CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF THE STUDY

A key objective of marketing firms is to increase their market share in a competitive market. With the intensification of marketing competition among firms struggling to increase their market shares, they adopt different marketing philosophies, strategies and techniques to increase their market share. To achieve this objective, the main organization’s task is to attract and retain customers. This is known as relationship marketing (Odion 2003:2). This form of marketing has the aim of building mutually satisfying long-

term relationships with customers, suppliers, distributors and other marketing partners in order to retain them.

Kotler (2003:21) posits that relationship marketing evolved from direct response marketing in the 1960s and emerged in the 1980s when companies began to place emphasis on building long-term relationship with their customers in the belief and understanding that it is more profitable to keep and improve relationships with current customers than acquiring new ones. Thus, at the core of Relationship Marketing is the notion of customer attraction and customer retention (Smith and Cross, 2001:42). Early studies on long-term relationships between some companies and customers have shown that the cost of retaining existing customers is far below what it takes to attract new ones.

The current conceptualization of Relationship Marketing emerged from organizational behavior and industrial marketing where interdependence between firms has been the foundation of successful business-to-business (B2B) alliances. In recent years, relationship marketing has gained popularity among academics and marketers. This popularity has been gained at the expense of traditional or transactional marketing which is based on primarily the management of the 4ps (Levitt, 2005:120).

Relationship marketing attempts to gain customer loyalty by focusing on building long-term relationships with customers, placing importance on a customer’s life-time values to the company rather than the profit made in a single transaction. Furthermore, Relationship marketing emphasises share of customer rather than market share which is often a yardstick for success in transactional marketing (Lacobucci, 2000:14). As a result customized offerings could be made to each customer, and in the process added value is created.

Relationship marketing is fast being adopted in Fast Food marketing. Lyn, (2005:10) attributes this to the realization that it is cheaper to keep existing customers than acquire new ones and that normally the longer a relationship lasts the more profitable it is for the firm. Adoption of Relationship Marketing by Fast Food marketers is strongly informed by reengineering in product offering which emphasizes the provision of a wide range of products or services to existing customers based on their wants. To attract and retain customers, which are at the core of relationship marketing, fast food firms adopt various strategies and techniques. Customers are normally attracted through competitively superior offerings and retained through satisfaction. After all, relationship marketing is all about creating relationships with customers. A firm can make huge profits without

relationships as in exchange or traditional marketing. In relationship marketing, emphasis is on identifying and relating to the identified customers for continued or repeat business.

Fast food firms strive to identify and create relationships with their customers. Perhaps, this is in realizing that the cost of retaining customers is lower than attracting them. Besides, it is more profitable to retain existing customers than to attract new ones. The repeat business occasioned by the established relationship is as a result of the marketers’ proactive efforts. Finding out how fast food firms create relationships with their identified customers for continued patronage and how viable and effective the adopted strategies are the motivation for this study.

1.2         STATEMENT OF PROBLEM

The practice of relationship marketing faces certain constraints associated with the techniques adopted by firms. In the highly competitive fast food industry, these may relate to inappropriate marketing mix which is unable to attract and retain customers. First, the promotional may not be effective and so will fail to attract customers. Thus, ineffective advertising will fail to create sufficient awareness among members of the public about

the existence of the fast food firm. This limits the level of awareness about the firm.

Secondly, the place where the firm is located may not be accessible or attractive. Consequently, people may not be attracted so much to the place. Third, poor pricing policy often scares aware customers instead of attracting them to patronize the firm. The firm will therefore lose its customers to competitors as a result of high prices.

Fourth, customer satisfaction which is at the core of customer retention may not be achieved as a result of poor production policy. Lack of knowledge of what customers want will lead to wrong offerings which will leave customers unsatisfied. Fifth, poor customer services will also leave customers largely unsatisfied and may lead to customer defection.

Besides, inadequate incentives for existing customer customers make customer retention efforts ineffective. Finally, not knowing who the customers are and the cost of knowing them may make the relationship marketing strategies to fail. These factors militate against effective relationship marketing in fast food firms.

1.3         OBJECTIVES OF THE STUDY

The main objective of this project is to study relationship marketing

strategies in the fast food industry. This is to be achieved by pursuing the

following sub-objectives;

1.   To examine the extent of relationship marketing practice in the fast food Industry.

2.      To examine the relationship marketing techniques adopted for customer retention of customers in the fast food firms.

3.           To study the effectiveness of the customer retention techniques in retaining customers and increasing profitability in the fast food firms

4.                 To determine the extent to which relationship marketing builds Brand loyalty in fast food firms.

5.   To ascertain the extent of relationship marketing in the fast food firms.