McDonalds Corporation and Its Application of the Marketing Mix Model - Case Study Example

McDonald’s Corporation and Its Application of the Marketing Mix Model Table of Contents 1.0 Executive summary 2 2.0 Introduction 3 3.0 The marketing mix model 3 3.1 The Product 4 3.2 Place 4 3.3 Promotion 5 3.4 Price 6 3.5 Process 6 3.6 People/personnel 7 3.7 Physical evidence 7 4.0 Recommendations 8 5.0 References 9 1.0 Executive summary Since 1970’s, fast food outlet have been on the rapid increase in America as many have opted for the diet served in those outlets. Fast food outlets have been preferred by adolescents who frequently visit these fast food outlets preferably two times in a week. The reason behind this has been due to time constraints and the changing lifestyle of the American people. This increasing demand for fast foods means that there is room for growth in the fast foods industry that Mc Donald’s and other fast foods companies can exploit. However, there is also a growing increase in the number of health conscious Americans that has been brought about by the realization of the high number of overweight and obese citizens. In addition, more than two thirds of the USA adults are obese or overweight and this is an alarming statistic for the future of the country. The widespread consumption of fast food among other lifestyle issues has been identified as the main cause of obesity in America and other countries and consequently, these poses a challenge in the continuous growth of the fast foods industry. It therefore calls upon all the companies operating in the food service industry to position strategically to take advantage of the large market but yet to putting into consideration the above heath issues. 2.0 Introduction McDonald’s Corporation is a food retail company with approximately 30,000 restaurants in over a 100 countries thus emerging to be the worldwide leader in the food franchise sector. McDonald’s Corporation recorded its highest profit in 2007 to hit an all time high in its 54 years of history. The success of the company has been in how well it has been able to employ the marketing mix model to create a competitive edge over its competitors. A marketing mix model is set of decisions that a marketer has to make when introducing his products to the market in relation to price, product, promotion and place. As the food industry is developing, there is pressure to realize the financial goals in the long run mainly from the external markets which can be realized through their emerging products and profit growth. Proper use of the marketing mix will help McDonald’s to take advantage of the diverse advertising channels in the media that will be of great help in delivering information to the customers. Through internet, use of search engines, cell phones and texts amongst others, there is need for the company to choose the method that will enable it to develop its targeted profits and sales growth and retain a stable customer base. 3.0 The marketing mix model The marketing mix model began with a single ‘P’ this being the price. However, there has developed a different view of defining marketing mix to be made up of the 4Ps’this being the price, the promotion, the product and the place, which puts the marketing plan into operation. The managers who have a thought that is geared by research use the marketing mix and the research findings and put it into practice. Due to the wide and diversified product line mainly on the different food types, there is need to involve the price, the product, the place and promotion to be the main guidelines in improving the marketing mix that is used by McDonald’s company. In general, the marketing mix uses the four Ps as the strategies used to sell the company’s products. However since McDonald’s operates in the service industry, it is important for the company to employ the expanded marketing mix concept of 7Ps which in addition to the 4Ps includes people, the physical evidence and process. 3.1 The Product The product is the good or the service bought or sold with the aim of satisfying a need or want. Other attributes that may be included are the packaging, design, brand names amongst others. Mc Donald’s company should focus on the taste of their foods, how the food is presented in terms of it being appetizing to the customer. The perception on the foods from Mc Donald’s should be charged at a price that is determinant on their quality. Most customers drive their perception of the foods sold through a perceived thought of the worthiness of the product. For example, Mc Donald has French fries as the main food product that has raised its revenue as compared to hamburgers. Their French fries has been highly regarded as tasty by Mc Donald’s competitors, their customers and thus it has been their focus to provide the best fries. The main challenge was on the oil that used to prepare the fries. The oil had high cholesterol level thou it made the French fries tasty. Although it was healthy and tastier, it exposed high risks of obesity to those who are consuming the fries and thus they changed to vegetable oil that was meant to banish the public perception of the McDonald’s as well as sell healthier food. The aim is to maintain the flavour of the fries so that the customer base is maintained (Schlosser 2001). Mc Donald’s has also improved the packaging of the product by use of recyclable papers that are unbleached to reduce the pollution of the environment with the company brand papers (Prince 1992). 3.2 Place The place deals with ensuring the “when and where” the customers should get their outlets and buy the foods and drinks. The component place is also referred to as distribution. This deals with the channel that McDonald’s uses to sell their products to the customers. The main channel is producer to customer because there is no intermediary. This component focuses on where Mc Donald’s has its outlets and how it ensures that they efficiently deliver the foods to the customers in their outlets. Mc Donald’s have opened various outlets worldwide for example, the Aunt and Uncle McDonald in China. The name suggests the use of family values, which are highly encouraged in the country. The main challenge was the fact that McDonald’s was not accepted in some areas like Russia and also in Japan where its outlets were highly discouraged as they regarded them to sell foods that encourage obesity and they also face severe competition from the outlets that prepare Japanese real foods as opposed to Mc Donald’s. There was also the threat of closure of 110 branches in Japan due to decrease in recorded profits and thus affecting the profits of the entire Mc Donald’s corporation (Lucy 2012). 3.3 Promotion Promotion is the process of making customers aware about the presence of a product, persuading them of the products superior attributes and influencing them to buy the product and not that of the competitor Khan (2011). According to Ahmed & Rafiq (1995), promotion in the service industry goes beyond the traditional elements of advertising, personal selling, sales promotion and publicity but it takes in to account how the services are delivered as well as the people delivering them. McDonald’s has a very strong online presence through its corporate website that it continues to use to advertise its products as well as creating good publicity for the company. According to Harris, Bargh & Brownell (2009), there is however an emergence of a health conscious population, and therefore it is important that advertising does not exaggerate the health benefits of the company’s products as this may be construed to be misleading and hence attract a backlash on the company’s products. In this digital era, the company must employ all possible avenues to make its presence felt and create an awareness of its products as this will be the first step in creating a potential customer base. Social media like Face book and Twitter must be fully exploited by the company as this has the potential to create an appeal to customers as well as building on a royal customer base. McDonald’s has also notably made sales promotions efforts as indicated in the corporate website and this will go a long way in attracting and retaining new customers. McDonald’s must also tap the potential of its employees that are directly involved in making sales to realize the benefits of personal selling. According to Hansen & Smith (1996), the role of a sales person has evolved from that of merely taking and processing orders to creating more value in the realization of the company’s overall profitability objectives. The sales force in McDonalds must create a lasting impression in to the customers they serve to ensure that this customers stick with the company and come back time and again. 3.4 Price Price as a component in the marketing mix refers to products selling price or other price related incentives among them quantity discounts and price cuts that aims at placing the company’s product at an advantage over that of the competitor Tellis (2006). Traditionally, marketers were using price to create competitive edge over their competitors but this has one danger in that the competitors can easily match or even better the company’s prices hence counseling out the advantage Kanagal (2009). A very low product price may be interpreted by customers to mean that the goods are of low quality while a very high price may make the product to be out of reach to majority of potential customers. For the case of McDonald’s, it calls upon the management to understand the market they are operating in through proper segmentation, decide which market to target and then strategically position the company’s products by offering the right prices to the right segment Tynan & Drayton (1987). The price set for the company’s products must very much try to incorporate the buyers’ perceived value of the product so as to attract and retain new customers. 3.5 Process The ways and means that have to be stream lined in order to ensure that the customer receives the particular good or the product and that the customer is ultimately satisfied. If well utilized, the process component leads to the company having a greater level of competitive advantage compared to their counterparts. The customer should be highly considered when introducing any innovative development. McDonald’s introduced the payment system by use of fingerprint, the customer giving their details and they are put into the system and later used. The customer uses the fingerprint. This did not succeed because the customers did not like the system due to some adaptation problems (Bilgihan et al 2009).The aim of the process of testing new technology is to enhance the competitive advantage of McDonald’s corporation. 3.6 People/personnel The success of any entity is highly determined by the caliber of their workforce which means a well trained and professional workforce that is highly motivated is a very crucial component of the organization’s goals and objectives. The employees are the bearers of the company’s vision and it’s through them that the products and services of the company are delivered and how well they are delivered makes the difference. According to Ahmed & Rafiq (1995), the essence of people as one of the important components of marketing mix touches on the personnel training, incentives, and people’s appearance among others. Training and properly remunerating the staff gives them the relevant skills for the task ahead as well as motivating them to carry out the task. The importance of a well motivated staff cannot be over emphasized especially in the case of a company operating in the service industry like the McDonald’s. McDonald’s has a well integrated system of developing the careers of its staff with numerous examples of staff that joined the company at the subordinate level and grew their careers to managerial level. While emphasizing the role of people in the organization, Kanagal (2009) puts it that while competitive advantage can be achieved through pricing it may not be sustainable as competitors can easily match prices but the next avenue must be creating social bonds. This must be the area that McDonald’s exploits to ensure that there is a strong personalized bond between its employees and its customers to ensure that these customers stick with the company and not its competitors. 3.7 Physical evidence According to Ahmed & Rafiq (1995), physical evidence refers to the environment in which a service is offered as well as the tangible goods that make it possible to deliver that particular service. It is very important for a company that deals in offering services to enhance its physical aspects of the business which more often than not the customers use to make decisions on whether to buy the services or not. McDonald’s is a service company and therefore it is very important that the physical aspects of the company are enhanced in order for the customers to have a fair assessment of the quality of services they expect. The branding of the restaurants must be attractive to create an enticing effect to customers and the décor used in the hotel rooms must create an appetizing effect. It’s important that McDonalds also invests heavily on the use of well designed brochures and handbills to create tangible clues to its customers about the value of the services they offer. 4.0 Recommendations According to Goi (2009), marketing mix does not present a scientific theory for managers to use but rather it is a conceptual framework and as such the management of McDonald’s must decide on the right mix to realize the full benefits. Each company is unique and is faced by varying challenges and therefore the company must employ the marketing mix in a way that meets its objectives within the available resources and in the most effective and efficient way. 5.0 References Ahmed, P & Rafiq, M 1995, using the 7Ps as generic marketing mix: an explanatory survey of UK and European marketing academics, journal of marketing intelligence & planning, Vol.13, Is.9, Pp 4-15 Bilgihan, A, Beldona, S & Cobanoglu, C 2009, the adoption of fingerprint payment technology mechanisms at the customer end, on 23, May 2013 from http://link.springer.com/content/pdf/10.1007%2F978-3-211-93971-0_22.pdf. Goi C 2009, a review of marketing mix: 4Ps or more? International journal of marketing studies, Vol.1, Is.1, Pp 1-15. Kanagal, N 2009, Role of relationship marketing in competitive marketing strategy, journal of management and marketing research, Vol.2, Is.1, Pp 1-17. Lucy, 2012, McDonald’s to Close 110 Branches in Japan As Profits Fall, retrieved on 23, May 2013 from http://www.japancrush.com/2012/stories/mcdonalds-to-close-110-branches-in-japan-as-profits-fall.html. Prince, S. & Denison, R 1992, Launching a new business ethic: the environment as a standard operating procedure, Industrial Management-Chicago then Atlanta-, Vol.34, Pp.15-15. Schlosser, E & Nation, F 2001, Why McDonald's fries taste so good, Atlantic Monthly, Vol.287, Is.1, Pp. 50-58. Tellis, G 2006, Modeling marketing mix, R Grover, M vriens, the handbook of marketing research: uses, misuses and future advances, thousand oaks’, CA. Tynan, A & Drayton, J 1987, Market segmentation, journal of marketing management, Vol.2, Is.2, pp. 301-335. Read More