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PRODUCT DIFFERENTIATION STRATEGIES AND CUSTOMERS’ PATRONAGE OF FAST FOOD RESTAURANTS IN ABIA STATE, NIGERIA

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Product Code: 00007744

No of Pages: 176

No of Chapters: 1-5

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ABSTRACT

Building strong differentiation strategy to attain competitive advantage is a top priority. Amongst many firms but it is not always an easy task to accomplish. Due to the increased globalization and competition, the management of strategy has become of importance and thus presents an interesting area to study. With the adoption of effective product differentiation strategies, many companies may compete effectively and efficiently. The study, therefore, set out to ascertain the effect of product differentiation strategies on customers’ patronage of selected fast food restaurants in Abia State, Nigeria. The specific aims were to: examine the effect of product size on customers’ patronage of selected fast food restaurants in Abia State; analyze the effect of product price on customers’ patronage of selected fast food restaurants in Abia State; ascertain the effect of continuous product innovation on consumers’ patronage of selected fast food restaurants in Abia State; determine the effect of physical environment on consumer patronage of selected fast food restaurants in Abia State; and examine the combined effect of product size, product price, continuous product innovation, and physical environment on customer patronage of selected fast food restaurants in Abia State. In this study, the survey research method was adopted as the scientific approach in the study. The study was carried out in Abia State of Nigeria. All customers of selected fast food restaurants in Aba and Umuahia in Abia State formed the population of the study. Using a model developed by Israel (2009), a sample size of 380 customers of the selected fast foods in Abia State were used. Judgmental sampling method was employed in the study. Both simple and multiple regression model through the electronic SPSS software version 20.0. Study findings revealed that product size is statistically significant and positively related to customers’ patronage of selected fast food restaurants in Abia State. Simple linear regression analysis in the study also showed that product price is statistically significant and negatively influencing customers’ patronage of selected fast food restaurants in Abia State. Similarly, continuous product innovation is statistically significant and positively affecting customers’ patronage of selected fast food restaurants in Abia State. Based on the study findings, it was concluded that product differentiation strategies exert significant effect on customer patronage of fast food restaurants in Abia State of Nigeria. We therefore recommended that managers of fast food restaurants in Abia State need to make sure that they provide adequate satisfaction to their customers. In other words, they should pay more attention to customer satisfaction, since their survival in this dynamic environment is highly dependent on their ability to retain a larger customer base compared to their competitors. 





TABLE OF CONTENTS

Title Page                                                                                                                                i

Declaration                                                                                                                              ii

Certification                                                                                                                            iii

Dedication                                                                                                                              iv

Acknowledgement                                                                                                                  v

Table of Contents                                                                                                                   vii

List of Tables                                                                                                                          xi

List of Figures                                                                                                                         xii

Abstract                                                                                                                                  xiv

CHAPTER 1: INTRODUCTION                                                                                      1

1.1 Background of Study                                                                                                       1

1.2 Statement of Problem                                                                                                       3

1.3 Objectives of the Study                                                                                                    4

1.4 Research Questions                                                                                                           5

1.5 Research Hypotheses                                                                                                        5

1.6 Significance of Study                                                                                                       6

1.7 Scope of the Study                                                                                                           6

CHAPTER 2: REVIEW OF RELATED LITERATURE                                                          8

2.1 Conceptual Review                                                                                                           8

2.1.1 An overview of the differentiation strategy                                                                  8

2.1.2 Product differentiation strategy                                                                                                10

2.1.3 Physical differentiation strategy                                                                                    14

2.1.4 Differentiation as a business strategy                                                                            15

2.1.5. Factors that influence choice of differentiation strategy                                              17

2.1.6 Challenges of differentiation                                                                                         18

2.1.7 Customer patronage                                                                                                       18

2.1.8 The effect of product differentiation on firms’ performance                                        20

2.2 Theoretical Framework                                                                                                     21

2.2.1 Product differentiation theory                                                                                       21

2.2.2 Innovation theory                                                                                                          22

2.2.3 Porter’s generic strategy                                                                                                23

2.3 Review of Empirical Studies                                                                                            24

2.4 Summary of Literature Review                                                                                        27

CHAPTER 3:  METHODOLOGY                                                                                     29

3.1 Research Design                                                                                                               29

3.2 Study Area                                                                                                                        29

3.3 Population of the Study                                                                                                    30

3.4 Sample Size Determination                                                                                               30

3.4.1 Sampling procedure and technique                                                                                30

3.5 Sources of Data Collection                                                                                               31

3.5.1 Instrument of data collection                                                                                         31

3.6 Validity of the Instrument                                                                                                31

3.7 Reliability of the Instrument                                                                                             32

3.8 Method of Data Analysis                                                                                                 32

3.9 Model Specification                                                                                                          32

CHAPTER 4: RESULTS AND DISCUSSION                                                                35

4.1 Presentation of Data                                                                                                         35

4.1.1 Questionnaire distribution and return                                                                            35

4.1.2. Sex of respondents                                                                                                       35

4.1.3. Age bracket of respondents                                                                                          36

4.1.4. Marital status of respondents                                                                                        36

4.1.5. Educational background of respondents                                                                      37

4.1.6. Occupational status of the respondents                                                                                    37

4.1.7. Years of respondents’ patronage of the studied fast food restaurants                         38

4.1.8. Respondents’ monthly income level                                                                             38

4.1.9. Frequency of patronage of the studied fast food restaurants in Abia State                 39

4.2 Test of Hypotheses                                                                                                           46

4.2.1 Effect of product size on customers’ patronage of selected fast food restaurants

in Abia State                                                                                                               47

4.2.2 Effect of product price on customers’ patronage of selected fast food restaurants

        in Abia State                                                                                                                   48

4.2.3 Effect of continuous product innovation on consumers’ patronage of

selected fast food restaurants in Abia State                                                               49

4.2.4 Effect of physical environment on consumer patronage of selected

         fast food restaurants in Abia State                                                                                40

4.2.5 Effect of product size, product price, continuous product innovation,

and physical environment on customer patronage of selected

fast food restaurants in Abia State                                                                             51

4.3 Discussion of Result                                                                                                         53

CHAPTER 5: SUMMARY, CONCLUSION AND RECOMMENDATIONS             56

5.1 Summary of findings                                                                                                        56

5.2 Conclusion                                                                                                                        57

5.3 Recommendations                                                                                                            58

5.4. Contribution to knowledge                                                                                              59

5.5 Areas for Further Research                                                                                               59

References                                                                                                                              60

Appendix





 

LIST OF TABLES

4.1    Distribution and return of questionnaire                                                                        35

4.2.    Frequency distribution showing the Sex of customers of the studied selected

          fast food restaurants in Abia State of Nigeria                                                              35

4.3.   Frequency distribution showing the age bracket of customers of the studied

         selected fast food restaurants in Abia State of Nigeria                                                 36

4.4.  Frequency distribution showing the Marital Status of customers of the studied

        selected fast food restaurants in Abia State of Nigeria                                                  36

4.5.   Frequency distribution showing the educational background of customers of the

          studied selected fast food restaurants in Abia State of Nigeria                                   37

4.6.  Frequency distribution showing the occupational status of the customers of the

        studied selected fast food restaurants in Abia State of Nigeria                                     37

4.7.  Frequency distribution showing the customers’ years of patronage of the studied

        fast food restaurants                                                                                                       38

4.8.  Frequency distribution showing the monthly income level of the customers of the

       studied selected fast food restaurants in Abia State of Nigeria                                      38

4.9.  Frequency distribution showing the frequency of patronage of the studied fast

        food restaurants in Abia State                                                                                        39

4.10. Frequency distribution showing responses on product differentiation attributes

         that are important in fast food restaurant patronage                                                     40

4.11. Frequency distribution showing responses on product size in the studied fast

         food restaurants in Abia State, Nigeria                                                                         41

4.12. Frequency distribution showing responses on product price in the studied fast

         food restaurants in Abia State, Nigeria                                                                         42

4.13. Frequency distribution showing responses on continuous product innovation in

          the studied fast food restaurants in Abia State, Nigeria                                              43

4.14. Frequency distribution showing responses on physical environment of the studied

         fast food restaurants in Abia State, Nigeria                                                                  44

 

 

 

4.15. Frequency distribution showing responses on customer patronage of the studied

        fast food restaurants in Abia State, Nigeria                                                                   45

4.16. Regression analysis showing the effect of product size on customers’patronage

         of selected fast food restaurants in Abia State                                                              47

4.17. Regression analysis showing the effect of product price on customers’ patronage

         of selected fast food restaurants in Abia State                                                              48

4.18.  Regression analysis showing the effect of continuous product innovation on

          consumers’ patronage of selected fast food restaurants in Abia State                         49

4.19. Regression analysis showing the effect of physical environment on consumer

        patronage of selected fast food restaurants in Abia State                                              50

4.20. Multiple regression analysis showing the effect of product size, product

         price, continuous product innovation, and physical environment on customer

        patronage of selected fast food restaurants in Abia State                                              51

 

 

 

 

 


 

LIST OF FIGURES

1.         Conceptual framework showing the relationship between product differentiation

strategies and customer patronage                                                                              21

2.         Heuristic model showing the relationship between product differentiation

strategies and customer patronage                                                                              59

 

 

 

 


CHAPTER 1

INTRODUCTION


1.1 BACKGROUND OF STUDY

In recent times, the fast food industry in Nigeria has experienced vast growth. The fast food industry in Nigeria became prominent in the 1970s. In 1973, Nigeria’s oldest fast food chain Mr. Biggs, owned by UAC, was founded and the restaurant was arguably the largest functioning fast food restaurant up until the 80s. In the 80s and 90s, other fast food companies such as Mama Cass, Big Treats, Tastee Fried Chicken, Tantalizers and Sweet Sensation were in operation in Nigeria.

For Nigeria’s fast-food restaurants, the need to compete against one another is borne out of a desire to attract new customers, and also to satisfy and keep their existing customer base. Stewart (1996) writes that successfully implemented customer retention strategies are a point of competitive advantage, which means that the customer should always be treated as king, and should be at the core or heart of the operations of every business. For some of the fast-food restaurants, customer service is a key competitive strategy, while for some others, customer service is not very high on their agenda, and while the latter operate as if it is still a seller’s world, this may bath case for those restaurants operating in towns where there is less competition.

Matanmi and Awodun (2013) listed the competitive weapons of Nigerian fast-food restaurants as including taste, prices, environment, class sensation, visibility and availability of parking space. They concluded by saying that for the restaurants, the critical factor remains the quality of products provided to customers at affordable prices. These classifications would appear to be consistent with the strategies adopted by the major players in the sector; this is because lesser-known operators are not so much concerned with long-term brand building efforts that may be eroded by poor product and service offerings. Hence the need for adoption of differentiation strategies by these fast food enterprises as a tool for competitive advantage.

Differentiation in business refers to the art of marketing a particular product or service in a way that makes it stands out against other products or services. This involves differentiating it from competitors' products as well as a firm's own product/service offerings. The concept was proposed by Edward Chamberlin in his 1933 Theory of Monopolistic Competition. Walters and Knee (1989), and Johnson and Scholes (2002) conducted a research and found out that distinctive marketing competencies are skills which businesses can develop to form the basis for competitive advantages over their competitors.  This therefore means that differentiation strategy has the potential of creating competitive advantages to a firm which leads to improved performance of the firm and increases consumer patronage.

Product differentiation is a competitive business strategy whereby firms attempt to gain a competitive advantage by increasing the perceived value of their products and services relative to the perceived value of other firm's products and services (Rahman, 2011). Product differentiation is prevalent throughout the financial world. Within most production zones, a wide range of differentiated products are available in the market place. This is evident when one walks into a store. One encounters different products for instance milk which comes in different varieties like fresh milk, mala and yoghurt all being sold by different companies. A seed sale unit for example a seed agent has different seed types which come from different companies. According to Rodney (2010), a homogeneous product is one that cannot be distinguished from competing products from different suppliers. The opposite of a homogeneous product is a differentiated product. Dirisuet al., (2013) stated that while there are numerous ways to differentiate brands, identifying meaningful product driven differentiators can be especially fruitful in gaining and sustaining a competitive advantage. Firms in the same industry, for example the seed industry, produce products that differ in performance and/or quality leading to production of low cost/low quality seed products or higher cost/high quality seed products. Often the same firm will sell a range of different products that differ in performance or quality and even service support from the seed producers.Some of the differentiation strategies adopted by organizations to foster increased customer patronage and loyalty evolve around interplay of various elements of the retail mix. These include: offering quality products, wide selection, assortment, strategic positioning, after-sales-service, quality service, convenient location, parking space, attractive design and layout, conducive atmosphere, sales incentives, convenient operating hours, own branding/value addition and a one-stop-shop (Carpenter and Moore, 2006). Economically valuable bases of product differentiation can enable a firm to increase its revenues, neutralize threats and exploit opportunities.


1.2 STATEMENT OF THE PROBLEM

Some streams of research advocate the value of being different. For example, the population ecology perspective argues that firms can avoid intense competition for limited resources by avoiding densely populated regions or by differentiating themselves fromtheir competitors (Baum and Mezias, 1992; Hannan et al., 1990).The resource-based view also emphasizes the value of rarity or uniqueness in achievingcompetitive advantages (Barney, 1991).These studies revealed the existence of differentiation strategies in the firms studied. Other studies have found that the link between differentiation strategy and performance was lessened by situational variables, such as a focus on manufacturing and profitability (Davis and Schul, 1993; Zahra, 1993).

However, it is not clear whether differentiation strategies adopted in product size, product price, continuous product innovation, and physical environment have any effect on the customer patronage. Limited research has been carried out in this area to determine the effect of these strategies on customer patronage, and thus a gap of knowledge. This therefore justifies the need for further research in this area. Thus, the research question this study sought to answer is: what is the effect of product differentiation strategies on customers’ patronage of fast food restaurants in Abia State, Nigeria?

The fast food restaurant industry was chosen owing to the fact that there has been a rapid increase in the number of such businesses in Abia State and Nigeria in general which is propelled by the strong forces of globalization and urbanization. They have branded and positioned themselves by capitalizing on the superior value of the unique features, products and services and thus enjoy more profits differentiating them from rivals to improve sales performance.

Clearly, based on these observed gaps in the use of product size, product price, continuous product innovation, and physical environment as differentiation strategies by fast food restaurants, there is a need for more empirical evidence pertaining to the effect of product differentiation strategies on customers’ patronage of fast food restaurants in Abia State, Nigeria. The need for studies in a State like Abia became more important in view of differences in socioeconomic characteristics of the population. These differences can lead to a different set of factors influencing customers’ patronage of fast food restaurants in Abia State, Nigeria. This research endeavoured to fill the gap by discussing the effect ofproduct differentiation strategieson customers’ patronage of fast food restaurants in Abia State, Nigeria.


1.3 OBJECTIVES OF THE STUDY

The main objective of this study was to ascertain the effect of product differentiation strategies on customers’ patronage of selected fast food restaurants in Abia State, Nigeria.

The specific aims were to:

i.                    examine the effect of product size on customers’ patronage of selected fast food restaurants in Abia State;

ii.                  analyze the effect of product price on customers’ patronage of selected fast food restaurants in Abia State;

iii.                ascertain the effect of continuous product innovation on consumers’ patronage of selected fast food restaurants in Abia State;

iv.                determine the effect of physical environment on consumer patronage of selected fast food restaurants in Abia State;

v.                  examine the combined effect of product size, product price, continuous product innovation, and physical environment on customer patronage of selected fast food restaurants in Abia State


1.4 RESEARCH QUESTIONS

The following questions guided this research work:

i.        What is the effect of product size on customers’ patronage of selected fast food restaurants in Abia State?

ii.      What is the effect of product price on customers’ patronage of selected fast food restaurants in Abia State?

iii.    What is the effect of continuous product innovation on consumers’ patronage of selected fast food restaurants in Abia State?

iv.    What is the effect of physical environment on consumer patronage of selected fast food restaurants in Abia State?

v.      What is the multiple effect of product size, product price, continuous product innovation, and physical environment on customer patronage of selected fast food restaurants in Abia State?


1.5 RESEARCH HYPOTHESES

The following research hypotheses were tested in the study.

Ho1: Product size does not have any significant effect on customers’ patronage of selected fast food restaurants in Abia State

Ho2: Product price does not have any significant effect on customers’ patronage of selected fast food restaurants in Abia State.

Ho3: Continuous product innovation does not have any significant effect on consumers’ patronage of selected fast food restaurants in Abia State.

Ho4: Physical environment does not have any significant effect on consumer patronage of selected fast food restaurants in Abia State

Ho5: Product size, product price, continuous product innovation, and physical environment do not have any significant effect on customer patronage of selected fast food restaurants in Abia State

1.6 SIGNIFICANCE OF STUDY

The findings of this study would benefit the fast food owners, product manufacturers/suppliers, entrepreneurs and other businessmen in gaining new knowledge of developing effective and efficient differentiation strategies aimed at improving consumer patronage and loyalty.  The study findings would also provide the owners of the fast foods with an opportunity to further understand available differentiation strategies that can be employed to boost sales performance. The work will be made available to these groups of beneficiaries through seminars, workshop, conferences, publications in journal and textbooks. lecturers/teachers will benefit from the findings. They would use this work in teaching their students in their various schools. The findings can also be used as reference materials to guide future studies.

 

1.7 SCOPE OF THE STUDY

The main objective of this study was to analyse the effect of product differentiation strategies on customers’ patronage of selected fast food restaurants in Abia State. The study examined certain product differentiation strategies applied by the selected fast food enterprises and how they influence customers’ patronage. Geographically, the study was carried out among selected fast foods in Aba and Umuahia Metropolis, Abia State. Aba and Umuahia were the main research areas because of a high concentration of fast foods enterprises located in these cities. The customers of six (6) selected fast foods enterprises formed the unit of analysis for the study. The studied fast food enterprises examined were Hoeffers, De choice, Crunchies (Umuahia), Romeo, Apples, and Noa (Aba).

 

 

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