Mcdonalds Mcdonalds Corporate Strategy3Corporate Strategy3

7/27/2019 Mcdonalds Mcdonalds Corporate Strategy3Corporate Strategy3

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McDonalds

McDonalds:

The Healthy Try

Heather EylarJoanna MathewsRikki Vomenici

Garrett Bjornsted

BUSA 308: Principles of Marketing

Professor Matthaei

May 5, 2006

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McDonalds

McDonalds:

The Healthy Try

Introduction

For our project we have decided to analyze McDonalds. We propose to look at how

McDonalds has attempted to change their image through marketing strategies over the years.

They have done this in a variety of ways, not just with their products. For example, they

changed packaging on their products to become more environmentally safe. They have also

created new menu items in the past 10 years in order to offer some healthy options to those

watching their waistlines. This is an effort to appeal to customers who might have disregarded

McDonalds in the past because of traditional stereotypes. They have done this in a variety of

ways using the four Ps and are attempting to change societys perceptions. Many people today

are unhappy with McDonalds and their unhealthy food, and we were interested to see if the

current marketing strategy that McDonalds is using is creating a positive change for the

company.

History

McDonalds, now known world wide as one of the major powerhouses in the fast food

industry, began in San Bernardino on May 15, 1940. It originated as a barbeque restaurant

under the ownership of brothers Dick and Mac McDonald, and soon evolved into a teen

hangout generating 80% of its revenues from hamburgers alone. In 1948, McDonalds

switched gears and increasingly targeted the young family market, developing its operation

concepts around speed, lower prices, and higher volume. They ran under the slogan of speedy

service systems, selling their hamburgers with fries for an astonishing 25 cents. In 1954 Ray

Kroc, a previous restaurant owner, saw potential for growth in the company and capitalized on

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it convincing the McDonald brothers to franchise the company with his financial support. In

1963 McDonalds introduced Ronald, a fun loving clown, to promote their restaurant as a

family establishment, and he became a huge success. In fact, Ronald is now an icon

symbolizing the McDonalds firm.

As the restaurant continued on its upward spiral toward success, they decided to go

public for the first time in 1965 offering one hundred shares of stock for $2,250 dollars. In

todays market, that is equivalent to 74,360 shares worth over $1.8 million

(www.mcdonalds.com). In effort to give help to those who are in need, McDonalds

collaborated with the Philadelphia Eagles Fred Hill and created the Ronald McDonald House

in 1974. At the house, families of critically ill children are given a home away from home

while their kids are treated. Today, McDonalds is the leading foodservice retailer with more

than 30,000 locations in over 119 countries, and is a symbol of American culture.

Historical Reputation

McDonalds was the first fast food restaurant on the scene. There have been many

imitators over the years, but it has historically been number one. Since its first opening in

1940, the business has boomed into an international craze. Historically, McDonalds has been

viewed as the pinnacle and one of the defining features of the American lifestyle. Burger, fries,

and a Coke were the traditional meal. Once it spread globally, it boomed into popularity

because other countries wanted to be associated with the successful image of the American

dream. It was not until recently, within the last 15 years, that people began to question the

health and safety of the fast food industry, and have been focusing on McDonalds because it is

an easy target. When a company is that large, it is a natural target forinner directed

consumers, and those who wish to upset the conformist lifestyle.

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McDonalds

Reputation Today

Though all this talk about poor health and risk associated with McDonalds seems

bad for the business, we set out to see if it was really hindering their success today.

McDonalds is, after all, still the most prevalent and recognizable fast food establishments in

the world. The health aspect has actually spread out of the United States and become a global

issue.

According to All Headline News, McDonalds saw a profit loss of 14 percent last

quarter. It was the biggest loss the company has had since 2002. This may seem like an

indication of their dropping popularity; however it was actually not related to their customers

satisfaction (or lack thereof). According to the company, their loss reflected a large tax benefit

it received over a year ago, and that sales have actually been going up over the last 35 months

due toa series of successful new products, extended hours, restaurant renovations and allowingcustomers to pay with credit and debit cards.

As stated before, McDonalds is the worlds leading fast food restaurant and is globally

recognized. With over tens of thousands of stores spread across 119 countries, McDonalds

serves an astounding 50 million customers daily (www.mcdonalds.com). With such an

extremely large consumer base, it is crucial that they know and understand how their customers

feel regarding the overall satisfaction of the McDonalds experience.

The type of experience McDonalds offers to its loyal consumer is, on the majority,

rated high in overall satisfaction. The reasons McDonalds consumers are loyal to McDonalds

and not to its competitors are many. First, McDonalds has recognized the importance of

diversity and its impact within company strategy. They have done an excellent job in

implementing a multidomestic strategy to ensure the loyalty of its customers and their changing

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wants and needs. This is shown through their diverse menu options around the globe. For

example, McDonalds restaurants in India created a vegetarian sandwich in order to cater to

their need of not eating beef. By increasing the number of segments they can market to, they

are able to reach more people. This is only one example of many on how McDonalds has met

the needs of its customers.

McDonalds provides a positive and caring attitude towards the community of which it

serves. McDonalds vision states that "We are not a hamburger company serving people; we

are a people company serving hamburgers". With a vision so clearly committed to people,

customers have responded by continuing to keep McDonalds number one.

Other aspects of the McDonalds dining experience show why their customers continue

to hold their reputation high. They use things like the dollar menu, playgrounds, endorsements,

and charities all add to create the overall satisfying experience. These things overshadow the

health risks that are a large issue in todays American society. Through the information we

have found, McDonalds is still popular because it is about convenience and fast food. Until

people are willing to wait longer to eat and pay more for healthier food, it will still be one of

the leading chains.

So, does it seem that they are repairing the damage done by the health nuts? On the

contrary, they may have maintained their customer base through smart advertising and

marketing but are still not popular with many people. They are such a large and conspicuous

company that many people find it easy to blame them for problems. Inside the US, they are the

target for various causes such as anti-globalization groups and environmentalists who believe

their packaging is creating excess waste. It has also been accused of being heavy-handed in its

retaliations to these protests, giving it a somewhat bully image. Outside of the US,

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McDonalds is still widely pervasive in most countries, all of which have local owners. Yet, it

finds itself a symbol of American domination of economic and natural resources. There are

also many urban legends about its food and company, and it is a target for unusual lawsuits.

Customer Base

This is not to say that all people hate McDonalds. Their website claims to serve over

50 million people per day. Who are McDonalds customers? Stereotypically they are

overweight, lazy, and unhealthy people (men, women, and children). This could be adding to

the social stigma surrounding McDonalds and adding to their unhealthy image. One crucial

group is what they call the heavy hitters. These are men 18 34 years old, who eat at the

restaurant three to five times a week. These men actually only make up about 20 percent of the

customer base, but account for nearly 70 percent of the visits to the chain (Alexander, 2004)!

However, McDonalds decided to phase out the Supersize Option on its meals in 2004, which

could be alienating this group. It is important to keep this group because they bring profits way

up by increasing margins on sales. The change was implemented when McDonalds began to

focus more attention on attracting moms and health-conscious adults.

Target Market

Traditionally, and still today, McDonalds focus in advertising, marketing, and design

has been children. This is obvious with their PlayPlace, Happy Meals, and character Ronald

McDonald. They actually introduced Ronald as a way to draw families into the restaurant. In

recent years, McDonalds has also been increasing their marketing toward mothers. This

makes sense because they have to also draw the moms into the restaurant, where the kids want

to go. They are almost a small addition to the child market. They use a variety of marketing

strategies to attract children, moms, and families in general.

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Promotions and Current Marketing

McDonalds is actively working to change their image to a healthier one. Gone are the

days where hamburgers are the key advertising attraction. People already know McDonalds;

in fact the golden arches are the single most recognized symbol around the world, even before

the cross. They have completely saturated the market to the point where you can now even

order a Big Mac while shopping at Wal-Mart. Their problem, however, is their battle with

health critics and customers filing lawsuits about their unhealthy products. This negative

publicity is shaping some stereotypes around the company which they want to change.

As we know, perception is reality. The American public sees McDonalds as a

restaurant that is as unhealthy. Americans dont go to McDonalds with visions of healthy food

dancing in their heads. Some dont even go to McDonalds at all. So how does McDonalds

get them back? This is an immense project that may also never be a successful one.

its what i eat and what i doim lovin it

The most recent way that McDonalds has tried to create a healthy image is their new

marketing campaign titled its what i eat and what i doim lovin it. The campaign is

meant to build upon their global marketing campaign, im lovin it, which was launched in

September 2003. It is designed to tie all our balanced, active lifestyles messages together,

said McDonalds CEO Jim Skinner (Press Release, 3/08/05). The theme highlights the

important interplay between eating right and staying active.

Throughout all of the press releases and media material that we found on McDonalds

corporate website there was one common phrase: balanced, active lifestyles. It is their new

platform and it consists of three pillar ideas: increasing menu choice, promoting physical

activity, and providing more accessible information. In the next few paragraphs we will

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illustrate just exactly what McDonalds is doing in their marketing campaign to address these

three pillars.

The most recent example of the first pillar, increasing menu choice, is the introduction

of the new Asian Chicken Salad. McDonalds is both expanding their menu and increasing the

availability of healthy foods. Advertisements for this new salad are everywhere. Signage is

present outside the restaurants, on street banners, and even on the windows and near the

registers. One food bag also featured the new Asian Chicken Salad as part of a GoActive!

Happy Meal. We even saw a couple different versions of advertisements on television for this

salad as well as an ad in InStyle magazine. It is their newest healthy item. Other recent

menu additions were also healthier choices such as Premium Chicken sandwiches and other

premium salads.

The second pillar of this campaign,promoting physical activity, is also evident on bags,

cups and signage in each store. The bags that hold food orders no longer have hamburger ads

on the outside. They now feature images of people leading balanced, active lives. On one

bag, a woman is doing yoga with a caption saying being good to myself has never been

easierim lovin it. This lady is sending a message that she thinks it is easy to maintain her

healthy lifestyle by eating at McDonalds. Physical activity is also promoted through the

introduction of four different 15 minute workout DVDs that you can get when you buy the

GoActive! Happy Meal that includes a salad and a Dasani bottled water. During the Winter

Olympics in Torino, many Olympic athletes were also featured on McDonalds bags with

motivational messages about their active lives. McDonalds is doing everything they can to

broadcast images of healthy active people and associating them with McDonalds.

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The third and final pillar, more accessible information, is evident in McDonalds new

packaging concept that will provide nutritional information on individual food boxes.

McDonalds has a 30 year history of providing nutrition information to customers, but as

recent lawsuits against McDonalds and scenes from the movie Super Size Me suggest, they

have room for improvement (Press Release, 2/0706). The lawsuits against McDonalds

claimed that the plaintiffs were obese because they were unaware of the nutritional content of

the McDonalds food that they were eating. Whether that is believable or not, McDonalds was

forced to make a move. They were lucky that these lawsuits were thrown out due to the fact

that the plaintiffs could not prove that McDonalds was at fault, but what if the next plaintiff

had a better case? McDonalds has to be on the defensive.

Therefore, McDonalds is moving nutrition facts straight to the box. Not only does

each box have the nutrition facts table, but McDonalds also chose to highlight the five most

relevant indicators that customers can understand: calories, protein, fat, carbohydrates, and salt.

These five indicators are presented in a different color, while the nutrition table is presented in

plain text. The only packages that will not feature nutritional information will be those used in

short-term promotions and wrappers and containers that are used for multiple products. In

those cases, customers will be referred to McDonalds websites and in-restaurant brochures.

Marketing for Children

Another part of McDonalds push toward balanced, active lifestyles also includes

their interaction with children. Kids are a huge market that McDonalds caters to and has done

so for many years. Parents often take their kids to McDonalds because it is often the only

indoor play area around, and also provides a quick, convenient, and fairly cheap meal. In a

country where everyone is busy with work and shuttling kids back and forth to soccer practice,

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a quick meal is invaluable. The kids are fed and are able to run around and play at the same

time.

McDonalds is finally aware of their hold on kids and how this hold is affecting the

health of American kids. Because of this, McDonalds is now using Ronald McDonald as an

advocate for balanced, active lifestyles. The goal is to have him inform both kids and families

around the world about the importance of eating healthy and staying active. In the fall

McDonalds plans to release the first two in a series of DVDs featuring Ronald McDonald,

these DVDs are meant to show kids how much fun they can have when they activate their

bodies, their minds, and their imaginations (Press Release, 2/07/06).

New Healthy Products

Over the years, McDonalds has also introduced a variety of new products to combat

the image of unhealthiness. These have worked to diversify their menu, but have not made

much of a difference in the perception of the restaurant. Some of the new items include the

Premium Salads, Premium Chicken Selects and Chicken Sandwiches, bottled water as a

substitute for soda, Low-Carb options for normal menu items, the Apple Dippers and fruit bags,

and the Fruit and Yogurt Parfait. Beside reminder ads, McDonalds is currently spending the

majority of its advertising budget on these new products, and still sell more double

cheeseburgers than all of them combined (Warner, 2006)! In fact, though they are marketed as

healthy but a Chicken Caesar Salad with dressing at McDonalds actually has more calories

from fat (270) and percentage of daily sodium (64%) than a Big Mac (270 calories from fat,

42% daily sodium) (Nutrition, 2006).

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The Olympics Partnership

The Olympics have a long lasting reputation for their presence and involvement with

sports and collaborations with corporations for sponsorship and advertising opportunities.

Because the Olympics have such a profound impact worldwide on individuals, it is not

surprising that the marketing element in the Olympic Games is so prevalent. With the

Olympics being a globally viewed event (over 2 billion) in over 200 countries, marketing

throughout the duration of the games can generate mass publicity leading to greater profits for

the sponsors. Sports also play a role in millions of peoples lives around the world. It is one

arena of life that the mass media also finds significant; implicating the obvious reason that

marketing through the Olympics is a golden opportunity.

Other than being a company who markets their product via commercial or some other

media outlet, sponsors of the official Olympic Games contribute a great deal in understanding

the entirety of how corporations are involved with the Olympics. Sponsors show their support

to the Olympic Games by providing financial and other resources to give their image a positive

boost. McDonalds has latched onto this sponsorship idea, and began sponsoring the Olympics

in 1976. It is important to understand how the Olympics affect their sponsors and vise versa,

which explains the in depth explanation of the Olympics.

McDonalds was in its rapid growth stage as America was embracing the experience

that McDonalds offered; inexpensive food and quick, friendly service. As McDonalds was

becoming a familiar household name throughout the country, so were the Olympics. When

they became an official sponsor, it was most definitely the merging of two huge forces, and

became a long lasting relationship. McDonalds today continues to show the Olympic Games

their committed support, and uses their relationship to promote its new healthy image.

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McDonalds CEO had this thought on their involvement with the Olympics, Our McDonalds

restaurant teams have always shared many of the same ideals as the Olympic team. They

include excellence, teamwork, and being your best. For more than 30 years, we have been a

proud sponsor of the Olympic movement, a partnership that directly aligns with our ongoing

commitment to help people live more balanced, active lives. Not only is McDonalds a

devoted and veteran sponsor, they hold the position of being the top sponsor of the entire

Olympic movement. Although McDonalds has had a long run as being the top sponsor to

the games, it will come to an end when the 2012 London games take place, for their

sponsorship will cease. We havent found the reason behind the decision which is surprising

because it is a significant one. McDonalds sponsorship with the Olympics has provided many

positive outcomes for both parties. Having a close affiliation with the Olympics altered the

way that the public perceives McDonalds, which was what they were hoping for, especially in

the last decade. The question is, has their sponsorship changed the company or how the public

perceives it?

The essence of the Olympics is about fitness and bringing together the best of the best,

two very important values. As McDonalds became more and more aware of their customers

increasing interests in a more healthy diet, they began to change their strategy fast.

McDonalds also realized that the affiliation with the Olympics alone could help make their

transition to a more health conscious restaurant more visible. So, McDonalds began

promoting the sponsorship by adding it to their packaging, voicing it in their commercials, and

in other media outlets. By doing so, people started to view McDonalds in a healthier way,

through a small halo effect. The affiliation between the two also intertwined the values of

health between both the Olympics and McDonalds. In other words, some people started to

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think of McDonalds as being the best in the fast food industry, and also purchasing the

healthy items. Although this was only the first step McDonalds took toward changing their

image, it was one that had a lasting impact.

Recently, McDonalds has become aware of the increasing health conscious public and

has tried to adapt accordingly. They have incorporated many different campaigns to capture

and promote the essence of healthy living. As stated before, among these include the

sponsorship with the Olympics, offering a line of products which are marketed to the health

conscious customers, endorsements with super-fit celebrities, collaboration with other health-

oriented products such as bottled water, and also the introduction and promotion of the

GoActive! Campaign. This campaign is headed by a famous celebrity fitness trainer, Bob

Greene, and has been named The GoActive! American Challenge.

GoActive! Campaign

The GoActive! Campaign is McDonalds most recent attempt to diversify their options

on the menu, and convince its customers to become more active. This is aimed more toward

the adult rather than the child market, which is a turn from traditional marketing strategies.

McDonalds wants parents to be able to order healthful food while still giving the kids what

they really want: The Happy Meal. This change is successful because the options are given to

customers, rather than automatically getting fries and a soda with the meal. Instead, customers

are given the option of things like fruit salad, apple slices with caramel sauce, cut veggies,

juice, and bottled water. By doing this, McDonalds is taking a proactive, hands-on approach

which shows customers they care about and realize the significance of a healthy lifestyle. To

promote this program, McDonalds and celebrity fitness trainer Bob Greene decided to

challenge America. Their challenge was called McDonalds GoActive! American Challenge

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and it encouraged others to live a more balanced life by taking steps to reach a goal. To

promote the new campaign, Bob Greene walked and biked across America for a total of 36

days. To include people in this journey, McDonalds distributed 10,000 to 15,000 step-o-

meters along with brochures containing information about fitness and ways to start living a

more active life.

It is McDonalds hope that customers will see, from this challenge, that McDonalds is

a place where they have a choice to consume either healthy or unhealthy food. Also, the

presence of Bob Greene adds advantage to McDonalds marketing techniques because of his

status in the fitness world. If he is associated with the company, then it must not be that

unhealthy. It is critical to analyze what perception is and how it plays a part in McDonalds

and their marketing strategy.

Interview with Bob Comisky

We also wanted to get the opinion and viewpoint of a person inside the McDonalds

Corporation on this topic of healthy marketing. We talked to a franchise owner, Bob Comisky,

to see whether or not he thought the current actions and advertisements were really working.

According to Bob, customers are not coming to McDonalds to eat healthy. He said, Overall

we have increased a little in healthy product sales but we have found that although there is a

health craze right now people come to McDonalds for the burgers, not to eat healthy. This

mimics our research, finding that the dollar menu sells much more than the healthy items. The

marketing has had little effect on the buying patterns on the restaurant patrons. He also said

that McDonalds is hoping to increase their market share globally:

McDonald's as a company has vision to dominate the world-wide foodserviceindustry. In order to do this they will set the performance standard high for customersatisfaction in addition to increasing the market share and profitability by fulfillingMcDonald's mission of value execution strategies and convenience.

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What is the Point?

The basic issue for McDonalds regarding perception is that the entire establishment is

based upon how they are perceived by the public. Are they perceived as a family restaurant by

families? If so, the family segment will more likely visit the restaurant for family dinners. Is

McDonalds perceived as a fun, inexpensive place for the high school and college segments to

eat at? If so, they are also more likely to eat there. Therefore, the perception that consumers

have about McDonalds is the basis of their decision to eat at the restaurant. Now that

McDonalds has tried to saturate the market with the healthy, balanced lifestyles campaigns,

they are trying to change the publics perception of them in terms of the health factor. While

McDonalds is trying so hard to be the new and improved healthy dining experience, the

perception of McDonalds in many peoples minds is already set in stone. Trying to change this

will cost huge amounts of money and there is not any guarantee that McDonalds will achieve

their goal.

Overall, we believe that McDonalds is using these healthy products and active

lifestyle campaigns as a defense mechanism. They are trying to dispel the image they have

right now, and also prevent future lawsuits. All the lawsuits that have been brought against

them in regards to obesity have been thrown out, but it is still negative publicity. The company

had to do some major damage control after movies like Super Size Me! and other negative

movements. They are less concerned with changing peoples perceptions of the chain, and

more with the fact they need to be seen as tryingto help the situation. They have already

saturated the market in the United States, and want to stay at the top and expand globally. It is

not so much about initially changing the companys image, though over time it may change in

response to this extensive marketing strategy.

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Though it may not change their image, we also think that this is a good direction for

McDonalds to focus toward. They are a mature company, and the only way to bend the arrow

backward on their product life cycle is to innovate and create new products. This is their

attempt to return to the rapid growth stage. As stated before, McDonalds is widely known for

its hamburgers and fries, but it has potential to grow into a new market with healthy options. It

also has enough money to fund this type of project, and there is no reason they should not

continue on this road. The worst that could happen is that they revert back to the same market

and style they have always had, but thepositive side could be expansion into an entirely new

market and much more revenue for the company.

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References

Alexander, D. (2004, March 4). Will they buy it? McDonalds plan to eliminate supersize

portions could anger its most loyal and biggest-spending customers. Chicago

Tribune. Retrieved April 21, 2006, from

http://www.chicagotribune.com/business/chi- 0403040339mar04,1,853952.story?

coll=chi-business-hed

McDonalds Corporate Website. www.mcdonalds.com

McDonalds Global Nutrition Director, Dr. Cathy Kapica. Retrieved April 18, 2006, from

http://www.mcdonalds.com/corp/values/balance/nutrition_director.print

McDonalds Press Release 4/29/04: Response to Super Size Me Movie. Retrieved April

20, 2006, from

http://www.mcdonalds.com/corp/news/corppr/2004/cpr_04292004.print

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McDonalds Press Release 6/15/04: Venus and Serena Williams Join the GoActive

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McDonalds USA Nutrition Facts for Popular Menu Items. Retrieved April 24, 2006, from

http://www.mcdonalds.com/app_controller.nutrition.index1.html

Warner, M. (2006, April 19). Salads or No, Cheap Burgers Revive McDonalds. The New

York Times. Retrieved April 20, 2006, from

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n=f49bafea1e4aee3a&ei=5070

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