GROWING THE McDONALD’S BRAND- Harsh Daga, PGP31149, IIM Lucknow

Key Questions Answered

1. What options does a brand have to grow when existing markets reach saturation level?

2. How can a brand tackle changes in customer lifestyles that are adverse to its growth?

3. How can the chances of success for an extension be improved through promotion?

4. How important is the consistency of brand associations between a parent brand and its extension?

5. How can a 70-year old brand successfully reposition itself in the mind of it’s target group?

McDonald’s brand extension strategy is unique and a source of insights for the following critical brand management questions.

McDonald’s Customer-based Brand Equity

Diversification• Opened McCafe in Portugal &

Austria & McTreat for desserts

• New products for new markets

PERFORMANCE IMAGERY

JUDGEMENTS FEELINGS

RESONANCE

SALIENCEFamous multinational fast food chain Presence in 120 countries

Sell tasty and cheap

Multiple secondary services

Historically targets children

Convenient, Fun and Efficient

Good Quality

Value for Money

Possibly unhealthy

Warmth, Fun

Excitement – Happy Meal

Cheap

Attachment

Loyalty - Repeat sales

Changes in Environment McDonald’s faced an adversarial environment from mid 2000s :

Market Saturation

Health Concerns

Economic Slump

Decline in Fast Food Acceptance• Globally fast food market was witnessing saturation across all

geographies, with the exception of Asia-Pacific

2010 2011 2012 2013 2014 20150

100

200

300

400

500

600

700

Fast Food Market (in $ Billion)

World Asia Pacific Australia Eastern EuropeLatin America Middle East and Africa North America Western Europe

Stiffening CompetitionIts competitive frame of reference also kept increasing

Stiffening Competition• As can be seen from the graph below, Subway aggressively

increased its no. of outlets worldwideLeading Fast food (in terms of outlet numbers

• In North America, Burger King provided a cheaper alternative to McDonald’s

How didMcDonalds respond?

“ For 59 years we asked customers to fit around our business model: Here's our menu and here's the way you can interact with us... But peoples' desires are changing ” - Steve Easterbrook, CEO

McDonald’s Response

Using New ProductsProduct Development Diversification

• Conscious focus on creating healthy options like salads

• Launched a premium coffee line

• Opened McCafe in Portugal & Austria & McTreat for desserts

• New products for new markets

McDonald’s ResponseThe company responded with a 4-prone growth strategy

Using Current ProductsMarket

PenetrationMarket

Development• Adopted motto of “Better, not

bigger”

• Upgraded facilities and

operations of existing stores

• 24-hour service at select outlets

• Expanded to new countries in

Asia & Africa

• Localized offerings based on

taste preferences

• Targeted new customer

segments

Ad Campaigns - Focus on extensions

Adapting to changed consumer preference

for healthy food

Geographic Diversification

Improving brand image

Brand Power• McDonalds continues to have the highest brand power among

fast food chains Globally

Ranks as the 9th strongest brand overall but has been witnessing a fall off-late

A 70-year old brand legacy

Extensions – Accepted or Rejected?

Impact - Global Sales of McDonald’s

Diversification• Opened McCafe in Portugal &

Austria & McTreat for desserts

• New products for new markets

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150

5

10

15

20

25

30

Global Sales of McDonald's ( in $ Billion)

Company-Operated Franchised

• A situation of depleting sales persisted, especially in its company owned outlets

Source : Bloomberg

• 2015 sales declined by $3 Billion from 2013

McDonald’s not able to get

rid of its unhealthy imageInconsistent Brand

Association

Negative associations related

to McDonald’s need to be

addressed through effective

communicationBottom-line

Successful brand extension requires a perception of fit between the parent and extension

DisclaimerThese slides have been prepared under the guidance of Professor Sameer Mathur for the Brand Management course at IIM Lucknow

Indian Institute of Management, Lucknow

Harsh DagaPGP31149