Marketing Strategies at McDonald’s

MARKETING AT MCDONALD’S

Introduction
McDonald’s is one of the best known brands worldwide. This case study shows how
McDonald’s aims to continually build its brand by listening to its customers. It also identifies the
various stages in the marketing process. Branding develops a personality for an organisation,
product or service. The brand image represents how consumers view the organisation. Branding
only works when an organisation behaves and presents itself in a consistent way. Marketing
communication methods, such as advertising and promotions, are used to create the colours,
designs and images which give the brand its recognisable face. At McDonald’s this is
represented by its familiar logo – the Golden Arches. In all its markets, McDonald’s faces
competition from other businesses. Additionally, economic, legal and technological changes,
social factors, the retail environment and many other elements affect McDonald’s success in the
market. Marketing involves identifying customer needs and requirements and meeting these
needs in a better way than competitors. In this way a company creates loyal customers. The
starting point is to find out who the potential customers are – not everyone will want what
McDonald’s has to offer. The people McDonald’s identifies as likely customers are known as
key audiences.
Marketing Strategies at McDonald’s

WHAT IS MARKETING?

Some important definitions of marketing are given below:

F, E. Clark: “Marketing consists of those efforts which effect transfer in ownership of goods and
core for their physical distribution.”

Stanton and Others: “Marketing is a total system of business activities designed to plan price
promotes and distribute wants-satisfying products to target markets to achieve organisational
objectives.”

American Management Association (1985): “Marketing is the process of planning and

executing the conception, pricing promotion and distribution of ideas, goods and services to
create exchanges that satisfy individuals and organisational objectives”. This is a widely
accepted definition of Marketing.
Thus marketing is getting the right goods and services to the right people at the right place at the
right time at the right price with the right communication and promotion. Marketing is the
performance of those business activities which are involved in the flow of ideas, goods and
services from their point of production to the point of consumption.

The objectives of marketing is to ascertain consumer needs, convert them into ideas, products or
services and move such ideas etc. to the final consumer or user, to satisfy certain needs and
wants of specific consumer segments with emphasis on profitability, ensuring the optimum use
of the resources available to the organisation.

In summary, “Marketing is the activity and process of creating, communicating, delivery and
exchanging offerings that have value for customers, clients, partners and society at large.”

MARKETING STRATEGY

A marketing strategy defines and describes the objectives or planning through which consumer
needs are satisfied in a selected targeted market. It includes communication between different
departments of the business enterprise for example: sales department, managers, executives, etc.
Marketing Strategies at McDonald’s

In fact, it is a set of strategies that is applied by the organization, in order to increase the growth
and development of the business. Normally, strategies deal with the manner in which the
organization plans to achieve the consumer satisfaction and maximize profit.

DEFINITION OF MARKETING STRATEGY

 Marketing Strategy is a set of actions that outline and guide decisions on the best or
chosen way to create, distribute, promote and price products or services (manage the
marketing mix variables).
 A marketing strategy is a process that allows an organization to concentrate its limited
resources on the greatest opportunities to increase sales and achieve a sustainable
competitive advantage. A marketing strategy should be centered on key concepts that
customer satisfaction is the main goal.

MARKETING STRATEGIES OF MCDONALD’S

Franchise Model

Only 15% of the total number of restaurants is owned by the company. The remaining 85% is
operated by franchisees. The company follows a comprehensive framework of training and
monitoring of its franchises to that they adhere to the Quality, Service, Cleanliness and Value
propositions offered by the company to its customers.

PRODUCT CONSISTENCY

By developing a sophisticated supplier networked operation and distribution system, the

company has been able to achieve consistent product taste and quality across geographies.

ACT LIKE A RETAILER AND THINK LIKE A BRAND

It focuses not only on delivering sales for the immediate present, but also protecting its long term
brand reputation.
Marketing Strategies at McDonald’s

RE-ENGINEERING THE MENU

McDonalds think according to the customer’s taste, value systems, lifestyle, language and
perception. Globally McDonalds was famous for its hamburgers which are prepared from beef
and pork burgers. But, due to religious reasons of some of its customers and to satisfy their
demand and preferences, McDonalds came up with chicken and fish burgers to suite those
customers.

THE VEGETARIAN CUSTOMER

There are many vegetarians in the U K. To satisfy these customers’ demand, McDonald’s came
up with a completely new menu of vegetarian items like McVegggie burger, Spicy Veggie wrap.

SEGMENTATION, TARGETING AND POSITIONING

Customer perception is a key factor affecting a product’s success. Many potentially

revolutionary products have failed simply because of their inability to build a healthy perception
about themselves in their customers’ mind. McDonalds being an internationally renowned
brand brings with it certain expectations for the customers.

McDonalds uses demographic segmentation strategy with age as the parameter. The main target
segments are children, youth and the young urban family. If we take children into consideration,
children are most attracted towards toys and delicious meals. Today’s youth also prefer such
places for their entertainment and the urban families select McDonalds on various occasions like
birthday party, etc

Table: targeting, Positioning and Differentiation

Marketing Strategies at McDonald’s

Since kids are on the top most level of purchased food products. So to attract children,
McDonalds has Happy Meal in which they give one toy on each happy meal, there are toys
ranging from hot wheels to various Walt Disney characters. Example of the latest range is the
toys of the movie Madagascar. For this, they have a tie – up with Walt Disney. At several outlets,
it also provides special facilities like “Playing Place” where children can play arcade games, air
hockey, etc. This strategy makes McDonald’s a fun place where customers can enjoy both
playing and eating. This also helps McDonalds to attract young urban families who want to
spend some quality time, while their children can enjoy every moment at the McDonald’s. To
target the teenagers and young youth, facilities like WI – FI are also provided on the outlets.

McDonald’s as a place for the entire family to enjoy. When McDonald’s entered UK, it was
mainly targeting the urban upper class people. But today, it has positioned itself as an affordable
place to eat without compromising on the quality of food, service and hygiene. The outlet
atmosphere and mild background music highlight the comfort that McDonald’s promises in the
slogans like “YOU DESERVE A BREAK TODAY”, “FEED YOUR INNER CHILD”. This
commitment of quality of food and services in a clean, hygienic and relaxing atmosphere has
ensured that McDonald’s maintains a positive relationship with its customers.

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 organization must first be identified and analysed.

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.

SWOT ANALYSIS
Marketing Strategies at McDonald’s

1) STRENGHTS
 GLOBAL BRAND
McDonald’s has a very well – established global brand that appeals to all age
groups and customer segments. In 2005, McDonald’s placed ninth in the top 100
global brands ranking of the “Business Week Magazine and the Interbrand”.
 STRONG OPERATIONAL CAPACITIES
McDonald’s has strong operational capabilities which allows it to provide high
quality products and customer services across its restaurants. It has a world –
class supply chain and standardized process to deliver products of uniform quality
across all restaurants, regardless of their locations or nature of operation
(company – owned or franchise - oriented).
 SUCCESSFUL ITEMS
Some of its products such as Big Mac, Chicken McNuggets have become brands
in their own right. Strong brand draws customers to the company’s restaurants
and provides it with a well-recognized brand currently in new markets.
 QUALITY PRODUCTS
McDonald’s is the symbol of quality with respect to its offering.
2) WEAKNESS
 WEAK REVENUE GROWTH
Low revenue growth suggests that the company has not been able to expand
customer traffic at existing restaurants thanks mainly to the maturation and
saturation of its key markets.
 WEAK PRODUCT DEVELOPMENT
Marketing Strategies at McDonald’s

McDonald’s faces a strong competition and its weak product development creates
problem.
3) OPPORTUNITIES
 EXPANSION
There is a large market for McDonald’s still to serve. Furthermore it has few
outlets within cities in which it is currently serving, so McDonald’s also has
opportunity to expand within cities.
 FRANCHISEE – OPERATED RESTAURANTS
McDonald’s intends to sell about company – operated restaurants to franchisees.
The operating margin of franchisee – operated restaurants is higher than that of
company – operated restaurants. The sale of company – operated restaurants to
franchisees is likely to increase the overall profitability of McDonald’s business.
 GROWING DIVING – OUT MARKET
As the lifestyle trends of consumers are changing, the dining out market is
growing, that would serve as an opportunity for the McDonald’s.

4) THREATS
 INTENSE COMPETITION
McDonald’s restaurants face intense completion from international, national,
regional and local retailers of food products. The company competes on the basis
of price, convenience, service and quality of food products. the company’s
competition includes restaurants, quick service eating establishments, pizza
parlours, coffee shops, street vendors, convenience food stores, delicatessens and
supermarkets.
 GROWING HEALTH CONSCIOUSNESS
As the education level has increased, health consciousness has also increased. A
growing consciousness of health matters could reduce McDonald’s.
 INCREASED SALES TAX
Sales tax has increased which results in the increased customer prices and reduced
sales level.
Marketing Strategies at McDonald’s

CUSTOMER PERCEPTION AND CUSTOMER EXPECTATION

Customer perception is a key factor affecting a product’s success. Many potentially

revolutionary products have failed simply because of their inability to build a healthy perception
about themselves in the minds of the customers. McDonald’s being an intentionally renowned
brand brings with it certain expectations for the customers.

Customers expect it to be an ambient, hygienic and a little sophisticated brand that respects their
values. The customers expect the brand to enhance their self – image.

FULLFILLING CUSTOMER EXPECTATIONS

Another greatest strength of McDonald’s is its product value. To fulfil customer’s expectations
when they walk in their franchise becomes their strongest marketing element.

 INNOVATION
 OVER EXPOSURE
 CUSTOMER TRENDS
 EXTERNAL ENVIRONMENT
Threats and opportunities prevail in any company’s external environment:
 Technology
 Politics
 Law

MCDONALD’S MARKETING MIX (5P’S STRATEGY)

After analysing the market, finding the key factor, target segments and understanding the market
demand, every company needs to come up with an offer or such type of plan, which speeds up
the growth of the company. For which McDonald’s uses the 5p’s of marketing mix which are as
follows:

1) PRODUCT
2) PLACE
Marketing Strategies at McDonald’s

3) PRICE
4) PROMOTION
5) PEOPLE

PRODUCT:

Product is the physical product or service offered by a company to its

consumers. Product includes certain aspects such as packaging, guarantee,
looks etc. This includes both the tangible and the non-tangible aspects of the product
and service.

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 (trade off). 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. 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.
Marketing Strategies at McDonald’s

It studied the behaviour of the UK customer and provided a totall y different

menu

McDonald’s studied the behaviour of the UK customer and provided a totally different menus as
compared its International offering. McDonald’s continuously innovates its products according
to the changing preferences and tastes of its customers. McDonalds bring with it a globally
reputed brand, world class food quality and excellent customer specific product features.

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. The place mainly consists of the distribution channels. It makes
the product available to the customer at the right place, time and quantity.

There is a certain degree of fun and happiness associated with each time spent at the
McDonald’s. It offers hygienic environment, good ambience and great service. Now McDonald’s
has started giving internet facility at outlets mixed with music. They also provide areas for
children to play as their parents have some quality time.

PRICE
Marketing Strategies at McDonald’s

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.

Pricing should take into consideration the probable reaction from the competitor. This is the most
important part of the marketing mix as this is the only part which generates revenue. All
the other four are expenses incurred in the business. The price must take into
consideration the appropriate demand – supply equation. McDonald’s came up with a very
catchy punch line. McDonalds has certain value pricing and bundling strategies such as
“happy meal”, “combo meal”, “family meal” to increase overall sales.

Promotions

Promotions cover all types of marketing communications. One of the methods employed is
advertising. Advertising is conducted on TV, radio, in cinema, online, etc. What distinguishes
advertising from other marketing communications is that media owners are paid before the
advert can take space in the medium. Other promotional methods include sales promotions, point
of sale display, merchandising, etc.

The various promotion channels being used by McDonald’s to effectively

communicate the p r o d u c t information are given above. A clear
u n d e r s t a n d i n g o f t h e c u s t o m e r v a l u e h e l p s decide whether the cost of promotion
is worth spending. The three main objectives of advertising for McDonald’s are: to
make people aware of an item, feel positive about it and remember it. The right message has to
be communicated to the right audience through the right media. M c D o n a l d ’ s d o e s i t s
p r o m o t i o n t h r o u g h television, hoardings and bus shelters.

Some of the most famous marketing campaigns of McDonald’s are:

Marketing Strategies at McDonald’s

 “You Deserve a break today, so get up and get away- To McDonald’s”

 “Food, Folks, and Fun”
 “I’m loving it”

These five promotion tools (advertising, personal selling, sales promotion, public relations and
direct marketing) are used by McDonalds to integrate marketing communication program which
allows McDonalds to access the communication channels clearly, consistently to easily transfer
messages and products to the customer.

People:

McDonald’s knows the value of both its employees and its customers. It understands the fact that
a happy employee can serve well and result in a happy customer.

The order of people for McDonald’s are (most important people are at the top):

1. Customers
2. Lineemployees
3. Middle Level managers
4. Frontline managers

The punch line “I’m loving it” is an attempt to show that the employees are loving their work at
McDonalds and will love to serve the customers

Conclusion

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
Marketing Strategies at McDonald’s

REFERENCES

John F. Love (1998). McDonald’s: Behind the arches. UK: Transworld Publishers Ltd.

Barnes, D., (2008), Operations Management: An International Perspective. UK Cengage

Learning EMEA.

Cooper. R.G.,Edgett. S.J (2009). Product Innovation and Technology Strategy. USA: State –
Gate International.

Facella, P., Genn, A. (2008). Everything know about business I learned at McDonald’s: the
7 leadership principles that drive break out success. USA. McGraw – Hill

Harris. P.S ., (2009): None of us is as good as all of us: how McDonald’s prospers by
embracing inclusion and diversity. John Wiley and Sons

Joan, V. G (2011): Five forces analysis of fast food industry. United States Census Bureau
Pri Dhavale (2012): McDonald’s marketing strategy. Slideshares Publications

www.google.com