arch deluxe
TRANSCRIPT
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In 1995 McDonald's was the largest restaurant chain in the USwith domestic sales of $15.9 bn
Country's fourth-largest advertiser, spending $490 mn on media
Big Mac, Egg McMuffin, QuarterPounder, Happy Meals
Friendliness, cleanliness, consistency
and convenience
Child-friendly approach, Ronald, brightand colorful interior, fun center, toys,food and the playground
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Domestic Sales in 1993 increasing at 4% annual rate
Sales slumped to 3% decrease by third quarter of 1996, fifth quarter in a row
In part, decline attributed to baby-boomers drifting away
Threat from competitors like King, Wendy’s, and Subway and falling market share.
Business strategy to keep their major
markets and expanding into emerging
markets
An attempt to offer more choice and to
win a new customer segment : a more
sophisticated adult.
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Introduced in May 1996 as the flagship of the adultline of burgers
$200 million dollar marketing campaign
Ads showed kids making “yucky faces,” turning uptheir noses at the new adult burger. Ronald engagedin “adult” activities like golf and pool
Launched in 12,500 McDonald's restaurants in theU.S. and Canada
Consumer acceptance survey: consumers in focusgroups loved it, and 80% said they’d buy it
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Arch Deluxe line of bacon, beef,fish, and chicken burgers.
Arch Deluxe Secret Sauce(mayonnaise and peppercornmustard)
1 sesame seed hamburger bun(potato roll style with split crown)
14 pound Topp's beef patty 1 slice American cheese 1-2 tomato slices 1-2 lettuce leaves, chopped 1 tablespoon ketchup 1 tablespoon chopped white onion McDonald's hamburger seasoning
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Arch Deluxe for $2.99 and an Arch Deluxe with Bacon for $3.29.
Price of an average Arch Deluxe kept at 32 cents higher than a BigMac - $1.90
McDonalds basic hamburger priced at 85 cents.
Burger King's 99-cent Whopper.
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Conflict of image – high quality, premium v/s cheap and
convenient
Product Quality Leadership - Simplicity not sophistication
Two basic arguments
o Priced too low v/s Big Mac
o Priced too high v/s regular burgers
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People are pre-decided about choice of burger
Too many variations
Sold on taste – people go for the brand
Alienation of one demographics hurt
Customization not possible
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Play down the mistake in Sept 1996 - “the Arch Deluxe was
never intended to be a silver bullet.”
Mid August 1997 McDonald’s acknowledged the out of sync
pricing
Product pricing and not taste
Dropped to $1.00 and coupons
offered
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Tomato McGrand by McDonald’s Japan a decade later in 2003
McFeast Delux in Australia in Nov 2009
Royal Deluxe in France
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Reference pricing plays a role in convenience snacks
Go for what you know
Avoid customer confusion
Be skeptical of research