Marketing Management Project

“Sub 80 Burger”

PRELUDE • Kentucky fried chicken was franchised in 1952. KFC

operates in 72 countries. KFC Corporation, based in Louisville, Kentucky, is the world’s most popular chicken restaurant chain.

• Nearly fifty years ago, Colonel Sanders invented what is now called “home meal replacement”…. Selling complete meals to harried, time-strapped families. He called it, “Sunday Dinner, Seven Days a Week”.

• KFC is part of Tricon Global Restaurants, inc., which is the world’s largest restaurant system with nearly 30,000 KFC, Taco Bell and Pizza Hut restaurants in more than 100 countries and territories

• The Colonel made his first franchise deal on a handshake in 1952; PEPSI CO bought KFC in 1986. By then it had 6600 units in 55 countries. Today KFC has more than 10,000 units in over 79 countries, with U.S. system sales of $4 billion. Each week nearly 49 million customers come through KFC’s door for the chicken they crave, made from recipes no one can match.

KFC WORLD WIDEU.S.A INTERNATIONAL WORLD WIDE

COMPANY 1,633 1,129 2,762

FRANCHISED 3,441 3,619 7,060

LICENSED 58 61 119

JOINT VENTURE 482 482

TOTAL 5,132 5,291 10,423

KFC has employed 273,800 employees all over the world. In Pakistan, Lahore there are 900 employees

U.S.A 120,400

INTERNATIONAL 153,400

WORLD WIDE 273,800

Corporate History of KFC Pakistan

• Food, Fun & Festivity, this is what KFC is all about. • Leading the market since its inception, KFC provides the ultimate chicken

meals for a chicken Loving Nation. • Be it Colonel Sanders secret Original Recipe Chicken or the Hot & Spicy

version, every bite brings a YAM on our face. At KFC we can proudly say, "WE Do Chicken Right".

• Perfecting its secret recipe of 11 herbs and spices in 1939, KFC has come a long way.

• With over 10,000 outlets in the world, KFC has maintained its title, for the last 60 years, of being the Chicken Experts.

• Opening the first KFC outlet in Gulshan-e-Iqbal, Karachi in 1996, KFC Wore the title of being the market leader in its industry.

• Serving delicious and hygienic food in a relaxing environment made KFC everyone's favorite.

• Since then, KFC has been constantly introducing new products and opening new restaurants for its customers. Presently KFC is branched out in nine major cities of Pakistan (Karachi, Lahore, Rawalpindi, Faisalabad, Multan, Peshawar, Sialkot, Hyderabad, and Islamabad) With 34 outlets nation-wide.

Facts: Apart from fulfilling our commitment of serving delicious, fresh

and hygienic food at the same time providing our customers with the ultimate entertainment, KFC also plays part in the economic development of our country. As

• Presently KFC has provided employment to over 1200 Pakistanis, which adds up to 6000 individuals directly dependent on KFC Pakistan.

• 95% of food and packaging material used in KFC Pakistan is procured locally, which sums up to a purchase of over Rs.35 million per month.

• Each new outlet developed by KFC Pakistan costs approximately Rs.40 million, which is a huge amount for our construction industry.

• KFC and Pakistan... Growing Together.

KENTUCKY FRIED CHICKEN IN PAKISTAN

• PRODUCTS:• Among other products of KFC, major well-

known products throughout the world are;• Chicken Original Recipe (In Pieces )• Snacks.

– Zinger Burger.– Fillet Burger.– Colonel’s Chicken Burger.– Big Double.– Nuggets.

• Hot Wings. • Side Orders

– French Fries.– Arabian Rice.– Corn on the Cob.– Dinner Roll.

• Drinks / Desserts.– Fruit Salad.– Pepsi / Mirinda / 7 Up.– Mineral Water.– Rass Bhara.– Tea.

• Nescafe Coffee.

PERFORMANCE OF EXISTING PRODUCTS

• KFC, a world renowned name in chicken is operating in 72 countries. But we focused our study to the limited environments of Pakistan.

• During our research and analysis of the outlets of KFC in Pakistan we conducted extensive surveys of KFC in Pakistan we conducted extensive surveys and interviewed KFC personnel to gain a better understanding of how well existing products are doing in the Pakistani market.

• Among the products of KFC, major well known products available throughout Pakistan, we have got crispy chicken, zinger burger, zinger tower, arabian rice, colonel’s brownie, colonel’s soup and freshly made fries – plus other varieties of chicken burgers.

• All of these products are doing a great business in Pakistan and people generally prefer KFC because the products mentioned above are tailored to the customer needs, are economical and most important of all completely hygienic whereas health conscious people are concerned.

PRICE:• Chicken Original Recipe (In Pieces) 48.00 / Piece.• Snacks.

– Zinger Burger. 120.00/ piece.– Fillet Burger. 110.00/ piece.– Colonel’s Chicken Burger. 60.00 / piece– Sub Sixty 60.00 / piece.– Big Double. 90.00 / piece.– Nuggets. 70/ 5 Pieces.– Hot Wings. 63 / 5 Wngs.

• Side Orders– French Fries. 40.00(Regular)– Arabian Rice. 40.00 Rs.– Corn on the Cob. 35.00RS– Dinner Roll. 10.00/ piece

• Drinks / Desserts.– Fruit Salad. 30.00/Cup.– Pepsi / Mirinda / 7 Up. 25.00 (Regular)– Mineral Water. 25.00 (Regular)– Rass Bhara. 25.00 Rs– Tea. 12.00Rs.

• Nescafe Coffee. 35.00 Rs.

PLACE:

In Pakistan there are 24 KFCs, which are in major cities like;

KARACHI 12

LAHORE 7

HYDERABAD 1

FAISALABAD 1

RAWALPINDI 1

PROMOTION:

• Unlike McDonald’s, KFC’s promotion is highly decentralized.

• It adopts cultural values for their advertisements.

THREE C’S

• COMPANY

• COMPETITORS

• CUSTOMERS

KFC is the company, which offers fresh food in less than 3 minutes. Its customers are upper and lower class members. KFC’s competitors include direct competitors (McDonald’s) and indirect competitors (local restaurants).

Reasons for Introduction of Sub 80

Sub 80 was launched in Pakistan a year ago due to non availability of a budget burger, which was spicy in taste. KFC wanted to explore that section of the market due to which it introduced their Sub 80.

• Newness to Market • Newness to Company• New to the World Products• New Product Lines • Addition to Existing Product Lines• Improvements in and/or Revisions to Existing Products• Repositioning • Cost Reductions The product which was introducing is an extension of the existing product of

KFC i.e. “Sub 60”; rather than being a totally new product to the company or the market.

Key Facts and Figures

• Name: Sub 80

• Price: Rs. 80

• Life span of failed product: 4-6 months

• Bread: 6” sandwich (same as Sub 60)

• Taste: Extra Spicy

• Fillet: Grilled chicken

• Sauce: Chilly Mayo & BBQ

Market niche:

• KFC produced Sub80 burger that was first of its kind in Pakistan.

• Sub80 is a spicy grilled chicken burger, which was specially introduced in Pakistan keeping in view the taste buds of the subcontinent.

• A gap existed for varieties of burgers other than the routine burgers hence a novelty could capture and maintain new and old market and in turn help increase KFC’s market share.

• Varieties in burger flavors could impose a competitive edge over KFC rivals like McDonalds and AFC.

KFC Sub 80 was a market oriented product…How?

• The marketing concept holds that the key to achieving organizational goals consists of the company’s being more effective than competitors in creating, delivering and communicating superior customer value to its chosen target markets.

• The KFC understood the market need and respond very positively to it.

• Though there wasn’t high level of innovation involved in introducing Sub 80 but delivering customers the best, as compared to its competitors, it was Relative marketing approach followed by the innovators.

Marketing Environment

The marketing environment of KFC can be concluded as follows:

Demographics:• The KFC Sub 80 was launched in Pakistan to cater to

the needs of people generally of age 15-50, any one mostly who has a taste for spicy food.

• It included both men and women, with an income of around 0.2 million and above per year.

• It was mostly consumed by young adults, mostly university going students, and fresh working graduates.

Economic Condition:• FMCG products are directly related to economic

conditions. • In Pakistan the buying power of consumers is on the

rise and the economy is going in the right direction as Pakistan’s economy is an industrializing economy, since the rich class and the upper-middle class demands new type of goods.

Social/Cultural Change:• Sub 80 was introduced because Pakistan socially

accepts spicy food. • And it has been integrated in to our culture, like

Sindhi biryani is very famous; this biryani originates from Sindh, and is spicy in taste.

Technology:• Different organizations require different structures

partly because of technology, knowledge, tools, equipment and work techniques used by an organization in delivering its product or services. KFC grasps the fantastic technology in its operations.

• They own Computer Aided Manufacturing (CAM) system to control production process.

• CAM makes it possible to change machines steps automatically by computers.

• For instance, they have fryer that operates on the principle of CAM.

• For example, the computerized fryer first tells the cook whether the oil is enough heated to put the chicken in or not, also the fryer determines the time of cooking.

STRATEGY FORMULATIONVision• While introducing the new product for KFC, we kept

into view the vision of the multinational fast food chain, KFC – who are known as the “chicken experts” worldwide.

Mission• KFC’s mission is to maintain and entrance their

position as the leading chain (WQSR) serving good value, innovative chicken based products throughout – we as potential marketers were very careful as we designed our products for KFC keeping in view all the time their mission.

Marketing ObjectivesWe also took also consideration the objectives and goals already mentioned in

the first part of our project while planning a meaningful strategy for our new product.

• The Sub 80 was introduced to cater to the budget market, and as Pakistan is still a developing country, it has a large lower middle and middle class, for which this Sub 80 was targeted.

• High service quality can be represented by speedy work, reliable servicing and sincere attitude to the customers. All these can be achieved by well-trained service staff working in a well-equipped kitchen.

• The Sub 80 was also marketed as the spicy burger which suited the taste of the local people.

• KFC’s Sub 80 could be viewed as a core competency that can give them a competitive edge over KFC’s rivals.

KFC’s VALUES:• Dedicate our organization and our selves to excellent service and

delighting customer.• Focus resources to support restaurant operations because that is where

we service our customers. • Recognize and respect the contribution of each individual at KFC. • Expect each individual to achieve his or her fullest potential and provide

support to enable each person to meet the highest expectations of performance.

• Pledge to be open, honest and direct in our dealings with one another.• Adhere to the highest standards of personal professional of integrity at

all times. • Confront issues willingly but never attack personality. • Encourage new and innovative ideas because these gave keys to our

competitive growth. • View failed attempts as learning opportunity. • Reward results, not simple efforts. • Commit to deliver consistent growth and sales, profit and size of

organization. • Commit to teamwork as this surpasses individual effort. • Share information, ideas and credit broadly within the organization

Marketing Research and methods to collect information:

Marketing research was done before launching the product through differentmediums.

Survey Research• KFC conducted survey through questionnaires and informal

interviews. Questionnaires were distributed in the KFC restaurant, different offices, open market and Bazars. They went out in the market to know people’s likings and disliking.

Observational Research• They also conducted research by observational method, the

company representatives simply observed the market, pointed out the market need compared with each and every aspect of the product demanded by the customers, observed what exactly their customer want, their need…

Experimental Research• They offered their customers a promotional meal before making

their mind whether they want to buy it or not, whether they are comfortable with their newly launched Sub 80. This way includes in the experimental research because by doing this KFC can get feed back from the customers on the spot, and they can improve their product on the very right time

Research Methods:Following types of research methods were used:Questionnaire:• KFC Sub 80 conducted their feed back by giving

questionnaires to collect the primary data from the people. • They carefully developed, tested and debugged the

questionnaire before they are administrated on large scale. In questionnaires they included both open ended and close ended questions.

• Close ended questions helped them to find out the specific information of the target market.

• They gave questionnaires at office areas and get the feed back in positive result but it was failed due to the extra spicy flavor, which did not suit people in summers.

Story telling: • When the customers came to restaurant for meals, they

regularly used to complaint about the spiciness of the burger, and the side effects it produced in hot weather.

SURVEY REPORT ON K.F.C

CUSTOMER'S CATAGORY

STUDENTS

BUSINESS

SERVICES

OTHERS

The kind of people who used to go to KFC. Based on the nature of their work.

•It was conducted after the survey that mostly students prefer to go to KFC than other people. The second in majority were people who are in services. That covers the majority of this country.

FREQUENTLY VISITS

OCCASIONALLY

MONTHLY

WEEKLY

How many times a customer visits KFC. Based on their average visits to the restaurant during a given period of time.•Mostly people occasionally go to KFC because they need a day off or two to make plans to go to a place like KFC. And they mostly enjoy going to a place occasionally because they may get too much of a single thing.

QUALITY

VERY GOOD

FINE

UN SATISFACTORY

Quality of the product. Based on the nature of the food given to customers.

•According to the survey the quality of the products like chicken, burgers, buns, cold drinks etc. etc.. is considered very good among the people of this city.

TASTE

EXCELLENT

GOOD

AVERAGE

Taste of the products. Based on the taste of the customers. •A lot of citizens considered the taste of the products of KFC good.• This is due to the reason that people of Lahore mostly like to eat continental dishes. •This is a famous thing about Lahore.

ATMOSPHERE

VERY GOOD

FINE

Atmosphere of KFC. Based on customers and other restaurants.•KFC provides one of the best atmospheres in the market of fast food joints. •Which is appreciated and confirmed by the citizens of Lahore.

PRICES

HIGH

NORMAL

Prices of KFC’s products

•The only drawback this company has is that the prices they have set of their products are considered to be a little bit high. •This was compared against the prices of a few fast food joints in Lahore.

Target market of KFC Sub 80:The target market of Sub 80 includes,• Budget conscious consumers• Taste for extra spiceThere is a large population of Pakistan, which goes out to fast

food restaurants like KFC to enjoy their meals. Their favorites are budget meals like Sub 60. Budget meals in are in greater demand because of a variety of reasons, which can be from a person who is less hungry, to a person who wants to enjoy KFC with limited amount of financial resource, other reasons may be that budget burgers may be preferred by parents for their children, as children tend to leave behind the main portions of the proper meal burgers.

• Basically the KFC is targeting the general public of Pakistan, by introducing the Sub 80, which is a budget burger, and is spicy in taste, it goes in accordance to the taste of Pakistan, and the budget of Pakistani’s, as still a good 30% of Pakistan in living below $1 income line.

Market Segmentation Strategies:• The market segmentation strategy for Sub 80 is the niche

market. Niche marketing is the process of finding and serving small but potentially profitable market segments and designing custom-made products or services for them. For big companies those market segments are often too small in order to serve them profitably as they often lack economies of scale. Niche marketers are often reliant on the loyalty business model to maintain a profitable volume of sales.

• Sub 80 is categorized as a niche market product because it is catering to the budget minded people, as well as fulfils their desire for a spicy burger, and also that it has been specially made for their class of people.

• There was a market gap present because no other fast food joint was trying to explore the lower middle and middle class of Pakistan. KFC took the opportunity by introducing Sub 80 in to the market. Also as people like spicy food, no other fast food joint like McDonald was trying to introduce new recipes which were according to the taste of the region having extra spice in it.

Product development process:• The new product Sub 80 which was introduced is an

extension of the existing product of KFC i.e. “Sub 60”; rather than being a totally new product to the company or the market.

• The planning process that we are going to discuss for our new product applies beautifully to the hypothetical situation we have created w.r.t. our new product’s strategy and planning.

• Our new product planning is guided by extensive surveys, analysis and an evaluation of customer needs which is an ever changing factor. – New Product of KFC – Name= Sub 80– Price = Rs. 80

PLANNING FOR THE PRODUCT:

• Customer Needs Analysis

• Idea Generation• Screening and

Evaluation• Business Analysis• Product Development• Marketing Strategy

Development• Testing• Commercialization

Sub 80 PLANNING: STEPS• A new product does not have to be a high technology break through to be successful but it

must provide customer satisfaction.• First of all we analyzed the customer needs and wants by conducting various surveys.• Finding promising new ideas was our starting point which was confined to the range of

incremental improvements of existing product. • Idea generation consisted of search, marketing research, internal and external development

etc.• After this all the new ideas generated were screened and further evaluated to test their

viability.• Two questions were asked:

– Is the venture of commercially feasible?– Is the idea compatible with the organization’s missions and objectives?

• In the business analysis we estimated the commercial performance of the new product concept, for e.g.; we studied the revenue forecasting, preliminary marketing plan, cost estimations and profit projections etc.

• During the product development stage we specified various criteria according to which the new product had to be developed.

• In the “Marketing Strategy Development” following points were taken into considerations– Target Market – Planned Production Positioning– Sales / Market Share / Profit Goals– Price / Distribution / Marketing Budget– Long Run Sales – Profit Goals – Marketing Mix Strategies

PRODUCT POSITIONING

The product of KFC Sub 80 was positioned:

• As a product to the younger population of Pakistan

• People with low budget• People having spicy taste• It was positional as a very

hip product• It was positioned as a

product for the innovators who always dare to try something new

POSITIONING CONCEPT • Positioning concept indicates the perception or association that management of KFC wants the

general consumers to have concerning the new product. POSITIONING STRATEGY• While developing the positioning strategy they focused on the “Marketing Program Decisions”. This

marketing strategy consisted of – Product Strategy – Distribution Strategy– Pricing Strategy– Promotion Strategy – Competitive Advantage

Product Strategy • The single product introduced for the existing product line is the Sub 80. They have created this

product keeping in view the demand of the general consumer market. Distribution Strategy • They have developed a decentralized marketing system (i.e. management of distribution process

directly from the producer to the end user or consumer). KFC has its outlets in various locations throughout the state which are going to cater to our needs for the distribution process.

Pricing Strategy • They have priced Sub 80 at an attractive and economical price to attract our target consumer i.e. the

middle class. This is going to be a Package Deal which is going to include a Sub 80, Fries (small) plus a regular Soft Drink priced at Rs.120 (inclusive of taxes).

Promotion Strategy • They used an effective combination of advertising and public relations to communicate with their

customers. Advertising strategy is going to include mostly the print media i.e. newspapers and magazines. Except these, brochures, pamphlets, signboards etc. are also going to be used.

Competitive Strategy • The competitive advantage is based on the fact that their new product “Sub 80” is included in a

package deal with is very economically priced plus a combination of value and innovativeness has been kept into account.

Branding PolicyThe branding strategy for a firm reflects the number and nature of common and

distinctive brand elements applied to the various products sold by the firm.• When a firm uses an established brand to introduce a new product it is called a

brand extension. Brand extensions can be classified into two general categories:– category extension– line extension

• KFC’s Sub 80 is a line extension of KFC. In a line extension, the parent brands(an existing brand that gives birth to a brand extension) used to brand a new product that targets a new market segment within the product category currently served by the parent brand, such as though new flavors,forms,colours,added ingredients,and package sizes.

• KFC recognized that one of their most valuable assets is their brand; hence it decided to leverage that asset by introducing a host of a new product named Sub 80 under its string brand name.

The imminent advantage to KFC of Line extension was to be in terms of:• Positive Feedback Effects: - KFC’s brand name helped clarify the meaning of

the brands and its core values. Line extensions such as KFC’s Zinger extreme could help renew interest and liking for the brand and benefit the parents brand by expanding market coverage.

• New-Product Success: - KFC’s wide recognition could improve the odds of KFC’s Sub 80’s success. Consumers can make inferences on the basis of the brand’s previous image. By setting positive expectations, extensions reduce risk and lower costs of introductory launch campaigns.

KFC’s Sub 80’s failure in the market occurred because of:

• The burger was extra spicy

• Too many spicy sauces like chilly mayo and BBQ sauce were used, which had never been used before

• The chicken strips used were also very spicy

• This kind of flavour did not suit the people of Pakistan espcially children, and most of the people in hot weather

Packing Strategy• The packaging strategy employed by KFC Sub 80 was to allow for

packaging and labeling efficiencies in terms of economies of scale. Similar or virtually identical packages and labels for KFC’s Sub 80 was aimed to lower production costs and, if coordinated properly, more prominence in the KFC restaurants by creating the “a good effect”.

• KFC used red length long, cardboard packing for the Sub 80. the color of the packing was similar to the taste of the burger, as red represents spices.

• It has been a nice and easy packing to open and close for the consumers as well as the staff of KFC. The packaging also kept the Sub 80 warmer for a longer time so the consumers can enjoy it warm till they take it to their tables or cars.

• The box also helped retain the Sub 8o ingredients and its freshness.• Well-designed packages can create convenience and promotional value.

The various packaging elements like colour, size, shape, and graphics must be harmonized in order to achieve marketing objectives for the brand and satisfy the desires of the consumers.

Porter’s 5 Forces Model:Threat of buyers bargaining power• Highly Elasticity (high demand fried

chicken)• Too many options and substitutes

– FMCG, McDonald etcThreat of suppliers bargaining power• Bargaining power of suppliers is low. • Fixed ratesThreat of intense segment rivalry• Low entry barriers• Too many big giants in the market

like – McDonalds– Subway– AFC

Threat of substitute products• There are a lot of competitors in the

market making substitute chicken products in the market

Threat of new entrants• Low entry barriers

Points of Parity• These are those attributes which are expected from a

particular product category as these have been already established by previous brands like McDonald’s ‘Spicy Chicken Cheese Burger’ and for KFC ‘Sub 80’ these were shape and extra spicy taste.

• If we take KFC, McDonald’s, AFC etc. into account, the similarities between these are they all lie into Fast Food category, all above provides more or less the same products and quick services but with different tastes.

Points of difference• New concept of long shape burger except for round shape

by any company in the market• Extra Spice• Low budget

Relaunching of KFC Sub 80 as “Zinger Extreme”

Soon after the failure of KFC Sub 80, they introdced ‘Zinger Extreme’ as the improved form of Sub 80, after eliminating its drawbacks

POSITIONING STRATEGYWhile developing the positioning strategy they focused

on the “Marketing Program Decisions”. This marketing strategy consists of

• Product Strategy • Distribution Strategy• Pricing Strategy• Promotion Strategy • Competitive Advantage

Product Strategy The single product they introduced for the existing product line is the Zinger

Extreme. They have created this product keeping in view the demand of the general consumer market.

Sub 80 was failed in the market due to the following reasons:• The burger was extra spicy• Too many spicy sauces like chilly mayo and BBQ sauce were used,

which had never been used before• The chicken strips used were also very spicy• This kind of flavour did not suit the people of Pakistan espcially children,

and most of the people in hot weather

Realizing all these facts, KFC introduced ‘Zinger Extreme’ that succeeded, despite of its spicy taste, because of

• Neutralizing effect (olives inside neutralize the spice effect)• Removing chilly mayo sauce• Providing a drink with the deal

Distribution Strategy • KFC has developed a decentralized marketing system (i.e. management of

distribution process directly from the producer to the end user or consumer).

• KFC has its outlets in various locations throughout the state which are going to cater to our needs for the distribution process.

Pricing Strategy • They have priced ‘Zinger Extreme’ at an attractive and economical price to

attract their target consumer i.e. the middle and upper class. • This is a Package Deal which is going to include a Zinger Extreme, Fries

(small) plus a regular Soft Drink priced at Rs.220 (inclusive of taxes). • The product could be bought separate at Rs.160.

Competitive Strategy • Their competitive advantage is based on the fact that their new product

“Zinger Extreme” was included in a package deal with is spicy taste and economically priced deal compared to others plus a combination of value and innovativeness has been kept into account.

Promotional Strategy They used an effective combination of advertising and public relations to

communicate with their customers. Advertising:• Advertisement plays an important role in success of any product, it

depicts the overview of the product we will be using some more sources of advertisement to attract more people.

• Billboards in busy localities• Pamphlets• Signboards• TV adsDirect marketing:• KFC can bring complete hassle-free meals and serve at your specified

premises so direct marketing can be done in “Home Delivery Services” to make consumer more aware about the product.

Events / Experiences:• Meeting with trade people or customers can also be arranged at KFC. • It arranges Kids birthday parties and other seminars to know the better

idea of consumer preferences and taste.

Recommendations Despite of the relaunch of Sub 80 as Zinger Extreme, there are

some issues that should be focused upon:

• Focusing more on its advertising compaign to create awareness about spicy product

• Focusing on its sales promotion by some incentives like ‘buy 2…get 1 free’ and gifts

• Making the decisions decentralizing• Reducing its price a bit for more competitiveness • Offering Zinger Extreme with cheese to resolve

some spicy effect for health concious customers

Refferences

• KFC ‘H’ Block• Mr Salman Zafar

(Franchise Manager)• Internet