Service Marketing (MKT 412) Section: 1 Semester: Fall 2011

Submitted To

S.S.M.Sadrul Huda Assistant Professor Department of Business Administration East West University

Submitted By

ZUBAIR AHMED

ID: 2008-2-10-017

SHEKH AHAMMOD IRTIZA ID: 2009-2-10-010 AVIJIT MONDAL HASAN MAHMUD ID: 2009-2-10-203 ID: 2008-2-13-003

Date of Submission: December 08, 2011

EAST WEST UNIVERSITY

Letter of Transmitter
December 08, 2011 To S.S.M Sadrul Huda Assistant Professor Department of Business Administration East West University

Subject: Submission of assignment on Kentucky Fried Chicken (KFC) . Dear Sir We are delighted to submit our report on Atmospheric elements of Kentucky Fried Chicken (KFC). We have given our utmost effort to make a master piece. But if there is any mistake please consider it with regard.

We hope that you will accept our service report enthusiastically on Kentucky Fried Chicken (KFC) Sincerely, Avijit Mondal Hasan Mahmud Zubair Ahmed Shekh Ahmmod Irtiza

Background Kentucky Fried Chicken (KFC)

KFC Corporation, based in Louisville, Kentucky, is the world's most popular chicken restaurant chain, specializing in Original Recipe, Extra Crispy, Kentucky Grilled Chicken and Original Recipe Strips with home-style sides, Honey BBQ Wings, and freshly made chicken sandwiches. Every day, more than 12 million customers are served at KFC restaurants in 109 countries and territories around the world. KFC operates more than 5,200 restaurants in the United States and more than 15,000 units around the world. KFC is world famous for its Original Recipe fried chicken -- made with the same secret blend of 11 herbs and spices Colonel Harland Sanders perfected more than a half-century ago. Customers around the globe also enjoy more than 300 other products -- from Kentucky Grilled Chicken in the United States to a salmon sandwich in Japan. In 2008 the Colonel has a new look! KFC updates one of the most recognized, respected and beloved brand icons with a new logo. The new logo depicts Colonel Sanders with his signature string tie, but for the first time, replaces his classic white, double-breasted suit with a red apron. The apron symbolizes the home-style culinary heritage of the brand and reminds customers that KFC is always in the kitchen cooking delicious, high-quality, freshly prepared chicken by hand, just the way Colonel Sanders did 50 years ago. KFC is part of Yum! Brands,

Inc., the world's largest restaurant company in terms of system restaurants, with more than 36,000 locations around the world. The company is ranked #239 on the Fortune 500 List, with revenues in excess of $11 billion in 2008. In 2009 KFC introduces Kentucky Grilled Chicken a better-for-you option for health conscious consumers who love the flavor of KFC. Kentucky Grilled Chicken has less calories, fat and sodium than KFCs Original Recipe chicken, without sacrificing the great taste of KFC.

KFC Analysis
KFC has a very long history and has the most recognizable brand in chicken. With over 50% of the market share it becomes very difficult for new companies who may want to enter the market. KFC has name recognition around the world and has been globally positioned for many years. KFCs secret recipe of 11 herbs and spices has made it the leader in chicken for the last fifty years. KFC sells three recipes: Original recipe, Extra Crispy, and Tender Roast. The many sales of KFC during the 1970s and 1980s lead to a very confusing direction and took the focus of the company off of its original strategy. During the 1980s and 1990s KFC struggles were much do to the inability to bring new products to the market quickly and its innovation of new products. KFC fell behind the market in new products and was copying other fast food chains to stay competitive. KFC changed its strategy in the late 1990s, which included adding items to its menu. The merger with PepsiCo was met with large cultural issues as the KFC employees were used to the previous strategy of a laid-back, self-governing environment, to an environment who demanded tighter control over operations. Other segments of the industry are turning to new menu offerings. They believed the franchisees knew the business better than they did. The second largest threat would be other chicken chains that are now adding other types of food to their product lines. The largest threat KFC is faced with is the restaurant industry as a whole. The consumer continues to have many choices when it comes to fast food restaurants. By the year 2000 only 27

percent of the restaurants were company owned. The cultural differences took the focus away from the chicken business. KFCs target market of four person middle class families is not their main consumer. The main consumer of KFC is a middle aged white male. The loss of market share and slowing growth also was due to the many mergers they went through during a limited time period. KFC established units that sold both Taco Bell and KFC or KFC and Pizza Hut. By the year 2000 more than 50 percent of KFCs restaurants were located outside the United States. As we will address further in this report KFC is continuing to expand in foreign markets, which is one of Yum!s goals for growth.

Company Information

Type: wholly owned subsidiary Industry: Restaurants Founded: 1930 (original) (North Corbin, Kentucky), 1952 (franchise) (South Salt Lake, Utah) Founder(s): Harland Sanders Headquarters: Louisville, Kentucky, U.S Key people: Roger Eaton, President; Harvey R. Brownlea, COO; James O'Reilly, VP for Marketing Products: Fried chicken, grilled chicken, related Southern foods Revenue: $520.3 million USD (2007)

Employees: 24,000 (2007) Parent: Yum! Brands Website: KFC.com

KFC in Bangladesh

Transcom Foods Limited, a concern of Transcom Group is the franchisee of KFC in Bangladesh. The first ever KFC restaurant has been opened in September at Gulshan, Dhaka with a seating capacity of 178 persons. KFC restaurant has been opened in 2009 at Lalkhan Bazar circle, Chittagong with a seating capacity of 120 persons. In the coming days, KFC plans roll out more restaurants in Bangladesh.

Values
Focus all our resources to our restaurant operations because that is where we serve our customers. Reward and respect the contributions of each individual at KFC. Expand and update training with time and be the best we can be and more. Be open, honest and direct in our dealings with one another. Commit ourselves to the highest standards of personal and professional integrity at all times. Encourage new and innovative ideas because these are the key to our competitive growth. Reward results and not simple efforts. Dedicate ourselves to continuous growth in sales, profit and size of organization.

Work as a team.

Goals of KFC

Build an organization dedicated to excellence. Consistently deliver superior quality and value in our products and services. Maintain a commitment to innovation for continuous improvement and grow, striving always to be the leader in the market place changes. Generate consistently superior financial returns and benefits our owner and employees. To establish in Pakistan our position as leading WQSR (Western Quick Service Restaurant) chain, serving good value. Innovative chicken-based products. Consistently, providing a pleasant dining experience, with fast friendly, in a clean and convenient location. At all times we must be dedicated to providing excellent and delighting customers.

Question and Answer

Question 1: Who is the firms target market?
Answer: KFC will be using differentiated market coverage strategy. It means that different marketing mix will be used for different age groups. Target marketing tailors a marketing mix for one or more segments identified by market segmentation. Target marketing contrasts with mass marketing, which offers a single product to the entire market. Two important factors to consider when selecting a target market segment are the attractiveness of the segment and the fit between the segment and the firm's objectives, resources, and capabilities. Target Market Selection

The target customers of KFC are mixed. It basically target higher class as well as middle class people. There are different types of customers like economic customers who make purchase decision based primary on the price, personalized customer consumers who desire to be pampered and attended to and who are much less price sensitive, apathetic customers consumer who seek convenience over price and personal attention.

Target Market for Fast Food

After evaluation of various segments, KFC has decided to target the market of Urban and Suburban Areas of Bangladesh. Product usage

People are educated and they want variety in their diet. Normally people of rural areas dont take fast food. On the other hand people of urban areas take fast food. Income of the people of urban areas is normally high and they can afford to purchase such products, which are slightly higher in price as compared to prevailing prices of local food in the market.

People of Urban Areas are more quality conscious than the people of Rural Areas. In Urban Area there lived people from every walk of life and profit generation is easier than in Rural Areas. Population density is higher in Urban Areas as compared to Rural Areas, so the number of customers is more in Urban Areas.

Attractiveness of a Market Segment The following are some examples of aspects that should be considered when evaluating the attractiveness of a market segment: Size of the segment (number of customers and/or number of units)

 Growth rate of the segment Competition in the segment Brand loyalty of existing customers in the segment Attainable market share given promotional budget and competitors' expenditures Required market share to break even Sales potential for the firm in the segment Expected profit margins in the segment Market research and analysis is instrumental in obtaining this information. For example, buyer intentions, sales force estimates, test marketing, and statistical demand analysis are useful for determining sales potential. The impact of applicable micro-environmental and macro environmental variables on the market segment should be considered. Note that larger segments are not necessarily the most profitable to target since they likely will have more competition. It may be more profitable to serve one or more smaller segments that have little competition. On the other hand, if the firm can develop a competitive advantage, for example, via patent protection, it may find it profitable to pursue a larger market segment.

Suitability of Market Segments to the Firm Market segments also should be evaluated according to how they fit the firm's objectives, resources, and capabilities. Some aspects of fit include: Whether the firm can offer superior value to the customers in the segment The impact of serving the segment on the firm's image Access to distribution channels required to serve the segment

 The firm's resources vs. capital investment required to serve the segment the better the firm's fit to a market segment and the more attractive the market segment, the greater the profit potential to the firm. Target Market Strategies There are several different target-market strategies that may be followed. Targeting strategies usually can be categorized as one of the following: Single-segment strategy - also known as a concentrated strategy. One market segment (not the entire market) is served with one marketing mix. A single-segment approach often is the strategy of choice for smaller companies with limited resources. Selective specialization- this is a multiple-segment strategy, also known as a differentiated strategy. Different marketing mixes are offered to different segments. The product itself may or may not be different - in many cases only the promotional message or distribution channels vary. Product specialization- the firm specializes in a particular product and tailors it to different market segments. Market specialization- the firm specializes in serving a particular market segment and offers that segment an array of different products. Full market coverage - the firm attempts to serve the entire market. This coverage can be achieved by means of either a mass market strategy in which a single undifferentiated marketing mix is offered to the entire market, or by a differentiated strategy in which a separate marketing mix is offered to each segment. A firm that is seeking to enter a market and grow should first target the most attractive segment that matches its capabilities. Once it gains a foothold, it can expand by pursuing a product specialization strategy, tailoring the product for different segments, or by pursuing a market specialization strategy and offering new products to its existing market segment. Another strategy whose use is increasing is individual marketing, in which the marketing mix is tailored on an individual consumer basis. While in the past impractical, individual marketing is becoming more viable thanks to advances in technology.

The comparison of KFC in the worldwide units

Yum! Brand The parent to KFC was started in October 7, 1997

Question 2: What does the target market seek from the service experience?

Answer: The target market seeks several things from the service experience. If those are fulfilled customers feel satisfied if not customer dissatisfaction occur. The target customer of KFC expects the following things from the service experience.
1. Knowledgeable and available staff: While a customer is making the buying decision,

they want knowledgeable assistance, available when they want it. Customers place a high value on accurate information and want to be served by employees who know the product inside and out.
2. Friendly people: Customers not only want product-savvy sales people, they want them

to be friendly and courteous. Your staff should value each customer more than any individual sale.
3. Good value: This is where price factors in. But customers surveyed see price as only one

component of the bigger picture of value that includes the service, information and follow-up they also receive.
4. Convenience: The service rule here is simple: make it easy! Says Gross, Customers

want merchandise that is well organized, attractively displayed and easy to find. Thats how todays customers define convenience, and the easier you can make the shopping, the more money you will be lugging to the bank.
5. A fast finish: This final item is where too many businesses fall flat, right at the finish

line. While customers are in the process of deciding to buy or not, they are proceeding on your time. They want thoughtful help making the right decisions. But once the buying decision is made, get out of their way because now you are working on their time, and they want to complete the transaction and be on their way as quickly as possible. At the cash register, there is no time for making additional suggestions. If these are effectively fulfilled, customers show a desire to stay or further explore the service otherwise they will avoid it. Service Environment

Facility exterior is the physical exterior of the service facility that includes the exterior design, signage, parking, landscaping and the surrounding environment. Facility interior is the physical interior of the service facility that includes the interior design, equipment used to serve customers, signage, layout, air quality and temperature.

Question 3: What atmospheric elements can reinforce the beliefs and emotional reactions that buyers seek?
Answer: Due to the intangibility of services, service quality is difficult for consumers to objectively evaluate. As a result, consumers often rely on the tangible evidence that surrounds the service to help them form their evaluations. The role of physical evidence in the marketing of intangibles is multifaceted. Physical evidence can fall into three broad categories: a. Facility exterior, b. Facility interior, c. Other tangibles. Facility exterior is the physical exterior of the service facility that includes the exterior design, signage, parking, landscaping and the surrounding environment.

Facility interior is the physical interior of the service facility that includes the interior design, equipment used to serve customers, signage, layout, air quality and temperature. Other tangibles are the part of firms other physical evidence such as business cards, stationary, billing statements, reports, employee appearance, uniforms and brochures. The use of physical evidence to create service environments and its influence on the perception and behaviors of individuals is referred to as environmental psychology. The StimulusOrganism-Response (SOR) model was developed by environmental psychologists to help explain the effects of the service environment on consumer behavior. The SOR model consists of three components:
a. A set of stimuli, b. An organism component and c. A set of responses or outcomes.

In a service context, the different elements of the firms physical evidence, such as the exterior, interior design, lighting and so on that compose the set of stimuli. The organism component which describes the recipients of the set of stimuli within the service encounter includes employees and customers. The responses of employees and customers to set of stimuli and influenced by three basic emotional states: a. Pleasure - displeasure,
b. Arousal - no arousal,

c. Dominance - submissiveness. The pleasure - displeasure emotional state reflects the degree to which consumers and employees feel satisfied with the service experience. The arousal - no arousal emotional state reflects the degree to which consumers and employees feel excited and stimulated.

The dominance - submissiveness emotional state reflects the degree to which consumers and employees feel in control and able to act freely within the service environment. Ideally, service firms should utilize physical evidence to build environment that appeal to pleasure and arousal states and creating atmosphere that create submissiveness. Theory asserts that customers and employees are exposed to the set of stimuli that make up the firms perceived Services cape and the responses to these stimuli are moderated by emotional states. Customers and employees internally respond to the firms environment at different levels cognitively, emotionally and physiologically. Cognitive responses are the thought of individuals and according to the model include beliefs, categorization and symbolic meaning. Beliefs that states consumers opinions about the providers ability to perform the service. Categorization that states consumer assessment of the physical evidence and a quick mental assignment of a firm to a known group of styles or types. Symbolic meaning that inferred from the firms use of physical evidence. Emotional responses to the firms physical environment on an emotional level instead of an intellectual or social level. Positive emotions that create atmospheres in which employees love to work and customers want to spend their time and money. Physiological responses are often described in terms of physical pleasure or discomfort. Typical physiological responses involve pain and comfort. Like, environments in which music is played very loudly that create discomfort for the customer; the lack of a nonsmoking section may cause some customers in breathing and further discomfort. Instead of being arousing, environments that are brightly lit may cause eye discomfort. All these responses determine whether a customer will approach and explore the firms offering or avoid and leave the premises to minimize the amount of physiological discomfort. Ultimately, individuals base their perceptions of a firms facilities on their interpretation of sensory cues. The following section discusses how firms can utilize the senses of sight, sound, touch and taste in creating sensory appeal that enhances customer and employee attraction responses. Sight Appeals:

Sight appeals can be defined as the process of interpreting stimuli that appeal to consumers are size, shape and colors. Consumers interpret visual stimuli in terms of visual relationships, consisting of perceptions of harmony, contrast and clash. Harmony refers to visual agreement and is associated with quieter, plusher and more formal business settings. In comparison, contrast and clash are associated with exciting, cheerful and informal business settings. Size perceptions are the actual size of the firms facility, signs and departments conveys different meaning to different markets. In general, the larger the size of the firm and its corresponding physical evidence, the more consumers associates the firm with importance, power, success, security and stability. For many consumers, the larger the firm, the lower the perceived risk associated with the service purchase. Such consumers believe that larger firms are more competent and more likely to engage in service recovery efforts when problems do arise. Color perceptions are the color of the firms physical evidence often makes the first impression, whether seen in the firms brochure, the business cards of its personnel or the exterior or interior of the facility itself. The psychological impact of color upon individuals is the result of three properties: hue, value and intensity. Hue refers to the actual color such as red, blue, yellow or green. Value refers the lightness and darkness of the colors. Darker values are called shades and lighter values are called tints. Intensity refers the brightness or dullness of the hue. KFC focus on red color basically because it is the symbol of appetite. The location of the Firm which is dependent upon the amount of customer involvement necessary to produce the service. While low customers contact services should consider locating in remote sites that are less expensive and closer to sources of supply, transportation and labor, high customer contact services have other concerns. The Firms Architecture that states the architecture of the firms physical facility is often a three way trade off among the type of design that will attract the firms intended target market, the type of design that maximizes the efficiency of the service production process and the type of design that is affordable. The firms architecture conveys a number of impressions as well as communicates information to its customers such as the nature of the firms business. The Firms Sign has two major purposes: to identify the firm and to attract attention. The firms sign is often the first mark of the firm that customer notices. All logos on the firms remaining

physical evidence such as letterhead, business cards and note cards should be consistent with the firms sign to reinforce the firms image. The Firms Entrance and foyer areas can dramatically influence customer perceptions about the firms activities. Worn carpet, scuffed walls, unprofessional network, torn and outdated reading materials and unskilled and unkempt personnel form one impression. In contrast, neatly appointed reception areas, the creative use of colors, distinctive furnishings and friendly and professional staff create a much different and more positive impression. Sound Appeals: Sound appeals have three major roles: mood setter, attention grabber and informer. Proactive methods for purposely inserting sound into the service encounter can be accomplished through music and announcements. Music helps set the mood of the consumers experience while announcements can be used to grab consumers attention or to inform them of the firms offerings. Sound can also be a distraction to the consumers experience; consequently, sound avoidance tactics should also be considered. Music in which studies have shown that background music affects sales in at least two ways. First, background music enhances the customers perception of the stores atmosphere, which in turn influences the consumers mood. Second, music often influences the amount of time spent in stores. In one study, firms that played background music in their facilities were thought to care more about their customers. Studies have shown that in addition to creating a positive attitude, music directly influences consumer buying behavior. Playing faster tempo of the music increases the pace of consumer transactions. Slowly down the tempo of the music encourages customers to stay longer? Still other studies indicate that consumers find music distracting when considering high involvement purchases, yet found that low involvement purchases made the choice process easier. Sound Avoidance which plans the firms facilities, it is as important to understand the avoidance of undesirable sounds as it is to understand the creation of desirable ones. Desirable sounds attract customers and undesirable sounds distract from the firms overall atmosphere. Other tactics for eliminating unwanted noise include installing durable hallway carpets to eliminate the distracting sounds of clicking heels, strategically placing loud central air

conditioning units in areas away from those where the firm conducts the majority of its business and also installing lower ceilings and sound absorbing partitions so that unwanted sounds can be reduced even further. Scent Appeals: Sense of smell is our most accurate level of recall. So, scent appeal is an important factor to consider. What we smell is significantly more influential on our moods and emotions than any other sense. Our sense of smell is the strongest of all human senses and the closest sense linked to memory and emotion. Research has shown that people remember 35% of what they smell, compared with only 5% of what they see, 2% of what they hear and 1% of what they touch. This Research clearly shows that scent enhances consumer product memories.KFC which provides pleasurable scents often induce customer to make more purchases and can affect the perception of products that dont naturally have their own scent. KFC provides pleasurable scents for making a friendly environment for the employees to work effectively and for the customers KFC provides pleasurable scents that attract themselves to come more in KFC. Taste Appeals: Taste appeal the final sensory cue, are the equivalent of providing the customer with samples. Within the service sector, the usefulness of the taste appeals when developing the service atmospheres is depend upon the tangibility of the service. Service firm such as carwash, dry cleaners and restaurants may use taste appeals to initially attract customers. While sampling firms the firms services, the customer will have opportunity to observe the firms physical evidence and form perception regarding the firm and its performance capabilities. Consequently, firms that use samplers should view this process as an opportunity rather than as catering to a bunch of people who want something for free.

Question 4: How do these same atmospheric elements affect employee satisfaction and the firms operations?
Answer:

Cognitive Responses: Cognitive Responses are the thought processes of individuals and, according to the model, include beliefs, categorization, and symbolic meaning. In the formation of beliefs, the firms environment acts as a form of non-verbal communication and influences a customer believe about the providers ability to perform the service. Through the physical evidence, employees form beliefs about the firm based on the overall perceived services cape. Beliefs that states consumers opinions about the providers ability to perform the service. Categorization that states consumer assessment of the physical evidence and a quick mental assignment of a firm to a known group of styles or types. Symbolic meaning that inferred from the firms use of physical evidence.

Emotional Responses: Emotional Responses do not involve thinking; they simply happen, often inexplicably and suddenly. Specific songs, for example, may make individuals feel happy, feel sad, or recreate other past feelings that were associated with the particular piece of music. Scents have similar effects on individuals. Obviously, the goal of effective physical evidence management is to stimulate positive emotions that create atmospheres in which employees love to work and customers want to spend their time and money. Physiological Responses: Physiological Responses are often described in terms of physical pleasure or discomfort. Typical physiological responses involve pain and comfort. Environments in which music is played very loudly may lead to employee discomfort and movement away from the source of the noise. The lack of a nonsmoking section may cause some employees difficulty in breathing and further discomfort. Instead of being arousing, environments that are brightly lit may cause eye discomfort. In contrast, a dimly lit restaurant may cause eye strain as employees struggle to serve customers menus. All these responses determine whether an employee will approach and explore the firms offering or avoid and leave the premises to minimize the amount of

physiological discomfort. Because of the duration of time spent in the firms facility, employees might find the physical environment particularly harmful appropriate ambient conditions such as temperature and air quality are direct related to employees willingness to continue to work, their productivity while at work, their job satisfaction, and their positive interaction with coworker. Ambient conditions Temperature, air quality, noise, music, odor Space/Function Layout, equipment, furnishings Signs, symbols, and artifacts Signage, personal artifacts, style of decor Sound appeals mood setter, attention grabber, informer music, announcements, and sound avoidance Scent appeals

pleasurable scents vs. foul odors

Taste appeals the equivalent of providing the customer with free samples

Question 5: Does the suggested atmosphere development plan compete effectively with competitors atmospheres?
Answer:

The effective management of physical evidence is particularly important to KFC. Due to the intangibility of services, consumers lack objectives sources of information when forming evaluations. As a result, customers often look to the physical evidence that surrounds the service when forming evaluation. A firms physical evidence includes, but is not limited to, facility exterior design elements such as the architecture of the building, the firms sign, parking, landscaping, and the surrounding environment of the firms location, interior design elements such as size, shape, and colors, the firm entrance and foyer areas, equipment utilized to operate the business, interior signage, layout, air quality and temperature, and other physical evidence that forms customer perception, including business cards, stationary, billing statements, reports, the appearance of personnel, and the firms brochures. From a strategic perspective the importance of managing the firms physical evidence steams from the firms ability to: (1)package the service, (2)facilitate the flow of the service delivery process, (3)socialize the customers and employees alike in terms of their respective roles, behaviors, and relationship, and(4) differentiate the firm from its competitors. From a theoretical perspective, the firms environment influences the behavior of consumers and employees alike due to the inseparability of many services. When designing the firms facilities, consideration needs to be given to weather the firm is a remote service, an interpersonal service, or a self service. The subsequent design should reflect the needs of the parties who are dominating the service production process decision about facility location , layout, product design, and process design in particular may re3sult in different outcomes, depending on weather the customer is actively involved in the production process.. Finally, numerous tactical decisions must be made by KFC when designing the firms environment. Individuals base perception of the firms services on sensory cues that exist in the firms environment. Specific tactical decision must be made by KFC about the creation and sometimes the avoidance of the scent appeals, sight appeals, sound appeals, touch appeals, and

taste appeals. The design and management of the KFC sensory cues are critical to the firms long-term success.

Conclusion
On the whole KFC is the name of trust for the customers because there is no compromise on the quality of the food. KFC fully concentrate on the quality of food thats why it is the hall mark of excellence among the customers. The supplier of KFC is Transcom Foods Ltd. They have good and fully furnished places for Chicks to grow and finally to provide there valued customers. By following such practices, KFC is providing a just and equitable environment for work and through its diversity programs, giving back to the community at various levels. Doing business internationally means taking stock of the local population and molding your menus and work practices to suit local tastes, laws and regulations. Animal welfare program for poultry Co-branding High customer demand Sustainable and successful franchise

Certainly the home delivery market is huge and KFC can take well advantage of the situation. Thus it would be in the best interest of the company to start the service as soon as possible and capitalize on the opportunity. KFC expects a rise in the orders by at least 20% by starting this service. Therefore, to conclude we would say that KFC should definitely have home delivery service.

The best maxim here is: Think Globally, Act Locally.

Thank you for your attention!