
looked at more of a hangout place rather than eating out with the family.
However, restaurant business is such that it is surrounded by competitors from all sides, be it
Indian joints or foreign joints. Each of the foreign food joints that have come into the country
have their own strategy lined up to differ from the rest. Each of these studied the Indian tastes
and style and thereby targeted the Indian customer. An average Indian restaurant goes is no
convenience eater, unlike the Americans. If he is paying, he is paying for food that tastes good,
not for how pleasantly the stuff is served or how spotless the windows are. He wants food for
that can make him come back to the restaurant. An Indian food joint owner would definitely
understand this but an American company which comes and places itself directly without
knowing the customer is definitely in for trouble. Customer loyalty in a restaurant business is
essentially low.
A customer when he comes to a restaurant usually looks at the quality of food, variety,
ambience, speed of delivery and the location. The variety would influence the frequency of visits
since taste is a dominating factor to the Indian customers. Almost all the fast food chains both
Indian i.e., Nirulas and foreign i.e., McDonalds etc., are targeting the families. This serves to be
an advantage because the turnaround time is short and family has higher propensity to spend
because different members order larger variety of dishes. Each of these restaurants delivers
quality, value and services in its own way through its line of strategies. The emphasis is on the
value that the restaurant is delivering to the customers.
1.3 Purpose of the study: Basically, the purpose of the study is to research the fast-food
industry in India and identify both global and domestic food trends. Further more, to check
the trend of taste and preference in India after globalization and liberalization.
1.4 Research questions:
Which type of service quality McDonald’s provide?
Does McDonald’s service quality better than others?
Is McDonalds improving service quality?
1.5 Research objectives: The objective of the study is divided into two parts, which are:
1.5.1 Major Research Objectives:
The service quality prevailing in McDonald's
To find out the service quality of McDonalds in the various areas and finding out the
deficiencies.
Service quality of other players vis-a-vis McDonalds:
Comparing the service quality of McDonald along with that of Nirulas’, Pizza Hut and
others.
To find out the ways by which McDonald’s can improve upon its service quality and
bring more satisfaction to customers and thus add value to its bottom-line.
1.5.2 Major Research Objectives:
The service quality prevailing in McDonald's.
To find out the service quality of McDonalds in the various areas and finding out the
deficiencies.
Service quality of other players vis-a-vis McDonalds.
Comparing the service quality of McDonald along with that of Nirulas’, Pizza Hut and
others.
To find out the ways by which McDonald’s can improve upon its service quality and
bring more satisfaction to customers and thus add value to its bottom-line.
1.6 Significance of the study: This study will help to consumer; entrepreneurs related to this
sector that how consumers taste and preference are changing. Based on these trends, owners can
make a strategy and serve better.
1.7 Limitations of the study: In this study, have many limitations. Here some of these:
100% response rate was not found from the respondents. Some extent of biasness was
found because of Brand loyalty while answering the questions.
Potential biases such as reluctance of consumers, executives etc.
Unauthenticated information of the target sample.
Lack of interest of the respondent was one of the major problems.
Sample size is limited.
Only some other fast food restaurants are considered for the study
1.8 Structure of the Dissertation: Henceforth, this dissertation will entail five major parts;
introduction, literature review, research methodology, data analysis and lastly a conclusion with
findings & recommendations.
Chapter I- The initial part of the dissertation discussed basically introduce the Indian fast food
industry and its major players.
Chapter II - The literature review part of this dissertation start with some introductory part and
further that discusses about some research work done previously.
Chapter III - The methodology part will give both detailed accounts of how this study was
conducted as well as explain as to why the chosen methods were of the greatest use.
Chapter IV – The Analysis and Interpretation of data will give the empirical results and data
analysis linking it to the theoretical framework provided in the literature review.
Chapter V – Conclusions, findings and Recommendations will be the concluding chapter with a
discussion concerning the empirical results, in turn, leading to this study’s conclusions and
recommendations by this study.
CHAPTER.2 LITRATURE REVIEW
2.1 Introduction: A fast-food industry in a primarily a service sector emphasis in given on the
role-played by relationship marketing. It is imperative to develop proactive methods for
understanding what customers like and dislike. Customer satisfaction is an ultimate goal of any
service industry. There is no higher achievement than to satisfy the customer which an organization has
committed itself to serving. This doesn’t mean that the organization become a not for profit industry.
Profits and revenues are nothing more than the outcomes of fulfilling customer’s needs and expectations
(Dick, A.S. and K. Basu 1994). Customer loyalty describes the tendency of a customer to choose
one business or product over another for a particular need. (Buttle, F 1996) Companies invest in
retention rather than attracting new customers. It’s really hard for companies to make customers
and then retain them; the one’s who do it pose major threat to rest of their competitors. (Caruana,
2002).
According to Vavra Customer satisfaction is the leading criterion for determining the quality that
is actually delivered to customers through the product/ service and by the accompanying
servicing. (Alexandris et al, 2002) In simple terms customer satisfaction is essential for corporate
survival. As mentioned above several studies have found that it costs about five times as much in
time, money and resources to attract a new customer as it does to retain an existing customer
This creates the challenge of maintaining high levels of service, awareness of customer
expectations and improvement in services and product. (Buttle, F 1996)
Furthermore, customer satisfaction is recognized as of great importance to all commercial firms
because of its influence on repeat purchases and word-of mouth. It reinforces positive attitudes
towards the brand, leading to a greater likelihood that the same brand will be purchased again.
While this research provides some perspectives to the field of service quality, it is believed that
there are a number of things that should be done to confirm the verified methodologies as well as
to develop the use of service quality in design and improvement of quality services. There are
number of problems with the instrument that are mentioned in the literature.
The evidence suggests that differential scores of perception minus expectation tend to exhibit
reduced reliability, poor discriminant validity, spurious correlation’s, and restricted variance
problems (Alexandris et al, 2002). Also, inconsistent definitions and/ or interpretations of the
‘expectation’ might lead to a number of problems. In addition, since expectations and
perceptions are based on experience, its temporary nature might lead to question marks on the
reliability of service quality difference scores. As for customer loyalty, one thing that Is felt
important is that firms are good at attracting customers for the first time but they can’t actually
retain them which is most important as It costs between three and seven times as much as to win
a new customer as it does to hang on to an existing one.
Also, there is a close link that exists among learning, habit and loyalty. It is a result of consumers
learning that one brand can satisfy their needs and develop a favorable attitude towards it which
results in consistent purchase over time. Based on Coyne (1989), there are two critical thresholds
affecting the link between satisfaction and loyalty. On the high side, when satisfaction reaches a
certain level, loyalty increases dramatically; at the same time, when satisfaction declined to a
certain point, loyalty dropped equally dramatically. As per the Rama, (2005), Managers should
realize that having satisfied customers is not good enough; they must extremely satisfied
customers. Moreover, a small increase in customer satisfaction boosts customer loyalty
dramatically. In addition to benefiting from the extremely satisfied customers' repeat patronage,
the fast-food can save their marketing expenses.
Customer loyalty is concerned with customer satisfaction because of the benefits of retaining
customers, and the activities involved in it are aimed at developing long-term, cost-effective
links between an organization and its customers. Now day’s fast-food companies have stepped
up their promotions of frequent guest programmes to compete in the market.
2.2 Customer Loyalty: Customer loyalty describes the tendency of a customer to choose one
business or product over another for a particular need. Companies invest in retention rather than
attracting new customers. It’s really hard for companies to make customers and then retain them;
the one’s who do it pose major threat to rest of their competitors.
Customer retention has a direct impact on profitability and past research has claimed that it can
be five times more expensive to obtain a new customer than to retain one. Naturally then,
considerable time and money is being spent in many organizations to develop strategies to retain
customers.
Its commonly known to everyone that typically about 80 percent of revenue comes from
only 20 percent of customers therefore It would make sense to concentrate most
marketing resources on this 20 percent, but the problem for managers is that the most
financially rewarding 20 percent are not necessarily the loyal customers (Dowling and
Uncles, 1997).
Customer loyalty is a customer’s commitment to a brand or a store or a service or a
supplier based on a strong favourable attitude (N.Seth, Mittal, I.Newman, 1999).
On the flip side of the coin, as said above not all consumers are loyal to any one product or
service, nor is any one customer loyal to everything he or she buys and uses. There are some
products, stores and services that command little or no loyalty from their customers. Service
quality is a critical element of customers’ perceptions that compliments loyalty. In the case of
pure services, service quality will be the dominant element in customers’ valuations.
The quality of the services may be judged by the customers on the basis of their perceptions of
the technical outcomes provided, process by which the outcome was delivered and the quality of
the service surroundings where the actual service was delivered. Customer loyalty includes both
attitude and behaviour towards the service or product. Ratings, commitments, satisfaction, trust
are various forms of attitudes that could be measured by survey presumed to guide behaviour. On
the other hand behaviour which includes retention and share-of-category loyalty could be
measured with panel data or survey which would indicate the possibility of purchase and
generally applies to service organizations like groceries, hotels, airlines, stores, etc.
A fast-food might want to measure its loyalty on the basis of repeat patronage and repeat
behaviour. Repeat loyalty, Latent loyalty, spurious loyalty and no loyalty are the 4 constituents
of same which are represented in a model known as Alexandris et al, (2002) typology.
When both behaviour and attitude are weak, no loyalty exists. Weak attitude means
customers don’t have a liking or preference for the brand and weak behaviour means that
the same brand is not purchased consistently.
When both behaviour and attitude are strong, strong loyalty exists. In this case the
attitude towards the brand is favourable and the purchasing is done consistently for same
brand.
When behaviour is high but attitude is low, the customer has spurious loyalty which
means loyalty that is incidental and not well founded. In this case the customer buys the
same brand or shops at the same store regularly, but has no preferential attitude or liking
towards it. May be because this brand or store happens to be the only one affordable or
convenient but if he is given choice they might shift towards another brand or store.
Finally, in the typology it’s the latent loyalty which evolves strong attitude and weak
behaviour. Perhaps the customer favours or likes the brand but is not able to buy it
because of certain barriers which could be high price or lack in access to the brand or the
store. Here, marketers can tap into the hidden potential market by diminishing the
barriers that prevent customers from buying their desired brands. (Rama, 2005)
Now, every company would want their customers to be converted into a partner, which is on the
top level of the loyalty ladder designed by Paine (1995). It is the strongest form of supplier-
customer relationship, which is sustained because both parties see it as mutually beneficial.
Customers on the other hand are typical purchasers who have no feeling of loyalty towards your
organization. Value, Personality, attention, involvement and personal relationship are 5 major
factors that would help a company generate customer loyalty. All these factors are very
important factors as they focus on benefits offered, ability of customer to relate with the brand,
paying attention to the customer, involving the customer in creating the service and having a
personal relationship with the customer through all communicational activities and touch-points.
Customer loyalty is also the basis of relationship marketing because retaining customers for life
contributes to enhanced profitability. The relationship between the customer and the service
provider should be maintained at all times and personal interest should be shown towards each
customer. Companies have to learn continuously about their customers' needs and expectations,
which are ever changing and often unpredictable. For example, hotels are beginning to customize
service, and regular guests are given the same room, their table is booked for dinner at their
regular time and newspapers can be ordered and delivered. This is just a simple example of
building customer loyalty by taking personal care of loyal customers and satisfying them. (Rama,
2005).
2.3 Customer Satisfaction: Customer satisfaction is an important concept to consider when
developing a customer loyalty programmes. It is the measure of how well the customer’s
expectations are met. Whereas if we compare customer loyalty with customer expectation,
customer loyalty is a measure of how likely a customer is to repurchase and engage in
relationship activities. Loyalty is vulnerable because even if customers are satisfied with the
service they will continue to defect if they believe they can get better value, convenience or
quality elsewhere. Therefore, customer satisfaction may not be an accurate indicator of customer
loyalty. Satisfaction is a necessary but not a sufficient condition for loyalty. A customer
travelling away from home may be very satisfied with a hotel in which they stay, but they will
not necessarily stay in the same hotel when they visit that area again. Other variables impact on
the customer's choice including price, location and convenience. Loyalty is established when the
customer makes a commitment to the brand and returns to the same hotel whenever they are in
the area. In other words, we can have satisfaction without loyalty, but it is hard to have loyalty
without satisfaction (Alexandris, 2002). While there is no guarantee that a satisfied customer will
return it is almost certain that a dissatisfied customer will not return (Rama, 2005).
There is a link between customer retention and satisfaction, loyalty and profitability and this is
illustrated by Orr (1995), who states that the best way to get the repeat business that you need to
be profitable is by loyal programmes, frequent-buyer clubs, good service and fair prices.
2.3.1 What is customer satisfaction?
Customer satisfaction can be defined as satisfaction based on an outcome or a process. Vavra's
(1997, p. 4) outcome definition of customer satisfaction characterizes satisfaction as the end-state
resulting from the experience of consumption. This end state may be a cognitive state of reward,
an emotional response to an experience or a comparison of rewards and costs to the anticipated
consequences. Social psychologists, marketing researchers, and students of consumer behaviour,
have extensively studied the concepts of customer satisfaction and dissatisfaction
The increasing importance of quality in both service and manufacturing industries has also
created a proliferation of research, the result of all this research has been the development of nine
distinct theories of customer satisfaction. The majority of these theories are based on cognitive
psychology; some have received moderate attention, while other theories have been introduced
without any empirical research. A minority of researchers perceives the satisfaction process to be
subjective in expectations but objective in the perceptions of the product attributes, or outcome.
Thus, Klaus (1985, p. 21) defines satisfaction as ``the customer's subjective evaluation of a
consumption experience, based on some relationship between the customer's perceptions and
objective attributes of the product''. Others point out that both what is perceived (outcome) and
what is expected are subjective and therefore psychological phenomena - not reality (Dick, et al,
1994).
Since both expectations and perceptions are psychological phenomena, they are both vulnerable
to external influences and manipulation. As an illustration of how expectations can be explicitly
manipulated Sasser et al. (1979, p. 89) note that: ``some restaurants follow the practice of
promising guests a waiting time in excess of the ``expected time''. If people are willing to agree
to wait this length of time, they are quite pleased to be seated earlier, thus starting the meal with
a more positive feeling'' (Dick, et al, 1994).
2.3.2 Service quality via Customer satisfaction: According to Vavra (1997) Customer
satisfaction is the leading criterion for determining the quality that is actually delivered to
customers through the product/ service and by the accompanying servicing. In simple terms
customer satisfaction is essential for corporate survival. As mentioned above several studies have
found that it costs about five times as much in time, money and resources to attract a new
customer as it do to retain an existing customer (Ingram and Daskalakis, 1999). This creates the
challenge of maintaining high levels of service, awareness of customer expectations and
improvement in services and product. Furthermore, customer satisfaction is recognized as of
great importance to all-commercial firms because of its influence on repeat purchases and word-
of mouth Recommendations (Berkman and Gilson, 1986).
It reinforces positive attitudes towards the brand, leading to a greater likelihood that the same
brand will be purchased again. To assess the quality of services and customer satisfaction there
are several ways i.e. through subjective, or soft, measures of quality, which focus on perceptions
and attitudes of the customer rather than more concrete objective criteria. These soft measures
include customer satisfaction surveys and questionnaires to determine customer attitudes and
perceptions of the quality of the service they are receiving (Ingram and Daskalakis 1999).
Customers' perceptions of service is vital in identifying customer needs and satisfaction because
the extent to which goods or services meet the customer's needs and requirements is the index by
which quality is determined
Finding a strong relationship between satisfaction scores and performance does not ensure
economic success. In the long run the level of satisfaction may decline; customers' attitudes and
desires change, and new competition may emerge.
2.3.3 Components of customer satisfaction: Unlike material products or pure services, most
hospitality experiences are a fusion of products and services. Therefore it is possible to say that
satisfaction with a hospitality experience such as a hotel stay or a restaurant meal is a sum total
of satisfactions with the individual elements or attributes of all the products and services that
make up the experience. There is no uniformity of opinion among marketing experts as to the
classification of the elements in service encounters. As per the, Reuland et al. (1985, p. 142)
suggest that hospitality services consist of a harmonious mixture of three elements: the material
product in a narrow sense which in the case of a restaurant is the food and beverages; the
behaviour and attitude of the employees which are responsible for hosting the guest, serving the
meal and beverages and who come in direct contact with the guests, and the environment, such
as the building, the layout, the furnishing, the lighting in the restaurant, etc. Czepiel et al. (1985)
on the other hand, suggests that satisfaction with a service is a function of satisfaction with two
independent elements.
The functional element, delivery element, to prove the independence of the two elements from
each other, the authors claim that restaurant clients are quite capable of having responses to each
element that differ one from the other: ``The service was great, the food poor''. Davis and Stone
(1985, p.29) divide the service encounter into two elements: direct and indirect services. For
example, direct services may be the actual check-in/checkout process in hotels, while the indirect
services include the provision of parking facilities, concierge, public telephones for guests' use,
etc. Lovelock (2002) divides the service attributes into two groups: core and secondary. In a
restaurant situation Lovelock's core will be composed of the food and beverage, while his
secondary will be composed of everything else, including service, environment, etc.
Alexandris, (2002) classifies the service encounter attributes in two groups: essential and
subsidiary. The essential attributes are identical to Czepiel's functional, Davis and Stone's direct,
Reuland and colleagues' product, and Lovelock's core, i.e. the food and beverage in the meal
experience. The subsidiary attributes are more comprehensive than Davis and Stone's indirect,
Czepiel's performance delivery, or Lovelock's secondary, and include such factors as:
accessibility, convenience of location, availability and timing and flexibility, as well as
interactions.
2.3.3.1 What is service quality?
Service quality is considered a critical determinant of competitiveness. Attention to “service
quality” can help an organization to differentiate itself from other organizations and through it
gain a lasting competitive advantage. High quality of service is considered an essential
determinant of the long-term profitability not only of service organizations, but also of
manufacturing organizations.
Service quality has been discussed in only a handful of writings (Rama, 2005). Examination of
these writings and other literature on service suggest three underlying themes:
Service quality is more difficult for the consumer to evaluate than goods quality.
Service quality perceptions result from a comparison of consumer expectations with
actual service performance.
Quality evaluations are not made solely on the outcome of a service: they also involve
evaluations of the process of service delivery.
When purchasing goods, the consumer employs many tangible cues to judge quality: style,
hardness, colour, label, feel, packaging etc. But while purchasing services fewer tangible cues
exist. In most cases tangible evidence is limited to the service provider’s physical facilities,
equipment, and personnel. Study done by the Kandampully (2000) revealed that service quality
is crucial to the success of any service organization. As the customers participate in the
production and consumption of services, they interact closely with various aspects of the
organization. This inside knowledge gives them the opportunity to assess critically the services
provided in particular the quality of service. Customers will assess service quality by comparing
the service they get with the service they desire. Hence, service quality plays a critical role in
adding value to the overall service experience. Since superior quality is one of the crucial factors
within the control of the hospitality service provider, Lee, Barker, & Kandampully (2003)
suggested that enhancing the quality of service at all levels of service delivery has therefore
become mandatory for organization survival.
“Service quality” affects the repurchase intentions of both existing and potential customers.
Market research has shown that customers dissatisfied with a service will divulge their
experiences to more than three other people. Thus, it is reasonable to conclude that poor service
will reduce the potential customer base. According to the Technical Assistance Research Project
(TARP), the research indicates that six times more people hear about a negative customer service
experience than hear about the positive one. Although Johns (1996) asserts that service quality is
both ephemeral and personal, it needs to be defined and characterized in order to be specified
and delivered reliably in hotels. Many authors have tried to identify the tangible and intangible
components of service quality, which may affect guest satisfaction either selectively or by their
absence, in the same way as Herzberg’s (1959) hygiene factors or Maslow’s (1954) hierarchy of
needs operate at different levels.
Balmer and Baum (1993), remark that these ingredients change over time and are not likely to be
the same in hotels of different star ratings. Lee-Mortimer and Buxton (1991) contend that hotel
star ratings tend to measure tangible quality, and this is reflected in the current interest in quality
accreditation frameworks.
2.3.3.1.1 Service quality dimensions: In service organizations, the assessment of the quality of
a service is made during the actual delivery of the service ± usually an encounter between the
customer and a service contact person. Exploratory research of Parasuraman, Zeithml and Berry
(1985) revealed that the consumers used 10 potentially overlapping dimensions in assessing
service quality fit. These dimensions were tangibles, reliability, security, competence, courtesy,
understanding/ knowing the customer, access, responsiveness, communications and credibility.
These dimensions were derived for SERQUAL scale to serve as the basic structure of service
quality domain and further reduced to just five generic dimensions of service quality
(SERVQUAL) that must be present in the service delivery in order for it to result in customer
satisfaction.
Reliability which shows the ability to perform the promised service, Responsiveness which
shows the willingness to help customers and provide prompt services, Assurance which shows
employees knowledge and courtesy and their ability to inspire trust and confidence, Empathy
which shows caring and individualized attention given to customers and finally tangibles which
includes appearance of physical facilities, equipment, personnel, and written materials.
The service quality (SERVQUAL): Much of the contemporary theory considers service
quality from the viewpoints of both provider and customer, and Parasuraman et al. (1985)
propose a model which enables perceptual gaps to be identified. In 1991, these authors
developed this framework into the SERVQUAL scale which enables actual service
delivery to be measured. Zeithaml et al. (1990) suggest that the criteria used by
customers in moulding their expectations and perceptions fit five dimensions of service
quality which have been already discussed above.
2.4 GAPS model of service quality: SERVQUAL as an effective approach has been studied
which analysis the difference between customer expectations and perceptions. Outcomes of the
study outline the fact that although SERVQUAL could close one of the important service quality
gaps associated with external customer services; it could be extended to close other major gaps
and therefore, it could be developed in order to be applied for internal customers, i.e. employees
and service providers. While there has been an effort to study service quality, but still there is no
general agreement on the measurement of the concept. The majority of the work to date has
attempted to use the SERVQUAL methodology in an effort to measure service quality.
According to Brown and Bond (1995), "the gap model is one of the best received and most
heuristically valuable contributions to the services literature". The SERVQUAL approach is the
most common method for measuring Service quality. There are seven major gaps in the service
quality concept. The model is an extension of Parasuraman et al. (1985) which discusses 7 major
gaps below:
Gap1: Customers’ expectations versus management perceptions: as a result of the lack of a
marketing research orientation, inadequate upward communication and too many layers of
management.
Gap2: Management perceptions versus service specifications: as a result of inadequate
commitment to service quality, a perception of unfeasibility, inadequate task standardization and
an absence of goal setting.
Gap3: Service specifications versus service delivery: as a result of role ambiguity and conflict,
poor employee-job fit and poor technology-job fit, inappropriate supervisory control systems,
lack of perceived control and lack of teamwork.
Gap4: Service delivery versus external communication: as a result of inadequate horizontal
communications and propensity to over-promise.
Gap5: The discrepancy between customer expectations and their perceptions of the service
delivered: as a result of the influences exerted from the customer side and the shortfalls (gaps)
on the part of the service provider. In this case, customer expectations are influenced by the
extent of personal needs, word of mouth recommendation and past service experiences.
Gap6: The discrepancy between customer expectations and employees’ perceptions: as a
result of the differences in the understanding of customer expectations by front-line service
providers.
Gap7: The discrepancy between employee’s perceptions and management perceptions: as a
result of the differences in the understanding of customer expectations between managers and
service providers.
2.4.1 Measuring Service Quality Gaps: Alexandris (2002) suggested that what can be
measured are the differences between the abstractions. So, it is the logic that if we can measure
the difference between expectations and perceptions, which is defined as perceived quality, we
can therefore determine the level of satisfaction. This concept is quite similar with
Parasuraman’s (1985) service quality model, which applied the expectancy-disconfirmation
theory. As discussed above Parasuraman (1985) defined service quality in ten major dimensions
that consumers use in forming expectations about and perceptions of services. In a later research,
Parasuraman (1988) revised and defined the service quality in five dimensions, again- reliability,
responsiveness, assurance, empathy, and tangibles. The model suggested service quality as the
gap between customer’s expectations (E) and their perception of the service provider’s
performance (P). Hence, the service qualities score (Q) can be measured by subtracting
customer’s perception score from customer’s expectations score:
Quality score (Q) = P - E
Zeithaml and Bitner (2003) stated that in order to manage service quality, it is important to
manage the gaps between expectations and perceptions on the part of management, employers
and customers. The most important gap (Gap 5) is that between customer’s expectation of
service and their perception of the service actually delivered. Hence by referring to the gap
model, it states that a service marketer must close the customer gap (Gap 5). In order to do so,
the service provider must close the four other gaps (Gap 1, 2 3, and 4) within the organization
that inhibit delivery of quality service. Serious action must be taken because how the customers,
in these case fast-food joint customers, perceive the level of service performance that meets their
expectations will reflect on the quality of service provided by the organization.
According to Alexandris (2002), the gaps measurement may be a significant marketing tool. It
also has the advantage of being less abstract, even though not completely. It also considerably
eases the task of measuring service quality. Without question, SERVQUAL has been widely
applied and is highly valued. Any critique of SERVQUAL, therefore, must be seen within this
broader context of strong endorsement.
2.4.2 Priority Marketing: Priority Marketing focuses on what’s important to the customer.
Consider the varying demand placed on a hotel: An airline stewardess may find the 24 hour
room-service extremely valuable, a retired couple may need dietary menu options, a tour
wholesaler may favor low prices, and a young female executive considers a security a priority
(Swift, 2001). Hotels should break down their services and ask customers what is important to
them. This approach can field very valuable insight about changing customer preferences.
Identifying groups of customers who have similar preferences or even similar tastes (such as
sharing common perceptions of quality or states), hotels can target promotions to capitalize on
known characteristics and individualize the presentation. It is important that hotels involve their
guests and stay in touch with customer perceptions of current services.
2.4.3 Other researches similar to this topic: As the service sector of the global economy
grows, the study of services and innovation are becoming increasingly important. Service
products distributed regionally, nationally, and globally have become larger portions of company
revenue streams; knowledge-intensive business services aimed at enhancing performance require
reliable methods of measurement, assessment, and improvement (Spohrer & Maglio, 2008). As a
result, accurate and reliable instruments that assess service quality are of great interest to
companies whose revenues come from service delivery. Perhaps the most popular and widely
used service quality instrument is SERVQUAL.
2.4.3.1 Service Quality: In 1988 Parasuraman, Zeithaml, and Berry developed a generic
instrument called SERVQUAL to measure service quality based on input from focus groups.
Although SERVQUAL was developed within the marketing sector, it also is used in a variety of
organizational settings, including libraries and information centers (Kettinger & Lee, 1994;
Nitecki, 1996). Since 1988 Parasuraman, Zeithaml, and Berry have made numerous changes to
SERVQUAL, some in response to problems identified by other researchers. For instance, in
1994 they reported on three different SERVQUAL formats; they recommended that researchers
use a format that separated customer expectation scores into tolerance zones. Researchers have
continued to use SERVQUAL instruments. In 1997, Van Dyke, Kappelman, and Prybutok
employed SERVQUAL in an IS context, while in 2002 Banwet and Datta measured IT service
quality in a library service, as did Landrum and Prybutok in 2004. Still, some researchers
question the appropriateness of using SERVQUAL in an IS or IT context; others disagree about
whether the service quality should be the difference between expected and perceived service.
Parasuraman, Zeithaml, and Berry (1988) stated that since service quality depends on the
relationship of customer expectations with customer perceptions, it is appropriate to calculate
service quality by subtracting expected from perceived service. One then achieves an overall
measure of service quality by averaging the scores of all items (Brown, Churchill, & Peter,
1992). However, this procedure gives also rise to two issues: the first is disagreement over what
really is being measured in SERVQUAL with expectations and the second is the problematic
nature of the resulting difference scores. These two issues are resolved if one follows Cronin and
Taylor (1992), and Teas (1993), who recommended that expectation ratings be eliminated
altogether. In addition, Liljander (1994) states that there is more support for performance only
models than for the disconfirmation model of service quality. Bolton and Drew (1991) stated that
assessments of overall service quality are affected only by perceptions of performance levels.
They suggested that direct measures of disconfirmation are more important than expectations.
Boulding, Kalra, Staelin, and Zeithaml (1993) also suggested that perceptions alone influence
overall service quality. Furthermore, other studies suggested that SERVQUAL has unstable
dimensions. For example, Jiang, Klein, and Carr (2002) used four dimensions in their study,
while Landrum and Prybutok (2004) used five. Nitecki (1996) proposed a three-dimensional
SERVQUAL model, as opposed the five dimensions proposed by Zeithaml, Parasuraman, and
Berry in 1990. As we have noted, these issues are all resolved if customer expectations are
eliminated from the model. The performance only approach to service quality utilizes the five of
the seven SERVQUAL dimensions— the five performance dimensions. Cronin and Taylor
(1992), called this performance only subset instrument SERVPERF. When Cronin and Taylor
(1992) compared SERVPERF to SERVQUAL, their results supported the dissenters:
performance scores alone account for more variation in service quality than performance minus
expectations. Performance alone provides better predictive validity than SERVQUAL which is
gap-based (Brady, Cronin, & Brand, 2002; Cronin & Taylor 1992) and other studies show that
performance scores alone exhibit better reliability and validity than difference scores (Babakus &
Figure.13.1 Ambience Score (Cumulative) in vertical bar chart
Cleanliness is a very important factor for restaurant to attract the customers. Based on
the data of table.13.2 and figure.13.2, it can be seen that majority of respondent i.e. 374
respondent ranked McDonald’s as first for its cleanliness and second being the Pizza Hut having
364 respondent while Nirulas comes in third with 325 respondent and fourth being the Others
with 251 respondent. McDonalds come in first in cleanliness because due to this factor put in its
one of the important priority.
Cleanliness Score (Cumulative) Respondents
McDonalds 374
Nirulas' 325
Pizza Hut 364
Others 251
Table.13.2 Cleanliness Scores (Cumulative) of different restaurants
Figure.13.2 Cleanliness Scores (Cumulative) of different restaurants
Employee behaviour toward the customers is another most important factor to maintain
and retain customers. Table 13.3 and figure 13.3 showing the cumulative scores of employee
behaviour of different restaurants. McDonald’s comes in first with 379 respondent and pizza Hut
being the second with 361 respondent whereas Nirulas ranked third with 312 respondent and
Others being the fourth having 247 respondent. Mostly, it is seen that the top fast food
restaurants employee behavior is most appreciable and have much patience not for job security
but also for brand value.
Employee Behaviour Score(Cumulative)
Respondents
McDonalds 379
Nirulas' 312
Pizza Hut 361
Others 247
Table.13.3 Employee Behaviour Scores (Cumulative) of different restaurants
Figure.13.3 Employee Behaviour Scores (Cumulative) of different restaurants
As per the table.13.4 and figure.13.4, it is clearly indicating that the only Nirulas is best managed
in its space as basis on respondents feedback while McDonalds come second with 340
cumulative score and Pizz Hut stood third with 328 score. Rest other restaurants comes at fourth
with 226 score. Best space management is also an attractive and magnetic factor for customers
that focused the attention and feel more comfortable.
Space Management Score(Cumulative) Respondents
McDonalds 340
Nirulas' 372
Pizza Hut 328
Others 226
Table.13.4 Space Management Scores (Cumulative) of different restaurants
Figure.13.4 Space Management Scores (Cumulative) of different restaurants
Menu composition tells that the how much a particular restaurant is diversified in food items and
makes customers more choose. Based on customer response taken by the structured
questionnaire, it is indicating that the Nirulas comes second in menu composition with 359
cumulative score, McDonalds third with 331 cumulative score, Pizza hut fourth with 306 score.
Finally, other restaurants comes first in menu composition with highest score 374.
Menu Composition Score(Cumulative) Respondents
McDonalds 331
Nirulas' 359
Pizza Hut 306
Others 374
Table.13.5 Menu Composition Scores (Cumulative) of different restaurants
Figure.13.5 Menu Composition Scores (Cumulative) of different restaurants
4.2.14 What do you have to say for happy hours concepts in McDonalds?
The respondent feedback for the happy hour concept by the McDonalds is
highly appreciable because 41 respondents i.e. 42.7 % of respondents said excellent and 26 % of
total respondent remark as good idea. But only 18 respondents show no interest in this concept
whereas, 12 said poor concept introduce by the McDonalds.
Happy hour feedback No. of respondents Percentage (%)Excellent 41 42.7Good idea 25 26.0
Does not matter 18 18.8Poor 12 12.5Total 96 100.0
Figure.14 Respondents feedback for McDonalds happy hour concept
Figure.14 In bar chart, respondent’s feedback for McDonald’s happy hour concept
4.2.15 The suggestion asked by the respondents for improvement in service quality provided by
the McDonalds is not very satisfactory for it. Because 76% of respondents does not give any
suggestion for it due to at par service quality provided by the McDonald’s but rest 23
respondents out of 96 said yes. As per the suggestions given by the respondents want to change
the service quality because in the front counter sometimes there are a long queue for giving order
and some suggestions for proper space management.
Suggestions for service quality No. of Respondents Percentage (%)Yes 23 24.0No 73 76.0
Total 96 100.0
Table.15 Respondents suggestions for improve in service quality
Figure.15 Respondents suggestions for improve in service quality in bar chart
2.4.16 Which similar restaurant you think has the best service quality and why?
In previous question 2.4.15, only 23 respondents gave some suggestions for
improve in service quality. By asking which other restaurants except McDonalds provide good
service quality. Then out of 23 respondents, 11 said Pizza hut, 9 Nirulas and rest 3 respondents
favour for local unbranded restaurants. It means the service quality provided by the McDonalds
is not at top as compare to brand and some other local restaurants.
Restaurants No. of Respondents Percentage (%)Pizza hut 11 47.8Nirulas 9 39.1
Other (Local) 3 13.0Total 23 100
Table.16 Respondents feedback for service quality
Figure.16 In Pie chart, Respondents feedback for service quality
4.2.17 Would you recommend McDonald's to your friends and relatives?
This question was asked to the respondent whether they like to recommend
McDonald’s to their friends and relatives. The result showing in table.13 and figure.13 shows
that out of 98 respondent 60 respondents says definitely yes and 22 respondents says probably
yes that they will recommend McDonald’s to their friends and relatives, while only 14
respondent says probably no and 2 respondent definitely no that they will not recommend
McDonald’s to their friends and relatives.
Attributes No. of respondents
Definitely Yes 60
Probably Yes 22
Probably No 14
Definitely No 2
Total 98
Table.17 Recommendation of McDonald’s to Friends and Relatives
Figure.17 Recommendation of McDonald’s to Friends and Relatives
4.3 Comparative analysis of order & delivery time: 4.3 Comparative analysis of order & delivery time: Out of 32 respondents who visitOut of 32 respondents who visit
McDonalds. Based on the table.18 given below, indicating that the 5 respondents, whose orderMcDonalds. Based on the table.18 given below, indicating that the 5 respondents, whose order
time interval lies within two minutes got delivery less than 5 minutes, i respondent got within 5-time interval lies within two minutes got delivery less than 5 minutes, i respondent got within 5-
10 minutes and next 1 between 10-15 minutes. For order time span 2-5 minutes, 6 respondents10 minutes and next 1 between 10-15 minutes. For order time span 2-5 minutes, 6 respondents
got in 5-10 minutes, 13 got 10-15 minutes, 1 after 15 minutes and only one got within 5 minutes.got in 5-10 minutes, 13 got 10-15 minutes, 1 after 15 minutes and only one got within 5 minutes.
In other brackets, single respondent got delivery in 10-15 minute whose order period is lyingIn other brackets, single respondent got delivery in 10-15 minute whose order period is lying
between 5-7 minutes. Rest 1 respondents, whose order period comes in 7-10 minutes, receivebetween 5-7 minutes. Rest 1 respondents, whose order period comes in 7-10 minutes, receive
delivery more than 15 minutes.delivery more than 15 minutes.
Order placing time/ Delivery time <2 min 2-5 min 5-7 min 7-10 min Total
< 5 minutes 5 2 0 0 19
5-10 minutes 2 6 0 0 11
10-15 minutes 1 13 1 0 1
> 15 minutes 0 1 0 0 1
Total 8 22 1 1 32
Table.18 Cross -tabulation between order & delivery timeTable.18 Cross -tabulation between order & delivery time
4.4 Service GAP analysis of fast food industry based on the questionnaire: Service gap is a
factor which causes the unsuccessful delivery. These are five gap cause the
unsuccessful/delivery.
i. Gap between consumer expectation and management perception.
ii. Gap between management perception and service quality specification and service delivery.
iii. Gap between service delivery and external communication
iv. Gap between perceived service and expected service,
i. Gap between consumer expectation a management perception: While the management of
pizza hut perceives that the consumers need better quality food, but the consumers may a
clinically want better ambience, (Like, light, music) or work floor area.
ii. Gap between management perceptions Service-quality specification: The “fast” service
provided by McDonald goes very well with its customer perceptions. Here the negotiation has
perceived well what the customer wants but, the main area where at lacks is that it has not
specified its customer “how to serve “or” what quality to be served”.
iii. Gap between service quality specifications & service delivery: The delivery personnel in
McDonald are mainly fresh graduates without a personal degree in “hotel management”.
If the other person visit except the recognize restaurant like and what is in some what difference.
They find what have shown in media and what shown here in name some what difference.
iv. Gap between perceived service and expected service: The customer of McDonald and
Nirula’s are wanted free home delivery but presently there not providing. Whereas Pizza Hut is
providing home delivery to there customers.
4.5 SWOT Analysis
4.5.1 Strength:
Brand Equity world wide: McDonald's has a brand name and brand value associated
with it world wide. With its corporate vision and mission spelled out in clear terms world
wide McDonald's commands respect and belief in the minds of the people through out the
world wherever its operations are present.
Consistency of food products: McDonald's has well laid out procedures for preparing
food, checking the quality of the food items at various stages, the equipments used are
also pre calibrated to add the quantity of ingredient, etc. making the taste the food
consistent at any of its outlets.
Overseas market: Besides USA, McDonald's has its operation in 121 countries giving it
the largest overseas market and tremendous growth opportunities.
Successful items: On its menu, the company has successful food products such as
Burgers, French fries, Happy meals, McPuff, etc. and to add to this McDonald's
marketing strategy has various promotional schemes to make it more attractive during the
lean time periods, generally known as Happy hours.
4.5.2 Weakness:
One order at a time: Employees take one order at a time, making the other customers to
wait in line. This allows for accuracy and quality of the service to a high degree but
decreases the speed of the service.
Business focus: The employees seem to be more focused on the business rather than on
the customers. Therefore the element of human touch is missing in the restaurants.
Formal Communication: Only communication between the customer and the employee
is during the placement of the order.
Inflexible products: Though the variety of food items provided is large but there is still
inflexibility in terms of food products, like some people may want to have onion in their
burgers while others may not.
Serving in the Same tray: Even while McDonald's has separate production lines for the
vegetarian and non-vegetarian food products, still when it comes to serving, the
employees serves the two different products in the same tray, which is sometimes
objected by the strict vegetarians.
4.5.3 Opportunities:
Serving only one percent: McDonald's with its huge presence in more than 121
countries and serving about 45 million people every day world wide still serves less than
1 percent. So there is huge opportunity of growth.
International Exposure: McDonald's has a vast exposure and experience of operating in
different cultures and it is because of its flexibility of adopting the cultures that it has
been able to lead the fast food industry from the front.
Growing Dining-out market: with the increase in the dining out culture and trend in the
market, it is expected that the sales of McDonald¡¦s should increase.
4.5.4 Threats:
Competition: With opening up of newer fast food joints providing more options to
choose from and better service, the market has started to feel the heat because of the
competition.
Health Conscious Customers: The calories content in a vegetarian burger is 418
calories besides 10 gm of protein, 22 gm of fat and 48 gm of carbohydrate. With people
becoming more health conscious, they are already avoiding these fast foods.
4.6 Porters five forces model with reference to fast food joints4.6 Porters five forces model with reference to fast food joints:
Threat of New Entrants high
Unorganized sector has low entry barriers and low initial investment
Threat of FMCG majors entering fast food with established distribution
Success dependent on maintaining low costs
Further entry of Power of suppliers –
High Expensive, hard to
procure ingredients Pries determined by
suppliers to maintain quality
Lack of single supplier on a contract basis to ensure fixed rates
Fluctuation in supply of seasonal products offerings studied,
Intensity of rivalry high with both national (Dominos, Pizza hut, McDonalds with deep pockets and rapid expansion plans