Will McD’s first customer officer connect with Millennials?
McDonald’s has been on a sales skid and many watchers of the golden arches point to a failure by the chain to connect with Millennials as a major factor in its struggles. That’s where Fred Ehle comes in. He has just been named as McDonald’s first VP-customer officer.
Mr. Ehle will report directly to Deborah Wahl, McDonald’s chief marketing officer in the U.S., who, as Ad Age points out, has reorganized the company’s marketing department by demographic focus since taking over in March.
In his new role, Mr. Ehle will turn his attention to gaining the insights needed to help improve the customer experience at McDonald’s. This will be a major challenge relative to Millennials who experts say are drawn to the higher quality offerings of chains such as Chipotle.
Whatever Mr. Ehle does, there will certainly be pressure for him to do it quickly. McDonald’s shareholders are certainly not lovin’ the latest numbers posted by the fast food giant, with same-store sales in the U.S. down 2.8 percent in August following a 3.2 percent decline in July.
Earlier this week, McDonald’s launched its second national Free Coffee Event, giving consumers the opportunity to get a small McCafé coffee during breakfast hours at participating locations. The event runs through September 29.
- McDonald’s Reports Global Comparable Sales For August – McDonald’s Corporation
- McDonald’s Reports Global Comparable Sales For July – McDonald’s Corporation
- McDonald’s Names First VP-Customer Officer – Advertising Age (tiered sub.)
- McDonald’s Sales Woes Continue in August – The Wall Street Journal (sub. required)
- McDonald’s Sees Biggest Sales Drop in a Decade – Time
- McDonald’s USA Perks Up The Nation With Free Coffee – McDonald’s Corporation
Discussion Questions
What do you think of McDonald’s organizing its marketing department by demographic groupings? What advice do you have for Fred Ehle as he moves into his job as the first VP-customer officer for McDonald’s in the U.S.?
What’s the first thing you do when your company is in trouble? Reorganize. Hard to believe that marketing wasn’t paying attention to Millennials before this. Note that the Wall Street Journal article attributes their problems to China, not to Millennials. Burger King and Wendy’s sales are up lately, again suggesting it’s not a problem with Millennials. And the assumption that Millennials are going to higher-quality offerings ignores the fact that they are also huge Taco Bell fans. No offense, Taco Bell, but nobody’s describing your products as “high quality.”
Obviously it is a decision prompted by McDonald’s poor performance. However, aligning resources by target market is a good idea. The key for Mr. Ehle is to determine what problems/opportunities the Millennials will allow McDonald’s to solve. I suspect free coffee events will not be sufficient to draw them from Chipotle.
The other potential problem is the repositioning of McDonald’s toward Millennials and away from current target markets. It is extremely difficult to talk from both sides of your mouth. Plus concentrating everywhere means concentrating nowhere.
My advice would be to up the pay for cashiers and get better quality and more approachable cashiers. How many times have you walked into McDonald’s and found the employees so repulsive and unapproachable you lost your appetite and walked out? Orange hair is fine for Ronald but not a cashier. The drive-thru solves some of that. McDonald’s should be about having fun and enjoying food. Having pleasant and approachable employees is part of that experience. I’m not saying we need to do anything radical like raise the minimum wage. Just use some common sense on who the customer is going to interact with even if its going to cost a few more dollars. Culver’s, In-N-Out Burger, and Chik-fil-A have done this.
Seems a bit like rearranging the deck chairs on the Titanic.
I’ve seen this before up close and personal, except that time it was Gen Y, Gen X and Boomers that were the problem.
One of these days people are going to figure the two important rules of foodservice marketing:
Rule 1: If the food doesn’t taste good it will be hard to sell it to adults unless you can put a cool enough “toy” in their meal package, and
Rule 2: Assuming (and it is a big assumption full of all those first syllable caveats) that there is such a thing as cohort eating patterns, you can’t make it. If Millennials for example have some “genetic” predisposition toward upscale, they aren’t ever going to McDonald’s no matter what the chain does, unless of course McDonald’s is prepared to fire all of its other customers and blow up its current model.
It’s really pretty McSimple if you think about it, but there seems to be an endless market for denial.
Consumer Reports rated 65 fast food chains. Readers ate 96,208 meals. The question posed to participants was simple: “On a scale of 1 to 10, from least delicious to most delicious you’ve ever eaten, how would you rate the taste?” In the burger category, Consumer Reports rated about 53,745 answers. McDonald’s came in dead last!
Coffee events are not going to change this issue. If you are going to be the burger guy—40 percent of McDonald’s revenue comes from burgers and fries—then your burger has to be the best. Coffee and salad and chicken and breakfast become irrelevant.
Connecting with Millennials with products that do not fit their needs will not help this company. McDonald’s built a great brand with a great meaning and as hard as they try, in the U.S. they stand for something that the consumer finds less and less appealing.
The company’s opportunity is two-fold. 1.) Continue to grow McDonald’s internationally, where they aren’t locked into a menu that is being rejected on a daily basis. (They have more revenue internationally than in the U.S., even today.) 2.) In the U.S., grow a completely different chain, without the Rusty Arches, that meets the needs and desires of today’s consumers.
Hmmm. McDonald’s divested its investment in Chipotle in 2006. I think I will use this for a case study in class on how success breeds failure.
I don’t know that it is a good idea to organize around demographic groupings as your primary orientation. That sounds like a way to end up with a very fractured marketing message. I agree with David that I think the problem is more that McDonald’s has lost its way. It doesn’t stand for anything anymore, except maybe fast and cheap and sub-par service.
That said, I do think the new counter orientation is a much more pleasant experience, with numbers and an expediting system that goes much more smoothly.
But it used to be that McDonald’s was where kids and families went, and Burger King was where the teens and college kids went, and Wendy’s was where people who wanted vegetables with their meals went. With Burger King’s “inversion” to Canada, you would think that McDonald’s has a huge opportunity to promote itself as an American original. But if you’re only looking at sub-segments of the population, you could easily miss the overall trends.
Tailoring customer experience to demographic groups is what it’s all about baby! It’s what I’ve been preaching for years.
Mr. Ehle, contact people and LISTEN to what they have to say, then WATCH what they DO!
Ryan’s right about rearranging deck chairs on the Titanic. It was my thought also. McDonald’s problem isn’t Millennials, and that’s a silly smokescreen. And the idea that “free coffee” days are going to help turn things around is actually laughable. The factors already mentioned here by others need immediate attention, but my guess is that they likely won’t get it, given the absurdity of the McDonald’s response thus far. The other major concern is consumer demand for healthier products. But of course McDonald’s image is for toxic, unhealthy meals. Even my frozen food pals have recognized the danger in that.
McDonald’s needs to do more than focus marketing to a specific demographic. Eating at McDonald’s is a total experience for all consumers, and there is room for improvement in several areas, particularly service. There is a need to ensure that today’s core consumers, especially families, are part of the continuing development of the company to reach an evolving customer base.
The irony in this one is huge. Just yesterday I read something in which McDonald’s was cited as exhibit A of marketers who have resisted the siren song of “multicultural marketing”—instead pioneering the “total marketing” approach (i.e., “I’m Lovin’ It” presented in every relevant way possible to every target group imaginable) that is now in vogue.
So now they decide that isn’t working and that they will focus the marketing department (and ostensibly the marketing programs) by target demographic? Hmmm.
I think Gene got it right—make a better hamburger.
Reorganizing away from product to consumer marketing is one big step closer to putting their customers at the center of their strategy and communications. Good idea, what it actually means operationally is a different matter. But is it really a Millennial problem?
If McDonald’s is serious about changing the perception, then two things. First, from a marketing perspective it’s not about a “refresh” of the Millennial-relevant “I’m Lovin’ It” messaging, it’s about boldly ‘repositioning’ the brand. Second, no matter what marketing programs and campaigns they do devise, McDonald’s must solve the “delicious” meal challenge mentioned by Gene.
McDonald’s is a global brand with ultra-high awareness regardless of the consumer segment. The problem is people no longer find novelty in just “fast” foods as the key convenience marker and do expect fast, tasty (even healthy) and upscale as the new experience and value proposition.
That combination (which implicitly puts the customer at the center of their strategy) should drive all decisions: menu, pricing, staffing, service, lighting, eating experience, etc. Until then, we’ll see more of the same results with an occasional spike one way or the other.
Make McDonald’s a haven for retirees—the largest, most cost-conscious, fastest-growing segment of the population. Discourage Millennials and all other fringe groups from entering. Play only Benny Goodman music. Do everything to keep everyone else out of McDonald’s. NO ONE is pursuing this demographic, but they are clean, well-mannered, have money and plenty of time. Furthermore they aren’t bound by business schedules. What is needed here are diabetes-friendly menus. Take out products that lend themselves to reheating. McDonald’s should become a major source of information for seniors. Some email marketing should be done with seniors that takes advantage of their ability to time shift and fill stores when other segments leave the stores empty. How lame can you be if you ignore this market?
It is not about the marketing, it is about the product.
As the mother of Millennials I can tell you with certainty that McDonald’s is passé with that group. They won’t easily be recaptured. In some ways they’ve grown up and McDonald’s hasn’t.
It is the first time at the plate for both the person and the position. Chances for a home run point to luck being a major part of the equation. Finding and hiring a “first menu officer” that can make the dollar menu a more meaningful experience for all, including the company’s store owners, might have been a better move. Back to the basics is always a good first move. Perhaps the basics may have been forced out for good over time in this case, due to financial reasons. But that’s just what I think.
Re-organizing the marketing department by geography doesn’t change the issues that McD’s is facing. Instead, they need to identify what their competitors are doing to win away their customers (i.e. – listen to what their target market customers are asking for). Adding more tacos and fajitas to their menu for lunch and dinner, perhaps special hot dogs, grilled chicken and grilled larger burgers with lots of tomatoes, onions, lettuce, and perhaps adding a submarine sandwich to the menu would be a great change.
Better coffee – cool, can I have mine with soy milk? No, can’t help you.
Fast cheap burgers – OK, can my one friend have a garden burger? No. Can’t help you.
Are your fries vegetarian? – Not really.
Want to own the millenials? – Be the first chain fast feeder to go GMO free up the non-meat offering, and go to 100% recycled packaging (as allowed in food service).
Let’s face it, the product quality is horrible and the restaurants are sometimes pleasant, sometimes not. I often use them for $1 iced tea which ranges in quality from great, to stale, to watery, depending on the location and time of day, but it’s very unpredictable. Some operators have 49 cent vanilla cones which are a nice add on, but other operators charge $1-$1.59 for the cone and I’ll pass. The little paper bag kid fry is another great add on but out west, most operators are $1.39 for it and as high as $1.79, so I again pass as that item isn’t worth more than $1.
Once or twice a year I will order a chicken snack wrap. It’s very consistent. Stale tortilla, slimy chicken that tastes awful, and most is in the trash. I’d never risk trying a burger or larger chicken sandwich.
Their marketing already seems to skew young to me. That and ethnic. So, not sure a team devoted to marketing to young people is the answer. Seems superficial.
Since young people respond better to the truth because they are exposed to so much BS that it’s readily apparent to them, I’d say that should be step one: tell the truth. And in order to do that in a positive sense, they need to fix the quality of their product as a number one driver. That’s the root cause of all their woes: favoring quantity and low price over quality for decades. A team of young people advising on quality would be a better tact IMO.
Question is: will fixing the quality of McDonald’s food turn them around? Or is it too late? Have they fouled up the brand perception to the point that they can’t go back? I get the feeling we’re going to find out pretty quick.
I think what is lost in all of this is—burgers, fries, and a Coke.
Another issue is their prices are not really low. Factor in the awful quality hot entrees and it’s a downright ripoff. Their prices for burgers and fries are higher than In-N-Out out west and there’s no comparison in product quality. $1 drink transactions with 15 cents of that going to process the credit card won’t pay the bills….
Could it be Ronald McDonald is not working for Millennials? Here is a segment that grew up watching the Ronald McDonald TV commercial and now they have outgrown them, but the image is still there. Over the years I have observed McDonald’s advertising to children and African Americans. As the children grow older a reinforced expanded image is required. This means the communication strategy must be created to follow this progression.
Understanding each demographic group, in particular age, will be needed.
If McDonald’s wants to remain relevant, than they can upgrade the quality of the food and maybe I will go back. The quality of their product is bottom of the barrel, and the burgers are really small. How about some low-carb and gluten free options, and some real veggies as well? I don’t see them growing their way out of this, unless they change what they serve, along with some creative tasting items.