McDonald‘s : Marketing Strategies
THE MCDONALD‟S STORY
The story of McDonald‘s started in 1954, when its founder Raymond Kroc saw a
hamburger stand in San Bernardino, California and envisioned a nationwide fast food chain. Kroc proved himself as a pioneer who revolutionized the American restaurant industry. Today McDonald‘s is the world‘s largest fast food chain serving 47 million customers daily. McDonald‘s is now one of the most valuable brands
globally, worth more than $25 billion. The Golden Arches and its mascot Ronald McDonald have gained universal recognition. Though the company has roots in the US, McDonald‘s today has become an accepted citizen of the world.
Year
Events
1955
Ray Kroc opens his first restaurant. McDonald‘s Corporation is
created 1957
Quality, Service, Cleanliness and Value (QSC & V) becomes company motto
1963
Ronald McDonald makes debut
1965
The company goes public
1968
Big Mac is introduced`
1974
Happy Meal is launched
1996
McDonald‘s opens in India, the 95 country
THE MCDONALD‟S STORY
The story of McDonald‘s started in 1954, when its founder Raymond Kroc saw a
hamburger stand in San Bernardino, California and envisioned a nationwide fast food chain. Kroc proved himself as a pioneer who revolutionized the American restaurant industry. Today McDonald‘s is the world‘s largest fast food chain serving 47 million customers daily. McDonald‘s is now one of the most valuable brands
globally, worth more than $25 billion. The Golden Arches and its mascot Ronald McDonald have gained universal recognition. Though the company has roots in the US, McDonald‘s today has become an accepted citizen of the world.
Year
Events
1955
Ray Kroc opens his first restaurant. McDonald‘s Corporation is
created 1957
Quality, Service, Cleanliness and Value (QSC & V) becomes company motto
1963
Ronald McDonald makes debut
1965
The company goes public
1968
Big Mac is introduced`
1974
Happy Meal is launched
1996
McDonald‘s opens in India, the 95 country
BUSINESS MODEL
Franchise Model – Only 15% of the total number of restaurants are owned by the Company. The remaining 85% is operated by franchises. The company follows a comprehensive framework of training and monitoring of its franchises to ensure that they adhere to the Quality, Service, Cleanliness and Value Value propositions propos itions 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 – McDonald‘s focuses not only on delivering sales for the immediate present, but also protecting its long term brand reputation.
MCDONALD‟S IN INDIA
McDonald‘s entered India in 1996. McDonald‘s India has a joint venture with
Connaught Plaza Restaurants and Hard Castle Restaurants. Connaught Plaza Restaurants manages operations in North India whereas Hard Castle Restaurants operates restaurants in Western India. Apart from opening outlets in the major metros, the company is now expanding to Tier T ier 2 cities like Pune and Jaipur.
Challenges in Entering Indian Markets
Regiocentricism: Re-engineering the menu - McDonald‘s has continually
adapted to the customer‘s tastes, value systems, lifestyle, language and perception. Globally McDonald‘s was known for its hamburgers, beef and pork burgers. Most Indians are barred by religion not to consume beef or pork. To survive, the company had to be responsive to the Indian sensitivities. So McDonald‘s came up with chicken, lamb and fish burgers to suite the Indian
palate.
The vegetarian customer – customer – India has a huge population of vegetarians. To
cater to this customer segment, the company came up with a completely new line of vegetarian items like McVeggie burger and McAlooTikki. The separation of vegetarian and non-vegetarian sections is maintained throughout the various stages.
Challenges for McDonald‟s in India: Vegetarianism:
The major issue was beef. Cow being sacred and worshipped, beef could not be served. Muslims did not eat pork. The challenge was to change the form of the worldwide popular Hamburger to make an entry into India. With 25-30% of the population being lacto vegetarian and a large majority eating meat, an alternative to beef and pork was necessary. The population of a billion was undoubtedly a promising opportunity for an international company. McDonald‘s accepted the challenge and created the Aloo –
Tikki Burger known as McAloo Tikki especially for the Indian vegetarian customers. Aloo- Tikki was a potato patty with spices. It also made a chicken and fish option available for the non vegetarians. 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. In
addition, the crew cooking vegetarian food were asked to wear green aprons. McDonald‘s in India was one of its kinds as it did not offer beef at all. In order to
convince and change the perception of the customers about the burgers they offered, McDonald‘s made attempts to clarify thei r stand about beef in India.
So the world famous hamburger was without meat. This was indeed a classic case of product adaptation, to gain foothold in a new market. Competition from Local Food Retailers:
The competition from the local food retailers was intense. The food retailers had been doing business for years. Their familiarity with the market and the understanding of the local taste gave them a competitive edge. There were numerous eating joints which offered snacks and meals with affordable price tags. Organized food retailing was dominated by the north Indian style and the south Indian style restaurant chains. The metropolitan cities and some developed urban areas offered superior dining experience through the existence of some fine, classic restaurants. But the price was expensive and only a select group of customers could afford to make visits there. On the other hand, the size of the unorganized food retailing was larger and comprised of roadside food vendors, dhabas (the eateries on the highways) and on the outskirts of the cities and a plethora of small eateries.
Local food in a large assortment was widely available within acceptable price r anges. It was observed that food choices made by consumers were impulsive. Aroma, taste, habits and visibility worked on the subconscious level and played a major role in affective decision making. The local food business exactly understood the psychology of the customers and operated accordingly. The mass markets in India had their own set of preferences. Target Marketing:
Value propositions had to be directed to the right target market to establish a new product. An interesting question was who would eat at McDonald‘s? In order to
develop the marketing strategy, it was important for any company to understand the consumer market. The more one knew and understood about consumers, the more effectively one could communicate and market to them. Four aspects of consumer behaviour which needed to be examined to understand a consumer market were the ability of the people to buy, consumer needs, buying motives and the buying process. The initial attempt of McDonald‘s was to induce
trials and get the customers into the restaurants. Word of mouth and advertising was expected to reveal the experience of eating at McDonald‘s. McDonalds Value Meal addressed the price sensitivity of the Indian consumer market. However, irrespective of this effort, McDonalds was affordable to select customers only. These were the ambitious middle, upper middle and affluent classes who were keen to combine eating with fun. Children were the major influencers. 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 Meal was used to reflect the fun element of the experience at McDonald‘s. Happy Meals were all about the simple pleasures of childhood, a time of excitement, joy, and being treated special. Each Happy Meal was themed and had on offer, a set of collectible toys from that particular theme. One theme typically was used for duration of 4 – 6 weeks. In this deal the customer got a choice of a burger, a drink and a toy. Happy Meals were a huge success. The rising income levels in India increased the disposable income. Fun and entertainment assumed importance in the financially stable families. McDonald‘s was perceived to be a fun place with special
areas marked for kids, toy gifts and of all the attraction of a burger. Subsequently,
McDonald introduced newer menus appealing to the India taste. Children in India preferred a burger over pizza and McDonald, 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. Youngsters value d McDonald‘s for the trendy environment and the joint acted as an interesting meeting place. In United States, two thirds of the business of McDonalds was done at the drive through windows. In India, because of unavailability of space and lack of proper infrastructure, the company could not do so. However, home delivery was an area of consideration. In March 2007, McDonalds announced that it would invest about Rs 3 crore (US $0.75 million) over the next three years to strengthen its home delivery services. It launched an all-India single home delivery number — 66-000-666 to facilitate this service. In March 2007, the company's Managing Director Mr.Vikram Bakshi said ―Mc Delivery currently accounts for almost 5 per cent of the overall sales
and with the introduction of the new system; the company is looking at a substantial share of 7.5 per cent in the turnover by next year‖.
Pricing
Food pricing was a sensitive issue in India. An ideal strategy was to focus on customer‘s ability to pay and tap the rich and upper middleclass population in India.
Although McDonald‘s strategy was to increase sales volumes by making products available at affordable price, its products were perceived to be expensive. 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. Additionally, people in the metros were open to experiment with variety of foods. Absorption of newer cultures was faster in the Metros than other areas. The mass markets in India were price sensitive.The positive factors were the growth in consumer markets with rapid growth in disposable incomes, development of modern urban lifestyles and the demand for value.
Eating Habits
Eating out was a special occasion to many Indian families. Meals had been an essential medium for social sharing and relationship xii.Whenever families decided to eat out, the choices available were abundant. The trend in metropolitan cities was however changing. With more nuclear families and dual income households, the demand for fast and readymade food was growing. The needs of the growing working population stimulated the need for new products and services. Indian culture was relatively new to the use of technology and streamlined process in food service. McDonald‘s needed to find ways and methods to motivate the customers opt for
initial trials and acceptance. The conventional eating pattern of Indians involved breakfast, lunch and dinner. Lunch and dinner menus were complete meals providing the right balance in terms of nutrition. Breakfast was conventional as per the family culture and upbringing. Burgers were likely to be slotted in the category of snacks. But globally burgers and beverage brands were linked with poor eating habits. The market situation called for focus on the environment within the restaurant and western association. Issues McDonald‘s had been accused of destruction of vast areas of the rainforest for the
production of cattle to produce beef, promoting unhealthy food with a risk of cancer and heart disease, taking advantage of children with its advertising and marketing, and cruelty to animals. There had been complaints as regards the nutrition, hygiene etc……..
Animals
Vegetarians and animal welfare campaigners were not too wholehearted about McDonald's - for obvious reasons. As the world's largest user of beef, they were responsible for the slaughter of countless cows every year. In Europe alone they used half a million chickens every week, all from windowless factory farmsxvi. This meant that these animals suffered great cruelty during their unnatural, painful and short lives, many being kept inside with no access to fresh air and sunshine, and no freedom of movement.
A major consideration for the fast food industry was whether it was acceptable for the food industry to exploit animals at all. McDonald's argued that it stuck to the letter of the law and if there were any problems, it would be a matter concerned with the government. Although meat eating had a long history, it was only in recent decades that factory farming and intensive methods had been applied on a vast scale. This mass production process was primarily to benefit the food companies' drive for greater profits, backed by their promotional campaigns. McDonald‘s corporation was the world's largest promoter of meatbased products, the largest user of beef and the second largest user of chicken. Environment
Conservationists had often focused on McDonald's as an industry leader promoting business practices detrimental to the environment. But the company spent a fortune promoting itself as environmentally friendly. They annually produced over a million ton of packaging, used for just a few minutes before being discarded. The environmental effect of the production and disposal of all this needed to be taken into account. Multinational companies operating on such a scale contributed to global warming, ozone destruction, depletion of mineral resources and the destruction of natural habitats. The modern industrial system, with transnational corporations in particular, had callously taken advantage of the natural resources globally, damaging forests and other ecosystems, reducing biodiversity, adding to land, and sea and air pollution while adversely affecting the global climate. McDonald's contribution to these were mainly through the effects of cattle ranching (as the world's foremost promoter of a beef-based diet), through the growing and transportation of cash crops, and through the production and disposal of thousands of tons of packaging material.
Nutrition and Health
One of the most fundamental and enjoyable aspects of the day-to-day lives of people had been eating food of their choice and the circumstances in which it was eaten. For most people this generally meant eating the healthiest possible food (bearing in mind constraints of time and poverty), usually cooked on site and then eaten communally - either in a family or home setting, or with others while at work or in school. But there were rapid changes as the pace and nature of society had shifted. An
industrial
or
service
infrastructure
increasingly
dominated
the
local
neighborhoods and people's lives, undermining existing patterns of human interaction, whether among families, friends, neighbors or in the community in general. Mass-produced, processed food gradually and increasingly replaced fresh and healthy foods in people's diets over the course of the twentieth century. In recent decades, McDonald‘s capitalized on this situation by promoting quick meals to be eaten outside the home. This change in eating habits brought serious consequences to human relations and health. These consequences sparked a debate about healthy food. They also brought out a whole range of new campaigns and movements dedicated to encouraging healthy eating and healthy lifestyles. Macro environmental factors affected McDonald‘s, forced it to become defensive, and they had to resort to
lip service to try and deflect public criticism. In the health debate, food industry was heavily criticized for creating products that are high in fat, sugar and salt. Health consciousness was rising amongst people with the obesity crisis hitting the world. The concern was serious as it was children who were the most affected. Nutrition and exercise issues which were important and needed to be reviewed earlier, now were considered, discussed, and debated only after witnessing the frightening consequences. Many critics blamed McDonalds like businesses for public health concerns, contending that fast food menus and portion sizes contribute to obesity, diabetes and heart disease and a variety of other diet related problems. But at the same time, it was worthwhile to note that the type of demand exhibited by the market initiated the processes within the companies. As long as the demand for fast food continued, nutritional issues would continue to be argued and deliberated upon. India also had its own set of so called nutritious and non-nutritious food. People in India appeared to prefer food for its taste. Bhel Puri, Samosas and Potato Wada which were some of the very popular Indian snacks were
weak in terms of nutrition. However, a large level of population savored them for the spicy taste ignoring the hygiene and the value in terms of nutrition. Trans- fats and their use in food also had been a major controversial issue. It had been established scientifically that artificial trans- fats were bad for human health. In United States, New York City was the first city to announce a ban on all restaurants from using artificial Trans fats with the deadline on July 1, 2007. When the legal system imposed bans and developed a regulatory framework, the food industry was compelled to respond. In January 2007, McDonald‘s picked new Trans fat free oil for cooking its famous French fries after years of testing. In view of the health risks and dangers, it was important that food service did not just confine to respond to the basic need of hunger. Food industry was required to innovate and work on introducing healthy eating options and making them available. This would create a situation where the final choice would then be made by the consumers. A healthy lifestyle only would help overcome the health problems gripping the society. Awareness about health needed to be built up and somewhere the responsibility definitely lay with companies which were into the food business. Health concern was a global call and responding to this was the need of the hour. Employment
McDonald's Corporation created a global, highly standardized and fast production line system, geared to maximum turnover of products and profits. McDonald's employed more than a million mostly young people around the world and provided them with work opportunities. The fast food giant helped pioneer employment that was low-pay, non-union, temporary or part-time with few guaranteed rights and conditions. McDonald's worldwide employed over one and a half million workers, over half of them under 21 years old. It had been calculated that a staggering 10% of all workers in the USA got their first job at McDonald's! Outlets like McDonald‘s provided job opportunities to youngsters in India pursuing their education. The franchisee model of McDonald‘s was a significant source of employment for many people in India. Sources at McDonald‘s reported that they were an equal opportunity employer, providing not just employment but long-term careers as well. The average McDonald‘s restaurant employed as many as 50 people- from crew to restaurant manager. The chain planned to invest in the improvement of supply chain
management and new outlets in the country which in turn would generate employment. Advertising and Marketing Initiatives at McDonald‟s
Advertising was known to have an impact on the minds and the hearts of the consumers. But product and the value offered needed to be attractive and powerful to maintain consistency in sales and build customer loyalty. Advertising was the backbone of McDonald‘s marketing strategy in India. The positioning had been directed towards establishing McDonald‘s as a family restaurant. Special efforts were made to not allow it to get converted into a typical teenage hangout. Advertisements were created using storylines with focus on emotions. Through a variety of advertisements, 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. Advertising helped in building brand recall, but advertising alone was not able to sustain the brand. Despite the fact that McDonald's was a fast food chain of restaurants, in India it was positioned as the family restaurant and outlets were called ―McDonalds Family Restaurant‖. Extra care was taken to make the
restaurants child friendly, by providing play areas wherever possible so that the parents could relax and have a good time while visiting McDonald's. The counters were low, 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. The entire restaurant was attractive and child friendly. When operations in India began, initially McDonald‘s positioned its elf as a place to
visit with the baseline "McDonald's mein hain kuch baat" (―There‘s definitely something about McDonald‘s‖) in their advertisements. People were encouraged to try the McDonald's experience. However, over the years, after McDonald's had been hugely accepted by Indian customers, 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. After McDonald‘s established itself and people knew what McDonald's was all about, the baseline was changed to ―Toh aaj McDonald's ho jaye" (―Let it be McDonald‘s for today‖), which talked about an everyday experience. The objective was to continue
positioning McDonald's as a comfort zone for families.
The brand‘s media strategy focused more on the electronic media. The advertising continued to use emotional appeal to display family ties and fun at McDonald‘s .
Indians being emotional found it easier to correlate themselves with such types of emotional messages. Advertisements with audio –visual appeal created more impact on the viewers. So McDonald‘s narrated the fun filled environment at their fast food outlet using electronic media. McDonald‘s did have enough repeat customers. The customer base increased substantially since they started operations. The strength of McDonald's as a brand in India was that it was the most recognizable brand world over amongst all age groups. It was the ‗Indianization‟ of the brand that helped McDonald‘s establish in a new market successfully. The brand‘s success was
attributed to its promise of a great fun filled experience delivered at its outlets. McDonald's executed promotional campaigns involving children. McDonald‘s used
kids as an entry strategy to the family. World over McDonalds was a family restaurant and children were an integral part of a family. During the last few decades, kids had become the target audience for most categories including consumer durables. In the 1990's, India saw a major shift to nuclear families. When joint-extended families existed, the head of the family made most decisions. In smaller-nuclear families, individual opinions had become more dominant, whether it was buying a refrigerator or a TV or whether it was about eating out. Children were an integral part of the decision making process for buying things and played an influential role. Word of mouth and peer pressure worked effectively for this age group. Children influenced the decisions of parents, and McDonald‘s realized that this group could no longer be ignored. 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. The restaurants hosted birthday parties, played latest pop-music hits and became a favorite place even for the new generation of jean-clad ‗Americanized‘ teenagers of India. McDonalds even introduced unusual ice-cream
flavors such as bubblegum, green apple and berry to entice the curious youngsters. Using collectable toys, television commercials, promotional schemes in schools and figures such as Ronald McDonald, McDonald‘s pursued its main target group – children. Many parents objected strongly to the influence this had over their own children. McDonald‘s adhered to all the advertising codes in each country. But some
argued that it still amounted to exploitation of children, sponsoring so many school events and learning programs out of publicity, not philanthropy. In view of this criticism, McDonald with some other companies vowed to devote at least half of their radio, print, television and internet advertising to promoting more healthful products and healthy lifestyle. Mary Dillon, McDonald‘s Chief Marketing Officer said that
McDonalds planned to put more emphasis on physical activity in ads and was reviewing how it could use licensed characters. Disney characters were used extensively by McDonald‘s at one time but the e ntertainment company decided to
allow its characters to push products that met certain nutritional guidelines‘. Ethics and Social Responsibility
In India, Mrs. Maneka Gandhi, 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. To respond to such campaigns, McDonald‘s launched several pro -green advertisements such as ―We love Green‖ and funded community related activities including ―Keep our city clean‖. McDonalds sponsored ―Olympic Day Run‖ in 2005 and offered baked
potatoes and McCurry Pan instead of fries. As a part of its Corporate-Citizenship strategy and to help its own brand and reputation in India, McDonald‘s participated in community-related projects targeting children. McDonald‘s in India hosted interschool arts competition and raised funds for charity on World Children‘s Day. The restaurant celebrated Children‘s week every year from November 14-20 and tactfully supported educational programs for girlchild to promote goodwill among community organizations who worked towards improving status of women in India. 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.
PEST ANALYSIS
Political & Legal
The international operations of McDonald‘s are highly influenced by the
individual state policies enforced by each government. Any changes in regulations, the imposition of additional regulations, or the enactment of any new legislation under the Obama administration that impacts employment/labor, trade, product safety, transportation/logistics, health care, tax, privacy, or environmental issues could have an adverse impact on our financial condition and results of operations.
Economic
McDonald‘s has the tendency to experience hardship in instances where the
economy of the respective states is hit by inflation and changes in the exchange rates.
Market leader.
Very high target market.
Low cost and more incomes.
The rate at which the economy of that particular state grows determines the purchasing power of the consumers in that country.
Social
Working within many social groups.
Increase employments.
Technological
Advanced technology development.
Quality standards.
Environmental:
Quality packing.
Local manufacture using foreign supplies.
Legal:
Legislation for product.
Sustained logo
The mar ket envir onment: PEST Analysis
Political / Legal:
In India, where there are lots of political parties, each having their own set of policies and each having a desire to come to power has made the government unstable. As a result of this, the peoples and organizations are hesitant towards making FDI in India.
The government has increased the prices of Diesel as result of which the transportation costs are bound to increase and net effect will be reduction in the profit margin of the organization.
The unexpected change in government policies has always been
of great
concern for the industry.
Also with the domestic message spreading all around. It is acting as a sword which is hanging over the head of the management of the organization.
Legislation related to manufacturing and taxation should be made more investment friendly.
The industry suffers from multiple taxes like excise, sales tax and in certain cases even local taxes, leading to a cascading impact.
Economical:
It is not unrealistic to say that all companies, small or large, engaged in strategic planning examine the economic environment. Relevant published information in usually gathered, analyzed, and interpreted for use in planning.
With the rise in inflation, the cost of production rises due to increase in the prices of raw materials, which have an adverse effect on the profits of the organization, if they don‘t increase the price or reduce their overheads.
Social:
The relevance‘s of the social environment to a particular business will depend on
the nature of business. The impact of the social environment on a consumer products company is much more than any other company.
Over 40% of all packaged goods consumed in urban India are foods and beverages, while that in rural India is over 20%. This trend will deepen because of the changing profile of the consumer. Education, employment and media will make the consumer more discerning and demanding.
Technology:
Technology developments come out of the R&D effort.
McDonalds continuously trying to come out with new products and variants and flavors‘ that will fit in the Indian palate. The company is trying to offer better value
to their customer and also trying to deliver superior product at competitive price.
Marketing strategy for future prospective: The first step in developing a marketing
strategy is to understand the customers, reacting to their changing needs and the changing dynamics of the market. To this end McDonald‘s should conduct several
stages of in-depth customer research and audits of the McDonald's brand. The research must involve both quantitative and qualitative research methods. This research should describe how McDonald's is perceived and about changes that are taking place in the market. Research should also conduct into the local area of their restaurants, into the general market environment and into specific areas of their business. Which is considered at three distinct levels?
Total Eating out Market gives the broadest competitive context and includes all restaurants, hotels, pubs, and any other outlet where people eat. This category contains the entire gamut of eating outlets ranging from the ―mom -&pop outlet‖ to the most exclusive five star hotels.
Quick Service Restaurant sector includes any outlet where food is served quickly and the process is usually self- service. Example: Domino‘s, Nirula‘s.
Burger House Sector includes those restaurants that serve different varieties of burgers as their primary menu item. This is the narrowest sector in consideration. Example: Wimpy‘s.
Having an in-depth understanding of all aspects related to the competition allows McDonald‘s, to monitor the competitive environment to exploit the opportunities and
check threats in time. This is achieved through the following:
Competitive Pricing: Being in touch with the pricing of their competitors
allows them to price their products correctly, balancing quality with value.
Competitive Promotion: At McDonald‘s it is believed that before they
communicate with their customers, they must be aware of what the competitors are communicating so that they can create a beneficial advantage.
Competitive Place: Distribution is the key to any retailer or brand;
McDonald's prides itself on its superior delivery process.
Competitive Product: Quick Service Restaurants are constantly expanding
their menus. This can be done on a short-term promotional basis or as a longterm expansion strategy.
Segmentation, Targeting and Positioning
McDonald‘s uses demographic segmentation strategy with age as the parameter.
The main target segments are children, youth and the young urban family.
% of kids who influence what FMCG brand their family buys
80%
71%
70%
59% 52%
60% 50% 40% 30% 20% 10% 0% Biscuits
Burgers & Pizzas
Fruit Juices
As shown above, kids reign supreme in FMCG purchase related to food products. So to attract children McDonalds has Happy Meal with which toys ranging from hot wheels to various Walt Disney characters are given (the latest in this 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 „Play Place‟ where children can play arcade games, air hockey, etc. This strategy is aimed at making McDonald‘s a
fun place to eat. This also helps McDonald‘s to attract the young urban families wanting to spend some quality time while their children have fun at the outlet. To target the teenagers, McDonald‘s has priced several products aggressively, keeping
in mind the price sensitivity of this target customer. In addition, facilities like Wi-Fi are also provided to attract students to the outlets like the one at Vile Parle in Mumbai.
“Mc Donald‟s mein hai kuch baat” projects McDonald‘s as a place for the whole
family to enjoy. When McDonald‘s entered in India it was mainly perceived as targeting the urban upper class people. Today it positions itself as an affordable place to eat without compromising on the quality of food, service and hygiene. The outlet ambience and mild background music highlight the comfort that McDonald‘s promises in slogans like “You deserve a Break Today” & “Feed your inner child”. This commitment of quality of food and service in a clean, hygienic and relaxing atmosphere has ensured that McDonald‘s mainta ins a positive relationship
with the customers.
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 customers‘ minds. McDonalds being an
internationally renowned brand brings with it certain expectations for the customers.
Target Segment
What is McDonald‟s for me?
A Family with children
A treat to children, a fun place to be for the children.
Urban customer on the Great taste, quick service without affecting the work move
schedule
Teenager
Hangout with friends, but keep it affordable.
Customers expect it to be an ambient, hygienic and a little sophisticated brand that respects their values. The customer‘s expect the brand to enhance their self -image.
Customer responses obtained at the Vile Parle, Mumbai outlet confirmed the fact that they connect strongly with the brand. However, fulfilling some of the customer
expectations like a broader product variety provide McDonald‘s a great scope for
improvement.
McDonalds Marketing Mix (5 P‟s)
After segmenting the market, finding the target segment and positioning itself, each company needs to come up with an offer. The 5 P‘s used by McDonalds are:
1. Product 2. Place 3. Price 4. Promotion 5. People
Product: How should the company design, manufacture the product so that it enhances the customer experience?
Product is the physical product or service offered to the consumer. 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. McDonalds has intentionally kept its product depth and product width limited. McDonalds studied the behaviour of the Indian customer and provided a totally different menu as compared to its International offering. It dropped ham, beef and mutton burgers from the menu. India is the only country where McDonalds serve vegetarian menu. Even the sauces and cheese used in India are 100% vegetarian. McDonalds continuously innovates its products according to the changing preferences and tastes of its customers. The recent example is the introduction of the Chicken Maharaja Mac. McDonalds bring with it a globally reputed brand, world class food quality and excellent customer specific product features.
Place: Where should be the product be available and the role of distribution channels?
The place mainly consists of the distribution channels. It is important so that the product is available to the customer at the right place, at the right time and in the right quantity. Nearly 50% of U.S.A is within a 3 minute drive from a McDonald‘s
outlet. There is a certain degree of fun and happiness that a customer feels each time he dines at McDonalds. There are certain value propositions that McDonalds offer to its customers based on their needs. McDonalds offers hygienic environment, good ambience and great service. Now McDonalds have also started giving internet facility at their centres and they have been playing music through radio instead of
the normal music. There are certain dedicated areas for children where they can play while their parents can have some quality time together.
Price: What should be the pricing strategy?
Pricing includes the list price, the discount functions available, the financing options available etc. It should also take into the consideration the probable reaction from the competitor to the pricing strategy. This is the most important part of the marketing mix as this is the only part which generates revenue. All the other three are expenses incurred. The price must take into consideration the appropriate demandsupply equation. McDonald‘s came up with a very catchy punch line ― Aap ke zamane mein ,baap ke zamane ke daam‖. This was to attract the middle and lower class consumers and
the effect can clearly be seen in the consumer base McDonalds has now. McDonalds has certain value pricing and bundling strategies such as happy meal, combo meal, family meal etc to increase overall sales volumes.
Promotion: What is the suitable strategy and channels for promotion of the product?
The various promotion channels being used by McDonald‘s to effectively
communicate the product information are given above. A clear understanding of the customer value helps decide whether the cost of promotion is worth spending. There are 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. McDonald‘s does its promotion through television, hoardings and bus shelters. They use print ads and the television programmes are also an important marketing medium for promotion.
Some of the most famous marketing campaigns of McDonald‘s are: ―You Deserve a break today, so get up and get away- To McDonald‘s‖ ―Aap ke zamane mein ,baap ke zamane ke daam‖. ―Food, Folks, and Fun‖ ―I‘m loving it‖.
People: How to converge the benefits of internal and external marketing? McDonald‘s understands 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. McDonald continuously does Internal Marketing. This is important as it must precede external marketing. This includes hiring, training and motivating able employees. This way they serve customers well and the final result is a happy customer. The level of importance has changed to be in the following order (the more important people are at the top): 1. Customers 2. Front line employees 3. Middle level managers 4. Front line 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.
THE MCDONALD‟S EXPERIENCE Marketing in a services industry is becoming an increasingly complex challenge. The paradigms of service marketing demand a passionate understanding of customer expectations and perceptions, and linking them to product design & delivery as well as operational planning. This is where McDonald‘s has excelled due to its ability to successfully integrate the customer‘s perspective in its products and operations in a
comprehensive manner. The revamped menu in India is an example of McDonald‘s strategy of integrating the customer‘s perspective in its products. And, the operational integration is evident from McDonald‘s emphasis on its suppliers as its
customers as well as its treatment of its consumers as co-producers of services. The ultimate aim of Service Marketing is not just to become a Service Leader but to create a Service Brand. The Service Delivery Process is the key to achieving this aim of Service Marketing.
Service Delivery Process
Core Product
Supplementary Process
During the Service Delivery Process, each moment of interaction between the firm and the customer, called ―Moments of Truth‖, helps understand the opportunities that a firm has to win or lose the customer. For example, these ―moments of truth‖ are created for McDonald‘s every time the guard at the McDonald‘s outlet meets the
customer, every time an attendant takes down the order from the customer waiting in the queue, every time the cashier interacts with the customer, every time the attendant helps the customer guided the customer towards the table, every time the attendant cleans the table, etc. Customer
Service Provider
Service Delivery Points
Managing these ―moments of truth‖ is a great challenge in Service Marketing especially due to customer‘s involvement as a co -producer of services (e.g. McDonald‘s self -service concept wherein the customer not only collects the order but
also cleans the table after consuming the food). However, McDonald's has been able to create a great experience for its customers by understanding the nature of the entire Service Delivery Process and the various stages in the process that are exposed to the customers. Transparency in the processes at its outlet has helped McDonald‘s bring the back office in its outlet at the front so that the customer is able
to know the operations and provide feedback on service design improvements. Internal Customer Focus is equally important as External Customer Orientation in order to win these ―moments of truth‖. McDonald‘s focus on its People and their
service delivery methods therefore plays a very important role in creating a successful Service Brand. The quality and the consistency of the service delivered by McDonald‘s have been greatly enhanced by the combination of the factors mentioned above. This has helped McDonald‘s become Service Leader and a
successful Service Brand. This is evident from the fact that very few of its customers opt for take-home parcels or home deliveries while most of them prefer to eat at the outlet and enjoy the McDonald‘s experience.
McDonaldizing the Suppliers
McDonald‘s has changed the nature of not only the food service industry but also the food processing industry as well. McDonald‘s realized that the battle between fast
food chains would increasingly be one of efficiency of supply, lower cost production and greater desire to innovate. It pioneered with innovative and sophisticated food distribution and packaging systems when the traditional food processors were unwilling or unable to supply food items that McDonald‘s demanded. They achieved
amazing consistency by devoting more attention than anyone else to field service and training at store level. Production was concentrated in huge plants devoted exclusively to McDonald‘s. McDonald‘s also started with tiny suppliers and grew with
them displaying great loyalty. Nowhere is the supplier loyalty more evident than in development of new, improved products. Some of McDonald‘s classic food items like Filet -o-Fish, French Fries,
Chicken Nuggets etc. are results of supplier innovation. Interestingly, it took KFC more than three years before in finally introduced its own version of chicken nuggets. Thus supplier technological expertise had given McDonald‘s a product which was not a mere marketing innovation but a technical one. McDonald‘s attempted to squeeze
labour out of the stores by moving more preparation back into the processing plant, creating the opportunity to develop unique products based on suppliers‘ processing
skills. For the first time, McDonald‟s suppliers became the focal point of new product development. This converted the fast-food industry‘s most fragmented distributed system into more efficient one which helped McDonald‘s reduce its
inventory and manage costs effectively.
Importance of PLC in McDonalds The requirements of customers change over time and thus the product offering has to be changed accordingly. What is the fashion today may be out of market within few weeks. Thus continuous innovation is required.
To counter these changes McDonalds has continuously introduced new products and has phased out the old ones which were at the decline stage of their PLC. The introduction is timed such that the new product does not cannibalize the product already in the maturity or growth stage. Thus the secret lies in getting profits with different products in the different stages of the PLC.
A perfect example of revitalising a product in decline phase
The French Fries have been an important part of the McDonalds menu worldwide. But now it was in the stage of decline and was actually not generating proper return. In an attempt to revitalize it, a new variant was introduced namely Shake Shake Fries. This is being served with chatpata spice mix which has resulted in increase in
the sales of French Fries and has elevated it from to the decline stage. This is used to delay the decline of a well established product which has the potential of generating further revenue.
Competitors Analysis McDonald‘s has been a leading fast-foods outlet in Vile Parle. But the outlet
understudy has other competitors eating away into its market share. In addition to its traditional rivals—KFC, Dominos, Pizza Hut—the firm encounters new challenges. Jumbo King competes using a back-to-basics approach of quickly serving up burgers for time-pressed consumers. On the higher end, the KFC has become potent competitor in the quick service field, taking away customers from McDonald‘s.
Perhaps in the new environment, fast, convenient service is no longer enough to distinguish the firm. At this time, a new critical success factor may be emerging: the need to create a rich, satisfying experience for consumers. This brings us to service and experience based competition which McDonald‘s can use for competitive
advantage against Jumbo King. Keeping in mind the demographics of the area, McDonald‘s has Wi-Fi enabled the outlet to cater to the student community. It is for this overall ―Food, Fun & Folks‖ experience that customers pay a premium over the
other competitors.
Competition also reduces product lifecycle; inducing firms to revise their products portfolios and to revisit their product market to understand changing
needs, expectations and perception of different market segments. The new McBreakfast would be introduced between 6 to 11 am as a pilot project. This would open up a whole new revenue stream for McDonald‘s by tapping into the student and
working population by providing a healthy and wholesome breakfast. This shows how demographic shift can affect the demand for products and services. McDonald‘s
has anticipated these changes to maintain its competitive edge. Two Dimensional Perceptual Mapping
SWOT Analysis
Strength
Risk diversity
Large market share.
Strong supply chain.
Promoting ethical conduct
Rigorous food safety standards
Decentralized yet connected system
Strong brand name, image and reputation.
Strong financial performance and position
Affordable prices and high quality products
Nutritional information available on packaging
Strong global presence & performance in the global marketplace.
Specialized training for managers known as the Hamburger University.
McDonalds Plan to Win focuses on people, products, place, price and promotion.
Weakness
Unhealthy food image.
High Staff Turnover including Top management
Customer losses due to fierce competition.
Legal actions related to health issues; use of trans fat & beef oil.
Uses HCFC-22 to make polystyrene that is contributing to ozone depletion.
Low depth and width of products
Opportunities
Growing health trends among consumers
Joint ventures with retailers (e.g. supermarkets).
Consolidation of retailers likely, so better locations for franchisees.
Respond to social changes - by innovation within healthier lifestyle foods. Its move into hot baguettes and healthier snacks (fruit) has supported its new positioning.
Use of CRM, database marketing to more accurately market to its consumer target groups. It could identify likely customers (based on modeling and profiles of shoppers) and prevent brand switching
Strengthen its value proposition and offering, to encourage customers who visit coffee shops intoMcDonalds.
The new ―formats‖, McCafe, having Wifi internet links should help in attracting segments. Also installing children‘s play -parks and its focus on educating consumers
about health, fitness.
International expansion into emerging markets of China and India.
Diversification and acquisition of other quick-service restaurants.
Growth of the fast-food industry.
Worldwide deregulation.
Low cost menu that will attract the customers.
Threats 1. Health professionals and consumer activists accuse McDonald's of contributing to the country‘s health issue of high cholesterol, heart attacks, diabetes, and obesity.
2. The relationship between corporate level McDonald's and its franchise dealers. 3. McDonald‘s competitors threatened market share of the company both internationally and domestically. 4. Anti-American sentiments. 5. Global recession and fluctuating foreign currencies. Fast-food chain industry is expected to struggle to meet the expectations of the customers towards health and environmental issues. Recent economic condition impacts on consumer confidence & spending, prime real estate is competitiveness; the gradual increment in Limited Brands operations can hamper the MCD‘s growth. In addition, possible tariffs from government over the imported materials, or
minor disturbance in the long supply chain of the company are a risk. The increasing cost of labor in other countries and decline in value of US Dollars everyday can compel the company to change its way of operation.
Five Forces Analysis
Competition Restaurant industry is highly competitive industry. There are many small fast food businesses in the industry who fight with each other to improve their customer base; McDonalds is not an exception to this. Since its establishment in 1940, MCD has excelled in the sector. Nevertheless, to stay in the competition, it started with McCafé. This helped the company to stay in the business as a major fastfood business. Another major step came out when McDonald started Breakfast to compete with the existing business serving breakfast. Hence, this industry is extremely competitive and the MDC should be up to date with customer taste & preferences.
Ease of Entry Although it is hard to enter the restaurant business, it is hard to establish a distinct brand name. There is a high cost of entry in the market and there is \ high research and development costs. Large established companies with strong brand identities such as McDonald‘s do make it more difficult to enter and succeed within the marketplace; new
entrants find that they are faced with price competition from existing chain restaurants.
Substitutes There are many substitutes in this industry. Since there are a wide variety of products that people can choose, they could either be substituted by MDC Burgers, Beverages, dairy products, and others.
Strength of Suppliers Power of suppliers within the fast food industry would be relatively small, unless the main ingredient of the product is not readily available.
Strength of Buyers Relatively strength of buyers is low in this industry
The Road Ahead
Entry to Tier 2 and Tier 3 cities – The main target customer for McDonald‘s
is the new urban Indian family. With the customer demographics constantly changing and tectonic social and cultural shifts being observed in Tier 2 and Tier 3 cities due to globalization, the company is now expanding to Tier 2 cities like Pune and Jaipur.
Rolling out McBreakfast across all outlets – In India, the company has
recently launched its entry into the breakfast food category. This is now launched on a pilot basis on select stores. In Mumbai, it available at the Vile Parle outlet. The company views this category as a key growth driver in future.
How McDonald‟s Became a Household Name in India In the US, McDonald‘s is branded as a fast food restaurant that offers QSC&V
(Quality, Service, Cleanliness & Value). In India, the company has to market products to a group of people who prefer family dining. Thus, McDonald‘s was
marketed as a fine dining restaurant where a family can enjoy group meals in a comfortable set up. Incorporating this philosophy in the USP of the company, McDonald‘s launched a series of television commercials, such as ‗ Toh Aaj McDonald’s Ho Jaye‘ (Let‘s go to McDonald‘s today) and ‗McDonald’s Mein Hai Kuch Baat ‘ (McDonald‘s has something that attracts you). Initially, the restaurant
targeted children and teenagers. In 2004, the Happy Price Menu was launched to attract price-sensitive middle-class individuals to the restaurants. In 2008, a new advertising campaign, Prices of the Yesteryears, was launched to attract teenagers as well as adults.
FUTURE ANALYSIS
McDonalds‟ can use following promotional techniques which should be appropriate to be used for increasing the sales:
1. Increase its product line. 2. To have more variety to choose from, to include more deserts and more items. 3. To provide better and quick service. 4. Lower the supply chain cost so that it helps in cost reducing. 5. To expand their Happy Meal choices to attract and retain customers. 6. To educate about healthy lifestyle. 7. Introduction of cafeterias serving premium and specialty coffees and other beverages and other products such as cakes, pastries etc in the existing McDonald‘s.
8. Provide with better ambience. 9. Focus on gifts for all generations i.e. youth, kids‘ especially senior citizen which is
completely new concept. 10. Special promotions during festivals as Indians tend to spend more at such events. 11. Increasing the space for provision of birthday party areas. 12. Try to sponsor college festivals. 13. Work for social welfare of the society. CONCLUSION
McDonald's marketing mix is strategic because of the diverse approaches that are used. First, in identifying the "four P's" of marketing addressed earlier (product, price, promotion, and placement), research shows that McDonald's is very careful in making decisions that effect each area and/or how each area effects the other. McDonald's is concerned about how the firm will fulfil the needs and wants of its customers and in the activities associated with maintaining the relationships with its stakeholders. McDonald's stakeholders include customers, franchisees, suppliers, employees, and the local communities surrounding them. McDonald's has shown care for customers through the decisions to add more healthful foods to the menus, by changing how products are packaged or how foods
are prepared, and by philanthropic contributions and sponsorships. Local adaptation, no doubt, has contributed to McDonald‘s business growth in India. The restaurant
has developed competitive advantages in the industry of serving quality fast food at a low cost. In addition to these decisions, the development of the Golden Arches or Ronald McDonald has provided consumers with memorable icons that are associated with quality, service, and value, just like the McDonald brothers and Ray Kroc intended. McDonald's faces some difficult challenges in moving away from the fast food king to a more health conscious provider for customers who care about what they eat. The keys to its future success will be maintaining its core strengths-an unwavering focus on quality and consistency-while carefully experimenting with new options. The company's environmental efforts, while important, should not overshadow its marketing initiatives. Though there are many opportunities for this fast food giant, McDonald's must keep the strategic nature of its marketing efforts to stay on top and provide what customers want.
Exhibits 1. McDonald‟s Indian Menu
Vegetarian
Non Vegetarian
McVeggie
Chicken Maharaja Mac
McAlooTikki
McChicken Burger
Paneer Salsa Wrap
Shahi Chicken McCurry
Crispy Chinese
Wrap Chicken Mexican
McCurry Pan
Fillet-O-Fish
Pizza McPuff
Vegetarian Menu
Non-Vegetarian Menu
Survey Questionnaire Q. Which is your favorite product at McDonald‘s?
Favourite Product MAHARAJ MAC
10% 8%
MC CHICKEN BURGER
6% 18%
MC VEGGIE BURGER FRENCH FRIES
12% 12%
MC CURRY PAN FILETO FISH
34% OTHERS
Q. Is the product line in McDonald‘s adequate?
Is the product line adequate?
28% 38%
YES NO AVERAGE
34%
Q. What is the main problem you faced at McDonald‘s?
Problems Faced in McDonald's
Long Queues 24% Rude Behavior of Employees
40%
Congestion 4% Other 16% No Problem 16%
Q. Which area do you think needs the most improvement?
Improvement Required Delivery Time 10%
10% 6%
20%
Capaciousness Product Variety Prices
30% Offers and discounts 24%
Others
Q. What is the first thing that strikes your mind about McDonald‘s?
First Thing About McDonald's That Strikes Customer's mind
22% 30%
Burger Golden Arches
4%
Service Value for Money Fun
18% 26%
THE FREE TOYS PROVIDED WITH HAPPY MEALS (WALT DISNEY‟S MADAGASCAR )
KIDS PLAYING AT PLAY PLACE- MCDONALD‟S VILE PARLE (MUMBAI)
THE NEW BREAKFAST MENU
CUSTOMER QUESTIONNAIRE
1. How frequently do you go to restaurants?
Only on holidays
On special occasions
Weekends
Everyday
Pizza Hut
Others (specify) ---------------------
2. Which restaurants do you go to?
McDonalds
Nirulas’
3. What drives you to go to this restaurant?
The quality of food
Better service
Homely atmosphere
4. Are you satisfied with the present service provided by the Restaurant? Yes
No
5. What is the time taken at the counter by you to book your order?
Within 2 minutes
2 - 5 minutes
5 - 7 minutes
7 - 10 minutes
6. How much time do they take to deliver your order?
Within 5 minutes
5 - 10 minutes
10 - 15 minutes
More than 15 mins.
7. What is your view about the hospitality provided by this Restaurant?
Average
Good
Very Good
Excellent
8. What is your satisfaction level with McDonald's? Attributes
No. of Respondents
Percentage
Extremely Satisfied Moderately satisfied Moderately dissatisfied Extremely dissatisfied OK
9. What is the level of understanding of service problems of the customers? Attributes
No. of respondents
percentage
Excellent Very good Average Poor
10. Which are the combination of the factors do you thing very vital while you select a particular fast foods
Service price and location
Service, Price, Promotional Scheme, Location
Price, Location, Promotional Scheme
11. Why do you prefer McDonald's?
Service differentiation
Price differentiation
Product differentiation
Promotional Scheme
12. How frequently do you visit other restaurants except McDonald's?
Regularity
Occasionally
Frequently
Rarely
13. How do you evaluate at the various aspects McDonald's, Nirulas and Pizz a Hut ? Scale
1-5
(1 is the minimum, 5 is the maximum)
McDonald’s
Nirulas
Pizza Huts
Ambience Cleanliness Behaviour of employees Space management Menu composition Quality of food Service quality
14. What do you have to say for happy hours concepts in McDonalds?
Excellent
Good idea
Does not matter
Poor
