Industry watchers speculating on the next phase of McDonald’s USA’s marketing after the retirement of chief marketing officer Neil Golden do not foresee a radical shift in messaging but nonetheless think the brand could seize new sales-driving opportunities with its menu and digital platforms.
Restaurant marketing veteran Dan Dahlen said Golden’s decision to retire is not an indictment of his performance as the chief marketing officer during a difficult year and a half for the chain’s sales. The advertising, anchored by the “I’m lovin’ it” tagline and steady promotion of value and new products, remained effective, he said, yet sales faltered in a weak economy in late 2012 and through 2013.
“Whether it was his decision to retire or somebody else’s is irrelevant,” said Dahlen, who interacted with Golden when he was executive vice president of Nielsen IAG’s restaurant practice. “The time had probably come. … He did well in his time in that seat.”
He added that McDonald’s likely would look to hire from within to replace Golden, as was the case when he took over for Bill Lamar in 2008.
Tim Nelson, president of Chicago-based agency Tris3ct, agreed that McDonald’s advertising had not led to ineffective marketing, and he saw the transition to the next CMO as a way to arrive at a strategy centered on different products.
“The messaging and the ‘I’m lovin’ it’ tagline have been good for the business, and there is a genuine sense people have of what McDonald’s brand is about and that people love a Big Mac, fries and a Shamrock Shake,” he said. “But what are the products they want to feature in their marketing, and how will they get the value perception right, and how will that change their core business?”
Making room for more
McDonald’s might take its test of an expanded value menu nationwide as its first major marketing move after Golden’s retirement announcement, possibly before he leaves the position at the start of 2014, according to one securities analyst who visited the brand’s headquarters this week.
After meeting with McDonald’s chief executive Don Thompson and McDonald’s USA president Jeff Stratton Tuesday, Jason West of Deutsche Bank speculated that the brand could introduce the Dollar Menu & More platform to all 14,000-plus restaurants in the United States this year.
The tiered menu would include the usual $1 price point of the Dollar Menu, but also $2 and $5 prices as well for new versions of value-priced sandwiches, such as a double-patty Grilled Onion Cheddar burger or a McDouble with bacon.
West wrote in a research note that McDonald’s management “seemed likely to move forward with a national rollout in the not-too-distant future,” adding that it would likely be ahead of the “value-conscious post-holiday period” in 2013.
He noted that the Dollar Menu & More’s greatest potential benefit to McDonald’s, aside from possible trading up to $2 or $5 items, would be moving the McDouble off its current $1 price point.
“We believe this new menu is an important step in weaning customers off the fixed $1 price point as a symbol of value, appeases franchisee concerns about this lower-margin portion of the business and should be supportive of margins — and potentially sales, if the traffic erosion is managed,” West wrote.
Tris3ct’s Nelson was optimistic that a possible systemwide rollout of Dollar Menu & More would give McDonald’s the chance to drive sales with its core value proposition and menu items, rather than rely on limited-time offers.
While he conceded that “McDonald’s successful run started when it got organized around the Dollar Menu” more than 10 years ago, the tiered Dollar Menu & More could redefine the brand’s value through bundling, bulk offers like the 20-piece Chicken McNuggets or daypart pricing similar to “happy hour” promotions at Taco Bell or Sonic.
“Having been so successful defining value through the Dollar Menu, it was a little enabling,” he said, “and when you move past that, there are a lot of places you can go with value.”
Rather than “just trying to get through a marketing window or having a comp you need to meet” with a limited-time offer, McDonald’s could keep its menu relevant by improving or repurposing its signature items, Nelson said. “When I think about energizing the core menu, it’s about re-presenting it in a value context or in a daypart context that creates a new business opportunity.”
He cited new flavors of Quarter Pounders, which replaced the Angus Third Pounder line this spring. He also pointed to tests of a “McDonald’s After Midnight” menu that includes breakfast sandwiches and hash browns along with burgers and fries at the late-night meal occasion.
‘From laggard to leader’ in digital
In their meeting with Deutsche Bank’s West this week, McDonald’s leaders “admitted that [the brand] has not been aggressive enough in pursuing digital opportunities, such as mobile payment, mobile ordering and loyalty,” West wrote.
The company does have several tests of these platforms running in parts of the United States, but West speculated in his research note that McDonald’s could roll out a “more robust digital platform” across the country in the next 12 months.
“We would expect it to start with mobile payment, before moving to mobile ordering and eventually loyalty,” he wrote. “Given McDonald’s significant scale, resources and technology investments, we believe the company can quickly move from laggard to leader in the mobile engagement arena, perhaps providing a competitive advantage against quick-service peers that do not have the resources or infrastructure to move as quickly.”
Nelson of Tris3ct agreed that better digital capabilities would serve McDonald’s well, because “the biggest issue McDonald’s has is throughput.”
“If there were a possibility of ordering and paying via phone and then just picking it up, however that technology works, it’s going to increase throughput for a relatively low cost,” he said.
Alleviating the bottleneck at the drive-thru during peak lunch periods would help McDonald’s drive sales from its core menu, Nelson added about his earlier point.
Oak Brook, Ill.-based McDonald’s operates or franchises more than 34,000 restaurants worldwide.