HAUTE ECOLE ICHEC- ISC SAINT LOUIS- ISFSC
CATEGORIE ECONOMIQUE
HORAIRE DECALE
DEUXIEME ANNEE DU BACCALAUREAT
COURS DE MARKETING MANAGEMENT : TRAVAUX PRATIQUES
McDonald's
Pallarés García, Juan
Ferrer Villacampa, Clara
SPANISH ERASMUS STUDENTS
ANNEE ACADEMIQUE 2010-2011
Contents Index:
) Introduction:
.1) Business model
.2) Suppliers
.3) History
.3.1) Advertising themes
.3.2) General advertising
.4) Customers perception and expectation
.4.1) Meeting the needs of the key
Audience
2) SWOT Analysis:
2.1) Strengths
2.2) Weaknesses
2.3) Threats
2.4) Opportunities
3) Competitive advantages
4) Market research and Marketing mix
5) 4 P'S Marketing mix + People
5.1) Product
5.2) Price
5.3) Place
5.4) Promotion
5.5) People
6) Identification of marketing strategies
7) Conclusion and recommendations
8) Bibliography references
) Introduction:
McDonalds is one of the best known brands worldwide. This project shows how McDonald's continually works to build its brand by listening to its customers and it also determines the various stages of its marketing process.
Branding creates a personality for an organization, product or service. It represents how consumers regard the organization and it only works when an organization behaves and presents itself in a consistent or unchanging way. Marketing communication methods, such as advertising and promotions, are used to develop the colours, designs and images which provide the brand its recognizable face. At McDonald's this is represented by its familiar logo: the Golden Arches. In all its markets, McDonald's faces competition from other businesses. Additionally, economic, legal and technological changes, social factors, the retail environment and many other elements affect McDonald's success in the market.
Marketing involves identifying customer needs and requirements and meeting them in a better way than competitors. In this way a company creates loyal customers.
The starting point is to find out who the potential customers are because not everyone will want what McDonald's has to offer. The people McDonald's identifies as likely customers are known as key audiences, which will be analyzed later.
.1) Business Model:
It is a Franchise Model where only 15% of the total number of restaurants is owned by the Company itself and where the remaining 85% is operated by franchisees.
The company sticks to a comprehensive framework of training and monitoring of its franchises to ensure that they adhere to the Quality, Service, Cleanliness and Value propositions rendered by the company to its customers.
The product consistency effect is happening at McDonalds because with the development of a sophisticated supplier networked operation and distribution system, the company has been able to achieve consistent product taste and quality across geographies.
The great success of the company is mainly due to its managers attitudes which are basically acting like a retailer and think like a global brand. With this manager's mentality, McDonald's focuses not only on delivering sales for the immediate present, but also protecting its long term brand reputation.
.2) Suppliers:
McDonald's suppliers play a pivotal role in the global success, providing quality products at competitive prices. This philosophy, established by the founder, Ray Kroc, is often described as a ``three-legged stool´´. One of the legs is McDonald's, a second leg is their franchisee partners and the third leg is their supplier partners. The stool is only as strong as its three legs.
McDonald's has changed the nature of not only the food service industry but also the food processing industry as well. McDonald's realized that the battle between fast food chains would increasingly be one of efficiency of supply, lower cost production and greater desire to innovate. It pioneered with innovative and sophisticated food distribution and packaging systems when the traditional food processors were unwilling or unable to supply food items that McDonald's demanded. They achieved amazing consistency by devoting more attention than anyone else to field service and training at store level. Production was concentrated in huge plants devoted exclusively to McDonald's. McDonald's also started with tiny suppliers and grew with them displaying great loyalty.
Nowhere is the supplier loyalty more evident than in development of new, improved products. Some of McDonald's classic food items like Filet-o-Fish, French Fries, Chicken Nuggets etc. are results of supplier innovation. 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 labor out of the stores by moving more preparation back into the processing plant, creating the opportunity to develop unique products based on suppliers' processing skills. For the first time, McDonald's suppliers became the focal point of new product development. This converted the fast- food industry's most fragmented distributed system into more efficient one which helped McDonald's reduce its inventory and manage costs effectively.
In the case of McDonald's in Canada, they work closely with more than 100 Canadian leading suppliers, striving to source products and supplies locally. Together, suppliers and the Company, along with franchisees, create new products, help reduce costs and ensure our customers receive the same great taste of McDonald's in every community across Canada.
In essence, we shop where our customers shop - our shopping basket is just a bit bigger! McDonald's buys and serves the same wholesome foods our customers use at home, supplied by brand name companies Canadians know and trust.
McDonald's suppliers include leading Canadian companies such as Coca-Cola, Danone, Heinz, McCain, Minute Maid, Mother Parkers, Nestle, Newman's Own, Quaker and Saputo.
.3) History:
Ray Kroc, at 52 years old, invested his entire life savings to become the exclusive distributor of a milk shake maker called the Multimixer. Hearing about the McDonald's hamburger stand in California owned by Dick & Mac McDonald running eight Multimixers at a time, he packed up his car and headed west. It was 1954. Ray Kroc had never seen so many people served so quickly. He pitched the idea of opening up several restaurants to the McDonald brothers, convinced that he could sell eight of his Multimixers to each and every one. "Who could we get to open them for us?" Dick McDonald said. Well," Kroc answered, "what about me?"
Ray Kroc opened the Des Plaines, Illinois restaurant in 1955 and never looked back. In 1965 McDonald's went public with the company's first offering on the stock exchange. In 1967, the first McDonald's restaurant outside the United States opened in Richmond, British Columbia. In 1968, the Big Mac(r) sandwich was introduced, followed by the Egg McMuffin breakfast sandwich in 1973. Milestones and accomplishments have followed ever since.
Today, there are tens of thousands of McDonald's restaurants serving millions of people daily around the world. The incredible growth and success of McDonald's can be summed up with the first thought that went through Ray Kroc's mind when he first saw McDonald's: "This will go anyplace."
.3.1) A history of McDonald's advertising themes:
Over the years, McDonald's has developed TV advertising campaigns that have become, like McDonald's, a part of our lives and culture. McDonald's commercials have focused not only on product, but rather on the overall McDonald's experience, portraying warmth and a real slice of everyday life. This "image" or "reputation" advertising has become a trademark of the company and created many memorable television moments and themes, including:
McDonald's is Your Kind of Place (1967), You Deserve a Break Today (1971), We Do it All for You (1975), You, You're The One (1976), Nobody Can Do It Like McDonald's Can (1979), Nobody Makes Your Day Like McDonald's Can (1981), McDonald's and You (1983), It's a Good Time for the Great Taste of McDonald's (1984), Good Time, Great Taste, That's Why This is My Place (1988), Food, Folks and Fun (1990), McDonald's Today(1991), What You Want is What You Get (1992), Have you Had your Break Today? (1995), My McDonald's (1997), Did Somebody Say McDonald's (1997), We Love to See You Smile (2000), There's a little McDonald's in Everyone (2001) - Canada Only, I'm lovin' it (2003).
.3.2) McDonald's Advertising
McDonald's original advertising symbol was a winking little fellow named "Speedee", designed to promote McDonald's fast service.
In the 50s and early 60s, McDonald's drive-in restaurants were easily identified by their red and white tile buildings, which were capped with a slanted roof and framed on either end by a single golden, neon arch. Restaurants began to use the advertising theme, "Look for the Golden Arches" and in 1961, the "Speedee" symbol was replaced by a new logo - an "M" slashed with a line, symbolizing the neon arches and restaurant roofline. The arches, updated over the years, remain the advertising symbol for the company and are now one of the most recognized icons in the world.
At first, local franchisees focused all of their energies on marketing within their own communities, primarily in print advertising. With the evolution of television and the rapid growth of McDonald's across the United States and into Canada in the late 1960s, it quickly became apparent that local advertising would not be enough to promote the system's growth as a North American chain with a single brand identity.
In 1967, the franchisees created a special fund whereby a percentage of restaurant sales would go towards national advertising initiatives. By pooling resources, McDonald's gained access to the venue of television advertising.
From promoting new Happy Meals toys to rolling out new menu items, their marketing and advertising efforts are a fun way to connect us with McDonald's.
By combining fundamentally sound operational practices with innovative marketing strategies, Ray Kroc laid the foundation for McDonald's global success.
Today, McDonald's values transcend borders and cultures. Each and every day, 47 million consumers worldwide visit McDonald's because they know and love the Golden Arches, Ronald McDonald and Big Mac sandwiches. From one restaurant in 1955, to more than 31,000 locations in 119 countries, McDonald's has become not only the leading global foodservice company, but also one of the strongest and most recognized brand names in the world.
.4) Customer's perception and expectation:
There are a limited number of customers in the market. To build long-term business, it is essential to retain people once they have ...
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Today, McDonald's values transcend borders and cultures. Each and every day, 47 million consumers worldwide visit McDonald's because they know and love the Golden Arches, Ronald McDonald and Big Mac sandwiches. From one restaurant in 1955, to more than 31,000 locations in 119 countries, McDonald's has become not only the leading global foodservice company, but also one of the strongest and most recognized brand names in the world.
.4) Customer's perception and expectation:
There are a limited number of customers in the market. To build long-term business, it is essential to retain people once they have become customers.
Customers are not all the same. Market research identifies different types of customers. For example: A parent with two children Visits McDonald's to give the children a treat. Children want to visit McDonald's as it is a fun place to eat. A business customer Visits McDonald's during the day as service is quick, the food tastes great and can be eaten in the car without affecting a busy work schedule. Teenagers are attracted by the Saver Menu which is affordable and the internet access available in the restaurants because they care about hanging out with friends.
These examples represent just a few of McDonald's possible customer profiles. Each has different reasons for coming to McDonald's. Using this type of information McDonald's can tailor communication to the needs of specific groups. It is their needs that determine the type of products and services offered, prices charged, promotions created and where restaurants are located.
Customer perception is a key factor affecting a product's success. Many potentially revolutionary products have failed simply because of their inability to build a healthy perception about themselves in the customers' minds. McDonalds being an internationally renowned brand brings with it certain expectations for the customers.
In general, customers expect it to be an ambient, hygienic and a little sophisticated brand that respects their values. The customer's expect the brand to enhance their self-image. Customer responses obtained at the Vile Parle, Mumbai outlet confirmed the fact that they connect strongly with the brand.
Furthermore, fulfilling some of the customer expectations like a broader product variety provide McDonald's a great scope for improvement. And this is exactly what they are working on at the moment because nowadays McDonald's menu is more than just delicious burgers and outstanding fries. From Snack Wraps to McCafé to Premium Salads, they proudly offer variety, quality and fun-filled value in all of their restaurants. This continuous innovation carried out by McDonald's is perceived and valued by its clients in the form of a huge product variety.
.4.1) Meeting the needs of key audiences:
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 new menu in India is an example of McDonald's strategy of integrating the customer's perspective in its products. Another example in which McDonalds has worked to meet a new group of target consumers is the fact that in some countries, vegetarians can choose their meal from a full variety vegetarian menu.
2) SWOT Analysis:
In order to create a successfully marketing strategy we need to know the needs of the market. To achieve it, we need to identify and analyze the strengths and weaknesses of the organization.
The analysis will examine the following parts of the company's business:
•The company's products and how appropriate they are for the future.
•The quality of employees and how well trained they are to offer the best service to customers.
•The systems and how well they function in providing customer satisfaction e.g. marketing databases and restaurant systems
•The financial resources available for marketing.
The SWOT analysis does not only examine the strengths and weaknesses. Once we have identified them, they are combined with the opportunities and threats in the market place. That is what we call SWOT analysis - strengths, weaknesses, opportunities, threats.
We have to point out that McDonalds is one of the largest food chain companies in the world. We are going to start with the strengths and the positive aspects which define the performance of this company.
2.1) STRENGTHS:
We have to say that Strength is a distinctive competence that gives the firm a comparative advantage in the market place. There is much strength we can mention about McDonalds:
-McDonalds is situated in a very high position on the Fortune Magazine's food service companies, so we can say that is one of the most admired in the list. Moreover, it is one of the best brands recognized in the world with one of the most recognized logo. Their advertisement campaigns were highly successful in establishing the brand image and logo in the minds of people. By that customers know what to expect when they walk into a McDonalds store.
-McDonald's is the first Quick service and fast food restaurant that got approved by FDA for its very low calorie and fat hamburger that was introduced in different calorie combinations.
-McDonalds always thinks about cultural diversity when offering their products so it adapts to the cultural differences regarding the region where the restaurant is set up.
-A large part of the restaurants are franchised out.
-McDonalds has excellent locations usually in theme parks, airports, and along most well traveled roads, cities, highways, tourist locations.
-McDonalds always use top quality products, they adjust the ingredients and products according to health standards:
* They use brand name processed items like Kraft cheese, DANONE Yogurt, and Dasani Water.
* Food safety guidelines are strictly adhered to.
* They provide nutritional information to the consumers
-It has a strong global presence all over the world and is considered as a market leader.
-It is a global organization that owns 31,000 restaurants serving in 120 countries. Of these 31,000 restaurants at least14, 000 restaurants are situated in the US.
-It uses economies of scale to reduce the costs, as its huge expansion diversifies the overall risk involved with the economic performance.
-McDonalds own an active children's charity called 'The Ronald McDonald House'.
-It earns revenue by fast food sales as well as a property investor and a franchiser of restaurants.
-It has a firm real estate portfolio.
-McDonalds has branded their menu items (Big Mac, Chicken McNuggets)in order promote McDonalds.
-It is recognized as a socially responsible and community oriented firm.
-It has an efficient food preparation style that follows the process in a systematic way. They try to work as quickly as they can; customers care and cleanliness are the core strengths on which these stores are concentrating on.
-McDonald's was the first organization that provides the customers about nutrition facts.
-McDonalds marketing strategy is concerned with the internal resources, external environment and its basic competencies along with its share holders.
-It gives great emphasis to human resources by satisfying both the customer and the employees.
-The innovation aspect is really important for this organization. With their new line of products they try influence tastes of the people.
-We have to point out the caring attitude of the company towards its employees. It is also shown by the fact that around its 67,000 managers were initially hired as restaurant staff. For this reason, the McDonald's was listed in the Fortune Magazine 2005 as the "Best Place to Work for Minorities. McDonalds invests over $1 billion every year in training its staff, and every year over 250,000 employees graduate from McDonald's training facility, Hamburger University.
2.2) WEAKNESSES:
- McDonald's position sometimes can be questioned.
-Nowadays people prefer eating in restaurants healthy food. We do not eat fast food as frequently as we used to do. Hamburgers and fries are slowly getting out of line and being avoided by the people because of the awareness of healthier living and eating habits for children and adults. Customer trends change as they change their choices. People usually are tired of the same brands that they had been using over the years, so when they do not see the expected innovation they migrate to new brands.
-The secret of any marketing strategy is to reach the target audience. And in this aspect we have to point out that the target audience should be chosen carefully. McDonald's uses advertising that mostly targets children.
-High employee turn-over.
-It has yet to accomplish going on the trend of organic food.
-Price competition with the competitors resulting in low revenue.
-We can say that their products are always the same so the lack of innovative products can be a problem in the future. The company is focused on obtaining profits and revenues from its burgers and hot food items but nowadays the trend is more towards organic foods.
-Quality management is getting difficult for the company as the network is huge and the quality cannot be checked across its franchise network.
-McDonald's conducted a test service for pizza to enter a potential market but it was not as good compared to other known pizza chains.
-The company invests a lot in the training of its staff and employees but due to high turnover the investment does not pay off.
2.3) THREATS:
-Nowadays competitive pressures are a threat for the company as new entrants offer greater product ranges, value and healthier food products.
-It is possible that new products appear on the market. The ,major organizations that are considered a threat for McDonald's are include Burger King, Taco Bell, Starbucks, KFC, Wendy's, Sonic Drive, Pizza hut and local small and fast food restaurants.
-The recession negatively impacts the holding position of the firm regarding its revenue streams, even though they are quite diversified.
-Foreign currency fluctuations are regarded to be a major problem as it uses standard pricing for its food item.
-The current Recession in economy is another threat that may affect sales of the retailers.
2.4) OPPORTUNITIES:
-McDonald's, as a big company, has the opportunity of acquiring new technology, human resources qualified and also has the opportunity to open new branches.
-It can adapt to the needs of the societies and undergo an innovative product line.
-It can research ways to use 'green' energy and packaging which will work as a part of their promotional effort as well as fulfill their social responsibility.
-It can create new product offerings, use mobile text messaging to offer services that appeal to consumers.
-It can upscale some of its restaurant settings at luxurious locations to attract more customers.
-It can provide optional items that are regarded to be the basis of allergy for some.
-It can slow down the level of expansion in order to increase the profitability of the organization.
-Opening more joint ventures with several different retailers.
-Being more responsive to the social changes to healthier options.
-Advertising the capabilities of Wi-Fi internet services in the branches.
-Creating more play places for the children in more of the restaurants.
-Expanding on the advertising in regards to being more socially responsible in the environment.
-Expansions of business into newly developed parts of the world.
-Creating a more upscale appearance to attract a more upscale clientele.
-Open products up to allergen free options such as peanut free and gluten free foods.
3) Competitive Advantages:
Now we are going to analyze the competitive advantage of McDonald's. First of all, we have to know what is a competitive advantage and how can it be related to McDonald's.
A competitive advantage is the advantage that a company has, which is very difficult or impossible for other companies to possess or break through. It can either be the brand, dynamic customer care, cost structure or its patent. The advantage in order to be considered as sustainable it should either be proprietary or distinctive.
Three different aspects that help in Competitive Advantage are:
-The managerial and organizational process should share a good integration and coordination. The organization should learn about changes according to their needs and should always be flexible to changes in the environment such as customer trends, legal or government restriction and developments in the technology. McDonalds is concentrating on this advantage by concentrating on organizational behavior and managerial expertise. Although this advantage was ignored some years ago, as the organization was more into expansion over the world, is being taken into account. As a result, the revenue did not see much of a change while newer outlets were open but the company suffered a massive loss of time from their inceptions which further lead to the change in the managerial heads.
-Technological, structural and financial assets of a company are excellent market position which helps in the Competitive Advantage. In this aspect, we have to point out that McDonalds do not have problems with structure, technology and finance, so it has helped it to increase their benefits and to improve the general level of the company. After 2003 the company has really started to concentrate on its greatest advantages.
-Most of all the greatest advantage is the vision or the dream with which the company was started. Maintaining this dream over the years is a really important advantage at any company. Usually the brand is really important to achieve this dream and it is also a great competitive advantage. As for McDonalds, it was created with the idea of helping people who had very little time to cook or was too busy to get into a proper restaurant. The objective was to provide quick service, cheap products and quality satisfaction.
To sum it all up Competitive Advantage means implementing the best strategies of the company by using all the advantages which make a company unique and that cannot be copied by other competitors.
McDonalds is an example of a company with competitive advantage. In the fast food business, McDonalds it is well known all over the world due to its brand.. It is a successful company because they have great advertising and they are consistent. They are innovators in their industry by creating revolutionary ideas such as the $1 menu and introducing healthier lines of food such as salads and wraps to appeal to the changing tastes of consumers. They recently came out with a new premium coffee line that is taking business from Starbucks because it is much cheaper. It is a powerful company that consumers have come to know and trust and they have the power to change as tastes change. This keeps their competitive advantage alive.
Another of the competitive advantages that are used by McDonalds is outsourcing. Today everything is outsourced (employee appointment, finance and customer care) because concentrating on every detail is not possible with a big concern especially like McDonalds. But it is important not to outsource core competencies. There are many advantages by outsourcing because it is a cheap service, it makes possible the knowledge of markets, speedy operations, expansion in supplier relationship and helps to solve problems due to the lack of technologies.
4) The marketing mix and market research:
Having identified its key audiences, a company has to ensure a marketing mix which appeals specifically to those people. The marketing mix is a term used to describe the four main marketing tools - the 4Ps.
By analyzing detailed information about their customers, as derived from ongoing market research, the McDonald's Marketing department can ascertain information key to determining the correct marketing mix, such as: which products are well received, what prices consumers are willing to pay, which restaurants are visited, but also what TV programs, newspapers and advertising consumers read and view
Accurate research is essential in creating the right marketing mix which will help to win customer loyalty and increase sales. As the economy and social attitudes change, so do buying patterns. McDonalds needs to identify whether the number of target customers is growing or shrinking and whether their buying habits will change in the future.
As every market research provides information about the market place in which the company is producing for; it should therefore seek for facts according their competitors offerings and in compliance with the changing environment.
This is closely related to the PESTEL analysis of the macro-environment and in this case, McDonalds managers must pay attention to political changes as political decisions can impact on many vital areas for business such as the education of the workforce, the health of the nation and the quality of the infrastructure of the economy such as the road and rail system. In addition, it is crucial to analyze economic changes (e.g. rising living standards), technological changes (e.g. new food production techniques), legal changes (e.g. changes in laws about packaging), social changes (e.g. changes in patterns of eating out) and finally environmental factors which include the weather and climate change. Changes in temperature can impact on many industries including farming, tourism and insurance. With major climate changes occurring due to global warming and with greater environmental awareness, this external factor is becoming a significant issue to be considered by McDonald's and therefore they are following the general move towards more environmentally friendly products and processes by affecting demand patterns and creating business opportunities.
Market research considers everything that affects buying decisions. These buying decisions can often be affected by factors wider than just the product itself. Psychological factors are important, e.g. the image a particular product conveys or how the consumer feels when purchasing it. These psychological factors are of significant importance to the customer. They can be even more important than the products' physical benefits. Through marketing, McDonald's establishes a prominent position in the minds of customers. This is known as branding.
In conclusion, market research gives accurate information about the requirements of the target group, making it possible to create a well thought out marketing mix that satisfies customers.
5) The Marketing-Mix - 4 P'S + People:
A marketing strategy must be created in order to determine the means by which a set of clear objectives may be met.
Objectives communicate what marketers want to achieve, guide marketing actions and are used to measure how well a plan is working. They can be related to market share, sales, reaching the target audience and creating awareness in the marketplace.
Long-term objectives are broken down into shorter-term measurable targets, which McDonald's uses as milestones along the way.
Results can be analyzed regularly to see whether objectives are being met. This type of feedback allows the company to change plans and allows flexibility.
Once marketing objectives have been established, the next stage is to define how they will be achieved. The marketing strategy is the statement of how objectives will be delivered.
It explains what marketing actions and resources will be used and how they will work together.
5.1) PRODUCT: How should the company design, manufacture the product so that it enhances customer's experience?
The product is the physical product or service offered to the consumer. Product includes certain aspects such as packaging, guarantee, looks etc. This includes both the tangible and the non- tangible aspects of the product and service.
The important thing to remember when offering menu items to potential customers is that there is a huge amount of choice available to those potential customers with regard to how and where they spend their money.
Therefore McDonald's places considerable emphasis on developing a menu which customers want. Market research establishes exactly what this is.
However, customers' requirements change over time. What is fashionable and attractive today may be discarded tomorrow. Marketing continuously monitors customers' preferences.
In order to meet these changes, McDonald's has introduced new products and phased out old ones over time, and will continue to do so.
Care is taken not to adversely affect the sales of an existing option by introducing a new option which will cannibalize its sales (trade off).
McDonald's knows that sales of products on its menu will vary at different points in their life cycle as is illustrated on the graph.
The type of marketing undertaken and the resources invested will be different depending on the stage a product has reached. For example, the launch of a new product will typically involve television and other advertising support.
At any time a company will have a portfolio of products, each in a different stage of its cycle. Some of McDonald's options are growing in popularity while arguably the Big Mac is at the maturity stage.
McDonalds has intentionally kept its product depth and product width limited. It studied the behaviour of the Indian customer and provided a totally different menu as compared to its International offering. It dropped ham, beef and mutton burgers from the menu. India is the only country where McDonalds serve vegetarian menu. Even the sauces and cheese used in India are 100% vegetarian. McDonalds continuously innovates its products according to the changing preferences and tastes of its customers. The recent example is the introduction of the Chicken Maharaja Mac, with which McDonalds brings with it a globally reputed brand, a world class food quality and an excellent customer specific product features.
5.2) PRICE: What should the pricing strategy be?
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.
The customer's perception of value is an important determinant of the price charged. Customers draw their own mental picture of what a product is worth. A product is
more than a physical item; it also has psychological connotations for the customer.
The danger of using low price as a marketing tool is that the customer may feel that a low price is indicative of compromised quality. It is important when deciding on the price to be fully aware of the brand and its integrity. A further potentially adverse consequence of price reduction is that competitors match the lower prices resulting in no extra demand. This means the profit margin has been reduced without increasing the sales.
McDonalds has certain value pricing and bundling strategies such as happy meal, combo meal, family meal etc to increase overall sales volumes.
5.3) PLACE: Where should be the product be available and the role of distribution channels?
Place in the marketing mix, is not just about the physical location or distribution points for products. It encompasses the management of a range of processes involved in bringing products to the end consumer.
It mainly consists of the distribution channels. It is important so that the product is available to the customer at the right place, at the right time and in the right quantity. Nearly 50% of U.S.A is within a 3 minute drive from a McDonald's outlet.
There is a certain degree of fun and happiness that a customer feels each time he dines at McDonalds. There are certain value propositions that McDonalds offer to its customers based on their needs. McDonalds offers hygienic environment, good ambience and great service.
Another thing to love about McDonalds is that nowadays customers can even enjoy at 11500 restaurants the free Wi-Fi access connection. This provides them with a complementary service by allowing them to have a relaxing coffee with milk while they check their email, get some work done connect with their friends etc. This last point about the Wi-Fi connection is important as clients have found another kind of way to visit McDonald's restaurants as it is not just eating quickly a hamburger and leaving the place immediately.
At McDonalds, instead of listening to a normal CD music, they have been playing lately music through the radio. The fact that McDonalds puts the music at their restaurants through the most popular radios has a clear purpose which is to offer their clients with the latest hit songs of the moment so that the majority of them can recognize the music and get involved with it, causing an increase of happiness as they feel they are at home and therefore feel more comfortable at the moment of ordering the food and eating it. There are also certain dedicated areas for children where they can play while their parents can have some quality time together. Additionally, with the PlayPlaces & Parties service, parents only worry about taking their children to the McDonald's restaurant because they do the rest: HappyMeals, cake, decorations, party favors etc.
So, McDonald's restaurants are always a great place to celebrate the children's birthdays as it is super-fun for the kids and stress-free for the parents.
Furthermore, McDonald's restaurants provide customers the possibility of getting their food without going out of the car through their ``McDrive´´ service.
5.4) PROMOTION: What is the suitable strategy and channels for promoting the products?
The promotions aspect of the marketing mix covers all types of marketing communications. The methods include advertising, sometimes known as 'above the line' activity. Advertising is conducted on TV, radio, cinema, online, poster sites and in the press (newspapers, magazines).
What distinguishes advertising from other marketing communications is that media owners are paid before the advertiser can take space in the medium. Other promotional methods include sales promotions, point of sale display, merchandising, direct mail, telemarketing, exhibitions, seminars, loyalty schemes, door drops, demonstrations, etc.
The skill in marketing communications is to develop a campaign which uses several of these methods in a way that provides the most effective results. For example, TV advertising makes people aware of a food item and press advertising provides more detail.
This may be supported by in store promotions to get people to try the product and a collectable promotional device to encourage them to keep buying the item. It is imperative that the messages communicated support each other and do not confuse customers. A thorough understanding of what the brand represents is the key to a consistent message.
The purpose of most marketing communications is to move the target audience to some type of action. This may be to: buy the product, visit a restaurant, recommend the choice to a friend or increase purchase of the menu item.
Key objectives of advertising are to make people aware of an item, feel positive about it and remember it. The more McDonald's knows about the people, the more it is able to communicate messages which appeal to them.
Messages should gain customers' attention and keep their interest. The next stage is to get them to want what is offered. Showing the benefits which they will obtain by taking action, is usually sufficient. The right messages must be targeted at the right audience, using the right media.
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 which are to make people aware of an item, to feel positive about it and to 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 also use print ads and the television programs are also an important marketing medium for promotion.
For example, to reach a single professional woman with income above a certain level, it may be better to take an advertisement in Cosmopolitan than Woman's Own. To advertise to mothers with children, it may be more effective to take advertising space in cinemas during Disney films. The right media depends on who the viewers, readers or listeners are and how closely they resemble the target audience.
The following pictures include some of McDonald's promotional adverts and even the current new Angus hamburger launched just a few weeks ago:
In addition, another promotional campaign done by McDonalds is the McDonalds Junior Club. It provides more than 1million kids with lots of action and funny activities, exciting games, latest news about the Happy Meal, a coupon for their birthdays etc. And all for free!
5.5) PEOPLE: How to converge the benefits of internal and external Marketing?
McDonald's clearly understands the huge value of both its employees and its customers. They continuously does Internal Marketing which is important as it must precede external marketing. This includes hiring, training and motivating their employees. They obviously realize the fact that a happy employee can 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):
. Customers
2. Front line employees
3. Middle level managers.
4. Front line managers
The punch line "I'm lovin it" is an attempt to show that the employees are loving their work at McDonalds and will love to serve the customers. Even presidents and CEOs of major corporations had to get their start somewhere. And for many of them, that start was a job at McDonald's. They are proud of the many people who chose to stay with them over their careers, building long-term success for their future careers and their family's wealth.
Regarding the benefits that they offer, they strive to hire and keep the brightest and the best. And to do that, they have put together perks designed to make them smile - even before they pick up their paycheck. From flexible schedules and competitive wages to management training and investment opportunities, their benefits let them know that they are a valued part of their huge team.
Workers do not have to achieve upper-level management status to reap the rewards. When they are a part of their restaurant crew, they will enjoy a competitive wage, a schedule that fits their needs, a team that's there to support them in every way, and a workplace that's close to wherever you need to be. It's a great way to earn extra income for anyone, from students to moms and dads. The main advantages that they offer their employees are: competitive wages, free or discounted meals, flexible hours, medical insurance, 24-hour nurse line access, vision discount, dental service, short-term disability, term life insurance, paid holidays, vacations and educational assistance.
6) Identification of marketing strategies:
McDonalds, as a business follows different strategies. We can differentiate the following ones:
-Strategy for the global domination:
McDonalds in its annual report says that the objective of the organization is to dominate the global industry of the service of food. This means that the company try to satisfy customer's needs, at the same time it increases the quote of benefits.
-Competitive strategy:
McDonalds try to put in practice the same strategy all over the world. This strategy consists of being the first one in the market and to make popular its brand as quick as possible by an intense campaign of advertising.
-To be total leadership in differentiation:
Through this strategy the company tries to differentiate its products and services, creating important characteristics perceived as unique for the customers.
Thanks to these strategies McDonalds has obtained important benefits and has reduced operative costs.
-Integration's strategy:
McDonalds follows two different ways of integration, which are:
. Integration forward, since the company exercises control on its franchises all over the world
2. Integration backward as it integrates the chains of value with that of its suppliers, coordinating its activities to obtain some benefit.
-Intensive strategies:
. Market penetration: since strategies develop to increase the sales.
2. Development of new products
-Strategies to grow:
· Execution: Its plans are based on the total satisfaction of its consumer needs trying to offer a better quality, a good service, and top quality products. These are the reasons of McDonald's growth
· Expansion: The company expands its products, it offers what consumers wishes and reject what consumers displease.
· Extension: In the long term, it aims that the business continues growing. that is why companies constantly looks for innovation and development of new business.
-Strategy of unique brand:
All its products are marked with the same initials (Mc). This favors that the consumers associate the quality image of the brand with the product. We have to take into account that the brand McDonald's supposes for the consumers of its products, a guarantee of quality and good service. These characteristics are always taken into account by consumers.
As for the brand, we have to say that the latest surveys about the image and the perception of the brand placed the company among the first 10 companies of the total market.
To sum up all the strategies followed by McDonalds, we have to point out that the organization has been able to position the brand around the world by a strong and intensive campaign of marketing and has achieve the top position of fast food. Moreover, it has suffered a diversification of its products and have developed new ones according to the preferences of clients, to satisfy the client. It has reduced operative costs and it has standardized and timed procedures.
7) Conclusion and Recommendations:
The marketing functions are consumer oriented and therefore marketing decisions are based on the careful identification of consumer needs and on the design of marketing strategies to meet those needs. The distribution system brings the product or service to the place where it can best fulfill customer needs. Access to distribution can mean all the differences between success and failure for a new product. Because many products require support from distribution channels in the form of prompt service, rapid order processing etc the choice of distributors, wholesalers and jobbers is essential.
Promotion is more than advertising. The location, size and nature of markets which the business strategy specifies, will orientate promotion mix decisions and should indicate the content of promotional material as well. Pricing is a complex issue because it is related to cost, volume, tradeoffs etc and because it is frequently used as a competitive weapon. Pricing policy changes are likely to cause competitors response. Using a low price strategy to position will lead to price wars, which usually hurt all participants.
Marketing has received increasingly greater attention in the competitive business since the early modern era. The old concept of marketing focused on the firms existing products and considered marketing to consist of selling and promotion to maximize sales at a profit. The new concept however focuses on the firms existing potential customers and seeks to earn profit through customer satisfaction with an integrated marketing program.
In the case of McDonald's, we strongly recommend the company to keep on innovating and developing new strategies which enables them to continue being the fast food market leader. These innovative strategies should not just be focused on new hamburgers but it is important that they position themselves in new market segments to attract new clients. This last point can be achieved by continue introducing the new concept of McCafé restaurants where customers are offered with a huge variety of coffees and cakes to enjoy in their comfortable sofas and quite atmosphere so that they can relax themselves or even use its free Wi-Fi internet connection service. This is a great change, as customers do not only have their meal quickly and leave but instead they can rest and enjoy other kind of products afterwards.
Another example of moving into new segments can also be in the form of meeting the needs of vegetarian people. Actually, they have already introduced vegetarian menus in some countries but it is a trend which is being lately demanded by more and more people and that in our opinion should be brought to more restaurants by previously checking with fast surveys for example.
At the same time, they should also continue innovating to present new products at their restaurants, such as: ice creams, milkshakes, salads, kebabs, fruits, new chips and drinks etc. In this way, they will attract an increasingly number of potential customers who will value the huge product variety.
We additionally and finally suggest that they strengthen publicity or advertising to keep showing their image through the mass media in order to revive the huge potential. We also think that the home delivery service is a key point which franchises should develop to get closer to its clients. This service could perfectly allow McDonalds to know much more their customers by the introduction of opinion surveys for example. As a consequence, their needs can be pursued and fulfilled in a much more precise way.
8) Bibliographic References:
Marketing Management ICHEC course notes - Brigitte Feys
Marketing Management - Dr. Rajan Saxena
Marketing Management, De l'idée a l'action - Jean-Paul Sallenave.
"McDonalds - Behind the Arches" - John S Love
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