Transcript McDonald*s: Competing Against Fast Casual Dining

McDonald’s:
Competing Against
Fast Casual Dining
MKTG 277/777
Jesús Alcázar, Christopher Kuo,
Danielle Levite, Brenda Nguyen, Erik Pump
Agenda
Background (Brenda)
• Current market situation (US)
Survey
• McDonald's: perception vs. reality
Recommendation for McDonald's
• Compete for more market share
o
Product
o
Price
o
Place
o
Promotion
• Limitations
Market Trends:
From Fast Food to Fast Casual
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Fast Food: Food that is prepared and served quickly at
inexpensive restaurants with preheated or precooked
ingredients
Fast Casual: Hybrids of quick service and casual dining
that provide counter service and offer more customized
and freshly prepared dishes than traditional fast-food
Market Trends:
From Fast Food to Fast Casual
Fast Casual Market
o Worth $22 billion
o 5.7% growth in sales
revenue
Burger Industry
Worth $40 billion
Fast Food Market
o Worth $162 billion
o 2.2% growth in sales
revenue
Fast casual burger segment
o 16% growth
Fast food burger segment
o 3.2% growth
McDonald's (U.S.): SWOT Analysis
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Strengths
o
Brand name
o
Locations
o
Advertising
o
Price
Weaknesses
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Unhealthy image
o
Low quality food
o
Bad stigma
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Opportunities
o
Expansion
o
Promotions
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Healthy trends
Threats
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Intense competition
o
Health regulations
o
More health-conscious
consumers
Five Guys
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Simple, casual and diner environment
792% growth since 2006 (32.8% in 2011 alone)
o Nearest competitor is Jimmy John's, which grew
241% over the same period
Entire chain surpassed $1 billion in revenues in 2012
Worth an estimated $500 million
Measuring Reality v.
Perceptions of McDonalds
Primary Research Survey
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Asked respondents to rank McDonald’s, Five Guys,
Wendy’s and Smashburger on:
o Healthiness, Menu Variety, Price, Quality, and Taste
on a scale of “very poor” to “excellent”
At end, asked respondents to rank each characteristic
from “not important at all” to “very important”
Characteristics
Healthiness
Menu Variety
Price
Quality
Taste
Characteristic
Level of
Importance
Taste
94%
Quality
82%
Price
65%
Healthiness
61%
Menu Variety
43%
Price
McDonald’s Double
Quarter Pounder with
Cheese
$4.49
Five Guy’s
Cheeseburger
(Double Patty)
$6.39
Price
McDonald’s Large Fries
$2.49
Five Guy’s Large Fries
$4.99
Regular Soda (Medium)
$1.59
Regular Soda
$2.29
Total before tax: $8.57
Total before tax: 13.67
Do Perceptions Match Characteristics?
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McDonald’s Perceived Price
o 82% of survey respondents cite it as very cheap or
cheap
Five Guy’s Perceived Price
o 78% of survey respondents cite it as moderate or
expensive
Healthiness
McDonald’s Double Quarter
Pounder with Cheese
750 Calories
43g Fat
19g Saturated Fat
1280mg Sodium
Five Guy’s Cheeseburger
(Double Patty)
840 Calories
55g Fat
26.5g Saturated Fat
1050mg Sodium
Healthiness
McDonald’s Large Fries
154 g
500 Calories
25g Fat
3.5g Saturated Fat
350mg Sodium
Five Guy’s Large Fries
567g
1314 Calories
57g Fat
10g Saturated Fat
1327mg Sodium
Do Perceptions Match Characteristics?
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McDonald’s Perceived Healthiness
o 61% rated as “very poor”
o 25% rated as “poor”
Five Guy’s Perceived Healthiness
o 31% rated as “very poor”
o 39% rated as “poor”
Taste
Excellent
Processed
Fresh
Quality
Very Poor
Summary of Primary Research
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Severely lagging behind on perceptions for primary
characteristics for the customers: taste and quality
Advantage on price
Also advantage on healthiness HOWEVER perceptions
are unfavorable and customers do not realize
RECOMMENDATIONS
RECOMMENDATION
Recommendation – Summary
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Product
o Create a higher quality burger
Price
o More expensive
Promotion
o Change their campaigns – not only fast food, but
also clean restaurants, healthy food, including
premium options
Place
o Same places, change decoration
PRODUCT
McDonald’s Focuses on Standardized
Meals
PRODUCT
Current McDonald’s Burger Selection
• Highly standardized across the traditional menu
• Customer familiarity with products
PRODUCT
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Salt, pepper, pickles, minced onions, ketchup, mustard
PRODUCT
Current Five Guys Burger Selection
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(Little) Hamburger
(Little) Cheeseburger
(Little) Bacon Burger
(Little) Bacon Cheeseburger
PRODUCT
Five Guys: Customized Product
PRODUCT
Five Guys: High Quality Beef
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“Five Guys uses 80/20 ground chuck-high quality
ground beef containing only steer and heifer meat,
which does not include any cow meat or fatty
trimmings. We do not use ammoniated procedures to
treat our ground beef.”
PRODUCT
PRODUCT
Recommendations – Product
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Introduce single new product
Fully customizable
o Bun (Egg vs. White vs. Wheat)
o Size (1/3 Pound vs. 1/2 Pound)
o Toppings
Higher quality beef
PRICE
Recommendations – Price
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Burgers currently in the range of $0.99 to $4.99
Five Guys currently in the range of $3.39 to $6.99
New product with an increased price ($6.00 - $6.50)
Free toppings
PROMOTION
New Product in a Distinct Part of Menu
PROMOTION
McDonald’s Advertising
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McDonalds is one of the most prevalent fast food
advertisers: television, radio, newspaper ads, billboards
and signage, sponsors sporting events, etc.
McDonalds spends over $2 billion each year on
advertisements --> has sufficient resources to allocate
towards extensive advertising campaigns
PROMOTION
Comparison – Five Guys Advertising
• Five Guys does not undertake rapid advertising and
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shuns national advertising campaigns, which they find
fake, and instead rely on word of mouth.
As a result, a considerable portion of the target market
is completely unaware of their existence
In contrast, the giant competitors of Five Guys
(McDonalds) carry out intense all-media advertising
campaigns which help them create enough attention
so as to generate the desired consumer base
PROMOTION
Recommendations – McDonald’s
Advertising
• McDonalds should take advantage of Five Guys'
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weakness → Lack of Advertising -> Low Consumer
Awareness
It should use its advertising advantage to promote a new
premium menu and focus on an enjoyable dining-in
experience
PROMOTION
McDonald’s Commercials
http://www.youtube.com/watch?v=kZCbvpJ4O6c
Q: What is portrayed in the commercial?
Q: What is noticeably left out?
--> Speed, efficiency, fast-paced
PLACE
Comparison – Five Guys
• Fast-casual restaurant that successfully creates an
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environment that speedily serves specialty foods at
moderate prices
They resemble sit-down diners that act as hang-out
spots for friends and family seeking cheaper prices
Their simple and clean decor enables them to be
perceived as a higher-end restaurant with quality food
and reasonable prices
PLACE
Recommendations – Place
• McDonalds has 13,382 stores in the U.S.
• They should capitalize on their extensive real estate
• Redirect the use of the funds towards purchasing
quality meat and remodeling their current stores to
enhance customer experience → striving for a more
fast-casual environment
Limitations / Risks
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Economic
Legal
Other
o Brand