In 1995 McDonald's was the largest restaurant chain in the US

with domestic sales of $15.9 bn

Country's fourth-largest advertiser, spending $490 mn on media
Big Mac, Egg McMuffin, Quarter

Pounder, Happy Meals

Friendliness, cleanliness, consistency

and convenience
Child-friendly approach, Ronald, bright

and colorful interior, fun center, toys, food and the playground

 Domestic Sales in 1993 increasing at 4% annual rate Sales slumped to 3% decrease by third quarter of 1996, fifth quarter in a row In part, decline attributed to baby-boomers drifting away Threat from competitors like King, Wendys, and Subway and falling market share.

Business strategy to keep their major

markets and expanding into emerging markets

An attempt to offer more choice and to

win a new customer segment : a more sophisticated adult.

 Introduced in May 1996 as the flagship of the adult

line of burgers $200 million dollar marketing campaign Ads showed kids making yucky faces, turning up their noses at the new adult burger. Ronald engaged in adult activities like golf and pool Launched in 12,500 McDonald's restaurants in the U.S. and Canada Consumer acceptance survey: consumers in focus groups loved it, and 80% said theyd buy it

 Arch Deluxe line of bacon, beef,

fish, and chicken burgers. Arch Deluxe Secret Sauce (mayonnaise and peppercorn mustard) 1 sesame seed hamburger bun (potato roll style with split crown) 14 pound Topp's beef patty 1 slice American cheese 1-2 tomato slices 1-2 lettuce leaves, chopped 1 tablespoon ketchup 1 tablespoon chopped white onion McDonald's hamburger seasoning

 Arch Deluxe for $2.99 and an Arch Deluxe with Bacon for $3.29. Price of an average Arch Deluxe kept at 32 cents higher than a Big

Mac - $1.90
McDonalds basic hamburger priced at 85 cents. Burger King's 99-cent Whopper.

 Conflict of image high quality, premium v/s cheap and

convenient
Product Quality Leadership - Simplicity not sophistication

Two basic arguments

o Priced too low v/s Big Mac o Priced too high v/s regular burgers

 People are pre-decided about choice of burger Too many variations Sold on taste people go for the brand Alienation of one demographics hurt

Customization not possible

 Play down the mistake in Sept 1996 - the Arch Deluxe was

never intended to be a silver bullet.

Mid August 1997 McDonalds acknowledged the out of sync

pricing
Product pricing and not taste

Dropped to $1.00 and coupons

offered

 Tomato McGrand by McDonalds Japan a decade later in 2003 McFeast Delux in Australia in Nov 2009

Royal Deluxe in France

 Reference pricing plays a role in convenience snacks Go for what you know Avoid customer confusion Be skeptical of research

 Abhishek Baneerjee Shraddha Chillarige Vivek Hariharan Manisha Kumar Mythri Macherla Kanchan Tiwari

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