Marketing Plans of McDonald’s
Presented By Rajiv Chand
Marketing Plans of McDonald’s
McDonald’s History/Foundation
In the late 1940’s, Dick and Mac McDonald were searching for a way to improve their little drive-in restaurant business in San Bernardino, California. Rather than tinker with the business, which was bringing in a very comfortable $200,000 yearly, they invented an entirely new concept based upon speedy service, low prices, and big volume. They did away with car-hops in favor of self-service at the counter. They ditched their 25item barbecue menu in favor of a limited menu of just nine items: hamburger, cheeseburger, three soft-drink flavors, milk, coffee, potato chips, and pie, with French fries and milkshakes added soon after they resumed operations. They re-engineered their stainless steel kitchen for mass production and speed with assembly-line procedures. And they slashed the price of their hamburger from a competitive 30 cents to just 15 cents. When the new McDonald’s re-opened in December of 1948, business took a while to build. But it soon became apparent that they had captured the spirit of post-war America. By the mid-1950s, their little hamburger factory enjoyed annual revenues of $350,000 – almost double the volume of their previous drive-in business at the same location. It was not unusual for 150 customers to crowd around the tiny hamburger stand during peak periods. Word of their success spread quickly, and a cover article on their operations in American Restaurant Magazine in 1952 prompted as many as 300 inquiries a month from around the country. Their first franchisee was Neil Fox, and the brothers decided that his drive-in in Phoenix, Arizona would be the prototype for the chain they envisioned. The resulting red-
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Marketing Plans of McDonald’s and-white tile building with a slanting roof and the “Golden Arches” on the sides became the model for the first wave of McDonald’s restaurants to hit the country, and an enduring symbol of the industry. The McDonald brothers actually designed the assembly line kitchen – twice as large as their original – by drawing an exact chalk diagram on their tennis court. They were able to place the equipment most efficiently after studying their crew members as they walked through their food preparation steps. Occasional rain bursts washed out the chalk, prompting them to redraw and refine their design. But the brothers – successful beyond their dreams in San Bernardino – were barely tapping the franchising potential of the business concept they had pioneered. For as little as a thousand dollars, franchisees would receive the McDonald’s name, a basic description of their Speedy Service System, and the services of Art Bender, their original counterman at the new restaurant, for a week or two to get them started. But then, in 1954, a milkshake machine salesman named Ray Kroc saw the McDonald’s operation first-hand. The fast food industry was about to take off. Ray Kroc was 52 years old – an age when many people begin thinking about retirement – when he founded the company that has become the McDonald’s of today. But Kroc, who dropped out of high school at age 15 to drive a Red Cross ambulance in World War I, was a constant dreamer...a salesman who never stopped looking for the ultimate product to sell. He began by selling paper cups to sidewalk vendors in Chicago, took a fling at Florida real estate, and had ultimately built a good business as the exclusive distributor for “Multi mixer” milkshake machines. It was the sale of Multi mixers, which first drew him to the McDonald brothers’ hamburger stand in San Bernardino, California. After all, if he could discover the secret of how they sold 20,000 shakes each month, how many more milkshake machines could he sell? But when Kroc showed up at McDonald’s one morning in 1954 and saw the rapidly moving line of customers buying bags of burgers and fries, he had but one thought: “This will go anyplace. Anyplace!” After the McDonald brothers explained that they didn’t have the personal desire to oversee the expansion of their concept across the nation, Ray Kroc became their exclusive franchising agent for the entire country. A great salesman had discovered his ultimate product. Kroc formed the new franchising company on March 2, 1955 under the name of McDonald’s System, Inc.
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Marketing Plans of McDonald’s On April 15, 1955 his prototype McDonald’s restaurant began business in Des Plaines, Illinois, opened with the help of Art Bender, who had served the first McDonald brothers’ hamburger and the first Ray Kroc McDonald’s hamburger. Bender went on to open the first of Kroc’s McDonald’s franchises in Fresno, California, and ultimately retired owning seven restaurants. Rather than tinker with a successful format, Kroc retained the McDonald’s formula of a limited menu, quality food, an assembly-line production system, and fast, friendly service – adding to that his own demanding standards for cleanliness. Indeed, Quality, Service, Cleanliness, and Value – QSC & V – continues as McDonald’s operating principle today. But it was in the area of franchising where Kroc uniquely applied the lessons of his sales background to create a successful organization. In many ways, it was a matter of necessity. Kroc’s agreement with the McDonald brothers was to limit the franchise fee to $950 per restaurant and charge a service fee of only 1.9 percent of restaurant sales – with 0.5 percent of that going back to the McDonald brothers. In addition, Kroc decided early on that the McDonald’s system would not be in the business of selling franchise owners their equipment, their supplies, or their food. The company did, however, purchase or lease much of the real estate the restaurants were located on; a program that soon produced a valuable competitive asset in its own right. So it was in Kroc’s best interest to do everything possible to assure that his franchise owners could build their sales. If they failed, he would fail with them, and vice versa. Kroc used his persuasive salesman’s skills to convince his first franchisees to sign onto line up prospective suppliers to inspire the company’s first team of managers and to convince lenders to finance his young company. Kroc so firmly believed in his dream that he didn’t take a dollar in salary from the company until 1961. The formula worked. At the end of 1956, McDonald’s 14 restaurants reported sales of $1.2 million and had served some 50 million hamburgers. In just four years, there were 228 restaurants reporting $37.6 million in sales, and the company had sold its 400 millionth hamburger mid-way through 1960. But to enjoy further growth, Kroc knew he had to buy out the McDonald brothers in order to loosen the restrictive agreement, which he had been operating under. For all the restaurants’ success, Kroc’s company had netted a meager $77,000 profit in 1960 and was carrying $5.7 million in long-term debt.
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Marketing Plans of McDonald’s The brothers asked for a flat $2.7 million in cash – $700,000, of which they would pay in taxes, leaving $1 million for each of them. A fair price at that time, thought the McDonald’s, for inventing the fast food industry. Kroc managed to obtain a loan in 1961 – based on the company’s real estate values – and though it ultimately cost him $14 million to repay it, he bought the ability to control his growing system. That same year, he opened Hamburger University in the basement of a restaurant in Elk Grove Village, Illinois, a training facility for new franchisees and store managers which has grown to be a worldwide institution utilizing sophisticated training techniques and high-level management courses.
McDonald’s Growth in the United States
McDonald’s growth in the United States soon became a series of milestones in sales, numbers of restaurants, numbers of hamburgers served, and in establishing standards of quality, service, cleanliness and value (QSC&V) previously unknown in the growing fast food restaurant industry. By 1963, they were selling one million hamburgers a day, and Ray Kroc served hamburger number one billion to Art Link letter on Link letter’s national television show. The first national meeting of McDonald’s franchise owners was held in Hollywood, Florida in 1965, celebrating the chain’s 10th anniversary with the theme, “The Sky’s the Limit.” It was also in 1965 that McDonald’s became a public company, selling its shares over the counter for $22.50 each – a price that sky-rocketed to $49 within a few weeks. Ray Kroc’s years without a salary had paid off – the initial stock he sold was worth $3 million and the rest of his holdings were now worth $32 million. Even June Marino, a longtime associate who had been Kroc’s secretary back in the Multi mixer days, shared in the rewards –selling $300,000 worth of stock and holding an additional $5 million. One year later, on July 5, 1966, McDonald’s was listed on the New York Stock Exchange, quite an accomplishment then for a chain of hamburger restaurants. In 1967, the price of a McDonald’s hamburger rose from 15 to 18 cents – the first increase since the McDonald brothers introduced the 15-cent price two decades earlier. And in the following year, restaurant number 1,000 opened in Des Plaines, Illinois, not far from Kroc’s original restaurant.
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Marketing Plans of McDonald’s By 1970, McDonald’s reported $587 million in sales from almost 1,600 restaurants in all 50 states of the U.S. and four other countries. In the same year, a restaurant in Bloomington, Minnesota became the first to reach $1 million in annual sales and another in Waikiki, Hawaii was the first to serve breakfast. The following year, the first McDonald’s Play land opened in Chula Vista, California. McDonald’s broke the billion dollar sales mark in 1972 and the stock split for the fifth time, making 100 shares of the original 1965 stock equal to 1,836 shares. In 1975, the first drive-thru operation was established in Sierra Vista, Arizona – an innovation that today accounts for about half of all McDonald’s restaurant sales in the U.S. and Canada. The company enjoyed sales of $2.5 billion that year, with 3,076 restaurants in 20 countries. The following year, hamburger number 20 billion was sold. In 1977, Ray Kroc was named Senior Chairman of McDonald’s, and Fred Turner, who was the grill man at Kroc’s first restaurant, was named Chairman of the Board. That year, more than 1,000 restaurants exceeded $1 million in sales, and 11 topped $2 million. By our silver anniversary in 1980, the 6,263 restaurants in 27 countries rang up sales of $6.2 billion and passed the 35 billion hamburger milestone. On January 14, 1984, Ray Kroc died – having accomplished his dreams for McDonald’s and then some. That same year, his “little company” broke the $10 billion sales barrier, served its 50 billionth hamburger, and operated 8,300 restaurants in 36 countries. A new McDonald’s restaurant opened somewhere in the world every 17 hours, and the average restaurant enjoyed an annual sales volume of $1,264,000. By 1990, their sales had grown to $18.7 billion, passing the milestone of 80 billion hamburgers sold. McDonald’s 11,800 restaurants were in 54 countries. And top leadership changed for just the third time in our history in 1990 – with Fred Turner becoming senior chairman and passing the baton to Mike Quinlan, who had begun working for McDonald’s in 1963 as a part-time mail clerk. In 1999, Jack M. Greenberg took over the top job, which was passed to Jim Cantalupo, former Vice Chairman and President, when Greenberg retired in December of 2002. As testimony to our consistent performance over the years, McDonald’s was the only company in the Standard & Poor’s 500 to have publicly reported 100 consecutive quarters of year-to-year combined increases in revenues, income, and earnings per share since 1965. Not surprisingly, Better Investing magazine ranked McDonald’s as the most popular and widely
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Marketing Plans of McDonald’s held common stock by individuals and investment clubs. And Life magazine names Kroc as one of the 100 Most Important Americans of the 20th Century. Ray Kroc’s dreams for McDonald’s growth throughout the United States had been more than satisfied but that’s only the beginning of the story. McDonald’s took the world by storm as well. International Expansion While McDonald’s was astounding the experts with the rapid growth of its hamburger chain in the United States, company had another big surprise brewing – international expansion. They opened their first restaurant outside the U.S. in Canada on June 1, 1967 in Richmond B.C., and the race was on. Canada today has more than 1,300 restaurants. After a few false starts in the Caribbean and the Netherlands – where they tried a more handsoff style and attempted to compromise their menu for local tastes – they realized that what had worked so well in the U.S. could travel virtually anywhere. A strong local partner fully trained and totally involved in the business the traditional McDonald’s menu and their detailed operating procedures for QSC&V were the formula for success. One of the most dramatic examples came in Japan, where Den Fujita, who owned an import company specializing in handbags, shoes, and apparel, became McDonald’s joint venture partner in 1971. Fujita opened his first restaurant on July 20, 1971 in a tiny 500-square-foot restaurant in a prime location in Tokyo’s Ginza shopping district – a site that only allowed 39 hours for construction that normally took three months. On its first day, the restaurant rang up $3,000 in sales, and Fujita has never looked back. At the end of 1993, McDonald’s was Japan’s most successful restaurant chain, with some 1,400 restaurants – and nearly double the annual sales of the next competitor. They also opened their first restaurants in Germany and Australia in 1971. Today, Germany has more than 1,200 restaurants and Australia has some 700 McDonald’s locations. And after entering France and England in the early 1970s, McDonald’s today runs some 980 restaurants in France and more than 1,200 restaurants the United Kingdom. These six countries – Canada, Japan, Germany, Australia, France and England – are known as McDonald’s “Big Six” because combined, they provide about 80 percent of international operating income. McDonald’s international operations are playing an increasingly important
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Marketing Plans of McDonald’s role in their company’s results. In 1995, for example, 7,030 restaurants in 89 countries produced sales of $14 billion. Some of McDonald’s international openings have been so dramatic that they have become headline news in the media around the world. On January 31, 1990, for example, more than 30,000 people lined up on a cold winter day in Moscow to visit the new, 23,680-square foot McDonald’s – the most people ever served by a single restaurant to that date. That restaurant opening culminated years of negotiations which had begun during the Montreal Olympics in 1976 and represented the largest joint venture agreement between the Soviet Union and a food company. The Russian crew was soon serving between 40,000 and 50,000 customers each day – a total of 15 million people in its first full year. To meet the unrelenting demand, they built a $45 million food processing facility near Moscow, one of the most modern food processing facilities in Europe. McDonald’s opening in Beijing, China, on April 23, 1992 shattered the Moscow opening day record, attracting some 40,000 Chinese customers to the 28,000-square-foot restaurant, which had 29 cash register stations to handle the flow. Located in the city’s busiest shopping district, the restaurant has some 800,000 pedestrians passing by daily. The joint venture partnership between McDonald’s and the General Corporation of Beijing Agriculture, Industry, and Commerce had been working for five years to establish the network of local farmers, manufacturers, and other suppliers to support the restaurant. Not to be outdone, two new restaurants opened in Poland in 1992 and each surpassed the Moscow and Beijing records for opening day transactions, with the Warsaw restaurant amassing 13,304 transactions in June 1992, a record which was broken six months later in Katowice, 200 miles south of Warsaw in Poland’s coal country. Other former Iron Curtain countries where McDonald’s has proven tremendously popular include the Czech Republic, East Germany, Hungary, and Slovenia. They also broke ground in another new part of the world when we entered the Middle East with a new restaurant, which opened in Tel Aviv, Israel in October of 1993. New restaurants were added in Saudi Arabia, Oman, Kuwait, Egypt, Bahrain, United Arab Emirates, and Qatar, reflecting our extensive and long-term commitment to the region. Out of respect for local cultures, McDonald’s restaurants in Arab countries maintain “Halal” menus, which signify compliance with Islamic laws for food preparation, especially beef. In addition, restaurants in Saudi Arabia do not display statues or posters of Ronald McDonald,
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Marketing Plans of McDonald’s since the Islamic father prohibits the display of “idols.” And the first kosher McDonald’s opened in early 1995 in a suburb of Jerusalem. It does not serve dairy products, and is closed on Saturdays, the Jewish Sabbath. The growth of McDonald’s to date – domestically and internationally – has proven the validity of the first thought through Ray Kroc’s mind when he initially saw McDonald’s in operation: “This will go anyplace.”
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McDonald's in Mumbai and Nationwide
Marketing Plans of McDonald’s
The Team
A Locally Owned Company
McDonald's is the world's leading food service retailer with more than 33,000 restaurants in 118 countries serving more than 67 million customers each day. In India, McDonald's has two Indian entrepreneurs: Amit Jatia, Vice Chairman, Hardcastle Restaurants Pvt. Ltd, which has been awarded a Development Licensee status by McDonald's Corporation, U.S.A, spearheads McDonald's operations in West & South India, while McDonald's restaurants in North & East India is managed by Vikram Bakshi's Connaught Plaza Restaurants Private Limited, which is still a Joint Venture with McDonald's Corporation. For Hardcastle Restaurants Pvt. Ltd ('HRPL'), the transition to a Development Licensee implies a higher level of commitment by McDonald's Corporation as it enhances its trust in the local partner. McDonald's ensures that the evolution to a Development Licensee takes place only after the financial strength, viability, profitability and long - term sustainability of the business is assured. Celebrating over 15 years of leadership in food service retailing in India, McDonald's India now has a network of over 250 restaurants across the country. McDonald's India is a leader in the food retail space, with a presence of more than 250 restaurants serving more than 6.5 lakh customers daily in India with alone 43 restaurants in Mumbai. McDonald's to double network, revenue by 2014 in south, east McDonald's India has joined hands with Indian Oil Corporation (IOC) to increase its presence in petrol stations in west and south and aims to more than double its sales by 2014 from both these regions. Under the agreement, IOC will provide space to McDonald's for opening 'Drive Thru' restaurants in the west and south. McDonald's expansion plans is going to double it’s retail expansion by 2014 at an approximate investment of Rs 175-crore. Presently, McDonald's has 108 outlets in the south and west and a total 211 across the country. By 2014, the fast food giant plans to up its headcount by another 10,000 in the south and west where, by then, it aims to have a chain-network of 216. McDonald's already operates restaurants under the oil alliance programmed with Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd (BPCL). By the exclusive marketing plans McDonald’s is going to double its outlets to 500 over the next three years with an investment of Rs 1,000-crore. A significant number of the new outlets will be the drive -through, which are typical highway outlets where take-away are encouraged. McDonald's has 45-50 drive-through outlets in the company and the franchisees are keen to more than double the format. Being "Drive through a big focus it has a plan to double its reach. McDonald's also plans to double its headcount in next three to four years by adding 2,500 people each year. The company has managed to keep its prices affordable by adding 3-4 percent on an annual basis despite of high input cost. McDonald's India has set up farm and processing facilities that are owned by suppliers. It sources almost 98 percent of its products
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Marketing Plans of McDonald’s
Business Model
? Franchise Model – 20% of the total restaurants are owned by the company while rest
80% is operated by. 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 – Based on the feedback form taken from restaurants company
has managed to maintain the product taste as per the requirement by consumer and also the quality across the nations.
? Act like a retailer and think like a brand – Protecting the brand reputation along
with the fastest delivery is the motto of McDonald’s.
FIRM CUSTOMERS
Perfect vision to be maintained is by saying ‘All Population of India are our customers’.
Customer Perception and Customer Expectation
Creating image in the minds of customer is very important to sustained in the market hence with right approach and by dedication towards consumers McDonald’s has met the expectation unlike other who has failed to build healthy image about themselves in the consumers mind. Target Segment A Family with children What is McDonald’s for me? 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.
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 Andheri, Mumbai and Kandivali 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.
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Marketing Plans of McDonald’s
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.
K inclined towardstheir eatinghabits ids
Cookies and Candies Burgers & Pizza Cold drinks and 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 and recently they are handing out watch which really attract the kids. At several outlets, it also provides special facilities like ‘Play Place’ where children can play arcade games, air hockey, etc. (Witnessed in New York, USA). 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. “Mc Donald’s mein hai kuch baat”- India (Oct. 13, 1996–1999) it immediately drive our attention to its unique word hence many of them try its uniqueness hence it was mainly targeted on upper middle class in India. 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, friendly and helpful staff. The comfort that McDonald’s promises in slogans like “You deserve a Break today” & “Feed your inner child”. This
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Marketing Plans of McDonald’s 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.
5p’s of Marketing Mix
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. 2. 3. 4. 5.
Product Place Price Promotion People
Product: How should the company design, manufacture the product so that it
enhances the customer experience?
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Marketing Plans of McDonald’s
As the marketing concept in concerned it is believe that ‘First impression is the last impression’ hence the major focus on packaging precisely known as its looks is very important aspects. “Our clear strategy is to bring the customers in initially and provide a range of entry-level products so that they can try new items and graduate to the higher rungs.” --Vikram Bakshi, Managing Director, Northern Region, India •McDonald’s product includes vegetarian and non-vegetarian items. •Also involves combo. •Cares for customer’s sentiments towards religion and •Separate cooking area and equipment’s. Culture.
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Marketing Plans of McDonald’s
Co- Branding:
McDonald’s has major tie-ups with various companies as their co-branding Strategy. Few of them are listed below:
Product Mix
It includes vegetarian, non-vegetarian and beverages.
McDonald’s SWOT Analysis Strength
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McDonald’s has a strong global presence with its nearest domestic competitor being only half its size, McDonald’s is the market leader in both the domestic and international markets. McDonald’s benefit from cost reduction through economies of scale because of its enormous size and its huge global presence allows it to diversify risk involved with the economic performance of specific countries.
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In international markets, McDonald’s is well placed to expand and take advantage of long-term economic growth. McDonald’s also has a strong real estate portfolio. The company’s outlets are located in areas that are highly known for visibility, traffic volume and ease of access.
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Marketing Plans of McDonald’s McDonald’s also has exceptional brand recognition. This strong brand recognition creates significant opportunities for the company.
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McDonald’s is able to generate more sales because of its brand recognition. Through aggressive market planning, McDonald’s has been able to recapture its youth market.
Weaknesses
• The food industry is really saturated. As a result of this, MacDonald’s has to deal with the prospect of looming market saturation, which could make it difficult to add new outlets.
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The market is forecast to grow by around 2% per year. There is also an increasing price competition driven by too many competitors, which reduces the company’s ability to increase revenue.
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Nevertheless, the swift of the company’s focus from a value menu to a more diverse one has recently limited the negative effect of the intense price competition that was traditionally taking place among the industry leaders.
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Lack of product innovation is another weakness of McDonalds. The last break-through for McDonald’s was the Chicken McNugget in 1983, but again the company’s new strategy seems to have successfully dealt with the problem through the popularity of its new salads and other new products.
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Lack of Jain meal.
Opportunities
Also to increase profitability the company has slowed its expansion of McDonald’s restaurants so as to refurbish and change the image of current restaurants and adding new features such as Internet access.
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McDonald’s still has plans for more international expansion. McDonald’s still needs to penetrate in many countries especially in Europe, Asia and Latin America. Changing trends in eating habits toward more health eating, seen as a threat to McDonalds can also be seen as an opportunity. McDonalds introduced new premium salads and Fruit n’ Yogurt Parfaits in the US which lead to growth in 2004 and the same products will probably bring some more growth in foreign markets.
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Marketing Plans of McDonald’s
Threats
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McDonald’s is exposed to changes in the global economy. The company’s aggressive international expansion has left it extremely vulnerable to other countries economic slowdown. Foreign currency fluctuation is McDonalds. The Fast food industry is becoming keeps up with an increasingly competitive sector. MacDonald’s competitors through expensive promotional also another problem global companies like
campaigns which leads to limited margins to gain market share. •
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McDonald’s is attempting to differentiate itself, with new formats and new menu items, but other fast food industry are doing the same too. McDonald’s, just like other fast food industry, often receives bad press because of its link obesity. Increased concern such as this has led the Food Standards Agency and the Department of Health in the UK to review the advertising of ’junk’ foods such as McDonalds to children.
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Top Competitors for MacDonald’s include: Yum! Brands, Inc, Wendy’s International, Inc. Jack in the Box Inc, and Burger King Corporation.
Promotion:
What is the suitable strategy and channels for promotion of the product?
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Marketing Plans of McDonald’s 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”
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“Aap ke zamane mein ,baap ke zamane ke daam”.
• “Food, Folks, and Fun” • “I’m loving it”. • Target customer – Children’s • Awareness about products among People • Use of Different Media like Television, hoardings and bus shelters • DDB Needham and Leo Burnett agencies appointed for the advertisement • Description of Products on Paper Mats placed in the trays. • The placing of the pamphlets and banners in and around the outlets • 80-20 Menu Board • Lucky Promotion strategies An activity, such as a sale or advertising campaign, designed to increase visibility or sales of a product. •McDonalds, for years has maintained an extensive promotion strategy with highest spending on marketing amongst all its competitors. Advertising: Focus on overall experience. “Brand globally and act locally”. Overall it is doing what it does the best – marketing. Intensive advertising aimed at children.
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Marketing Plans of McDonald’s Paper mats on trays ensure that no new scheme goes unnoticed. 80-20 menu boards marketing tool. • Sponsors sport events with their logos advertised in these events. Significant use of billboards and signage. • Image of portraying warmth and a real slice of everyday life has become a trademark and have created many memorable commercials. Campaign “I’m lovin’ it” is an international branding campaign which was launched in 2003 and has proved to be its biggest success. “aap ke zamaane mein baap ke zamaane ke daam” is a highly localized campaign which aimed at attracting the masses through its happy price menu.
Majority of the customers learn about the firm’s product and services from the newspapers ads, franchises and TV commercials. Only KFC and Pizza Hut is our major competitor in India. More focus on service delivery time because of customer don’t have much time today. Use electronic media for promotion.
Placement:
•Located at prime locations •Evenly spread in India •Almost in all big cities •At residential areas, malls, Multiplexes
Firm point of view
• • • • Easy availability of product and services to the customers Easy availability for providing basic services and value added services Easy complaint handling To cover target market
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Marketing Plans of McDonald’s
Customers Point of view
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Easy availability of Product and Services Time and Money saving Fast Service System and Resolve Conflict
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HOW WOULD YOU IMPROVE THE CHANNEL ACTIVITIES?
Try to convert your traditional channel into remote channel
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. •Policy which caters to Indian customers •Quite affordable products •Heavily marketed “Happy Price Menu” •Importance to brand and its integrity
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Marketing Plans of McDonald’s Household Expenditures
Pricing Strategy: Purchasing power pricing:In 1997 slashed prices for vegetable nuggets and soft serve cone. In September 2001, they offered Veg surprise burgers for Rs 17. March 2004 – Aap ke zamane mein, baap ke zamane ka daam. Value Ladder strategy :a) Started offering value meals in a range of prices. b) Ensure affordability and attract widest section of customers. c) Brought the customer and provided a range of entry- level products. d) Try those new items and graduate to higher-rungs. e) E.g- if a customer starts with McAloo Tikki, he will finally graduate to McVeggie and so in Non veg. f) Helped its Volume business. Value Pricing. a) McChicken & McVeggie Meal b) Happy Meal for Kids c) Big saving Meals d) A-la carte menu e) Desserts f) Beverages
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Marketing Plans of McDonald’s
Customers react positively due to Good quality of our product and services. McDonald’s rationalizes its tariff with the passage of time in order to beat the competitors.
Cleanliness and Hygienic
Mc Donald’s focuses on clean and hygienic interiors of is outlets and at the same time the interiors are attractive and the fast food joint maintains a proper decorum at its joints. Cleanliness, speed, quality and transparency of process is the biggest physical evidence. • The interiors are attractive and more or less consistent throughout the world. A proper decorum and strict standards of cleanliness are maintained at all the joints. Extra care is given to make the joints children Friendly Family environment message throughout the world, just the way of communication is adjusted to different countries. Play areas are provided so that kids don’t play areas are provided so that kids don’t Become panicky. Counters are kept low and menus pictorially displayed so that children can order for themselves. • The physical appearance affects not only the impression outsiders have of a business but also the way that business functions. • Staff members • Location & appearance
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Marketing Plans of McDonald’s • Building maintenance
Mcdonalds in Mumbai
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Marketing Plans of McDonald’s
Process:
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Marketing Plans of McDonald’s The food manufacturing process at Mc Donalds is completely transparent i.e. the whole process is visible to the customers. In fact, the fast food joint allows its customers to view and judge the hygienic standards at Mc Donalds by allowing them to enter the area where the process takes place. The customers are invited to check the ingredients used in food.
• Food manufacturing Transparent • Training to the licensees
to customers
• Invented the most efficient cooking equipment • New methods of food packaging and distribution • McDonald’s In India followed the same tradition
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
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Marketing Plans of McDonald’s 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 employees in Mc Donald’s have a standard uniform and Mc Donald’s specially focuses on friendly and prompt service to its customers from their employees. Each outlet is headed by a Restaurant Manager. He is responsible for the daily operation and customer interaction. • Delivery Crew Member carries basic operation of a restaurant. Ensures customer satisfaction at the restaurants. In order to motivate there employees they give them stars as per their performance. • Stars as per their performance • Gives employees larger role in decisions • Philosophy of Quality, Service, Cleanliness and Value (QSC&V) is the guiding force behind its service • Customer always comes first • Fast friendly service • Provides clean, comfortable environment especially suited for families
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Marketing Plans of McDonald’s
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 Pakistan 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
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Marketing Plans of 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. “Moments Of Truth” – The Service Encounter
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
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Marketing Plans of McDonald’s 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 fastfood 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
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Marketing Plans of McDonald’s 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.
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Marketing Plans of McDonald’s
McDonald’s
Name: Age Group: a) Below 18 b)18-28 b) Business Gender: M / F c)28-40 d)Above 40 c) Service d) Housewife e) Any other
Occupation: a) Student
Feedback Form by McDonald’s outlets
Was your food hot and fresh? Were the staffs friendly and courteous? Was the service quick and efficient? Did you find the restaurant clean? Were the rest rooms clean? Did we make you smile today?
? ? ? ? ? ?
? ? ? ? ? ?
CONCLUSIONS:
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Marketing Plans of McDonald’s McDonald's views the relationship between franchisor, franchisee and supplier to be of paramount importance to the success of the business. Ray Kroc recognised the need very early on for franchisees that would dedicate themselves to their restaurants. He wanted people who had to give up another job to take on the franchise venture, relying on their franchise as their sole source of income and would therefore be highly motivated and dedicated. Consequently, McDonald's will not offer franchises to partnerships, consortia or absentee investors. The initial capital has to come from the franchisee as a guarantee of their commitment. The selection process is rigorous to ensure that McDonald's only recruits the right people.
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Marketing Plans of McDonald’s
References
1. “Marketing Management”. 2. “McDonalds – Behind the Arches” – John S Love. 3. www.Mcdonaldsindia.com. 4. McDonald’s Kandivali and Andheri. 5. Google. 6. Employee of Hard Castle Restaurants Pvt Ltd (purchase department)
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doc_335537248.doc
Presented By Rajiv Chand
Marketing Plans of McDonald’s
McDonald’s History/Foundation
In the late 1940’s, Dick and Mac McDonald were searching for a way to improve their little drive-in restaurant business in San Bernardino, California. Rather than tinker with the business, which was bringing in a very comfortable $200,000 yearly, they invented an entirely new concept based upon speedy service, low prices, and big volume. They did away with car-hops in favor of self-service at the counter. They ditched their 25item barbecue menu in favor of a limited menu of just nine items: hamburger, cheeseburger, three soft-drink flavors, milk, coffee, potato chips, and pie, with French fries and milkshakes added soon after they resumed operations. They re-engineered their stainless steel kitchen for mass production and speed with assembly-line procedures. And they slashed the price of their hamburger from a competitive 30 cents to just 15 cents. When the new McDonald’s re-opened in December of 1948, business took a while to build. But it soon became apparent that they had captured the spirit of post-war America. By the mid-1950s, their little hamburger factory enjoyed annual revenues of $350,000 – almost double the volume of their previous drive-in business at the same location. It was not unusual for 150 customers to crowd around the tiny hamburger stand during peak periods. Word of their success spread quickly, and a cover article on their operations in American Restaurant Magazine in 1952 prompted as many as 300 inquiries a month from around the country. Their first franchisee was Neil Fox, and the brothers decided that his drive-in in Phoenix, Arizona would be the prototype for the chain they envisioned. The resulting red-
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Marketing Plans of McDonald’s and-white tile building with a slanting roof and the “Golden Arches” on the sides became the model for the first wave of McDonald’s restaurants to hit the country, and an enduring symbol of the industry. The McDonald brothers actually designed the assembly line kitchen – twice as large as their original – by drawing an exact chalk diagram on their tennis court. They were able to place the equipment most efficiently after studying their crew members as they walked through their food preparation steps. Occasional rain bursts washed out the chalk, prompting them to redraw and refine their design. But the brothers – successful beyond their dreams in San Bernardino – were barely tapping the franchising potential of the business concept they had pioneered. For as little as a thousand dollars, franchisees would receive the McDonald’s name, a basic description of their Speedy Service System, and the services of Art Bender, their original counterman at the new restaurant, for a week or two to get them started. But then, in 1954, a milkshake machine salesman named Ray Kroc saw the McDonald’s operation first-hand. The fast food industry was about to take off. Ray Kroc was 52 years old – an age when many people begin thinking about retirement – when he founded the company that has become the McDonald’s of today. But Kroc, who dropped out of high school at age 15 to drive a Red Cross ambulance in World War I, was a constant dreamer...a salesman who never stopped looking for the ultimate product to sell. He began by selling paper cups to sidewalk vendors in Chicago, took a fling at Florida real estate, and had ultimately built a good business as the exclusive distributor for “Multi mixer” milkshake machines. It was the sale of Multi mixers, which first drew him to the McDonald brothers’ hamburger stand in San Bernardino, California. After all, if he could discover the secret of how they sold 20,000 shakes each month, how many more milkshake machines could he sell? But when Kroc showed up at McDonald’s one morning in 1954 and saw the rapidly moving line of customers buying bags of burgers and fries, he had but one thought: “This will go anyplace. Anyplace!” After the McDonald brothers explained that they didn’t have the personal desire to oversee the expansion of their concept across the nation, Ray Kroc became their exclusive franchising agent for the entire country. A great salesman had discovered his ultimate product. Kroc formed the new franchising company on March 2, 1955 under the name of McDonald’s System, Inc.
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Marketing Plans of McDonald’s On April 15, 1955 his prototype McDonald’s restaurant began business in Des Plaines, Illinois, opened with the help of Art Bender, who had served the first McDonald brothers’ hamburger and the first Ray Kroc McDonald’s hamburger. Bender went on to open the first of Kroc’s McDonald’s franchises in Fresno, California, and ultimately retired owning seven restaurants. Rather than tinker with a successful format, Kroc retained the McDonald’s formula of a limited menu, quality food, an assembly-line production system, and fast, friendly service – adding to that his own demanding standards for cleanliness. Indeed, Quality, Service, Cleanliness, and Value – QSC & V – continues as McDonald’s operating principle today. But it was in the area of franchising where Kroc uniquely applied the lessons of his sales background to create a successful organization. In many ways, it was a matter of necessity. Kroc’s agreement with the McDonald brothers was to limit the franchise fee to $950 per restaurant and charge a service fee of only 1.9 percent of restaurant sales – with 0.5 percent of that going back to the McDonald brothers. In addition, Kroc decided early on that the McDonald’s system would not be in the business of selling franchise owners their equipment, their supplies, or their food. The company did, however, purchase or lease much of the real estate the restaurants were located on; a program that soon produced a valuable competitive asset in its own right. So it was in Kroc’s best interest to do everything possible to assure that his franchise owners could build their sales. If they failed, he would fail with them, and vice versa. Kroc used his persuasive salesman’s skills to convince his first franchisees to sign onto line up prospective suppliers to inspire the company’s first team of managers and to convince lenders to finance his young company. Kroc so firmly believed in his dream that he didn’t take a dollar in salary from the company until 1961. The formula worked. At the end of 1956, McDonald’s 14 restaurants reported sales of $1.2 million and had served some 50 million hamburgers. In just four years, there were 228 restaurants reporting $37.6 million in sales, and the company had sold its 400 millionth hamburger mid-way through 1960. But to enjoy further growth, Kroc knew he had to buy out the McDonald brothers in order to loosen the restrictive agreement, which he had been operating under. For all the restaurants’ success, Kroc’s company had netted a meager $77,000 profit in 1960 and was carrying $5.7 million in long-term debt.
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Marketing Plans of McDonald’s The brothers asked for a flat $2.7 million in cash – $700,000, of which they would pay in taxes, leaving $1 million for each of them. A fair price at that time, thought the McDonald’s, for inventing the fast food industry. Kroc managed to obtain a loan in 1961 – based on the company’s real estate values – and though it ultimately cost him $14 million to repay it, he bought the ability to control his growing system. That same year, he opened Hamburger University in the basement of a restaurant in Elk Grove Village, Illinois, a training facility for new franchisees and store managers which has grown to be a worldwide institution utilizing sophisticated training techniques and high-level management courses.
McDonald’s Growth in the United States
McDonald’s growth in the United States soon became a series of milestones in sales, numbers of restaurants, numbers of hamburgers served, and in establishing standards of quality, service, cleanliness and value (QSC&V) previously unknown in the growing fast food restaurant industry. By 1963, they were selling one million hamburgers a day, and Ray Kroc served hamburger number one billion to Art Link letter on Link letter’s national television show. The first national meeting of McDonald’s franchise owners was held in Hollywood, Florida in 1965, celebrating the chain’s 10th anniversary with the theme, “The Sky’s the Limit.” It was also in 1965 that McDonald’s became a public company, selling its shares over the counter for $22.50 each – a price that sky-rocketed to $49 within a few weeks. Ray Kroc’s years without a salary had paid off – the initial stock he sold was worth $3 million and the rest of his holdings were now worth $32 million. Even June Marino, a longtime associate who had been Kroc’s secretary back in the Multi mixer days, shared in the rewards –selling $300,000 worth of stock and holding an additional $5 million. One year later, on July 5, 1966, McDonald’s was listed on the New York Stock Exchange, quite an accomplishment then for a chain of hamburger restaurants. In 1967, the price of a McDonald’s hamburger rose from 15 to 18 cents – the first increase since the McDonald brothers introduced the 15-cent price two decades earlier. And in the following year, restaurant number 1,000 opened in Des Plaines, Illinois, not far from Kroc’s original restaurant.
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Marketing Plans of McDonald’s By 1970, McDonald’s reported $587 million in sales from almost 1,600 restaurants in all 50 states of the U.S. and four other countries. In the same year, a restaurant in Bloomington, Minnesota became the first to reach $1 million in annual sales and another in Waikiki, Hawaii was the first to serve breakfast. The following year, the first McDonald’s Play land opened in Chula Vista, California. McDonald’s broke the billion dollar sales mark in 1972 and the stock split for the fifth time, making 100 shares of the original 1965 stock equal to 1,836 shares. In 1975, the first drive-thru operation was established in Sierra Vista, Arizona – an innovation that today accounts for about half of all McDonald’s restaurant sales in the U.S. and Canada. The company enjoyed sales of $2.5 billion that year, with 3,076 restaurants in 20 countries. The following year, hamburger number 20 billion was sold. In 1977, Ray Kroc was named Senior Chairman of McDonald’s, and Fred Turner, who was the grill man at Kroc’s first restaurant, was named Chairman of the Board. That year, more than 1,000 restaurants exceeded $1 million in sales, and 11 topped $2 million. By our silver anniversary in 1980, the 6,263 restaurants in 27 countries rang up sales of $6.2 billion and passed the 35 billion hamburger milestone. On January 14, 1984, Ray Kroc died – having accomplished his dreams for McDonald’s and then some. That same year, his “little company” broke the $10 billion sales barrier, served its 50 billionth hamburger, and operated 8,300 restaurants in 36 countries. A new McDonald’s restaurant opened somewhere in the world every 17 hours, and the average restaurant enjoyed an annual sales volume of $1,264,000. By 1990, their sales had grown to $18.7 billion, passing the milestone of 80 billion hamburgers sold. McDonald’s 11,800 restaurants were in 54 countries. And top leadership changed for just the third time in our history in 1990 – with Fred Turner becoming senior chairman and passing the baton to Mike Quinlan, who had begun working for McDonald’s in 1963 as a part-time mail clerk. In 1999, Jack M. Greenberg took over the top job, which was passed to Jim Cantalupo, former Vice Chairman and President, when Greenberg retired in December of 2002. As testimony to our consistent performance over the years, McDonald’s was the only company in the Standard & Poor’s 500 to have publicly reported 100 consecutive quarters of year-to-year combined increases in revenues, income, and earnings per share since 1965. Not surprisingly, Better Investing magazine ranked McDonald’s as the most popular and widely
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Marketing Plans of McDonald’s held common stock by individuals and investment clubs. And Life magazine names Kroc as one of the 100 Most Important Americans of the 20th Century. Ray Kroc’s dreams for McDonald’s growth throughout the United States had been more than satisfied but that’s only the beginning of the story. McDonald’s took the world by storm as well. International Expansion While McDonald’s was astounding the experts with the rapid growth of its hamburger chain in the United States, company had another big surprise brewing – international expansion. They opened their first restaurant outside the U.S. in Canada on June 1, 1967 in Richmond B.C., and the race was on. Canada today has more than 1,300 restaurants. After a few false starts in the Caribbean and the Netherlands – where they tried a more handsoff style and attempted to compromise their menu for local tastes – they realized that what had worked so well in the U.S. could travel virtually anywhere. A strong local partner fully trained and totally involved in the business the traditional McDonald’s menu and their detailed operating procedures for QSC&V were the formula for success. One of the most dramatic examples came in Japan, where Den Fujita, who owned an import company specializing in handbags, shoes, and apparel, became McDonald’s joint venture partner in 1971. Fujita opened his first restaurant on July 20, 1971 in a tiny 500-square-foot restaurant in a prime location in Tokyo’s Ginza shopping district – a site that only allowed 39 hours for construction that normally took three months. On its first day, the restaurant rang up $3,000 in sales, and Fujita has never looked back. At the end of 1993, McDonald’s was Japan’s most successful restaurant chain, with some 1,400 restaurants – and nearly double the annual sales of the next competitor. They also opened their first restaurants in Germany and Australia in 1971. Today, Germany has more than 1,200 restaurants and Australia has some 700 McDonald’s locations. And after entering France and England in the early 1970s, McDonald’s today runs some 980 restaurants in France and more than 1,200 restaurants the United Kingdom. These six countries – Canada, Japan, Germany, Australia, France and England – are known as McDonald’s “Big Six” because combined, they provide about 80 percent of international operating income. McDonald’s international operations are playing an increasingly important
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Marketing Plans of McDonald’s role in their company’s results. In 1995, for example, 7,030 restaurants in 89 countries produced sales of $14 billion. Some of McDonald’s international openings have been so dramatic that they have become headline news in the media around the world. On January 31, 1990, for example, more than 30,000 people lined up on a cold winter day in Moscow to visit the new, 23,680-square foot McDonald’s – the most people ever served by a single restaurant to that date. That restaurant opening culminated years of negotiations which had begun during the Montreal Olympics in 1976 and represented the largest joint venture agreement between the Soviet Union and a food company. The Russian crew was soon serving between 40,000 and 50,000 customers each day – a total of 15 million people in its first full year. To meet the unrelenting demand, they built a $45 million food processing facility near Moscow, one of the most modern food processing facilities in Europe. McDonald’s opening in Beijing, China, on April 23, 1992 shattered the Moscow opening day record, attracting some 40,000 Chinese customers to the 28,000-square-foot restaurant, which had 29 cash register stations to handle the flow. Located in the city’s busiest shopping district, the restaurant has some 800,000 pedestrians passing by daily. The joint venture partnership between McDonald’s and the General Corporation of Beijing Agriculture, Industry, and Commerce had been working for five years to establish the network of local farmers, manufacturers, and other suppliers to support the restaurant. Not to be outdone, two new restaurants opened in Poland in 1992 and each surpassed the Moscow and Beijing records for opening day transactions, with the Warsaw restaurant amassing 13,304 transactions in June 1992, a record which was broken six months later in Katowice, 200 miles south of Warsaw in Poland’s coal country. Other former Iron Curtain countries where McDonald’s has proven tremendously popular include the Czech Republic, East Germany, Hungary, and Slovenia. They also broke ground in another new part of the world when we entered the Middle East with a new restaurant, which opened in Tel Aviv, Israel in October of 1993. New restaurants were added in Saudi Arabia, Oman, Kuwait, Egypt, Bahrain, United Arab Emirates, and Qatar, reflecting our extensive and long-term commitment to the region. Out of respect for local cultures, McDonald’s restaurants in Arab countries maintain “Halal” menus, which signify compliance with Islamic laws for food preparation, especially beef. In addition, restaurants in Saudi Arabia do not display statues or posters of Ronald McDonald,
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Marketing Plans of McDonald’s since the Islamic father prohibits the display of “idols.” And the first kosher McDonald’s opened in early 1995 in a suburb of Jerusalem. It does not serve dairy products, and is closed on Saturdays, the Jewish Sabbath. The growth of McDonald’s to date – domestically and internationally – has proven the validity of the first thought through Ray Kroc’s mind when he initially saw McDonald’s in operation: “This will go anyplace.”
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McDonald's in Mumbai and Nationwide
Marketing Plans of McDonald’s
The Team
A Locally Owned Company
McDonald's is the world's leading food service retailer with more than 33,000 restaurants in 118 countries serving more than 67 million customers each day. In India, McDonald's has two Indian entrepreneurs: Amit Jatia, Vice Chairman, Hardcastle Restaurants Pvt. Ltd, which has been awarded a Development Licensee status by McDonald's Corporation, U.S.A, spearheads McDonald's operations in West & South India, while McDonald's restaurants in North & East India is managed by Vikram Bakshi's Connaught Plaza Restaurants Private Limited, which is still a Joint Venture with McDonald's Corporation. For Hardcastle Restaurants Pvt. Ltd ('HRPL'), the transition to a Development Licensee implies a higher level of commitment by McDonald's Corporation as it enhances its trust in the local partner. McDonald's ensures that the evolution to a Development Licensee takes place only after the financial strength, viability, profitability and long - term sustainability of the business is assured. Celebrating over 15 years of leadership in food service retailing in India, McDonald's India now has a network of over 250 restaurants across the country. McDonald's India is a leader in the food retail space, with a presence of more than 250 restaurants serving more than 6.5 lakh customers daily in India with alone 43 restaurants in Mumbai. McDonald's to double network, revenue by 2014 in south, east McDonald's India has joined hands with Indian Oil Corporation (IOC) to increase its presence in petrol stations in west and south and aims to more than double its sales by 2014 from both these regions. Under the agreement, IOC will provide space to McDonald's for opening 'Drive Thru' restaurants in the west and south. McDonald's expansion plans is going to double it’s retail expansion by 2014 at an approximate investment of Rs 175-crore. Presently, McDonald's has 108 outlets in the south and west and a total 211 across the country. By 2014, the fast food giant plans to up its headcount by another 10,000 in the south and west where, by then, it aims to have a chain-network of 216. McDonald's already operates restaurants under the oil alliance programmed with Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd (BPCL). By the exclusive marketing plans McDonald’s is going to double its outlets to 500 over the next three years with an investment of Rs 1,000-crore. A significant number of the new outlets will be the drive -through, which are typical highway outlets where take-away are encouraged. McDonald's has 45-50 drive-through outlets in the company and the franchisees are keen to more than double the format. Being "Drive through a big focus it has a plan to double its reach. McDonald's also plans to double its headcount in next three to four years by adding 2,500 people each year. The company has managed to keep its prices affordable by adding 3-4 percent on an annual basis despite of high input cost. McDonald's India has set up farm and processing facilities that are owned by suppliers. It sources almost 98 percent of its products
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Marketing Plans of McDonald’s
Business Model
? Franchise Model – 20% of the total restaurants are owned by the company while rest
80% is operated by. 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 – Based on the feedback form taken from restaurants company
has managed to maintain the product taste as per the requirement by consumer and also the quality across the nations.
? Act like a retailer and think like a brand – Protecting the brand reputation along
with the fastest delivery is the motto of McDonald’s.
FIRM CUSTOMERS
Perfect vision to be maintained is by saying ‘All Population of India are our customers’.
Customer Perception and Customer Expectation
Creating image in the minds of customer is very important to sustained in the market hence with right approach and by dedication towards consumers McDonald’s has met the expectation unlike other who has failed to build healthy image about themselves in the consumers mind. Target Segment A Family with children What is McDonald’s for me? 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.
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 Andheri, Mumbai and Kandivali 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.
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Marketing Plans of McDonald’s
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.
K inclined towardstheir eatinghabits ids
Cookies and Candies Burgers & Pizza Cold drinks and 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 and recently they are handing out watch which really attract the kids. At several outlets, it also provides special facilities like ‘Play Place’ where children can play arcade games, air hockey, etc. (Witnessed in New York, USA). 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. “Mc Donald’s mein hai kuch baat”- India (Oct. 13, 1996–1999) it immediately drive our attention to its unique word hence many of them try its uniqueness hence it was mainly targeted on upper middle class in India. 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, friendly and helpful staff. The comfort that McDonald’s promises in slogans like “You deserve a Break today” & “Feed your inner child”. This
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Marketing Plans of McDonald’s 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.
5p’s of Marketing Mix
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. 2. 3. 4. 5.
Product Place Price Promotion People
Product: How should the company design, manufacture the product so that it
enhances the customer experience?
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Marketing Plans of McDonald’s
As the marketing concept in concerned it is believe that ‘First impression is the last impression’ hence the major focus on packaging precisely known as its looks is very important aspects. “Our clear strategy is to bring the customers in initially and provide a range of entry-level products so that they can try new items and graduate to the higher rungs.” --Vikram Bakshi, Managing Director, Northern Region, India •McDonald’s product includes vegetarian and non-vegetarian items. •Also involves combo. •Cares for customer’s sentiments towards religion and •Separate cooking area and equipment’s. Culture.
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Marketing Plans of McDonald’s
Co- Branding:
McDonald’s has major tie-ups with various companies as their co-branding Strategy. Few of them are listed below:
Product Mix
It includes vegetarian, non-vegetarian and beverages.
McDonald’s SWOT Analysis Strength
• •
McDonald’s has a strong global presence with its nearest domestic competitor being only half its size, McDonald’s is the market leader in both the domestic and international markets. McDonald’s benefit from cost reduction through economies of scale because of its enormous size and its huge global presence allows it to diversify risk involved with the economic performance of specific countries.
• •
In international markets, McDonald’s is well placed to expand and take advantage of long-term economic growth. McDonald’s also has a strong real estate portfolio. The company’s outlets are located in areas that are highly known for visibility, traffic volume and ease of access.
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Marketing Plans of McDonald’s McDonald’s also has exceptional brand recognition. This strong brand recognition creates significant opportunities for the company.
•
McDonald’s is able to generate more sales because of its brand recognition. Through aggressive market planning, McDonald’s has been able to recapture its youth market.
Weaknesses
• The food industry is really saturated. As a result of this, MacDonald’s has to deal with the prospect of looming market saturation, which could make it difficult to add new outlets.
•
The market is forecast to grow by around 2% per year. There is also an increasing price competition driven by too many competitors, which reduces the company’s ability to increase revenue.
•
Nevertheless, the swift of the company’s focus from a value menu to a more diverse one has recently limited the negative effect of the intense price competition that was traditionally taking place among the industry leaders.
• •
Lack of product innovation is another weakness of McDonalds. The last break-through for McDonald’s was the Chicken McNugget in 1983, but again the company’s new strategy seems to have successfully dealt with the problem through the popularity of its new salads and other new products.
•
•
Lack of Jain meal.
Opportunities
Also to increase profitability the company has slowed its expansion of McDonald’s restaurants so as to refurbish and change the image of current restaurants and adding new features such as Internet access.
• •
McDonald’s still has plans for more international expansion. McDonald’s still needs to penetrate in many countries especially in Europe, Asia and Latin America. Changing trends in eating habits toward more health eating, seen as a threat to McDonalds can also be seen as an opportunity. McDonalds introduced new premium salads and Fruit n’ Yogurt Parfaits in the US which lead to growth in 2004 and the same products will probably bring some more growth in foreign markets.
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Threats
• • • •
McDonald’s is exposed to changes in the global economy. The company’s aggressive international expansion has left it extremely vulnerable to other countries economic slowdown. Foreign currency fluctuation is McDonalds. The Fast food industry is becoming keeps up with an increasingly competitive sector. MacDonald’s competitors through expensive promotional also another problem global companies like
campaigns which leads to limited margins to gain market share. •
•
McDonald’s is attempting to differentiate itself, with new formats and new menu items, but other fast food industry are doing the same too. McDonald’s, just like other fast food industry, often receives bad press because of its link obesity. Increased concern such as this has led the Food Standards Agency and the Department of Health in the UK to review the advertising of ’junk’ foods such as McDonalds to children.
•
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Top Competitors for MacDonald’s include: Yum! Brands, Inc, Wendy’s International, Inc. Jack in the Box Inc, and Burger King Corporation.
Promotion:
What is the suitable strategy and channels for promotion of the product?
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Marketing Plans of McDonald’s 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”. • Target customer – Children’s • Awareness about products among People • Use of Different Media like Television, hoardings and bus shelters • DDB Needham and Leo Burnett agencies appointed for the advertisement • Description of Products on Paper Mats placed in the trays. • The placing of the pamphlets and banners in and around the outlets • 80-20 Menu Board • Lucky Promotion strategies An activity, such as a sale or advertising campaign, designed to increase visibility or sales of a product. •McDonalds, for years has maintained an extensive promotion strategy with highest spending on marketing amongst all its competitors. Advertising: Focus on overall experience. “Brand globally and act locally”. Overall it is doing what it does the best – marketing. Intensive advertising aimed at children.
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Marketing Plans of McDonald’s Paper mats on trays ensure that no new scheme goes unnoticed. 80-20 menu boards marketing tool. • Sponsors sport events with their logos advertised in these events. Significant use of billboards and signage. • Image of portraying warmth and a real slice of everyday life has become a trademark and have created many memorable commercials. Campaign “I’m lovin’ it” is an international branding campaign which was launched in 2003 and has proved to be its biggest success. “aap ke zamaane mein baap ke zamaane ke daam” is a highly localized campaign which aimed at attracting the masses through its happy price menu.
Majority of the customers learn about the firm’s product and services from the newspapers ads, franchises and TV commercials. Only KFC and Pizza Hut is our major competitor in India. More focus on service delivery time because of customer don’t have much time today. Use electronic media for promotion.
Placement:
•Located at prime locations •Evenly spread in India •Almost in all big cities •At residential areas, malls, Multiplexes
Firm point of view
• • • • Easy availability of product and services to the customers Easy availability for providing basic services and value added services Easy complaint handling To cover target market
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Marketing Plans of McDonald’s
Customers Point of view
•
Easy availability of Product and Services Time and Money saving Fast Service System and Resolve Conflict
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HOW WOULD YOU IMPROVE THE CHANNEL ACTIVITIES?
Try to convert your traditional channel into remote channel
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. •Policy which caters to Indian customers •Quite affordable products •Heavily marketed “Happy Price Menu” •Importance to brand and its integrity
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Marketing Plans of McDonald’s Household Expenditures
Pricing Strategy: Purchasing power pricing:In 1997 slashed prices for vegetable nuggets and soft serve cone. In September 2001, they offered Veg surprise burgers for Rs 17. March 2004 – Aap ke zamane mein, baap ke zamane ka daam. Value Ladder strategy :a) Started offering value meals in a range of prices. b) Ensure affordability and attract widest section of customers. c) Brought the customer and provided a range of entry- level products. d) Try those new items and graduate to higher-rungs. e) E.g- if a customer starts with McAloo Tikki, he will finally graduate to McVeggie and so in Non veg. f) Helped its Volume business. Value Pricing. a) McChicken & McVeggie Meal b) Happy Meal for Kids c) Big saving Meals d) A-la carte menu e) Desserts f) Beverages
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Marketing Plans of McDonald’s
Customers react positively due to Good quality of our product and services. McDonald’s rationalizes its tariff with the passage of time in order to beat the competitors.
Cleanliness and Hygienic
Mc Donald’s focuses on clean and hygienic interiors of is outlets and at the same time the interiors are attractive and the fast food joint maintains a proper decorum at its joints. Cleanliness, speed, quality and transparency of process is the biggest physical evidence. • The interiors are attractive and more or less consistent throughout the world. A proper decorum and strict standards of cleanliness are maintained at all the joints. Extra care is given to make the joints children Friendly Family environment message throughout the world, just the way of communication is adjusted to different countries. Play areas are provided so that kids don’t play areas are provided so that kids don’t Become panicky. Counters are kept low and menus pictorially displayed so that children can order for themselves. • The physical appearance affects not only the impression outsiders have of a business but also the way that business functions. • Staff members • Location & appearance
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Marketing Plans of McDonald’s • Building maintenance
Mcdonalds in Mumbai
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Marketing Plans of McDonald’s
Process:
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Marketing Plans of McDonald’s The food manufacturing process at Mc Donalds is completely transparent i.e. the whole process is visible to the customers. In fact, the fast food joint allows its customers to view and judge the hygienic standards at Mc Donalds by allowing them to enter the area where the process takes place. The customers are invited to check the ingredients used in food.
• Food manufacturing Transparent • Training to the licensees
to customers
• Invented the most efficient cooking equipment • New methods of food packaging and distribution • McDonald’s In India followed the same tradition
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
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Marketing Plans of McDonald’s 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 employees in Mc Donald’s have a standard uniform and Mc Donald’s specially focuses on friendly and prompt service to its customers from their employees. Each outlet is headed by a Restaurant Manager. He is responsible for the daily operation and customer interaction. • Delivery Crew Member carries basic operation of a restaurant. Ensures customer satisfaction at the restaurants. In order to motivate there employees they give them stars as per their performance. • Stars as per their performance • Gives employees larger role in decisions • Philosophy of Quality, Service, Cleanliness and Value (QSC&V) is the guiding force behind its service • Customer always comes first • Fast friendly service • Provides clean, comfortable environment especially suited for families
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Marketing Plans of McDonald’s
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 Pakistan 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
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Marketing Plans of 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. “Moments Of Truth” – The Service Encounter
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
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Marketing Plans of McDonald’s 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 fastfood 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
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Marketing Plans of McDonald’s 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.
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McDonald’s
Name: Age Group: a) Below 18 b)18-28 b) Business Gender: M / F c)28-40 d)Above 40 c) Service d) Housewife e) Any other
Occupation: a) Student
Feedback Form by McDonald’s outlets
Was your food hot and fresh? Were the staffs friendly and courteous? Was the service quick and efficient? Did you find the restaurant clean? Were the rest rooms clean? Did we make you smile today?
? ? ? ? ? ?
? ? ? ? ? ?
CONCLUSIONS:
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Marketing Plans of McDonald’s McDonald's views the relationship between franchisor, franchisee and supplier to be of paramount importance to the success of the business. Ray Kroc recognised the need very early on for franchisees that would dedicate themselves to their restaurants. He wanted people who had to give up another job to take on the franchise venture, relying on their franchise as their sole source of income and would therefore be highly motivated and dedicated. Consequently, McDonald's will not offer franchises to partnerships, consortia or absentee investors. The initial capital has to come from the franchisee as a guarantee of their commitment. The selection process is rigorous to ensure that McDonald's only recruits the right people.
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References
1. “Marketing Management”. 2. “McDonalds – Behind the Arches” – John S Love. 3. www.Mcdonaldsindia.com. 4. McDonald’s Kandivali and Andheri. 5. Google. 6. Employee of Hard Castle Restaurants Pvt Ltd (purchase department)
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