mcdonald’s : competing against fast casual dining

Download McDonald’s : Competing Against Fast Casual Dining

Post on 23-Feb-2016




0 download

Embed Size (px)


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 - PowerPoint PPT Presentation


McDonalds: Competing Against Fast Casual Dining

McDonalds: Competing Against Fast Casual DiningMKTG 277/777Jess Alczar, Christopher Kuo, Danielle Levite, Brenda Nguyen, Erik PumpBackground (Brenda)Current market situation (US)

SurveyMcDonald's: perception vs. reality

Recommendation for McDonald'sCompete for more market shareProductPricePlacePromotionLimitationsAgendaFast 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-foodMarket Trends: From Fast Food to Fast Casual

Fast Food Market Worth $162 billion 2.2% growth in sales revenue

Market Trends: From Fast Food to Fast Casual Burger IndustryWorth $40 billion

Fast Casual MarketWorth $22 billion 5.7% growth in sales revenueFast casual burger segment16% growthFast food burger segment3.2% growth

McDonald's (U.S.): SWOT AnalysisStrengthsBrand nameLocationsAdvertising Price

WeaknessesUnhealthy imageLow quality foodBad stigma OpportunitiesExpansionPromotionsHealthy trends

ThreatsIntense competitionHealth regulationsMore health-conscious consumersFive GuysSimple, casual and diner environment792% growth since 2006 (32.8% in 2011 alone)Nearest competitor is Jimmy John's, which grew 241% over the same periodEntire chain surpassed $1 billion in revenues in 2012Worth an estimated $500 million

If we take a look at Five Guys, an up-and-coming competitor in the fast-casual segment, we can see that they have been incredibly successful in the past few years. They grew 32.8% in 2011 alone compared to McDonalds 2.9% sales growth. Measuring Reality v. Perceptions of McDonaldsPrimary Research SurveyAsked respondents to rank McDonalds, Five Guys, Wendys and Smashburger on: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 important51 responsestesting perception v. reality we conducted a survey among college aged participantsPrice was very cheap to very expensive CharacteristicsHealthinessMenu VarietyPriceQualityTasteCharacteristicLevel of ImportanceTaste94%Quality82%Price65%Healthiness61%Menu Variety43%Level of importance is noted by percent who chose either very important or important on survey for each characteristic. We will talk about taste and quality later b/c those are more subjective measures, but for now we will take a look at the third and fourth most important characteristics noted: price and healthiness. Focus on perceptions of taste and quality McDonalds Double Quarter Pounder with Cheese$4.49Five Guys Cheeseburger (Double Patty)$6.39PriceLooking at comparable menu items, we isolated the double quarter pounder with cheese to be similar to the five guys cheeseburger with double patty. Does anyone have a guess as to the cost of the double quarter pounder? Take 2 answers. And the cheeseburger from five guys? PriceMcDonalds Large Fries$2.49

Regular Soda (Medium)$1.59

Total before tax: $8.57Five Guys Large Fries$4.99

Regular Soda$2.29

Total before tax: 13.675 dollar differenceMcDonalds Perceived Price82% of survey respondents cite it as very cheap or cheap

Five Guys Perceived Price78% of survey respondents cite it as moderate or expensiveDo Perceptions Match Characteristics?Yes! McDonalds Double Quarter Pounder with Cheese750 Calories43g Fat19g Saturated Fat1280mg SodiumFive Guys Cheeseburger (Double Patty)840 Calories55g Fat26.5g Saturated Fat1050mg SodiumHealthinessNow comes another quality measured by our survey: healthiness. Taking the same two items we measured price on before, were going to measure the classs perceptions on the healthiness of each item? Who believes the quarter pounder is healthier? Cheeseburger? Ok, it turns out it is actually the quarter pounder. Five Guys cheeseburger has more calories, more grams of fat, and more grams of saturated fat HealthinessMcDonalds Large Fries154 g500 Calories25g Fat3.5g Saturated Fat350mg SodiumFive Guys Large Fries567g1314 Calories57g Fat10g Saturated Fat1327mg SodiumWhat about the infamous mcdonalds french fries? Here is where the great discrepencies come from. Although it should be taken with a grain of salt, the largest mcdonalds size measured in grams was actually smaller than the five guys little size of french fries McDonalds Perceived Healthiness61% rated as very poor25% rated as poor

Five Guys Perceived Healthiness31% rated as very poor39% rated as poorDo Perceptions Match Characteristics?So here is where the discrepency arises. McDonalds, although offering a product that is healthier than Five Guys is perceived to be much worse for you. This relates a lot to the B&D case where functionally the products are superior but the perceptions are very low ProcessedFreshExcellentVery PoorQualityTasteOrigin is 3 for taste and 3 for qualityMcdonalds Quality 1.42Taste: 2.91

Five Guys Taste 4.24Quality 3.43 Summary of Primary ResearchSeverely lagging behind on perceptions for primary characteristics for the customers: taste and qualityAdvantage on priceAlso advantage on healthiness HOWEVER perceptions are unfavorable and customers do not realizeRECOMMENDATIONSRecommendation SummaryProductCreate a higher quality burgerPriceMore expensivePromotionChange their campaigns not only fast food, but also clean restaurants, healthy food, including premium optionsPlaceSame places, change decorationRECOMMENDATIONPRODUCT

McDonalds Focuses on Standardized MealsHighly standardized across the traditional menuCustomer familiarity with products

PRODUCTCurrent McDonalds Burger SelectionSalt, pepper, pickles, minced onions, ketchup, mustard

PRODUCTCurrent Five Guys Burger Selection(Little) Hamburger(Little) Cheeseburger(Little) Bacon Burger(Little) Bacon Cheeseburger

PRODUCTFive Guys: Customized Product PRODUCTFive 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.

Five Guys: High Quality BeefPRODUCT

PRODUCTRecommendations ProductIntroduce single new productFully customizableBun (Egg vs. White vs. Wheat)Size (1/3 Pound vs. 1/2 Pound)ToppingsHigher quality beefPRODUCTImpact on taste?Recommendations PricePRICEBurgers currently in the range of $0.99 to $4.99Five Guys currently in the range of $3.39 to $6.99New product with an increased price ($6.00 - $6.50)Free toppings

Mcdonalds currently perceived to be very cheap, maybe raising price can change perceptions: heuristic more expensive is betterNew Product in a Distinct Part of MenuPROMOTION

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

PROMOTIONMcDonalds AdvertisingComparison Five Guys Advertising Five Guys does not undertake rapid advertising and 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

PROMOTIONMcDonalds should take advantage of Five Guys' 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

Recommendations McDonalds AdvertisingPROMOTION

Q: What is portrayed in the commercial?Q: What is noticeably left out?

--> Speed, efficiency, fast-pacedMcDonalds CommercialsPROMOTIONFast-casual restaurant that successfully creates an 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 pricesTheir simple and clean decor enables them to be perceived as a higher-end restaurant with quality food and reasonable prices

PLACEComparison Five GuysRecommendations PlaceMcDonalds 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

PLACELimitations / RisksEconomicLegalOtherBrand


View more >