A critical analysis of the factors which are influencing consumer behaviour in the UK’s fast food industry taking the example of McDonald’s and how it is responding to this change and its consumer behaviour process.
The main aim of this research dissertation is to examine the factors which are influential to the consumer decision making processes in the conditions of the fast food industry of the United Kingdom. Moreover, it aims to examine how a company like McDonald’s is reacting this change in consumer behaviour and environment. This is an interesting topic to investigate considering the high public and political debate about obesity in the UK and its after influencing especially in young children.
McDonald’s has been a sufferer of generality of the market forces which are depressingly influencing the consumer decision making process. These factors are forceful consumer towards a negative attitude curve which are affecting the revenue production of McDonald. The objective of this dissertation research is to critically examine the various factors responsible for the negative influence over the reliable consumer of McDonald’s and suggest recommendation for the case study about how it can overcome this challenge and increase its market share.
Our two-piece “A critical analysis of the factors which are influencing consumer behaviour in the UK’s fast food industry taking the example of McDonald’s and how it is responding to this change and its consumer behaviour process” is further divided into three main areas of research in order to provide the targeted questions. The three main research areas are listed below for your kind perusal.
1. To recognize how our chosen organization (McDonald’s) is evolving during the change in consumer decision making process:
A careful application of PESTEL Framework will be applied so as to identify the various major key change drivers that might have an impact on the future of the UK fast food industry. .
2. To understand and identify the important factors which are influencing consumer purchasing decisions in regards to the fast food products:
An examination of the Consumer Decision Making Process will be conducted, in particular in the psychological areas, primarily focusing on fast food consumer attitudes towards McDonald’s products. Furthermore, the various socio-cultural environmental attributes will be observed that had an influence on consumer decision making process.
3. Corporate responses and strategy formulation in regards to the above changes:
Learning about how McDonald’s is responding to these changes using its unique marketing mix and communication strategy. The researchers also seek to propose certain recommendations aiming at future marketing actions of McDonald’s corporation.
Reason for Selecting McDonald’s
McDonald’s is a establish in the fast food industry and today world leader in the sector. The company has over 31,000 fast food restaurants in over 120 countries. The company operates primarily in the US and the UK. It is headquartered in Oak Brook, Illinois and employs 447,000 people all over the world. According to Datamonitor ( 2010) McDonalds currently operates in more than 1,316 restaurants throughout the UK. Its profits grew by 55% in 2010.
In 2003 the company was losing money for the fist time in its five-decade history, as it was serving mainly greasy food and therefore fuelling the obesity epidemic. Moreover the company was losing important consumers trust due to release of the documentary ‘Super size me’ and critical book “Fast Food Nation”. According to Clark ( 2008) McDonalds introduced healthier menus and just recently in the Annual Financial Report in 2011 has announced that its sales had rocketed, sending its shares soaring to a six year high. British restaurants were singled out among the biggest improvers in performance
Consumer behaviour can be defined as the analysis of the functions/processes which are occupied when an individual or a collective set of individuals decides to choose, buy, use or give away products/services/ideas or their shopping experiences. According to Solomon ( 2006) The core focus of this behaviour pattern is based on various methods using which individual or a collective set of individuals take decision for spending their accessible funds on items related to consumption .According to Schiffman and Kanuk ( 2004) That includes what they buy, why they buy, when they buy, where they buy it, how often they buy it how often they use it, how they evaluate it after they purchase and the impact of such evaluations on future purchases, and how they dispose it
According to the dictionary.com website (2011), As per the definition offered by fast food is any food that is available at an inexpensive price in an easily accessible restaurant for eating or take away and which is being prepared in a bulk quantity using a standardized method and that can be easily dispensed.
According to the Food Survey report (2011) As per the junk food is the name given to a food product that is extremely low in nutritional value and which is usually highly greasy or highly processed and which is consumed instead of or along with a well balanced meal.
According to Bairs (2008) demonstrated in his research that the term which is commonly used to describe fast food is junk food and recently, there are furious debates over its usage for describing unhealthy food, whether it is justified or not. Many industry experts believe that the term junk food is used for selective description depending upon the location of the food outlet, as most of the food outlets in urban or suburban locations are termed junk food outlets whereas it is not used to describe posh locations. Therefore, it is being seen that the term junk food is used to disapprove a selective category of food products.
Obesity in UK
According to Boseley (2008) has demonstrated in his research that it is nowadays very common to be fat or obese in the UK; which is proven by the official statistics that shows that approximately two third of men and nearly 58 percent of women are extremely overweight in the UK. The research further reveals that the UK is the state which ranks number one for the highest number of obese or fat population across all the 27 states of Europe which was termed as grotesque by the UK health secretary.
UK Fast Food Industry
It is surprising to hear that that even though there are numerous serious concern against fast food in the UK and for it being linked with various issues such as obesity, diabetes, heart burning, food poisoning, scares and animal cruelty adverts, the UK fast food industry still remains the fastest growing industry during the last few years. According to Euro Monitor( 2010 )In terms of per capita expenditure, between 2005 and 2010, the fast food outlets have been growing at the fastest pace within the consumer food service sector
The literature review provides readers with a background for understanding current knowledge on a topic and illuminates the significance of the new study. It will help the reader to understand and identify research procedures and instruments that have been utilized successfully in the past. Thereby, it identifies, does comparisons and contrasts views and theories of other writers in relation to the research topic. Furthermore, it provides the stepping stone towards the research methodology chapter of this research work.
CHAPTER 2: LITERATURE REVIEW
This literature review will provide pointers towards the formation of probable marketing strategies and recommendations that our case study organization might pursue so as to provide a strong and positive response to the changing consumer behaviour and environment. This review will provide the reader with an insight into the following theories related to:
Process of consumer decision making.
Change and formation of consumer attitude.
Innovative mix of marketing.
PART 1 – CASE STUDY (MCDONALD’S) REVIEW
European Fast Food Industry
Figure 1.2: European market position of McDonald’s as of 2010
(All financial values listed in pound sterling and published as of September 2011)
Source: Retail Index Website, 2011
As we can clearly understand from the above figure that McDonald’s remains at the peak of the market share across the European Union. It has a yearly turnover which is massively ahead of its nearest competitors and therefore leaves no doubt how critical it is for McDonald’s to maintain this top position.
McDonald’s Financial Performance
Figure 1.3: Company Financial Results for the year 2011
According to the annual report 2011The above figure is accessed from the of McDonald’s as published on the MSN website. The company has shown more than 20 percent net profit margin which is a great achievement in this fast paced fast food market. As mentioned in the financial report, the company has announced the bonus along with dividend payouts. Above information clearly signifies the strong growth and success of McDonald’s.
This chapter is solely devoted to provide insights into the various research methodologies that are available and thereby develops into providing the design and the research methodology which is used to answer the research question in this dissertation. Furthermore, it provides a clear descriptive analysis of the research models and concept.
Findings & Analysis
This is one of the most important chapters of this dissertation research work and provides detail presentation of the information and data which was obtained using the various research tools and methodology. To make it further simple to understand, this chapter is divided into parts, firstly, the PESTEL analysis is applied in order to explain the involvement of McDonald’s and secondly the key factors which are influencing the process of consumer decision making is analysed and discussed.
It was very insightful while investigating the response of McDonald’s with respect to the documentary Super Size Me. To everyone’s surprise, McDonald’s has mentioned on their website that the they agree with the what is shown in the documentary and completely endorse the message which says that everyone should follow a balanced diet and lifestyle. Further, they argued that the central character ate a one-dimensional meal for nearly 30 days which consisted of 5000 calories per day and which is double the recommended amount for an adult. Also, he gave up an active lifestyle to a more sedentary lifestyle stopping all his physical activities. On the contrary McDonald’s supports all their consumers by offering healthy living guidance available in restaurants and websites. McDonald’s also launched a website in response to the documentary to offer various reasoning to the same.
Referring to WHO Report (2010), the education can play a vital part towards the pursuit of a greater understanding of consumer with respect to healthy food habits and lifestyle and could take place within home, social environment or school. This could be the reason why among all the general participants, the group who has finished their final year studies do not eat at McDonald’s.
A very lengthy discussion took place concerning Government’s intervention for bringing in laws to manage or regulate the fast food industry or to let the industry self regulate itself and let the consumer be left to have a free choice. The majority of the group supported the regulation in terms of issues related to children and advocated to leave the adult for making their own choices.
Role of Fast Food Restaurants
There was a final debate over the last question that talks about the fast food companies being held responsible for the current obesity epidemic in the UK, almost everyone except one participant said yes and added his defence by saying: “Fast food companies are well aware about the products which they are serving in their restaurants and what impact it had on the consumerâ€¦. But they are more concerned about the adverse impact on the people as they are busy making money for their businessâ€¦ these companies should know where to draw the lineâ€¦ to be aware of what is wrong and what is right”.
Key Factors Influencing Consumer Decision Making Process
Now reaching the final part of this research dissertation which is about understanding the results of the analysis from the questionnaire, which was developed using the Focus group interviews. It should be noted that the first three questions are designed to focus on consumer’s attitudes towards fast food and McDonald’s as a company. While the last three questions are exploring the impacts that might come from external environment having influence on consumer decision making process in regards to the fast food items. The complete questionnaire can be accessed in the Appendix chapter.
2.9 Internal Determinants
Every consumer possesses a different type of mental and emotional characteristics which allow him to take decision and think differently. These internal characteristics would be Motivation, Attitude, Perception, Personality, self confidence and life Style. In this Section we are analyzed these factors which influence consumer to take effective decision and what forces operating on consumer at the time of decision.
Motivation is a key factor to bringing consumer in the market. When need arise consumer start think which product and which location I need to go. The need is a source of motivation. The initial state when consumer not bothers about the need and just in the state of no motion, then the motivation invoke consumer to start search desired need and acquire their goal. It is difficult for the consumer to get the desired product but by motivating we can achieve our goal. Our goal is to motivate the consumer to buy our product and that product satisfies the consumer needs. The only power is motivation which achieves the desired results. Needs can be categories into Utilitarian and hedonic/Experiential needs. Utilitarian needs always consider the attributes and benefits of the product and consider the product related issues. However, “Hedonic/Experiential needs believed on subjective responses, pleasures and aesthetic considerations” Diwakar & Dolon, 2008). The gap between desired and actual state is increased but due to motivation it decreases. The huge advantage of motivation is bringing consumer from initial state to a state of done.
Attitude is referred to an overall consumers believes, behaviours and cognitive believes. Attitude has many attributes like it could vary in strength, positive or negative directions or stability (Hawkins, 2009). Attitude does not have same degree of trust and they vary consumer to consumer. Also attitude based on the consumer behaviours, when experience is good then attitude is different when experience is bad then attitude is bad or approach is different. Consumer wants more information about the product before making any type of decision because they are not confident in attitude. With less attitude the confidence of the consumer is always be suspected about the product, in the case of McDonald consumer attitude vary because of products and services they offer. The best defined by the Extended Fishbein in his model where he claimed that attitude revolved against the intention and he built his whole theory about it (Mathew & Penguin, 2009).
Perception related to recognizing, understanding, point of view, thought, interpreting, and stimuli to make the sense about the world (Le Anre, 2010). Consumer always believe on their perceptions about the brand or product but they do not understand the needs, attitudes, believes and actions. Before making any sort of perception about the product it important to understand that it not conflict with attitude, aspiration and motivations. If consumer initial perception is positive then customer will see the menu otherwise it ignore the product and pass away.
Personality is a key feature of the organization and decision making process. First impression is a last impression, customer always go in that place where staff is friendly and helpful. In this criteria Personality of staff and management matters. If sales man personality is not good then nobody will come to him and it effect the sales. Personality represents the culture of the organization and standard at which organization stands.
E) Self Confidence and Life Style
As per Hawkes & Merlyn (2008), life style gives the idea how the consumer lives, thoughts and take decision. It also gives the insight that how consumer spends the money, time and what they consider the important factors and their activities. Consumer interests and Opinions are also comes in the light of life style. There are different factors which related to the lifestyle like population, if population increase it increase the submarket and new phenomena emerge of competitions and it difficult for the consumer to take decision about the product.
In above we describe the internal consumer behaviour characteristic which influencing consumer to make decision but there are external consumer behaviour factors also which has their own impact and weight age.
2.10 External Determinants
Consumers not live in isolation. The surrounding environment effect the consumer decisions like values, believes and opinions. The external factors which influence the customers are culture, social class, family and social groups.
Culture consist of traditions, customs, social believes, norms, and artefacts. Values can be shared peoples follows the trends. People discussion and thought become the cultures. If parents bring their children to McDonald and then it share where we did dinner to his friend (Fitzgerald, Chatrier and Ralph, 2010). This trend becomes a culture so other peoples start following this trend. Values are inter related with the cultures and values define the nation character. Values influence the society and at the end it become culture like there was a trend to go to fast food outlets but know it is a part of the culture people went there eat food and discuss their issues. These restaurants become a part of their culture and meeting point. By selecting a good fast food out let represent the decision making by the consumer and mostly consumer take the decision on the basis of the culture and values.
B) Social Class
Classes always describe the social categories of the people. It also indicates the people power, prestige and status which they belongs too. There are many variables which emerged from research in which social class based on. Economical and Political factors are important which describe different types of classes (Haysman, 2009). There are main there classes, upper, middle and lower class. What upper class adopts, the other two classes also try to be copied. This class culture identified the consumer purchasing power and but in the case of McDonald this class culture not important because this fast food restaurant has number of items which are reachable to lower class consumer.
The family is most influential group where everyone influence each other decision. Selecting the restaurant or menu everyone has its own choice but family always believe the rule of majority is authority. Family values and believes are very important ,some people do like public gathering and some people like public gather, some people like privacy and some people enjoy with everyone. So mostly the decision is so controversial and delayed. The consumer behaviour is so complicated in the case of the family. Clarke (2008) believes that families changes over time and this is called a family life cycle where new members of family added so there point of view with time is different too and varies according to the needs.
D) Social Groups
Number of people who has same school thought make a group and implement their point of view on whole society. In this type of consumer behaviour where collections of people take decision heavily impact on the business. If consumer belongs to some influential group then it insist the other members of the groups to follow its experience about the product or avoid the product. These types of groups work on make or break who make their own perception and strictly follows the rules.
E) Variables Driving Choice
In this section we discuss in detail that consumer behaviour change due to environment friendly products. One of the major factors in consumer point of that product should be environment friendly and according to the health principles. Therefore, nowadays it is a one of major factor which influence consumer behaviour.
E.1 Belief and Knowledge
It is important to realize that how knowledge effect the consumer and ecological behaviour. In some of the cases it is noticed that on the bases of the knowledge consumer gather a information, organize and evaluate the information (Schiffman & Kanuk, 2004). Consumer also fined that product which has environment friendly behaviour (Wright, 2010). Knowledge is important to make a right decision but wrong information causes a less favourable choice. The very renowned example that soapsuds clean the clothes very effectively but actually it give the “impression to the consumer that it will clean. But actually it harms the environment (Zavier, 2008). In fast food industry also face criticism about the product which are not accordingly health and safety or environment friendly. It is also important educate consumer about recycle products, in fast food industry mostly material is used from recycling material and consumers have many misconceptions about the material which used in packing and serving.
In this research I want to include the green consumers. We know that on this issue so much research has been done but it is very important factor. Based on past studies, demographic consumers fall into these categories: Education, Age, Gender, Income, Intentions.
Education is very important for the consumer. The education about the product or Consumer personal education both related to green consumer behaviour and attitude. Most of work already done on the green consumer education where behaviour and education is correlated with each other positively (Fitzgerald, Chatrier and Ralph, 2010). Education gives the idea to choose between good or bad and distinguishes your choice. McDonald offers number of items or deals in their outlets but if the consumer is educated then it chose the right choice and save the money. It is also good for the company as well as because the perception of consumer is very important after leaving the outlet. McDonald also gives details in their Menu list to avoid from any sort of misunderstanding or confusion.
Aging affect the consumer behaviour and choice. Demographic profile of young people base on uncertainty. The choice and behaviour of young people cannot be predicted so long period and they switch the services in very short time. Aging affect mostly business and in fast food industry mostly focused the consumers between 5 to 20 years. Therefore, Fast food industry never trusts these customers and for motivation brings new deals and services. Green consumers are older than these consumers and the relationship between behaviour and choice is negatively correlated between them. It is also found that the relationship between these aging groups is uncertain and more research needed in this area.
Gender relates studies are very difficult because it involves number of areas in which you need to look into and then you reach at any conclusion. It also noticed that females are more like to be ecologically conscious (Baines, Pomael and Joel, 2009). The relationship between gender and environment is concern and their relationship would be significant (Abraham, 2009). The female consumers are more conscious about the environment and they purchased products which are more environments friendly. In fast food industry also care the environment and bring new campaign to attract these consumers.
The power of purchasing and income is directly proportional. If the consumer earns more than they spent more. It also be noticed that consumers are price conscious in every industry. Especially in food industry consumer want good food in low price, so competition in fast food industry is high as well. McDonald offers good food in less price but it need to keep eye in market competitors like KFC or Burger King which also provides a fast food in low price. There is theory which describe, if consumer spent less then there are more chances to save the environment. So some people this theory and give alternative ways to save the environment and not relate this theory with Income. Sales also affect from the income and if the inflation rate is not controllable then consumer behaviour is also changed.
Intention defined the actions and actions are taken due to intentions. If consumer has an intention to save the environment they it purchase an environment friendly product. Intentions are internal feelings which motivate consumer a thing which going to be wrong or un predicted event. It is also said that intentions are decisive factor to take decision. There are many studies who distinguish between Intentions and actual behaviour (Ayarts & Doris, 2008). Some companies take more money from the consumers in the name of environment friendly product but some critics said it’s a company responsibility to give environment friendly product without taking extra money.
There are two Intervening variables which affect consumer’s intentions:
“Labelling is Confusion”, is it labelling give two thoughts? Yes some times in consumer perspective. The improper labelling always confuses customers and some products are labelled that they are environment friendly. If some companies attaching labels with their product, it does not mean that consumer proper understand it too. (Baker and Bayer, 2009). The approach to create awareness in consumer are used is called holistic approach. This approach used to educate consumer using eco labelling, the impact of product on environment. Companies need to understand that environment labelling gives them support to increase a sale but actually they need to contribute by dumping wastage product and in development process. Past studies shows that labelling play a important part when consumer taking purchasing decision and if the message convey properly then consumer trust the product more.
Every one claims that, their products are environment friendly or part of the green environment. According to the research of Fairbrother (2010), 63 percent of consumers think that product are not environment friendly and their manufacturing in suspicious. By claiming every company that they are environment friendly, consumer are confused. Know they do believe on their saying. Media played an important role to expose these companies and create confusion in the mind of consumers. People are resisting to give more money which products are tagged environment friendly because their trust is shatter due to miss trust. Peoples think that companies are misleading and take advantage of nature (Brooks and Javier 2009).
PART 3 – MARKETING CONCEPTS/THEORIES REVIEW
2.11 Marketing Mix
Marketing mix referred as a variable, by controlling this variable manager’s control the brand sales and market share. Traditionally, we recognize them as four P’s of marketing involving Product, Price, Promotion and Place (Vladimir and Essex, 2009). The main objective of the marketing is to deliver the product in the market which fulfils the customer needs. This involve of number of decisions like the product or products at which they need to offer to sale and the market where these products are going to be sale it out, it means that communication with customer is very important. All these decision form a decision Mix.
However, due to the growth and importance of service in recent years, a special attention is concentrated towards marketing of services. Various academicians have suggested and theoretically recognized additional variables, that can be easily supplemented to the existing four P’s of marketing. Also, the added variables are now an integral part of the marketing mix i.e. Process, Physical and People (Morgan, 2009). We are trying to apply the seven P’s for interpreting the marketing mix of this research case study i.e. McDonald in the following way:
1. Product – Quality/Features and Quantity.
2. Place – Number of business locations.
3. Price – Pricing Strategy, Price Determinants.
4. Promotion – Innovative Promotions, PR, Advertising.
5. People – HR, Promotion, Recognition, Quality.
6. Process – Legal Procedures, Automation.
7. Physical – Customer Relationship, Restaurant Décor, Ambience.
The reader should note that in this research dissertation, the author will not be elaborating each of this marketing mix from the 7P’s, as not all are relevant to our research investigation. The real focus would be emphasized on Product, Promotion and Physical features of the marketing mix.
As demonstrated earlier, that the consumer purchases the products related to fast food category rather impulsively, therefore they are deemed products of low involvement. It is acknowledged that the extent of consumer involvement in a product category has turn out to be a chief factor pertinent to strategies of promotion and advertising (Diwakar & Dolon 2008).
Therefore, we can safely suggest that McDonald’s would want hire expert advertising and marketing professionals so as to positively influence the consumer attitudes.
2.12 Major Concepts of Marketing Mix
The processes of Marketing and distribution products are very important and it is management responsibility to give attention until the product is not sale out. Marketing mix is the process in which number of elopements is integrated and design in this way that it achieve an enterprise objective. These elements are stated as Product, Price, Place and promotion. The Marketing Mix term also be described that number techniques and tactics used to achieve goal by marketing its products or services. It is important for every company that ensures them marketing right product, right place, right person, right price and right time. For example in McDonald, The burger is a product, Low price (price), Selling at McDonald Outlets (place), promoting it by distributing leaflets. In marketing targeting an audience is very important. So choosing a right group of people and selling the product is real task in marketing.
In 4p’s, decision which related to the product include number of decision in which labelling, production and packaging of the product. Decision relating to price is very important, because sale is directly affected by this element of Marketing Mix. Managers need to take decision about taking uniform price for the product or different prices for the same product in different marke