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Are those Golden Arches crumbling ?
©
November 2002
Picture the scene: A Penthouse apartment over- looking
Central Park, NY. The phone rings. “Hello, this is Donald Trump, one of
the richest men in the world and with an ego to match it? How can I help
you?”
A nervous sounding voice on the other end says “Ah …Mr.
Trump, I represent one of the largest advertisers in the world and we
were wondering would you like to appear in one of our commercials” The
‘Donald” as he is known, envisioning Microsoft or Boeing has his
interest piqued. “Well can you tell me more?”
“Yes sir, McDonald’s would like you to appear in one of
their commercials”. Trump hesitates a little and asks “And what exactly
do you want me to advertise?”
“Mr. Trump, we think you would be the ideal person to
advertise our $1 sandwich campaign”
Before we come to the end of that conversation, let’s
review why McDonald’s decided to ask Donald Trump to appear in their
advertising.
McDonald’s is in trouble. For seven of the last eight
quarters it has reported declining earnings and has announced plans to
close 175 restaurants globally. Sales in US were down more than 1% last
year and share price has fallen from over $40 two years ago to between
$17-18 today.
Commitment to
change
Given this type of scenario it is not surprising that
management at the Golden Arches is committed to change. And they need to
be. The very significant dollars spent on market research confirmed that
customers find McDonald’s restaurant’s to have poor customer service,
surly staff and not very good food. Apart from that everything else is
apparently OK!
Jack Greenberg, Chairman and CEO of McDonald’s, says the
company is determined to sort the restaurant operations process as an
absolute priority. This is the key to turning customers around speedily
and ensuring that food quality is up to McDonald’s standards.
121,000 mystery
shoppers
In an effort to track just how their customers are being
treated, last year over 121,000 mystery shoppers (yes, 121,000) visited
McDonald’s restaurant.
In addition, the company receives an average of 2,200
customer contacts each day, primarily on their free phone line.
48 hour follow up
McDonald’s commit to providing local follow up within 48
hours. This additional follow up by the burger giant generates goodwill
in that 12% of those who complained are ‘likely to visit McDonald’s more
often’ according to a company executive.
The largest restaurant organization in the world with
over 30,000 units, is not just relying on improved customer service to
re-build volumes. In the United States, they want to aggressively
reposition themselves as providing the best value in the industry.
October saw the introduction of two $1 sandwiches
- Big N Tasty
-McChicken
and November saw the launch of a Dollar Menu which
offers 8 different items for $1.
Can the franchisees really make money on this? McDonald’s
HQ said ‘yes’ when announcing the program. Company research indicates
that overall restaurant profitability can actually increase and there is
no impact on check average. Initial sales numbers for the campaign are
mixed.
McDonald’s
redesign
The chain has committed to spending between $300-400
million on restaurant refurbishment in the next year including working
on ‘external cues’ (that is restaurant exterior to you and me). Tests
conducted in the San Diego, California area where they introduced value
pricing and improved ‘external cues’ resulted in sales increases of up
to 10.5%
The jury is out as to whether the market has passed
McDonald’s by. Baby Boomers are getting older (do you remember when you
were a yuppie?) and tastes have changed. Irrespective of how aggressive
their advertising and promotional schemes are, it is this macro trend
that may result in the burger giant showing very sluggish numbers for
some time to come. But don’t count them out just yet!
And now back to our opening conversation. Donald Trump
did say yes to McDonald’s. We leave the final word to Bill Lamar, senior
vice president of marketing for McDonald’s USA. He says McDonald’s chose
the likes of Donald Trump – “who know great deals when they see them --
to help us make that point in a fun and memorable way,”
***********************************************************************
Conor Cunneen is an internationally acclaimed speaker on strategy,
marketing, leadership and strategy. He speaks on foodservice strategy,
food service growth, profitable foodservice, foodservice trends in
addition to other industries. The author is an award winning humorist
and has won the coveted Chicago Toastmasters Humorous Speaker of the
Year title. He is author of
Why Ireland
Never Invaded America – An Insightful Unique Look at Corporate
Strategy
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