CASE 2-RRM

mcDonalD’s ongoing marketing challenge: Social Perception in India
A Story Began…….. It was a busy day at the Mumbai Central Station in India, marked with the usual rush of passengers. A large group of passengers was ready and anxiously awaiting to board their respective trains. Porters in their red uniforms were seen carrying baggage to help the travellers. Food vendors, bookstalls, newspaper sellers... It was a mini marketplace. A family with two kids arrived in an air conditioned car two hours earlier then their scheduled departure. After they entered the train station, the humid weather, the typical odour at the railway station and the crowd made them uncomfortable. With a bored look, the children looked around and suddenly shrieked with joy. Excited, they indicated a sign to their parents. It was the Golden Arch of McDonalds. Smiling, the family entered Ronald‘s place, McDonald‘s, for a great time before they boarded the train. They were sure that that the experience would be wonderful like the ones they had during their earlier visits to They were Indian customers who considered McDonald‘s as a symbol of the American culture. Availability of McDonald‘s in their country reflected the beginning of globalization which had brought in western brand influences into the Indian markets. The impressive aspect was that the intangibles of the fast food service had made the maximum impact on the customers. The Indian customers had always seen the kitchen doors of the other restaurants with a sign ‗Restricted Area‘ or ‗For Employees‘ only. Now in McDonald‘s, they were able to see the operations and hence the conviction in the QSC – Quality, Service and Cleanliness was quick and lasting.

Introduction McDonald’s restaurant in Delhi In 1996, McDonald's opened in India for the first time, a country where the majority of the population was Hindu and vegetarian, and the cow was sacred. McDonald‘s opened its doors in India in October 1996, demonstrating what the McDonald‘s experience was all about. McDonald‘s in India was a 50-50 joint venture partnership between McDonald‘s Corporation (U.S.A.) and two Indian

These service standards were visible and noteworthy and hence triggered quick acceptance within the customers. owned and operated the North Indian operations. Foreign brands were valued and perceived to be superior in quality. In a way McDonald‘s revolutionized the food retailing business in India.000 restaurants worldwide and employed more than 1. With their presence in more than .. But it was only after five years of preparation. South and East. the traditional and culturally rich. language. These companies signed their joint-venture agreements with McDonald's in April 1995 and along with their Indian management team trained in McDonald's restaurants in Indonesia and the U. It operated over 31. The customer markets were eager to acquire newer products and use newer forms of services. and food varied from one state to another. Later the company exhibited ambitious plans for expansion in Eastern and Southern regions. the powerful North. McDonald‘s got clearance from Foreign Investment Promotion Board (FIPB) of India in 1991. Hence the biggest challenge to any food business in India definitely was about balancing the diversity and the product offerings. the vegetation. the progressive West. Latin Americans and Asians were the biggest supporters of globalisation and the value that it added to the various aspects of their lives. before opening the first McDonald‘s restaurant in India. climate.5 million people. The market had begun to open up. The entry of McDonald‘s in India was perfectly timed. headed by Vikram Bakshi.S. According to a report of AC Neilson.A. McDonald‘s positioning in India as a family restaurant further fuelled its success. while Connaught Plaza Restaurants Pvt. Amit Jatia‘s company. Ltd. Divided into 28 states and 7 union territories. Mumbai. owned and operated McDonald‘s restaurants in Western India. With the combination of spices in a unique way. The second restaurant was opened in the financial capital of India. among the world‘s consumers. Hardcastle Restaurants Pvt. The economy of the country was growing stronger. India as a market was a unique example of diversity. religion.businessmen. Ltd. McDonald‘s opened their first restaurant in the capital of India which is Delhi. History McDonald's expansion worldwide was mind boggling. Indian companies for their operational convenience had divided the Indian subcontinent into four zones. that the first restaurant became operational in 1996. It introduced the Indian customers to service standards which were available in the western world for years.. It worked on developing local relationships with local partners to facilitate the raw material. clothing. food of these states reflected their traditions and culture. McDonald initially concentrated in the West and North regions.

In order to convince and change the perception of the customers about the burgers they offered. The population of a billion was undoubtedly a promising opportunity for an international company. In addition. 1955. Cow being sacred and worshipped. On the other hand. Aloo. The food retailers had been doing business for years. It also made a chicken and fish option available for the non vegetarians. Competition from Local Food Retailers: The competition from the local food retailers was intense. Muslims did not eat pork. McDonald‘s even separated the non vegetarian cooking process and the vegetarian cooking process to convince the customers of the ―Shudh Shakahari Experience‘ which means pure vegetarian experience. McDonald‘s made attempts to clarify their stand about beef in India. the size of the unorganized food retailing was larger and . classic restaurants. Organized food retailing was dominated by the north Indian style and the south Indian style restaurant chains. McDonald‘s since then has expanded phenomenally.119 countries in six continents a global traveller saw them everywhere. beef could not be served. With 25-30% of the population being lacto vegetarian and a large majority eating meat. Challenges for McDonald’s in India: Vegetarianism: The major issue was beef. But the price was expensive and only a select group of customers could afford to make visits there. McDonald‘s accepted the challenge and created the Aloo – Tikki Burger known as McAloo Tikki especially for the Indian vegetarian customers. The metropolitan cities and some developed urban areas offered superior dining experience through the existence of some fine. an alternative to beef and pork was necessary. There were numerous eating joints which offered snacks and meals with affordable price tags. The challenge was to change the form of the worldwide popular Hamburger to make an entry into India. McDonald‘s in India was one of its kinds as it did not offer beef at all. This was indeed a classic case of product adaptation.Tikki was a potato patty with spices. The first store opened near Chicago on April 15. the crew cooking vegetarian food were asked to wear green aprons. Their familiarity with the market and the understanding of the local taste gave them a competitive edge. to gain foothold in a new market. Indians also used more spices in their food. So the world famous hamburger was without meat.

and being treated special. the more effectively one could communicate and market to them. Target Marketing: Value propositions had to be directed to the right target market to establish a new product. The more one knew and understood about consumers. taste. dhabas (the eateries on the highways) and on the outskirts of the cities and a plethora of small eateries. It was observed that food choices made by consumers were impulsive. irrespective of this effort. toy gifts and of all the attraction of a burger. The local food business exactly understood the psychology of the customers and operated accordingly. Children in . McDonald‘s was perceived to be a fun place with special areas marked for kids. These were the ambitious middle. Aroma. Local food in a large assortment was widely available within acceptable price ranges. it was important for any company to understand the consumer market. habits and visibility worked on the subconscious level and played a major role in affective decision making. Happy Meal was used to reflect the fun element of the experience at McDonald‘s. Word of mouth and advertising was expected to reveal the experience of eating at McDonald‘s. consumer needs. Fun and entertainment assumed importance in the financially stable families. Children were the major influencers. Four aspects of consumer behaviour which needed to be examined to understand a consumer market were the ability of the people to buy. joy. McDonalds was affordable to select customers only. buying motives and the buying process. The rising income levels in India increased the disposable income. McDonald‘s advertisement put forth an attractive proposition to the children segment that played a major role in the decision making as regards the choice of a restaurant. Happy Meals were all about the simple pleasures of childhood. Subsequently. An interesting question was who would eat at McDonald‘s? In order to develop the marketing strategy. a time of excitement. One theme typically was used for duration of 4 – 6 weeks. a set of collectible toys from that particular theme. upper middle and affluent classes who were keen to combine eating with fun. In this deal the customer got a choice of a burger. Happy Meals were a huge success. The initial attempt of McDonald‘s was to induce trials and get the customers into the restaurants. McDonald introduced newer menus appealing to the India taste. However. Each Happy Meal was themed and had on offer. McDonalds Value Meal addressed the price sensitivity of the Indian consumer market.comprised of roadside food vendors. a drink and a toy.

In March 2007. In India. However. the company is looking at a substantial share of 7. two thirds of the business of McDonalds was done at the drive through window. McDonalds announced that it would invest about Rs 3 crore (US $0. In United States. Whenever families decided to eat out.India preferred a burger over pizza and McDonald. the company could not do so. The positive factors were the growth in consumer markets with rapid growth in disposable incomes.Vikram Bakshi said ―Mc Delivery currently accounts for almost 5 per cent of the overall sales and with the introduction of the new system. because of unavailability of space and lack of proper infrastructure. the choices available were abundant. Although McDonald‘s strategy was to increase sales volumes by making products available at affordable price. the demand for fast and readymade food was growing. Youngsters valued McDonald‘s for the trendy environment and the joint acted as an interesting meeting place. McDonald‘s needed to find ways and . Meals had been an essential medium for social sharing and relationship. In March 2007. the king of burgers was announced as the number one in a survey titled India‘s most respected companies by Business Week in India for Food retailing in 2006. Pricing Food pricing was a sensitive issue in India. Additionally. its products were perceived to be expensive. Eating Habits Eating out was a special occasion to many Indian families. The needs of the growing working population stimulated the need for new products and services. The company outlets in Delhi and Mumbai initially were opened due to the increased affordability of people with western exposure and brand recognition factors in metros. the company's Managing Director Mr. With more nuclear families and dual income households. development of modern urban lifestyles and the demand for value. The mass markets in India were price sensitive. home delivery was an area of consideration.75 million) over the next three years to strengthen its home delivery services. Absorption of newer cultures was faster in the Metros than other areas. An ideal strategy was to focus on customer‘s ability to pay and tap the rich and upper middleclass population in India.5 per cent in the turnover by next year‖. The trend in metropolitan cities was however changing. It launched an all-India single home delivery number — 66-000-666 to facilitate this service. people in the metros were open to experiment with variety of foods.

Advertising helped in building brand recall. After McDonald‘s established itself and people knew . tables were rounded so that children did not hurt themselves in the restaurant and the menus are pictorially depicted so that a child could order a meal without bothering parents. Advertising and Marketing Initiatives at McDonald’s Advertising was known to have an impact on the minds and the hearts of the consumers. there was a need to evolve the communication strategy and move on from trying to encourage and motivate people to visit for the first time to making McDonald's a regular experience. But globally burgers and beverage brands were linked with poor eating habits. But product and the value offered needed to be attractive and powerful to maintain consistency in sales and build customer loyalty. Extra care was taken to make the restaurants child friendly. Special efforts were made to not allow it to get converted into a typical teenage hangout. The market situation called for focus on the environment within the restaurant and western association. after McDonald's had been hugely accepted by Indian customers. over the years. in India it was positioned as the family restaurant and outlets were called ―McDonalds Family Restaurant‖. Through a variety of advertisements. lunch and dinner. Breakfast was conventional as per the family culture and upbringing. The counters were low. initially McDonald‘s positioned itself as a place to visit with the baseline "McDonald's mein hain kuch baat" (―There‘s definitely something about McDonald‘s‖) in their advertisements. However. Despite the fact that McDonald's was a fast food chain of restaurants. the visit to McDonald was portrayed as a special occasion providing excitement and satisfaction to the customers who comprised of families with kids and the youngsters. Lunch and dinner menus were complete meals providing the right balance in terms of nutrition. Burgers were likely to be slotted in the category of snacks.methods to motivate the customers opt for initial trials and acceptance. The entire restaurant was attractive and child friendly. When operations in India began. Advertisements were created using storylines with focus on emotions. by providing play areas wherever possible so that the parents could relax and have a good time while visiting McDonald's. Advertising was the backbone of McDonald‘s marketing strategy in India. The conventional eating pattern of Indians involved breakfast. People were encouraged to try the McDonald's experience. but advertising alone was not able to sustain the brand. The positioning had been directed towards establishing McDonald‘s as a family restaurant.

Children were an integral part of the decision making process for buying things and played an influential role. During the last few decades. The strength of McDonald's as a brand in India was that it was the most recognizable brand world over amongst all age groups. World over McDonalds was a family restaurant and children were an integral part of a family. The objective was to continue positioning McDonald's as a comfort zone for families. Using collectable toys. McDonald's executed promotional campaigns involving children. Word of mouth and peer pressure worked effectively for this age group. When joint-extended families existed. The brand‘s success was attributed to its promise of a great fun filled experience delivered at its outlets. India saw a major shift to nuclear families. Advertisements with audio –visual appeal created more impact on the viewers. played latest pop-music hits and became a favorite place even for the new generation of jean-clad ‗Americanized‘ teenagers of India. The brand‘s media strategy focused more on the electronic media. and McDonald‘s realized that this group could no longer be ignored. In smaller-nuclear families. McDonalds even introduced unusual ice-cream flavors such as bubblegum.what McDonald's was all about. It was the ‗Indianization’ of the brand that helped McDonald‘s establish in a new market successfully. McDonald‘s did have enough repeat customers. The advertising continued to use emotional appeal to display family ties and fun at McDonald‘s. kids had become the target audience for most categories including consumer durables. McDonald‘s ―Happy Meals‖ were often accompanied with Lego toys to attract children and the restaurant maintained several ‗Play-Zones‘ to provide children with a fun experience. whether it was buying a refrigerator or a TV or whether it was about eating out. McDonald‘s used kids as an entry strategy to the family. In the 1990's. which talked about an everyday experience. McDonald‘s . Many parents objected strongly to the influence this had over their own children. McDonald‘s pursued its main target group – children. television commercials. So McDonald‘s narrated the fun filled environment at their fast food outlet using electronic media. Children influenced the decisions of parents. The restaurants hosted birthday parties. the head of the family made most decisions. the baseline was changed to ―Toh aaj McDonald's ho jaye" (―Let it be McDonald‘s for today‖). individual opinions had become more dominant. The customer base increased substantially since they started operations. promotional schemes in schools and figures such as Ronald McDonald. green apple and berry to entice the curious youngsters. Indians being emotional found it easier to correlate themselves with such types of emotional messages.

November 20. McDonald's India announced the completion of its annual fundraiser. McDonald‘s introduced more vegetarian selections. As part of `Each One Contribute One' programme. McDonald‘s in India hosted interschool arts competition and raised funds for charity on World Children‘s Day. towards the corrective eye surgeries of the needy children. McDonald‘s India planned to invest Rs. French Fries in India were not beef flavoured as in the US. McDonald‘s participated in community-related projects targeting children. Maneka Gandhi. Growth Plans In 2006. McDonald‘s launched several pro-green advertisements such as ―We love Green‖ and funded community related activities including ―Keep our city clean‖. McDonald‘s also partnered with local health organizations to make India Polio-free by helping to set up Pulse-Polio program to provide free vaccine to children. As a part of its Corporate-Citizenship strategy and to help its own brand and reputation in India. and even created egg less products for their vegetarian customers. Mrs. McDonald's World Children's Week 2006 `Each One Contribute One'. In November 2006.adhered to all the advertising codes in each country. a popular environmental activist and her supporters launched an aggressive campaign against fast food chains which contributed in the destruction of the ecological balance and promoted unhealthy food. McDonald's did not offer any beef or pork items in India. The month-long campaign garnered proceeds for vision correction of the visually and economically challenged children. The restaurant celebrated Children‘s week every year from November 14-20 and tactfully supported educational programs for girl-child to promote goodwill among community organizations who worked towards improving status of women in India. McDonald‘s celebrated its tenth anniversary in India.400 crores (US$ 75 Million . Re 1 was contributed on the sales of all meals sold from October 13 .US$ 100 Million) in the next three years . McDonalds sponsored ―Olympic Day Run‖ in 2005 and offered baked potatoes and McCurry Pan instead of fries. To respond to such campaigns. During popular religious festivals in India.300 crores. Ethics and Social Responsibility In India.

000 to 15. McDonald‘s India operated around 100 restaurants across the country which includeed 11 ―drive thru‖ restaurants. Petroretailing was evolving in India. This fact revealed the company‘s perspectives and plans for India. Despite the fact that globally McDonald‘s slowed down its expansion. Only time would tell if McDonald‘s localization strategies and positioning as a family restaurant would continue to appeal Indian population. the penetration it has achieved in the country matches most of the countries. Out of the total investment. McDonald‘s also introduced the concept of ‗Litter Patrols‘ where the employees of McDonald‘s would go around the market every day picking up garbage left behind not only by customers from McDonald‘s restaurants but also by other visitors in the area. Rs.to add 100-125 restaurants in the country as against the then existing number of After establishing itself in the Northern and the Western India. In order to target the shopping mall and cinema lovers. In order to tap the potential among the middle-class Indians. McDonald‘s opened their first restaurant in Eastern India at Kolkata. McDonald‘s strategy revolved around customizing the taste of their menu to suit the Indian palate. there were no restrictions on the Indian operations. where the chain is 20-30 years old‖. With 5000 employees working. the company partnered with railway stations and bus stations. McDonalds partnered with BPCL (Bharat Petroleum Corporation Limited) and HPCL (Hindustan Petroleum Corporation Limited) to set up restaurants targeting the automobile driving consumers. According to Mr. ―even when India is the youngest market for the Big Mac in the Asia Pacific region. The focus was on expansion of the brands presence and introduction of new formats. Petroleum bigwigs proposed to upgrade the service experience to the customers at the gas stations. The company adopted a cluster approach to identify key locations in a 500-700 km radius of the city for further expansion. resulting in a cleaner neighbourhood. the company setup outlets in new shopping malls and new multiplexes in the country‘s metros.100 crore (US $ 25 Million) was to be spent to concentrate on the new Eastern region. the company intended to hire another 10. a new concept to the Indian market.000 people in the next few years. India was identified as one of the top 10 markets for McDonald‘s.Vikram Bakshi. The plan was to set up drive through eateries at the fuel stations. .

Have you ever visited a McDonald‘s store? Compare and contrast your experience with another quick-service restaurant or fast-food joint you visited earlier. What challenges did McDonald‘s face in India? 2. Does local adaptation contribute to business growth in a country? Explain McDonald‘s efforts to adapt to the local culture in India. How can McDonald‘s improve? Should it alter its strategy? .Questions for Discussion 1.