McDonald’s Marketing Program The story of McDonald’s began in 1940 when Dick and Mac McDonald open their first car hop in San Bernardino, CA which had a large menu and employees served customers while they sat in their vehicles. In 1948 the brothers redesigned the location to include a walk-up self-service counter and drive-in, simplified the menu to only 9 items and opened a second location.In addition to burgers and fries, the McDonald’s brothers served milkshakes made with an appliance called a Multimixer which they bought from a salesman by the name of Ray Kroc, who, in 1949 visited the brothers in San Bernadino to supply them with additional Multimixers. Kroc was extremely impressed with the efficiency and success of their operation and discussed the brother’s interest in expanding. Ray Kroc caught the vision of the franchise model by becoming McDonald’s franchise agent and in 1955 officially opened the first McDonald’s franchise in Des Plaines, Illinois.The restaurant was constructed using red and white tile and with large golden arches which famously became the signature look for many years. Four years later they opened their 100th store Fon Du Lac, WI in 1959.

McDonald’s first international locations were opened in Canada and Puerto Rico in 1967. One of the main components of McDonald’s success came in 1961 with the establishment of Hamburger University which opened in Elk Grove Village, Illinois. Ray Kroc knew that to orchestrate a successful expansion the McDonald’s system must be taught and duplicated with exactness.The success of Hamburger University was proven in 1963 with the opening of the 500th location in Toledo, OH. McDonald’s began to market to families in 1962 by including indoor seating and introducing the Ronald McDonald character in 1966 which was instantly popular with children.

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The company has continued to grow throughout the years into one of the most recognized restaurant chains in the world. Since its inception 56 years ago McDonald’s has grown to more than 33,000 restaurants in 118 countries with approximately 1. million employees worldwide (McDonald’s website, n. d. ). The company also currently boasts $24. 1 billion in revenue and $2. 9 billion in net income (Kowitt, 2011).

In addition to a popular menu, services include a play area for children, Redbox video rental in most locations along with Wi-Fi so customers can access the Internet on compatible devices. McDonald’s operates each facility with calculated exactness based on years of experience in field trials, internal research in test kitchens and customer surveys and feedback.All of this information is taught at the Hamburger University training facility which is duplicated with perfection in each restaurant around the world. The result of this operating strategy is staggering. “Last year average per-store sales jumped to $2. 4 million, from $1. 6 million in 2004” (Kowitt, 2011). Most people when asked about fast-food almost immediately recant the name McDonald’s.

The name is synonymous with low cost, high flavor, eat-on-the-run food. McDonald’s for better or worse has carved a niche in the world’s eating habits and it doesn’t show any signs of giving up that position. Every day 64 million people in 118 countries eat at its restaurants, which generate revenue that trumps Starbucks, KFC, Pizza Hut, and Taco Bell combined” (Kowitt, 2011). Over the years McDonald’s has become a major player in the world’s fast food industry. Their unique blend of marketing has allowed them become one of the most recognized brands in the world. Although, the product is low priced the amount of marketing dollars that McDonald’s spends is not; this translates into $2 Billion dollars annually and ranks them amongst the top 15 advertisers of the world (“McDonald’s looks for marketing chief”, 2010).McDonald’s has carefully and strategically marketed their brand as one that stands for low price, high flavor, fun fast food.

The marketing mix of a company consists of various elements which form the core of a company’s marketing system and hence helps to achieve marketing objectives. The marketing mix in the case of McDonald’s is described as follows: Product- 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.In order to meet these changes, McDonald’s has introduced new products and phased out old ones, and will continue to do so. Care is taken not to adversely affect the sales of one choice by introducing a new choice, which will cannibalize sales from the existing one (trade off). This is done through its rigid product testing phase, this approach “ensures a new launch is adding incremental sales rather than stealing share from an existing item” (Kowitt, 2011). McDonald’s knows that items on its menu will vary in popularity.

Their ability to generate profits will vary at different points in their cycle. In India McDonald’s has a diversified product range focusing more on the vegetarian products as most consumers in India are primarily vegetarian. The happy meal for the children is a great seller among its menu choices. Price- 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 quality is being compromised.

It is important when deciding on price to be fully aware of the brand and its integrity. In India McDonald’s classifies its products into two categories namely the branded affordability (BA) and branded core value products (BCV). The BCV products mainly include the McVeggie and McChicken burgers that cost Rs 50-60 and the BA products include McAloo tikki and Chicken McGrill burgers which cost Rs20-3.REFERENCE? This has been done to satisfy consumers with different price perceptions. Promotion- The promotions aspect of the marketing mix covers all types of marketing communications. One of the methods employed is advertising which is conducted on TV, radio, in cinema, Internet, using poster sites and in the press such as newspapers and magazines. Other promotional methods include sales promotions, point of sale display, merchandising, direct mail, loyalty schemes, door drops, 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 continue buying the item.

McDonald’s the prime target market is children which is exemplified by the popular Happy Meal which provides small toys along with the meal.Apart from this, various schemes for winning prizes by way of lucky draws and scratch cards are given when an order is placed on the various meal combos. Place- As an element of the marketing mix, place 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.

McDonald’s outlets are very evenly spread throughout cities and along major highways which makes them very accessible.Drive-in and drive-through options make McDonald’s products further convenient to the consumers. Great companies are built with great people. It is interesting to note that 40% of McDonald’s executives once worked behind the counter. (Kowitt, 2011) Franchise owners are thoroughly trained at Hamburger University and the employees share standard uniforms and are trained especially to offer friendly and prompt service to its customers. All successful franchises build their foundations on the people following the right process.At McDonald’s the proper process is followed from the inception of an idea to its implementation in each restaurant and thrives on the continuous flow of consistent products and service.

Environmental Analysis While McDonald’s was not the first of the big burger chains, for decades McDonald’s steamrolled its competition. The restaurant gave millions of Americans their first jobs and changed the way a nation ate. It rose from a single outlet to become an American icon. But odd things have happened to the fast food giant in more recent years.

Now McDonald’s does not just sell the most burgers in the world but it’s also one of the biggest retailers of salads. (Robinson, 2005). While the chain is still expanding, it is getting harder and harder to spot those golden arches. So what’s going on? The things that have spurred McDonald’s to change have affected other chains as well. Changing environmental factors and long term trends such as changes in the competitive landscape, political and legal woes, economic shift, and socio-cultural shifts began to affect the chain and threaten to leave it marginalized.

The problems started during the 1990s, when McDonald’s set its focuses on expansion. The company introduced 40 new menu items and almost all of them failed, mainly due to poor planning. Consultant Michael Seid, who manages a franchise consulting firm in West Hartford, CN, points out that McDonald’s, offered a pizza that didn’t fit through the drive-through window and salad shakers that were packed so tightly that dressing couldn’t flow through them.

At the same time the firm stopped grading franchises for cleanliness, speed, and service.The changes led to a rise in complaints and a fall in customers. Consequently, in 2002 McDonald’s experienced it’s first-ever decline in annual revenues. The company was forced to slash sales growth estimates, decrease the number of new chains, and close hundreds of existing stores (Robinson, 2005). The board reacted by ousting its then chief executive Jack M. Greenberg , and replacing him with retired Vice-Chairman James R. Cantalupo.

Cantalupo and his successors elected that they would rebuild the company’s foundation. It’s fruitless to add growth if the foundation is weak,” says Cantalupo (Robinson, 2005). Management concentrated their efforts on getting the basics of service and quality right. They instituting a tough “up or out” grading system that helped eliminated underperforming franchisees. The company also implemented technological advances that led to improved efficiency and higher customer satisfaction (Robinson, 2005). But not all the problems at McDonald’s could be solved by cleaning up restaurants and adding crafty machinery.Popular books such as Eric Schlosser’s Fast Food Nation, Marion Nestle’s Food Politics, and Greg Critser’s Fatland along with an entertaining but disturbing documentary by filmmaker Morgan Spurlock, ‘Super Size Me’, began to heighten awareness of the adverse health effects of the heavy consumption of fast food.

In August of 2002 a group of overweight children in New York City filed a class-action lawsuit against McDonald’s. The plaintiffs claimed that McDonald’s had engaged in deceptive advertising, sales and promotion; produced food that was reasonably unsafe; and failed to warn consumers of the dangers of its products.In laymen terms, customers were suing McDonald’s for allegedly making them fat (Pelman, 2002). While fending off litigation, McDonald’s watched as the “fast-casual” segment sprung up to become one of the fastest-growing restaurant categories. Take for instance emerging, In-N-Out Burger. Its burgers were tasty and grilled when ordered and never placed under heat lamps.

Customers began switching to rivals with food that tasted better and seemed healthier, chains such as Subway and Chick-Fil-A. Previously, prospective franchisees would wait in line for hours just for a chance to get an application into McDonald’s two-year training program.However, when franchisees started sensing that eating habits were shifting away from McDonald’s burgers to fresher, better-tasting food they began jumping ship to faster-growing rivals. Paul Saber, a McDonald’s franchisee for 17 years, sold his 14 restaurants in 2000 to later open 15 rival Panera Bread stores. When Saber was asked about this shift he responded,”The McDonald’s-type fast food isn’t relevant to today’s consumer (Robinson, 2005).

” Panera was not the only new competition though. The firm observed that consumer’s tastes were dramatically shifting.Foods once considered exotic, like sushi and burritos, were turning into everyday options; quick meals of all sorts were turning up in supermarkets, convenience stores and even vending machines. In 2003, executive Charlie Bell, was widely quoted as saying that the problem with McDonald’s, was like what happens to many companies who ‘get fat, dumb and happy and take their eye off the ball. ’ Alan Feldman, who was COO for domestic operations at McDonald’s realized that the corporation could not survive by “cloning their business into the future” (Robinson, 2005).

The Giant decided it was time for major change.The firm went back to basics; hygiene problems were addressed, the expansion plans for new restaurants were slimmed down and the firm focused on increasing sales at its existing outlets (Robinson, 2005). While the obesity lawsuits were not successful, it seems that litigation did in some way motivate McDonald’s to voluntarily institute changes. In the suits the plaintiffs were seeking compensation for obesity related health problems, improved nutritional labeling of McDonald’s products and funding for a program to educate consumers about the dangers of fast food.

The company realized that it could not allow growing obesity threats and nutrition concerns to go unaddressed so, it did just that (McDonald’s, 2003). In March of 2003 the company announced that it would be adding a number of lower-fat and lower-calorie offerings to its menu. It then increasingly began to post nutritional information in prominent locations in their stores and online.

The burger giant introduced its “Go Active” meals, a Happy Meal for adults that includes a premium salad, bottled water and a pedometer. Low carbohydrate dieters were given new options as well.Additionally, kids’ Happy Meals became healthier when the restaurant offered Apple Dippers (apple slices served with a low-fat caramel dipping sauce) and new beverage choices including 100% pure apple juice as well as 1% milk (McDonald’s, 2003).

These steps were apart of McDonald’s Balanced Lifestyles platform which together hope to improve the awareness of healthy eating. The company shifted its whole advertising strategy which had once focused on taste, value and convenience to now highlight the burger giant as the restaurant that wanted to help consumers achieve a healthier life.The program’s launch included athletes such as Wayne Gretzky, China’s gold-medal diver Guo Jingjing and tennis stars Venus and Serena Williams (McDonald’s, 2003). The firm did not just stop there. McDonald’s had lost a significant market share to its growing field of competitors.

The company knew that it had to do more if it wanted to recapture audiences. In an article for The Wall Street Journal, reporter Janet Adamy writes that in 2008, McDonald’s observed the public’s willingness to pay $4 for a cup of coffee at chains like Starbucks and set out to capitalize on it.Many analyst thought that it did not make sense for McDonald’s to go toe-to-toe with a chain that seemed its polar opposite. Starbucks was designed as a sophisticated hub where customers could get a premium coffee drink and read their newspapers while McDonald’s had come to be known as a configuration of fluorescent lights with plastic and vinyl booths where meals are counted in billions served. Critics argued that even if McDonald’s could successfully build its own version of a grande cappuccino, that the Starbucks customer would never come (Adamy, 2008).

However with high unemployment and rising fuel costs McDonald’s management sensed an opportunity to further democratize espresso. Adamy writes, “McDonald’s finally woke up and smelled the coffee,” with the number of outlets it already has in place they realized, “it could take Starbucks head-on. ” McDonald’s set out to recreate the Starbucks experience. The company hired baristas and ensured that espresso machines were displayed at the front counters in every one of their fast-food outlets, a big shift for a company that has always hidden its food assembly from customers (Adamy, 2008).McDonald’s said it wanted customers to see the coffee beans being ground and baristas topping the mochas Frappes with whipped cream. “You create a little bit more of a theater there,” says John Betts, McDonald’s vice president of national beverage strategy. McDonald’s observed that coffee companies had tried and failed to replicate the products and experiences of Starbucks, so in addition to the theater the burger giant borrowed another idea from Starbucks; the people component to delivering customer experiences has become ultra-important to McDonald’s.

The corporation has begun to ensure that McDonald’s franchisees only hire people who are “very friendly” (Adamy, 2008). McDonald’s began offering lattes, cappuccinos, and frappes selling coffee drinks ranging in price from $1. 99 to $3. 29, comparing well to pricier Starbucks. In just a few years the burger giant had successfully stolen a great deal of market share from the coffee chain.

Though they had their critics this move turned out to be one of the best so far for the corporation.McDonald’s predicts that this expanded coffee menu will add over $1-billion in yearly sales, but the corporation is not stopping there. McDonald’s admitted that they are trying to modernize their business in efforts to appeal to all audiences, particularly young professionals. So in addition to changing their menu, an article on ABCNews. com reported, McDonald’s would begin abandoning its cookie-cutter orange-and-yellow stores for individualized ones that offer more local flair and fare.

To prove this, couches, Wi-Fi and plasma TVs are already visible in most stores.In a blog post, writer Gu Chin said the giant no longer wants to be seen as a store that wants consumers in and out as quickly as possible but instead one that welcomes them to stay as long as they want (Chin, 2006). Sophia Galassi, vice president of restaurant development at McDonald’s added, the change is to entice people to use and see McDonald’s as a sociable place where social connections can be made. They hope people will begin to go to McDonald’s for other reasons than to eat fast food. They will go there to meet up with friends, have meetings or just to relax (Chin, 2006).Beginning in the 1990’s McDonald’s began to experience great decline. It created some of its own problems while others were the result of environmental factors and sheer misfortune. Management did not panic, but instead tactically set out on mission of continual growth with a balanced strategy of responding to the demands of their changing environment while strengthening their core.

McDonald’s largely concentrated its reviving efforts on addressing hygiene and customer service issues, responding to growing nutrition concerns, increasing its new product development efforts and rebranding its overall concept.This resulted in improvement in customer experiences, the additional acquiring of healthy menu options, premium coffee, comfy couches, advertising built around the “I’m Lovin’ it” slogan, which have all helped to give the giant a whole new appeal. The firm intends to continue its success by maximizing sales and profits in existing restaurants, adding new restaurants and improving international profitability.

SWOT Analysis- McDonald’s success can be contributed to the establishment of the brands that caters to customers from all walks of life.The company is continually making strides to appease the customers by adding extensions of healthier food selections such as salads, smoothies, and fruits. In this portion of the paper, an analysis on the internal and external components will be viewed to give a brief synopsis of the strengths, weaknesses, opportunity and threats of the company. Strengths- McDonald’s has a sturdy foundation in its leadership position that contributes to the attainment of their well established global brands. The company has increased its global market equity by cultivating and entering into international markets.The business has a huge diversified geographical presence. Regions that include the USA, Europe, Asia Pacific, Middle East, Africa, Latin America and Canada.

According to the information provided in Datamonitor Profile on McDonald’s ( 2011 ), income received from the global markets accounted for 66. 3%, while the US accounted for approximately 33. 7%.

The expansion of economic scales that the company has acquired has reduced the risks and has allowed the company to hold constant with its income growth.McDonald’s large scale of operations in comparison to their competitors, places the company as the highest among its industry rivals. The 2010 fiscal year recorded McDonald’s as producing revenue greater than that of Yum! Brands and Burger King ( Datamonitor, 2011 ). McDonald’s large scale of operations and economy scales are well established enough to continually magnify their market investments as it relates to the price advantage.

The success in cash flow is another strength that will promote entrance into new markets and new customers. Weaknesses- McDonald’s has been a part of several litigations around the world.The violations that have been filed against the company are to include claims for violation of state consumer fraud, unfair competition or deceptive trade practices, failure to warn, negligence, breach of express and implied warranties, misrepresentation and concealment, unjust enrichment, and false advertising ( Datamonitor, 2011 ). The company has had its share in product failures that had contributed to the loss of sales and negative outcomes on its income and profitability.

McDonald’s introduced several products that were not successful for the company such products included Arch Deluxe, McLean Deluxe, McSoup and McPizza.The Arch Deluxe, in particular caused McDonald’s to plummet in its sales because the initial onset of the product, was to provide a burger that was catered to the adult customer but the sales did not deem successful because McDonald’s has always been known to cater to all customers, but in greatest numbers, children. The company also encountered another failure, this problem manifested by McDonald’s promotional tie to the movie ‘Shrek’. McDonald’s partnered with the entertainment sector to advertise and to promote glassware for the movie and due to this business venture a major recall was orced because of high cadmium contents found in the glassware ( Datamonitor, 2011 ). The lack of product innovation is a weakness of McDonald’s but the company’s new strategy had successfully dealt with the problems through the popularity of its new salads, smoothies, fruit yogurt parfait, coffees and fruit snacks for the children and other new products that have been added to the menu.

Opportunities- McDonald’s offer great opportunities for growth by promoting franchise restaurants as an expansion to the company. Over the past few years the company has made strides in enhancing the mix of its franchised and company operated restaurants.The introduction of developmental license strategy and franchise initiatives gave way to the increase of franchise restaurants in the 2006 fiscal year which was 73. 7% to 80. 4% during the fiscal year of 2010 ( Datamonitor, 2011 ). The transition of company operated restaurants to franchisees and developmental license brought about promising profits to the company. To increase profitability the company had focused on product innovation by introducing new premium products such as the Angus Third Pound hamburger and the McCafe specialty coffee menu.

The hot drinks that were introduced around the world generated a total income of $68 billion in 2009 alone and yielded a compound annual growth rate of 3. 7% between the years 2005 and 2009. The performance forecast that follows the same pattern will also yield a 3. 7% (CAGR) for the hot drinks from 2009 to 2014 the next five years and is expected to generate $81. 4 billion by the year of 2014. To say that the come-back from the product failures that were among the weaknesses of the company have paid-off with the lucrative market for the hot drinks that have been added to the menu is an market advantage.

Threats- Yum! Brands, Burger King, Whataburger, Wendy’s, Jack in the Box and the new kid on the block, Carls Jr. are among the retail food industry contenders. The retail industry is favorably competitive with regards to price and quality of food products, new product development, price advertising levels, promotional initiatives, customer service, reputation location and attractiveness and maintenance of properties ( Datamonitor, 2011 ).Another potential problem that may arise as a threat to the company is the new healthy food trend that has bombarded the retail food industry.

McDonald’s, just as other fast food restaurants, often receive bad media publicity because of its affiliation to obesity. Over the years the number of obesity cases has risen to a staggering all-time high in the country and because of such data the food industry must implement healthier products to remain competitive in the market.In conclusion, unfortunately there is no single marketing strategy that is guaranteed to achieve success each time it is implemented. It takes the ingenuity of experienced individuals to study, analyze, experiment and adapt at different times in different markets. McDonald’s is a company who has, for the most part, maintained the philosophy derived in its humble beginnings which is to create a positive image in the minds of fast-food consumers of prompt product delivery, satisfactory customer service and overall cleanliness of its establishments.McDonald’s has created an icon of its famous Golden Arches as its corporate symbol and has been very successful in establishing their product value, brand and logo in the hearts and minds of millions of the world’s population. Customers know exactly what to expect when they enter a McDonald’s establishment; there is nothing more a customer desires than for a company to meet their expectations, needs and requirements with each visit.

What are they doing right? – McDonald’s was established to cater to active people who had very little time to cook or were too busy to sit down at a real restaurant.The vision is to provide fast service with quality products designed to leave customers. McDonald’s continues to innovate and try new things while maintaining the core essentials that originally made them great. They have studied and listened to the consumers and have made the necessary adjustments to accommodate for setbacks. McDonald’s has added and removed many menu items over the years to cater to specific geographical areas, seasons and trends. This shows its ability to adapt to market conditions and seize profitable opportunities.

In order to meet their social responsibility, McDonald’s interest in children, families and community involvement became apparent in 1974 with the introduction of the Ronald McDonald House of Charities (RMHC) which not only sponsors local charities and events but provides rooms and meals for families who are attending to their children in nearby hospitals. Nearly 300 RMHC locations are now active around the world. RMHC believes that when people come together to bless the lives of children it strengthens families, communities, nations and ultimately the world. (Ronald McDonald House Charities website, n. . ) What are they doing wrong? – Obvious setbacks have been unpopular food products due to poor planning and testing and focusing on opening additional stores while loosing sight on increasing individual store revenues. In 2006 McDonald’s was found acting inconsistent with its policy against corporate sponsorship. New Zealand Police discontinued allowing McDonald’s from participating in its road safety program in local schools and pre-schools because McDonald’s was handing out vouchers to school children during school visits to use at their establishments.

Even school road-crossing guards had McDonald’s logo on their safety vests (Burton, 2006). For corporations, community involvement is encouraged but simultaneously targeting children sends the wrong message, one of ulterior motives, not of sincere service. Recommendations for change- McDonald’s has been criticized over the years for targeting children, arguably of which has been a successful tactic. However, though it is vital in marketing that one identifies and targets its customers, it is important not to cross the line of exploiting the market and preying on its weaknesses.The success of McDonald’s has brought a slightly tarnished image of a company whose interest in children can sometimes be viewed as ulterior.

McDonald’s; the name, the logo, golden arches, Ronald and every product beginning with ‘Mc’, each one of these marketing features are widely recognized throughout the world. Although the company still needs to use the efficiency of target marketing with certain products, it is recommended McDonald’s use the established branding as tools for general promotion of the company.McDonald’s must continue to use its success to promote good in the world, as with the Ronald McDonald House Charities. When corporations display good stewardship of their success by giving back to the communities which contribute to their success it establishes in the minds and hearts of the people that the corporation is trustworthy. This translates to people responding positively to company and its products.

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