KFC is a fast food restaurant that specializes in chicken. The company was founded in the year 1930 by Harland Sanders with the first unit in Salt Lake City. Today, the company owns around 19500 units and operates in more than 115 countries. In this paper, I will discuss how KFC restaurant has used market segmentation to penetrate various markets in different parts of the world to create value for its products. The company has segmented its market by particular characteristics such as geographical location, psychometric factors, demographic factors, and behavioral factors among others. KFC has a distinctive taste of chicken and is keen on developing its markets in different countries around the world. KFC has maintained to be competitive in the market because it has been able to establish a whole brand in its various market segments (Anderson, Narus & Van, 2006). The company took sincere efforts to understand the needs of its customers in the market. Today, the company provides the best-fried chicken to its customers in various market segments.
Critical Analysis of Segmentation
The primary objective of any marketing strategy is to understand the market and satisfy the needs of customers in a better way that competitors would find difficult to imitate (Anderson, Narus& Van, 2006). Business organizations understand that two customers are never the same and different strategies must be utilized to ensure that their expectations are met at the right time by providing the right quality of products at the right place. A business organization can only achieve this by implementing effective business marketing strategies (Cravens & Piercy, 2006). Identification of the right market segments is the initial step that a firm can use to create value for its products. Therefore, market segmentation is the process where a market is divided into different distinct groups where consumers exhibit the same characteristics. The individuals who have similar traits or tastes are classified in a particular market segment. Market segmentation is used by firms to determine the requirements of the potential customers in a given market segment. In this case, the business will determine the suitable products for particular market segment. Today most consumers are well educated and better informed. As such their demands keep on changing. Therefore, it is necessary for producers and other business organizations to pay attention to issues on market segmentation. For firms to succeed in a highly competitive market, they should chose on the best segmentation approach which will add value to the products. Most firms always implement two types of segmentation namely post hoc and priori segmentation. The segmentation approaches are usually implemented depending on the product positioning of the firm. A priori market segmentation is implemented without conducting thorough market research to identify the market segments that are most appropriate. It is based on the already existing techniques of market segmentation. On the other hand, post hoc segmentation is based on extensive research where the firm has to determine the most appropriate market for its products. The firm must obtain evidence from the customers concerning their needs and wants. The customers’ evidences are then used as a background for market segmentation. Firms should always perform a comprehensive analysis to determine the best segmentation approach which would add value to the organization. The major variables which should be considered in market segmentation includes the benefits of the product, the brand preference, brand loyalty, brand usage pattern, the purchase pattern of the product, the lifestyle and status of the consumers, and the opinion and attitude of the customers about the effects of the brand on the environment. Market segmentation is an important issue for every business organization. The firms should take into account the different preferences of consumers. The consumer preferences are what form the segmentation variables which every firm should consider. Therefore, during segmentation the firm identifies the possible clusters of the consumers depending on their preferences. The consumers are then grouped according to their needs, requirements, and demands among other characteristics.
Advantages and Disadvantages of Market Segmentation
Market segmentation allows the marketer to identify the existing marketing opportunities. As such, he can identify the needs of each market segment and examine how the current offerings meet the expectations and needs of consumers in a particular segment. If consumers derive low level of satisfaction from the current market offerings then an excellent market opportunity exists. In this case, the company will improve the quality of the products to meet the needs and expectations of the customers. The knowledge about the existing market segments allows the marketer to allocate funds for various markets. The knowledge about the different market variables serves as a better marketing tool for allocating funds to various consumer groups. Market segmentation allows the firm to modify and improve the products to appeal to the target market segment. Besides, segmentation allows the business organization to set realistic sales targets. Segmentation also allows the company to identify the most profitable markets and those that require special attention. Segmentation will allow the firm to utilize resources effectively thus will help it in dealing with competition.
Market segmentation increases operational costs for the firm. The firm may experience proliferation of goods in its attempt to serve different market segments. Besides, the firm will be obligated to maintain a larger inventory to allow it serve all the markets. The promotion and distribution costs are likely to rise as the firm will be utilizing separate programs in different markets segments. Furthermore, the investments made in a particular market segment may go into waste incase the preferences and needs of the customers change.
The Value of Segmentation to the Organization and the Consumers
Most companies understand that consumers are not homogeneous and must be approached in different ways (Anderson, Narus& Van, 2006). Every consumer has a personal preference, needs, behaviors and resources. Firms know that they cannot provide for the interest of all consumers in one single market. As such, they have differentiated their markets to create value for their products. Market segmentation benefits the business in the following ways:
Satisfaction of the Needs and Wants of the Customers
Customers have different tastes and preferences. The wants and needs cannot be met in a single market segment. Therefore, various market segments allow business organizations to meet the demands of different types of customers. Market segmentation allows firms to utilize different promotional strategies to reach potential customers (Anderson, Narus& Van, 2006). Besides, the company may decide to use different incentives in the market segments to promote customer loyalty. Furthermore, the various pricing models are also used in different market segments to satisfy the needs and expectations of a given segment. For instance, KFC sells its products at a higher cost in the developed countries compared to the developing countries. Most people in the developed countries indulge in luxury compared to those who come from developing countries. This allows the firm to create value for its products by meeting the needs of people who have both low and high income. KFC provides the same type of chicken and other types of foods, but it is usually adjusted to meet the needs of different market segments.
Attract More Customer Groups
Market segmentation allows firms to attract consumers who would opt to look for specialized products among other market players. Through market segmentation, firms would find it easy to create a specialized market niche that would attract more customers (Anderson, Narus& Van, 2006). Market segmentation also improves customer’s loyalty. The business can make the consumers move along the loyalty ladder. This is where firms introduce starter products and encourage their customers to make progress up the ladder to consume their premium products. This will give the company an opportunity to learn the needs and wants of its customers as it plans to offer more advanced products. For instance, KFC has been able to attract Muslim consumers by introducing Halal foods in its restaurants (Alserhan &Alserhan, 2012). When KFC learned about their needs, it started to produce Halal foods to prevent them from moving to other specialized niche players. As such, it has been able to create more value for its products by attracting more customers. Today, most Muslims have become loyal to the KFC foods because they feel that their needs have been catered for.
Sustainable Relationship between the Customer and the Business
Customers change their tastes and preferences from time to time. Market segmentation allows a business organization to serve customers throughout their life cycle. Business organizations that operate in segmented markets can offer products that satisfy the needs of their clients at every stage of their life cycle (Anderson, Narus & Van, 2006). In this case, the business will be able to provide special solutions to the needs of its customers. For instance, KFC offers foods that cater for the needs of customers at all phases of their life cycle. They offer foods that meet the needs of children, the youth, and the older adults. This has allowed KFC to appeal to people from all demographics. As such, it has been able to increase its market share by providing for what its customers needs at the right time and the right place (Sophonsiri & Polyorat, 2009). On the other hand, the customers also identify themselves with the brand of the company. They have become loyal to KFC, since their needs are met at every stage of their life cycle.
Market segmentation allows firms to create more value for their products by becoming more innovative (Cravens & Piercy, 2006). Different market segments do not have similar needs, tastes, and preferences. In this case, the business has to get innovative so as to provide products that meet the specifications of each market segment. For instance, customers from upper class will require more luxurious products compared to those who come from the middle class or lower class. Therefore, understanding the specific needs of each market segment allows firms to become innovative so as to produce products that meet the specifications of each market segment (Sophonsiri & Polyorat, 2009). For instance, KFC provides products that address the needs and wants of people from both upper class and social class. Besides, it has introduced economy foods to cater for the needs of the lower class consumers. This allows customers from all social classes to find products that meet their specifications at one place.
Increased Marketing Efficiency
Market segmentation makes it easy for firms to reduce the cost involved in marketing. Segmentation allows them to avoid costs incurred in market research while determining who to sell to and the market strategy to be utilized to appeal to all customers. Firms that have segmented their markets are aware of the products and services to provide, the people they should sell to, the strategies to be utilized to appeal to their customers and when to sell their products (Anderson, Narus & Van, 2006). As such, customers can get the right quality of products and the right place. Besides, the products are offered at the right prices and quantity. Therefore, consumers do not suffer from shortages.
Measurable– Before conducting market segmentation, the firm ensures that it is in a position to measure the purchasing power of its customers. This will give the business an opportunity to determine the quantity and type of foods to supply within a particular market segment.
Substantial– This criterion enables the firm to determine the size of the market segment. Besides, it would be able to identify whether the market would be profitable and can be sustained in the long run.
Accessibility– Before dividing the markets, the company must ensure that it is in a position to reach its consumers through various methods of marketing communication.
Differentiation– This criterion is used to determine the difference between various market segments. Besides, the firm uses differentiation to determine how the customers will respond to different marketing mix strategies and programs.
Actionable– This criterion is employed by KFC to determine whether the marketing programs in place will be adequate for the selected market segment.
How KFC Utilizes Segmentation Theory
KFC utilizes the above marketing criteria to divide its market into various segments. The firm’s market segmentation is done based on demographic, geographic, behavioral, and psychographic aspects (Anderson, Narus& Van, 2006). Initially, the company utilized niche marketing to promote its products to the consumers. But as a result of increased competition, the company changed its marketing strategy in order to expand its market share.
Geographic segmentation refers to the process of dividing the market into various geographical regions such as states, cities, neighborhoods, and countries (Cravens &Piercy, 2006). KFC has different outlets in different countries. The products are sold depending on the needs of customers in a given geographic unit. Moreover, the geographic unit must be measurable to allow the firm to function efficiently. Most outlets of KFC are located in the urban areas. This gives the company an opportunity to reach as many customers as possible (Sophonsiri&Polyorat, 2009). KFC operates several stores in the main cities of the world. Its products are designed in such a way that they accommodate the cultural differences of people residing in these towns.
Demographic segmentation refers to dividing up the market based on the income, gender, religion, family, race, occupation, and nationality of the consumers (Cravens & Piercy, 2006). KFC has demographically segmented its market to cater for the different customers who reside in various cities where it has its outlets. KFC considers the following demographic factors in its market segmentation.
Age is one of the important demographic variables that are used in market segmentation. The needs and wants of customers always change as their age advances (Anderson, Narus & Van, 2006). KFC does not consider age limit. It provides products that suit people of all ages. This has given it an opportunity to expand rapidly in different countries, since it can accommodate the needs of individuals from all ages including kids, youths, and elderly people. The firm also considers the life cycle of its consumers (Sophonsiri & Polyorat, 2009). They are served with the right kind of food that they require at that particular time. For instance, children are always served a meal with toys while elderly person – veggie burger. This gives it a competitive advantage over other fast food restaurants that do not consider the life cycle of their clients. In this case, several customers are interested in the foods, since their needs are always met.
Income is also another important demographic variable that KFC considers while conducting market segmentation. An individual’s level of income determines their ability and willingness to purchase products and services. Income is the primary decisive factor that producers consider before availing a particular type of product to consumers. Income influences the purchasing power of consumers. The customers who earn low incomes may not be in a position to purchase the products which they desire (Anderson, Narus& Van, 2006). On the other hand, consumers who receive a substantial amount of income may not be satisfied with the existing goods and services provided in the market. In this case, the products offered by KFC target people from the upper class who have a high income. However, they have introduced the economy meals to attract individuals who earn low incomes or come from the middle and lower class. Adding foods that appeal to people who come from the middle and lower class is a competitive strategy that would allow the company to create more value for its products and serve a variety of market segments.
Social class plays an important role in market segmentation. It is important for a firm to understand the social class of a particular people before they introduce a product in a given market segment (Anderson, Narus & Van, 2006). Most of the products offered by KFC are expensive. As such, their market strategy targets people coming from the upper class, middle class, and lower class. In most of their market segments, their products are out of reach for people who belong to the poor working class. People from the poor working class consider their products as a luxury. In this case, they have not created value for their products for people from this class. The demographic segmentation of KFC also focuses on the ethnic group of individuals where they operate. For instance, the company introduced Halal Foods to cater for the interests of Muslims who are interested in their products (Alserhan & Alserhan, 2012). This has enabled the company to expand its market share and appeal to people from different ethnic backgrounds.
Psychographic market segmentation refers to the market division based on various characteristics such as lifestyle, social class, and personality characteristics (Cravens & Piercy, 2006). KFC has divided its market based on various psychometric variables such as personality characteristics and lifestyle. Concerning personality characteristics, its products target the authoritarian and ambitious consumers (Sophonsiri & Polyorat, 2009). Under social class, the firm has segmented its market to meet the needs of people from the middle and upper class. Psychometric segmentation is the most important type of market segmentation utilized by KFC to appeal to the different lifestyles of its consumers (Anderson, Narus & Van, 2006). For instance, people from both upper and middle class are interested in super-quality products. KFC can provide super-quality chicken products that appeal to those who enjoy luxury. As such, the firm has gained trust from the middle and upper class. Most consumers from these two social classes identify themselves with the brand created by KFC.
Behavioral market segmentation is where a market is divided based on the customer’s level of knowledge, attitude, and response towards a particular product (Cravens & Piercy, 2006). Under behavioral segmentation, KFC has differentiated price, quality, and taste. In the market, there are customers who are taste conscious, quality conscious, class conscious and those who are conscious about the quality and price (Sophonsiri & Polyorat, 2009). KFC is also aware of the needs of its consumers and provides products that satisfy their wants. KFC also offers foods that are suited for different occasions. For instance, they allow their customers to celebrate various occasions where they are provided with foods that meet the expectations of their clients. They offer popcorn chicken for couples who are celebrating Valentine at a discounted rate. Behavioral market segmentation has enabled KFC to attract customer’s loyalty, since they are provided with what they require at the right time. The ability of KFC to divide its market based on various characteristics has allowed it to remain one of the most famous international fast food company.
The 4Ps Marketing Strategy of KFC
KFC operates in a competitive market and must utilize 4ps marketing mix to allow it remain ahead of its competitors in the industry. KFC serves fried chicken as its fried product. Other chicken products include crispy chicken and barrel chicken. The firm serves different types of chicken to appeal to its customers in various geographical locations. For instance, in Malaysia KFC serves barrel chicken this consists of 21 pieces of chicken. Besides, KFC has also introduced porridge made of cereals and grains to meet the demands of the Malaysian who love having porridge in the morning.
Price is another marketing mix strategy used by the firm to remain competitive in the market. KFC utilizes market skimming to determine price for its products. Most products of KFC are priced highly and majorly target the major class and middle class individuals. However, the company has introduced economy foods whose prices are relatively low to suit the demands and needs of the lower class people. The prices of the foods provided by KFC are always inclusive of the variable and fix costs. Such costs include exercise duty and the tax imposed by the government in various regions where it operates. The company compares its price with those of the competitors such a McDonalds and Subway before deciding on the appropriate price to settle on. For instance, if McDonald’s provides similar product at a lower price, KFC will also lower the price to retain its customers.
Place is another factor that plays a critical role in market competition. It refers to the channels of distribution, location and the intermediaries involved before the final product reaches the consumer. Most of the outlets of KFC can be accessed easily by the consumers. Most outlets are located in the major cities at strategic locations where customers can easily access. KFC also locates its outlets next to schools, market areas, colleges, and cinemas so as to attract more customers.
Promotion also plays an important role in ensuring that the products reach the intended customers in the market. Promotion is also used to educate the customers about the existence of a product and their usage. KFC uses reminder advertisements to inform consumers about the different products they offer in the market to encourage repeat purchase. The company utilizes a slogan known as finger lickin to promote its products in various market segments. Finger lickin is an advert that is used to remind consumers of their previous experience about their products. This encourages to do repeat purchase. The company also utilizes sponsorship as a promotional strategy to increase the image of its brand in the market. For instance, it sponsors a cricket team in Australia. Besides, KFC uses sales promotion to reach potential customers. Other promotional strategies utilized by the firm include coupons, exhibits and entertainment to promote its products and increase its sales.
Therefore, market segmentation plays a vital role to the business organization and customers. It enables business organizations to expand their market share and maximize their profit potential (Cravens & Piercy, 2006). Besides, firms can attract new customers since it can understand their market needs. On the other hand, market segmentation provides consumers with an opportunity to get the right quality and quantity of goods to the right place. Market segmentation is an effective marketing strategy which every organization should embrace to remain competitive.
Also study: Project Report on KFC MARKETING STRATEGIES
- Alserhan, B.A. and Alserhan, Z.A., 2012. Researching Muslim consumers: do they represent the fourth-billion consumer segment? Journal of Islamic Marketing, 3(2), pp.121-138.
- Anderson, J.C., Narus, J.A. and Van Rossum, W., 2006. Customer value propositions in business markets. Harvard business review, 84, pp.1-4.
- Armstrong, G., 2009. Marketing: an introduction. Pearson Education.
- Chesbrough, H., 2007. Business model innovation: it’s not just about technology anymore. Strategy & leadership, 35(6), pp.12-17.
- Christopher, M., 2005. Logistics and supply chain management: creating value-adding networks. Pearson education.
- Clow, K.E., 2007. Integrated Advertising, Promotion and Marketing Communications, 4/e. Pearson Education India.
- Cravens, D.W. and Piercy, N., 2006. Strategic marketing (Vol. 7). New York: McGraw-Hill.
- Gummesson, E., 2011. Total relationship marketing. Routledge.
- Kennedy, J., Worosz, M., Todd, E.C. and Lapinski, M.K., 2008. Segmentation of US consumers based on food safety attitudes. British food journal, 110(7), pp.691-705.
- Kotler, P., Keller, K.L., Manceau, D. and Hémonnet-Goujot, A., 2015. Marketing management (Vol. 14). Englewood Cliffs, NJ: Prentice Hall.
- Kotler, P. and Armstrong, G., 2010. Principles of marketing. pearson education.
- Lafferty, B.A. and Goldsmith, R.E., 2005. Cause–brand alliances: does the cause help the brand or does the brand help the cause? Journal of business research, 58(4), pp.423-429.
- Madden, T.J., Fehle, F. and Fournier, S., 2006. Brands matter: An empirical demonstration of the creation of shareholder value through branding. Journal of the Academy of Marketing Science, 34(2), pp.224-235.
- Osterwalder, A. and Pigneur, Y., 2010. Business model generation: a handbook for visionaries, game changers, and challengers. John Wiley & Sons.
- OlyNdubisi, N., 2007. Relationship marketing and customer loyalty. Marketing intelligence & planning, 25(1), pp.98-106.
- Priem, R.L., 2007. A consumer perspective on value creation. Academy of Management Review, 32(1), pp.219-235.
- Sophonsiri, S. and Polyorat, K., 2009. The impact of brand personality dimensions on brand association and brand attractiveness: the case study of KFC in Thailand. Journal of Global Business and Technology, 5(2), p.51.
- Steenkamp, J.B., 2014. How global brands create firm value: the 4V model. International Marketing Review, 31(1), pp.5-29.
- Sun, S., 2009. An analysis on the conditions and methods of market segmentation. International journal of business and management, 4(2), p.63.
- Ulwick, A.W., 2005. What customers want: Using outcome-driven innovation to create breakthrough products and services (Vol. 71408673). New York: McGraw-Hill