Interbrand Case Study on McDonalds
McDonalds – How Interbrand helped in changing its brand image and revive sales
Problems faced by McDonalds before 2006
In the early part of this decade, McDonalds started facing pressure from competition (Starbucks and Subway) and as a result, its revenues started falling especially in Europe and Asia[1]. In 2002, its stock lost more than 70% in value.
It also was also facing flak from around the world for supposedly causing harm to environment because of the excessive paper wastage out of its restaurants. Also, there was lots of trash being produced in McDonalds restaurants which was leading to cries of de-forestation occurring because of their restaurants. For example, it was mentioned that on an average, 196,821 kilograms of trash was being generated in McDonalds restaurants every hour[2].
There were criticisms that the animals were treated cruelly before being slaughtered for meat at McDonalds[3].
But most importantly, it was being criticized for the unhealthy food (especially beef) it was serving to kids. Also, it was criticized that did not have healthy food options like salads, eggs in their menu. There were campaigns around the world against this fact and McDonalds was being forced to defend its right to advertise to children in UK, US[4].
Actions taken to improve Brand Image
The company decided to improve its negative image by spending billions on the image re-building exercise. Interbrand realized that McDonalds was becoming a ‘schizophrenic brand’ that is, it meant different things to kids and different things to adults. It was proposed that McDonalds sends a universal message. That is, it positions itself across the world as a brand having universal appeal amongst the kids, moms and teens[5].
It worked on the 5 P’s of marketing to improve McDonalds brand image and sales.
Products: It started by working on its “Unhealthy Food for Kids” image. It added Salads, sandwiches and fruit items to its menu. It made tie-ups with Vegetarian Society to use its seedling logo on certain foods such as green salad[6]. McDonalds was the first restaurant company to place the nutrition information in an easy-to-read graphical format on the package.
Place: Instead of expanding its number of outlets (which do still continue to expand at 3-5% per year) the focus has been on improving the total customer experience. It started refurbishing its restaurants and gives it more aesthetic and hip-hop look. It also introduced facilities like Wi-Fi, comfortable armchairs and cool hanging lights in their restaurants just like Starbucks did. The restaurants will have more of wood and brick instead of plastic to get the warm-up in their look. It was done to change the image that McDonalds was place meant for kids only but also that adults could also use it as a hangout place[7].
Price: McDonalds keeps its price lowest and affordable as compared to its competition like Burger King.
People: Earlier McDonalds was focused only on kids but McDonalds decided to focus on other segments by bringing more variety and choice in offering a spectrum of price points. It launched this concept with a slogan “Something for Everyone” which it hoped will help it getting a universal appeal among kids and adults alike[8].
Promotion: They focused on new promotion strategies like ‘Above the line’ advertising which is directly paid for (e.g. advertising) and ‘Below the line’ are promotional offers and special offers like giving top-selling Cars, perennially popular games like Monopoly and Uno and great collectibles like Coca Cola glasses.
It dropped the “famous arches” logo from its British advertizing and replaced it with a “golden question mark” and tagline as “McDonalds. But not as you know it”[9]. Also, to promote that it is environment conscious, it decided to abandon the traditional gold-on-red livery and decided to use “Green” background in Ireland.[10]
McDonald started getting associated with Hollywood Animation movies like Madagascar 2 and stated bringing out memorabilia related to movies which became instant hits with kids and increased their sales[11].
Other steps that it took include:
It refocused corporately on being a single-brand company, McDonalds, by de-positioning of Chipotle Mexican Grill in 2006[12].
McDonald adopted the ‘reduce, recycle, and reuse approach to reduce amount of trash it produces. They also introduced ‘one meal one napkin’ campaign to save paper. Also, 82% of the consumer packaging was made from renewable matter. They re-used their cooking oil for various products like creation of environment friendly biodiesel.
To counter the claims that the animals are treated cruelly, they started publicizing the fact that it used Free Range Eggs in its breakfast meals. Free Range Eggs are produced by hens which are allowed to roam freely and are not caged at one place[13].
They started new packaging initiatives like changing the graphics and using more eco- friendly materials and called it ‘Simple, easy enjoyment’[14]. They tried to achieve following goals through this initiative
· Move from fast food to good food fast
· Build a strong relationship with customers
· Build a strong and modern identity
Results achieved due to this Image Re-building exercise:
McDonald revenue from regions like Europe and Asia has been increasing on an average of 10% annually since 2008 and more than 7% globally[15].
McDonald won ‘Food Business of the Year award in 2007 by British Free Range Egg Producers Association for promoting the use of free range eggs in the morning meals[16].
In 2007, Stanford University had carried out a research which suggested that kids rated food wrapped in McDonalds wrapper tasted better as compared to same food wrapped in plain paper. This suggested that McDonalds brand itself was becoming consistent with tastier food[17].
Looking at the demographics of the crowd in almost all the McDonald restaurants around the world, it’s campaigning of ‘Something for everyone’ and also strategy of refurbishing its restaurants has worked and we can say that McDonald is not just a kids brand anymore but is now preferred equally by adults too.
[3] Mccruelty, http://www.mccruelty.com/why.aspx
[4] EmeraldManagementfirst, Page 3, http://first.emeraldinsight.com/samples/mcdonalds2.pdf
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