I’ve been watching what McDonald’s is up to a lot lately. The Travis Scott partnership was well conceived and executed, but the brand has been a bit of a mishmash of ideas over the last few years and yesterday’s announcement of three new chicken sandwiches points to a business that is still struggling with the foundational principle of Market Orientation and market strategy.
Let me explain:
Expansion into chicken because it is growing faster than beef isn’t a strategy:
In marketing the core idea is to be market oriented and to look at the market from the point of view of your customer.
Remarkably, McDonald’s seems to often confuse being product oriented with “hearing” their customers “loud and clear”. Because we’ve seen the company over the last few years turn to fast casual type selections to compete with Shake Shack, rely on the brand of star entertainers to reach audiences that should be in their core segments, and now we are seeing them roll out three chicken sandwiches because “chicken is growing faster than beef.”
I like the Travis Scott partnership effort because I generally like co-branding efforts, especially when they are done well. And, in this case, the customer won, McDonald’s won, and Travis Scott won.
But in the case of the McDonald’s chicken sandwich, the business case is a little less clear.
If you look at McDonald’s brand associations, you’ll see that most customers associate them with fast food, burgers, and fries.
To break through into a crowded market, McDonald’s will need to do at least two things that are expensive, difficult, and likely not to work:
- They have to educate their market on why they need to think chicken when they think McDonald’s.
- They have to hope that once they’ve created associations with McDonald’s and chicken that they can create enough awareness and preference to get folks to go to McDonald’s over the other fast food brands that are more closely aligned with chicken like Popeye’s and Chick-Fil-A.
This boils down to a classic example of a business confusing tactics with strategy and placing more important on product than customer.
To drive growth and profits, there is a path forward:
Because McDonald’s is being driven by the constant demand of growth that hampers any efforts to put their business on a firm footing, the changes that are needed to get off the carousel of gambling on new products to fit a new trend or partnerships that aren’t guaranteed to always be home runs isn’t guaranteed to work.
But there are three steps that they can take right now to get them headed in the direction of future profitability:
Get Market Oriented, Fast:
You have to begin at the beginning and make sure the business is looking at what they are doing through the eyes of their customers.
If you look at the brand associations that McDonald’s has of fast food, burgers, and fries, you’d struggle to see the natural fit of three new chicken sandwiches just because “chicken is growing faster than beef” or “customers are demanding more chicken options.”
You have to look at people’s actions and not what they say they are going to do.
And, if you look at the recent history of McDonald’s, you’ll see that their customers are looking to them to deliver fast food, at a reasonable price, and in most cases they look to them for comfortable things that they’ve known for years like burgers, fries, and the McRib.
The idea here isn’t to let the tail wag the dog, but to look at why your customers buy from you and find a way to give them more of what they associate with you.
Revisit their STP:
A quick glance at the McDonald’s website and it is pretty apparent that McDonald’s is a business getting pulled in all directions at once.
That’s a challenge a lot of businesses deal with and it usually comes from not having a good strategy in place or having one that is changing too often or not often enough.
The core idea for McDonald’s and their drive to profitability needs to start by segmenting their market, understanding what consumer behaviors look like in the market, and defining the different segments based on behavior.
Proper segmentation work.
After that, they need to go through the process of figuring out exactly who they are going to target.
The challenge that is evident from their recent earnings calls, their chicken announcements, and the website is that they haven’t picked a target for their attention and this has led them to be unable to position themselves in the market in a way that will enable their initiative to cut through the clutter of fast food options, deliver options, and other competition that they are battling for their customers’ spending.
Finally, spend some time on positioning yourself in the market.
Compare the McDonald’s landing page with the landing page of In-N-Out and the differences can’t be more striking.
As soon as you hit the In-N-Out landing page, the big message is “Quality You Can Taste” and that defines a pretty clear position for the brand against their competition because their competition is being implied to have lower quality and to not be as tasty.
Not so much!
Instead of adding to the menu, consider killing off some of the menu items:
One recap of the last quarterly earnings call from McDonald’s said that their franchises were demanding a “category leading chicken sandwich” and that’s the classic sign that a business is falling into the trap of being sales oriented.
The challenge with being too sales oriented is that you do a couple of things that sound good on the surface but actually eat into your profitability like:
- Thinking all sales are good sales
- Having more things to sell is a good thing
- Using price promotions to goose revenues in the short term
In looking at the menu for the typical McDonald’s, you can easily count almost 40 to 50 menu items.
When you combine that with the brand associations that most customers have with McDonald’s of fast food, burgers, and fries, you see an organization that is losing focus by trying to be everything to everyone.
The Pareto Principle is something that is common knowledge to a lot of people now and research has pointed that it holds up, not at 80/20, but at 60/20.
I bring this up because in the case of McDonald’s the constant expansion of the menu is probably putting the 20% of products that deliver most of the profits for the business under the pressures of losing attention in a cluttered menu and driving down the quality because of the need to squeeze efficiencies into the business due to the lack of many products carrying their weight at the checkout.
This combination leads to a situation where the customer has a lower quality experience, the business ends up being less profitable, and the value proposition of the restaurant gets muddied and lost…leading to the endless repeating of the cycle.
So what should McDonald’s do?
I’d take a step back before I went forward, but I’m also not a big fan of chicken either.