McDonalds - a Marketing Concept and a Business Philosophy

«We do it all for you»

A Marketing concept and a business philosophy

In 2005, McDonald's celebrated its 50th anniversary. It has long been the largest food-service organization in the world, and its success story is unparalleled in the food-service industry.

In 2007, total revenues for McDonald's were $23 billion from 31'000 restaurants (Burger King has 11'283 outlets). McDonald's worldwide sales increased 6.8% in 2007. There were one billion more customers in 2007 than in the previous year. The company has 1.6 million employees. The annual revenue per outlet in the US in 207 was $2.2 million. In 2008 Total revenues were $23.5 billion. Despite the economic crisis in 2009 McDonald's reports doing very well.

How did McDonald's get this way? The answer to that question demonstrates the marketing concept, in other words, a customer- focused philosophy of business.

Ray Kroc, McDonald's founder, probably never heard of the marketing concept. Yet Kroc with McDonald's is probably the best example we have in the hospitality industry of a successful marketer.

McConcept

Ray Kroc started his career selling milkshake mixers to restaurants. He encountered a particularly successful restaurant in San Bernardino, California, and approached the owners (the McDonald brothers) with the idea of franchising their fast-food (then an unknown term) concept. When they finally and reluctantly agreed, Kroc converted a product orientation into a marketing orientation (focusing on the customer and their environment) that has since spelled out the reasons for McDonald's success.

Major demographic shifts were taking place in the American landscape in the 1950s and early 1960s. First, there was a massive movement of the middle-class population to the suburbs. This population was families, typically with 2.7 children, a wife and mother who stayed home, a casual lifestyle, and many trips to shopping centers and other suburban locations with the children in the back of a station wagon. There was also a perceptive increase in discretionary dollars for these families.

Kroc saw in these demographic movements a need for food-service establishments that provided uniformity and cleanliness, wherever and

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whenever a family might choose to eat, at affordable prices. Typically, in those days, one of a mother's most frustrating experiences was to enter a restaurant with children. Enduring the long wait for service was harrowing experience, not to mention the usual "greasy spoon" ambience and the unreliability of the product.

Recognizing these problems, Kroc turned them into opportunities and developed the concept of QSC - quality, service, cleanliness". Quality meant that the food was hot and tasted good. Rigid standards were established as to the beef used in hamburgers, the potatoes used for fries and the recipe used for milkshakes. Service meant that it was served quickly and courteously and produced without hassle. Cleanliness meant that the surroundings would be clean and eat, both inside and out. This included personnel, equipment, and product presentation. Perhaps Kroc's great coup in this respect was the use of large windows in the front to his stores that revealed everything inside. Cleanliness not only existed, it was there for all to see. In 1955, this concept was totally unique.

Kroc initially identified his market as the large number of families across the United States who wanted budget-priced hamburgers produced fast in clean surroundings. Early advertising was targeted at this market, and McDonald's research revealed that over three fourths of the company's sales were to families influenced by children. The early McDonald's sales pitch was aimed almost entirely at these children.

According to Kroc, McDonald's success was derived from finding something the market wanted that was basic and simple and that could be sold fast and in volume. "What could be more natural than meat and potatoes - that's what we sell at McDonald's", he said. McDonald's initial emphasis was on the customer, and it still is.

McProgress

Of course, menu expansion occurred. The market changed and McDonald's changed with it. There was the first Big Mac in 1968 and the Quarter Pounder in 1972. Then came Filet-O-Fish sandwich, hot apple pie, McDonald land cookies, Egg McMuffin, Chicken McNuggets, and the McLean Deluxe burger as well as salads for the calories-conscious. Innovative packaging was developed for takeout orders. Some of these innovations succeeded and some did not, but almost all new menu items originated with franchisees who got the ideas from their customers. They then went through extensive testing in McDonald's cooking labs as well as in the field. It was McDonald's that changed America's morning habits when it rolled out "Breakfast at McDonald's".

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In the 1990s McDonalds initiated McChannel, which broadcasts "the latest on what's cookin' at McDonald's". Patrons tune in their car radios as they pull into the parking lots (signs give the FM radio frequency, which can only be heard within about 100 feet of the restaurant). It begins by saying that the station intended "to make your visit even quicker and easier by telling you some specials before you order." These are quickly recited to the listener as "McTheme music" plays in the background.

McDonald's stuck with its original strategy and its continued reverence for the principles of Ray Kroc. Consistently in good times and bad, McDonald's has been able to maintain, if not increase, market share against its rivals who "do or die" to catch the leader. More than that, McDonald's has never taken its eye off the customer. This strategy led to overseas expansion, although it was initially unprofitable, while other chains concentrated on saturating the US domestic scene before following McDonald's abroad.

A strong marketing research department conducts ongoing surveys to measure the company's strengths with consumers and to provide direction for marketing strategy. McDonald's inaugurated its "At McDonald's We Do It All For You" campaign on the