McDonald’s is the world’s leading hamburger fast-food chain with more than 34,000 restaurants in 119 countries. More than 80 percent of McDonald’s restaurants are owned and operated by franchisees, which decreases the risk associated with expansion and ensures long-term tenants for the company. McDonald’s serves 70 million people each day and promises an easy and enjoyable food experience for its customers.
McDonald’s Corporation dates back to 1955 when Ray Kroc, a multi-mixer salesman, franchised a hamburger restaurant from the McDonald brothers. Kroc named it McDonald’s and offered simple foods such as the famous 15-cent hamburger. He helped design the building, which featured red and white sides and a single golden arch that attracted local attention. Just 10 years later, McDonald’s had expanded to more than 700 U.S. restaurants, and the brand was on its way to becoming a household name.
During the 1960s and 1970s, Kroc led McDonald’s growth domestically and internationally but always reinforced the importance of quality, service, cleanliness, and value. The menu expanded to include iconic items such the Big Mac, the Quarter Pounder, the Happy Meal, Filet-O-Fish, and breakfast items like the Egg McMuffin. The company ramped up its advertising as well. To target its core audience—children and families—it introduced Ronald McDonald during a 60-second commercial in 1965. Soon, characters like Grimace, the Hamburgler, and Mayor McCheese made their debut in McDonald’s advertising and helped lure children into its restaurants for familiar food and a fun experience.
In 1974, McDonald’s opened the Ronald McDonald House, a charitable cause to help children with leukemia. Since then, it has expanded into a global effort called Ronald McDonald House Charities that consists of three major programs: Ronald McDonald House, Ronald McDonald Family Room, and Ronald McDonald Care Mobile.
McDonald’s aggressively expanded overseas during the 1980s by adding locations throughout Europe, Asia, the Philippines, and Malaysia. However, this rapid growth led to many struggles during the 1990s and early 2000s. The company lost focus and direction as it added as many as 2,000 new restaurants a year. New employees weren’t trained fast enough or well enough, which led to poor customer service and dirtier restaurants. In addition, new healthier-option competitors popped up such as Subway and Panera Bread.
Consumers’ tastes and eating trends also started to change in the early 2000s, and McDonald’s new food offerings failed on many fronts. Product launches like pizza, the Arch Deluxe, fajitas, and deli sandwiches did not connect with consumers, nor did tweaks to the current menu like multiple changes to the Big Mac special sauce. Jim Skinner, McDonald’s former chief executive, explained, “We got distracted from the most important thing: hot, high-quality food at a great value at the speed and convenience of McDonald’s.”
In 2003, McDonald’s implemented a strategic effort called the Plan to Win. Still in effect, the plan helped McDonald’s restaurants refocus on offering a better, higher-quality consumer experience rather than a quick and cheap fast-food option. Its “playbook” provided strategic insight on how to improve on the company’s 5 Ps—people, products, promotions, price, and place—yet allow local restaurants to adapt to different environments and cultures. For example, McDonald’s introduced a Bacon Roll breakfast sandwich in the United Kingdom, a premium M burger in France, and an egg, tomato, and pepper McPuff in China. Prices also varied slightly across the United States to better reflect different regional tastes.
Some changes that initially helped turn the company around included offering more chicken options as beef consumption started to decline, selling milk in a bottle instead of a carton, and removing “Super Size” options after the documentary “Super Size Me” targeted McDonald’s and its link to obesity. The company responded to customers’ desire for healthy foods with premium salads and apple slices instead of French fries in its Happy Meals. It also dismissed claims of “mystery meat” by introducing all-white-meat McNuggets.
Many of these healthier options targeted moms and charged a premium price. Meanwhile, McDonald’s targeted teenagers and its lower-income consumers with the introduction of the $1 menu. The company improved its drive-thru service, added more snack options, and refurbished restaurants with leather seats, warm paint colors, Wi-Fi, and flat-screen TVs. In many locations it created three different “zones” that fit the needs of each target audience: a linger zone with comfortable sofas where teenagers could hang out and socialize, a family zone with tables and chairs that could easily be reconfigured, and an efficient zone for consumers who needed to grab a quick bite and go.
Initial results were staggering; from 2003 to 2006, revenues increased 33 percent and share price soared 170 percent. In 2008, McDonald’s was one of only two companies in the Dow Jones industrial average whose share price rose during the worldwide recession. Sales continued to increase, and in 2012, McDonald’s experienced record revenues of $27 billion.
Today, McDonald’s increases its consumer base through global growth and product expansion. For example, the successful introduction of McCafe directly targeted consumers in the booming coffee industry and stole share from companies like Starbucks, Dunkin’ Donuts, and Caribou Coffee. It is a good example of how McDonald’s works to appeal to new consumers and aims to stay relevant through the years. Its current campaign, “I’m Lovin’ It,” seems to connect with McDonald’s large consumer base and keep them coming back again and again.
Source: Kotler Philip T., Keller Kevin Lane (2015), Marketing Management, Pearson; 15th Edition.