Customer Loyalty in Fast Food Industry Under Current Economic Crisis

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Table of Contents

Background
Objective
Project Aim
Literature Review
Research Hypothesis
Research Questions
Research Methodology
List of References

Background

Many businesses have been adversely hit by the current economic crisis which has swept across international boundaries and is surely going to affect millions of lives in many countries around the world. The impact of current economic crisis could be seen as overall decline in corporate sales and eventually companies being forced to declare bankruptcies and book losses in their records. The crisis which started from subprime mortgage market is taking its toll on other industries as well which are now facing greater challenges in term of survival and their ability generate sufficient cash to pass through the current economic recession period (Shiller 2008). This has also resulted in companies stocks declining in their value and stockholders money being wiped off the floor of the capital markets. The crisis which was initially considered to hit corporate sector of major economies has transcended to the consumers. With job losses and savings shrinking the consumer spending has been observed to be declining. People have become more cautious of what they buy and where they want to put their savings. In such situations companies are finding it really difficult to revive their standings by inducing consumer spending. In such situations major companies have turned their focus on promoting their brand loyalty in order to attract customers and relying on customer loyalty they are aiming to put their businesses back on track of profitability and sustainability. This forms the basis of the proposed study and its objective that is laid out in the next section.

Objective

The objective of this research is to evaluate different customer loyalty programs offered by companies operating in the UK Fast Food Industry to induce more sales and assess their effectiveness amid of the current economic recession.

Project Aim

The proposed study will be an attempt to identify the issues facing companies operating in the UK Fast Food Industry and their business affected by the weakening conditions in the UK economy amid of the current economic recession. Different companies have launched customer loyalty programs offering customers a wide variety of offerings to retain customers and also to induce further buying from them. These programs will be evaluated by gathering information from companies under review and also by collecting responses from consumers. This research will provide a thorough understanding of the customer loyalty programs and their outcome for businesses that may be struggling to either keep their profits up or even sustain in the current difficult times. The proposed research will be of great value to companies under review as it may help them in determining the critical success factors of such customer loyalty programs and it will make recommendations for improving results expected by these companies.

Literature Review

A research by Jang and Mattila (2005) suggests that customers favour immediate benefits from customer loyalty programs offered by restaurants particular fast food companies in terms of monetary advantage. Other factors which also affect their loyalty are the quality of service and food and also convenience. Furthermore, it was observed that consumers of fast food are also interested in exciting and entertaining offerings in addition to cost savings. Another study reveals that customer satisfaction and loyalty programs have recently been placed at high priority levels by fast food companies. The outcome of these determines the repurchase frequency that is very much influenced by factors such as staff behaviour, waiting time, quality and variety of food at these outlets. These factors could be considered as critical success factors for customer loyalty programs offered by fast food businesses (Law, Hui and Zhao 2004)

UK Fast Food Industry could be traced back to eighteen century and the rapid change in the industry could be viewed as McDonaldisation of the UK society that accepted food culture from the US (Guthman 2003). The UK Fast Food Industry comprises of all major fast food chains and also local regional chains, restaurants, kiosks and drive ins. In the current economic recession restaurants are also feeling pressure due to low turnout at their outlets and generally lower spending by consumers. However, despite of the economic slowdown McDonalds, a leading fast food retailer, was able to record highest number of sales as 88 million customers visited its stores in 2008 as compared to 78 million in 2007 (Hawkes 2008).

Research Hypothesis

The proposed research will focus on investigating different areas to develop an understanding of customer loyalty to brands and in particular to the UK fast food industry it will test out the following research hypothesis and conclude by either rejecting or accepting them. This may result in rejection or acceptance of either or both hypotheses.

H0: Customer Loyalty programs inducted by UK Fast Food companies have assisted companies to generate more sales for them.
H1: Customer Loyalty programs inducted by UK Fast Food companies are accepted and appreciated by customers leading to greater brand loyalty.

Research Questions

The research hypotheses set out for this research will be tested by gathering of relevant information through different techniques identified in the next section to find suitable answers for the following research questions:

What impact does current economic crisis have on companies in the UK Fast Food industry?
What customer loyalty programs fast food companies operating in the UK have implemented?
Do these customer loyalty programs result in better sales for fast food companies?
Do these customer loyalty programs result in greater brand loyalty by customers and induced more buying by them?

Research Methodology

Previous researches have set out two broad approaches to conducting a research which are identified as quantitative and qualitative research. The quantitative research approach is based on positivistic paradigm which relies on establishing a research hypothesis and applying statistical tools and techniques such as observation or comparison using different variable parameters on the collected data to present numerical findings. The outcome of such research is either acceptance or rejection of previously established research hypothesis. This approach has certain limitations in terms of its understanding and assumptions made for testing. On the other hand qualitative research is based on interpretative paradigm which allows descriptive analysis of collected data (Ketchen and Bergh 2004). This approach does not test out existing hypothesis but in fact establishes a new one that is based on research findings.

The selected research methodology will be qualitative research using deductive approach. Deductive approach allows discussion from a broader scenario and using findings from collected data hypotheses are assessed and finally results are generalized to a particular set of situations (Wellington 2000). The data will be collected from both primary and secondary sources.

Primary Source

For primary data collection two survey questionnaires will be designed (Bradburn et al. 2004). The survey questionnaire will be based on descriptive and Likert Scale questions (Trochim 2006). One survey will be aimed at gathering responses from companies / restaurants which will help in developing an understanding of different customer loyalty programs offered by them. Second questionnaire will be targeted at consumers which will gather responses regarding their behaviour and effects of customer loyalty programs on the buying decisions at fast food outlets.

Secondary Sources

Different secondary sources (ADAH 2009) will be accessed to provide literature review on the subject topic and also to draw important findings from companies sources regarding their customer loyalty programs and progress reports.

Research Variables

The outcome of the proposed study is based on the following independent and dependent variables.

Categorical Variables

These variables have limited number of distinct values (SUNY 2009). Two dependent variables include firstly researchers own ability and knowledge to interpret data collection for the proposed research (Agarwal 1983) and secondly selection of fast food companies based as suggested in the research methodology and consumer respondents visiting outlets of these companies. Two independent variables of time and cost can be suggested for conducting the proposed research (Key 1997).

Continuous Variables

These variables have an infinite number of possible values (Lane 2009). A dependent variable is the number of responses collected for the proposed research. While on the other hand an independent variable may be suggested as the motive and intention of the respondents (Key 1997).

List of References

ADAH. (2009). Secondary Sources. Web.

Agarwal, R. D. (1983). Organization and Management. New Dehli: Tata Mc-Graw Hill.

Bradburn et al., N. (2004). Asking Questions: The Definitive Guide to Questionnaire Design For Market Research, Political Polls, and Social and Health Questionnaires. San Francisco: Jossey-Bass.

Guthman, J. (2003). Fast food/organic food: reflexive tastes and the making of yuppie chow. Social & Cultural Geography , 45 58.

Hawkes, S. (2008). New hunger for old favourites gets McDonalds back in shape. Web.

Jang, D. and Mattila, A. S. (2005). An examination of restaurant loyalty programs: what kinds of rewards do customers prefer? International Journal of Contemporary Hospitality Management , 402-408.

Ketchen, D. J. and Bergh, D. D. (2004). Research Methodology in Strategy and Management. New Jersey: Emerald Group Publishing.

Key, J. P. (1997). Qualitative Research. Oklahoma State University. Web.

Lane, D. (2009). Continuous Variable.

Law, A. K., Hui, Y. and Zhao, X. (2004). Modeling repurchase frequency and customer satisfaction for fast food outlets. International Journal of Quality & Reliability Management , 545-563.

Shiller, R. J. (2008). The subprime solution: how todays global financial crisis happened, and what to do about it. New Jersey: Princeton University Press.

SUNY. (2009). Variable Types. [online] Available from State University of New York at Oswego. Web.

Trochim, W. (2006). Types of Surveys. [online] Available from Research Methods Knowledge Base.

Walden, G. R. (2006). Survey Research Methodology 1990-1999: An Annotated Bibliography. Charlotte: IAP.

Wellington, J. J. (2000). Educational Research: Contemporary Issues and Practical Approaches. Educational research: contemporary issues and practical approaches. London: Continuum International Publishing Group.

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