Retail Management 12th Edition by Barry Berman ,Joel Evans

Exercise 12

Case 1: Making McDonald's Recession-Resistant
As its chief executive likes to say, McDonald's (www.mcdonalds.com) is "recession-resistant" as opposed to "recession-proof." Nonetheless, the retailer has outperformed many other retailers during the recent tough economic times. The nation's leading fast-food chain has even managed to report comparable store sales growth in many quarters-due to the strong growth in its McCafé beverages, its new fruit-and-maple oatmeal, expanded sales of healthier foods, and its everyday value pricing menu.
Both the McCafé line of beverages and the fruit-and-maple oatmeal were developed to bolster McDonald's weakest meal-breakfast. In May 2009, McDonald's launched its McCafé beverages as an addition to its traditional coffee segment. According to Ashlee Yingling, a company spokesperson: "It continues to evolve as we look at espresso-based drinks." Additional coffee products may make McDonald's a destination retailer of coffees, which Dunkin' Donuts (www.dunkindonuts.com) has accomplished.
McDonald's, which is best known for its burgers, milk shakes, and French fries, is now also featuring healthier foods. Although mostly perceived as a breakfast item, McDonald's fruit-and-maple oatmeal is available all day long. And unlike other products that have been criticized as being unhealthy, the fruit-and-maple oatmeal is available with or without brown sugar, provides the equivalent of two servings of whole grain, and comprises 20 percent of the daily requirements for fiber. The fruit-and-maple oatmeal was developed in association with the Whole Grains Council.
While McDonald's has had salads on its menu since 2003 and snack wraps since 2006, today it also offers small food portions, grilled versus fried alternatives, and a "made for you" platform in which consumers can order any item on the menu to their liking (such as a burger without cheese or oatmeal without brown sugar). Yingling says: "It's not about categorizing it as 'healthier,' it's about providing options customers feel good about eating."
Instead of offering a constant stream of promotions (such as buy a burger and fries and get a free soda) and price reductions, McDonald's is more committed to providing everyday value to its customers. The use of everyday value pricing reduces advertising costs, makes sales forecasting more predictable, avoids excessive peaks and valleys in sales, and is not reliant on a franchisee's joining each promotion.
McDonald's product-planning process seeks to eliminate duplication between existing and new products. Thus, the Big N' Tasty burger was eliminated after the Angus Third Pounder was developed. Similarly, the Mac Snack Wrap was discontinued once the Angus Snack Wrap was commercialized. As Ashlee Yingling notes: "It's just about realizing the similarities in menu items, then a decision has to be made about keeping both or not-but it is not a decision that we take lightly." The introduction of five new products in a year does not mean that five existing products need to be eliminated.
Some retail analysts are concerned that McDonald's stream of new products will reduce its ability to quickly deliver hot-and-tasty foods. Yingling counters this criticism by stating that all of the chain's new products must meet the criteria of being served within 1½ minutes of a customer's initial order.
Questions
1. Evaluate the appropriateness of the McCafé line of coffees and the fruit-and-maple oatmeal to McDonald's overall merchandising strategy.
2. Discuss the pros and cons of McDonald's use of an everyday value pricing strategy versus a constant stream of promotions.
3. Describe the pitfalls associated with McDonald's having too many products.
4. Develop a system for McDonald's to use to eliminate duplication among new and existing products.