Marketing Systems & Structures

Introduction:

McDonald’s has built itself into one of the largest multi-national restaurant chain in the
world with its presence over 118 countries and more than 30,000 locations worldwide since
its founding in the year 1940 by two brothers Dick and Mac McDonald at San Bernardino,
California. McDonald’s is the world’s largest food chain serving around 47 million customers
on regular basis thus making it one of the most expensive brand worth over $25 billion. The
brothers opened the restaurant with the idea to have a reduced menu that would be able to be
cooked at a fast pace and at cheaper rate which will eventually lead to higher turnover to the
management. With this idea McDonald brothers cooked the first ever famous McDonald
hamburger on 12th December, 1948. Since its opening, McDonalds have transformed itself
into a brand which each and every person on this planet is familiar with and there is hardly
any country left which does not have a McDonald’s restaurant within its border. In the year
1954, Ray Kroc, a salesman with a milkshake mixing company came up with the idea to start
the franchisee with the McDonald’s brothers. Ray Kroc started the first franchise restaurant
of McDonald’s at Des Plaines in Illinois in 1955 and gave rise to the McDonald’s
Corporation and later taking over the control of the expansion of the McDonald’s
Corporation.

McDonald’s is one of the best brands world-wide and the main objective of the restaurant is
continuously listening to the customer’s demands and accordingly build its brand value. The
marketing strategy of McDonalds is to identify the customer needs and meeting their needs in
an efficient manner than the competitors and making such customers loyal to the
McDonald’s. The main aim is to identify the potential customers as not everyone will be
happy with what McDonalds has to offer its customers. The likely customers are the key
audiences which McDonald’s target to increase their customer base.

McDonald’s uses strategic demographic segmentation of market with age as the main
parameter to differentiate the customers. The market is of limited customers for McDonald’s
but they have following type of customer segmentation:

Parent with two children: These parents visit McDonald’s in order to treat their children.

Children: Visit McDonald’s as a fun place to eat at.

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Business Customers: Who visit McDonald’s because of its fast service and the food tastes
good which can be taken away in car or office without affecting their business schedules.

Teenagers: They visit McDonald’s because the food is cheap in here and they get to use the
internet and have a place for get- together with friends.

The marketing objective of McDonald’s is to break the long-term objectives into short-term
objectives which can be used as benchmarks and these objectives can be monitored through
feedbacks and the results are analysed then whether they are achieved or not. Once the
objectives are set then the focus turn to how to achieve these objectives using the available
resources and acting in the appropriate manner.

Marketing Mix at McDonald’s (4 P’s):

Product: The main intention of McDonald’s the beginning is to have a limited product width
and product depth. The menu is decided after a considerable amount of market research. The
items on menu are carefully monitored and new products are introduced on the menu and the
older products are phased out in a very efficient manner in order to prevent cannibalization to
increase sales. The new products are introduced taking into consideration the customer’s ever
changing taste and lifestyle. The management in McDonalds also undertake a Product Life
Cycle Analysis to determine at which stage the product is. The marketing and the resources
required for the product depends upon the stage at which the product is, for example if a new
product is being launched in the market, then there will be promotion and advertisements on
large scale.

Price: The in McDonald’s is determined keeping into consideration the customer’s

perception about the product and value. The product is physical but the price have
psychological connotation on the customer. The low price may sometime make the customer
feel that the quality of the product is being compromised. Thus utmost care is being taken at
McDonald’s while deciding the price keeping in mind the brand value and its integrity. The
most dangerous aspect of further price reduction is that the competitors can achieve the price
reduction without any difficulty. This adversely affects the company as the profits are
reduced without achieving any increase in sales.

Promotion: McDonald’s use the right combination of media to promote its products and
brand image. The main motive of promotion in McDonald’s is to make people aware of it
products, give a positive vibe about the product and to remember it in the future. The most

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important aspect of McDonald’s is that it knows it target customers it is serving then

effectively communicate with customers and send the message it wants to deliver.

Place: McDonald’s does not consider place as just a physical location but as a medium of
encompassing the with all the variety of process required to deliver the product to the end
customer. The McDonald’s delivers a hygienic place, good environment and great service to
its customers.

Each organisation have strategic plans to maintain the customer focus and accordingly the
organisation decides on which level the loyalty of customer is towards the organisation. The
loyalty of the customers can be differentiated into following types:

Price loyalty: as long as the organisation is the price leader in the market, the customer
remains loyal to the organisation. The customer is loyal till the time they change their
lifestyle. McDonald’s caters to the needs to all types of customer from rich to poor and
without any age barriers.

Monopoly: These firm practice monopoly and acquire considerable amount of customer base
till the time a new competitor with similar product enter the market.

Inertia Loyalty: The customer falls under this type of loyalty in order to escape the
cumbersome work of finding an alternative to the existing product even though there may be
many benefits of switching the product but the inertia prevents them from switching. This
type of customer loyalty can be seen in the banking sector where the customer remains loyal
to the bank for most of his lifetime.

Promotional loyalty: Few customers remain loyal to the product even though they have to
pay a higher amount for the product than other alternatives in order to acquire a social status
and also the give recommendations to family and friends to make use of the product.

Disloyalty: The dissatisfied customers come under this category and they can bring about bad
publicity to the organisation. Their behaviour can be dangerous to the target or potential
customers. (Principles and practice of marketing).

Looking the current world scenario full of credit crunch and the falling economies, price is
the only factor determining the customer centrality. Price is the only factor in the marketing
mix which generates revenues for the organisation whereas other factors in marketing mix
add to the cost to the organisation. It is rightly said that 1 percent decrease in price can lead to

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approximate 12.5 percent increase in revenues to the organisation. The price decided by the
organisation should add value to the customer perceived satisfaction.

Value added pricing strategies:

This is the strategy adopted by McDonald’s which focus on cutting down the price of the
product so that the price is competitive in the market. The strategy is to add value added
features and services to complement the price of the product which encourages the customer
to buy the product and feel the value being added in the form of satisfaction being derived
from consuming the product. The strategy of McDonald’s is to offer set of kid’s meal or a
pack of meal at a lower price than buying individual items to eat at higher price. This strategy
helps McDonald’s to achieve a higher sales volume.

Literature Review:

Being customer-centrality in organisation means the ability to continuously learn from its
customers and to respond in an appropriate manner to what we learn is the motto of each
employee in the organisation. The resources, products and services should be utilized in an
appropriate manner according to the organizations plans and strategies and meeting the
customer’s demands. Customer centrality is the view of the customer’s needs and this need is
the starting of all the decision making process within the organisation. The main aim of
customer centrality is to create value for the true customer. Unless the organisation gives
value to the customer there will not be any value from customer in terms of money in return.

The idea of customer centrality can be credited to Peter Drucker. He said, “Marketing is so
basic that it cannot be considered a separate function. It is the whole business, seen from the
viewpoint of its final result, that is from the customer’s point of view.”

“Since the consumer is central, management realises that it must have a profound
understanding of consumer perceptions, needs and wants and must constantly track changes
in them so that the organization can respond to subtle shifts as quickly as they occur” (Kotler
and Andreasen, 1991, p. 54).

“An axiom of new product development efforts is that to be successful. A product must
satisfy customer need”. (Voss and Voss 2000; Crawford and di Benedetto, 2000).

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The method of maintaining good relations with the customers has been followed in business
for a very long time and this relationship is based on thin thread of commitment and trust.
The customer centrality is a matter of understand the customer need and fulfil them instead of
just producing goods and making the customers buy them.
According to Narver and Slater (1990) customer orientations is the extent to which the
organisation is capable of understanding its customer’s needs. The customers can have
following type of generic needs:
Current product needs: the customer buys the product according to the usage and features
of the product and derives benefits out of it. They may have needs on the basis of quantity of
goods they buy and also they may face problems on the usage of product. Taking example of
a mobile phone, the user will also require the instruction manuals to operate the device.
Future needs: forecasting the future needs of the customer is an essential element of
customer orientation. The marketing research aims in determining the future needs of the
customers but sometimes when constantly asked about the future needs to the customer, he
may resent from answering even though the firm is just being helpful to the customer.
Desired pricing level: the consumer expects to pay lowest possible price for the product he
wants to buy. Price is a psychological connotation to the customer. He will desire to pay only
that amount which he thinks is reasonable for the product. If the customer perceives that the
price is fair for the product, he purchases that product but with the price there also comes a
signal of quality. There is a perception in the mind of customers that a highly priced good is
of high quality and vice versa. Thus a strategy of lowering the price can prove harmful to the
organisation and lead to reduced revenues.
Information needs: Sometime the customer purchase a product just out of curiosity in order
to find out the advantages and disadvantages of using the product. The marketers usually try
to hide the drawbacks of the product from the customers as it can have counter effects on the
sales but the customer can get the information from other purchaser and user of the product.
Thus it is mandatory to provide information of product in an appropriate manner and format
and the information should be true to the product.
Product availability: The duty of the organisation is to provide the products in right quantity
at the right time to satisfy the customers. The distribution channel of the firm should be
efficient to make the product reach the final customer in a cost effective way.

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The above mentioned generic needs include all types of customers from commercial
consumers, customers buying on behalf of family and friends and business organisations
having a customer like relationship.
McDonald’s have always focused on improving the customer experience rather than reducing
the cost unlike other organisation. This has helped McDonald’s to achieve a greater scale of
customer retention. The effective marketing strategy is necessary to ensure growth and the
customer must be kept aware of the promises the brand makes. McDonald’s took utmost care
during the time of recession by looking at what the customer expects from the brand. People
usually prefer McDonald’s because it delivers quick service in a very clean and hygienic
environment. So McDonald’s invested a lot in maintaining this image in the eyes of its
customers and also by making investment in hiring hostesses to look after the children of the
customers in the restaurant.
The competition on the basis on price is short term till the time the competitors responds. But
at the end building a brand image on the basis of loyalty by customer has some long lasting
effect as it is difficult to replicate.
Customer retention has become an extremely important aspect in the business. According to
Gupta et al, customer retention is as much as 5 times more effective than cost cutting.
Customer can be retained into the business by giving him what the organisation has promised
and also by effective interaction with the customer. Customer retention can be done by
penetrating the market to maximize the value of the current market customer. It is the idea of
making the customer spend additional amount by stimulating his spending desire for more
value. In McDonald’s the sales person tries to up-selling method of market penetration by
trying to persuade the customer to purchase a richer version of product in question. Cross-
selling is also done to make the customer buy more products like ‘French fries with burger’.
This up-selling and cross-selling is done by skilled sales person when he thinks that he has
established a considerable of confident relationship with the customer. Loyalty of the
customer is the source of all the profits to the organisation. When a customer becomes
disloyal to the organisation it is the time to make and improve the value delivery to the
customers and preventing them from defecting the organisation.

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Conclusion:

The consumer is the most important person in the business and it is the consumer which
decides where to place the brand in their life. The consumer is independent whereas the
company is dependent on the consumer for its survival. The strategy of the organisation
should be establishing a relationship with the customer, which is going to last for lifetime of
the customer and give a high level of meaning to the relationship. The firm must have a great
deal of value in understanding the customer expectations in the long run. The companies need
to create a great amount of insight in to the lives of customer and understand their personal
life. The customer always expects a neat and clean experience when he enters the
McDonald’s restaurant.

Putting the customer first is an easy concept to understand as it is obvious that if a customer
gets a bad treatment he is surely going to someone else who is going to serve him better. But
the concept is difficult to apply. Most of the firms usually describe their performance in
financial terms at the end of the year rather than showing the customer satisfaction ratings
and the customer retention level and other things related to customers. The concept of
customer centrality is difficult to implement in real life as the management has to take care of
needs of other stake holders also. The company directors have the responsibility of fulfilling
foremost the expectations of the stakeholder whereas the personnel managers have to take
care of the needs on the employees in the organisation. The main difficulty is to reason the
concept of customer centrality. Meeting the need of the customer is not the end in itself but
making the customer agreeing to part with the money is more difficult.

Peter Doyle in 2000 has explained the idea of customer centrality in his book Value Based
Marketing. He has argued that most of the companies in modern world are still stuck to the
age old paradigm of profit making with a new meaning to it i.e. maximizing shareholder’s
wealth and have not successfully integrated the modern concept of value creation. It is the
duty of Board of Directors to provide value to the customers and providing value to the
customer is only a step in the entire process of shareholders value creation. The concept of
customer centrality is easy but in reality it is difficult to implement completely. The directors
are probably right to fulfil foremost the customer needs as the customers are the only
stakeholders which fund the other stakeholders of the company. Marketing in McDonald’s
the focus of the organisation will always be delivering value to the customers. Being

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customer centric means additional revenues to the organisation. Customers need to

communicate effectively with the organisation which enables the organisation to supply
information efficiently within the organisation. Secret to an organisations success is to deliver
the value to its customers and by reminding the employees of the organisations that whatever
the customer says the latter is always right.

References:

1) Kotler, P.Armstrong , J., Saunders, G. And Wong, V. 2003.Priciples of Marketing.

Harlow: FT Prentince Hall.
2) Jobber, D. 2003. Principles and Practice of Marketing. Maidenhead: McGraw-Hill., .
3) Customer Centricity is a trademarked term for a program at the University of
Pennsylvania's Wharton School of Business, The Customer Centricity Program,
upenn.edu. Retrieved on 2007 June 25.
4) Kotler, P. and Andreasen, A. (1991), Strategic Marketing for Nonprofit Organizations,
Prentice-Hall, Englewood Cliffs, NJ.
5) Voss, G.B. and Voss z.G. (2000). Strategic orientation and firm performance in an artistic
environment. Journal of marketing, vol 64 No. 1pp67-84.
6) http://www.ruthstevens.com/pdf/B2BCustRetention.pdf
7) Doyle, P. (2000) Value-Based Marketing. Chichester: John Wiley.
8) Financial Times (1987) Also reported in The Observer (3 May 1987) ‘Sayings of the
week’.
9) Narver, J.C. and Slater, S.F. (1990) ‘The effects of a market orientation on business
profitability’, Journal of Marketing, 54 (Oct): 20–55.
10) http://www.just-food.com/article.aspx?id=95558
11) http://www.3sc.co.uk
12) http://www.mcdonalds.co.uk

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