McDonald’s Case Study

BrandScience Conference

16 Novembro 2007

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McDonald’s TodayTrends

Emergence of the “Smart consumer”

Growing demand for time saving solutions

Quest for Well-Being “good for the body and for the soul”

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McDonald’s TodayBusiness Results

2005 2006 2007

Rate of Sales Growth

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McDonald’s TodayChallenges

Understanding key business drivers and their potential

Pricing

Extended Hours

Store remodelling

Food innovation

Brand Trust

Operational Excellence

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McDonald’sChallenges

Maximizing our marketing budget in times of limited resources

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McDonald’sChallenges

Balancing short-term and long-term initiatives

FranchiseeMarketeer

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McDonald’s

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McDonald’s and BrandScience

Development of a solution that:

Quantify the impact of business drivers

Aids sales forecasting

The basis for budget optimization, specially the media budget

Econometric modelling

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McDonald’sBrandScience Results

Identifying key sales Drivers

Seasonality Price

Stores

&

Timetables

Promotions

Product

Variants

Advertising

Brand

Performance

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McDonald’sBrandScience Results

Base Price Stores+Timetable Brand Performance Product Promotions Advertising

Base + Seasonality

Quantifying Effects

sale

s

weeks

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Price Timetable Brand Performance Product Promotions Advertising

McDonald’sBrandScience Results

New product launches

Increasing brand consideration

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Quantifying Effects

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McDonald’s

1st w

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2nd

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3rd

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Seasonality Learnings

End of Month Effect: results suggest that most people are paid close to the end of the month, as such are more willing to “eat out” in the 2 following weeks. As the end of month approaches, a negative impact is visible

Incr

emen

tal s

ales

Carnival

25 Apr

Corpo Deus

1st school week

5th October

1st November

1st December

8th December

Xmas

Children's Day

Extremely important for promotional activity scheduling

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McDonald’sProduct Insights

Incremental Sales Effect

Eurosaver indicator

Increasing the Eurosaver program’s product offering has proven effects over sales

Incr

emen

tal s

ales

Synergies' with Summer weeks

Eurosaver offeringweeks

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McDonald’sProduct Insights

The introduction of new products produces a novelty effect that lasts for at least 4 weeks an in a recent period this effect has risen and lasts longer

Incr

emen

tal s

ales

1st w

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2nd

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3rd

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4th

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5th

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6th

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7th

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1st w

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2nd

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3rd

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4th

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5th

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6th

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7th

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9th

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New Product Launch New Product

Launch

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McDonald’sProduct Insights

Happy Meal - different offers have different levels of appeal, hence the effect over sales is also quite different

Incr

emen

tal s

ales

Incremental Sales HM

Xmas

Summer

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McDonald’sPromotion Insights

Two different types of promotion: the 1st offering a price discount, the 2nd implying a special offer when buying a particular product. Both have a significant effect over sales, even though the discount on average has a higher impact

Incr

emen

tal s

ales

Promotion Intensity

Incr

emen

tal s

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Special offer distribution waves

Free Gift BNon food item plurchase

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Free Gift A

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TV GRP's Eq. - Brand Campaigns Brand Performance Press - Brand Campaigns

McDonald’sBrand Performance

Increasing brand performance

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McDonald’sROI

Promotions and advertising have very different levels of return on investment.Price discounts produce a high level of return, however it isn’t taken into account the forgone revenue due to a price decrease.

RO

I

Sales upliftInvestment

ROI =““

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PriceDiscount

OtherMedia

Avertising

SpecialOffer

TVAdvertising

Econometric ModellingMedia planning implications

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95%

2%2%

OUTDOOR

PRESS

RADIO

TV

McDonald’s advertising is highly focused on TV, however return by media figures show that radio is also a valuable media.

TV Radio Press Outdoor

RO

I

Media – ROI

95%

2% 2%

Ad Spend by Media RoI by Medium

20052005

20062006

Note: ratecard valuesSource: MediaMonitor

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Bra

nd

New

Pro

duct

Pro

mot

ion

A

HM

Pro

mot

ion

B

RO

I

Media – ROI per campaign Type

RoI by Campaign Type

Promotional or price related campaigns tend to show higher ROI

Different campaign types have different sales impact which affects thelevel of return by medium

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An advertising campaign effect extends beyond its own life period, and how long this effect last is a function of creative, campaign type and media used.Promotional campaigns have a half life period of three weeks, however for new product campaigns this figure is closer to two week

Media – Carryover Effect

1 2 3 4 5 6 7 8 9 10 11

Promotions

Brand

New Product

Half Life by Campaign

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S-shape curves applied to advertising: identifying saturation points and investment thresholds

Media – Advertising Effect

Camp ACamp B

Incr

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Investment

Minimum level of investment

Saturation point

A B C D

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These curves provide guidance in media planning, allowing for wastage minimization

Media – S shape curves

BRANDNEW PRODUCTPROMOTION BPROMOTION A

GRP’s

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S- shaped curves by Campaign Type

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The incremental effect of tv activity tends to be higher when radio campaigns are being aired, there is also a visible effect related to outdoor activity.Tv also enhances other media performance

Media Synergies

TV onlyTV+RadioTV+Outdoor

Time

Incr

emen

tal S

ales

TV

onl

y

TV

+Rad

io

TV

+Out

door

Incr

emen

tal S

ales

TV Effect

Rad

ioon

ly

TV

+Rad

io

Radio Effect

Out

door

only

TV

+Out

door

Outdoor Effect

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TV Effect - 1st w eek month

TV Effect - 2nd w eek month

TV Effect - 3rd w eek month

Consumer income doesn’t affect solely the sales pattern but also media performance. Starting an advertising campaign in different weeks of the month affects media return

Media scheduling

Time

Incr

emen

tal S

ales

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Scenario Evaluation