Marketing: Custom Edition for Texas A&M University 17th Edition by William Pride,Ferrell

Exercise 10

McDonald's Continues to Be a Global Marketing Success
Serving 68 million people in 33,000 locations worldwide is all in a day's work for McDonald's-an ordinary day for a company that rings up $27 billion in annual sales in 119 nations. Through smart marketing and an understanding of what, when, where, why, and how customers want to eat, McDonald's has been able to withstand competition from traditional fast-food rivals like Burger King and KFC, as well as from casual dining chains like Panera. Growth-minded McDonald's never stops looking for new ways to reinforce customer loyalty and build profits.
What's in Store?
One key to McDonald's success is its menu of core items that are inextricably linked to the McDonald's brand and other items that are adapted to regional tastes. In Moscow, consumers have made Fresh McMuffin sausage sandwiches a top-selling morning item. In Argentina, the Ranchero hamburger sandwich, with a special salsa sauce, is a particular customer favorite. In France, the Croque McDo is McDonald's version of the popular croque monsieur hot ham-and- cheese sandwich. In India, the McVeggie sandwich satisfies local needs for vegetarian dishes. Taking advantage of seasonal tastes, McDonald's adds some menu items for limited periods, which encourages customers to enjoy these special foods while they can.
Although McDonald's built its reputation on burgers and fries, its marketers recognize that many consumers have become more health conscious. That's why McDonald's has developed lighter fast-food fare for adults and children alike, including fresh salads, wrap sandwiches, and apple slices. It reduced the amount of sodium in McNuggets and lowered the calorie count in Happy Meals. In fact, McDonald's now sells more chicken in the United States than beef. Consumers can access the company's website for detailed nutrition and ingredient information about every menu item.
Ready for Customers Early, Late, and on the Go
Another way McDonald's has increased sales and profits is by opening stores early to serve the breakfast crowd and keeping select stores open until midnight or later. Some units operate drive-through service 24 hours a day. In China, where McDonald's has more than 1,500 outlets, late-night hours are popular and have helped significantly increase revenues. Breakfast is a big draw as well, accounting for up to 10 percent of McDonald's China sales. Knowing that car ownership is on the rise in China, and few competitors have drive-through locations, McDonald's is equipping new stores with drive-through capabilities, and most are open around the clock. At the same time, its stores in China offer to deliver meals to the home or office because local restaurants have traditionally provided this service.
To fuel faster growth in China, McDonald's wants to pick up the pace of franchising. Currently, fewer than 10 percent of its units in China are owned by franchisees, in contrast to the 80 percent of McDonald's units worldwide that are owned by franchisees. Meanwhile, the company is opening 200 new restaurants each year across China and diversifying its menu to appeal to customers' tastes.
Dealing with the Dollar Menu
To appeal to cash-strapped customers on a budget, Mc- Donald's highlights its Dollar Menu of breakfast entrees and sandwiches. It has also developed an Extra Value Menu, bundling foods and beverages at a special price. Because of rising costs, however, some foods that had previously been on the Dollar Menu are now priced above a dollar and, in their place, the company has added beverages and snacks.
Rising costs are a problem for McDonald's international stores as well. In countries like Russia, for example, McDonald's boosts menu prices more than once a year to cope with inflation that drives up the cost of ingredients. The company increases the price of less-expensive menu items by about half the inflation rate but increases the price of premium menu items by more than the inflation rate because, as one executive explains, "We still have a huge amount of people who are price sensitive."
Despite the price hikes, Moscow's Pushkin Square is usually the busiest McDonald's on the planet, with 26 cash registers and seating for 900. For a few weeks during the 2012 Olympic Games in London, the McDonald's restaurant built expressly for this event exceeded the records set by the Pushkin Square unit by serving 1,200 customers per hour. Constructed as the official restaurant of the Olympic Games, this unit had a dining area built for 1,500 customers and served some 50,000 Big Mac burgers and 180,000 packs of fries during its six weeks of operation. At the end of the Olympics, McDonald's dismantled the restaurant and reused or recycled nearly all of the materials, equipment, and fixtures as part of its sustainability agenda.
Social Responsibility on the Menu
Ronald McDonald House Charities, a nonprofit group started by McDonald's, provides accommodations for families while their critically ill children are treated in hospitals far from home. Now more than three decades old, the group runs houses in 52 nations. This isn't the company's only philanthropic activity. Local McDonald's outlets support their communities by contributing to neighborhood charities and causes.
Prodded in part by animal activists, the company has established animal-handling standards for its meat suppliers. It's also going green by using paper and cardboard packaging made from recycled materials. In addition, McDonald's is involving its employees in suggesting and implementing a wide range of changes to make its restaurants and operations more eco-friendly. Its U.K. division has 600 employees volunteering as Planet Champions to investigate and recommend such changes. Thanks to their efforts, McDonald's U.K. has been able to cut its energy and water consumption even as its 1,200 restaurants are serving thousands more customers each year. The corporation showcases its environmental and charitable accomplishments in a yearly corporate responsibility report posted on its website.
Not all of McDonald's community activities are well received. For instance, McDonald's restaurants in Seminole County, Florida, arranged to give Happy Meals to local elementary school students as rewards for good grades and attendance. But some parents and child advocates raised concerns when students brought home report card jackets with a picture of Ronald McDonald. "It's a terribly troubling trend because it really, clearly links doing well in school with getting a Happy Meal," the head of the Campaign for a Commercial- Free Childhood told The New York Times.
Viral Videos and Blogging about Beef
McDonald's has a strong presence on the Internet and in social media, with country-specific Facebook pages and Twitter accounts. Its U.S. Facebook page has 20 million "likes," and its U.S. Twitter account has more than 500,000 followers. The company also posts videos online. A YouTube video by McDonald's Canada, intended to "open the virtual doors" and reveal what happens behind the scenes, received more than 3 million views within days of being posted. This video demonstrated why Quarter Pounders with cheese look better in McDonald's ads than they do in person. In the video, the director of marketing for McDonald's Canada showed how food stylists and photographers fuss over every tiny detail of preparing a burger for an ad, from the exact placement of mustard to the angle of the top bun. Then she bought a Quarter Pounder with cheese from a local McDonald's and brought it to the studio to be photographed. By comparison, the store-bought burger lacked the perfect shape and careful construction of the mouthwatering version in the ads. Not only did this video go viral, it also attracted considerable media attention worldwide.
To generate grassroots word-of-mouth communications about food and service quality, the company has enlisted a handful of Mom's Quality Correspondents to visit headquarters, suppliers' facilities, and individual McDonald's stores. The moms are free to look around, ask questions, videotape what they see, and then blog about their reactions, including video snippets. A McDonald's marketing official says these bloggers can say whatever they like because "if moms were out there speaking to their communities and online communities unedited, it would get us far more credibility than just posting an article or doing website copy." After the moms traveled to a McDonald's beef supplier in Oklahoma City, one wrote on the blog, "Hey, moms across America-it is really 100% beef!" McDonald's marketing and nutrition executives are continuing the outreach to keep the conversation going. Some have attended the annual BlogHer conference and hosted lunches where bloggers can ask about nutrition, Happy Meals, and anything else on their minds.
McDonald's social media initiatives don't always go the way its marketers would like. Not long ago, the company created commercials featuring some of the local farmers and ranchers who supply its restaurants with fresh potatoes, beef, and other ingredients. It paid Twitter for the privilege of being at the top of the trending list and created two hashtags, #MeetTheFarmers and #McDStories, to highlight related tweets. The objectives of this campaign were to build buzz, encourage interactivity, and lead consumers to the online commercials. Twitter users generally reacted positively to #MeetTheFarmers and the videos. However, conversations tagged as #McDStories took a negative turn, with many users posting complaints and sarcastic comments about the company. McDonald's social media director quickly decided to remove #McDStories from Twitter's home page but left #MeetTheFarmers in place because "we got lots of great engagement on that, lots of uptick from it."
Selling the Arch Card
Although McDonald's has sold gift certificates for many years, it now has a corporate sales division that targets businesses interested in giving small incentives to employees or customers. The incentive that McDonald's offers is its Arch Card, a prepaid gift card issued in the amount of $5, $10, $25, or $50. Businesses can buy up to 25 Arch Cards through local McDonald's outlets. The corporate sales division handles bulk purchases and gives business customers a discount if they buy $10,000 worth of Arch Cards. After recipients spend the initial gift amount, they can reload up to $110 on each card. The next time they visit a McDonald's restaurant, they'll be ready to grab and go with just a swipe of plastic.
What are the advantages and disadvantages of McDonald's using franchising to grow more quickly in China?