Wednesday, 4 February 2009

McD's Secret Sauce: It Embodies Value

McD's Secret Sauce: It Embodies Value
Big Mac Marches On as Others Stumble Due to Unflinching Focus on Value -- and Adapting What That Means to Varied Consumers
By Emily Bryson York Published: February 02, 2009
CHICAGO ( -- With no sign the economy will improve anytime soon, fast feeders are rolling out the value offerings thick and fast. But by relentlessly reminding consumers about its 6-year-old dollar menu, McDonald's has managed to own the space.
McDonald's has figured out how to translate its value message to more than one audience. Not only has the push translated into sales -- McDonald's reported stellar fourth-quarter and full-year sales last week, and emphasized that dollar-menu sales are hovering around 13% of sales -- but the fast feeder has also figured out how to translate its value message to more than one audience.
Still, while consumers may wind up ordering pricier sandwiches, the dollar menu gets them in the door. "Even my kids tell me if we need to save money, we need to eat at McDonald's," said Darren Tristano, exec VP at Technomic. "It's scary to hear them say that." But it's one effect of the fast feeder's massive ad buy, Mr. Tristano said. "They've been pushing it so hard that when you think McDonald's you think value."
Dan Dahlen, exec VP-restaurants and retail at Nielsen IAG, said McDonald's dollar-menu ads don't score particularly high in overall recall. He said the spots are "microtargeted" to specific groups, "and if you cut that data tighter demographically, I bet they'd be much higher." He said when competitors try to reach everyone with the same ad, it just isn't as effective. "They've gotten the most out of their TV investment because they know who they're targeting and what to say and when to say it," he said.
Mark Carlson, senior creative director-McDonald's USA, said the chain has been careful not to overuse value messaging during the economic crisis, although it added the tagline "Now more than ever" to its dollar-menu advertising in the second half of 2008. "That said, though, we believe we offer value across our entire menu. That's important, because we know our customers use our menu in different ways," he said.
Value is relativeAnother concept that McDonald's seems to understand: Value means something different to everyone. For a college student, it may be a sandwich for a buck, but for a working mother, it may be driving through for a breakfast latte that's a dollar cheaper than Starbucks.
Different strokes: McDonald's says because people define value differently, consumers seek bargains beyond dollar menu.
Photo Credit: Mary AltafferLast week, McDonald's CEO Jim Skinner also credited chicken, breakfast and the chain's expanding beverage choices with its 5% increase in fourth-quarter same-store sales. Starbucks, by comparison, reported a 10% decline in same-store sales for the quarter. They will be implementing a value strategy this spring.
The chain's other competition is doubling down on value, too. Wendy's is advertising a sandwich trio, and Burger King has brought its sandwich family back to the airwaves. Subway is still offering the "$5-Foot-Long" promotion that catapulted the chain into phenomenal double-digit sales increases during 2008. The aggressive promotions even have some of McDonalds' biggest cheerleaders fretting.
McDonald's also recently took its double cheeseburger off the dollar menu and is now charging extra for the second slice of cheese. The McDouble, with one slice, has taken its place at the $1 price point. "In a time when everyone is kind of sharpening up their swords for price wars, these guys are staying back and guarding the kingdom," said Larry Miller, an analyst with RBC Capital Markets. "It's really smart, and it's a bold move, but I don't know if they can hold them off."

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