MCDONALD’S MARKETING MANAGEMENT
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Executive Summary
McDonald’s is considered as one of the most popular and well-loved brands in the world and it can be reflected on the growing size and improving financial performance of the company. The said success can be attributed to the strong brand of the company, because of the different activities and strategic movements that have been done by the management for the past 69 years. It includes the long history of the company, which enables McDonald’s to be well experienced regarding the changing environment of the business which resulted to the company to innovate and strive for continuous development.
The strong brand of McDonald’s benefited the brand owner as well as the customers. For the brand owner, it had helped to maintain the position of the company in the market because of the growing number of loyal customers, which reflect on the financial aspect. Furthermore, because of strong brand, the company enables to become a global business, which helps to increase its size. On the other hand, it had helped the customers in the process of deciding about where to eat.
Contents
TOC \o "1-3" \h \z \u Executive Summary
Introduction
Background of the Company
Strong brand and brand owners
establish customer loyalty
Financial Aspect and Profitability
Attract quality internal customers (Employees)
strong brand and customer
How Mcdonald’s established strong brand
Long History and experience
Media Support and Advertisement
Differentiation and Innovation
Conclusions and recommendation
Bibliography
Appendices
Appendix A: Top 10 Most Powerful Brands
Appendix B: How Strong Brands General Greater Profitability
Introduction
As of now, the world of business is facing different challenges, particularly the increasing competition due to the changes in the lifestyles and demands of the customers. As a result, more and more business are becoming aware that applying effective marketing management will be very beneficial to the competitive advantage and position of a given product or service in the market. Brand is defined as the translation or conversion of the strategy of a business into the experience and practice of the consumers which suggests the specific behavior of the consumer (Van Gelder 2003, p. 15). It can also be considered as the promise that the level of quality people expect from a brand will turn to loyalty of the customers. Thus, the process of applying different marketing strategies to a given product, product line or brand is called brand management. In addition it can help to increase the perceived value of the product to the customers, which result to the increase in the franchise and equity of the brand (XPFLOW Software, Inc. n.d.). Therefore, it can be said that strong brand has positive impact on the performance of the company as well as the different entities or stakeholders that are directly and indirectly connected to the company.
This paper will focus on examining the different benefits of the strong brands to the business and the consumers by using the case of McDonald’s. Furthermore, it will also tackle issues that are related on the different processes that are involved in establishing strong brand.
Background of the Company
McDonald’s is the leading food service organization in the world. It generates more than $40 billion in terms of Systemwide sales. It operates in 31,000 restaurants in more than 120 countries over six continents in the world. The company claims that they have the benefits that are from the scale and strong financial position; the most recognized and respected brands; unparalleled global infrastructure and competencies in terms of restaurant operations, real state, retailing, marketing as well as franchising; leader in areas of social responsibility; sharing knowledge and expertise in terms of food safety; and committed in protecting the environment for future generations (Funding Universe 2003).
The restaurant chain of McDonald’s of today began its humble beginnings in San Bernardino, California as a renovated barbecue car-shop restaurant by the McDonald brothers Richard and Maurice (Briggs n.d.). The business was later on developed by Ray Albert Kroc by convincing the McDonald brothers to open more restaurants under his management, which later on lead to the opening of Des Plaines, Illinois restaurant, the current McDonald’s museum. (Parris Kraus 2006). During 1960s to 1970s, the company experienced a phenomenal growth due to the dependency of Americans towards fast services (The Wall Street Journal 2003).
Due to the different strategic movement, particularly with the aspect of marketing and R&D, McDonald’s had been able to maintain its position as one of the most popular and loved brands in the world, as well as in each nation where it operates. The study of BrandZ and Newsweek positioned McDonald’s as the 8th most powerful brands in the world, with the total brand value of US$49,499 million, increased by 49%, compare with the last year (see Appendix A) (BrandZ 2008).
Strong brand and brand owners
Strong brands have become a vital part of the asset value of a company. In the case of McDonald’s, its brand is one of the primary reason why it had survived on the different challenges that were encountered by the company regarding the changing lifestyles and demands of the customers, together with the different problems that are related with the economic aspect.
establish customer loyalty
Due to the popularity of the McDonald’s, it can be said that its brand name is synonyms to fast-food, burgers, fries etc. Because of that, the company had been able to established more than 31,000 restaurants around the world, and enables to serve more than 47 million customers around the world (McDonald’s 2009). The said number can be considered as loyal customers who came from different geographic, age and economic status that became used to McDonald’s and considered the company as part of their fast-food consumption. Due to that, it can be said that one of the most important asset of the company is its brand name and image. A product or retail establishment has many aspects which combine in order to form its total impression. There are many studies which show that consumers form impressions of brands, and that these impressions later exert a major influence on the choice of products or brands, and the said impressions serve as major factors which influence on the buying behaviors of the customers (Porter & Claycomb 1997). Furthermore, when the brand equity is high, customers are often more willing and prepared to pay a price premium for the product and more likely to engage in favorable word-of-mouth communication about the firm and its brand (Beverland 2005)
The effort of McDonald’s in maintaining their position as one of the strongest brands in the world is considered as intensive because just like other companies, the company believe that the brand is considered as a vital aspect of the company.
Financial Aspect and Profitability
For many financial analyst, a key consideration when looking at companies with strong brands is that they present less risk. Strong brands generally remain strong, and this assumes the likelihood of a solid income steam. The said strong income stream reflects the interaction of different factors. With a strong market share, usually comes connected with higher price points, coupled with lower price elasticity compare with the competitors. As a result, it will help the company to have a better margins and a higher return on investment. Aside from that, well-known brands are much more likely to enjoy good distribution, which helps maintain high market share. These factors will result to greater profitability (see Appendix B) (Elliot & Percy 2007).
In the case of McDonald’s, the fast-food industry, where it belong is experiencing problems that are connected to health issues which resulted for the said industry to lose market share against the fast casual dining restaurants (Eligon 2008). However, even though the industry is facing problem, the company still maintain its position as the most favorite fast-food chain the world. As a matter of fact, beside of the said factor, together with the ongoing problems about financial crisis, the company had been able to report 6.9% increase in sales during April 2009, and 5.1% in May of the same year (McDonald’s 2009).
Attract quality internal customers (Employees)
According to McDonald’s one of the most important factors behind the success of the brand is the people who are working together in order to offer high quality services and products towards the customers. Organizations that have a strong brand can use its brand in order to attract and retain employees (Elliot & Percy 2007). Increasingly companies are allocating more money on the employee or employer brand, because strong employer brand can help to attracts better applicants (Slaughter & Zickar 2004). In the end, according to Ritson (2002) strong employer brand image can help to reduce the cost of employee acquisition, improve the relations between employees and employer, at the same time extend the average length of the employee retention and allow the companies to attract high-caliber staff at lower salaries than the competitors with weaker employer brands (cited in Elliot & Percy 2007).
strong brand and customer
Although strong brand primarily and immensely beneficial towards the brand owner or company, it also play a vital aspect towards the customers. Brands play a vital role in the process of the decision-making of the customers (Bendixen 2004). Different research in psychology has shown that the name recognition alone can result in more positive feelings toward nearly everything, whether it is music, people, words and even brands.
In one study, the sample population was asked to taste each of the three samples of peanut butter. One of these samples contained an unnamed superior (preferred in blind tests 70% of the time) peanut butter. Another contained an inferior (not preferred in taste test) peanut butter labeled with a brand name known to the respondents but neither purchased nor used by them before. The result showed that 73% of the respondents selected the brand name (inferior) as being the best-tasting peanut butter. The said result shows that the power of brand-name recognition. Mere name recognition will make people feel an inferior peanut butter tastes butter than the actually better-tasting peanut butter (Yang 2005). According to Davis (2000), the said consumer psychological reaction to brand names is called PATH or the acronym for promise, acceptance, trust and hope. A strong brand makes the intangible feelings of promise, acceptance, trust and hope tangible (cited in Yang 2005).
How Mcdonald’s established strong brand
According to Aaker (1996) developing the strength of a brand is not deemed to be easy (cited in Schroeder & Salzer-Morling 2006). Different branding literature suggests that more advertising does not always create a strong brand, especially those brands that are badly positioned or connected with the inferior products or services (Schroeder & Salzer-Morling 2006). According to Aaker & Biel (1993), in order to establish a strong brand, it is important to consider the different factors which influence brand strength: Longevity, product category, quality, media support, personality and imagery, continuity, renewal and efficiency.
Long History and experience
McDonald’s is already serving its customers and been in the industry for 69 years. Thus, the longevity of the brand can be considered as one of the most important aspect which enables the company to build a strong brand. It can be observe that majority of the firms that were included in the top most powerful brand have been in their respective industry for 25 – 50 years and even longer. Just like financial equity, brand equity is built up over time. Thus, those brands that have maintained a consistent presence over the years are better able to utilize the familiarity and understanding a customer has with their products in order to establish a momentum and power (Aaker & Biel, 1993).
In addition, brand loyalty cannot be built in a short period of time. It is important to connect the idea that the behavior of the customers can be affected by different factors including social factors from family, friends and society. Because, McDonald’s had been there for a long time, it had created a strong relationship with the customers, particularly with the families and group of friends, which enables them to be familiar and loyal to the brand. In addition, the company also enables to gain the trust of the customers because despite of the different challenges and hindrances towards the operations of the company, it had maintained its best performance.
The company is also focusing on the corporate social responsibility (CSR). The strength of the brand is not because of the strength of creating a difference in the perceptions of the customers but because of the meaning that brand creates (Kay 2005). Thus, brands can be powerful symbolic products, having considerable social impact and provoking considerable loyalty (Muniz & O’Guinn 2001 cited in Kay 2005).
Media Support and Advertisement
The company also focuses on implementing different media and advertising activities by creating different messages that will strengthen and support brand to be connected with the customers, particularly families and young adults. In addition, the company also focuses on integrating the corporate social responsibility in marketing in order to build bonds of trust with the customers and the community where in the company performs its business. In 2003, the I’m Lovin’ it is considered as one of the most important marketing move and campaign of the company in order to target the changing behavior of the customer (Thompson & Strickland 2005, p. C-299). Visibility plays a vital role in establishing a strong brand, because it enables the customers to have a recall. Aside from advertising, McDonald’s gains visibility by strongly branded location. Furthermore, in order to come up with the current technological dependency of people, McDonald’s is one of the companies which established their presence over the Internet, and later on enables their customers to order online. The website serve as a communicating channel for the customers and stakeholders and the company by presenting news and archives about the company, at the same time, serve as a marketing tool that is used in order to entice customers (McDonald’s Are “Lovin’ It” 2005). In connection, the company had been able to show a strong message continuity by the evolution of its advertising slogans from one campaign to another, where in each theme is executed towards a range of customer targets around a single core message, where in the said message does not change radically from year to year (Aaker & Biel, 1993).
In connection, the company had been able to categorize their customers based on their demands. For instance, McDonald’s had been able to include products in the menu for those premium and price sensitive customers. Furthermore, the company also focuses on focusing on the demands of children, tweens as well as adults.
Differentiation and Innovation
McDonald’s also focuses on their products by becoming responsive on the changing tastes, demands and preferences of the customers by focusing on the growing interests of the public towards wholesome food choices and other premium products in different part of the globe (Thompson & Strickland 2005, p. C-228). One of the major problems which are being faced by the company is the changing preferences of the people towards healthy diet. Because of the advocacy of different organizations towards health problems, particularly obesity, McDonald’s and its competitors are facing veto vote from mothers, tweens as well as kid. Because of that, the company focuses on food and menu innovation. One of the results is the Chicken McNugget which is made from pressed chicken that is equivalent of hamburger or different miscellaneous parts that were combined and pressed into an easily workable whole. Aside from that, the company also introduced the premium chicken nugget made with breast meat only and offers salad and replaces the shaken salad which is composed of shredded iceberg lettuce with a mixed salad that contains sixteen different lettuces. Furthermore, varieties of fruit and yogurt parfaits, new soup selections, McGriddles and other crispy-spicy options were added in the menu (Silverstein & Butman 2006, p. 177).
The said movement is important because it enables the customers to feel that the company is considering their demands and references in the process of deciding about the products and services to be offered. Aside from that, it also enables the company to change its image into healthy one, which will help to capture the hearts of those figure and health conscious people in the different parts of the globe. Thus, it helps to create a new meaning that the company will show to the current and possible customers.
Conclusions and recommendation
Strong brand plays a very crucial role in maintaining competitive advantage of any company. In the case of McDonald’s, its strong brand had been one of its important assets, which enables the company to have a strong position in the market. The success of the brand can be attributed to the different factors including the process of marketing, R&D or innovation and human resource.
McDonald’s had been able to focus on the different factors which are influencing the behavior of their customers, and uses those information in order to offer new or improve products and services which will ensure satisfaction and loyalty from the customers. At the same time, the company also focuses on the different marketing strategies which will improve their visibility, particularly the aspect of real state, which enables the company to locate their restaurants in feasible places and the advertising activities, including online.
In order for the company to maintain the said position, it will be important to maintain the current strategic practices including the process of introducing products that will meet the needs and demands of different market segments such as premium and cheap products, and those for adults, tweens and children.
Above all, it is crucial for the company to maintain its connection with the society by the fully integrating the aspect of CSR in their entire system. This can help to maintain the brand meaning and image of McDonald’s which is considered as one of the most important marketing strategies today.
Bibliography
Aaker, D & Biel, A 1993, Brand Equity & Advertising: Advertising’s Role in Building Strong Brands, Lawrence Erlbaum Associates
Bendixen, M, Bukasa, K A & Abratt, R 2004, ‘Brand Equity in the Business-to-Business Market’, Industrial Market Management, vol. 33, no. 5, p. 371 – 380
Beverland, M B 2005, ‘Creating Value for Channel Partners: The Cervena Case’, Journal of Business & Industrial Marketing, vol. 3, pp. 127 – 135
BrandZ 2008, The 100 Most Powerful Brands08, Millward Brown Optimar, viewed 10 June 2009, <http://www.millwardbrown.com/Sites/optimor/Media/Pdfs/en/BrandZ/BrandZ-2008-Report.pdf>
Briggs, M, The History of the McDonald’s Restaurant Chain, Helium, viewed 10 June 2009, < http://www.helium.com/items/867501-the-history-of-the-mcdonalds-restaurant-chain>
Eligon, J 2008, Where to Eat? A New Restaurant Genre Offers Manhattan More Choices, viewed 10 June 2009, < http://www.nytimes.com/2008/01/13/nyregion/13casual.html?_r=2&scp=1&sq=fast%20casual&st=cse>
Elliot, R & Percy, L 2007, Strategic Brand Management, Oxford University Press
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Appendices Appendix A: Top 10 Most Powerful Brands
Position
Brand
Brand Value (US$m)
Brand Value Change
1
86,057
30%
2
GE (General Electric)
71,379
15%
3
Microsoft
70,887
29%
4
Coca-Cola (1)
58,208
17%
5
China Mobile
57,225
39%
6
IBM
55,335
65%
7
Apple
55,206
123%
8
McDonald’s
49,499
49%
9
Nokia
43,975
39%
10
Malboro
37,324
-5%
Source: (BrandZ 2008)
Appendix B: How Strong Brands General Greater Profitability
Source: (Elliot & Percy 2007)
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