Marketing Strategies Used By McDonald's
This article will discuss the marketing strategies used by McDonald's and how they are predicted to affect the future of the company.
McDonald's has a history of implementing new strategies to capture a bigger market.
The first changes in marketing strategy occurred in 1969, when the introduction of the Happy Meal, Mac Tonight, and the introduction of the Dollar Menu are the first changes in marketing strategies.
The company introduced the Happy Meal as a parent-pleasing product that had a place for children to consume as much food as they wanted and McDonald's sold a food that children love.
The Happy Meal replaced the hamburger and fries of the original Happy Meal, and it was advertised in a more bright, child friendly, and upbeat way.
The McDonald's Dollar Menu introduced in 1993 is the second, major marketing strategy implemented by the company
The new food items on the menu were all priced under $1, but most people did not recognize the low price, and McDonald's started to realize how popular the menu was.
The company did not anticipate that people would choose a menu that was limited in number. In the first quarter of 1994, sales of these items were increasing dramatically, and McDonald's decided to buy these items out of every store to better meet the demand.
These new food items are estimated to have increased sales by one billion dollars.
These two marketing strategies alone increased sales by 30% in the first year of their implementation, and sales increased by another 30% in 1995.
The success of these two marketing strategies helped to keep sales at McDonald's steady during the recession of 1994.
McDonald's then went on to try to better meet customer demand by the introduction of the McRib sandwich in 2004.
The McRib is a pork sandwich that McDonald's decided to create to offer their customers something different. While the McRib was a success, it did not provide the same experience and enjoyed only minor success.
After these strategies have been implemented, there may be a gap in the company's revenue. While the consumers grew familiar with the marketing strategies used by McDonald's, they may not see the same success in the future.
McDonald's is trying to increase the appeal of their products by offering delivery, removing many of the menu items to focus on the McChicken sandwich, and changing the boxes that the food is packaged in.
These changes help to increase the appeal of their products and are estimated to increase revenue by $2 billion.
However, the main issue that McDonald's faces is that their core customers, that are parents with young children, have more trouble affording McDonald's menu items, and as a result have fallen away.
The rising cost of food is another issue for the company, and cost increases have been going on for years, but the effects have not yet shown in McDonald's sales.
However, the company has been trying to pass these costs onto the consumers in order to generate the same kind of revenue that it has seen in the past. By reducing the cost of an item from $1 to $1.29, McDonald's can save about $2.50, and by requiring a 20 cent increase in the minimum wage for workers in the United States, McDonald's can save about $350 million annually.
These cost-cutting measures may show a little success, but they are too little, too late for McDonald's. The higher costs of food and labor and the loss of interest of a core customer group has taken a toll on the company and they now face a major downturn.
It is estimated that McDonald's will see revenue declines of 4% to 5% in the next three years, but if it is unable to improve, it will see more rapid and significant revenue declines.
The company is currently trying to find a replacement for its president, Paul Mangiamele, who left McDonald's to work at Walmart in March of 2008. McDonald's is hoping that the person they hire will be able to pick up where Mangiamele left off.
A search committee has been formed and is currently interviewing candidates to find the right person to fill the position. They have decided to advertise the position until May 1.
McDonald's is also facing a lawsuit over using his own name to help sell a computer that is being sold by his company, BlueMountain
The company had been developing a video game called McDonaldland that is a remake of the McDonald's character, but claimed that their game did not contain his name. McDonald's claimed that BlueMountain was acting on their behalf when they used his name on their marketing material, and thus breached his contract.
BlueMountain decided to fight the claim and, despite McDonald's attorney's claims that a Supreme Court ruling had already ruled against the company, they decided to take their fight to court.
The trial is scheduled to start in June of 2008.
McDonald's has recently been losing market share to competitors and their executives are being replaced by other, younger executives with new ideas.
The new CEO for McDonald's is Salah Khan, a very successful, 37-year-old executive that has been with the company for 11 years and is familiar with the company's business models.
His plans are to increase the company's international business, and to also try to create a stronger presence in the fast-food market with more successful products.
He is said to be interested in trying out breakfast in McDonald's restaurants and has said that the company is currently working on several new foods.
Khan has said that he will attempt to reduce the company's declining sales by $1 billion each year by 2011, and has also stated that they are considering turning some of their restaurants into a restaurant.
McDonald's has stated that it plans to increase investment in the company by $2.5 billion.
The company has said that it plans to introduce three new large-format restaurants in 2008, one of which is in the United States, and another in England, both of which will be 5,000 square feet.
It has also planned to start to decrease the number of large-format restaurants in the United States, and instead focus on offering more smaller restaurants for its customers to go to.
The company also plans to redesign the restaurants in many of its stores, by making them much larger and cleaner, as well as offering more convenient ways for customers to order their food.