NMIMS UNIVERSITY

McDonald’s : Behind The Golden Arches

Customer Acquisition and Retention
Group RITABRATA GHOSH (316) M.S. DEEPAK BALAJI (339) JIGAR SHAH (350) NIKET SHER
LEKAR (354) DISHANT SIDANA (357)
The McDonald’s Story - Genesis....................................................
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McDonald’: Behind The Golden Arches
Business Model..................................................................
...................................3 McDonald’s in India..........................
...................................................................4
Challenges in Entering Indian Markets...........................................
.................4
Segmentation, Targeting and Positioning.........................................
....................4 Customer Perception and Customer Expectation .............
...................................6 McDonalds Marketing Mix (5 P’s)..............
.........................................................6 The McDonald’s Experien
ce..............................................................................
10 McDonaldizing the Suppliers..................................................
...........................12 Importance of PLC in McDonalds....................
..................................................13 Competitors Analysis.......
................................................................................
...14
Two Dimensional Perceptual Mapping..............................................
.................15
SWOT Analysis...................................................................
...............................15 The Road Ahead................................
.................................................................16 Exhibits....
................................................................................
...........................17
1. McDonald’s Indian Menu.........................................................
...................17 Survey Questionnaire......................................
..............................................17
References......................................................................
.....................................23
The McDonald’s Story - Genesis
The story of McDonald’s started in 1954, when its founder Raymond Kroc saw a hambu
rger stand in San Bernardino, California and envisioned a nationwide fast food c
hain. Kroc proved himself as a pioneer who revolutionized the American restauran
t industry. Today McDonald’s is the world’s largest fast food chain serving 47 milli
on customers daily. McDonald’s is now one of the most valuable brands globally, wo
rth 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.
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McDonald’: Behind The Golden Arches Year 1955 1957 Events Ray Kroc opens his first
restaurant. McDonald’s Corporation is created Quality, Service, Cleanliness and V
alue (QSC & V) becomes company motto 1963 1965 1968 1974 1996 Ronald McDonald ma
kes debut The company goes public Big Mac is introduced` Happy Meal is launched
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 comp
rehensive 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.
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McDonald’: Behind The Golden Arches
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 br
and reputation.
McDonald’s in India
McDonald’s entered India in 1996. McDonald’s India has a joint venture with Connaugh
t Plaza Restaurants and Hard Castle Restaurants. Connaught Plaza Restaurants man
ages operations in North India whereas Hard Castle Restaurants operates restaura
nts in Western India. Apart from opening outlets in the major metros, the compan
y 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. Globa
lly McDonald’s was known for its hamburgers, beef and pork burgers. Most Indians a
re barred by religion not to consume beef or pork. To survive, the company had t
o be responsive to the Indian sensitivities. So McDonald’s came up with chicken, l
amb 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 vegetar
ian items like McVeggie burger and McAlooTikki. The separation of vegetarian and
non-vegetarian sections is maintained throughout the various stages.
Segmentation, Targeting and Positioning
McDonald’s uses demographic segmentation strategy with age as the parameter. The m
ain target segments are children, youth and the young urban family.
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McDonald’: Behind The Golden Arches
% of kids who influence what FMCG brand their family buys
80% 70% 60% 50% 40% 30% 20% 10% 0%
71% 59% 52%
Biscuits
Burgers & Pizzas
Fruit Juices
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 w
heels to various Walt Disney characters are given (the latest in this range is t
he 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 chi
ldren can play arcade games, air hockey, etc. This strategy is aimed at making M
cDonald’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 aggressiv
ely, 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 u
rban 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 am
bience 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 ens
ured that McDonald’s maintains a positive relationship with the customers.
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McDonald’: Behind The Golden Arches
Customer Perception and Customer Expectation
Customer perception is a key factor affecting a product’s success. Many potentiall
y 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 custo
mers.
Target Segment A Family with children
What is McDonald’s for me? 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.
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 th
e fact that they connect strongly with the brand. However, fulfilling some of th
e customer expectations like a broader product variety provide McDonald’s a great
scope for improvement.
McDonalds Marketing Mix (5 P’s)
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
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McDonald’: Behind The Golden Arches
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 incl
udes certain aspects such as packaging, guarantee, looks etc. This includes both
the tangible and the nontangible aspects of the product and service. McDonalds
has intentionally kept its product depth and product width limited. McDonalds st
udied the behaviour of the Indian customer and provided a totally different menu
as compared to its International offering. It dropped ham, beef and mutton burg
ers from the menu. India is the only country where McDonalds serve vegetarian me
nu. Even the sauces and cheese used in India are 100% vegetarian. McDonalds cont
inuously innovates its products according to the changing preferences and tastes
of its customers. The recent example is the introduction of the Chicken Maharaj
a Mac. McDonalds bring with it a globally reputed brand, world class food qualit
y 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 importan
t so that the product is available to the customer at the right place, at the ri
ght time and in the right quantity. Nearly 50% of U.S.A is within a 3 minute dri
ve from a McDonald’s outlet.
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McDonald’: Behind The Golden Arches 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. McDonal
ds offers hygienic environment, good ambience and great service. Now McDonalds h
ave also started giving internet facility at their centres and they have been pl
aying music through radio instead of the normal music. There are certain dedicat
ed areas for children where they can play while their parents can have some qual
ity 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 t
he 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 a
nd 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 volume
s.
Promotion: What is the suitable strategy and channels for promotion of the
product?
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McDonald’: Behind The Golden Arches
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 th
ree main objectives of advertising for McDonald’s are to make people aware of an i
tem, feel positive about it and remember it. The right message has to be communi
cated 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 tele
vision 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 under
stands the fact that a happy employee can serve well and result in a happy custo
mer. 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 cu
stomer.
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McDonald’: Behind The Golden Arches The level of importance has changed to be in t
he following order (the more important people are at the top): 1. Customers 2. F
ront line employees 3. Middle level managers 4. Front line managers The punch li
ne “I’m loving it” is an attempt to show that the employees are loving their work at M
cDonalds 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 abi
lity to successfully integrate the customer’s perspective in its products and oper
ations in a comprehensive manner. The revamped menu in India is an example of Mc
Donald’s strategy of integrating the customer’s perspective in its products. And, th
e operational integration is evident from McDonald’s emphasis on its suppliers as
its customers as well as its treatment of its consumers as coproducers of servic
es. 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 achie
ving this aim of Service Marketing.
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McDonald’: Behind The Golden Arches
Service Delivery Process
Core Product
Supplementary Process
During the Service Delivery Process, each moment of interaction between the firm
and the customer, called “Moments of Truth”, helps understand the opportunities tha
t 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 custo
mer, every time an attendant takes down the order from the customer waiting in t
he queue, every time the cashier interacts with the customer, every time the att
endant helps the customer guided the customer towards the table, every time the
attendant cleans the table, etc.
Customer “Moments Of Truth” – The Service Encounter
Service Provider
Service Delivery Points
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McDonald’: Behind The Golden Arches Managing these “moments of truth” is a great chall
enge in Service Marketing especially due to customer’s involvement as a co-produce
r 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 unde
rstanding the nature of the entire Service Delivery Process and the various stag
es in the process that are exposed to the customers. Transparency in the process
es 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 o
n service design improvements. Internal Customer Focus is equally important as E
xternal Customer Orientation in order to win these “moments of truth”. McDonald’s focu
s on its People and their service delivery methods therefore plays a very import
ant 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 combinat
ion of the factors mentioned above. This has helped McDonald’s become Service Lead
er and a successful Service Brand. This is evident from the fact that very few o
f 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 t
he food processing industry as well. McDonald’s realized that the battle between f
ast food chains would increasingly be one of efficiency of supply, lower cost pr
oduction and greater desire to innovate. It pioneered with innovative and sophis
ticated food distribution and packaging systems when the traditional food proces
sors were unwilling or unable to supply food items that McDonald’s demanded. They
achieved amazing consistency by devoting more attention than anyone else to fiel
d service and training at store level. Production was concentrated in huge plant
s 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 e
vident than in development of new, improved products. Some of McDonald’s classic f
ood items like Filet-o-Fish, French Fries, Chicken Nuggets etc. are results of s
upplier innovation. Interestingly, it took KFC more than three years before in f
inally introduced its own version of chicken nuggets. Thus supplier technologica
l expertise had given McDonald’s a product which was not a mere marketing innovati
on but a technical one. McDonald’s attempted to squeeze labour out of the stores b
y
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McDonald’: Behind The Golden Arches moving more preparation back into the processi
ng 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 fastfood industry’s most fragmente
d distributed system into more efficient one which helped McDonald’s reduce its in
ventory 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 withi
n 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 in
troduction is timed such that the new product does not cannibalize the product a
lready in the maturity or growth stage. Thus the secret lies in getting profits
with different products in the different stages of the PLC.
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McDonald’: Behind The Golden Arches
A perfect example of revitalising a product in decline phase
The French Fries have been an important part of the McDonalds menu worldwide. Bu
t now it was in the stage of decline and was actually not generating proper retu
rn. In an attempt to revitalize it, a new variant was introduced namely Shake Sh
ake Fries. This is being served with chatpata spice mix which has resulted in in
crease in the sales of French Fries and has elevated it from to the decline stag
e. 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 unde
rstudy has other competitors eating away into its market share. In addition to i
ts traditional rivals—KFC, Dominos, Pizza Hut—the firm encounters new challenges. Ju
mbo 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 competi
tor 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 servic
e and experience based competition which McDonald’s can use for competitive advant
age against Jumbo King. Keeping in mind the demographics of the area, McDonald’s h
as Wi-Fi enabled the outlet to cater to the student community. It is for this ov
erall “Food, Fun & Folks” experience that customers pay a premium over the other com
petitors. Competition also reduces product lifecycle; inducing firms to revise t
heir products portfolios and to revisit their product market to understand chang
ing needs, expectations and
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McDonald’: Behind The Golden Arches perception of different market segments. The n
ew McBreakfast would be introduced between 6 to 11 am as a pilot project. This w
ould 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 sho
ws how demographic shift can affect the demand for products and services. McDona
ld’s has anticipated these changes to maintain its competitive edge. Two Dimension
al Perceptual Mapping
SWOT Analysis
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McDonald’: Behind The Golden Arches
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 d
ue 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 p
ilot basis on select stores. In Mumbai, it available at the Vile Parle outlet. T
he company views this category as a key growth driver in future.
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McDonald’: Behind The Golden Arches
Exhibits
1. McDonald’s Indian Menu
Vegetarian McVeggie McAlooTikki Paneer Salsa Wrap Crispy Chinese McCurry Pan Piz
za McPuff Non Vegetarian Chicken Maharaja Mac McChicken Burger Shahi Chicken McC
urry Wrap Chicken Mexican Fillet-O-Fish
Vegetarian Menu
Non-Vegetarian Menu
Survey Questionnaire
Q. Which is your favorite product at McDonald’s? 17 | P a g e
McDonald’: Behind The Golden Arches
Favourite Product
MAHARAJ MAC 6% 18% MC CHICKEN BURGER MC VEGGIE BURGER FRENCH FRIES 12% MC CURRY
PAN FILETO FISH 34% OTHERS
10% 8%
12%
Q. Is the product line in McDonald’s adequate?
Is the product line adequate?
28% 38% YES NO AVERAGE
34%
Q. What is the main problem you faced at McDonald’s?
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McDonald’: Behind The Golden Arches
Problems Faced in McDonald s
Long Queues 24% 40% 4% Rude Behavior of Employees Congestion Other 16% 16% No Pr
oblem
Q. Which area do you think needs the most improvement?
Improvement Required
Delivery Time 10% 10% 6% 20% Capaciousness Product Variety Prices 30% 24% Offers
and discounts Others
Q. What is the first thing that strikes your mind about McDonald’s?
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McDonald’: Behind The Golden Arches
First Thing About McDonald s That Strikes Customer s mind
22% 30% 4% Burger Golden Arches Service Value for Money 18% 26% Fun
THE FREE TOYS PROVIDED WITH HAPPY MEALS (WALT DISNEY’S MADAGASCAR)
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McDonald’: Behind The Golden Arches
KIDS PLAYING AT PLAY PLACE- MCDONALD’S VILE PARLE (MUMBAI)
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McDonald’: Behind The Golden Arches
THE NEW BREAKFAST MENU STARTED AT SELECT STORES IN MUMBAI.
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References
1. “Marketing Management” – Dr. Rajan Saxena 2. “McDonalds – Behind the Arches” – John S Lo
3. www.Mcdonaldsindia.com 4. Outlet Manager – McDonald’s Vile Parle
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