Please note! This essay has been submitted by a student.
South Africa has one of the most developed economies in Southern Africa with the second highest GDP of all African countries in 2017. With that comes a higher amount of disposable income, and a tertiary market for Quick Service Restaurants (QSRs)fast food. As you can see by the chart below, that shows the number of stores of each franchise in South Africa, all the international suspects are prevalent, with KFC being the most popular for reasons this research will show.
Chicken based fast food remains the most eaten fast food in South Africa for multiple reasons. Using a streetwise 2 combo as an example, it is energy dense (Calories 861), relatively cheap (R29,50), flavourful, kosher in all religions and highly addictive. In theory, any one person can make these foods at home, but the costs would be higher and not everyone has the equipment to do so. These factors make the fast food market one of the biggest contributors to most countries’ GDP. The basic categories for fast food in South Africa are, burgers, chicken, and pizza. And using the chart above we can see in the top five we have two Chicken based QSRs, Nandos and KFC. These two provide two very different products but do share a certain target market of families who want quick easy and tasty foods. The target market they don’t share however is the low income younger market, which KFC dominates with its cheap meals. Nandos however is a restaurant and provides a more upscale service and atmosphere attracting a different market of families who want to go out for dinner without breaking their budgets. Steers and Wimpy, also in the top 10 are both considered burger places although Wimpy provides a wider range of food and focus partially on breakfasts. Yet again their difference lies in their target markets, sharing a target market but each also having a different target market. Steers is a QSR with a delivery service and sells quick easy flavourful food. Whereas Wimpy is a restaurant that provides takeaways but also a sit-down service as well as a wider variety and breakfast foods. South Africa has a wide variety of cultures and peoples and each have their favourite place to go, which allows most Fast Food places to succeed, but let’s look at the factors involved.
The market environment that allows the success and continued growth of the fast food industry would include 5 primary environments working together.
The Political and Regulatory Environment. This environment involves regulations pertaining to every aspect of the production, marketing and selling of fast food. Many labour laws are similar to the United Kingdom’s labour laws, and the culture of strikes in south Africa ensures businesses pay a fair minimum wage. The two biggest political and regulatory problems in South Africa is, corruption and the weaker Rand. These however do not often affect the fast food market as extensively as other businesses. Regulations in the business environment is however up to international standards, with a focus on the fair treatment of employees and profitability of the business.
The Economic Environment. The South African economy has recently been downgraded to junk status. Simply put, this means money is going to become a problem for more people. In the last year alone, the country has seen unemployment rise, gas prices rise, VAT increase to 15%, it is more expensive to exist. However, the researcher has found that despite the growing cost of living and economic difficulties, fast food markets continue to show growth. This is likely as a result of people working longer hours, both parents in a family working and the lack of time needed to cook meals. The ease of ordering fast food and possibly having it delivered becomes more attractive the busier people get. The other side of the spectrum is people who consider fast food to be a treat to be enjoyed on special events. These people are unlikely to change these habits unless the economic downturn directly affects them.
The Competitive Environment. Also known as the level of rivalry, this is an important factor any new entrants into the market would have to take into consideration. Most participants in the fast food market have a long history in south Africa and have solidified themselves in the community. KFC, Chicken Licken, Nando’s, (the top 3 chicken based QSRs), All sell chicken, but they have very different themes, and target markets. If a new entrant, such as Popeyes, decides to enter the market, it would have to compete with 3 well known well settled franchises. South Africa however still has a growing appetite for fast food, and according to multiple researchers, there is space for new entrants.
The Technological Environment. Most South African franchises originate in other countries so their technology match that of first world countries.
The Social and Cultural Environment. South Africa is a mixing pot of cultures so there are multiple markets for the variety of people. The largest market is lower to middle class, so fast food needs to be cheap enough for a large part of the population to enjoy. There is also a wide variety of religions, which is part of the reason chicken is as popular as it is in South Africa, it is kosher in most if not all religions.
What influences people to buy fast food.
Marketing is about putting the right product, at the right price, at the right place, at the right time. It mostly consists of manipulating buyer behaviour using certain stimuli, as shown below. This research will be focusing on KFC specifically for the 7ps.
Price: The price elasticity of demand is the effect an increase or decrease of price will have on the demand of a product. According to an Article by the BBC the fast food market is an excellent place to see this theory in action. The prices are incredibly competitive, and therefore elastic, so a change in price will cause a change in demand. In the international market, pricing wars consistently drag prices down. The fast food market is mostly dominated by oligopolies such as KFC and McDonalds, which is why they can afford to lower prices. KFC specifically knows its target market is largely low-income families and therefore keeps their prices low enough to keep that market. Like the Aforementioned Streetwise 2 combo for R29.50, which is quite affordable for a full meal. KFC uses demographic segmentation to serve the market as per each customer needs & wants. The consumers of KFC are the young as well as young adults.
Promotion: Promotion is the part of marketing where the product is advertised somewhere where potential customers can see for a price that attracts buyers. Consumers are lured by surprisingly cheap deals, which are especially attractive to teenagers and young adults with low income. But sales promotions such as discounts and coupons often offer only short-term benefits to consumers and are usually not effective among middle-age adults. But if the promotion is offered for a longer period of time, it can greatly influence buyer behaviour. Social media is also a new frontier for advertisement and greatly influences younger generations to buy certain types of fast food. KFC even has a Facebook page, and advertisements pop up quite often on Instagram even if you do not follow them.
Physical evidence: Services as we know are largely intangible when marketing. However, customers tend to rely on physical cues to help them evaluate the product before they buy it. In the fast food world this relates to the ambience, decorations and theme. In the case of KFC, Colonel Sanders is a good example of this, he represents the brand. KFC has other themes, like their colour scheme which is mostly black red and white. We Learn to associate these colours with this restaurant which is a long-term method of advertising.
People: People buy from people they like: bad customer service can greatly reduce our enjoyment of any product of service. Most of the customers can be defined as youngsters or young adults who want to shell out a minimum amount of money to have a delicious meal. This target market is not as sensitive to poor customer service as older generations but has access to social media. This means they are capable of unofficially slandering a fast food brand if the customer service was inadequate. Companies like KFC put their people through training programs and set up a complaint department to keep track of this.
Product: The proof is in the pudding, and in the case of KFC its in the fried chicken. A product is an item that satisfies a need or want. It is produced at a certain cost and has to be sold at a certain price to generate profit. Products need to be sold to a target market at the right price and therefore needs to have an appeal. The Appeal of KFC is flavour and convenience, which is the appeal of all Fast food. KFC has product appeal in their secret recipe, and cultural aspects to their food (Pap being an optional extra in South Africa). and the evidence of this can be found in their success as a brand in South Africa and the world.
Process: The process of producing and selling fast food needs to be as efficient as possible. Customers expect to get their food fast and easily with minimal effort, it is the appeal of Fast Food. This is why Drive throughs and also delivery services where created and implemented in most QSRs including KFC.
Place: Location is a very important aspect of the marketing function, it’s critical to evaluate what the ideal locations are to convert potential clients into actual clients. Convenience is the most important aspect of Fast food and having a location near where you work or live increases the convenience. Other aspects also affect where QSRs place their stores. Such as, foot traffic, and target markets, so KFC has stores in a wide variety of locations. From malls to bus stops all around the country, which makes it easy to buy from them. Franchises in First world countries use geographic information systems (GIS) to determine where to build new outlets. They compare all sorts of data overlays which allow them to see auto traffic, consumer demographics, safety information, commercial mix, and other factors.
Macro-economic factors influencing South African buyers.
South Africa is undeniably in the middle of an economic downturn that is having adverse effects on most aspects of its citizen’s lives. But, Fast food restaurants tend to fare better during an economic downturn than pricier restaurants do, but in long term recessions overall spending decreases. But economic downturns always have a cause, and a result. In the case of South Africa, the cause is definitely political instability as a result of a long list of scandals involving the Zuma administration. This caused the eventual junk status rating which led to a variety of issues from higher VAT to higher interest rates. Meaning most people have less disposable income and will cut unneeded spending. Many companies will downsize, worsening the unemployment issues in South Africa and with that also worsen poverty.
As part of this research I asked 15 people of Ages 15-20, a number of questions to analyse buyer behaviour for myself.
What is your Family’s most frequented fast food restaurant?
How many times a week does your family eat fast food?
Less than once a month
100% of people said No.
Through secondary research, the researcher found that the appeal of fast food is primarily convenience. Buyers are affected by economic changes but only large ones, smaller economic changes do not greatly affect buyer behaviour. There are various target markets that each QSR taps into and economic downturns and increased unemployment will affect one of the largest ones, this being low income households. Middle class households are less affected by economic factors and will continue to consume Fast food, lower income households may however completely stop. The economic effects of Junk status may also force some households to work longer hours and increase the need for quick easy food. A variety of factors also affect a buyer’s decision from advertising to location, and marketing is a complex science, so it is not exact.
Primary research confirmed this, the control group consisted of people in middle class families and therefore weren’t concerned about factors such as junk status, or rising crime rates, but were concerned with Health trends. It also showed the popularity of KFC among middle class households. However, most people did not care much for loyalty programs and delivery services, making the researcher question their actual effect on the fast food market. Most people also don’t believe they are affected by advertising, although research would show advertising is incredibly effective it is likely people simply do not notice the effect on them.
This research was interesting to put together but quite difficult to find. Finding articles and or information relating specifically to South Africa was incredibly difficult. However, it did give the researcher an interesting view on the nature of a market driven by people. If the researcher was going to consider a career in marketing this would provide an insight into the complexity of it.
Primary research was done on an anonymous verbal basis to reduce difficulty.