much more than that. What marketer sponsors only store.
store. The video featuring Stew Leonard’s shows how the
one car for only one race? Do you want customers to
order your product by phone? That will cost you $8–$13
per order. Do you want a sales representative calling
on customers? That’s about $100 per sales call, and
that’s if the rep doesn’t have to get on an airplane and
stay in a hotel, which can be very costly considering
some companies have thousands of sales reps calling
on thousands of customers. What about the $1-off
coupon for Tropicana orange juice that you found in
the Sunday newspaper? It costs Tropicana more than $1
when you redeem it at the store. These are all examples
of just one marketing element—promotion. Marketing
costs also include the costs of product research and
development (R&D), the costs of distributing products
to buyers, and the costs of all the employees working
in marketing.
1. Select a publicly traded company and research how
much the company spent on marketing activities in the
most recent year of available data. What percentage
of sales do marketing expenditures represent? Have
these expenditures increased or decreased over the
past five years? Write a brief report of your findings.
(AACSB: Communication; Analytic Reasoning)
2. Search the Internet for salary information regarding
jobs in marketing. What is the national average for
five different jobs in marketing? How do the averages
compare in different areas of the country? Write a brief
report on your findings. (AACSB: Communication;
Use of IT; Reflective Thinking)
V ideo Case
Stew Leonard’s
Stew Leonard’s is a little-known grocery store chain
based in Connecticut. It has only four stores. But its
small number of locations doesn’t begin to illustrate
what customers experience when they visit what has
been called the “Disneyland of dairy stores.” Since
opening its first dairy store in 1969, the company has
been known for its customer-centric way of doing
business. In fact, founder Stew Leonard’s obsession
with the concept of customer lifetime value made him
determined to keep every customer who entered his
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retailer has delighted customers for more than 40 years.
With singing animatronics farm animals, associates in
costume, petting zoos, and free food and drink samples,
this chain serves as many as 300,000 customers per
store every week and has achieved the highest sales per
square foot of any single store in the United States. After
viewing the video, answer the following questions about
the company.
1. What is Stew Leonard’s value proposition?
2. How does Stew Leonard’s build long-term customer
relationships?
3. How has Stew Leonard’s applied the concepts of
customer equity and customer lifetime value?
C ompany Case
McDonald’s in the Philippines:
Stung by the Bee
McDonald’s opened its first restaurant in the Philippines
in 1981, when George T. Yang, an entrepreneur of
Chinese descent and a Wharton graduate, launched the
fast-food phenomenon in a joint venture with the U.S.-
based McDonald’s Corporation.
The Philippines, with its four-decade history as an
American-occupied territory, is a huge fan of American
culture. Several American restaurant franchises have
been well-received here, and Yang was confident that
McDonald’s would do well too. Introducing the Big Mac
experience to the Philippines was seen as something
of a revolution in the local dining industry. It offered
consumers a taste of McDonald’s Quarter Pounder™,
the World Famous Fries™ and Coke McFloat®. Apart
from the fast-food fiesta, McDonald’s also provided
quick service, a clean environment, and a young-and-
upbeat staff. In 2005, the business became a fully owned
Filipino enterprise.
However, the McDonald’s journey hasn’t been
all smooth sailing. A local company called Jollibee,
which turned its ice cream parlor into a burger joint
has been stinging McDonald’s in the Philippines ever
since it was opened. Jollibee, which was founded by
Filipino entrepreneur Tony Tan Caktiong in 1978, is
often referred to as Asia’s response to McDonald’s.
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 With more than 31,000 outlets in over 100 countries,
of which 3,000 are in Asia, and their vast experience, one
would think McDonald’s would easily surpass its regional
brands; however, Jollibee has surfaced as its biggest
competitor. Having heard that McDonald’s was coming
to the Philippines, Tan traveled to the United States to get
a better understanding of Jollibee’s competitors.
Just before McDonald’s was launched, Jollibee
offered consumers a menu similar to McDonald’s but
adapted it to suit the Filipino palate and priced the items
lower. Unlike the Americans, Filipinos don’t like pure-
beef patties as they consider them to be bland. Catering
to the local tastes and preferences, Jollibee ensures that
their patties have a stronger flavor, usually with more
garlic, onion, and celery. One of its popular dishes is
Chickenjoy, which is a serving of fried chicken and rice
with a generous helping of chili powder. Its fries are dry
on the inside and taste like they have been fried several
times over, just the way the primary consumers like it.
Other items on their menu include Jolly Spaghetti, which
is spaghetti served with sweet meat sauce and hotdog
slices, and its signature deep-fried mango pie, which is in
a better position to take on McDonald’s apple pie. Even
its mascot, Jolly Bee, epitomizes the Filipino spirit of
lighthearted, everyday happiness and is more endearing
to the Filipinos than Ronald McDonald.
Unlike Jollibee, McDonald’s remained largely
faithful to its core menu. According to Yang, initial sales
were astounding. However, it became apparent that
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9780133795028_CH01.indd 36
localization was necessary to win the Filipinos over and
beat the competition. Yang lobbied to integrate local
flavors into the menu. As a result, in 1986 McDonald’s
Philippines introduced McSpaghetti, which was a take on
the Filipinos’ distinct version of spaghetti. The following
years saw new items on the menu, including the Chicken
McDo and the Burger McDo in 1993.
Such localization has seen some success. In the
Philippines, McDonald’s has been affectionately given
a nickname, McDo. Several of the catchphrases in its
commercials have found their way into local lexicon—
“Kita-kits” from “Kita-kits sa McDo,” a phrase in one of
its early commercials, was adopted by locals as a short
way for saying “See you there.”
Marketing to the smartphone-savvy Filipinos,
McDonald’s has launched several apps. The McDo PH
app, with its “Never Miss a Craving” tagline, was built to
make McDelivery more accessible. In 2014, McDonald’s
collaborated with Coca-Cola to launch the BFF Timeout
App, a gaming app that challenges players to go on
a “digital timeout” with their best friends. The longer
they can go through life without digital interruptions,
such as checking their mobile phones, the more points
and badges the players get. Best friends can even
win free trips through the app. Innovation has also
helped McDonald’s promote its sales. The Fry Holder,
launched in 2014, can be placed in cars to hold fries,
allowing drivers to have a hassle-free, eat-on-the-go
experience.
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 Despite these adaptations, innovations, investments,
and the brand’s heritage, McDonald’s still lags behind
Jollibee. The latter has over 750 stores nationwide
compared to McDonald’s 400, around twice in terms
of store-count market share. Other fast-food chains,
such as Wendy’s and Burger King, have about 250
collectively. According to Forbes Asia, Jollibee controls
some 18 percent of the market in Metro Manila, beating
McDonald’s 10 percent. Jollibee is reportedly also ranked
higher than McDonald’s when it comes to courtesy and
service.
In light of the sting, Kenneth S. Yang, President and
CEO, ponders on how he can remedy the situation.
❯ The McDonald’s delivery guy: In cities like Beijing, Seoul, and
Cairo, armies of motorbike delivery drivers outfitted in colorful
uniforms and bearing food in specially designed boxes strapped to
their backs make their way through bustling traffic to deliver Big Macs.
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Questions for Discussion
1. How does remaining faithful to its core menu
jeopardize McDonald’s success in the Philippines?
Does this make McDonald’s less marketing oriented?
2. Is adaptation to local culture always important? Why
do you think it is so in the case of the fast food industry?
3. What can McDonald’s do to win customers over?
4. What can Jollibee do to thwart McDonald’s challenges?
Sources
Cathy Rose A. Garcia (2013), “How Jollibee Beat
McDonald’s in the Philippines,” www.ABS-CBNnews.
com, 2 November 2013; Marge C. Enriquez (2012),
“George Yang: ‘I’m Known as the McDonald’s Guy’,” www.
business.inquirer.net, 10 November 2012; Tara Sering
(2011), “The Journey of George Yang,” www.philstar.com,
4 December 2011; “Jollibee Stings McDonald’s in the
Philippines,” The New York Times, 20 May 2005; Materials
from www.jollibee.com.ph, accessed on 8 April 2015;
Materials from www.mcdonalds.com.ph, accessed on 8
April 2015.
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