Monday, November 9, 2009

McDonald's Moves Beyond Value Menu to Rise Above

Marketer of the Year Runner-up: Listening to Consumers Led Golden Arches to Growth

Like Walmart, McDonald's, with its menu of inexpensive, comforting items, seemed tailor-made for this recession. But great marketing and focus on product has ensured that the fast feeder hasn't missed any opportunities, even as other burger purveyors have stumbled. Second-quarter same-store sales in the U.S. grew 3.5% and global same-store sales were up 5% when many of the best-performing rivals were flat and the industry was down overall.
Being associated with a value menu chockablock with popular products isn't the worst thing for hard times, but that's not all McDonald's is about. A bold strategy of highlighting core, higher-margin items, like the Big Mac, Chicken McNuggets and the Quarter Pounder resulted in double-digit sales increases late last year and early this year. By doing this and raising the price on the dollar double cheeseburger, they've been able to shift sales toward higher-ticket items.
They might not be the target of burger ads, but it's moms who decide whether to turn the car into the drive-thru. Appealing to them means one thing: having an array of healthy choices on the menu. That's something McDonald's has taken seriously in recent years, introducing salads, yogurts and apple dippers. CMO Mary Dillon -- herself a mother -- has even established a moms' council and given a group of Moms Quality Correspondents what the company describes as "unprecedented access to the McDonald's system" so they can make sure the ingredients and cooking processes are up to snuff for their kids.

Not long ago, McDonald's, as the burger chain leader, was the poster child for unhealthy fare, perhaps best summed up by its starring role in the 2004 documentary "Super Size Me." While it could have the image of an uncaring corporation poisoning million, it doesn't, thanks largely to the fact that it's zeroed in on the health concerns and offered alternatives to all that fatty fare.

With "I'm Lovin' It," McDonald's has a solid global campaign that's translated well around the world. But the fast feeder, mindful of cultural differences and variations among media habits around the globe, can boast a portfolio of strong market-specific ideas. When launching the Quarter Pounder in Japan, it created an unbranded restaurant that only sold Quarter Pounders, an idea that kicked up a lot of buzz before it was revealed to be a McDonald's. The introduction of the McFlurry to France used TV -- no surprise there -- but the biggest portion was mobile, with games and ringtones that played up the idea of customizing the McFlurry. So credible is the brand in France that it recently earned a spot in the Louvre.

Much of the buzz around McDonald's has to do with those lattes, salads, chicken sandwiches and its forthcoming smoothies, but consider that one of the newest menu items is an Angus burger tipping the scale at one third of a pound and a $4 price tag. It's its first burger launch in eight years and, though the timing isn't great, early indications were that the sandwich is catching on -- a timely reminder that what McDonald's knows is beef.

Ethnic Insights Form Foundations of McDonald's Marketing

CMO Golden: 'Start With the Ones Who Are Setting the Pace'

PHOENIX ( -- The marketing at McDonald's is informed first and foremost by ethnic insights that shape the chain's marketing to African Americans, Asians and Hispanics. Then McDonald's lays those insights over work for the general market.

Neil Golden addresses the ANA Annual Conference in Phoenix.
"Ethnic segments are leading lifestyle trends," Neil Golden, chief marketer officer of McDonald's USA, told the ANA assembly. He added that his team decided to "start with the ones who are setting the pace."

They're also where a lot of the money is. Mr. Golden said 40% of McDonald's current U.S. business comes from the Hispanic, Asian and African-American markets, and 50% of consumers under the age of 13 are from those segments. "And they're among our most loyal users," Mr. Golden said.
'No malls in the ghetto'
McDonald's has attempted to understand ethnic segments for decades, hiring Burrell Communications in the early 1970s. But they haven't always gotten it right. Mr. Golden recalled a meeting with Chicago franchisees 15 years ago in which he announced that the African-American population was going to love a new product and marketing program. A franchisee asked him how he knew. McDonald's had done a study. The franchisee asked where it was held. Mr. Golden told him it had been conducted in a mall. "We don't have malls in the ghetto," the franchisee told him.

Since then, Mr. Golden said McDonald's has instituted an "approach that ensures this will never be an afterthought." Now during in the product-development cycle, McDonald's looks for a disproportionate level of ethnic insights, he said. Out of nine focus groups, whenever possible, two are Hispanic, two are Asian, two are African American and the remaining three represent the rest of the market.

When McDonald's takes its ads to market, the chain makes sure that spending behind certain spots represents the country's ethnic makeup, such as 15% behind Hispanic marketing, 12% behind African America, 5% behind Asian.

As for the ad-creative-development process, Mr. Golden said each ethnic agency is given a blank canvas -- within the "I'm Lovin' It" framework -- to create campaigns that will resonate in the respective market. The chain's McCafe launch, for instance, included a Hispanic push aimed at the increasingly empowered Latina. The Asian McCafe work focused on the quality of ingredients. And while McCafe is performing well in the general market, it's doing even better in many ethnically driven locations.

The chain has also looked for more meaningful touchpoints, including a scholarship program for Hispanic students in Texas and tie-ins with Lunar New Year celebrations to target the Asian community.

And it's paying off. McDonald's ethnic marketing continues to receive accolades from trusted names in the communities they're targeting, such as Latina Style and Black Enterprise magazine.

He also pointed out McDonald's "walks the talk" in its C-suite as well. His boss, McDonald's USA President Don Thompson, is African American. Mr. Thompson's boss, Chief Operating Officer Ralph Alvarez, is Hispanic. CEO Jim Skinner has said his goal is not to have to talk about it anymore.
Hard to argue with results
It's hard to argue with McDonald's business results. Since 2002, he said the U.S. business alone has grown by $10 billion, or $750,000 per restaurant. That translates into an additional 1.8 billion customer visits each year, or about 75,000 visits per restaurant. Restaurant cash flow has grown 50% over the same period.

Mr. Golden admitted that his company in 2000 "had lost its way." The company was focusing on limited-time promotions and partnerships with other properties that subordinated the McDonald's brand. At the time, he said, the marketers wanted to get back to the glory of "Nothin' but net" and "You deserve a break today."

"We'd lost our confidence," Mr. Golden said. "Reinventing and modernizing the brand had to be a top priority."

He credited the "Plan to Win," an overall business strategy unveiled in 2002, and the "I'm Lovin' It" theme, introduced in 2003. He said the five-note jingle now enjoys 100% awareness, boosting not only sales results, but also morale.

When asked about the growing momentum toward fast-food regulation, Mr. Golden said, "Our commitment is to evolve what we offer our consumers as consumers change their tastes and needs," pointing to the addition of low-fat milk and apple dippers to kids meals, as well as grilled chicken options and better salads. Now, said the former tennis pro, consumers can eat at McDonald's "six, seven, 10 times a week. I sure do." 

Seasonal Store Check: Super Bowl 2009

By Jean Luo

Economic woes may have subdued the traditional excesses of the Super Bowl merchandising season, as retailers and product manufacturers incorporated value themes into an otherwise familiar lineup of marketing activity in 2009.

Promotional programs tying into Super Bowl XLIII on Feb. 1 combined annual brand campaigns with the value-driven messages that have taken over the retail marketplace in recent months. The consumer packaged goods sector dominated overall activity this year, after a 2008 in which the marketing of large-screen HDTVs by consumer electronics chains was most ubiquitous. (Electronics retailers instead focused on low-price messages or, in the case of Circuit City, liquidation sales.)

While many CPGs reportedly cut back on their Super Bowl advertising budgets, the slumping economy appeared to have less impact in stores, as top manufacturers returned to annual campaigns with gusto.
Leading beer brands Coors, Miller and Budweiser restaged longstanding umbrella programs in supermarkets, mass merchants, drugstores and convenience stores, presenting a variety of display materials to support rebate offers with snack and packaged foods partners.
  • Coors Light again touted its status as "Official Beer Sponsor" of the National Football League on display materials bearing the official Super Bowl logo. The MillerCoors brand also distributed its annual "Super Bowl Party Guide," which features coupons and ads from fellow NFL sponsors PepsiCo, Campbell Soup Co., Samsung, DirecTV, NFL Shop, Warner Bros. and The booklet included a mail-in rebate form for $10 off the combined purchase of a Coors 12-pack and $20 worth of Tostitos chips or party-related products, such as disposable utensils or ice. The booklets were carried on branded case cards that were often incorporated into product spectaculars.
  • Miller Brewing Co., which merged with Coors in 2008, restaged its "Miller Lite Super Party" with a variety of generic football-themed P-O-P vehicles. The brand paired with packaged food makers to present regional rebate offers, such as $3 off a pizza from Chicago-area brand Home Run Inn with purchase of a 24-pack of beer. Case cards, cooler clings and shelf signs communicated the cross-category offers -- even appearing in some Walmart stores.
  • Retailers supported Anheuser-Busch's annual "Bud Bowl" campaign with endcap displays and product spectaculars showcasing Budweiser and Bud Light. The displays incorporated football-themed standees, base wraps, banners, pole toppers and other materials. A-B also hosts a "Home Field Advantage" sweeps in 26 states that awards 25 winners with 46-inch Sharp TVs, distributing entry forms on case cards at participating retailers. The promotion runs Jan. 1 to Feb. 6.

    In account-specific activity, A-B paired with select Kroger chains, including Kroger and Fry's Marketplace, to award $75 off a television (of at least $200) with purchase of two Budweiser 18-packs; stores supported with product spectaculars that incorporated HDTVs. Budweiser also paired with Kraft Foods to dangle $5 off a DiGiorno pizza with any 18-pack, communicating through window posters at 7-Eleven and other retailers.
Heineken and Grupo Modelo's Corona also distributed football-themed P-O-P materials featuring such slogans as "Top Picks of the League" and "Kick Back for the Big Game," respectively.

In the grocery channel, official Super Bowl sponsor PepsiCo and unofficial promoter Kraft again led merchandising activity, with both promoting rebate offers and sweepstakes through multi-brand product spectaculars, floorstands and various signage.

Campbell's Chunky Soup, meanwhile, touted its sponsor status on shelf signs, pallet displays and other materials, while sister brand Pepperidge Farm's Goldfish declared itself "The Ultimate Game Day Snack" on thematic floorstands that doubled as yardsticks with which children could measure their height. Campbell's Pace also staged an instant-win game, communicated in a Jan. 25 FSI drop and by SmartSource shelf talkers.

In other officially licensed activity, Mars Inc. employed sidekicks and shelf signs to promote a "Celebrate on the Field" instant-win game, awarding a grand-prize trip for four to the 2010 Super Bowl; two first-prize trips to the 2010 Pro Bowl in Hawaii; and two second-prize trips to the 2009 home opener of this year's Super Bowl champion. Nearly 300 secondary prizes included Visa gift cards of $1,000, $500 and $100; and gift cards to the NFL's official online store. Entry was online with a Snicker's, M&M's, Twix, Milky Way or 3 Musketeers UPC from Dec. 26, 2008, to Feb. 1. Mars also ran an account-specific sweeps at Kmart.

Among "unofficial" brand activity:
  • Coca-Cola used headers, pole toppers and other signs to showcase its My Coke Rewards continuity program. Retailers incorporated the signage into football-themed endcap displays and spectaculars; many of the displays tapped into Coke's partnership with Kraft, which played out through rebate offers on the combined purchase of Coke beverages and Nabisco snacks. Coke also leverages Walt Disney's ESPN Zone restaurant chain to host a sweeps for Rewards members that awards a grand-prize "Home ESPN Zone Viewing Room" via gift certificates of $6,000 to Best Buy and $2,000 to online furniture retailer Dreamseat. The sweeps began Jan. 1 and runs through Feb. 8.
  • Kellogg Co. again recruited retired NFL players Jerome Bettis, Jerry Rice and Joe Theismann to star on floorstands and promotional materials for the "Big Game VIP Getaway" sweeps, which awards a grand-prize trip for four to the 2010 Super Bowl, a meeting with a professional athlete, autographed memorabilia and $3,500 in cash. Secondary prizes include 10 jerseys autographed by Bettis and 100 one-year supplies of Kellogg's snacks (via 52 product coupons). Entry is online with a Kellogg's, Keebler or Cheez-It UPC from Jan. 8 to April 30.
  • Diamond Foods' Emerald Nuts holds a sweeps awarding a grand-prize trip to the 2010 Super Bowl in Miami and a first-prize trip to an NFL game. Five additional winners receive 42-inch plasma TVs, while 500 others get $6 Emerald Nuts coupons. Entry is online with a UPC from Dec. 29, 2008, to Feb. 7. SmartSource shelf vehicles and dump bins encouraging shoppers to "Kick off with a heart-healthy snack" communicate the sweeps in participating stores.
  • ConAgra's Hunt's and Orville Redenbacher's featured the slogan, "Throw a Winning Party" on floorstands and SmartSource shelf vehicles; some displays distributed recipe books that included coupons for a free soda SKU. The program received circular mention from such retailers as Delhaize America's Food Lion.
  • Spirits manufacturer Diageo hosted an instant-win game asking consumers to match scratch-off game codes found in Jan. 25 FSIs against one featured on displays in participating stores. The promotion awarded $500 checks to subsidize groceries, gas or mortgage bills.
Hershey Co., Russell Stover and Herr's also distributed thematic P-O-P vehicles. Other manufacturers, including Tyson Foods, Blue Diamond Growers and B&G Foods' Ortega, bought into the annual "Super Bowl Savings Spectacular" run by co-op FSI distributor SmartSource and, in return, were able to use the official Super Bowl logo on syndicated media vehicles.

Retailers also stepped up merchandising activity to leverage the game, presenting account-specific promotions with top CPG vendors while touting values on party foods, electronics and other "Game Day" supplies.

Walmart dusted off its "Game Time" merchandising program by adorning ceiling signs, pallet displays, four-ways and endcaps with the campaign's traditional blue-and-red graphics. The "Game Time" slogan also appeared on the seasonal food gondola in Action Alley, which merchandised brand-name snacks and beverages, as well as on co-branded four-ways and pallet displays for Nabisco, Keebler, Frito-Lay and other manufacturers. Furthering its "Operation Main Street" value initiative, Walmart showcased rollbacks on food and electronics, including savings of $50 to $100 on HDTVs. The retailer dedicated a Jan. 25 circular to the campaign and ran "Game Time" ads in Parade and USA Weekend promoting electronics and packaged foods.

Sister chain Sam's Club hosted "pre-game sampling" events Jan. 29-31 to showcase "big game party food" such as shrimp and steak.

Target again devoted its upfront merchandising space to a topical meal solutions program, this time featuring game-time recipes that incorporated ingredients from private label Archer Farms. The section also merchandised foods from such party-appropriate brands as Nabisco and Hunt's. The chain's "Score Huge Savings" slogan also played out on ceiling signs and endcap headers, including product-specific graphics for Archer Farms SKUs.

Meijer hosted an account-specific sweeps with PepsiCo and a chainwide "Super Party" event on the eve of the game. Among seasonal merchandising activity, stores featured a special header combining Kraft's Velveeta and licensed Taco Bell salsa that directed shoppers online to Meijer's MealBox microsite. The header also communicated an offer for a free Velveeta SKU with purchase of a slow cooker and Taco Bell salsa.

Delhaize America's Food Lion and Sweetbay used weekly circulars to tout their sponsorship of PepsiCo's "Taste of the NFL" fundraiser, a Jan. 31 event in St. Petersburg, FL, that benefited hunger relief organization Feeding America. (The Super Bowl took place in nearby Tampa.) Sweetbay also promoted its 2009 "Celebrity Flag Football Challenge," a Jan. 31 event sponsored by Coca-Cola, Kraft, Nestle, Hershey Co. and other manufacturers.

Kroger chains hosted a "Score Mega Savings" event, dangling $5 off the purchase of 10 participating items from PepsiCo, Kraft, Unilever, ConAgra, Pepperidge Farm, Nestle and other snack and beverage brands. The event earned spreads in weekly circulars and stanchion signs in stores. Shelf tags identified the qualifying SKUs.

Publix hosted another account-specific sweeps with PepsiCo, asking shoppers to enter by dialing a toll-free hotline. Pole toppers and other graphics communicated the sweeps, joining national P-O-P materials in expansive product spectaculars.

ShopRite offered a free deli platter to loyalty cardholders who bought $75 in product from Kraft, Coca-Cola, Georgia-Pacific's Dixie and Vanity Fair, or private-label snacks in a single trip from Jan. 18-31. Shelf tags identified qualifying items in stores. Shoppers can redeem the offer through Feb. 7 to receive a platter of cheese, chicken, buffalo wings or jumbo shrimp worth $29.99.

Supervalu's Shaw's leveraged its ties to hometown team the New England Patriots by hosting a "Football Fantasy" sweeps during the 2008 regular season. The sweeps awarded four monthly winners with, respectively, a Samsung HDTV, tickets to a Patriots home game, an appearance by a Patriots player at a designated K-12 school, and a trip to Super Bowl XLIII. Fourteen weekly prizes included Patriots merchandise and tickets to home games. Loyalty cardholders were automatically entered with purchase of a "Patriots item of the week," which spotlighted products from Nestle, PepsiCo, General Mills, Unilever, Hormel, Kraft, Procter & Gamble and other vendors. The promotion began Sept. 5, 2008, and ran through Jan. 2.

Whole Foods launched a merchandising program to showcase values on natural and organic party foods, employing football-related slogans that varied by store.

Best Buy tapped into Samsung’s Super Bowl sponsorship with price promotions on various HDTVs. Store circulars also promoted Bruce Springsteen’s album Working on a Dream, which was released Jan. 27. The cover encouraged consumers to watch Springsteen perform during the game's half-time show.

Published: February 2009