Post on 16-Jan-2016
description
McDonald’s Product Introduction: Alcoholic
Beverages
Prepared by Saga Analytics: Jake Decicco, Nicholas Gatto, Ryun Holder, Michael Lederhouse
April 2015
Executive Summary
Mcdonald’s is struggling with decreasing sales and customer loyalty, introducing alcohol to the menu
is a method that could enhance customer experience and help the company overcome these
challenges. However, this introduction may pose a threat to McDonald’s brand image and the family
dining experience. The key to a successful introduction is to first undergo a test market while
implementing the customer-preferred pricing, placement, and product specifications. If implemented
correctly, with the customer in mind; this test-market introduction may lead to a national roll-out and
result in an improvement in McDonald’s sales and customer experience.
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Contents
❖ Background
❖ Research Objectives
❖ Design and Methodology
❖ Detailed Results and Conclusions:
Insights from Focus Group and
Survey
❖ Managerial Implications and
Recommendations
❖ Appendix
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Slide 4
Slides 5-9
Slides 10-13
Slides 14-27
Slides 28-32
Slides 33-51
Background Information
After experiencing its greatest decline in quarterly profits in the last seven years
(30%) and a decline in global sales growth of 3.3%, McDonald’s is at a
strategic crossroads. Something must be done to stop constantly falling
revenues and a lack of customer loyalty while simultaneously converting
potential customers who are opting to spend their dollars at popular, fast-casual
restaurants like Chipotle and Panera. Competitors in the QSR sector such as
Sonic and Burger King have begun to offer alcoholic beverages on their menus
in the hopes to solve similar problems with declining sales and customer
loyalty. This research explores and analyzes the idea of introducing alcoholic
products to McDonald’s menu.
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4
Research Objectives
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Management Decision Problem
● American consumers are increasingly demanding an actual dining experience and not just a
rapid, meal on the go. McDonald’s has not been effectively satisfying this demand and this has
led to major losses in sales, profits, customer loyalty, and brand reputation as customers flock to
fast casual offerings like Chipotle and Panera that provide these experiences.
● Core Management Decision Problem:
○ Determine how to create an attractive dining experience for the consumer
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Marketing Decision Problem
● The key marketing decision problem is: Should McDonald’s introduce alcoholic beverages to
their menus?
● In order to answer this main, marketing decision problem, we must also answer:
1. Should McDonald’s introduce alcohol to their menu?
2. If Mcdonald’s should introduce alcohol to their menu, what type and brands should they
offer?
3. What will we price this product at?
4. Where will we sell this product: Traditional McDonald’s Restaurants, McCafe’s, Specialized
McDonald’s Bars?
7
Marketing Research Objectives
In reference to MDP #1
1.1: Explore the proposition of serving alcoholic beverages at McDonald’s restaurants in the USA.
1.2: Explore perceptions of alcoholic beverages on consumers’ dining experience
1.3: Explore the effect on McDonald’s brand image of selling alcohol
1.4: Evaluate changes in visiting behavior as the result of selling alcohol
In reference to MDP #2
2.1: Generate options of alcoholic beverages that McDonald’s consumers would purchase
2.2: Select menu of alcoholic beverages based on survey results
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Marketing Research Objectives
In reference to MDP #3
3.1: Measure consumers’ willingness to pay for specific alcoholic beverage
In reference to MDP #4
4.1: Explore customers’ preferences for alcoholic consumption in McDonald’s (locations, airports, bar,
seating, can vs. draught vs. bottle etc)
4.2: Select test locations for introduction of alcoholic menu
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Research Design and Methodology
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Method and Sampling: Focus Group
● Sampling
o We utilized a judgement sampling technique when choosing respondents for our focus
group. The focus group consisted of four males, ages nineteen to twenty-one. A
homogenous group of college-age males was chosen because McDonald’s has lost
millennials of this sort to competing quick-serve restaurants, like Chipotle.
● Focus Group Method
o Michael Lederhouse served as a moderator, following the discussion guide in Appendix 1
o The session was held in a quiet, casual setting with the goal of brainstorming current
millennial males’ perceptions regarding McDonalds and the proposition of adding alcoholic
beverages to the restaurant’s menu.
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Method and Sampling: Survey
● Sampling
o Convenience sampling was used to select family and friends for participating in the study
o 89 complete responses were used in analysis out of 115 surveys
o Respondents under the age of 21 were screened out of questions regarding alcohol
consumption but still responded to general questions regarding their perceptions and
evaluations of the McDonald’s dining experience
● Survey Method
o Online survey was chosen as the data collection method
● Tabulation
o Data from questionnaires was transferred into SPSS, with which data tabulation and
statistical analyses were processed
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Composition of the Survey Sample
● Demographic Characteristics of the Sample
o The majority of respondents were between the ages of 15-20
o Males comprised 69.57% of the sample
o Most respondents were from suburban areas
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Detailed Results and Conclusions:
Focus Group and Survey Insights
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McDonald’s is facing an overall negative perception of
its brand and offerings by the consumer
● By learning about the customer attitudes to the current McDonald’s offerings, one can begin to
understand necessary changes for the consumer:
● Focus group participants possessed an overall negative view of the McDonald’s brand and
offerings. When utilizing word association techniques with the McDonald’s name,
participants generally offered up negative statements like “greasy, fake, processed”.
Discussion proved that just being a fast and inexpensive offering is not enough,
McDonald’s needs to improve the quality of their food.
MRO 1.2, MDP 1
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Customers have a negative perception of the
McDonald’s Dining experience
● Focus group participants had an overall negative view of McDonald’s dining environment and
ambience, citing “cheap furniture and poor lighting”. Most were unaware of McDonald’s recently
revamped interiors. .
● Focus group participants prefer to do drive-thru, instead of dining in.
MRO 1.2, MDP 1
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The McDonald’s dining experience is dependent on the
location of the restaurant
● Focus group members from urban areas viewed the restaurant as an establishment filled with
homeless people and drunks, while focus group members from more suburban locations viewed
it as just a normal quick service restaurant.
MRO 1.2, MDP 1
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Alcoholic Beverages create a dining experience
● An alcoholic beverage transforms a dinner into a dining experience. Focus group participants
order a drink to relax, drinking an alcoholic beverage makes the meal “more of an experience”.
● Alcohol is a paired-product, certain beverages go with certain food items and actually enhance
each other.
MRO 1.2, 1.3, 1.4 and MDP 1
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Customers’ Willingness to Pay is dependent on many
factors
● Focus group participants’ willingness to pay for alcoholic beverages depends on the type of
beverage, quality of beverage, the restaurant, and the environment of the meal. Focus group
participants were much more willing to pay higher prices for a beer at a bar or upscale
restaurant, then compared to a QSR or fast casual restaurant.
MRO 3.1, MDP 3
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The average consumer is willing to pay $3.14 for a
drink at McDonald’s
● Respondents’ willingness to pay ranged from a minimum of $.99 to a maximum of $10
● On average, consumers are willing to pay $3.14 for a standard drink at McDonald’s, with a
median of $2.99
MRO 3.1
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Alcohol will alter the environment, dining experience,
and clientele of McDonald’s
● Some of the focus group participants viewed McDonald’s as a family restaurant and believed
that serving alcohol would contradict this image. At the same time, many participants said that
they would feel uncomfortable drinking in front of families, while some feared that offering
alcohol could attract a “transient” clientele.
● Focus group participants were attracted to McDonald’s offering alcohol but would not go out of
their way just to have it. Many would have to be passing by a McDonald’s and be hungry/thirsty
to actually go in.
● We explored this insight further in the survey and found consistent results (See next page)
MRO’s 1.1-1.4, MDP 1
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Many respondents believe that alcohol will negatively
impact the McDonald’s experience and image
● Surveyed respondents would be unlikely to purchase an alcoholic beverage at McDonald’s
because:
o Alcohol isn’t a good fit for McDonald’s food, atmosphere, environment
o It would be awkward, inappropriate in a family setting
o Consumption at McDonald’s would be have a negative social stigma
o See Appendix 3 for full list of responses
RO1.2, 1.3
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Respondents preferred Beer as McDonald’s alcoholic
beverage
● Beer was unanimously mentioned first as the go to beverage for McDonalds. The participants
had little issue reconciling beer with the McDonalds menu because, “burgers and beer go
together.” Beers are considered a casual alcoholic beverage which would be more socially
acceptable to drink at a place like McDonald’s than a cocktail or hard liquors.
● Cost of beer must follow McDonald’s “value menu” pricing style. Respondents suggested that
the quality of beer needs to be correlated to the quality of McDonald’s food. Suggestions of
beers like Pabst Blue Ribbon and Bud Light came from focus group participants.
MRO’s 2.1, 2.2, 4.1, MDP 2, 4
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Coors Light is the preferred beverage of respondents
Consumers are most likely to purchase Coors Light with 46.23% of respondents stating that they are
“likely” to purchase this beverage (See Appendix 4.2)
Mean rating (1-5) on likelihood of purchase:
Coors and Budweiser highest with a 3.278.
RO 2.2
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Setting is very important for alcohol consumption at
McDonald’s
● Focus group participants think that it is important to separate those consuming alcohol at
McDonald’s from those who are not. By creating an alcove, separate room, or patio, McDonald’s
would be able to preserve the family dining experience and create a unique experience for those
of age.
● Introduction alcoholic beverages on McDonald’s menu will create many regulatory issues, such
as ID enforcement.
MRO 4.1-4.2, MDP 4
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Consumers want their drinks served in a designated
area in a bottle
● 48.65% of respondents would prefer to consumer their alcoholic beverages at a bar in
McDonald’s
● 43.24% of respondents would prefer to drink their beverage out of a bottle Preferred Drinking Area Preferred Drinking Vessel
RO 4.1 26
Introducing alcohol to the menu has a unknown impact
on visiting behavior, but not overwhelmingly negative
● 56.52% of respondents are “undecided”
about a change in their visiting behavior
due to the addition of alcohol to
McDonald’s menu
RO 1.4
● Respondents who haven’t visited
McDonald’s in the past month are more
“undecided” regarding a change in their
visiting behavior due to the addition of
alcohol to McDonald’s menu (See
Appendix 4.1)
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Managerial Implications and
Recommendations
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Test Market
● Although data analysis from the survey indicates an undecided yet non-negative effect on
customer visitation with the introduction of alcohol, insights from the focus group reveal that this
product introduction may negatively affect McDonald’s brand image and the overall customer
experience. It is imperative that McDonald’s does not underestimate the effects of social
influence and criticism on this product introduction and as a result, it is recommended that
McDonald’s begins this roll-out in a test market. This test-market must be highly-contained but
also representative of McDonald’s customer base. Introducing alcoholic beverages to the
McDonald’s menu in a contained test-market will allow the company to further observe the effect
that this introduction has on the McDonald’s experience and brand image and aid in a decision
regarding a national roll-out.
● The following recommendations should be implemented in this test market (See following pages)
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Serve Coors Light in a bottle
● Data contains information to support the introduction of Coors Light as the primary alcoholic
beverage on McDonald’s menu
● We found that serving beer in a glass bottle was highest rated by respondents. Thus, it is
recommended to serve these beverages in bottles.
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Price the beer under $3
● Analysis found that the average consumer was willing to pay $3.14 for a bottle of beer, with a
median of $2.99. Thus, it is recommended that McDonald’s prices a bottle of Coors Light at
$2.99.
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Serve Alcoholic Beverages in a
designated, private area ● We found that customers would prefer to consume alcohol in a designated area, either at a bar
or table. As a result, it is recommended that McDonald’s creates a private area for drinking at
their test market location complete with a bar and tables. Current QSR competitors have created
outdoor patios and lounges for customers who are drinking alcohol and this designated area
would aid McDonald’s in separating the experience of of-age customers and families, while
facilitating the regulation and monitoring necessary to serve alcohol at a restaurant. In short,
data supports that this designated area would improve and preserve the dining experience of all
McDonald’s customers.
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Technical Appendix
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Technical Appendix Contents
1. McDonald’s Product Introduction-Alcoholic Beverages Survey: Slides 35-45
2. Word Map of “Why would you be unlikely to purchase an alcoholic beverage at McDonald’s?”: Slide 46
3. Full response list for “Why would you be unlikely to purchase an alcoholic beverage at McDonald’s?”:
Slides 47-48
4. Inferential Testing and Analysis: Slides 49-51
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Appendix 1: McDonald’s Product Introduction-
Alcoholic Beverages Survey
Q1 The purpose of the following questionnaire is to collect your general insights on McDonald’s and the potential introduction of
alcohol to McDonald’ s menu. Please answer openly and thoughtfully. On behalf of McDonald’s, we would like to thank you for
your time and truly appreciate your insights!
Q3 What type of area do you live in?
Rural (1)
Urban (2)
Suburban (3)
Other (4) ____________________
Q5 Have you been to McDonald's in the past month?
Yes (1)
No (2)
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Very
Dissatisfied
(1)
Dissatisfied
(2)
Somewhat
Dissatisfied
(3)
Neutral (4) Somewhat
Satisfied (5)
Satisfied (6) Very
Satisfied (7)
Food Quality
(1)
m m m m m m m
Price (2) m m m m m m m
Service (3) m m m m m m m
Dining
Experience
(4)
m m m m m m m
Restaurant
Atmosphere
(5)
m m m m m m m
Question 6: How satisfied were you on the following
elements during your last visit?
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Answer If Have you been to McDonald's in the past month? No Is Selected
Q7 Have you ever been to McDonald's?
Yes (1)
No (2)
If No Is Selected, Then Skip To “Do you ever drink alcohol at restaurants”
Appendix 1: McDonald’s Product Introduction-
Alcoholic Beverages Survey
37
Q8 How would you evaluate the following aspects of
McDonald's restaurants?
Very Poor (1) Poor (2) Fair (3) Good (4) Very Good (5)
Food Quality
(1)
Price (2)
Service (3)
Dining
Experience
(4)
Restaurant
Atmosphere
(5)
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Q9 How do you typically eat McDonald's?
Drive-thru (1)
Dine-in (2)
Take-out (3)
Q4 What age bracket do you fall into?
14 and under (1)
15-20 (2)
21-26 (3)
27-32 (4)
33-38 (5)
39-44 (6)
45 and over (7)
If 14 and under Is Selected, Then Skip To Thank you for your responses! We val...If 15-20 Is Selected, Then Skip to Final
Question
Appendix 1: McDonald’s Product Introduction-Alcoholic
Beverages Survey
39
Q10 Do you ever drink alcohol at restaurants?
m Yes (1)
m No (2)
Answer If Do you ever drink alcohol at restaurants? Yes Is Selected
Q11 At what type of restaurants do you drink alcohol? (Select all that apply)
q Fast-Food (Burger King, Sonic etc) (1)
q Fast-Casual (Chipotle, Panera etc) (2)
q Bar/Pub (The Tomb's, Martin's Tavern etc) (3)
q Family Restaurants (Cracker Barrel, Applebee's etc) (4)
q Upscale Restaurants (Morton's, Daily Grill etc) (5)
Appendix 1: McDonald’s Product Introduction-Alcoholic
Beverages Survey
40
Q12 Which drink would you prefer to have with a McDonald's meal?
Water (1)
Soft Drinks (2)
Beer (3)
Wine (4)
None of the Above (5) ____________________
Q13 How would the introduction of alcohol to McDonald's menu change your likelihood of visiting?
Less Likely (1)
Undecided (2)
More Likely (3)
Appendix 1: McDonald’s Product Introduction-Alcoholic
Beverages Survey
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Appendix 1: McDonald’s Product Introduction-
Alcoholic Beverages Survey
Q14 How likely would you be to purchase an alcoholic beverage at McDonald's?
Very Unlikely (1)
Unlikely (2)
Somewhat Unlikely (3)
Somewhat Likely (4)
Likely (5)
Very Likely (6)
If Unlikely Is Selected, Then Skip To Why would you be unlikely to purchase...If Very Unlikely Is Selected, Then Skip To
Why would you be unlikely to purchase..
Q15 How much would you be willing to pay for a beer at McDonald's?
______ In Dollars (1)
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Q16 How likely would you be to purchase the following
brands of beer at McDonald's?
Very
Unlikely (1)
Unlikely (2) Neutral (3) Likely (4) Very Likely
(5)
Miller (1)
Budweiser
(2)
Pabst Blue
Ribbon (3)
Coors (4)
Natural Light
(5)
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Appendix 1: McDonald’s Product Introduction-
Alcoholic Beverages Survey
Q17 Where do you think McDonald's should offer alcoholic beverages? (All that apply)
Bar (1)
Table (2)
Outside Patio (3)
Designated area (4)
I don't drink alcohol (5)
Q18 How would you prefer to drink an alcoholic beverage at McDonald's? (All that apply)
Can (1)
Bottle (2)
Plastic Cup (3)
Glass (4)
I don't drink alcohol (5)
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Appendix 1: McDonald’s Product Introduction-
Alcoholic Beverages Survey
Q19 Why would you be unlikely to purchase an alcoholic beverage at McDonald's?
Q2 What is your gender?
Male (1)
Female (2)
Q20 Thank you for your responses! We value your input!
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Appendix 2: Word Map of Q19
46
Appendix 3: Responses to Q19
because I don't drink
I don't want it when I eat that food and I feel it is a family place with children that should not sell alcohol
drive thru
I usually eat take out from MCD in my car. Adding alcohol not a wise idea.
I go to McDonald's because they sell hamburgers for very cheap, which I believe is McDonald's greatest strength. My typical meal costs $2.20
(2 quarter pounders). One alcoholic beverage would most likely cost more than double that amount.
I don't associate McDonald's as a fun place to hang out with friends and drink alcohol
It's not the place for it.
I don't spend money on alcohol very much.
Doesn't fit the type of meal id be eating
because i would never go to mcdonalds in the first place
If it is more expensive than the alternative option of purchasing beer. Or if it feels awkward among families.
I've always associated with beer in a sit down setting, where I can enjoy it slowly. I would feel rushed in a fast food chain.
Only if I didn't want to drink alcohol at that moment. Unrelated to whether it was at McDonald's or not
Do not stay long enough at fast food restaurant to enjoy a drink
Just doesn't really appeal to me
I would be likely to purchase; maybe I completed the survey incorrectly. Having alcoholic beverages there will not change my propensity to
visit/purchase at McDonald's
I usually eat at McDonalds as a quick, lunch option, where I generally don't want alcohol.
Because I have self-respect, so I don't go to McDonald's.
Type of atmosphere47
Appendix 3: Responses to Q19
Don't feel it is an appropriate venue
Has a negative social stigma, kind of awkward in front of families
Because I would feel weird drinking in an environment like that. WIth so many children.
Price
Unlikely to purchase alcoholic beverage because its unlikely I will visit a McDonald's
Because when I buy McDonalds, I normally am driving.
I would rather have an alcoholic beverage with a higher quality meal as opposed to a fast food chain burger
I don't drink
Drive thru is primary reason, no drinking and driving
I'm not going there to drink, just get a quick bite through the drive through
Doesn't mixdont go there very often
I am opposed to purchasing anything from MacDonald's because I do not want to support their business.
People drink outside of their house for the sociable atmosphere. The only people who go to mac d's for the
atmosphere are those who are too young to drink alcohol.
I visit for quick food and not a dining experience
48
Appendix 4.1: Inferential Testing, Effect of Alcoholic
beverages on visiting behavior
This test was to determine whether or not there was a
significant difference in the distribution of responses.
H0: The responses are normally distributed across the three
levels
H1: The responses are not normally distributed across the
three levels
Results:
With a test statistic of
16.78 and a p-value of
0.000 there is evidence to
reject the null hypothesis
at the 5% significance
level.
This implies that there was
a significant difference in
the distribution of
responses.
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Appendix 4.2: Chi-Square Analysis, Beer Preferences
The purpose of this test was to determine whether or not the observed
differences in the distribution of responses of people “likely to purchase”
the different brands of beer. Initial analysis hinted that Coors was the
brand with the most positive responses; however, this test was to
determine whether or not there was a statistically significant distribution
in responses.H0: The responses are normally distributed across the four
brands
H1: The responses are not normally distributed across the four
brands
Results:
With a test statistic of
10.29 and a p-value of
0.016 there is evidence to
reject the null hypothesis at
the 5% level.
This reinforces prior
findings that Coors
received mostly positive
responses; the result of the
test implies that there were
differences in the
distribution of responses.
50
Appendix 4.3: ANOVA Testing, Willingness to Pay
across Regions
ANOVA testing is used to determine whether or not the means of the dependent
variable are equal across the different levels of the test factor. In this case the
dependent variable was the “Willingness to pay in dollars” and the factor is the
“Location” of respondents.
H0: The means of the Willingness to pay are equal between different
Locations
H1: The means of Willingness to pay are not equal between Locations
Results:
With a p-factor of 0.089
there is no evidence to
reject the null hypothesis.
The means of the
Willingness to pay are
relatively equal across
locales.
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