marketing strategy of mcdonalds report 2 | Mc Donald's | Marketing Communications

Report-2 Expansion of McDonalds to regional markets

Carbon copy: Management committee march 2009 Attention to: Panier salvam(co-director) No of Reports: 1 No of pages:10 Date: 15

2.0 Expansion to regional markets in India
McDonald's India is a joint-venture company managed by Indians. There are a limited number of customers in the Indian market. To build long-term business in India McDonalds are learning the nature of the people and the market, it is essential to retain people once they have become customers. Customers are not all the same. Around the world, McDonald's traditionally operates with local partners or local management. In India too, McDonald's purchases form local suppliers. McDonald's constructs its restaurants using local architects, contractors, labour and - where possible – local materials. McDonald's hires local personnel for all positions within the restaurants and contributes a portion of its success to communities in the form of municipal taxes and reinvestment. Market research of McDonalds has identified different types of customers. — McDonald's advert, 1996. For example:

A parent with two children Children A business customer

Visits McDonald’s to give the children a treat. Want to visit McDonald’s as it is a fun place to eat. Visits McDonald’s during the day as service is quick, the food tastes great and can be eaten in the car without affecting a busy work schedule. Are attracted by the Saver Menu which is affordable, and the internet access available in restaurants.

Teenagers

These examples represent just a few of the benefits of McDonald’s possible marketing option and the customer satisfaction. Each has different reasons for coming to McDonald’s Using this type of information McDonald’s can tailor communication to the needs of specific groups. It is their needs that determine the type of products and services offered, prices charged, promotions created and where restaurants are located. In order to create a marketing strategy that will enable the needs of the key market to be met, the strengths and weaknesses of the organisation must first be identified and analysed. The analysis will examine the following parts of the company’s business: • The company’s products and how appropriate they are for the future • The quality of employees and how well trained they are to offer the best service to customers • The systems and how well they function in providing customer satisfaction e.g. marketing databases and restaurant systems • The financial resources available for marketing. Once the strengths and weaknesses are determined, they are combined with the opportunities and threats in the market place. This is known as SWOT analysis - strengths, weaknesses, opportunities, threats. The business can then determine what it needs to do in order to increase its chances of marketing successfully.

2.1 Range of marketing strategy options
(4*4 Ps) (Positioning/Branding) • • • • Product Price Promotion Place

2.1.1 The four Ps The marketing mix is the combination of price, product, promotion and place that successfully markets a product to focus of McDonalds. I. Product

The product must be what the customer wants and has to be changed as tastes change. Most products go through a life cycle which sees them eventually decline. Price must match the customers' idea of what the product is worth. The important thing to remember when offering menu items to potential customers is that there is a huge amount of choice available to those potential customers with regard to how and where they spend their money. Therefore McDonald’s places considerable emphasis on developing a menu which customers want. Market research establishes exactly what this is. However, customers’ requirements change over time. What is fashionable and attractive today may be discarded tomorrow. Marketing continuously monitors customers’ preferences. In order to meet these changes, McDonald’s has introduced new products and phased out old ones over time, and will continue to do so. Care is taken not to adversely affect the sales of an existing option by introducing a new option which will cannibalise its sales. McDonald’s knows that sales of products on its menu will vary at different points in their life cycle as is illustrated on the graph to the right.

Product life cycle

Sales Maturity

Decline Growth

Development Introduction Time The type of marketing undertaken and the resources invested will be different depending on the stage a product has reached. For example, the launch of a new product will typically involve television and other advertising support. At any time a company will have a portfolio of products, each in a different stage of its cycle. Some of McDonald’s options are growing in popularity while arguably the Big Mac is at the ‘maturity’ stage.

ii. Price The customer’s perception of value is an important determinant of the price charged. Customers draw their own mental picture of what a product is worth. A product is more than a physical item; it also has psychological connotations for the customer. The danger of using low price as a marketing tool is that the customer may feel that a low price is indicative of compromised quality. It is important when deciding on the price to be fully aware of the brand and its integrity. A further potentially adverse consequence of price reduction is that competitors match the lower prices resulting in no extra demand. This means the profit margin has been reduced without increasing the sales.

iii. Promotions The promotions aspect of the marketing mix covers all types of marketing communications. One of the methods employed is advertising, sometimes known as ‘above the line’ activity. Advertising is conducted on TV, radio, in cinema, online, using poster sites and in the press for example in newspapers and magazines. What distinguishes advertising from other marketing communications is that media owners are paid before the advertiser can take space in the medium. Other promotional methods include sales promotions, point of sale display, merchandising, direct mail, telemarketing, exhibitions, seminars, loyalty schemes, door drops, demonstrations, etc. The skill in marketing communications is to develop a campaign which uses several of these methods in a way that provides the most effective results. For example, TV advertising makes people aware of a food item and press advertising provides more detail. This may be supported by in-store promotions to get people to try the product and a collectable promotional device to encourage them to keep on buying the item. It is imperative that the messages communicated support each other and do not confuse customers. A thorough understanding of what the brand represents is the key to a consistent message. For example, to reach a single professional woman with income above a certain level, it may be better to take an advertisement in Cosmopolitan than Woman’s Own. To advertise to mothers with families, it may be more effective to take advertising space in cinemas during Disney films. The right media depends on who the viewers, readers or listeners are and how closely they resemble the target audience. iv. Place Place, as an element of the marketing mix, is not just about the physical location or distribution points for products. It encompasses the management of a range of processes involved in bringing products to the end consumer.

2.1.2 Marketing objectives The marketing strategy will be planned to meet clear objectives, with intermediate targets showing progress along the way. The marketing strategy is the tool that lays out how marketing objectives will be achieved. Objectives communicate what marketers want to achieve, guide marketing actions and are used to measure how well a plan is working. They can be related to market share, sales, reaching the target audience and creating awareness in the marketplace. Long-term objectives are broken down into shorter-term measurable targets, which McDonald’s uses as milestones along the way. Results can be analysed regularly to see whether objectives are being met. This type of feedback allows the company to change plans and allows flexibility. Once marketing objectives have been established, the next stage is to define how they will be achieved. The marketing strategy is the statement of how objectives will be delivered. It explains what marketing actions and resources will be used and how they will work together. The company has developed a learning culture geared towards service excellence through its comprehensive, structured series of classroom and on-the-job training programmes, culminating with a diploma in "Hamburgerology" from McDonald's Hamburger University. 2.1.3 Evaluation of Benefits and Limitations

Benefits • McDonalds is relatively inexpensive when compared to the ratio of cost against the reach of the other fast foods. It can reach wide Customers for a small fraction of traditional advertising budgets. The Service of the company allows customers to Choose and purchase Food and services at their own convenience. Therefore, McDonalds have the advantage of appealing to consumers in a medium that can bring results quickly. The marketing strategy of McDonalds is not under recession to be panic and can develop the strategic options for the company. McDonalds advantage also have of measuring the the

Limitations
• From the Customers perspective, the inability of shoppers to touch, smell, taste or "try on" tangible goods before making a purchase can be limiting. However, there is an industry standard for Customers to reassure by having liberal return policies as well as providing in-store pick-up services. Insufficient ability to measure impact, lack of internal capability, and difficulty convincing senior management. In response to public pressure, McDonald's has sought to include more healthy choices in its menu and has introduced a new slogan to its recruitment posters: "Not bad for a McJob". (The word McJob,

statistics easily and inexpensively. Nearly all aspects of its marketing strategy can be traced, measured, and tested. It is not under the position to advertise to build it market it is under the peoples mind and have a good priority for McDonalds. Therefore, customers can determine which service or offerings are more appealing to the audience. The results of marketing strategy can be measured and tracked immediately because the measurements of the performance of the employees are tracked for customer needs. Such measurement cannot be achieved through any advertising. • McDonalds marketing strategies directly impact food purchasing and eating habits. For example, in the late 1970s scientists announced a possible link between eating a high-fiber diet and a reduced risk of cancer. However, consumers did not immediately increase their consumption of high-fiber cereals. But in 1984 advertisements claiming a relationship between high-fiber diets and protection against cancer appeared, and by 1987 approximately 2 million households had begun eating high-fiber cereal. Since then, other health claims, supported by scientific studies, have influenced consumers to decrease consumption of foods high in saturated fat and to increase consumption of fruits, vegetables, skim milk, poultry, and fish. McDonald's has dubbed its new

first attested in the mid-1980s and later popularized by Canadian novelist Douglas Coupland in his book Generation X, has become a buzz word for low-paid, unskilled work with few prospects or benefits and little security.) McDonald's disputes the idea that its restaurant jobs have no prospects, noting that its CEO, Jim Skinner, started working at the company as a regular restaurant employee, and that 20 of its top 50 managers began work as regular crew members. In 2007, the company launched an advertising campaign with the slogan "Would you like a career with that?" on Irish television, outlining that their jobs have many prospects. • In a bid to tap into growing consumer interest in the provenance of food, the fast-food chain recently switched its supplier of both coffee beans and milk. UK chief executive Steve Easterbrook said: "British consumers are increasingly interested in the quality, sourcing and ethics of the food and drink they buy". McDonald's coffee is now brewed from beans taken from stocks that have been certified by the Rainforest Alliance, a conservation group. Similarly, milk supplies used for its hot drinks and milkshakes have been switched to organic sources which could account for 5% of the UK's organic milk output. McDonald's announced on May 22, 2008 that, in the U.S. and Canada, it will be introducing cooking oil for its French fries that contains no trans fats. The company will use canola-based oil with corn and soy oils by year's end for its baked

marketing effort "Rolling Energy." The effort was designed to focus on increasing credibility with consumers at a time when people are becoming more interested in taking an active role in their diets. MacDonald’s benefit from cost reduction through economies of scale because of its enormous size and its huge global presence allows it to diversify risk involved with the economic performance of specific countries.

items, pies and cookies.

3.0 Changes in Marketing Environment for McDonalds
In April 2008, McDonald's announced that 11 of its Sheffield restaurants have been using a biomass trial that had cut its waste and carbon footprint by half in the area. In this trial, waste from the restaurants were collected by Veolia Environmental Services and used to produce energy at a power plant. McDonald's plans to expand this project, although the lack of biomass power plants in the U.S. will prevent this plan from becoming a national standard anytime soon. In addition, in Europe, McDonald's has been recycling vegetable grease by converting it to fuel for their diesel trucks.

Furthermore, McDonald's has been using a corn-based bioplastic to produce containers for some of their products. Although industries who use this product claim a carbon savings of 30% to 80%, a Guardian study shows otherwise. The results show that this type of plastic does not break down in landfills as efficiently as other conventional plastics. The extra energy it takes to recycle these plastic results in a higher output of greenhouse gases. Also, the plastics can contaminate waste streams, causing other recycled plastics to become unsaleable.

The U.S. Environmental Protection Agency has recognized McDonald's continuous effort to reduce solid waste by designing more efficient packaging and by promoting the use of recycled-content materials. McDonald's report that they are committed towards environmental leadership by effectively managing electric energy, by conserving natural resources through recycling and reusing materials, and by addressing water management issues within the restaurant.

3.2 Analyzing McDonalds in respond to changes
When McDonald’s received criticism for its environmental policies in the 1970s, it began to make substantial progress towards source reductions efforts. For instance, an “average meal” in the 1970s—a Big Mac, fries, and a drink—required 46 grams of packaging; today, it requires only 25 grams, allowing a 46 percent reduction. In addition, McDonald’s eliminated the need for intermediate containers for cola by having a delivery system that pumps syrup directly from the delivery truck into storage containers, saving two million pounds of packaging annually. Overall, weight reductions in packaging and products, as well as the increased usage of bulk packaging ultimately decreased packaging by 24 million pounds annually. 3.3 Functional area to be developed McDonalds must develop in the functional areas that is listed below in order to achieve its marketing objectives, the company must concentrate in all factors listed below.

• • • • •

Provide faster service Technology functions Customer perception reading Customer satisfaction Research and development activities etc.

3.3.1 Provide faster service The success of McDonald's is built upon the success of the service provided by the employees. In the case of service McDonalds must be straight forward and more active to the customers, there must be simple changes in the service in order to achieve the customer’s appreciation. This provides the attraction to the customer for their regular visit. The faster service of the company makes the customer to retrieve their hunger faster. Restaurant managers also must be given the opportunity to attain a degree in hospitality through McDonald's University Accredited Programme. This promises customers hotter and fresher food prepared only upon each order. Customers can also easily customize their menu order (for example, more vegetables or no sauce in burgers) to meet dietary needs, with no lapse in service time. 3.3.2 Technology Functions

In this age where technology is a key element in ensuring a company's success, The Company must provide many automated machines for good and faster service. This makes time saving and less work for the employees in McDonalds. This is the main functional aspect which the company has to consider for their good marketing perception and for the customer satisfaction. Since McDonald's is one of the world's most well-known and valuable brands and worlds leading food service retailer the company must target on the technology wise like automated machines for service sector and preparing food machines faster. As a result, managing its day-to-day operations is a major challenge and that the information and communications technology requirements and infrastructure should be well placed. Moreover, this is going to be cost-effective for the company. 3.3.3 Customer Perception Reading The main functional area which the McDonalds had to anticipate a lot is customer perception Analysis. It must bid to tap in growing consumer interest in the province of food. Employee engagement is critical in inculcating a strong service culture. McDonald's achieves this by placing major emphasis on aligned and open internal communications from the boardroom to the crew room. The management team schedules quarterly sharing sessions with all restaurant managers to create a strong sense of ownership of the company's quarterly goals. Ultimately, this discipline of aligned communication cascades down to the counter crew who can then deliver better service in the restaurants. 3.3.4 Customer satisfaction McDonald’s must always listen and understand the customer’s lifestyle needs. The 24/7 and no minimum order requirement demonstrate the commitment to always be relevant to our customers lifestyles. It is all about the customers and how we can offer quality, tasty food at great value and convenience. Customers craving for a McDonald’s meal can easily call anytime without even having to place a minimum order. A two dollars surcharge should not continue to apply. Be it breakfast in the comfort of your own home or a meal in the office anytime of the day or night, we will gladly deliver any of McDonald’s menu choices you like. This includes our recently launched Mix ‘N’ Match Happy Meals and even our Everyday Value Savers. We are looking forward to our customers loving’-captain cook Forster, 1988. 3.3.5 Research and Development Activities

McDonalds need to examine how their rivals are adapting their prices and products to meet the consumer’s needs, how well the rivals are selling and what marketing strategies they are using. Market research should supply the company with all the information they require about consumers preferences, whether they buy certain products, what design features are preferable and what kind of retail outfits are

most frequently used for purchasing certain food products. Quantitative data and Qualitative data’s must be developed in the form research activities. All parts of its organisation then have to work together to ensure that the strategy reaches its objectives. Once the marketing strategy is in place, various responsibilities are given to different individuals so that the plan can be implemented.

3.3.6 Achievements of marketing objectives at three years period Activity Average age of big Mac product Promotions of big Mac product Mcdelivery service Launched N mixed Happy meal Reputation in training Marketing Advertisements Adapting automated machines Total budget Conclusion McDonald's uses market research information to build a marketing strategy. All parts of its organisation then have to work together to ensure that the strategy reaches its objectives. Once the marketing strategy is in place, various responsibilities are given to different individuals so that the plan can be implemented. Systems are put in place to obtain market feedback which measure success against short-term targets. McDonald’s has to ensure that this is done within the confines of a tightly controlled, finite marketing budget. Time Period 2009-2011 Complete year 2009 2009-2011 2009-2011 2009-2011 2009-2011 2009-2011 Budget($) 1,000,000. 3,00,000 50,000 300,000 25,000 1,00,000 40,000 1,815,000

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