McDonald's has a lot to be happy about. Their quarterly earnings report Wednesday beat analyst expectations by a whopping 42%. This coming week's issue of The Economist has an excellent in-depth article
detailing the strategy that McDonald's used to weather the storms that it's been through, and how the company has fundamentally changed its course.
This gives you an idea of where they were coming from:
The company reached a low point in 2001, when customer-satisfaction surveys showed McDonald's was falling well behind its direct rivals, Wendy's and Burger King. Customers were also switching to healthier offerings, such as Subway's freshly filled sandwiches. Lots of money was spent opening yet more stores, but margins were shrinking and complaints about dirty restaurants and indifferent staff were growing. The firm's philosophy of QSC&V -- quality, service, cleanliness and value -- just was not working any more. McDonald's ended 2002 with its first quarterly loss since 1954, the year Mr Kroc persuaded the McDonald brothers to let him franchise their new "Speedee" self-service restaurant system.
McDonald's had lost more than direction. A wave of anti-American feeling abroad turned its world famous "golden arches" from an asset into a liability. And there was growing concern about obesity and junk food. McDonald's was even sued (so far, unsuccessfully) for making people fat. Even now, long after its debut in America, Morgan Spurlock's film "Super Size Me" is making overseas audiences cringe at how he made himself ill and gained 25 pounds (11kg) by eating only McDonald's food for 30 days.
Compare that to this:
McDonald's said yesterday that its third-quarter profits would beat expectations, as its healthier menu helped to boost sales in the US.
McDonald's has spent the past two years closing stores instead of opening new ones, cleaning up stores and improving its food in an effort to reverse its fortunes.
The company attributed stronger same-store sales in the US to more variety and value, tastier food, more convenient hours, stronger marketing and improved service.
The "tastier food" part of that is really at the core of McDonald's (McDonald's's?) recent success. After getting lots of flak about the nutritional value of their fare, they've introduced some more healthful menu items, like "premium salads" and parfaits. This has been a brilliant move, and it comes from McDonald's finally understanding an important insight about their business. People go to McDonald's first and foremost for the convenience. Indeed, there are many people who go in spite of the food, not because of it. If you can turn the food from a liability (for some) into an asset, you can get a lot more customers.
The conventional wisdom is that it was a great move, but it hasn't always been that way. The Motley Fool's 2002 take
on McDonald's and healthful food was pretty typical:
A health-conscious conscience doesn't become you. Do you really think a junk-food restaurant would grow to become the world's largest chain if all folks really wanted was a bucket of reduced-fat fries? Why tweak the one signature item folks habitually crave? You have salads and grilled chicken sandwiches on the menu, so rest easy knowing that the clogged arteries are self-inflicted. Remember your McLean Deluxe fiasco? Or the ill-fated Border Lites campaign at Taco Bell? Give folks the option to graze on wheat germ if you must, but don't try to fix one of the few things that isn't broken.
So why did it work? Imagine a mother in her minivan with three hungry kids. Getting fast food definitely involves less hassle than going to a sit-down restaurant, and because it's much quicker, there's less whining. But she cares about her children's health, and so she hesitates before feeding them burgers, fried potatoes, and sugar water. Even if she figures, "hey, they run around so much they'll work it off", she still won't want to violate her diet by eating there herself. So she's even less eager to go there, and if she does, she'll spend less, because she may not get something for herself. But if McDonald's now has a menu with lots of fruits and veggies, she's more eager to take her kids there, the kids start thinking more positively about healthful food, and she doesn't feel bad getting a meal for herself.
Subway has had tremendous success pushing the "healthful food" line, an they don't even come close to McDonald's in terms of convenience and brand affinity.
This logic has worked wonders for McDonald's in the US. It hasn't been nearly as successful overseas, however
, because McDonald's hasn't been nearly as aggressive on that front:
McDonald's continued to struggle in Europe, attributing flat growth in the region for the month and quarter to high unemployment and stagnant economic growth in several countries -- most notably Germany. Mr Bell said comparable sales rose slightly in the UK, a key market for the fast-food company but one which it has over-expanded in recent years.
And while UK sales have recently gone up a little, that increase comes after a huge decline last year, blamed on increased fears and government warnings about the country's obesity problems.
So McDonald's UK decided to do something radical. They needed to get people's attention, and really drive home the point that McDonald's is a whole new animal now, that eating at McDonald's can actually be good for you.
So what does McDonald's, no stranger to unorthodox marketing techniques
, do? Get rid of one of the most recognized symbols on earth (surpassed only by the crucifix and the Coca-Cola logo), and replace it
with the universal symbol of curiosity:
Consider just how far outside the box a group of advertising executives were thinking at the brainstorming session that came up with this one. Ronald McDonald should ditch his golden arches and opt instead for -- a great big question mark.
Billboards to be unveiled tomorrow will include close-up photographs of fresh salad and fruit pieces, nestling beside that ever-present question mark. A strapline reads: "McDonald's. But not as you know it."
Before your mind gets too blown, there are some important qualifiers here. It looks to only be in the UK, though if successful, I'd imagine it will spread. They won't replace the arches in front of the restaurants -- it's only in advertising campaigns. And it's only going to last for 2 weeks.
It's still a very bold move, nonetheless. They're explicitly shunning a logo that they've spent decades promoting, and trying to tell customers that McDonald's as you know it has ceased to exist, and has been replaced by a new restaurant with a much broader selection of foods.
I think this campaign has a good chance of being highly effective. It will really make people take notice, and possibly walk in and try some of the new McDonald's offerings. The added publicity from news articles hyping the campaign won't hurt either.
If you want your customers to think about you in a very different way, you have to take a very different approach in your marketing. While having a consistent, coherent message is very important, the McDonald's UK experience demonstrates that you can't communicate a radically different message using the same old techniques and expect it to work.
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