McDonald's: Pumping up the volumes

By , agencyfaqs! | In | August 22, 2000
McDonald's India has increased its share-of-voice to convey its value-for-money proposition and build the McDonald's brand. In its sights is the Sec B segment where the volumes lie.

N. Shatrujeet

"Get them in. Trade them up. Get them back." These are the three basic steps of McDonald's marketing strategy, as defined internally at Mudra Communications, the agency handling the account. Shorn of jargon, this simply means objective No 1 is to make consumers step into McDonald's outlets.
The second objective is to shift the consumer to McDonald's core products (the Veg Burger with cheese, the McChicken Burger with cheese and Fillet-o-Fish) by increasing sampling and showcasing the value aspect of McDonald's. Third, increase the frequency of visits by making the McDonald's brand experience unique and memorable.
"Our marketing strategy has evolved from offer-driven to value-driven to brand-driven," says Vikram Bakshi, managing director, McDonald's India. Shorn of jargon, it means exactly the same things as the Mudra definition, in exactly the same order.
"When McDonald's entered India in 1996, it had its work cut out," says Bakshi. "Competition was everywhere, in every possible form. So all our efforts were aimed purely at driving traffic." Towards this end, promotions and consumer offers were the order of the day. Of course, there is no distinct demarcation of the offer- and value-driven stages. There never are. All the same, in 1998, McDonald's India felt the need to step out of the 'offers' loop.
"We realized that it was time to educate consumers about our core strengths such as our quality, service, hygiene and, of course, products," says Bakshi.
There was also this perception of McDonald's being an expensive place that needed to be corrected. It was around this time that McDonald's opted for hot pricing of its cones and launched the EconoMeals concept. Recounts Bakshi, "Here you had a cone of ice cream, launched at Rs 9, now selling for Rs 7. And for Rs 29 to Rs 49, consumers got to sample a delightful meal. That was the kind of value-for-money that the consumer was not accustomed to."
Bakshi is, however, quick to point out that the value equation is not just about price. It is also about the McDonald's experience. "Research showed that consumers found the bright, informal atmosphere at McDonald's appealing," says Bakshi. "But there were some barriers to comfort in the consumers mind."
For instance, consumers felt that the counters at the outlets were "too high", making the McDonald's staff "unapproachable". Steps were immediately taken to lower the height of the counters. In fact, in the Noida (an East Delhi suburb) outlet, there is a counter specially designed for children.
Again, keeping kids in mind, McDonald's did away with sombre colours in favour of rich, vibrant ones. Even the paintings that once tended to be abstract were replaced with things children could relate to. "I don't know of many restaurants that would remodel the interiors on research findings," says Bakshi. "And this sort of attention to detail is value that consumers look for."
According to Bakshi, the impact of the 'value' message can be felt. "We have more than doubled the number of customers from 1998." And though he admits that this is also due to increased penetration, the frequency of visits is visibly higher. "Research shows that we enjoy the highest frequency among quick service restaurants (QSRs), despite fragmentation and competition."
Comparative gaps have also grown. This research - which was carried out in Mumbai and Delhi from March-May 2000, covering a sample size of 800 - has also thrown up the fact that for 70 per cent of consumers, McDonald's is the preferred QSR.
The closest competitor in the market trails with 24 per cent. While getting a fix on the size of the market is next to impossible, it is estimated that in Sec A and B, each family spends 8 per cent of its overall income (calculated at Rs 60,000 per annum) on eating out.
For McDonald's, the family unit clearly constitutes its base clientele. Asks Sanjeev Katyal, marketing manager, McDonald's India. "Why are all McDonald's outlets non-smoking, and why do we have lots of space for things like birthday parties etc? It's because we want to be a 'family restaurant' chain. And we are targeting both Sec A and B, because that's where the volumes lie."
No wonder the company has been targeting kids quite persistently. "Yes," admits Bakshi. "It's children who drive the going out and eating out patterns in families." McDonald's strategy is obviously to make the eating-out function the focus of these outings (see related story, Mcdonald's: Bringing up father).
"Parents take children out so that the kids can have good, wholesome fun. When the kids are happy, the parents are happy too. The McDonald's experience makes them all happy, and that's the bottomline."
And this bottomline is what McDonald's has attempted to communicate in its 'brand' ad. "Here you have a small boy in an uncomfortable situation, unable to remember a poem," says Bakshi. "Once he enters a comfortable atmosphere everything falls into place. That's what McDonald's does to you."
The ad and its sister commercial (the 'police chowki' ad, which promoted the cone) appear to have worked. "India is perhaps the only country in the McDonald's network to have registered a growth in volumes following a brand ad, even if you discount the seasonality factor," beams Hemant Misra, vice-president, Mudra. Sales of cones, which is a big driver of transactions, have apparently gone up by 20 and 30 per cent in Delhi and Mumbai, respectively.
Now, the focus at McDonald's is to move the consumer up the ladder to core products. Actually, here too, the lines of transition are a bit blurred. "In August 1999, we changed all our menu boards from a 50:50 to 80:20 ratio," points out Bakshi. The ratio being that of visual element to text. "The more food the customer sees, the more he is likely to try it out."
The objective in the latest ad is to show the variety of food at McDonald's. But a certain emotional appeal has been built into the ad. "It shows how involved the consumer is with McDonald's and the food," says Misra. "So much so, he dreams of it in his sleep."
While ad spends are not available, it is obvious that McDonald's is making good for its erstwhile frugality. "On an average, 5 per cent of the total sales is put back into marketing," says Bakshi. "Of course, we're spending more than that amount."
Looking at it, McDonald's is in all the three stages of transition at the same time. Promotions and offers are still regular features, something that is dictated by increased penetration. In fact, the company is in the process of expanding seating capacities in most of its Delhi outlets. By the end of this year, it plans to add two restaurants each in Delhi and Mumbai, taking its tally to 29.
And by 2001, it hopes to increase the count by 33 per cent, with presence in Agra and Ahmedabad. McDonald's already has outlets in Pune and Jaipur.
At the same time, the value aspects are constantly being addressed as more Sec B families come into the fold. Indianization is an important factor in reaching this segment. "Sec B is a critical mass for us. That's why even our communication is very Indian," says Katyal. McDonald's is, in fact, responding to this by launching two new Indianized products in the next one month. And many more will have to follow - without diluting the American-ness of the brand.
And all through this, the focus has to be on educating the consumer about the finer points of McDonald's and on building the brand.

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