11520753-Marketing-Strategies-of-McDonalds.pdf

NMIMS UNIVERSITY

McDonald’s : Behind The Golden Arches

Customer Acquisition and Retention

Group

RITABRATA GHOSH (316)

M.S. DEEPAK BALAJI (339)

JIGAR SHAH (350)

NIKET SHERLEKAR (354)

DISHANT SIDANA (357)

The McDonald’s Story - Genesis .......................................................................... 2

McDonald’: Behind The Golden Arches

Business Model ..................................................................................................... 3

McDonald’s in India ............................................................................................. 4

Challenges in Entering Indian Markets ............................................................ 4

Segmentation, Targeting and Positioning ............................................................. 4

Customer Perception and Customer Expectation ................................................ 6

McDonalds Marketing Mix (5 P’s) ....................................................................... 6

The McDonald’s Experience .............................................................................. 10

McDonaldizing the Suppliers ............................................................................. 12

Importance of PLC in McDonalds ...................................................................... 13

Competitors Analysis .......................................................................................... 14

Two Dimensional Perceptual Mapping ............................................................... 15

SWOT Analysis .................................................................................................. 15

The Road Ahead ................................................................................................. 16

Exhibits ............................................................................................................... 17

1. McDonald’s Indian Menu ............................................................................ 17

Survey Questionnaire .................................................................................... 17

References ........................................................................................................... 23

The McDonald’s Story - GenesisThe 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.

2 | P a g e


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 95th 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 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.

3 | P a g e


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 IndiaMcDonald’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

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 – 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.

Segmentation, Targeting and PositioningMcDonald’s uses demographic segmentation strategy with age as the parameter. The main

target segments are children, youth and the young urban family.

4 | P a g e


71%

59%52%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Biscuits Burgers & Pizzas Fruit Juices

% of kids who influence what FMCG brand their family buys

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

maintains a positive relationship with the customers.

5 | P a g e


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.

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

6 | P a g e

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 move Great taste, quick service without affecting the work schedule

Teenager Hangout with friends, but keep it affordable.


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.

7 | P a g e


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 demand-supply 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?

8 | P a g e


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.

9 | P a g e


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 ExperienceMarketing 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.

10 | P a g e


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.

11 | P a g e

Core Product

Supplementary Process

Service Delivery Process

Customer

Service Provider Service Delivery Points

“Moments Of Truth” – The Service Encounter


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 SuppliersMcDonald’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

12 | P a g e


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 McDonaldsThe 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.

13 | P a g e


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 AnalysisMcDonald’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

14 | P a g e


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

15 | P a g e


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.

16 | P a g e


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 QuestionnaireQ. Which is your favorite product at McDonald’s?

17 | P a g e


Favourite Product

6%

18%

12%

34%

12%

8%

10%

MAHARAJ MAC

MC CHICKENBURGER

MC VEGGIEBURGER

FRENCH FRIES

MC CURRY PAN

FILETO FISH

OTHERS

Q. Is the product line in McDonald’s adequate?

Is the product line adequate?

28%

34%

38%YES

NO

AVERAGE

Q. What is the main problem you faced at McDonald’s?

18 | P a g e


Problems Faced in McDonald's

24%

4%

16%

16%

40%

Long Queues

Rude Behavior ofEmployees

Congestion

Other

No Problem

Q. Which area do you think needs the most improvement?

Improvement Required

10%

6%

30%

24%

20%

10%

Delivery Time

Capaciousness

Product Variety

Prices

Offers anddiscounts

Others

Q. What is the first thing that strikes your mind about McDonald’s?

19 | P a g e


First Thing About McDonald's That Strikes Customer's mind

30%

26%

18%

4%

22%

Burger

Golden Arches

Service

Value for Money

Fun

THE FREE TOYS PROVIDED WITH HAPPY MEALS (WALT DISNEY’S MADAGASCAR)

20 | P a g e


KIDS PLAYING AT PLAY PLACE- MCDONALD’S VILE PARLE (MUMBAI)

21 | P a g e


THE NEW BREAKFAST MENU STARTED AT SELECT STORES IN MUMBAI.

22 | P a g e


References

1. “Marketing Management” – Dr. Rajan Saxena

2. “McDonalds – Behind the Arches” – John S Love

3. www.Mcdonaldsindia.com

4. Outlet Manager – McDonald’s Vile Parle

23 | P a g e

11520753-Marketing-Strategies-of-McDonalds.pdf

Documents

Transcript of 11520753-Marketing-Strategies-of-McDonalds.pdf