Strategic Brand Evaluation - KFC - Assignment Example

 Strategic Brand Evaluation - KFC Introduction KFC Corporation is one of the most popular chicken restaurants in the world. Operating more than 5,200 and 15,000 restaurants in U.S. and global markets respectively, KFC is serving more than 12 million customers in 109 countries and territories each day (Kentucky Fried Chicken, 2009). As part of evaluating the brand management and of KFC, the current management and marketing of KFC will be analyzed followed by recognizing whether or not the brand management and marketing efforts exerted by KFC is effective. Based on the research findings, ways on how KFC could improve its brand value will be provided. In the process of going through the main discussion, the theory presented throughout the course will be applied in the case of KFC. Current Brand Situation Branding is more than just choosing a corporate name and advertising it in the newspaper. (King, 2008) A successful brand is not limited on developing familiarity on the part of the company’s target consumers. It should make the company’s target consumers feel special when being associated with a brand. With the use of effective advertising and marketing strategy, the marketing manager of KFC is able to create brand equity which increases the brand popularity. For this reason, brand name of KFC is considered as one of the most important company asset in terms of encouraging the company’s target consumers to purchase KFC food products. Another importance of branding is that having high brand equity enables KFC to enjoy the benefits associated with brand extension and a product line extension. In general, a brand extension is defined as the use of an existing brand name for entry into a new product category (Rugimbana & Nwankwo, 2003, p. 101; Aaker & Keller, 1990). Compared with the promotion of a new brand name, the use of brand extension requires lower advertising costs in exchange with higher sales potential (Smith & Park, 1992). Similar to brand extension, a product line extension is about using an established brand name like KFC in promoting additional food items which is totally different from what the fast food chain is normally serving. In line with this, a successful brand extension or product line extension contributes to higher brand equity to the original brand (Dacin & Smith, 1994). Because of cultural differences between two different target market, KFC needs to develop a new product line that will suite the taste of its target consumers. For this reason, KFC continuously innovate new products based on the preferences of its target consumers (Kentucky Fried Chicken, 2008). In line with this, KFC has expanded its food choices from fried to grilled chicken (Bryson, 2009). By doing so, KFC will be able to expand its customer-base. As a result of having a positive branding, KFC is able to capture a huge circle of loyal consumers who are willing to purchase food products and merchandises that are being sold by KFC all over its global restaurants. For this reason, the company is able to gain the benefits of enjoying lesser need to spend on advertising and marketing expenses since the company attracts new customers without the need to exert so much effort (Aaker, 1991). Analysis of Brand Effectiveness Low Advertising Cost As a fast food chain company that specializes in serving chicken, KFC does not really invest a lot of money on advertising. On the average, the company is spending only approximately 3% and 2% of its annual gross revenues for local advertising and national cooperative advertising respectively (Franchise Direct, 2009). Instead of spending on significantly huge amount of money on advertising, the company uses the excess fund in opening new and renovating its existing fast food chain outlets within the selected strategic locations (London Evening Standard, 2009). Combined with the use of marketing advertisements, the expansion and renovation strategy can effectively capture the attention of KFC’s target consumers. Importance of Effective Marketing Strategy With regards to the company’s decision to spend only a minimal sum of money on advertisement, the management behind KFC strongly believes that investment on store interior designs is a more effective marketing communication tool as compared with spending money on pure advertising alone. As part of KFC’s branding strategy, the company uses effective advertising which focuses on giving away 2 pieces grilled chicken meal plus 2 side dishes, and 1 biscuit for free at one of the Oprah Winfrey show (Bukisa, 2009). Free KFC coupons can be printed from KFC’s official website http://www.kfc.com/coupons/ageverification.asp. Since the company website is accessible in different languages including English, Espaňol, and Italiano among others, the target consumers of KFC can easily develop a strong association with the brand. (See Appendix I – KFC Printable Coupon on page 12) The marketing strategy used by KFC can easily spread through word-of-mouth. This is one of the main reasons why KFC is able earn more revenue despite the fact that the company is spending less on its advertising cost. KFC is operating more than 5,200 restaurants in the U.S. market alone and 15,000 restaurants in the global markets. Each day, KFC is serving more than 12 million customers in 109 countries and territories (Kentucky Fried Chicken, 2009). Since KFC was able to expand its restaurants within the domestic and global markets, the company is able to gain competitive advantage of being able to negotiate the prices of raw chicken, herbs, and spices aside from the packaging materials the company is using each day. Impact of KFC’s Brand on Customers’ Perceived Brand Quality and Value Having a high-perceived brand quality and value is important to the success and profitability of KFC since having a strong brand quality and value enables the consumers to differentiate a company’s food products from its competitors aside from giving its target consumers a reason-to-buy a wide-range of food products at a premium price (Aaker, 1991: p. 86). As a common knowledge, perceived brand quality is intangible in the sense that it deals with the customers’ personal feelings with regards to being associated with a brand. Perceived quality is referring to consumer’s personal judgment with regards to the overall excellence or superiority of KFC food items (Zeithamal, 1998). Depending on the customers’ personal long-term experience with regards to the food products and services offered by KFC, people who purchase KFC food products can either develop a high- or low-perceived brand quality. With regards to the customers’ perception of the brand quality and value, Zeithamal (1998) explained that a perceived brand quality is actually a component of brand value. In other words, the fact that KFC has established a high-perceived brand quality drives its loyal customers to patronize the food products offered by KFC rather than from its other competing brands like McDonald’s among others. Through the use of effective advertising and marketing strategy, it becomes possible on the part of marketing manager of KFC to create positive brand equity which effectively increases the popularity of the brand name KFC. In general, brand equity is a set of brand assets and liabilities that are linked to a brand which includes either the company name and/or the company logo (Aaker, 1991). Depending on the success of marketing strategy used in the development of branding, brand equity can either add to or subtract from the customers’ perceived value over the KFC’s food products and services. Several studies explained that perceived quality, brand loyalty, brand awareness and brand associations are among the common dimensions of brand equity (Yoo, Donthu, & Lee, 2000; Aaker, 1991). Considering that the fact that consumers tend to purchase products wherein they can associate themselves with the positive qualities of the brand (Fuchs, 2008), it becomes a challenge on the part of KFC’s marketing manager to ensure that the brand name KFC is effective in terms of developing a positive brand loyalty, brand awareness, perceived quality, and brand association with its target consumers. With regards to the importance of being able to develop a positive brand loyalty, brand awareness, perceived quality, and brand association with its target consumers, Yoo, Donthu, & Lee (2000) and Aaker (1991) revealed that the store image of KFC combined with the cost of advertising and market price of KFC’s food items also significantly affect brand awareness and brand associations especially when it comes with issues related to the development of positive relationship between the company and its target consumers. In other words, branding can be used as an effective strategy when promoting and developing the consumers’ perceived value over the brand name KFC. Given that the company’s target consumers are able gain familiarity and strong connection with the brand name KFC, there is a better chance that more consumers would purchase and patronize the company’s wide-range of food products. Evidences of Effective Brand Management and Marketing Strategy Despite the current global economic recession and the tight market competition within the global fast food industry, KFC’s competitive advantage of being able to strongly hold onto its loyal customers enabled the company to earn US$ 310,009 as of January 2008 (KFC, 2008). This figure is almost 20.68% higher as compared to the total income back in 2004. (See Appendix II – Kentucky Fried Chicken (Bermuda) Limited Financial Statement on page 13) Summary of Brand Inconsistencies The selling of health foods has become one of the most serious concerns about fast food companies. In line with this, the problem with selling or advertising fried foods has been a common subject of health critiques. Often times, fried foods are categorized as ‘unhealthy’ foods (Walker, 2003). Although there are still many people who prefers to eat fried food over steamed food, the growing health concerns of the people concerning the risks for obesity and other related diseases such as heart disease and diabetes has been encouraging more people to minimize their consumption of high cholesterol- and fatty foods like fried chicken (Waters, 2009). Somehow, the growing health concerns of the people motivated KFC to immediately correct its brand inconsistencies in order to maintain the loyalty of their existing customers. A good example of brand inconsistency is noticeable in the way KFC has established its brand name in the local and international markets. In the past, KFC established its brand name as Kentucky Fried Chicken. Because of the growing health concerns about eating unhealthy foods, the company started to re-position its brand as ‘KFC’. Although the company has already changed its brand from Kentucky Fried Chicken to KFC, it remains a fact that the old message that has been imparted to the consumers around the world would remain for some time (Sutherland, 2005). Application of Branding Theories in the Case of KFC The application of brand portfolio adds value to the stakeholders of KFC. Since the stakeholders of the company include not only KFC’s employees but also its shareholders and valued customers, the success of KFC’s brand name benefits the entire stakeholders of the company. Because of globalization, competition within the international fast food businesses tightens. For this reason, the modern marketing managers who are working in fast food businesses are facing new challenges on how they can effectively capture and develop more loyal customers. Aside from being able to reduce the market price of fast food products, it remains a challenge on the part of KFC to satisfy the individual needs and preferences of its loyal customers. According to Theodore Levitt, “gone are accustomed differences in national or regional preference”; therefore, international fast food companies today should learn to operate its businesses in a global scale by being more flexible in addressing the needs and wants of its consumers and ignoring the superficial regional and national differences (Levitt, 1984). On top of the significant changes in running a business, international fast food companies should focus on increasing brand value in terms of being able to offer high quality food products at the right time aside from offering the public consumers with competitive market prices (Levitt, 1984). Philip Kotler (2005) and Douglas and Craig (1995) recognizes the importance of global branding strategy in terms of gaining bigger economies of scale and cost savings on the part of the international fast food companies. In line with this matter, Douglas and Craig (1995) explained that global branding does not necessarily need to be standardized. Therefore, flexibility in establishing KFC’s marketing strategy is necessary. To effectively increase KFC’s corporate brand value in other countries, Philip Kotler suggests that the application of a global brand marketing / positioning which uses of the traditional 4 P’s known as product, price, place, and promotion is the key towards a successful business (The Wall Street Journal, 2007; Kotler, 2005). Other basic principles of marketing such as brand extension, segmentation, selection of target markets including the brand positioning remains equally important theories today. (McAleer, 2008; Kotler, 2000) For example: When selling KFC’s food products in two different countries, marketing manager of KFC should be able to adopt and make use of the main concept of 4 P’s when analyzing not only the product preferences of its target consumers but also how the company will be able to effectively promote the food products in two different countries. Since each country has its own culture and tradition, it is important for KFC to analyze and identify strategic ways wherein the company will be able to capture the interests of its target consumers through the use of low-cost advertisements and effective market distribution. Recommendations for Improvement KFC should always be alert in terms of immediately acting on any brand inconsistencies that could make their loyal consumers find another restaurant that could equally satisfy their food preferences. Likewise, KFC should carefully study the specific needs and wants of its target consumers given that each foreign market has its own culture and tradition that the company should consider. Given that KFC has already established its brand name all over the world, the company should take advantage of innovating new food items that could attract new customers to patronize their food products. Conclusion Brand portfolio is about developing business strategies that will enable a company to differentiate its product and services within the global markets. When it comes to the application of standardizing in global branding, this type of branding strategy is effective in terms of enabling the international fast food companies to enjoy economies of scale. As a result of being able to gain more bargaining power over the company’s qualified suppliers, international fast food companies are able to negotiate a more attractive price for its purchased merchandises. For this reason, fast food companies like KFC is able to effectively compete in the global markets. With regards to social-cultural aspect, the application of global branding in terms of standardizing the branding strategy may not be effective at all times because of the fact that there will always be a possibility for some markets that do not patronize foreign brands. Aside from losing a portion of KFC’s target market, there is a possibility for some people to find this strategy as ineffective due to the reason that some of the company’s target consumer may not be able to effectively associate themselves with the brand. In order to minimize the possibility of losing some of KFC’s potential consumers, marketing managers of KFC should make use of the traditional branding theories like the 4 P’s when developing a more effective communication tool that will create a positive brand value on the part of its target consumers. *** End *** Appendix I – KFC Printable Coupon Source: http://www.kfc.com/coupons/ageverification.asp Appendix II – Kentucky Fried Chicken (Bermuda) Limited Financial Statement Source: KFC, 2008 References KFC. (2008, January 31). Retrieved October 3, 2009, from KFC (Bermuda) Ltd. - Financial Statement: http://www.bsx.com/AllCompanyDocuments/2008%20Financials/KFC%20FYE%202008.pdf Aaker, D. (1991). Managing Brand Equity. New York: The Free Press. Aaker, D., & Keller, K. (1990). Consumer Evaluations of Brand Extensions. Journal of Marketing , 54(1):27 - 41. Bryson, E. (2009, May 11). Marketing Fray. 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