MacDonalds and SubWay

Submitted By: Ankit Singh

2011

Services Marketing

Mc Donald’s and Subway

Mc Donald’s and Subway

Table of Contents CORE SERVICE AND VARIOUS SUPPLEMENTARY SERVICES…………………………………………………………………………………..5 FACILITATING SERVICES ......................................................................................................................................... 8 ENHANCING SERVICES ......................................................................................................................................... 10 HARD AND SOFT SERVICE STANDARDS .................................................................................................................... 11 CHANNELS OF SERVICE DELIVERY ............................................................................................................................. 14 COMMUNICATION MIX ............................................................................................................................................ 16 SERVICE BLUEPRINTING............................................................................................................................................ 21 SERVICESCAPE .......................................................................................................................................................... 23 SERVICE QUALITY GAP MODEL AND QUALITY DIMENSIONS ................................................................................... 28 PRICING STRATEGY ................................................................................................................................................... 35 Critical Analysis ......................................................................................................................................................... 42

3

Mc Donald’s and Subway

Table of Figures Figure 1: SubWay - Flower of Service ........................................................................................................................ 6 Figure 3: Facilition Services ....................................................................................................................................... 7 Figure 2: McDonald's - Flower of Service .................................................................................................................. 7 Figure 4: Communication Mix ................................................................................................................................. 16 Figure 5: Role Of Communication Mix .................................................................................................................... 19 Figure 6: McDonald - Go Global Act Local ............................................................................................................... 20 Figure 7: Mc Donald's Blueprint .............................................................................................................................. 21 Figure 8: Subway-Blueprint ..................................................................................................................................... 22 Figure 9: Service Gap Model.................................................................................................................................... 28 Figure 10: Characteristics and Evaluation Outcomes .............................................................................................. 29 Figure 11: Strategies to influence expectations ...................................................................................................... 30 Figure 12: McDonald's Pricing ................................................................................................................................. 36 Figure 13: SubWay Pricing ....................................................................................................................................... 38 Figure 14 : SubWay & Mc Donald 's Pricing Strategies............................................................................................ 41

4

Mc Donald’s and Subway CORE SERVICE AND VARIOUS SUPPLEMENTARY SERVICES SUBWAY SUBWAY has come a long way in India since it opened its first restaurant in India. Young Indians have warmed to the image of the American chain, and made it one of their favorite places to swarm to, and hang out in. Subway has very successfully entered the Indian market and sustained its growth by developing a unique menu to appeal to the Indian taste. If you are a foreigner visiting India, you might be interested in indulging in some of the Indianite treats at Subway -- for example, the legendary paneer tikka sandwich. Also, as an Indian you might be interested in some of Subway’s Continental treats like the Italian B.M.T.

Subway offers a wide variety of submarine sandwiches and salads on its menu. It offers an assortment of vegetarian and non-vegetarian fares. They also cater to the health-conscious customers by providing them with 97% fat free subs. Subway offers a separate specialty menu for breakfast. Apart from subs and salads, they also provide side dishes like cookies, desserts and beverages.

Subway allows customization of sandwiches by offering a variety of gourmet breads, different kinds of flavored meat, fresh and exotic vegetables and variety of sauces, both low and high calorie. Following the “Think Global, Act Local” policy, it offers ingredients specific to the locations; for instance, it offers Halal meat in Hyderabad.

MCDONALDS McDonald's is without a doubt the world's largest and fastest growing restaurants in the world, serving food and drink to 38 million customers daily. Right from its inceptions through being multi-billion dollar quick service restaurant, hamburgers and fries have always been at the front of McDonald's menu. However, their menu has expanded keeping the taste and the lifestyle of the local customers in mind. Its extensive menu also offers a full range of desserts, hot and cold drinks to cater to everyone.

McDonalds underlying strategy for success in the Indian market is- “Local sourcing is the key for Truly Indian products”. Prior to its launch into India, it invested six years to develop its unique cold chain, 5

Mc Donald’s and Subway enabling customers to enjoy highest quality products, absolutely fresh and at a great value. Keeping the culture of India in mind, McDonalds does not offer any beef or pork items. It has developed a specialty menu unique to the Indian palate with a variety of vegetarian and non-vegetarian selections. They are also conscious enough to prepare vegetarian food separately and this separation is maintained throughout the various stages of preparation. So much so that the mayonnaise and the soft serves are also 100% vegetarian and its uses only vegetable oil as a cooking medium in India. They also have an exclusive menu for breakfast. McDonalds also caters to the tastes of the local people. In Hyderabad, they offer “Halal Meat” for the non-vegetarians which they quite explicitly convey to its customers through a signage.

The efficiency with which the staff at Subway and McDonalds serves the customers is enhanced by the range of services that supplement the core service. Following the flower of services approach, the given figure shows the services that support the core service at Subway.

FLOWER OF SERVICE FOR SUBWAY

Figure 1: SubWay - Flower of Service

FLOWER OF SERVICE FOR MCDONALDS 6

Mc Donald’s and Subway

Figure 2: McDonald's - Flower of Service

These services can be broadly classified as facilitating and enhancing services:

Facilitating

•Information •Ordertaking •Billing •Payment

Enhancing

•Consultation •Hospitality •Safekeeping •Exceptions

Figure 3: Facilition Services

7

Mc Donald’s and Subway FACILITATING SERVICES INFORMATION Information to customers at Subway is provided through different ways:

Directions: in case of Subway, they provide a signage to direct the customers to the vegetarian and the non-vegetarian counters.Also, both Subway and McDonalds have user-friendly websites wherein customers can log on from any place at any time to locate their nearest stores.

Prices: Prices of the different items of food available at both Subway and McDonalds are displayed on a display board. Apart from that it also displays the prices of the other side dishes which the customer might want to buy.

Instructions on using core product: Since Subway is a made-to-order restaurant where a customer has full freedom to customize his sandwich, for a first-time customer, there are instruction sheets at both, vegetarian and the non-vegetarian counters that instruct the customers on the steps to follow to place an order for a sandwich. It also lists down the variety of ingredients and gourmet breads that it offers to its customers.

Notifications: At Subway, they are prompt enough to notify its customers of any technical problems that might bring inconvenience to them. At times, when the toaster is not in working condition, they put up a notice communicating the same. Both Subway and McDonalds also notify the customers of any promotional or “combo offers” for the day through posters and leaflets. They allow customers to sign up for offers on the net to get regular notifications on current offers and current news on Subway.

Conditions for service: At McDonalds, they promise to deliver the order within minute, at particular time slots, else they give a soft-drink free to the customer. This information is very explicitly visible to make sure that no customer misses to notice it.

ORDER FULFILMENT 8

Mc Donald’s and Subway The order entry methods followed at Subway are:

On-site order fulfillment: Here the customers are served immediately as the orders are placed. Once the customer has decided what to eat, that is, a sandwich or a salad, he moves on to the next step where he chooses bread from a variety of gourmet breads for his sandwich. He also decides the size of the sandwich he would like to have, that is, 6-inches or foot-long. In the next step the customer gets the option of adding extra ingredients to his/her sandwich like double layers of meat or extra cheese for better taste. He then chooses the assortment of vegetables he would like to have. The last item on the list of ingredients is the variety of sauces that subway offers. The customer might want to supplement the sub or salad with his choice of drinks. At McDonalds, they follow an on-site order fulfillment method too, where they promise to deliver the orders in a minute, else they give a soft drink free. McDonalds also allows its customers to enjoy its meals while they are on their move. Through “McDonalds Drive Thru”, customers enter the “drivethru”, place their orders and pick then up within minutes.

Web-site order placement: McDonalds allows its customers to become members which in turn helps them place orders online.

Telephone order placement: Subway also promises an express delivery facility to offices and home which allows customers to place orders through phone. McDonalds provides home delivery service to its customers with no restriction on the minimum order. However, they charge an additional fee of Rs 20/- per order irrespective of its size.

BILLING The billing process goes very systematically. A typical customer would start by placing orders looking at the display board. As he makes his order, the amount due is displayed on the machine after each item is entered. Once all the items have been recorded, the billing machine displays the total amount due. The person who is recording also verbally states the amount due as a confirmation. The invoice is generated and the payment is made. The billing process uses all the four elements, namely 9

Mc Donald’s and Subway Invoice for individual transactions Verbal statements of amount due Machine display of amount due

PAYMENT

Payment at both Subway and McDonalds is done using the conventional method of payment through cash or card. The customer is allowed to make payment through credit card only above billing of a certain amount. Also, they provide coupons and vouchers through newspaper inserts, which can be redeemed by the customers.

ENHANCING SERVICES CONSULTATION The staff at the counter provides customized advice to customers who are visiting both Subway and McDonalds for the first time. They also help customers decide on what orders to place and which combo offers to avail.

HOSPITALITY Subway is seen as a place to hangout with friends. Customers, mostly the younger generation go to Subway when they need to sit, eat and drink with their friends. Also, a Subway outlet is usually never jam-packed with customers, hence there is never a queue to enter or place orders. Thus, there is never a need for waiting space. The customers could also sit for as long as they want without being asked to leave. McDonalds offers high quality products at affordable prices which it promises to serve on time. They have a policy of greeting every customer with the traditional “Welcome to McDonalds, How may I serve you”. A lot of importance is given to the smile during the greeting. Each McDonald’s outlet has a washroom for must.

10

Mc Donald’s and Subway

SAFEKEEPING Subway provides the perfect ambience by ensuring that the outlets are clean, the seats are wellspaced out and it allows the customer to sit back and relax. Their packaging for take always is also ecofriendly and attractive. McDonald's is driven by the philosophy of Quality, Service, and Cleanliness & Value for Money. This translates into a commitment to provide customers high quality products, served quickly with a smile, in a clean and pleasant environment at an affordable price. This effectively means that the McDonald's menu is priced at a value that the largest segment of the Indian consumers can afford while at the same time ensuring that quality is not sacrificed for value. The packaging at McDonalds for orders like “Happy Meals” which most of the times contains “happy Toys” and other such items are a major attraction for the kids. These Happy Meals have different toys which when collected will form a set. This in turn, attracts children and increases the sales.

EXCEPTIONS Subway caters to the needs of the health conscious customers by providing them 75% fat-free subs and salads. Also, Subway has a policy of getting a feedback form filled by its customers.

HARD AND SOFT SERVICE STANDARDS MCDONALDS McDonald’s aims to provide 100 percent total customer satisfaction. In order to achieve this goal , McDonald’s relies on its operating philosophy based on QSC & V – Quality, Service, Cleanliness and Value. McDonald’s believes that customer satisfaction is crucial to the success of the brand and all restaurants must perform to the standards. These standards are used in both company owned and franchised restaurants. QUALITY Hard Standards:

11

Mc Donald’s and Subway Best ingredients: This is achieved by its commitment to sourcing all its requirements from local farmers and suppliers. Before entering India, the company spent six years and Rs. 450 crore to set up its supply chain. In India McDonalds pioneered the cold chain management which helps keep vegetables and processed products safe for a longer time. Potato farming in Gujarat Radhakrishna Foodland (Distribution partner) focused all its resources to meet McDonald's expectation of 'Cold, Clean and On-time Delivery’. Trikaya Agriculture (Supplier of fresh Iceberg lettuce) uses a cold chain to store and transport lettuce to maintain freshness all year round. Pre-cooling rooms ensure field to 2 degrees in 90 minutes. Dynamix Dairy (Supplier of cheese) has a completely computer controlled automation equipment to supply cheese to McDonald’s. Vista Processed Foods Pvt. Ltd (Supplier of chicken and vegetables) has storage facilities to maintain temperatures as low as -35 degrees to ensure freshness.

Preparation Standards: Best quality standardized ingredients ensure standardized preparation standards can be followed. Every product has a fixed procedure of preparation. However, newer McDonald’s stores offer MFY (Made for You) where the product is made only after the order is placed.

Other standards: Use FIFO (First in First Out) for all inventories. Reverse osmosis water treatment plant – best technology for water purification at every outlet to provide water. Strict standards for vegetarian products including eggless mayonnaise and eggless icecream. SERVICE Some soft standards followed by McDonald’s staff are Welcome every customer with a smile and are genuinely friendly at all times 12

Mc Donald’s and Subway Deliver consistent standards of hospitality Seize opportunities to interact with customers in a personal and positive way Be well informed about product contents and nutritional information Always appear clean and well groomed.

Hard standards Serve fresh and hot Serve within one minute of receiving order or give a free coke. This is implemented in a few outlets and is not applicable during peak hours. Cleanliness and Hygiene The counters, tables, floor area are to be kept clean at all times. All staff required to cover their heads and wear gloves when within preparation area. All these standards are evaluated by mystery shoppers and rated. This is called a RVR Restaurant Visitation Report) which provides a snapshot of the stores performance over a period of a few hours. The stores are graded either A, B, C or F. SUBWAY No information is available on the hard standards followed by the company. Below are some soft standards Subway has laid out. Quality All material, vegetables, sauces, meat and cheese have to be sourced from the supplier certified by Subway. Franchises cannot procure from other non-certified suppliers. All material has to be stored at specified temperatures to ensure freshness. All franchises are required to abide by the Gold Certification standards of Subway.

Cleanliness All employees must at all times wear gloves while making a sandwich or handling material. All employees must at all times wear a plastic covering their hair to ensure hygiene. Service The employees should greet the customer with a smile. 13

Mc Donald’s and Subway They should help customers choose combinations to customize their Subway Sandwich by making suggestions. During calls for home delivery, all the requirements of the customer should be attentively noted and followed.

CHANNELS OF SERVICE DELIVERY SUBWAY

Subway uses Franchising as its channel of delivery. Subway currently has 35340 restaurants in 98 countries. This is being followed by Subway from its inception. As all franchisers, Subway requires each store to operate by the strict standards of quality, service and cleanliness defined by the company. The Subway franchise ensures that safety measures are taken by all its franchisees to provide quality food. All employees need to use gloves at all stages of food handling. Members of the specialty food franchise have to attend a training course in their local area in order to provide needed information to their employees on this regard. Fresh food stock preparation and temperature regulation helps the fast food franchise to keep up its high standards of hygiene. It is to provide the necessary specifications on the levels of cleanliness to be maintained by franchisees that the Subway franchise initiated "Gold Standard" policies. However, there have been several problems faced by Subway along the way. Quality standards: There have been several complaints from consumers all over the world regarding quality issues of vegetables, meats and sauces used in Subway sandwiches. Most of these issues arise due to improper storage of materials in the store. Temperature controls aren’t maintained resulting in spoilage and wastage. Legal woes: Subway has faced more legal cases than most other franchises. Franchisees complain that even one slip results in threatening letters from the head office. Or complaints regarding too many stores opening in the nearby areas resulting in cannibalization.

14

Mc Donald’s and Subway Many instances have been cited by franchise holders where Subway has unfairly penalized them.

MCDONALDS

McDonald's is the world's leading global foodservice retailer with more than 33,000 locations in 118 countries. McDonald’s has several company owned stores, but uses Franchising for both domestic and international expansion. McDonald's India was set up as a 50:50 joint-venture between McDonald's at a global level and regional Indian partners such as Hardcastle Restaurants Private Limited in western India, and Connaught Plaza Restaurants Private Limited in northern India. McDonald’s currently has over 220 restaurants in the country. McDonalds doesn’t provide any financial assistance and absentee ownership of finance is not allowed. Also, the financial requirements are quite steep. MFY- In order to implement the MFY (Made for You) option for customers, the franchises are required to upgrade their equipment at their own expense. This caused some problem with maintaining standard service across all outlets. Pricing and menu may also be a point of difficulty for the franchiser and franchisee as prices vary between company owned and franchised stores. Inconsistent standards- There are several instances of poor service or disgruntled customers complaining about the quality of food served. This is because it is difficult to enforce the exact same standards in all franchised stores.

15

Mc Donald’s and Subway COMMUNICATION MIX COMPANY External Marketing Communications

Internal Marketing Communications

Advertising Direct Marketing Sales Promotion Public Relations

Vertical Horizontal

PROVIDERS

CUSTOMERS Interactive Marketing Communications Personal Selling

Customer Service Centre Service Encounter ServiceScapes

Figure 4: Communication Mix

The diagram above clearly explains a generic model for communication which is being implemented by services based companies in the world. The communication model is divided into 3 parts as clearly seen above:a) Internal Marketing Communications: It company should manage the information and its flow from company to employees in order to accurately and consistently reach to customers who are hearing and seeing it. b) External Marketing Communications: These are the channels (not under the company’s control) through which the company disseminates the information to its customers. These channels provide equal opportunities to all the companies for communication to masses.

16

Mc Donald’s and Subway c) Interactive Marketing Communications: These channels are in direct contact with the customers when it experiences the services in form of servicescapes, service encounters, Customer Service centers and company’s frontend employees.

I N T E R N A L

S E R V I C E M A R K E T I N G

Horizontal Company Policies Vertical

Internal Branding

Branding Through Employees Print Broadcast

Advertising

Outdoor Direct Mail Internet & Mobile

Discount Coupons Rebate

E X T E R N A L

Sales Promotion

Gifts(Toys) Co - Promotional Activities Press Release

Public Relations

Sponsorship Shows, Exhibitions & Special Events Media Coverage

Mc Donalds Extracurricular Crew activities, Free employee meals in the restaurant, MahaBucks Performance-linked pay, Graduate Career Advancement Programme, In House Training Courses Employee of the Month Newspapers, Magazines Television, Radio, Movies

Subway Extracurricular Crew activities

In Housing Training, Performance-linked pay Employee of the Month Newspapers, Magazines Television, Radio

Emails Websites, Banner Ads, M-Commerce

Hoardings, Pamphlets, Banners, vehicle advertising on Cabs Emails Websites, Banner Ads, M-Commerce

Movies Coupons Combo Meals, Corporate Rebates Nickeldon Toys

Movies Coupons Goodies , Corporate Rebates No

HCL Laptops

No

Hoardings, Pamphlets, Banners

Every Month press releases, News Yes Children's Day , Birth Days Bollywood Actors

News Yes World Health Day Sports Persons 17

Mc Donald’s and Subway

C O M M U N I C A T I O N M I X

CSR Activity

1. McDonald’s retail outlets to encourage young voters for the Lok Sabha elections. 2. McDonald’s ties up with Symbiosis Institute

Fit to Hunger

Social Media

Facebook , Twitter

Facebook , Twitter, YouTube

Customer Service Personal Selling

Sales Executive Tele- Marketing

I N T E R A C T I V E

Instruction Material

NO Countrywise Website

NO

NO

Signage

Name Boards Kids Zone, Interior Menu Board Ronald Donald Mc Donalds on tissue Paper ,Tray Paper and Sauce Sashes Dress Code

Name Boards

Mascot

Employee Uniform Remote Encounters

Encounters

Personalisation and Customization of Sub.

Countrywise Website

Stationary

Service

Confirmation Calls for Home Delivery

Website Brochures Catalog

Interriors Servicescapes

Confirmation Calls for Home Delivery Probing and giving alternatives for better Deals. NO

Phone Encounters Face to Face

Online orders Placing orders on phone At Franchises

Normal Interiors NO SubWay on Tissue Paper & Tray Paper Dress Code Online orders Placing orders on phone At Franchises

18

Mc Donald’s and Subway Role of the Various Communication Mix

Figure 5: Role Of Communication Mix

19

Mc Donald’s and Subway

Figure 6: McDonald - Go Global Act Local

20

Mc Donald’s and Subway SERVICE BLUEPRINTING

Figure 7: Mc Donald's Blueprint

21

Mc Donald’s and Subway

22 Figure 8: Subway-Blueprint

Mc Donald’s and Subway SERVICESCAPE It is a well known fact that the environment in which a service is executed is important. They physical environment or the Servicescape provides cues about the quality and character of the service quality and character of the service, cues that consumers look for both before and after buying and that affect their experience of it. Typology of McDonalds and Subway based on variation in form and Use of the Servicescape: Servicescape Usage

Interpersonal Service-Both customer and employee

Complexity of the Servicescape Elaborate McDonalds Subway

MCDONALDS McDonalds recognizes culturally defined expectations in allowing its franchisees around the world tremendous freedom in designing their Servicescape. McDonald’s strategy is to have restaurants worldwide reflect the culture and community in which they are found.

Elements of Physical Evidence Facility Exterior: Exterior Design: McDonalds design exhibits a sense of “Forever Young” look with bright red and yellow colours appealing to the children and establishing its family restaurant positioning. The building provides a practical, contemporary design that aligns with the McDonald's brand essence while accommodating the latest operational and consumer experience standards. Their mascot Ronald Mcdonald is also present outside each of their restaurants. McDonalds 23

Mc Donald’s and Subway always have all glass restaurants. McDonalds has always clearly identified and managed the various clues that customers use to form the impressions and feeling about their company. In addition to this, McDonalds has separate take away counters in order to save time of their patrons. Signage: All of McDonalds external signage reads as, “McDonalds-Family restaurant. Also keeping in mind with the local language, all McDonalds restaurant have their name boards in Hindi. McDonalds strongly believes in adhering to the local sentiments and hence none of the outlets in India sell Beef products and every restaurant has this mentioned. Also McDonalds, strongly believes in glass branding for any new products or services they offer. Most of the communication is designed to cater to local tastes and preferences. Parking/Landscape/Surrounding Environment: All McDonald outlets are located are accessible and present everywhere thus capitalizing on brand recognition. Most of the McDonalds have their own restaurants and hence the seating space available is exclusive to McDonald’s patrons. Also McDonalds offers proper parking facilities for its highway restaurants.

Facility Interior All McDonalds outlet are standardized in terms of layout and have proper in-store branding. The 24

Mc Donald’s and Subway “Young and Cheerful” design concept is a progressive, youthful, and energetic environment with open views for social interaction. All McDonald outlets are huge with proper aisles and passages with appropriate signage for seating arena, lavatories, wet floor and food counters. McDonalds has a Made for You food preparation platform.MFY is a unique concept (cooking method) where the food is prepared as the customer places its order. This cooking method has helped McDonald’s further strengthen its food safety, hygiene and quality standards. McDonalds also has illuminated Menu boards that offer a mix of both vegetarian and non vegetarian burgers along with other savories and drinks. McDonalds also has proper queues for placing order and often there is a executive who assists you in order placing. Also McDonalds gives toys for children thus making them wanting to come back. The other visible cues are color, lighting, in-store music, employee uniforms and trays with literary. McDonalds has ample in store lighting and directly influences an individual’s perception of the definition and quality of the space, influencing his or her awareness of physical, emotional, psychological, and spiritual aspects of the space. The bright McDonald stores ensure prompt handling and evaluation of products. In all McDonald stores the lighting is perceived as more pleasant than other fast food environments. The

color

scheme

that

McDonalds

uses

exhumes

cheerfulness

and

warmth.

Red depicts vibrance, cheerfulness while yellow depicts friendliness and brightness. At McDonalds, music is a positive auditory cue stimulating specific consumer behaviour and emotions. Music appears to influence buyer-seller interaction. There is audio played about the latest offers and products. Also a balance and constant sound creates a pleasant sound environment. All employees at McDonald are provided with uniforms and name badges along with caps with McDonald signature “M” arch. Employees are also trained with appropriate soft skills to address customers. Every employee or front line executive greets the customer and exchanges pleasantries

25

Mc Donald’s and Subway which makes them happy. McDonalds also has the policy of serving within one minute or they give free redeemable coupons on the next visit.

SUBWAY Elements of Physical Evidence Facility Exterior: Subway sandwich restaurants are often simple eat outs using minimal architecture and traditional branding with yellow and white shades. The facility exterior often gives a look of freshness and is located amidst other eateries in food courts of malls or recreation centres. Signage: The signage at every Subway store is uniform as per international standards. The store size is generally small and hence there is no room for enough glass branding. Unlike McDonalds, Subway doesn’t have extensive branding on door panels and windows. Facility Interior: The size of any Subway outlet is small in relation to McDonalds, Also, since Subway outlets are located in multiple eatery zones they do not have an exclusive seating arena for its patrons. However the exclusive Subway stores has minimal seating arena. The in-store lighting is sufficient however not exclusively bright as seen with McDonalds. The color scheme used in all subways is Green depicting a sense of Freshness. Most of the subway outlets have the aroma of freshly baked cookies that draws one towards it. The employees have a proper uniform and our courteous. Also the person who takes your order is the same one who prepares your Sub thus allowing more time for interaction. Since every Sub is customized as per the customer it takes time. 26

Mc Donald’s and Subway However all the ingredients used are fresh and thus adhere to Subway-Eat Fresh strategy.

Roles of Servicescape Package

Facilitator

Socializer

Differentiator

McDonalds Strong visual metaphors, right from its outlets to the employees to the trays to ketchup cups Well designed outlets with appropriate with signs, appropriate ventilation and proper seating arena The goal of being the customers “third place” is achieved with comfortable chairs, children play arena for customers to interact Red and Yellow colour scheme along with McDonald branding to differentiate from others.

Subway Visual metaphors in the form of wrapping paper, beverage cups. Small outlets or kiosk with minimal signs and few seats. More of a restaurant to have a quick bite.

Regular branding

27

Mc Donald’s and Subway SERVICE QUALITY GAP MODEL AND QUALITY DIMENSIONS

Figure 9: Service Gap Model

The five gaps that organizations should measure, manage and minimize: Gap 1 (listening gap) is the distance between what customers expect and what managers think they expect - Clearly survey research is a key way to narrow this gap. Gap 2 (standard and specification gap) is between management perception and the actual specification of the customer experience - Managers need to make sure the organization is defining the level of service they believe is needed.

28

Mc Donald’s and Subway Gap 3 (performance gap) is from the experience specification to the delivery of the experience Managers need to audit the customer experience that their organization currently delivers in order to make sure it lives up to the specification Gap 4 (communication gap) is the gap between the delivery of the customer experience and what is communicated to customers - All too often organizations exaggerate what will be provided to customers, or discuss the best case rather than the likely case, raising customer expectations and harming customer perceptions. Finally, Gap 5 is the gap between a customer's perception of the experience and the customer's expectation of the service - Customers' expectations have been shaped by word of mouth, their personal needs and their own past experiences. Routine transactional surveys after delivering the customer experience are important for an organization to measure customer perceptions of service

Service Quality dimensions 

Tangibles: Physical evidence of service



Reliability: Consistency of performance and dependability



Responsiveness: Willingness/readiness of employees to provide service in timely manner



Credibility: Trustworthiness, believability, honesty



Security: Freedom from danger, risk, doubt



Guarantee , Certification



Competence: Possession of required skills to perform service



Access: Approachability and ease of contact



Courtesy: Politeness, respect, consideration, friendliness

Assurance

E Empathy

Figure 10: Characteristics and Evaluation Outcomes

29

Mc Donald’s and Subway

Figure 11: Strategies to influence expectations

SUBWAY Location: City Centre Mall, Banjara hills, Hyderabad Mode of service delivery: mainly “Self Service Model” Number of visit: 3 (to check reliability) In our visit to SUBWAY there we had initial perception about the subway of “low calorie fast food alternative which is quick and fresh”. Reason for this perception was firstly their tagline “EAT FRESH” and their commercials starring Jared who had lost something like 150 pounds by eating an all-Subwaysandwich diet. Finally we also had in mind that there will be offer of day “SUB OF THE DAY” with this perception when we visited to SUBWAY there was no disappointment at all. From their nutrition charts we could make out that we can have good low calorie food. This was tangible cue on the counter making us aware that they provide what they convey. But best was, they were also having option of normal full of calorie diets for those who like it that way so in our group no one has to compromise. One of the service facilitator for us their separate VEG and NON VEG counter and their separate preparation counter. *Experience till this place actually reduce the “communication gap” as we were getting all we expected and it was in level of tolerance service zone so it was a good service. Dimension for service in terms of 30

Mc Donald’s and Subway tangible quality was good as employees were properly dressed, hygienic and clean area, good seating arrangement but in combination with other restaurant and finally good ambience with music. After looking at this entire scenario there was “assurance” that food delivered will be good and in accordance with expectation. We were quit assured with the quality because of the brand image they have in the market. Finally they replace the food if something goes wrong this also increase assurance from their side which is generally unsaid case for all the restaurants. Now further we went to place our order, here we were having ample of “tangible cue” (physical evidence) which helped us in making the decision, what to order? Further all information about the sub of the day was provided and people were assisting if extra information was required. Finally after billing we went to counter which were situated adjacent to each other to place order. We got customized subs and employees we continuously asking the way we want from which loaf to what and how much inside that loaf in the same charge. That was a good experience. Finally we had our food and as soon we were finished person came and immediately cleaned the table. *Experience Regarding the tangible cues, were quiet evident as person making sub was wearing gloves and hair cap. Fresh plates were served. All products of papers and plastic were recyclable. Quality of food was good as they were fresh and prepared in front of eyes in accordance to our taste. This actually reduce “performance gap” as they were pretty good in the employee end. Service delivery was also in time there was no “standard and specification gap”. “Listening gap” was not there as they actually served the food in the way we asked them to prepare and there was no mistake in any of our food. Even each person (employee) was well versed in Hindi, local language and English. “Empathy” wasn’t that great as they were polite but were in rush as customer were waiting because there were only two person preparing the sub so they have to rush. They were quiet “responsive” to what were ordering and even when we ask to clean table again it was done immediately. Quiet “reliable” service as they delivered all aspects equally to all of us and in our every visit. They also asked us to fill the feedback form that was good and person requested to do it. Service gap- Due to lack of loose small denomination money we were not refunded Rs. 10 change even after 45 min when we were going back. They assured that they will do it when we are returning but still it didn’t happen. They don’t provide the timeline in which you will get your order so if there is rush you 31

Mc Donald’s and Subway have to wait long. Even if we have to wait there is no magazine or television which make time cross by ease. Finally common sitting arrangement which make their customer dependent on rush in other restaurant. This can be reflected in low standard GAP and finally to performance gap in case of return of change. This will affect customer faith to their assurance level. Finally there was no operational cues format so disorder of cues was bound to happen.

Mc DONALD Location: City Centre Mall (1st floor, Banjara hills, Hyderabad) Mode of service delivery: mainly “Self Service Model” Number of visit: 3 (to check reliability) In our visit to Mc DONALDS there we had initial perception about the mc Donalds of “tasty food with fun” and basically reasonable family and friends restaurant. Reason for this perception was firstly their tagline “I m lovin it” and their adds on different places with packaging and also else were. Finally we also had in mind that it will be not costly at all. When we reach there it was different then subway in many respect firstly, multiple delivery counter and no separate counter for VEG and NON veg. separate sitting space and even different private meeting hall. Nice ambience, good music and clean place to enjoy food. There were multiple counters each taking order then and there and no customization. Here look at menu and order whatever you like from the menu. Lot of tangible cues which help in deciding meal and there were lot of complementary priced meals options. It is for the entire segment who seeks value for money apart from quality. *Experience till this place actually reduce the “communication gap” as we were getting all we expected and it was in level of tolerance service zone so it was a good service. Dimension for service in terms of tangible quality was good as employees were properly dressed, hygienic and clean area, good seating arrangement. After looking at this entire scenario there was “assurance” that food delivered will be good and in accordance with expectation. We were quit assured with the quality because of the brand image they have in the market. Finally they replace the food if something goes wrong this also increase assurance from their side which is generally unsaid case for all the restaurants. Now further we went to place our order, here we were having ample of “tangible cue” (physical evidence) which helped us in making the decision, what to order? Further all information about the meals which we generally happy meals were provided and people were assisting if extra information 32

Mc Donald’s and Subway was required. Operational line management were there apart from lot of counters and for entertainment they have television ads running around so even peak hours and even waiting was easy. Apart from this they say delivery in 5 min else free which they stick too. That was a good experience. Finally we had our food and as soon we were finished person came and immediately cleaned the table. *Experience Regarding the tangible cues, were quiet evident as person serving at back were wearing gloves and hair cap. Fresh plates were served. All products of papers and plastic were recyclable. Quality of food was good as they were fresh and prepared in front of eyes at the backend. This actually reduce “performance gap” as they were pretty good in the employee end. Service delivery was also in time there was no “standard and specification gap”. “Listening gap” was not there as they actually served the food in the way we asked and they used to recheck the order before placing them apart this was mechanized function so error was less. Even each person (employee) was well versed in Hindi, local language and English. “Empathy” was good as they were polite even while waiting because there were many counters to serve and no customization so efficiency can be maintained even with the speed. They were quiet “responsive” to what were ordering and even when we ask to clean table again it was done immediately. Quiet “reliable” service as they delivered all aspects equally to all of us and in our every visit. Service gap. Yes one of our friends got free coke for not getting food ordered in 5 min this was a performance GAP and free providing increases assurance quality of the Brand. They have good level of responsiveness as they were delivering in time and response to complain was also very quick.

33

Mc Donald’s and Subway

Rating on Basis of high low and medium

SUBWAY

Mc DONALDS

Service quality dimensions (high is good Assurance

medium

medium

and low is bad)

Tangibility

medium

high

Empathy

high

medium

Responsiveness

high

high

Reliability

medium

high

Service gap (low is good and high is Listening

low

low

bad)

Communication

low

low

Performance

medium

low

Standard

low

low

34

Mc Donald’s and Subway PRICING STRATEGY Pricing is the process of determining what a company will obtain in exchange for its products. Pricing factors include: Manufacturing cost Market place Competition Market condition Quality of product. It is a fundamental aspect of financial modeling and is one of the four Ps of the marketing mix. The other three aspects are product, promotion, and place. Price is the only revenue generating element amongst the four Ps, the rest are cost centers. When deciding on pricing objectives the organization or company must consider:  The overall marketing, financial and strategic objectives of the company  The objectives of the product or brand  Consumer price elasticity and price points

 The resources available with the organization. A well thought out price for a product or service should fulfill three things:  Achieve the financial goals of the company  Fit the realities of the marketplace  Support a product's positioning and be consistent with the other variables in the marketing mix.

Pricing strategies are of various types mainly: Competition – based pricing  Cost-plus pricing  Price skimming  Penetration pricing  Limit pricing  Premium pricing  Target pricing 35

Mc Donald’s and Subway  High – low pricing  Value based pricing

MC DONALDS Value Pricing McDonald’s has a unique pricing strategy that falls exclusively on their many product lines. Their Value Meals fall into the category of value pricing. McDonalds has certain value pricing and bundling strategies such as happy meal, combo meal, family meal etc to increase overall sales volumes. For example, you can order a Mc Veggie Value meal that comes with a Mc Veggie burger, medium drink and fries for around Rs99 where the customer can save Rs 39 if he/she bought the food items separately. You can Super Size this meal to get a large drink and large fries for a little more money or you can go with another value meal that might include different items for different price.

Figure 12: McDonald's Pricing

Also in its promotions, M c D o n a l d ’ s c a m e u p w i t h a v e r y c a t c h y p u n c h l i n e “ A a p k e z a m a n e m e i n , b a a p k e zamane ke daam”. This was to attract the middle and lower class consumers and the effect can clearly be seen in the consumer base McDonalds has now. 36

Mc Donald’s and Subway

Promotional Pricing To promote its breakfast menu Mc Donald’s has come up with a new scheme of giving Rs 20 off on its Great Breakfast meal. This kind of promotional pricing is adopted to target new customers, to increase its base of customers and to give a variety in its offerings to its existing customers to help increase volume.

SUBWAY Value Pricing Subway tries to create value products by service in terms of quality, ambience, variety, and convenience. By introducing the concept of sub of the day the company tries to satisfy the needs of its present customers by creating a sense of curiosity amongst in the sense they would want to know what sandwich is the sub of the day.

37

Mc Donald’s and Subway

Figure 13: SubWay Pricing

Bundling Strategies Subway offers combo offers of a sandwich, potato chips/cookie and a drink at only Rs. 45 extra for a medium size meal and Rs. 50 for a large size meal.

Promotional Pricing To increase its current consumers base and also to attract new customers, Subway has come up with new campaign where with any 6 inch sub and a medium beverage the company is offering another 6 inch sub for free. In September 2011, Subway has introduced a buy one get one free offer on Mondays. This is valid on all its sandwich offerings.

38

Mc Donald’s and Subway

39

Mc Donald’s and Subway

40

Mc Donald’s and Subway

Figure 14 : SubWay & Mc Donald 's Pricing Strategies

41

Mc Donald’s and Subway Critical Analysis MCDONALDS With respect to the services provided by Mc Donalds, the following management issues were observed: 1. McDonalds wishes to rework on its restaurant interiors and match up to those of its self owned restaurants, However the problem that they have encountered is that franchisee owners are unwilling to invest in interior design. 2. McDonald’s has introduced MFY (Made for You) whereby the burgers are made after the order is placed. However, the franchises are required to upgrade their equipment in order to follow this. The franchisees are not willing to incur such expenditure which poses a problem to McDonald’s. 3. We normally observe the customary trend of people queuing outside McDonalds especially during the weekends. This is due to the limited capacity space in the restaurants. This has been a persistent management problem for Mc Donalds. Even though the management at McDonalds has been trying to search for a solution for the same, it fears doing so pertaining to cost issues. With respect to Subway, the first and the third problem as stated above persist. In addition to them, the following problems hold ground as well: 1. Due to its customized sandwich option order fulfillment takes longer at times of high footfalls. Since the order is taken and prepared at the counter by the same person, people have to wait in queue for their turn. 2. Another issue Subway faces is with quality control in franchises. Temperature control for storage of material is not maintained resulting in sandwiches not being fresh. It is difficult to maintain quality resulting in several customer complaints.

42

Mc Donald’s and Subway Solutions through which the service providers can solve the above problems are:1. The service provider and franchises share the risk of the business. Both of them should come up with different floor layouts and innovate on the themes in order to increase and cater more foot falls. 2. The franchises should order more equipments or produce them in house or through third party manufacturers to increase their capacity. 3. Subway can employ more employees in order to maintain the demand. 4. The Subway service provider should set up quality control standards for the individual franchises to follow and constantly monitor these diligently.

43