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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