Whither McDonald’s? Or is the better question how badly has McDonald’s withered ?
The iconic fast food chain has been in the news quite a bit recently, under attack on all fronts. On one hand, consumer activists vilify the chain for selling “fake” food, mistreating animals, underpaying its employees, and its perceived contributions to the obesity crisis. On the other hand, marketing pundits and the business press criticize McDonald’s for a bloated menu, an unfocused attempt to stay relevant by trying to be all things to all people, the result of which is bogged down operations that threaten to take the “fast” out of fast food.
The prognosis varies depending on who you talk to. On the more sanguine end of the spectrum, we have McDonald’s itself. Check out this video with Chief Marketing Officer Deborah Wahl that was posted on the McDonald’s website. After introducing herself in a Sarah Palin-esque manner (“I’m a hockey mom…”), the photogenic Wahl goes on to talk about the “brand transformation” under way at McDonalds, which is based on her three core beliefs:
- “A focus on powerful ideas has more impact than relentless activity.”
- “The customer at the center of all decisions.”
- “Never best. Always better.”
Her message is that she got the message. McDonald’s is no longer just about “billions served.” It’s now about “billions heard.” Relentless consumer focus is the new mantra. As a result of all this listening, McDonald’s will now serve healthier meals, as evidenced by the presence of fresh fruit in Happy Meals, is launching a “Create Your Taste” platform to accommodate consumer desire for customization, and will overhaul its menu because guests want “simple and easy.”
I am highly skeptical bordering on cynical about this message, but we should give McDonald’s credit for publically acknowledging their problems, letting Wall Street and Main Street know that they are listening, and most importantly, taking action. However, are healthier food, a streamlined menu and customization really big, “powerful” ideas capable of turning the business around? It all seems more like basic blocking and tackling that should have been in place for some time now.
It gets easier to grow cynical as Wahl introduces the new ad campaign and the “Choose Lovin” tagline.
“For the last ten years, everything we’ve done has been summed up with three words. ‘I’m lovin’ it.’” Loving sits at the heart of our tagline and sits at the heart of our business. We are putting lovin’ in everything we do. Our food, our restaurants, our people, and most importantly, our communities. We believe that a little more lovin’ can change a lot. Even the world we live in. Lately, it seems the balance of loving to hating is off. Who better to stand up for loving than McDonalds? Over the next few months, we are reigniting the loving that’s been at the heart of our brand since the very beginning.”
Let’s give McDonald’s credit for trying to own “love.” Talk about setting the bar high! But, “Who better to stand up for loving than McDonald’s?” Really? Do we see McDonald’s standing up to ISIS, the emerging right wing immigrant haters in Europe or Boko Harum? And thinking about the personification of love, I’m not sure many of us would put McDonald’s in the same league as The Dali Lama, Pope Francis, or even Oprah for that matter.
The spot is actually clever, well executed and fun to watch. We see the likes of the Roadrunner and Wiley Coyote and other historic rivals getting along. Not exactly world peace, but cute. Still, I wonder where the “transformation” is here. Is this approach disruptive enough to change anyone’s mind about the brand or drive traffic to the stores?
McDonald’s is caught in a nasty existential mess of their own making. They’re still a huge company and won’t be going anywhere any time soon, but without a truly “powerful idea,” the decline will be irreversible.
A Yahoo Finance post, Is The Age Of McDonald’s Over?, posits that it might be time for “investors to move on,” and bemoans the lack of powerful ideas coming from the company.
“You spin around too much and you’re kind of just whirling in circles. They’re kind of slowly responding in a number of ways but it has a real ‘90s feel of ‘hey how about a salad?’ They’re just kind of chucking stuff out there… McDonald’s can’t do too much to change its image at this point…it might be time for shareholders to go elsewhere.”
A huge part of the problem here is the notion that “billions heard” is the solution. Obviously, it’s critical to listen to consumers. But you can’t listen to a billion people and please them all. Trying to be all things to all people is what got McDonald’s here in the first place. The company has let outside forces and changes in the market place define who they are. Rather than shaping trends through innovation, or leveraging trends to their advantage, they have consistently been way behind the curve. Knee jerk reactions to a variety of trends such as health consciousness, the move towards more premium and locally sourced foods, the animal rights movement and others have only served to cause confusion and erode McDonald’s core essence.
Unfortunately, any bold action to right the ship at this point is sure to alienate a segment of the McDonald’s customer base. Raise prices to focus on quality and the Dollar Menu crowd disappears. Streamline the menu to focus on a simple, In ‘N’ Out type offering of focused on burgers, fries and shakes, and lose anyone who wants a relatively healthy meal.
Marketing, as an old boss of mine loved to say, is a series of trade-offs. If McDonald’s is going to transform its brand, casualties along the way will be unavoidable. That’s the nature of making bold choices – not everyone will be happy. There will be no gain without pain.
The alternative is staying the course and continuing to tinker at the margins. The customers who have not defected to other chains will likely remain happy, as small changes aren’t likely to take away whatever it is that motivates them to visit McDonald’s. However, the brand would likely continue its downward trajectory, slowly at first but possibly exponentially at some point in the not so distant future, as it fails to put a stake in the ground that conveys a focused, proprietary reason for being. McDonald’s investors and Wall Street will not be happy as a result.
Wahl wisely quotes McDonald’s founder Ray Kroc, who said that, “We’re not in the hamburger business. We’re in the people business.” “At the core,” she continues, “We serve people.”
Now she needs to decide which people she wants to serve and figure out how to delight them on a consistent basis.
The first group of people I would focus on would be McDonald’s employees.
What better way to stand for “lovin’” than to raise their minimum wage? CEO Don Thompson (who takes home a sweet $10 million a year himself) recently suggested his company would support a bill, proposed by President Obama, which would raise the federal minimum wage to $10.10 an hour from $7.25. This might lower margins, but with more money in the pockets of their customers, a rise in sales could help ease some of the pain.
Regardless, there is enormous pressure and broad popular support for wage increases. Rising wages are inevitable, and companies like McDonald’s will have to adapt. So why wait? Imagine if McDonald’s announced tomorrow that they are raising their minimum wage to $15 an hour? That’s a lot of love that will result in an enormous wave of goodwill. All of a sudden, McDonald’s, now perceived by so many as a “bad guy” for selling “bad,” “unhealthy” food and taking advantage of its workforce would instantly turn into a caring, model corporate citizen. That’s brand transformation.
The stick in the spokes here is that pay raises are up to the franchisees, not the parent company. However, if corporate became a vocal proponent of pay raises, the pressure exerted on franchisees could lead to change. More important, if this recommendation was a single element in a comprehensive plan to right the business for the long term, franchisees might be a more receptive audience.
The most important bold step in this plan should be a relentless focus on cost conscious consumers. McDonald’s cannot compete on quality with chains like Chipotle or Five Guys, nor can they command those price levels. The chain may still be a destination for fries, but with so many other, higher quality and flavorful choices, it does not seem that McDonald’s food itself is the draw in most cases. What they’ve got left is fast, acceptable food at a low price.
Relying primarily on value to compete in the marketplace is not desirable, but it’s where McDonald’s finds itself. They should slash the menu by at least half, focus on a better in-store and drive-through experience for customers, leverage savings from more efficient operations and build back from there.
Premium coffee drinks, smoothies, wraps, salads and anything related to “health” are not very McDonald’s-like. Yes, these items have grown to represent a good deal of revenue that will be difficult to give up. But all of these items, created in reaction to trends so as not to be left behind, have sapped McDonald’s focus and core strength, serving comfort food conveniently at affordable prices.
Health, in particular, is a red herring for McDonald’s, an area in which McDonald’s should completely ignore its critics. The company is a victim of its own success here, a lightning rod due to its sheer size. The food at In ‘N’ Out and Five Guys is every bit as caloric and full of fat as McDonald’s, but they get a pass due to their niche status.
Most McDonald’s customers aren’t visiting for the salads, oatmeal or fruit & yogurt parfaits. These menu items are distractions, antithetical to the foundational McDonald’s experience of filling up on good (enough), greasy (in a good way) food for not a lot of money.
The company would catch all kinds of politically correct flack for this, but getting back to their core strengths will help rebuild their brand by projecting a single-minded message to customers. “I’m lovin’ it,” made a lot of sense in this context because the line related directly to signature items like McDonald’s fries, Big Mac and Quarter Pounders. “Choose Lovin’” is a bigger message, but the McDonald’s cannot credibly offer peace on earth, nor is that likely to be a motivating message to teens, young men or moms with kids with a few bucks in their wallets looking for comfort food at a decent price.
Finally, McDonald’s should create one or more additional new brands to capitalize on emerging trends such as fast casual (higher quality), health and farm to table. In fact, the company was at one time a big investor in Chipotle at one time, but they let it go (providing excellent returns to shareholders), when Chipotle went public. That ship has sailed, but there is nothing preventing McDonald’s from growing with new brands, each relentless focused on the trends fueling the growth of the Chipotles and Five Guys of the world.
