McDonald’s : Marketing Strategies

THE MCDONALD’S STORY

The story of McDonald’s started in 1954, when its founder Raymond Kroc saw a

hamburger stand in San Bernardino, California and envisioned a nationwide fast

food chain. Kroc proved himself as a pioneer who revolutionized the American

restaurant industry. Today McDonald’s is the world’s largest fast food chain serving

47 million customers daily. McDonald’s is now one of the most valuable brands

globally, worth more than $25 billion. The Golden Arches and its mascot Ronald

McDonald have gained universal recognition. Though the company has roots in the

US, McDonald’s today has become an accepted citizen of the world.

Year Events

1955 Ray Kroc opens his first restaurant. McDonald’s Corporation is

created

1957 Quality, Service, Cleanliness and Value (QSC & V) becomes

company motto

1963 Ronald McDonald makes debut

1965 The company goes public

1968 Big Mac is introduced`

1974 Happy Meal is launched

1996 McDonald’s opens in India, the 95th country

BUSINESS MODEL

Franchise Model – Only 15% of the total number of restaurants are

owned by the Company. The remaining 85% is operated by franchises. The

company follows a comprehensive framework of training and monitoring of its

franchises to ensure that they adhere to the Quality, Service, Cleanliness

and Value propositions offered by the company to its customers.

Product Consistency – By developing a sophisticated supplier

networked operation and distribution system, the company has been able to

achieve consistent product taste and quality across geographies.

Act like a retailer and think like a brand – McDonald’s focuses not

only on delivering sales for the immediate present, but also protecting its long

term brand reputation.

MCDONALD’S IN INDIA

McDonald’s entered India in 1996. McDonald’s India has a joint venture with

Connaught Plaza Restaurants and Hard Castle Restaurants. Connaught Plaza

Restaurants manages operations in North India whereas Hard Castle Restaurants

operates restaurants in Western India. Apart from opening outlets in the major

metros, the company is now expanding to Tier 2 cities like Pune and Jaipur.

Challenges in Entering Indian Markets

Regiocentricism: Re-engineering the menu - McDonald’s has continually

adapted to the customer’s tastes, value systems, lifestyle, language and

perception. Globally McDonald’s was known for its hamburgers, beef and pork

burgers. Most Indians are barred by religion not to consume beef or pork. To

survive, the company had to be responsive to the Indian sensitivities. So

McDonald’s came up with chicken, lamb and fish burgers to suite the Indian

palate.

The vegetarian customer – India has a huge population of vegetarians. To

cater to this customer segment, the company came up with a completely new

line of vegetarian items like McVeggie burger and McAlooTikki. The

separation of vegetarian and non-vegetarian sections is maintained

throughout the various stages.

Challenges for McDonald’s in India:

Vegetarianism:

The major issue was beef. Cow being sacred and worshipped, beef could not be

served. Muslims did not eat pork. The challenge was to change the form of the

worldwide popular Hamburger to make an entry into India. With 25-30% of the

population being lacto vegetarian and a large majority eating meat, an alternative to

beef and pork was necessary.

The population of a billion was undoubtedly a promising opportunity for an

international company. McDonald’s accepted the challenge and created the Aloo –

Tikki Burger known as McAloo Tikki especially for the Indian vegetarian customers.

Aloo- Tikki was a potato patty with spices. It also made a chicken and fish option

available for the non vegetarians. McDonald’s even separated the non vegetarian

cooking process and the vegetarian cooking process to convince the customers of

the “Shudh Shakahari Experience’ which means pure vegetarian experience. In

addition, the crew cooking vegetarian food were asked to wear green aprons.

McDonald’s in India was one of its kinds as it did not offer beef at all. In order to

convince and change the perception of the customers about the burgers they

offered, McDonald’s made attempts to clarify their stand about beef in India.

So the world famous hamburger was without meat. This was indeed a classic case

of product adaptation, to gain foothold in a new market.

Competition from Local Food Retailers:

The competition from the local food retailers was intense. The food retailers had

been doing business for years. Their familiarity with the market and the

understanding of the local taste gave them a competitive edge. There were

numerous eating joints which offered snacks and meals with affordable price tags.

Organized food retailing was dominated by the north Indian style and the south

Indian style restaurant chains. The metropolitan cities and some developed urban

areas offered superior dining experience through the existence of some fine, classic

restaurants. But the price was expensive and only a select group of customers could

afford to make visits there. On the other hand, the size of the unorganized food

retailing was larger and comprised of roadside food vendors, dhabas (the eateries on

the highways) and on the outskirts of the cities and a plethora of small eateries.

Local food in a large assortment was widely available within acceptable price ranges.

It was observed that food choices made by consumers were impulsive. Aroma, taste,

habits and visibility worked on the subconscious level and played a major role in

affective decision making. The local food business exactly understood the

psychology of the customers and operated accordingly. The mass markets in India

had their own set of preferences.

Target Marketing:

Value propositions had to be directed to the right target market to establish a new

product. An interesting question was who would eat at McDonald’s? In order to

develop the marketing strategy, it was important for any company to understand the

consumer market. The more one knew and understood about consumers, the more

effectively one could communicate and market to them.

Four aspects of consumer behaviour which needed to be examined to understand a

consumer market were the ability of the people to buy, consumer needs, buying

motives and the buying process. The initial attempt of McDonald’s was to induce

trials and get the customers into the restaurants. Word of mouth and advertising was

expected to reveal the experience of eating at McDonald’s.

McDonalds Value Meal addressed the price sensitivity of the Indian consumer

market. However, irrespective of this effort, McDonalds was affordable to select

customers only. These were the ambitious middle, upper middle and affluent classes

who were keen to combine eating with fun. Children were the major influencers.

McDonald’s advertisement put forth an attractive proposition to the children segment

that played a major role in the decision making as regards the choice of a restaurant.

Happy Meal was used to reflect the fun element of the experience at McDonald’s.

Happy Meals were all about the simple pleasures of childhood, a time of excitement,

joy, and being treated special. Each Happy Meal was themed and had on offer, a set

of collectible toys from that particular theme. One theme typically was used for

duration of 4 – 6 weeks. In this deal the customer got a choice of a burger, a drink

and a toy. Happy Meals were a huge success. The rising income levels in India

increased the disposable income. Fun and entertainment assumed importance in the

financially stable families. McDonald’s was perceived to be a fun place with special

areas marked for kids, toy gifts and of all the attraction of a burger. Subsequently,

McDonald introduced newer menus appealing to the India taste. Children in India

preferred a burger over pizza and McDonald, the king of burgers was announced as

the number one in a survey titled India’s most respected companies by Business

Week in India for Food retailing in 2006. Youngsters valued McDonald’s for the

trendy environment and the joint acted as an interesting meeting place.

In United States, two thirds of the business of McDonalds was done at the drive

through windows. In India, because of unavailability of space and lack of proper

infrastructure, the company could not do so. However, home delivery was an area of

consideration. In March 2007, McDonalds announced that it would invest about Rs 3

crore (US $0.75 million) over the next three years to strengthen its home delivery

services. It launched an all-India single home delivery number — 66-000-666 to

facilitate this service. In March 2007, the company's Managing Director Mr.Vikram

Bakshi said “Mc Delivery currently accounts for almost 5 per cent of the overall sales

and with the introduction of the new system; the company is looking at a substantial

share of 7.5 per cent in the turnover by next year”.

Pricing

Food pricing was a sensitive issue in India. An ideal strategy was to focus on

customer’s ability to pay and tap the rich and upper middleclass population in India.

Although McDonald’s strategy was to increase sales volumes by making products

available at affordable price, its products were perceived to be expensive. The

company outlets in Delhi and Mumbai initially were opened due to the increased

affordability of people with western exposure and brand recognition factors in

metros. Additionally, people in the metros were open to experiment with variety of

foods. Absorption of newer cultures was faster in the Metros than other areas.

The mass markets in India were price sensitive.The positive factors were the growth

in consumer markets with rapid growth in disposable incomes, development of

modern urban lifestyles and the demand for value.

Eating Habits

Eating out was a special occasion to many Indian families. Meals had been an

essential medium for social sharing and relationshipxii.Whenever families decided to

eat out, the choices available were abundant. The trend in metropolitan cities was

however changing. With more nuclear families and dual income households, the

demand for fast and readymade food was growing. The needs of the growing

working population stimulated the need for new products and services. Indian culture

was relatively new to the use of technology and streamlined process in food service.

McDonald’s needed to find ways and methods to motivate the customers opt for

initial trials and acceptance. The conventional eating pattern of Indians involved

breakfast, lunch and dinner. Lunch and dinner menus were complete meals

providing the right balance in terms of nutrition. Breakfast was conventional as per

the family culture and upbringing. Burgers were likely to be slotted in the category of

snacks. But globally burgers and beverage brands were linked with poor eating

habits. The market situation called for focus on the environment within the restaurant

and western association.

Issues

McDonald’s had been accused of destruction of vast areas of the rainforest for the

production of cattle to produce beef, promoting unhealthy food with a risk of cancer

and heart disease, taking advantage of children with its advertising and marketing,

and cruelty to animals. There had been complaints as regards the nutrition, hygiene

etc……..

Animals

Vegetarians and animal welfare campaigners were not too wholehearted about

McDonald's

- for obvious reasons. As the world's largest user of beef, they were responsible for

the slaughter of countless cows every year. In Europe alone they used half a million

chickens every week, all from windowless factory farmsxvi. This meant that these

animals suffered great cruelty during their unnatural, painful and short lives, many

being kept inside with no access to fresh air and sunshine, and no freedom of

movement.

A major consideration for the fast food industry was whether it was acceptable for

the food industry to exploit animals at all. McDonald's argued that it stuck to the letter

of the law and if there were any problems, it would be a matter concerned with the

government.

Although meat eating had a long history, it was only in recent decades that factory

farming and intensive methods had been applied on a vast scale. This mass

production process was primarily to benefit the food companies' drive for greater

profits, backed by their promotional campaigns. McDonald’s corporation was the

world's largest promoter of meatbased products, the largest user of beef and the

second largest user of chicken.

Environment

Conservationists had often focused on McDonald's as an industry leader promoting

business practices detrimental to the environment. But the company spent a fortune

promoting itself as environmentally friendly. They annually produced over a million

ton of packaging, used for just a few minutes before being discarded. The

environmental effect of the production and disposal of all this needed to be taken into

account. Multinational companies operating on such a scale contributed to global

warming, ozone destruction, depletion of mineral resources and the destruction of

natural habitats.

The modern industrial system, with transnational corporations in particular, had

callously taken advantage of the natural resources globally, damaging forests and

other ecosystems, reducing biodiversity, adding to land, and sea and air pollution

while adversely affecting the global climate. McDonald's contribution to these were

mainly through the effects of cattle ranching (as the world's foremost promoter of a

beef-based diet), through the growing and transportation of cash crops, and through

the production and disposal of thousands of tons of packaging material.

Nutrition and Health

One of the most fundamental and enjoyable aspects of the day-to-day lives of people

had been eating food of their choice and the circumstances in which it was eaten.

For most people this generally meant eating the healthiest possible food (bearing in

mind constraints of time and poverty), usually cooked on site and then eaten

communally - either in a family or home setting, or with others while at work or in

school. But there were rapid changes as the pace and nature of society had shifted.

An industrial or service infrastructure increasingly dominated the local

neighborhoods and people's lives, undermining existing patterns of human

interaction, whether among families, friends, neighbors or in the community in

general.

Mass-produced, processed food gradually and increasingly replaced fresh and

healthy foods in people's diets over the course of the twentieth century. In recent

decades, McDonald’s capitalized on this situation by promoting quick meals to be

eaten outside the home. This change in eating habits brought serious consequences

to human relations and health. These consequences sparked a debate about healthy

food. They also brought out a whole range of new campaigns and movements

dedicated to encouraging healthy eating and healthy lifestyles. Macro environmental

factors affected McDonald’s, forced it to become defensive, and they had to resort to

lip service to try and deflect public criticism.

In the health debate, food industry was heavily criticized for creating products that

are high in fat, sugar and salt. Health consciousness was rising amongst people with

the obesity crisis hitting the world. The concern was serious as it was children who

were the most affected. Nutrition and exercise issues which were important and

needed to be reviewed earlier, now were considered, discussed, and debated only

after witnessing the frightening consequences. Many critics blamed McDonalds like

businesses for public health concerns, contending that fast food menus and portion

sizes contribute to obesity, diabetes and heart disease and a variety of other diet

related problems. But at the same time, it was worthwhile to note that the type of

demand exhibited by the market initiated the processes within the companies. As

long as the demand for fast food continued, nutritional issues would continue to be

argued and deliberated upon. India also had its own set of so called nutritious and

non-nutritious food. People in India appeared to prefer food for its taste. Bhel Puri,

Samosas and Potato Wada which were some of the very popular Indian snacks were

weak in terms of nutrition. However, a large level of population savored them for the

spicy taste ignoring the hygiene and the value in terms of nutrition.

Trans- fats and their use in food also had been a major controversial issue. It had

been established scientifically that artificial trans- fats were bad for human health. In

United States, New York City was the first city to announce a ban on all restaurants

from using artificial Trans fats with the deadline on July 1, 2007. When the legal

system imposed bans and developed a regulatory framework, the food industry was

compelled to respond. In January 2007, McDonald’s picked new Trans fat free oil for

cooking its famous French fries after years of testing.

In view of the health risks and dangers, it was important that food service did not just

confine to respond to the basic need of hunger. Food industry was required to

innovate and work on introducing healthy eating options and making them available.

This would create a situation where the final choice would then be made by the

consumers. A healthy lifestyle only would help overcome the health problems

gripping the society. Awareness about health needed to be built up and somewhere

the responsibility definitely lay with companies which were into the food business.

Health concern was a global call and responding to this was the need of the hour.

Employment

McDonald's Corporation created a global, highly standardized and fast production

line system, geared to maximum turnover of products and profits. McDonald's

employed more than a million mostly young people around the world and provided

them with work opportunities.

The fast food giant helped pioneer employment that was low-pay, non-union,

temporary or part-time with few guaranteed rights and conditions. McDonald's

worldwide employed over one and a half million workers, over half of them under 21

years old. It had been calculated that a staggering 10% of all workers in the USA got

their first job at McDonald's! Outlets like McDonald’s provided job opportunities to

youngsters in India pursuing their education.

The franchisee model of McDonald’s was a significant source of employment for

many people in India. Sources at McDonald’s reported that they were an equal

opportunity employer, providing not just employment but long-term careers as well.

The average McDonald’s restaurant employed as many as 50 people- from crew to

restaurant manager. The chain planned to invest in the improvement of supply chain

management and new outlets in the country which in turn would generate

employment.

Advertising and Marketing Initiatives at McDonald’s

Advertising was known to have an impact on the minds and the hearts of the

consumers. But product and the value offered needed to be attractive and powerful

to maintain consistency in sales and build customer loyalty. Advertising was the

backbone of McDonald’s marketing strategy in India. The positioning had been

directed towards establishing McDonald’s as a family restaurant. Special efforts were

made to not allow it to get converted into a typical teenage hangout. Advertisements

were created using storylines with focus on emotions. Through a variety of

advertisements, the visit to McDonald was portrayed as a special occasion providing

excitement and satisfaction to the customers who comprised of families with kids and

the youngsters.

Advertising helped in building brand recall, but advertising alone was not able to

sustain the brand. Despite the fact that McDonald's was a fast food chain of

restaurants, in India it was positioned as the family restaurant and outlets were

called “McDonalds Family Restaurant”. Extra care was taken to make the

restaurants child friendly, by providing play areas wherever possible so that the

parents could relax and have a good time while visiting McDonald's. The counters

were low, tables were rounded so that children did not hurt themselves in the

restaurant and the menus are pictorially depicted so that a child could order a meal

without bothering parents. The entire restaurant was attractive and child friendly.

When operations in India began, initially McDonald’s positioned itself as a place to

visit with the baseline "McDonald's mein hain kuch baat" (“There’s definitely

something about McDonald’s”) in their advertisements. People were encouraged to

try the McDonald's experience. However, over the years, after McDonald's had been

hugely accepted by Indian customers, there was a need to evolve the

communication strategy and move on from trying to encourage and motivate people

to visit for the first time to making McDonald's a regular experience. After

McDonald’s established itself and people knew what McDonald's was all about, the

baseline was changed to “Toh aaj McDonald's ho jaye" (“Let it be McDonald’s for

today”), which talked about an everyday experience. The objective was to continue

positioning McDonald's as a comfort zone for families.

The brand’s media strategy focused more on the electronic media. The advertising

continued to use emotional appeal to display family ties and fun at McDonald’s.

Indians being emotional found it easier to correlate themselves with such types of

emotional messages. Advertisements with audio –visual appeal created more impact

on the viewers. So McDonald’s narrated the fun filled environment at their fast food

outlet using electronic media. McDonald’s did have enough repeat customers. The

customer base increased substantially since they started operations.

The strength of McDonald's as a brand in India was that it was the most recognizable

brand world over amongst all age groups. It was the ‘Indianization’ of the brand that

helped McDonald’s establish in a new market successfully. The brand’s success was

attributed to its promise of a great fun filled experience delivered at its outlets.

McDonald's executed promotional campaigns involving children. McDonald’s used

kids as an entry strategy to the family. World over McDonalds was a family

restaurant and children were an integral part of a family. During the last few

decades, kids had become the target audience for most categories including

consumer durables. In the 1990's, India saw a major shift to nuclear families. When

joint-extended families existed, the head of the family made most decisions. In

smaller-nuclear families, individual opinions had become more dominant, whether it

was buying a refrigerator or a TV or whether it was about eating out. Children were

an integral part of the decision making process for buying things and played an

influential role. Word of mouth and peer pressure worked effectively for this age

group. Children influenced the decisions of parents, and McDonald’s realized that

this group could no longer be ignored.

McDonald’s “Happy Meals” were often accompanied with Lego toys to attract

children and the restaurant maintained several ‘Play-Zones’ to provide children with

a fun experience. The restaurants hosted birthday parties, played latest pop-music

hits and became a favorite place even for the new generation of jean-clad

‘Americanized’ teenagers of India. McDonalds even introduced unusual ice-cream

flavors such as bubblegum, green apple and berry to entice the curious youngsters.

Using collectable toys, television commercials, promotional schemes in schools and

figures such as Ronald McDonald, McDonald’s pursued its main target group –

children. Many parents objected strongly to the influence this had over their own

children. McDonald’s adhered to all the advertising codes in each country. But some

argued that it still amounted to exploitation of children, sponsoring so many school

events and learning programs out of publicity, not philanthropy. In view of this

criticism, McDonald with some other companies vowed to devote at least half of their

radio, print, television and internet advertising to promoting more healthful products

and healthy lifestyle. Mary Dillon, McDonald’s Chief Marketing Officer said that

McDonalds planned to put more emphasis on physical activity in ads and was

reviewing how it could use licensed characters. Disney characters were used

extensively by McDonald’s at one time but the entertainment company decided to

allow its characters to push products that met certain nutritional guidelines’.

Ethics and Social Responsibility

In India, Mrs. Maneka Gandhi, a popular environmental activist and her supporters

launched an aggressive campaign against fast food chains which contributed in the

destruction of the ecological balance and promoted unhealthy food. To respond to

such campaigns, McDonald’s launched several pro-green advertisements such as

“We love Green” and funded community related activities including “Keep our city

clean”. McDonalds sponsored “Olympic Day Run” in 2005 and offered baked

potatoes and McCurry Pan instead of fries.

As a part of its Corporate-Citizenship strategy and to help its own brand and

reputation in India, McDonald’s participated in community-related projects targeting

children. McDonald’s in India hosted interschool arts competition and raised funds

for charity on World Children’s Day. The restaurant celebrated Children’s week every

year from November 14-20 and tactfully supported educational programs for girl-

child to promote goodwill among community organizations who worked towards

improving status of women in India. McDonald’s also partnered with local health

organizations to make India Polio-free by helping to set up Pulse-Polio program to

provide free vaccine to children.

PEST ANALYSIS

Political & Legal

The international operations of McDonald’s are highly influenced by the

individual state policies enforced by each government.

Any changes in regulations, the imposition of additional regulations, or the

enactment of any new legislation under the Obama administration that impacts

employment/labor, trade, product safety, transportation/logistics, health care, tax,

privacy, or environmental issues could have an adverse impact on our financial

condition and results of operations.

Economic

McDonald’s has the tendency to experience hardship in instances where the

economy of the respective states is hit by inflation and changes in the

exchange rates.

Market leader.

Very high target market.

Low cost and more incomes.

The rate at which the economy of that particular state grows determines the

purchasing power of the consumers in that country.

Social

Working within many social groups.

Increase employments.

Technological

Advanced technology development.

Quality standards.

Environmental:

Quality packing.

Local manufacture using foreign supplies.

Legal:

Legislation for product.

Sustained logo

The market environment: PEST AnalysisThe market environment: PEST Analysis

Political / Legal:

In India, where there are lots of political parties, each having their own set of

policies and each having a desire to come to power has made the government

unstable. As a result of this, the peoples and organizations are hesitant towards

making FDI in India.

The government has increased the prices of Diesel as result of which the

transportation costs are bound to increase and net effect will be reduction in the

profit margin of the organization.

The unexpected change in government policies has always been of great

concern for the industry.

Also with the domestic message spreading all around. It is acting as a sword

which is hanging over the head of the management of the organization.

Legislation related to manufacturing and taxation should be made more

investment friendly.

The industry suffers from multiple taxes like excise, sales tax and in certain cases

even local taxes, leading to a cascading impact.

Economical:

It is not unrealistic to say that all companies, small or large, engaged in strategic

planning examine the economic environment. Relevant published information in

usually gathered, analyzed, and interpreted for use in planning.

With the rise in inflation, the cost of production rises due to increase in the prices

of raw materials, which have an adverse effect on the profits of the organization,

if they don’t increase the price or reduce their overheads.

Social:

The relevance’s of the social environment to a particular business will depend on

the nature of business. The impact of the social environment on a consumer

products company is much more than any other company.

Over 40% of all packaged goods consumed in urban India are foods and

beverages, while that in rural India is over 20%. This trend will deepen because

of the changing profile of the consumer. Education, employment and media will

make the consumer more discerning and demanding.

Technology:

Technology developments come out of the R&D effort.

McDonalds continuously trying to come out with new products and variants and

flavors’ that will fit in the Indian palate. The company is trying to offer better value

to their customer and also trying to deliver superior product at competitive price.

Marketing strategy for future prospective: The first step in developing a marketing

strategy is to understand the customers, reacting to their changing needs and the

changing dynamics of the market. To this end McDonald’s should conduct several

stages of in-depth customer research and audits of the McDonald's brand. The

research must involve both quantitative and qualitative research methods. This

research should describe how McDonald's is perceived and about changes that are

taking place in the market. Research should also conduct into the local area of their

restaurants, into the general market environment and into specific areas of their

business. Which is considered at three distinct levels?

Total Eating out Market gives the broadest competitive context and includes

all restaurants, hotels, pubs, and any other outlet where people eat. This

category contains the entire gamut of eating outlets ranging from the “mom-&-

pop outlet” to the most exclusive five star hotels.

Quick Service Restaurant sector includes any outlet where food is served

quickly and the process is usually self-service. Example: Domino’s, Nirula’s.

Burger House Sector includes those restaurants that serve different varieties

of burgers as their primary menu item. This is the narrowest sector in

consideration. Example: Wimpy’s.

Having an in-depth understanding of all aspects related to the competition allows

McDonald’s, to monitor the competitive environment to exploit the opportunities and

check threats in time. This is achieved through the following:

Competitive Pricing: Being in touch with the pricing of their competitors

allows them to price their products correctly, balancing quality with value.

Competitive Promotion: At McDonald’s it is believed that before they

communicate with their customers, they must be aware of what the

competitors are communicating so that they can create a beneficial

advantage.

Competitive Place: Distribution is the key to any retailer or brand;

McDonald's prides itself on its superior delivery process.

Competitive Product: Quick Service Restaurants are constantly expanding

their menus. This can be done on a short-term promotional basis or as a long-

term expansion strategy.

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.

71%

59%52%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Biscuits Burgers & Pizzas Fruit Juices

% of kids who influence what FMCG brand their family buys

As shown above, kids reign supreme in FMCG purchase related to food products. So

to attract children McDonalds has Happy Meal with which toys ranging from hot

wheels to various Walt Disney characters are given (the latest in this range is the

toys of the movie Madagascar). For this, they have a tie-up with Walt Disney. At

several outlets, it also provides special facilities like ‘Play Place’ where children can

play arcade games, air hockey, etc. This strategy is aimed at making McDonald’s a

fun place to eat. This also helps McDonald’s to attract the young urban families

wanting to spend some quality time while their children have fun at the outlet. To

target the teenagers, McDonald’s has priced several products aggressively, keeping

in mind the price sensitivity of this target customer. In addition, facilities like Wi-Fi are

also provided to attract students to the outlets like the one at Vile Parle in Mumbai.

“Mc Donald’s mein hai kuch baat” projects McDonald’s as a place for the whole

family to enjoy. When McDonald’s entered in India it was mainly perceived as

targeting the urban upper class people. Today it positions itself as an affordable

place to eat without compromising on the quality of food, service and hygiene. The

outlet ambience and mild background music highlight the comfort that McDonald’s

promises in slogans like “You deserve a Break Today” & “Feed your inner

child”. This commitment of quality of food and service in a clean, hygienic and

relaxing atmosphere has ensured that McDonald’s maintains a positive relationship

with the customers.

Customer Perception and Customer Expectation

Customer perception is a key factor affecting a product’s success. Many potentially

revolutionary products have failed simply because of their inability to build a healthy

perception about themselves in the customers’ minds. McDonalds being an

internationally renowned brand brings with it certain expectations for the customers.

Customers expect it to be an ambient, hygienic and a little sophisticated brand that

respects their values. The customer’s expect the brand to enhance their self-image.

Customer responses obtained at the Vile Parle, Mumbai outlet confirmed the fact

that they connect strongly with the brand. However, fulfilling some of the customer

expectations like a broader product variety provide McDonald’s a great scope for

improvement.

McDonalds Marketing Mix (5 P’s)

Target Segment What is McDonald’s for me?

A Family with children A treat to children, a fun place to be for the children.

Urban customer on the

move

Great taste, quick service without affecting the work

schedule

Teenager Hangout with friends, but keep it affordable.

After segmenting the market, finding the target segment and positioning itself, each

company needs to come up with an offer. The 5 P’s used by McDonalds are:

1. Product

2. Place

3. Price

4. Promotion

5. People

Product: How should the company design, manufacture the product so that it

enhances the customer experience?

Product is the physical product or service offered to the consumer. Product includes

certain aspects such as packaging, guarantee, looks etc. This includes both the

tangible and the non-tangible aspects of the product and service.

McDonalds has intentionally kept its product depth and product width limited.

McDonalds studied the behaviour of the Indian customer and provided a totally

different menu as compared to its International offering. It dropped ham, beef and

mutton burgers from the menu. India is the only country where McDonalds serve

vegetarian menu. Even the sauces and cheese used in India are 100% vegetarian.

McDonalds continuously innovates its products according to the changing

preferences and tastes of its customers. The recent example is the introduction of

the Chicken Maharaja Mac.

McDonalds bring with it a globally reputed brand, world class food quality and

excellent customer specific product features.

Place: Where should be the product be available and the role of distribution

channels?

The place mainly consists of the distribution channels. It is important so that the

product is available to the customer at the right place, at the right time and in the

right quantity. Nearly 50% of U.S.A is within a 3 minute drive from a McDonald’s

outlet.

There is a certain degree of fun and happiness that a customer feels each time he

dines at McDonalds. There are certain value propositions that McDonalds offer to

its customers based on their needs. McDonalds offers hygienic environment, good

ambience and great service. Now McDonalds have also started giving internet

facility at their centres and they have been playing music through radio instead of

the normal music. There are certain dedicated areas for children where they can

play while their parents can have some quality time together.

Price: What should be the pricing strategy?

Pricing includes the list price, the discount functions available, the financing options

available etc. It should also take into the consideration the probable reaction from the

competitor to the pricing strategy. This is the most important part of the marketing

mix as this is the only part which generates revenue. All the other three are

expenses incurred. The price must take into consideration the appropriate demand-

supply equation.

McDonald’s came up with a very catchy punch line “Aap ke zamane mein ,baap ke

zamane ke daam”. This was to attract the middle and lower class consumers and

the effect can clearly be seen in the consumer base McDonalds has now.

McDonalds has certain value pricing and bundling strategies such as happy

meal, combo meal, family meal etc to increase overall sales volumes.

Promotion: What is the suitable strategy and channels for promotion of the

product?

The various promotion channels being used by McDonald’s to effectively

communicate the product information are given above. A clear understanding of the

customer value helps decide whether the cost of promotion is worth spending.

There are three main objectives of advertising for McDonald’s are to make people

aware of an item, feel positive about it and remember it. The right message has

to be communicated to the right audience through the right media. McDonald’s

does its promotion through television, hoardings and bus shelters. They use print

ads and the television programmes are also an important marketing medium for

promotion.

Some of the most famous marketing campaigns of McDonald’s are:

“You Deserve a break today, so get up and get away- To McDonald’s”

“Aap ke zamane mein ,baap ke zamane ke daam”.

“Food, Folks, and Fun”

“I’m loving it”.

People: How to converge the benefits of internal and external marketing?

McDonald’s understands the value of both its employees and its customers. It

understands the fact that a happy employee can serve well and result in a happy

customer.

McDonald continuously does Internal Marketing. This is important as it must

precede external marketing. This includes hiring, training and motivating able

employees. This way they serve customers well and the final result is a happy

customer.

The level of importance has changed to be in the following order (the more important

people are at the top):

1. Customers

2. Front line employees

3. Middle level managers

4. Front line managers

The punch line “I’m loving it” is an attempt to show that the employees are loving

their work at McDonalds and will love to serve the customers.

THE MCDONALD’S 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 India is an example of McDonald’s

strategy of integrating the customer’s perspective in its products. And, the

operational integration is evident from McDonald’s emphasis on its suppliers as its

customers as well as its treatment of its consumers as co-producers of services.

The ultimate aim of Service Marketing is not just to become a Service Leader but to

create a Service Brand. The Service Delivery Process is the key to achieving this

aim of Service Marketing.

Core Product

Supplementary Process

Service Delivery 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 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.

Service Delivery Points

Customer

“Moments Of Truth” – The Service Encounter

Service Provider

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 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 fast-food industry’s most fragmented

distributed system into more efficient one which helped McDonald’s reduce its

inventory and manage costs effectively.

Importance of PLC in 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 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.

Competitors Analysis

McDonald’s has been a leading fast-foods outlet in Vile Parle. But the outlet

understudy has other competitors eating away into its market share. In addition to its

traditional rivals—KFC, Dominos, Pizza Hut—the firm encounters new challenges.

Jumbo King competes using a back-to-basics approach of quickly serving up burgers

for time-pressed consumers. On the higher end, the KFC has become potent

competitor in the quick service field, taking away customers from McDonald’s.

Perhaps in the new environment, fast, convenient service is no longer enough to

distinguish the firm. At this time, a new critical success factor may be emerging: the

need to create a rich, satisfying experience for consumers. This brings us to service

and experience based competition which McDonald’s can use for competitive

advantage against Jumbo King. Keeping in mind the demographics of the area,

McDonald’s has Wi-Fi enabled the outlet to cater to the student community. It is for

this overall “Food, Fun & Folks” experience that customers pay a premium over the

other competitors.

Competition also reduces product lifecycle; inducing firms to revise their

products portfolios and to revisit their product market to understand changing

needs, expectations and perception of different market segments. The new

McBreakfast would be introduced between 6 to 11 am as a pilot project. This would

open up a whole new revenue stream for McDonald’s by tapping into the student and

working population by providing a healthy and wholesome breakfast. This shows

how demographic shift can affect the demand for products and services. McDonald’s

has anticipated these changes to maintain its competitive edge.

Two Dimensional Perceptual Mapping

SWOT Analysis

Strength

Risk diversity

Large market share.

Strong supply chain.

Promoting ethical conduct

Rigorous food safety standards

Decentralized yet connected system

Strong brand name, image and reputation.

Strong financial performance and position

Affordable prices and high quality products

Nutritional information available on packaging

Strong global presence & performance in the global marketplace.

Specialized training for managers known as the Hamburger University.

McDonalds Plan to Win focuses on people, products, place, price and promotion.

Weakness

Unhealthy food image.

High Staff Turnover including Top management

Customer losses due to fierce competition.

Legal actions related to health issues; use of trans fat & beef oil.

Uses HCFC-22 to make polystyrene that is contributing to ozone depletion.

Low depth and width of products

Opportunities

Growing health trends among consumers

Joint ventures with retailers (e.g. supermarkets).

Consolidation of retailers likely, so better locations for franchisees.

Respond to social changes - by innovation within healthier lifestyle foods. Its move

into hot baguettes and healthier snacks (fruit) has supported its new positioning.

Use of CRM, database marketing to more accurately market to its consumer target

groups. It could identify likely customers (based on modeling and profiles of

shoppers) and prevent brand switching

Strengthen its value proposition and offering, to encourage customers who visit

coffee shops intoMcDonalds.

The new “formats”, McCafe, having Wifi internet links should help in attracting

segments. Also installing children’s play-parks and its focus on educating consumers

about health, fitness.

International expansion into emerging markets of China and India.

Diversification and acquisition of other quick-service restaurants.

Growth of the fast-food industry.

Worldwide deregulation.

Low cost menu that will attract the customers.

Threats

1. Health professionals and consumer activists accuse McDonald's of contributing to

the country’s health issue of high cholesterol, heart attacks, diabetes, and obesity.

2. The relationship between corporate level McDonald's and its franchise dealers.

3. McDonald’s competitors threatened market share of the company both internationally

and domestically.

4. Anti-American sentiments.

5. Global recession and fluctuating foreign currencies.

Fast-food chain industry is expected to struggle to meet the expectations of the customers

towards health and environmental issues.

Recent economic condition impacts on consumer confidence & spending, prime real estate

is competitiveness; the gradual increment in Limited Brands operations can hamper the

MCD’s growth. In addition, possible tariffs from government over the imported materials, or

minor disturbance in the long supply chain of the company are a risk. The increasing cost of

labor in other countries and decline in value of US Dollars everyday can compel the

company to change its way of operation.

Five Forces Analysis

Competition

Restaurant industry is highly competitive industry. There are many small fast food

businesses in the industry who fight with each other to improve their customer base;

McDonalds is not an exception to this. Since its establishment in 1940, MCD has excelled in

the sector. Nevertheless, to stay in the competition, it started with McCafé. This helped the

company to stay in the business as a major fastfood business. Another major step came out

when McDonald started Breakfast to compete with the existing business serving breakfast.

Hence, this industry is extremely competitive and the MDC should be up to date with

customer taste & preferences.

Ease of Entry

Although it is hard to enter the restaurant business, it is hard to establish a distinct brand

name. There is a high cost of entry in the market and there is \ high research and

development costs. Large established companies with strong brand identities such as

McDonald’s do make it more difficult to enter and succeed within the marketplace; new

entrants find that they are faced with price competition from existing chain restaurants.

Substitutes

There are many substitutes in this industry. Since there are a wide variety of products that

people can choose, they could either be substituted by MDC Burgers, Beverages, dairy

products, and others.

Strength of Suppliers

Power of suppliers within the fast food industry would be relatively small, unless the main

ingredient of the product is not readily available.

Strength of Buyers

Relatively strength of buyers is low in this industry

The Road Ahead

Entry to Tier 2 and Tier 3 cities – The main target customer for McDonald’s

is the new urban Indian family. With the customer demographics constantly

changing and tectonic social and cultural shifts being observed in Tier 2 and

Tier 3 cities due to globalization, the company is now expanding to Tier 2

cities like Pune and Jaipur.

Rolling out McBreakfast across all outlets – In India, the company has

recently launched its entry into the breakfast food category. This is now

launched on a pilot basis on select stores. In Mumbai, it available at the Vile

Parle outlet. The company views this category as a key growth driver in

future.

How McDonald’s Became a Household Name in India

In the US, McDonald’s is branded as a fast food restaurant that offers QSC&V

(Quality, Service, Cleanliness & Value). In India, the company has to market

products to a group of people who prefer family dining. Thus, McDonald’s was

marketed as a fine dining restaurant where a family can enjoy group meals in a

comfortable set up. Incorporating this philosophy in the USP of the company,

McDonald’s launched a series of television commercials, such as ‘Toh Aaj

McDonald’s Ho Jaye’ (Let’s go to McDonald’s today) and ‘McDonald’s Mein Hai

Kuch Baat’ (McDonald’s has something that attracts you). Initially, the restaurant

targeted children and teenagers. In 2004, the Happy Price Menu was launched to

attract price-sensitive middle-class individuals to the restaurants. In 2008, a new

advertising campaign, Prices of the Yesteryears, was launched to attract teenagers

as well as adults.

FUTURE ANALYSIS

McDonalds’ can use following promotional techniques which should be

appropriate to be used for increasing the sales:

1. Increase its product line.

2. To have more variety to choose from, to include more deserts and more items.

3. To provide better and quick service.

4. Lower the supply chain cost so that it helps in cost reducing.

5. To expand their Happy Meal choices to attract and retain customers.

6. To educate about healthy lifestyle.

7. Introduction of cafeterias serving premium and specialty coffees and other beverages

and other products such as cakes, pastries etc in the existing McDonald’s.

8. Provide with better ambience.

9. Focus on gifts for all generations i.e. youth, kids’ especially senior citizen which is

completely new concept.

10. Special promotions during festivals as Indians tend to spend more at such events.

11. Increasing the space for provision of birthday party areas.

12. Try to sponsor college festivals.

13. Work for social welfare of the society.

CONCLUSION

McDonald's marketing mix is strategic because of the diverse approaches that are

used. First, in identifying the "four P's" of marketing addressed earlier (product, price,

promotion, and placement), research shows that McDonald's is very careful in

making decisions that effect each area and/or how each area effects the other.

McDonald's is concerned about how the firm will fulfil the needs and wants of its

customers and in the activities associated with maintaining the relationships with its

stakeholders. McDonald's stakeholders include customers, franchisees, suppliers,

employees, and the local communities surrounding them.

McDonald's has shown care for customers through the decisions to add more

healthful foods to the menus, by changing how products are packaged or how foods

are prepared, and by philanthropic contributions and sponsorships. Local adaptation,

no doubt, has contributed to McDonald’s business growth in India. The restaurant

has developed competitive advantages in the industry of serving quality fast food at

a low cost. In addition to these decisions, the development of the Golden Arches or

Ronald McDonald has provided consumers with memorable icons that are

associated with quality, service, and value, just like the McDonald brothers and Ray

Kroc intended.

McDonald's faces some difficult challenges in moving away from the fast food king to

a more health conscious provider for customers who care about what they eat. The

keys to its future success will be maintaining its core strengths-an unwavering focus

on quality and consistency-while carefully experimenting with new options. The

company's environmental efforts, while important, should not overshadow its

marketing initiatives. Though there are many opportunities for this fast food giant,

McDonald's must keep the strategic nature of its marketing efforts to stay on top and

provide what customers want.

Exhibits

1. McDonald’s Indian Menu

Vegetarian Non Vegetarian

McVeggie Chicken Maharaja Mac

McAlooTikki McChicken Burger

Paneer Salsa Wrap Shahi Chicken McCurry

Crispy Chinese Wrap Chicken Mexican

McCurry Pan Fillet-O-Fish

Pizza McPuff

Vegetarian Menu

Non-Vegetarian Menu

Survey Questionnaire

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

Favourite Product

6%

18%

12%

34%

12%

8%

10%

MAHARAJ MAC

MC CHICKENBURGER

MC VEGGIEBURGER

FRENCH FRIES

MC CURRY PAN

FILETO FISH

OTHERS

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

Is the product line adequate?

28%

34%

38%YES

NO

AVERAGE

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

Problems Faced in McDonald's

24%

4%

16%

16%

40%

Long Queues

Rude Behavior ofEmployees

Congestion

Other

No Problem

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

Improvement Required

10%

6%

30%

24%

20%

10%

Delivery Time

Capaciousness

Product Variety

Prices

Offers anddiscounts

Others

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

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

30%

26%

18%

4%

22%

Burger

Golden Arches

Service

Value for Money

Fun

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

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

THE NEW BREAKFAST MENU

CUSTOMER QUESTIONNAIRE

1. How frequently do you go to restaurants?

Only on holidays On special occasions

Weekends Everyday

2. Which restaurants do you go to?

McDonalds Pizza Hut

Nirulas’ Others (specify) ---------------------

3. What drives you to go to this restaurant?

The quality of food Better service

Homely atmosphere

4. Are you satisfied with the present service provided by the Restaurant?

Yes No

5. What is the time taken at the counter by you to book your order?

Within 2 minutes 2 - 5 minutes

5 - 7 minutes 7 - 10 minutes

6. How much time do they take to deliver your order?

Within 5 minutes 5 - 10 minutes

10 - 15 minutes More than 15 mins.

7. What is your view about the hospitality provided by this Restaurant?

Average Good

Very Good Excellent

8. What is your satisfaction level with McDonald's?

Attributes No. of Respondents Percentage

Extremely Satisfied

Moderately satisfied

Moderately dissatisfied

Extremely dissatisfied

OK

9. What is the level of understanding of service problems of the customers?

Attributes No. of respondents percentage

Excellent

Very good

Average

Poor

10. Which are the combination of the factors do you thing very vital while you select a

particular fast foods

Service price and location

Service, Price, Promotional Scheme, Location

Price, Location, Promotional Scheme

11. Why do you prefer McDonald's?

Service differentiation Price differentiation

Product differentiation Promotional Scheme

12. How frequently do you visit other restaurants except McDonald's?

Regularity Frequently

Occasionally Rarely

13. How do you evaluate at the various aspects McDonald's, Nirulas and Pizza Hut ?

Scale 1-5 (1 is the minimum, 5 is the maximum)

McDonald’s Nirulas Pizza Huts

Ambience

Cleanliness

Behaviour of employees

Space management

Menu composition

Quality of food

Service quality

14. What do you have to say for happy hours concepts in McDonalds?

Excellent Good idea

Does not matter Poor

15. Please give suggestions (If any) for improvement in service quality

16. Which similar restaurant you think has the best service quality and why?

17. Would you recommend McDonald's to your friends and relatives?

Attributes No. of respondents percentage

Definitely Yes

Probably Yes

Probably No

Definitely No

18. Any Suggestions for overall improvement of fast food joints?

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