Marketing Management of Pizza Hut - Research Paper Example

MARKETING MANAGEMENT Contents Sr. # Topic Pg. # 1. Introduction 2 1.1. Market orientation: Brief Overview 4 1.2. Definitions 6 2. Market Orientation and its significance 7 3. Case Study: Pizza Hut 10 4. Recommendations 13 References 15 1. Introduction "The single most important thing to remember about any enterprise is that there are no results inside its walls. The result of a business is a satisfied customer." Peter Drucker Organisations across the globe follow this maxim religiously, since in order to retain their competitive positioning in the industry customer satisfaction is inevitable and of utmost significance. The concept of market orientation is based on the classic marketing doctrine which is centered on satisfying the needs and tastes of the customers and achieving complete customer satisfaction in the process. Market orientation helps businesses in applying this basic doctrine and assists the firms in realizing its overall organizational goals and objectives. The current business environment is highly competitive owing to globalization and liberalization as well as the rapid technological developments which has swept the corporate world, making the business environment all the more intense. Organizations today are vying to attract customer attention through various means, market orientation being one such tool. In a bid to capture a larger customer base along with retaining the existing ones, the organizations worldwide, are pushed to develop their products through improvisation and innovation, improving their business practices, and enhancing their service delivery, in order to achieve a positive performance and customer satisfaction. This paper on market orientation discusses various aspects related the concept along with the significance, the probable benefits likely to be accrued by the organizations, the various characteristics or key elements, as well as the implications on overall business performance. In order to substantiate the findings as observed in the literature reviewed, a case study of Pizza Hut UK has been used to demonstrate the manner in which organizations apply market orientation and how it helps in achieving customer satisfaction. 1.1. Market Orientation: Brief Overview The term market orientation was conceptualized by Narver and Slater (1990) and Kohli and Jaworski (1990). According to Narver and Slater (1990) market orientation comprises of three key elements: customer orientation, competitor orientation and inter-functional co-ordination. The concept also involves two key decision based criteria: long-term focus as well as profitability. Customer orientation refers to the strengths and weaknesses of the customers, strategies developed to retain the customers for a longer period, as well as assessing the potential of the customers. Inter-functional co-ordination refers to the optimum utilization of the organizational resources by the management with a view to create superior value for the customers. Kohli and Jaworski (1990) on the other hand highlight the significance of market intelligence over and above acknowledging the influence of customer focus on achieving desired results for the organization, in terms of profitability and competitive positioning in the industry. According to them, the term market orientation refers to “the organisation wide generation of market intelligence pertaining to current and future customer needs, dissemination of the intelligence across departments, and organisation wide responsiveness to it”. Figure 1: Dimensions of Market Orientation Source: Narver and Slater (1990, Pp. 23) It is an inevitable part of organizational environment which is focused on enhancing customer satisfaction by delivering superior value in terms of products as well as services (Narver & Slater, 1990; Homburg & Pflesser, 2000; Day, 1999). A market oriented firm is involved in organization wide activities which are aimed at generation and dissemination of information related to customers as well as competitors and the resultant strategies framed on the basis of the available data (Kohli & Jaworski, 1990; Narver & Slater, 1990). 1.2. Definitions According to Slater and Narver (1995) “market orientation is the culture that (1) places the highest priority on the profitable creation and maintenance of superior customer value while considering the interest of other key stakeholders ; and (2) provides norms for behaviour regarding the organizational development and responsiveness top market information ” (p67). According to Kohli et al (1993) “Market orientation refers to the organization wide generation of market intelligence pertaining to current and future needs of customers, dissemination of intelligence within the organization, and responsiveness to it. Key features of this integrated view are (1) an expanded focus on market rather than customer intelligence, (2) an emphasis on a specific form of inter-functional coordination with respect to market intelligence and (3) a focus on activities related to intelligence processing rather than the effect of these activities.” (p468). According to Reukert (1992): “market orientation in a business unit is the degree to which the business unit: (1) obtains and uses information from customers; (2) develops a strategy which will meet customer needs; and (3) implements that strategy by being responsive to customer needs and wants” 2. Market Orientation and its Significance Various studies have focused on studying the benefits of market orientation in terms of positive outcomes for the organizations. The evidences made available through such studies indicate that market oriented firms have a high tendency towards enhanced profitability and customer satisfaction, and hence lead to the development of a superior well-functioning organization (Narver and Slater, 1990; Oczkowski and Farrell, 1998). As discussed in the previous section of this paper, market orientation involves creating of superior value for the customers (Day, 1994; Narver and Slater, 1990). The firms which subscribe to the market driven ideology as opposed to the product driven one, lends more emphasis on putting the customer’s interests first before any other organizational goal (Deshpande et al., 1998). In order to achieve this goal, of maximizing customer satisfaction, the market driven / oriented firms develop strategies to generate, disseminate and utilize market information (Kohli and Jaworski, 1990) which enables the organizations to co-ordinate all its resources in a manner which ensures maximum customer satisfaction (Narver and Slater, 1990; Slater and Narver, 1994, 1995) and it has been observed through empirical research, that customer centric organizations tend to outperform their corporate allies who are relatively less market driven in their approach (Deshpande et al., 1993; Jaworski and Kohli, 1993; Narver and Slater, 1990). Thus market orientation helps in enhancing customer satisfaction, retain existing customer base, increase and improve profitability and help sustain competitive positioning in the industry. Furthermore market orientation is regarded by various researchers as an important tool which facilitates better strategic formulations (Gatignon & Xuereb, 1997) and as a vital tool which helps organizations in differentiating the products and services offered by them as compared to that offered by their rivals. Such advantages which are available to the market oriented firms helps them in improving their market sensibilities and hence responsiveness and capture wider customer base even in markets which are relatively unreceptive and highly volatile in nature (Day, 1999; Jaworski & Kohli, 1993). Moreover, according to Day (1994) organizations which are highly equipped with sophisticated tools in terms of marketing are known to excel in generating, acquiring and analyzing information about the needs, wants, tastes and preferences of the customers and use the same in delivering goods and services which are best suited to their needs. Also, the presence of superior quality resources help the market oriented firms in generating and assessing the information about their rivals and inform them in advance about their prospective strategies and actions. Hence, such a process which allows the market oriented firms to acquire, develop, and apply the information in a manner which helps them to deliver better value to their customers further boosts the organizations’ overall position by lending them the added competitive advantage (Narver and Slater, 1990; Tuominen etal., 1997). The combination of much needed and vital information about customers as well as competitors acquired as a result of strategies formulated by the market oriented firms helps them in developing superior quality marketing policies leading to an improvement in the firms’ overall performance and in the process helping them in warding off their rivals Day, 1993, 1994; Kohli and Jaworski, 1990; Narver and Slater, 1990). A highly market oriented firm is known to enjoy the power of developing, acquiring and implementing strategies based on the information acquired, to respond to the market forces and cope with the external environment in a much better manner as compared to those firms which are relatively less market oriented in their approach (Kohli and Jaworski, 1990; Jaworski and Kohli, 1993). With the help of such strategies the market oriented firms can develop a competitive advantage and outsmart their rivals by providing products and services, which are better suited to the market as well as which are in tune with the needs and wants of the customers, hence delivering superior value to their customers and increasing their profitability in the process (Narver and Slater, 1990; Slater and Narver, 1994). The same information can be further used by market oriented firms in adapting to the changing markets when there is a shift in market demands or a change in the tastes and preferences of the consumers (Slater and Narver, 1995; Tuominen et al., 1997). Thus on the basis of the above discussions it can be safely concluded that the benefits of market orientation are manifold, however the fundamental principles of a market oriented firm lies in the power that it places in the hands of such firms, in terms of valuable information as well as the ability to quickly adapt to the changing market environment ultimately leading to higher customer satisfaction and hence profitability. 3. Case Study: Pizza Hut The concept of market orientation as discussed in the previous sections of this study comprises of various components. However for the purpose of this case study, the market orientation of Pizza Hut will be evaluated and analyzed on the basis of components of the Narver and Slater tool, which are described as follows: Customer Orientation Competitor Orientation and Inter-functional Co-ordination Brief Overview: Pizza Hut was founded in 1958, is owned by Yum Inc. The organization which started off as a humble local restaurant more than fifty two years ago is now an international brand with over five hundred restaurants in the U.K alone. The company faces stiff competition from its rivals Domino’s and Papa John’s and yet despite such highly competitive market, has managed to retain its brand value, and profitability in the UK market. It is one of the most recognizable pizza brands in the world and is known for its high market oriented approach (Pizzahut.com, 2010). Customer Orientation Narver and Slater define customer orientation as a combination of customer, competitor and profit orientation rather than just customer focus (in Weitz & Wensley, 2002). The customer is at the centre of all marketing activities at Pizza hut. The organization is highly cost conscious and offers high quality products at relatively affordable prices which has enabled the company to continue its trend of success over these years, in the face of growing competition from new entrants such as Domino's and Papa John's. Furthermore the company launched programs such as Customer Loyalty / Satisfaction Program and the customer satisfaction survey which aimed at ensuring maximum satisfaction to their customers. The programs aimed at compensating distraught customers with free offerings and in order to boost their service delivery even linked the bonuses of the employees with customer satisfaction. The company continues to conduct regular checks to ensure optimum service delivery and increase customer value (Johnson, Weinstein, 2004). Recently the pizza chain initiated a bold move by offering to provide calorie information on their menus on all their products in a bid to offer the customers vital information about their food consumption and hence serve them better. Such a move is reassuring for the consumers who now are much more aware of their calorie intakes as well as the dedication and support offered by the pizza chain, garnering much public appreciation in the process. Pizza hut is the only pizza chain so far, to have signed such a pledge (The Telegraph, 2009). Competitor Orientation According to Clemente (2002) competitor orientation is: "A corporate planning approach, where a company's moves are dictated by its competitors' activities" (Pp.88) Pizza hut is highly competitor oriented, especially in present times given the intensely competitive and rapidly expanding fast food industry. Initially, the pizza chain was established as a “sit-down restaurant” but owning to increasing market competition from Domino’s who offered home delivery services; it was forced to transform its internal functioning to offer similar services. Hence the restaurant was eventually transformed from a restaurant to a distribution unit. Thus the brand image underwent a significant transformation when the company had to follow suit and emulate its competitor’s home delivery model much against its traditional image of a dine-in restaurant (Stanton, George, 1999). Inter-functional Co-ordination According to Narver and Slater, inter-functional co-ordination refers to the optimum utilization of the organizational resources by the management with a view to create superior value for the customers. Pizza hut is a huge multinational organization and probably the world’s largest pizza chain. Various departments function simultaneously in close co-ordination with each other to deliver optimum value to the customers. For instance its delivery channels are divided into three distinct categories: sit-in restaurants, home delivery / online orders, and kiosks. These three departments function simultaneously with a common objective of attaining maximum customer satisfaction, which is the underlying motive of any market oriented firm. 4. Recommendations The pizza hut chain of restaurants is a highly popular and widely recognized brand in the fast food industry. It enjoys a position of trust and commands high brand value owing to its wide international network and impressive lineage of providing continuous good quality service as well as products. However, owing to the recent foray of a range of new brands in the industry, the fast food industry is getting highly competitive. The big three pizza brands: Domino’s, Papa John’s and Pizza Hut are currently dominating the fast food landscape and hence continuous improvement is inevitable to sustain the competitive positioning. The following recommendations are hence made to enable Pizza hut retain its customer base and offer more value to them in the process, thus fulfilling the basic underlying criteria of market orientation. Revamp the brand image Currently Pizza Hut enjoys its reputation as a “fast food” chain with its long and impressive list of products in terms of variety matched with high quality service delivery. However, it faces competition from its more up-market counterparts such as Pizza Express which not only offers good quality products with an equally impressive product line up but also a slightly more ‘cultured’ ambience, which gives it an up-market feel. It offers the ultimate restaurant like experience unlike the hurried take-aways which is a classic feature of most of the fast food chains. Pizza hut may benefit by elevating its brand image by remodelling its strategies to include the exclusive customers as well. It already offers online orders and home delivery services, and such an addition would expand its customer base thereby providing an excellent opportunity to increase their profitability and sustain its competitive positioning in the market. Diversify into other product categories / non-pizza items Pizza hut currently offers pasta, salads and beverages apart from pizzas as a part of its product range. It can however cash in on its popularity by including products both in the higher as well as lower price brackets such as expensive wines for its sit-in restaurants and low priced low calorie sandwiches for its kiosks or take away units. It’s recent move to disclose calorie information on its menu can be further capitalized by including low calorie food items added to its already impressive menu thus warding off competition from local mom & pop eateries. Shift focus from product orientation to market orientation Pizza hut is currently a product oriented organization although it has taken several constructive steps, from time to time, to adopt the market orientation approach. In the food / hospitality industry customer service guarantees higher returns as compared to products and hence focusing on improving and enhancing the service delivery systems, in a bid to secure higher customer satisfaction would help in retaining its valuable customer base. Fast food restaurants hardly face any entry barriers in terms of competition which may further intensify the competitive environment and hence adopting a market oriented approach is more suitable for firms in the service dominated industry, to attract customer attention and satisfaction. References: Clemente, M. N., (2002). The Marketing Glossary: Key Terms, Concpets and Applications, Pp. 88-89 Day, G. S., (1999). The Market-Driven Organisation: Understanding, Attracting, and Keeping Valuable Customers, New York, The Free Press Publication Deshpande, R., Farley, J. U., (1998). Measuring Market Orientation: Generalization and Synthesis, Journal of Market Focussed Management, Vol. 2, Pp. 213-232 Gatignon, H., and J. Xuereb (1997), ‘Strategic Orientation of the Firm and New Product Performance’, in: Journal of Marketing Research 34: Pp. 77-90 Johnson, W. C., Weinstein, A., (2004). Superior Customer value in the New Economy: Concepts and Cases, CRC Press, Pp. 365 - 370 Homburg, C., Pflesser, C., (2000). A Multiple-layer Model of Market-Oriented Organizational Culture: Measurement Issues and Performance Outcomes, Journal of Marketing Research, Vol. 37, No. 4, Pp. 449-469 Kohli, A. K., Jaworski, B. J., (1990). Market Orientation: The Construct, Research Propositions and Managerial Implications, Journal of Marketing Vol. 54, No. 2, Pp. 1-18 Kohli, A. K., Jaworski, B. J., & Kumar, A., (1993). MARKOR: A measure of market Orientation. Journal of Marketing Research, XXX (November), Pp. 467-477 Narver, J. C., Slater, S. F., (1990). The Effect of Market Orientation on Business Profitability, Journal of Marketing, Vol. 54, No. 10, Pp. 20-35 Oczkowski, E., Farell, M., (1997). Discriminating between Measurement Scales: the Case of Market Orientation, Marketing without Borders, Academy of Marketing 31st Annual Conference, Manchester Ruekert, R. W., (1992). Developing a Market Orientation; An Organisational Strategy Perspective, International Journal of Research in Marketing, Vol. 21, No. 2, Pp. 179-200 Slater, S. F & Narver, J. C ., (1995). Market orientation and the learning organization. Journal of Marketing, Pp. 59, 63-74. Stanton, J., George, R., (1999). Success Leaves Clues: Practical Tools for Effective Sales and Marketing, Silver Lake Publishing, Pp. 130 - 132 Tuominen, M. and Möller, K. 1996., “Market orientation: a state-of-the-art review.” 25th European Marketing Academy Conference, Budapest. Weitz, B. A., Wensley, R., (2002). Handbook of Marketing, SAGE Publication, Pp. 73 The Telegraph (2009). Burger King, Pizza Hut and KFC to list calorie content of food, Accessed: May 22, 2009 from: http://www.telegraph.co.uk/foodanddrink/foodanddrinknews/5112778/Burger-King-Pizza-Hut-and-KFC-to-list-calorie-content-of-food.html Read More