Marketing of Services End Term Project Report

On

Fast Food Service Industry By

Group 5:
Abhay Jain - 13XPGDM01 M. S. Rajesh - 13XPGDM21

FAST FOOD INDUSTRY IN INDIA

Introduction:
The fast food industry in India has evolved with the changing lifestyles of the young Indian population. The sheer variety of gastronomic preferences across the regions, hereditary or acquired, has brought about different modules across the country. It may take some time for the local enterprise to mature to the level of international players in the field. The diversity of Indian cuisine poses logistical problems when it comes to handling. Hence it is common to serve different cuisines at different counters within the same premises. Presence of a large vegetarian population, who eschew non-vegetarian food, has given rise to outlets which exclusively serve vegetarian fast food. Also, different variety of food may be served depending on the times of the day. Beverages such coffee, tea, soft drinks and fruit juices may also be served in such outlets. Some outlets may additionally have specially designed counters for ice-cream, chaats etc.

Unique & Typical Aspects of the Fast Food Industry in India:

Popular formats of fast food business in India have the following features in common:

Wide opening on the road side Easy to maintain and durable dcor A cash counter where food coupons are sold A food delivery counter which invariably is granite topped Additional counters for Ice Creams, Chaats, and Beverages etc. A well fitted kitchen located so as to be visible to the customers Tall tables, usually of stainless steel, where one can eat while standing A drinking water fountain adorned with a water filter Rust-proof and non-breakable crockery

Most of the fast food outlets in India are stand-alone establishment, few of them having more than one branch.

Prerequisites / Implications for its effective marketing in India:

In order to make the marketing effort more effective, a service marketer must understand the reasons which are leading to growth in this sector. Inspite of the sluggishness in the Indian economy, the fast food sector is experiencing a constant double digit growth. GlobalThen.com has done a study regarding the reasons for emergence of Indian Fast food Industry. The following were the key reasons: Gender Roles: gender roles are now changing. Females have started working outside. So, they have no time for their home and cooking food. Fast food is an easy way out because these can be prepared easily. Customer Sophistication and Confidence: consumers are becoming more sophisticated now. They do not want to prepare food and spend their time and energy in house hold works. They are building their confidence more on ready to eat and easy to serve kind of foods. Paucity of Time: people have no time for cooking. Because of emergence of working women and also number of other entertainment items. Most of the time either people work or want to enjoy with their family. Double Income Group: emergence of double income group leads to increase in disposable income. Now people have more disposable income so they can spend easily in fast food and other activities. Working Women: working women have no time for cooking, and if they have then also they dont want to cook. Because they want to come out of the traditionally defined gender roles, they do not want to confine themselves to household work and upbringing of childrens. Large population: India being a second largest country in terms of population possesses large potential market for all the products/services. This results into entry of large number of fast food players in the country. Relaxation in rules and regulations: with the economic liberalization of 1991, most of the tariff and non-tariff barriers from the Indian boundaries are either removed or minimized. This helped significantly the MNCs to enter in the country.
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Menu diversification: increase in consumption of pizzas, burgers and other type of fast foods.

Customer Needs, Size of Market, Growth patterns and evolution of the service:
The customer needs are very different in India (as compared to rest of the world) due to various reasons. Some of the unique needs of a fast food customer are: 1. Quick service: This aspect of service has a mixed response from various customer segments. Most of the Indian customers dont mind waiting for 10 minutes also if the queue is constantly moving and the customer strongly feels that the taste of food is good. However, if the affinity of customer to the brand or the taste of food of the outlet is not that high, even a wait of 5 minutes is sufficient to shoo away the customer permanently from the outlet. Hence, it is absolutely important for the outlets to manage the delivery time associated with the service.

2. Consumer tastes and preferences (Provide the taste which customers like): In most emerging markets, people spend more on food suited to the local palate than they do on so-called global cuisine. Nestl's most popular kind of Maggi-brand noodles in India is its masala variety, whose sales far outstrip those of any other flavor. Even global fast-food chains adapt their offerings to local taste. McDonald's indigenously developed a vegetarian McAloo-Tikki burger that accounts for approximately one-quarter of sales in India. Religious affiliation, yawning economic disparities, different geographic availability of ingredients, and significant rural-urban divides are just a few of the reasons for this variation, which is especially pronounced in large, multiethnic countries such as India and China. In fact, several food products are sold with slightly different formulations in the various regions, all while maintaining the same branding and packaging.

3. Price Levels: Economy is the key in generating higher volumes. Most of the fast food outlets encourage higher volumes as it can give them higher profitability in spite of low margin. It should also be noted that the cost of inputs in India is significantly lower as compared to other developed economies. Thus lower price levels can be sustained.

4. Brand: Most of the young Indian consumers are brand savvy and thus preferred foreign or foreign look-alike brands. A recent study done CRISIL highlighted the current market share of the fast food industry. As per this study the Indian consumers preferred to go for foreign brands and Indian brands had only 37% share.

According to a recent study done by NRAI on the size of Food Services in India, Licensed standalone market has the highest potential. Further in the segment of licensed standalone market, Casual Dine & Quick Service Restaurants have the highest growth & thus will redefine the complete distribution of the market share.

Environment of Service Business:

The study by GlobalThen.com also threw some key challenges to the fast food companies in the business & marketing environment. These are given below: Social and cultural implications of Indians switching to western breakfast food: Generally, Hindus avoid all foods that are believed to inhibit physical and spiritual development. Eating meat is not explicitly prohibited, but many Hindus are vegetarian because they adhere to the concept of ahimsa. Those seeking spiritual unity may avoid garlic and onions. The concept of purity influences Hindu food practices. Products from cows (e.g., milk, yogurt, ghee-clarified butter) are considered pure. Pure foods can improve the purity of impure foods when they are prepared together. Some foods, such as beef or alcohol, are innately polluted and can never be made pure. But now, Indians are switching to fast food that contain all those things that are considered impure or against their beliefs. Some traditional and fundamentalist are against this transformation of food habit and number of times they provoke their counterparts to revolt against such foods. Emphasis on the usage of bio-degradable products: Glasses, silverware, plates and cloth napkins are never provided with fast food. Instead, paper plates and napkins, polyurethane containers, plastic cups and tableware, drinking cartons or PET (polyethylene terephthalate) bottles are used, and these are all disposable. Many of these items are tossed in the garbage instead of being recycled, or even worse, merely thrown on the ground. This burdens nature unnecessarily and squanders raw materials. In order to reduce soil and water pollution, government now emphasizes more on the usage of bio-degradable products. Retrenchment of employees: Most of new industries will be capital intensive and may drive local competitors, which have more workers, out of business. Profit repatriation: Repatriation of profits is another area of concern for Indian economy. As when multinational enters the any countries, people and government hope that it will increase the employment rate and result in economic growth. However, with the multinational operation, host country experiences these benefits for a short time period. In long run neither employment increases (because of capital intensive nature of MNCs) nor it Increases the GDP or GNP because whatever MNCs earn they repatriate that profit back to their home country.

Industry Players & competitive scenario:

Fast food industry has been consistently growing at a fast pace. Further with the growth in the middle income group it is expected that the growth will continue in a robust manner. As per recent study done by Crisil, Indian Quick Service Restaurants (QSR) market has grown from Rs 15 Billion in 2009-10 to Rs 34 Billion in 2012-13 and is further expected to reach Rs 70 Billion by 2015-16.

Profitability along with the strong growth scenario has led to global payers entering the Indian Fast food sector. The breakup of the sector is given below:

It may be noted that Indian brands are trying fast to catchup to the global brands in terms of popularity. The tastes are also unique in different regions, thus a number of domestic brands have not been able to increase the foot hold in various regions of the country.
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Marketing Implications for existing players and new entrants:

Young Indian consumer has a passion for visiting fast food joints for fun and change, but still home-made food is their first choice. There is a strong feeling among consumers that the home made food will always be better as compared to fast food due to nutritional value associated with it. They give highest value to taste and quality followed by hygiene and ambience. The three important dimensions from a marketing angle are: Service & delivery dimension, Product dimension, and quality dimension. As per a recent study on preference of fast food with respect to home cooked food, majority comprising 81% of respondents preferred home food. The major reasons cited by the consumers are: 1. Fast food outlets food is heavy for wallet and stomach; 2. Ambience at home is better; 3. Home food is more nutritious, delicious, tasty, fresh, clean and healthy for body; 4. We know what is prepared and how but not sure about fast food outlets; 5. Home food is cooked as per our needs, personal liking; 6. Fast food outlets food is for fun, change, entertainment of the friends and some time for convenience; 7. Fast food outlets food may be harmful; and 8. Home cooked food has low fat contents. The existing players (or new entrants) must focus on quality & variety of food besides other service parameters. There is a need to communicate information on hygiene and nutritional value of the fast food which will build trust in the food provided by the fast food companies.

Part-II A Primary study of an Indian Organization service provider operating in the service: BTW India The study of BTW India was more of an exploratory research as no clear information about the business model is available in the public domain. Further, the organization was also not in a position to share its working style and business ideology with us. This was due to limited manpower at their head office and the marketing activity was more related with direct sales. During the study, 2 outlets were visited at different days of the week. Effort was done to understand the important aspects related to service process & service scape of BTW. In the process inputs were taken from the cashier of the outlet and the employees of the outlet. It was interesting to note that BTW had designed its operations in such a manner that even small aspects like the plastics spoons, uniform and various other aspects of service scape were meticulously planned. Different aspects of its operations & working are given below:

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Customer Expectation and buying behavior: Mostly the customer base for BTW is defined by the common middle income group which is looking for a quick snack. He / she may be on the move during the day and would like to take a quick bite of his favorite chaat. Or it may be a family also which is visiting a market for doing some shopping and would stop by BTW for having Tikki. On an average an outlet of BTW in west Delhi caters to more than 800 billings on weekdays and around 1500 billings on weekends. What is important to observe is the reason why the customers flock BTW. The main customers expectations of BTW: 1. Good & quick service: As in any business customer service plays an important role in customer satisfaction and which in turn makes a customer loyal. The customer being a savior of chaat knows that the any good outlet would have a pipeline of chaat stuff which is almost ready. The same will be processed at a short duration and would be served to the customer. This was evident from the average time of delivering chaat being 3 in 40 sec from billing counter to delivery from the chaat counter. 2. Hygiene: Hygiene factor is also one of the important expectations of the customer. BTW maintains an open kitchen which can be viewed from outside. It acts as an evidence of good hygiene and gives confidence to the customers. 3. Price: The customer expects value for money. BTW fares really well in this aspect. It provides economy and at the same time delivers a product which is wholesome, tasty & in reasonably good quantity which will be fulfilling for the customer. 4. Taste: The customer expects that the food served to him should be tasty and BTW is able to achieve this by constant quality control & standardization in its operations. The raw material & sauces (chutney) are directly managed from the factory in Lawrence road, Delhi. This enable BTW not just control the taste but also helps it to control its cost of managing the complete supply chain activity. 5. Ambience: The customers expect a good ambience where they can enjoy the experience of dining. Most of BTW outlets offer a semi sophisticated look where customers will have to use self-service and normally would be standing while eating. BTW has an active staff which keeps the ambience neat and clean, thus creating comfortable ambience for its customers.

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Buying Behavior of customers at BTW: 1. Dine in: Customers would purchase and have their food at BTW. The drive for purchase is the inner liking of Indian mass to their favorite chaats. 2. Home Delivery: Customers would order over telephone for their food, which would be delivered at home (Surrounding/ nearby localities). In case of BTW, the delivery is in range of 2 kilometers from their outlet. They also maintain a call center for taking the orders. 3. Take Away: Customers also prefer to get their food packed and carry it away to their homes for consumption by friends and family. This phenomenon is not very unique for BTW alone, and is prevalent in all the fast food businesses. 4. Out Door Catering services: Customer orders for occasions like marriages and birthday parties. BTW is providing the catering services in cities outside Delhi also. E.g. BTW provides the outdoor catering in the cities of Gurgaon, Ludhiana and even Amritsar.

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Strategy including target segments and positioning:

1. Demographic Segmentation: Families and youth. BTW offers different products for families it has made different outlets which are suitable for takeaways and drive-thru. BTW has made its environment which is suitable for youth to hang out with their friends. 2. Psychographic segmentation: Convenience and lifestyle. BTW has adopted itself according to the convenience and lifestyle of the consumers, by introducing sweets, deserts and south Indian food (Dosa). 3. Behavioral segmentation: Special Occasions, e.g. Marriages and Birthday Parties of kids (outdoor catering services) as well as No Occasions (Just Like That).

4. Economic segmentation: Middle income group is the key customers for BTW. The pricing of the product is such that it is not cheap and it is also not very expensive. Thus BTW provides for the middle income group which doesnt mind paying slightly more than the traditional local chaat waala or the nearby Agarwal sweet store for the taste and feel of a good quality standard product. That too from a famous and established brand. Positioning is marketing strategy that aims to create an image in the mind of consumers by which consumers can understand the uniqueness about the product when compared to competitors product. BTW doesnt have a catch line or positioning statement, but its name itself create a position in the minds of customers. Bittoo is a very common local nick name in north India. Even Kapil Sharma in Comedy Nights with Kapil uses the same nickname for himself. Thus the name associates with the typical culture and down to earth connection of the company. Tikki wala signifies its specialty and thus Positioning of BTW is the best Tikkiwala.

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Market offering Viz., marketing mix and brand positioning: The marketing mix of BTW consists of the various elements in the marketing mix which form the core of a companys marketing system and hence helps to achieve marketing objectives. The marketing mix of BTW discusses the 7ps of the leading fast food chain across North India. Product: BTW places considerable emphasis on developing a menu which customers want. However, customers requirements change over time. In order to meet these changes, BTW has introduced new products in its food menu. Care is taken not to adversely affect the sales of one choice by introducing a new choice, which will cannibalize sales from the existing one (trade off). Price: BTW prices its products in a manner that its economical and at the same time it doesnt look to be cheap. It also offers half plate option to its customers who intend to enjoy more than one dish. On an average one full potion of Tikki or Pav Bhaji is substitute as a full meal. Thus by offering half potions it provides an opportunity for its customers to enjoy more number of dishes at a time. It should also be noted that BTW charges a premium for serving half potions and thus leads to increase in its profitability. E.g. Full potion of Tikkis or Dahi Bhalla cost Rs 70 and the half Potion costs Rs. 45. The customers perception of value is an important determinant of the price charged. Customers draw their own mental picture of what a product is worth. A product is more than a physical item. It also has psychological connotations for the customer. The danger of using low price as a marketing tool is that the customer may feel that quality is being compromised. It is important when deciding on price to be fully aware of the brand and its integrity. Promotion: The promotion for BTW is mostly by word of mouth and by using the flyers in the newspapers being circulated in the area. The outlets are able to generate good response from the nearby residents and also the customers visiting the commercial centers. It maintains a website which is updated on the regular basis but it should also be noted that BTW currently doesnt use social media to promote its products. Place: One of the key elements is the selection of the outlet. All the outlets are well accessible to the public at large. This is done by choosing the locations which are close to parking and are in busy markets or commercial centers where people come for business or shopping. Place, as an element of the marketing mix, is not just
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about the physical location or distribution points for products. It encompasses the management of a range of processes involved in bringing products to the end consumer. BTW outlets are very evenly spread throughout the west and north Delhi making them very accessible and have a plan to expand across Delhi with the same strategy. People: The employees in BTW have a standard uniform and BTW specially focuses on friendly and prompt service to its customers from their employees. The uniform colour matches with the overall theme colour used in the outlets. The cap provides a sophisticated look and thus gives a high class modern image to the outlet. Process: The dish preparation process at BTW is completely transparent using kitchen which is well equipped and open. i.e. the whole process is visible to the customers. This instills an interest of customers in the cooking process of BTW and can thus keep the mind of customer occupied for some time. This would also help in reducing the pain of waiting also to a certain extent. Physical evidence: BTW focuses on clean and hygienic interiors of its outlets and at the same time the interiors are attractive. Lot of pictures and visuals of dishes are placed in the outlet which inculcates and interest in the customers. The actual product being served is also similar to the picture depicted thus acts as a physical evidence.

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Demand and Capacity management: Communication to the customer: At BTW where sitting space is limited they inform the customer about the possible waiting time and allotted tables in first come first bases. Low capital- adequate capacity: As the capital required to be deployed for making food is low BTW installs excess capacity for making food. However the constraints remains sitting space in dine in restaurants. Discounts on take away: Although BTW doesnt offer discounts on take away where space is a constraint, but still it can be an option to cater to excess demand on the Number of people on counters: BTW maintains a higher number of employees serving the food at counters during the peak times. This is done by giving the employees rest in a staggered manner during off peak hours of work and giving holidays on weekends only in exceptional circumstances. Mostly the workforce of BTW outlets is from outside Delhi and thus the absenteeism is predictable and low. Steady pace: Utmost care is taken to see to that the queue moves at a steady pace and not annoying the customers.

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Learnings, Conclusions and recommendations: BTW has really worked on almost all the aspects of brand building and quality service for its customers. The business models are having a high growth potential and profitability. Thus its possible for the model to be copied and modified to give better results to competitors. Currently, the presence of BTW is limited to west Delhi and thus has a huge potential to grow. The challenge for BTW is that now most frequented shopping destinations by the middle income group in parts of Delhi are being converted into shopping malls. The business model thus needs refinement. BTW doesnt use the social media currently. When it enters upscale shopping joints like malls, it can use this medium to reach to the tech savvy crowd by making them aware about the location. The key to BTWs success is constant focus on meeting the needs of its customers in the most convenient manner. High volume with economy coupled with good quality tasty food is the key to success in the fast growing market. BTW can look out for expanding its presence beyond north India into other cosmopolitan cities like Bangalore or Chennai or Mumbai also. These markets have a high density of middle income group which is ready to spend on Indian fast food. This will build the brand image and create new avenues for future growth.

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