McDonalds: The Arch Deluxe Launch Case Study

How is McDonalds doing?

How is McDonalds doing?

Is this a good sandwich?

Andrew Selvaggio, the creator of the Arch Deluxe

Arch Deluxe creator Selvaggio sees links between the sandwiches attributes and some potentially powerful childhood memories. The question is whether the sandwich will evoke those same memories in the minds of target customers.
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How would you describe the Arch Deluxe position?

??? A hamburger for adults

Why has McDonalds been so successful?

???

Why has McDonalds been so successful?

A firms competitive advantage consists of three key components:

Sources of advantage (skills and assets), Positional advantages (superior customer value and/or lower relative costs), and Performance outcomes.

McDonalds success. The companys sources of advantage include both assets (e.g., employees, retail outlets, real estate, financial resources, supplier network) and skills (e.g., franchisee training, employee training, restaurant audits).
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Why has McDonalds been so successful?

In 1994 Day defined a firms capabilities as complex bundles of skills and accumulated knowledge.

McDonalds skills certainly include the fast provision of consistent food in a clean environment for reasonable prices. These capabilities reflect McDonalds values (QSCVquality, service, cleanliness, and value) and are supported by the accumulated knowledge and skills of employees, technical systems such as the clamshell grill, and management systems such as franchisee training manuals and Hamburger University.

McDonalds skills and assets have enabled McDonalds to develop a positional advantage with consumers as a place for family meals.
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McDonalds been so successful?

Key elements of McDonalds business strategy include

a focus on families, an emphasis on franchisee profitability, and an insistence on tight control over both suppliers and franchisees.

McDonalds enjoyed timing advantages because the company was the first national fast-food chain to emphasize these elements. McDonalds was also the first chain to target parents through children, and exploit the power of national television advertising.
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McDonalds Challenges

McDonalds ability to turn skills and assets into a positional advantage has been affected by competitor marketing strategies. While competitors have not been able to challenge McDonalds on cleanliness, they have attacked on other fronts by attempting to redefine quality, service, and value:

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Who goes to McDonalds? When? Why?

Why consumers choose McDonalds over other fast-food alternatives.

When children are present, McDonalds is an attractive fast-food alternative. So a challenge for McDonalds is the presence of active, noisy children makes the atmosphere less attractive to adults unaccompanied by children.
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When you think of McDonalds, what comes to mind?

Consumer benefits (e.g., speed, and convenience), marketing associations, and users. The common theme that ties these brand associations together. McDonalds is a place for families with kids.

Need to understand the relationship among skills and resources, position, and performance
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The Arch Deluxe launch

The Arch Deluxes apparent lack of impact to the sandwich itself. Specific objections to the sandwich include:

The hamburger is still fried. Adults dont want a mayonnaise-based sauce. Adults dont want gunk on their hamburger. Increasingly health-conscious adults dont want another high-fat, high-calorie hamburger. The concern about frying presents the biggest challenge for McDonalds because fixing this problem would require a change in the way the company cooks its hamburgers. Major changes in their operations. Impact on company goals, consistency and speed.

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The Arch Deluxe launch

The campaign really offers an anti-position: The Arch Deluxe is a sandwich that kids dont like. The lack of product emphasis will probably also be a problem for franchisees, who have a history of complaining about ad campaigns that do not focus on products. For many operators, there was too much McDonalds personality coming through and not enough McDonalds product. Given this history, the franchisees would be less than happy with the lack of product focus in the Arch Deluxe ads. McDonalds has introduced the Arch Deluxe with the stated goal of inviting adults back to McDonalds.

More simply, given a choice, many adults dont want to eat in a place that is strongly associated with a clown. 15

Law of sacrifice
You have to give up something in order to get something Positioning to one segment often means sacrificing another segment

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Consumer behavior: How would you segment the market for fast food?

Skills and resources that make McDonalds such a difficult competitor in some segments limit the firms ability to compete effectively in other segments. In particular, McDonalds is always going to have a difficult time competing for adults who want a relaxing meal with other adult friends. McDonalds has done a very good job of positioning themselves to consumers in certain consumption situations (adults with children). The process of making their restaurants attractive in those consumption situations simultaneously makes the restaurant less attractive in other consumption situations.
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Recommendation

The proper goal for the Arch Deluxe should not to invite adults back to McDonalds, but to target adults accompanied by children and convince those adults to substitute the Arch Deluxe for other, lower-margin sandwiches like the Big Mac or the Quarter- Pounder with Cheese.

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What Happened

In mid-August McDonalds introduced a new Arch Deluxe advertisement that starred Andrew Selvaggio, the creator of the Arch Deluxe. The spot focuses on the ingredients of the new product like a soft potato-flour roll, a mustard-mayonnaise sauce and an optional slice of bacon. Those attributes are lovingly described by the creator of the Arch Deluxe, Andrew Selvaggio, the executive chef for McDonalds. He builds a sandwich on camera with the same self-confident flair he exhibited at a glitzy news conference May 9 at Radio City Music Hall; at one point he exclaims, Im in the zone! Two commercials run, One showed basketball star Grant Hill rejecting a young player who had never tried an Arch Deluxe. In the second, an old man picking up trash keeps muttering, darn kids until he picks an Arch Deluxe wrapper, when he mutters, darn grown-ups.
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What Happened

On September 19, 1996, the New York Times reported that:

In an unusual move, the head of the McDonalds Corporation has sent a memorandum to the companys 2,700 United States franchisees defending the introduction of the Arch Deluxe, saying that the sandwich was never intended to be a silver bullet

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What Happened

On September 26, McDonalds introduced three Arch Deluxe line extensions: the Crispy Chicken Deluxe, the Grilled Chicken Deluxe, and the Fish Filet Deluxe.

From teens to seniors, our customers are telling us that were really on to something with our new grown-up taste

Deluxe line features premium products with a heartier, more robust taste. As the customers in our test markets have told us, its a grown-up taste that will keep them coming back

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