Marketing Plan for Relationship Marketing for McDonalds - Research Paper Example

 1) CONCISE EXTERNAL MARKETING AUDIT USING APPROPRIATE ANALYSIS MODELS, AND IDENTIFICATION OF KEY ISSUES FACING MCDONALD’S ARISING OUT OF THE AUDIT The external environment of McDonalds comprises of several factors that affect and influence the workings of the firm. Political/legal McDonald’s ahs been involved in several lawsuits over the years. The firm has often sued other brands like McJoy in Philippines and McCoffee in San Francisco for using similar trademarks. In 2003, UK’s Advertising Standards Authority blamed McDonalds for breaching the codes and not stating the correct way they make their fries in advertisements. The latest legal issues McDonalds is facing is regarding the obesity issues that have been caused by their products in the US and UK markets. McDonalds has been blamed for using its political influence to increase their sales and profits at the cost of the health of their consumers. Their use of trans fat in cooking and raw materiel that are not of very high quality as compared to competitions are examples of such political use of their strength being the number one fast food chain (knowmore.org 2008). Economic The global food price inflation has affected the prices of beef and bread which will increase the prices at McDonalds UK market also. Coupled with that, markets like china and India with booming economies with increasing demand are pressuring the suppliers of McDonalds and causing further increases in prices. An anticipated 5-6% increase in the prices is expected next year (Hawkes 2008). The restaurant market globally is affected by the credit crunch including the UK and consumers are thinking twice before paying via credit cards etc and this directly affects sales (Business Wire 2008). Social Social factors have a great influence on McDonalds. As per Burrows (1997) the firm has to adapt the culture of the locals so that the customers may be attracted to the food and the overall experience. In the UK McDonalds has introduced healthier meals options like McSalads with the rising obesity issue in the market. Halal meat for instance is essential for Muslim countries etc. Technological To attract more customers to the stores in the UK, McDonalds has introduced the latest technology like PlayStation, video gaming, internet facilities, music videos and flat TV screens in their remodeled restaurants. Also, WIFI is going to be introduced (Thomas, D 2004). Ecological McDonalds plans to recycle its vegetable oil from its 900 UK restaurants and convert it into biofuel which it will use in its fleet of 155 trucks. This will conserve 1650 tones of carbon annually. It has also joined hands with Friends of the Earth to discontinue use of polystyrene in its restaurants (Environmental Graffiti 2008). Barriers to entry The barrier to entry is fairly low as the initial setup of a fast food restaurant is not that high. Thus local restaurants are easier to set up. However, entry of larger brands is more difficult as getting the right location is a problem as it is very competitive. Also, a lot of marketing and promotion is required before a brand can successfully enter a market (Novicevic, M 2004, pp. 65-96). Threats of substitutes This is at a medium level. Sandwiches at lower cost, sit-down restaurants, cooking at home are all substitutes for McDonald’s products. However, those in the habit of fast food are loyal customers and have a difficult time shifting to substitutes (Novicevic, M 2004, pp. 65-96). Buyer and supplier power The buyer power and supplier power is low for McDonalds. Since McDonalds is one of the biggest brands, suppliers like Coke, want to be associated with McDonalds thus they do not have much say. Equipment power is secondary for McDonalds as purchases are made after years and labor power is also low as the firm hires mainly part time workers which are in ample supply (Business Wire 2008). Buyers are individuals and contribute very little individually thus their power is low. Also franchisees have low bargaining power as corporate McDonalds has power over contracts. Competition There is tough competition in the market and internal rivalry. According to Stires (2002, pp.74-76) the products are very similar especially the burgers and pose a threat to McDonalds. The core competitors are Burger King and Wendy which are soon catching up and posing a threat. Strengths McDonalds has strong customer base and brand recognition. Big Mac, happy Meal and Ronald play significant roles to build loyalty and recognition. McDonalds also has a strong franchise network with 85% of restaurants franchised which has enabled it to earn much more than competition (McDonalds 2008). Also, aggressively expanding globally McDonalds has an edge over its competitors especially in Asian markets. Weakness Since the cost of customers switching to other products is low, the loyalty factor is weak and McDonalds needs to perform at its best every time to hold on to its customers. Over centralization with 85% franchisees, McDonalds is failing to respond swiftly to geographical needs and localizing (McDonalds 2008). Opportunities McDonalds has cross and new branding opportunities like opening restaurants in Wall-mart, branding with Disneyland etc which gives new growth opportunities and building loyalty. International growth also remains an opportunity for example 1/3 of total sales came from Europe alone. Aroma Café opened in Europe have been successful. Changing the menu to attract new markets is also an opportunity like Mcsalad (Business Wire 2008). Threats. The market is becoming more health conscious and thus threatens McDonalds which has been blamed to cause obesity among youngsters in the US and UK markets. As per Burrows (1997) there also exists competition from other fast food restaurants like Wendy’s and Burger King which poses stiff competition. 2) EXPLANATION OF MCDONALD’S CURRENT SEGMENTATION, TARGETING, AND POSITIONING STRATEGIES Segmentation is the subdiving of a market into distinct subsets of customers, where any subset may conceivably be selected as a target market to be reached with a distinct marketing mix. (Kotler 1991). Effective market segmentation depends upon the Measurability, Accessibility, and Sustainability of the chosen segments. Targeting is the second stage of the segment "Target" position (STP) process. After the market has been separated into its segments, the marketer will select a segment or series of segments and 'target' it/them Positioning is how the target market defines an organization in relation to their competitors. A good position is what makes an organization unique, and it’s considered a benefit by the target market. Geographical segmentation McDonalds has many segments and caters to different markets. Globally it caters to different cultures like Asian, American, British, and South Asian etc and modifies its menus and services to match their cultural and social needs (Novicevic, M 2004, pp. 65-96). Although the basic menu is the same but there are variations according to the market segment it caters to. Age There is segmentation based on age. As Arndt (2000, pp. 166-170) claims it caters to young children with its Happy Meal and has play areas for the kids in several restaurants. However, the meals for the kids are tailored globally to meet the specific needs of children across the globe. Another segment that McDonalds caters to is the studying and working people who have a fast paced life and enjoy the quick and prompt services (McDonalds 2008). Class segmentation Although McDonalds focuses on every sector its primary focus is on the middle class segment. It tries to cater to those who want a cheap meal with an overall good experience. It also caters to those who are price conscious and offers deals which give consumers the option to save money (Burns 1997). Target market Families McDonalds mainly targets families and offers deals, value meals and environment that caters to families. As Arndt (2000, pp. 166-170) it targets middle class families who want a cheap meal in a good environment and service with their families. Working /studying market McDonalds also targets those who are working or studying and who do not have the time to cook at home. They are accustomed to the fast paced life and seek to have quick meals at affordable prices. Children McDonalds also targets children with its Happy Meal, toys and play areas. It focuses on children from the age of 4 to 8 (McDonalds 2008). They target children so that these children get hooked onto the taste and grow with the brand and as adults keep coming back for the same taste. When they grow older they get their families and children here too and in turn this grows the customer base building consumer connect along the way (Burns 1997). Positioning McDonalds has positioned itself as a place for the kids to come and enjoy. Their Happy Meal, advertising, the environment of their restaurants with music and colorful décor all speak fun and enjoyment. They also have play areas in their restaurants with mascot Ronald who entertains children. McDonalds is perceived as a place where children are entertained and they can come with their parents for a good meal and at the same time play there too. McDonalds has promotions for children and offers free toys, gifts, movies, activities and several meal options in their Happy meal for kids (Business Wire 2008). Globally McDonalds is positioned as the American way of eating with its fast food taste, service and the environment. When a customer enters a McDonald’s restaurant he is there to experience the American style of eating and he knows that wherever in the world he goes, he will have the same experience at any McDonald’s restaurant (McDonalds 2008). 3) DISCUSSION OF THE MOST APPROPRIATE MARKETING STRATEGY FOR MCDONALD’S WITH JUSTIFICATION McDonalds employs several marketing strategies to grow and increase its customer base. It uses market penetration where it increases the number of restaurants in the same markets with the same products with more than 1200 restaurants just in the UK market. This is why McDonalds is seen in every nook and corner. They compete on the basis of prime localities for their restaurants and often beat competition due to their ideally located restaurants (Ansoff 1957, pp.113-124). However, this strategy doesn’t work as much because this does not build customer loyalty and customers easily shift to competitors. Thus more attention should be made on retaining the existing customers and thereby increasing the sales rather than increasing the number of restaurants. McDonalds also uses the product development strategy and introduces new products in the same markets (Ansoff 1957, pp.113-124). They localize their products according to their markets. For example they have McRice in Indonesia, vegetarian products in India and McArabia in Bahrain etc. however, due to extreme centralization, with 85% of the restaurants franchised, it becomes difficult to make swift and regular changes in the menu options as the chain of command and decision making is centralized and takes longer (McDonalds 2008). Thus McDonalds is slow at localizing as compared to Burger King and Wendy’s which although are smaller chains but they have better quality and taste along with localized tastes. McDonalds also has the market development strategy. This is where they go into new markets with the existing products. For instance they entered the Asian markets with their basic manus of Big Mac and Happy Meals etc. this is a safer marketing strategy as the consumers know what to expect and know what they will get in the restaurants. Also, the products have been tried and tested and the firm knows how they will fair in the market. McDonalds, does localize, but it is only after it has set foot firmly in the market and understands the market well (Burns 1997). This strategy makes them be ahead of the competition and enables them to venture new markets with full force and thus it becomes difficult for the competition to compete with them as the products are the same and thus McDonalds is not taking that much of risk with products. As Arndt (2000, pp. 166-170) says understanding new markets is difficult but it can do so better than competition like Burger King and other local brands. McDonalds has now even gone into diversification. It is venturing new markets like with McCafe in competition with Starbucks. There are 21 McCafes in the US but there are plans for expansion. Also, McCafe have been in the Eurpoean markets for a year now. This diversification seems to be working and is giving McDonalds a new face and an opportunity to target new customers (Mcdonalds 2008). 4) RECOMMENDATIONS FOR AN EFFECTIVE EXTENDED MARKETING MIX (7Ps) IN RELATION TO THE IMPORTANCE OF CUSTOMER RELATIONSHIPS FOR MCDONALDS The 7P’s of marketing should be modified to suit the changing needs of the market. This will improve the relationship between the brand and the customer. PRODUCTS Where the products are concerned, McDonalds has been fairly successful in localizing the products for different countries, however, what McDonalds has not been able to do is create a product which appeals to the masses. The last successful product of the kind has been McNuggets which was more than a decade ago. Thus McDonalds needs to create a product that has a global appeal. This will bring back a lot of customers and would encourage them to try the new product and at the same time build the relationship between the customer and the brand as they would be better satisfied. McDonalds also needs to focus on taste and quality and not just the fast service as competitors like Burger King and Wendy are focusing more on quality and taste and winning more customers. McDonalds has core products like Big Mac, Quarter Pounder, Ham and Cheese Burgers, Happy Meals, McChicken, McSpicy in Singapore, Snackwrap in UK, US, Canada and Australia, Filet-O-Fish and McLobster in New England etc are a few products which are various products to suit the different customer needs. The firm keeps introducing new products and variations to keep the customers satisfied and in the process build customer relationships (McDonalds 2008). PRICE The prices of McDonalds are very competitive. Burger King costs about 3.69 pounds and is about 10p-20p higher than McDonalds. This is a positive sign as the customers especially the middle class ones remain loyal to the brand. The prices have been marked carefully so that they are affordable by the masses. This feature keeps the customers happy and wanting to come back thus building the relationship between the customers and the brand (Business Wire 2008). Packaging The packaging of the products is also simple and convenient which is attractive for the customers. Also, due to the simple packaging, the customers are served promptly which further adds value at the same time building customer relationships. PROMOTIONS Sales promotions are often offered at McDonalds. The Happy Meal is always accompanied by a free toy, upsized options are given to customers, deals are offered that offer the customers to promote sales. To promote the sales of new products, deals and offers are made to increase their sales. Price reductions are also made to increase sales and attract more customers. TV commercials of McDonalds mainly target children featuring young kids, golden arches, colorful and chirpy advertisements that attract kids. This builds relations with the children and lures them to go to McDonalds. Personal selling is also practiced at point of sales where the employees inform the customer of the new offers and deals and upsize options. This also builds the customer-brand relations as they are offered better and more options. Public relations are also built with billboard and print advertisements and to build a general image of the brand. Events held include fundraisers, in-store promotions, grand openings etc which are mainly focused to improve public relations and image (McDonalds 2008). PHYSICAL EVIDENCE The physical environment is friendly and welcoming. The color schemes, play area, posters, posters and music are all friendly and cheerful. This creates a happy environment and attracts more customers. Thus the customers like coming in for the environment and as the promotional things have McDonald’s logo, the Ronald’s mascot is present in all restaurants and the overall aura is happy in all the restaurants, it builds the relationship between the customers. However, McDonalds needs to change its restaurant interiors and make it more modern to meet the changing needs of the customers (McDonalds 2008). PEOPLE The employees are cheerful and friendly. They are accommodating and friendly and help the customers when they need help with orders, menus and seating etc. this makes the customers feel more welcome and thus the relationship between the brand and them improves. McDonalds has ‘employee of the month’ where it recognizes the employee with the best performance. McDonalds also has employee benefits, competitive pays, health and insurance etc to keep the employees satisfied and improve the brand employee relationship which in turn reflects on how the employees treat the customers (McDonalds 2008). PLACE All restaurants globally are identical and have the same atmosphere. Also they are located at convenient places which makes the customers feel that they have a special bond with McDonalds as it is present every where they go. PROCESS The whole process of ordering and serving etc is fast and convenient. It is a simple process and adds value to the whole process of customer experience. McDonalds should focus on improving their technology and incorporate it in the process to make it more effective and efficient. 5) EVALUATION OF THE IMPORTANCE OF CUSTOMER RELATIONSHIPS FOR MCDONALDS AND EXPLANATION OF HOW CUSTOMER RELATIONSHIPS CAN BE DEVELOPED AND SUPPORTED BY THE MARKETING MIX Customer relationship is essential for McDonalds so that customers become loyal and they keep coming back for the McDonalds experience. The market is very competitive and there are many options available in terms of restaurants, experiences and products (McDonalds 2008). Thus if McDonalds doesn’t attract the customers enough they will easily switch to other brands unless there is a strong relationship between the customer and the brand which would keep them connected together. Using the SERVQUAL their customer relations can be assessed (Buttle 1996, pp 8-31). McDonalds has strong reliability as the customers know that they will find the same taste and quality of products and services all over the world ( McDonalds 2008). There is quality assurance and the customers can rely on the brand for that. Thus this further enhances the customer brand relations and makes them more loyal. McDonalds penetrates the market very well and thus the consumers have no difficulty in accessing McDonalds wherever they go. The restaurants are located at strategic locations in every market and thus are easy for consumers to find (McDonalds 2008). McDonalds is also responsive and makes changes according to the changing needs of the consumers. It modifies its products and services according to the markets. Like restaurants in Saudi Arabia are segregated and Mcsalad is introduced for health conscious customers. This builds customer loyalty and relations. McDonalds is very competition and has been able to expand globally as the number one fast food chain. However, competition is rising and its competency has to be improved to attract more customers and retain existing ones. The employees are very courteous and smile for every customer. However, this has become more a practice and habit and customers can figure this out easily. Instead of building relations such an attitude in some restaurants disappoints the customers. The communications that McDonalds uses to interact with its customers include advertisements, print media and in-store promotions etc. internet is also being used increasingly by the firm to communicate its message to its target market which builds customer-brand relations. However, the firm needs to improve its communication strategy and make it more customized. The firm however is losing its credibility with the growing concerns of obesity in the UK and US markets. There measures being taken like switching from transfat to vegetable oil and introducing healthier meal options like Mcsalad. However, the image overall has been marred and the credibility has been shaken. McDonalds provides little security for its employees (Buttle 1996, pp 8-31). This is because most of them are part time workers and there is little job security for them. This generates dissatisfaction among them and they are not happy and content at work which reflects on how they interact with the customers. Tangibles include the products that McDonalds offers. McDonalds needs to come up with some successful product in its main menu. This is because the consumers need a change and want new tastes (McDonalds 2008). They could come up with a new burger which is a healthier option and tastes as good coupled with salad and diet drinks or juices to compliment it. This would attract the consumers and at the same time give a positive image to the brand thereby increasing customer trust and loyalty. McDonalds understands the growing needs of the consumers to some extent (Buttle 1996, pp 8-31). However, major improvements need to be made in this realm. This is because the consumers now seek more than just convenience in the products. they also want quality and taste which the competitors like Burger King and Wendy understands but McDonalds has not done much to improve either the taste or quality of its products. This makes the consumers want to look for better options. 6) SUGGESTION OF BUDGET AND EVALUATION METHODS FOR THE MARKETING PLAN McDonalds will require about $1-$1.5 billion remodeling all its outlets (fundinguniverse.com).This is a rough estimate and will entail changing the color schemes, layouts, seating and the basic structure. Also, the kitchen will be revamped and installed with better technology. This will improve the efficiency and make the production process faster and thus more satisfying for the consumers. Some of the restaurants will be installed with internet and Hi Fi music systems. This will attract the younger generation and would encourage them to spend more time in the restaurants and thus spend more. The annual marketing budget is 35 m pounds in the UK (Sweney 2007). From this 40% should be dedicated to advertising on TV but the advertisements should be interactive. Sales promotions should be dedicated 20% of the budget and focus should be on customized promotions especially via the internet. 25% should be spent on public relations and building the image of the brand which has been damaged due to the obesity issue. The remaining should be spent on personal selling and building employee customer relations. Also, about $1 million will be needed to hold the training of the employees (Alexander 2003). McDonalds would need to spend another $50,000 to improve the internet selling and making a customer data base so that they can customize their promotions and improve upon their relations with the customers (Alexander 2003). Thus by incorporating all these in the budget, the firm can aim to implement the recommendations and head towards improvements and progress. With the implementations McDonalds can also compete in the market and sustain itself at the number one position that it holds. GOOD REFS BUT WE WILL NEED TO TALK THIS THROUGH TO CONFIRM THEY ARE ALL CORRECT.   REFERENCE Alexander, D 2002, ‘McDonald's Chief to End Rocky Tenure Years Early,’ Chicago Tribune. Arndt, M 2000, ‘Did Somebody Say McBurrito?" Business Week, pp. 166-170. Burns, G 1997, ‘Fast-Food Fight,’ Business Week, pp. 34-36. Burrows, G 1997, ‘McGlobal: McDonald's begins to think globally about its distribution to overseas restaurants, ‘American Shipper. Chiem, P 2000, ‘Putting the Sizzle Back in McDonald's,’ Chicago Tribune. Gogoi, P 2003, ‘Hamburger Hell,’ Business Week, pp. 104-06, 108. Leung, S 2003, ‘As McDonald's Braces for Loss, CEO Has a Plan,’ Wall Street Journal, p. B1. 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