2nd TCU-CBM Research Conference 2023

Customer Loyalty in the Fast-Food Industry in the Philippines

Marlon B. Raquel
Taguig City University
Taguig City, Philippines
[email protected]

Abstract—The emergence of new players in the fast-food industry are characterized by free flow of goods, services, and human
makes competition fiercer than before, i.e., the entry and resources.
subsequent expansion of branches of both local and foreign fast- One major challenge fast food industry is facing is
food companies. As such, it is important to assess customer that customers do not stick to just one store when dining
loyalty because without loyal customers, business survival and
profitability will not be guaranteed. The primary objective of
although they keep on coming on the same store. For instance,
this study is to explore the factors that affect customer loyalty in only 30%-40% of the 85% to 95% of satisfied customers in
the leading fast-food chain in the Philippines. Specifically, it aims the automotive industry actually buy again the same brand of
to (1) determine the level of customer loyalty in terms of car [1].
repurchase intention, word-of-mouth, and first-in-mind; (2) The fast-food business is a lucrative market in the
explore the relationships of these dimensions to customer loyalty; Philippines. The personal consumption expenditure gross
and (3) examine the combined effects of these variables to domestic product (GDP) share of food industry in 2015 is
customer loyalty. Questionnaires were distributed to 250 equivalent to 41.90% [2]. In a country report published by
respondents who patronized the fast-food store. Convenience
Euromonitor International [3], fast food market is the largest
sampling was employed. Means, standard deviations, and
rankings were determined to measure the level of customer and fastest-growing category in the foodservice industry. In
loyalty. Pearson correlation coefficients were identified to test the fact, the total revenue in 2012 amounted to Php 12.9 billion
relationships among variables. Logistic regression analysis using which is equivalent to 30% of the total sales revenue in
SPSS software was used to explore the influence of the three consumer food service. Of the 13,119 business establishments
dimensions on customer loyalty. Results showed that customers engaged in food and beverage services, fast food chains
were loyal in terms of repurchase intentions, word-of-mouth, and ranked second with 2,535 establishments. Based on the same
first-in-mind. This study also found that these three dimensions report, the fast-food market is expected to be the biggest
are highly correlated to customer loyalty. All predictors are category in the foodservice industry in the Philippines by the
significant at p-value .01. Based on these findings, fast food
restaurants should increase return patronage by meeting their
end of 2017.
customers’ needs and expectations. Understanding these factors Despite this relative importance of fast foods in the
is essential in developing sound marketing strategies. foodservice industry, it has not gained much attention in
Recommendations and suggestions for future research are research in the Philippines. In addition, there is no research
provided. that examines the combined effects of repurchase intention,
word-of-mouth, first-in-mind on customer loyalty. Because of
intense rivalry in the fast food industry, fast food restaurants
Keywords— First-in-Mind; Word-of-Mouth; Repurchase should increase return patronage by meeting their customers’
Intention; Customer Loyalty; Fast food Industry needs and expectations. It is imperative that understanding the
factors that influence customer loyalty is essential in
developing sound business strategies. Consequently, this
I. INTRODUCTION research work aimed to bridge these gaps.
The primary purpose of this study is to explore the
Business organizations have given much attention to
factors that affect customer loyalty in the leading fast food
the concept of customer loyalty because of its relationship to
restaurant in Taguig City. Specifically, the study aims to (1)
business profitability. With the entry of new players in the fast
determine the level of customer loyalty in terms of repurchase
food market, both local and foreign, home-grown fast food
intention, word-of-mouth, first-in-mind; (2) explore the
restaurants need to compete for business sustainability. The
relationships of these dimensions to customer loyalty; and (3)
creation of ASEAN Community in 2015, which was signed in
examine the combined effects of repurchase intention, word-
Malaysia by heads of states and governments of the ten (10)
of-mouth, first-in-mind to customer loyalty.
members of the Association of Southeast Asian Nations, offers
more business opportunities for all member-countries which

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Figure 1 shows the conceptual framework used in would eat in a fast food restaurant again tomorrow, this store
this study. It shows the relationships between the three would be my first choice; (2) When talking about fast food, I
independent variables, namely, repurchase intention, word-of- think of this store first; (3) Even with the presence of new
mouth, first-in-mind, and the dependent variable – customer competitors, I will dine in this fast food store first; (4) The
loyalty. offering of discounts from other fast food stores will not
change my mind to prioritize first this store.; and (5) I think of
this store first when talking about burgers and spaghetti.

Repurchase Intention
Word-of-Mouth Customer
First-in-Mind Loyalty II. METHODOLOGY

Research Design
Fig. 1 Framework of analysis
The research design used in the study is quantitative
method. Information was gathered from survey questionnaires.
Questions are structured, close-ended, and self-administered.
Measurement indicators of customer loyalty were
This research is a descriptive study because it describes the
used based on the previous studies [4] [5]. These are
characteristics of the respondents, namely, age, sex, education,
repurchase intention, word-of-mouth, and first-in-mind. Each
and income.
indicator has five items.
The correlation design was used to test the
There are several studies that measure customer
relationships of the independent variables to customer loyalty
loyalty in terms of repurchase intention [6] [7] [8]. According
which is the dependent variable.
to Fornell [9], repurchase intentions simply refer to the
likelihood of using a brand again in the future.
Sampling Procedure and Instrumentation
Zeithaml et al. [10] enumerated five behavioral
intentions of customer loyalty: repurchase intentions,
Convenience sampling was used to attain the number
willingness to pay a price premium, word-of-mouth, and
of respondents on the selected fast food chain. An adequate
complaining. Yi and Suna [11] measured repurchase intention
sample size is necessary to determine statistical power of the
with two indicators: repeat purchase intention and repurchase
findings. The proponent distributed 260 questionnaires. Of this
probability.
number, 250 were completed questionnaires. The 16
Hayes [12] concluded that customer loyalty is
questionnaires were considered spoiled due to too many items
directly related to financial growth of the company. The
that were left unanswered. Therefore, the response rate is
researcher used number of referrals (word of mouth), purchase
96.15%.
again, purchase different products, increase purchase size and
The source of data was dine-in customers who were
customer retention or defection size as measures of customer
inside the fast food store at the time of distribution of
loyalty.
questionnaires and have finished eating their meals. Questions
Boonlertvanich [13] used variables repurchase
are designed on a 4-point Likert scale rating anchored on
intention, word-of-mouth, and first-in-mind to measure
‘1’ with range of means 1.00-1.74 for strongly disagree, ‘2’
customer loyalty in Thailand’s banking sector. As a result,
with range of means 1.75-2.49 for disagree, ‘3’ with range of
customer perceived value has a great impact on customer
means 2.50-3.24 for agree, and ‘4’ with means 3.25-4.00 for
loyalty.
strongly agree. Each of the four dimensions has five items.
Based on these literature and studies on customer
loyalty, the following constructs were constructed. For
Analytical Procedures
repurchase intention, the following statements were rated: (1) I
would visit this store again; (2) I can recall this fast food in the
Two kinds of analyses were employed: univariate and
future; (3) I would eat in this store the next time; (4) I am
multivariate analyses. Frequency and percentage distributions
willing to continue to patronize the products and services of
were employed. This is the simplest form of univariate
this store in the future; and (5) I will buy other products and
analysis. It describes the socio-demographic characteristics of
services being offered in this store. For word-of-mouth, the
respondents.
following measurement items were utilized: (1) I would say
The second analysis involves measuring the
positive things about this store to other people; (2) I would
associations between the independent and dependent variables.
encourage my friends, relatives, and colleagues to eat in this
Pearson correlation coefficients were determined. For the
fast food; (3) I would recommend this store as the best fast
multivariate analysis, logistic regression is used to determine
food store; (4) I can say that this store makes me satisfied; and
the factors associated with customer loyalty.
(5) I will not say any bad reviews to people about this store.
To measure the internal consistency of constructs
Indicators for first-in-mind variable are the following: (1) If I
used in the study, Cronbach’s alpha was used as shown in

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Table 1. The minimum level generally accepted is 0.70 and all Table 2 Profile of Respondents (n=250)
measures exceeded the cut-off coefficient (Repurchase
Intention =0.87, Word-of-Mouth =.89, and First-in-Mind Variables n % Variables n %
=.90). This indicates internal homogeneity among the items Sex Education
scales used in the study, thus, constructs used in the survey
questionnaire were reliable. Male 98 39.2 Elementary 2 0.8
Female 152 60.8 High school 54 21.6
Table 1 Cronbach’s Alpha Reliability Statistics College 186 74.4
Master’s 7 2.8
Doctorate 1 0.4
Dimensions of Cronbach’s Number of Age Monthly Income
Customer Loyalty Alpha Items
Repurchase Intention .87 5 10-19 81 32.4 P10,000 and below 90 36.0
Word-of-Mouth .89 5 20-29 121 48.4 P10,001-P20,000 104 41.6
First-in-Mind .90 5 30-39 32 12.8 P20,001-P30,000 36 14.4
40-69 16 6.4 P30,001 and above 20 8.0
Customer
Loyalty
III. RESULTS
Yes 199 79.6
No 51 20.4
Profile of the Respondents
Table 3 indicates that respondents’ level of loyalty is
Table 2 presents the frequency and percentage very high as shown in the degree by which they agree on the
distributions of respondents by socio-demographic variables. repurchase intention indicators with composite mean of 3.28
There are more females than males (60.8% vs. 39.2%). About and its verbal interpretation of ‘strongly agree’. In fact, even if
32.4% of the respondents belong to ages 10-19 while 48.4 they are offered with a free product, they would still buy
percent belong to age group 20-29. About 12.8% was 30-39 products of the fast food store (WM=3.33) which ranks first.
years old and the remaining 6.4% was 40-69 years old. Respondents are also likely to visit the store again (WM=3.32)
Majority of the respondents have college degrees and eat the next time around (WM=3.32) which ranks second.
with 74.4%. A significant proportion of them (21.6%) reached Not only products of the fast food store will be patronized by
high school level of education. About 2.8% has master’s the respondents but services as well (WM=3.23). Likewise,
degrees while 0.4 % of the respondents have doctorate customers are willing to buy other products and services
degrees. Respondents who reached elementary level only offered by the store (WM=3.18). The first three indicators
correspond to two. have verbal interpretations of ‘strongly agree’ while the last
There are 104 or 41.6% respondents who have a two indicators have descriptive interpretations of ‘agree’
monthly income of P10,001-P20,000 while 36.0% of the which are indicative that customers would still come back to
respondents have P10,000 or below monthly income. About the store and make purchases of store’s products and services
14.4% of the respondents have monthly income of P20,001- in the future.
P30,000 while the remaining 8.0% earns more than P30,000
per month. Table 3 Customer Loyalty in terms of Repurchase Intention
Three of four (4) respondents are loyal to the fast
food store under study or around 79.6% of the total number of Repurchase Intention WM SD VI Rank
respondents. Only 51 diners reported that they were not loyal 1. I would visit this store 3.32 .684 Strongly 2.5
to the said fast food store. again. Agree
2. If I got any product for 3.33 .686 Strongly 1
free, I would still buy Agree
product from this store.
3. I would eat in this store the 3.32 .689 Strongly 2.5
next time. Agree
4. I will continue to patronize 3.23 .621 Agree 3
the products and services of
this store in the future.
5. I will buy other products 3.18 .667 Agree 4
and services being offered in
this store.
Composite Mean 3.28 Strongly
Agree

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 2nd TCU-CBM Research Conference 2023
As can be seen in Table 4, the overall rating of the level Table 5 Customer Loyalty in terms of First-in-Mind
of customer loyalty in terms of word-of-mouth indicators is 3.11
and interpreted as ‘agree’. Among the indicators mentioned, First-in-Mind WM SD VI Ran
customers agreed that they would say positive things about the k
store to other people with a weighted mean of 3.20, the highest 1. If I would eat in a fast 3.06 .734 Agr 2
among the five. Customers would also encourage their friends, ee
food restaurant again
relatives, and colleagues to eat in the same fast food having a
weighted mean of 3.17. They also agreed that the store made tomorrow, this store would
them satisfied (WM=3.08), they will say positive reviews to be my first
people about the store (WM=3.06), and they would recommend choice.
the store as the best fast food store (WM=3.05). 2. When talking about fast 2.99 .794 Agr 4
ee
food, I think of this store first.
3. Even with the presence of 2.98 .733 Agr 5
Table 4 Customer Loyalty in terms of Word-of-Mouth ee
new competitors, I will dine in
Word-of-Mouth WM SD VI Rank this fast food store first.
1. I would say positive 3.20 .692 Agree 1 4. The offering of 3.04 .690 Agr 3
ee
things about this store discounts from other fast
to other people. food stores will not change
2. I would 3.17 .720 Agree 2 my mind to
encourage my prioritize first this store.
5. I think of this store first 3.15 .750 Agr 1
friends, relatives, ee
and colleagues to eat when talking about burgers
in this fast food. and spaghetti.
3. I would recommend 3.05 .745 Agree 5 Composite Mean 3.04 Agr
ee
this store as the
best fast food store. Mean scores of customer loyalty indicators are shown
4. I can say that this 3.08 .678 Agree 3 in Table 6. As seen in the table, two of the three indicators has
store makes me a weighted mean that falls under the descriptive interpretation
satisfied. of ‘agree’ while repurchase intention is under ‘strongly agree.’
5. I will say 3.06 .734 Agree 4 Customers strongly agree that they have the intention to
positive reviews to repurchase products from the store with a weighted mean of
3.28, followed by word-of-mouth with a weighted mean of
people
3.11, and lastly the first-in-mind indicator with a weighted
about this store. mean of 3.04. With a composite mean of 3.14 and a verbal
Composite Mean 3.11 Agree interpretation as ‘agree’, this means customers exhibited
loyalty to the fast food store under study.
Table 5 shows customers’ level of loyalty in the
leading fast food store in terms of first-in-mind indicators. Table 6 Composite Mean Scores of Customer
When asked about their degree of agreement or disagreement Loyalty Indicators
on the statement ‘I think of this store first when talking about
burgers and spaghetti’, respondents said that they are agree as Customer Loyalty WM VI Rank
manifested by mean score of 3.15 which ranks first. This is Indicators
followed by the statement ‘If I would eat in a fast food Repurchase Intention 3.28 Strongly 1
restaurant again tomorrow, this store would be my first Agree
choice’ with a weighted mean of 3.06. The third rank has a Word-of-Mouth 3.11 Agree 2
mean of 3.04 which refers to the statement ‘The offering of
First-in-Mind 3.04 Agree 3
discounts from other fast food stores will not change my mind
to prioritize first this store.’ When customers talk about fast Composite Mean 3.14 Agree
food stores, they think this leading store first with a weighted
mean of 2.99. Even with the presence of new competitors,
customers said they will dine in fast food store first as shown Correlations between Customer Loyalty and Its Indicators
in the weighted mean of their responses which is 2.98 which
ranks last. These three variables were further examined using
correlations matrix to measure the strength of association
between customer loyalty and the independent variables as
presented in Table 7. It shows that repurchase intention, word-

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of-mouth, and first-in-mind have are highly associated with Among the independent variables, repurchase
customer loyalty. The level of significance at each relationship intention is the strongest predictor of customer loyalty. This
is .01. was followed by word-of-mouth and first-in-mind.
The coefficient for repurchase intention is 1.36 which
means for every unit increase in repurchase intention, 136%
Table 7 Correlations between Customer Loyalty and increase in the loyalty level of customers is expected, holding
Independent Variables all other variables constant at .01 p-value level of significance.
Thus, repurchase intention has a significant impact to
Variables Pearson R Significance customer loyalty.
Repurchase The second most important factor that affects
-.18** .004
Intention customer loyalty is word-of-mouth. Its coefficient is 0.66
Word-of-Mouth -.59** .000 which means 66% increase in the loyalty level of customers is
First-in-Mind -.54** .000 expected for every unit increase in the word-of-mouth, holding
**. Correlation is significant at the 0.01 level (2- all other variables constant. Its p-value is less than .01 which
tailed). means a very high level of significance (p-value of .01). First-
in-mind indicator has a coefficient of 0.64 which means for
C. Correlates of Customer Loyalty every unit increase in first-in-mind indicator, there is a 64%
increase in the customers’ level of loyalty holding all other
Variables were tested in the regression model. All variables constant at p-value of .002 which is less than p-value
three variables emerged as significant which are the bases of of .01.
interpreting the net effects of the correlates customer loyalty The R square value of .30 which means that 30%
as shown in Table 8. The ANOVA table significant value is variation in customer loyalty can be explained by the model at
less than 0.01. This means that all three variables analyzed in 0.05 level of significance.
this study are highly significant and could be considered as
correlates of customer loyalty.

Table 8 Summary of Logistic Regression Analyses for IV. DISCUSSION AND CONCLUSION
Variables Predicting Customer Loyalty
Majority of the respondents are young (10 to 29 years
Variables in the Equation old) with a combined sample of 80.8%. There were more
Variable B SE. β females than male respondents (60.8% vs. 39.2%). Most
Constant 6.08 1.31 437 respondents have bachelor’s degrees that comprise 74.4% of
.58 the total sample size. About 41.6% of the respondents have
Repurchase 0.31 0.11 1.3 incomes between P10,000 and P20,000 per month.
Intention 6* Among the three indicators of customer loyalty,
Word-of- -0.42 0.14 0.6 repurchase intention ranks first which means customers will
Mouth 6* be returning to dine in the fast food restaurant. Fast food
First-in-Mind -0.44 0.11 0.6 managers are thus ensured that diners who have had positive
4* experience with the store will be visiting the store again even
0.30** if competitors would offer freebies. Customers who intend to
R2
purchase again in the future can be considered loyal
customers. They will continue to patronize the products and
*p < .01 ** p < .05 services of the store and try other products and services which
will be offered.
This is followed by word-of-mouth marketing where
The following is the logistic regression form of the
customers would say good things about the store to other
regression model:
people. Word-of-mouth as a form of advertising strategy
becomes powerful when satisfied customers start to tell and
Logit = 6.08 + 0.31Repurchase Intention – 0.42Word-of-
invite their friends and relatives to dine in at the same store.
Mouth – 0.44First-in-Mind
Customers trust companies which are being trusted by their
friends. Recommendation is thus very important. When
When the logistic regression coefficients are
buying certain products especially online, customers tend to
exponentiated, odds ratios will be derived which measure the
know or read reviews first before purchasing. Managers,
net effect of each explanatory variable on the odds of
therefore, have to make sure that when customers leave their
customer loyalty. The odds ratio represents the multiplicative
stores, they would have positive experiences to tell to other
effect of a one-unit change in the independent variable, that is,
customers.
on the odds of customer loyalty.

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 2nd TCU-CBM Research Conference 2023
Lastly, first-in-mind ranks third. Customers were
generally loyal to the fast food store as shown by the
composite mean of 3.04 with the verbal interpretation of References
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