McDonald’s: topping the list

In this special report, Strategy identifies 10 retailers of distinction. The names were suggested to Strategy in discussions with several retail specialists. Each was asked to identify retailers who had excelled in specific areas of the marketing process, such as advertising,...

In this special report, Strategy identifies 10 retailers of distinction.

The names were suggested to Strategy in discussions with several retail specialists.

Each was asked to identify retailers who had excelled in specific areas of the marketing process, such as advertising, merchandising, trade and supplier relations, product innovation, customer service, staff relations and database marketing.

The 10 profiles include a brief description of the innovation for which the retailer is being recognized and a question and answer interview that attempts to explore some of the larger issues facing retailers today.

The report opens with McDonald’s Restaurants of Canada, because according to our retail contacts, the successful launch of McDonald’s pizza demonstrated innovative thinking in almost all areas.

Retailer of Distinction: McDonald’s Restaurants of Canada

Reason: Product innovation, trade and supplier relations, advertising, merchandising, staff relations and customer service, associated with the launch of McDonald’s pizza.

Becoming the country’s largest pizzeria overnight was no small task, says Peter Beresford, vice-president, national director of marketing for McDonald’s Restaurants of Canada.

Seven years in development, McDonald’s pizza was the result of extensive product testing, including the trial of 145 blends of pepperoni and 75 blends of cheese. In addition, the company had to develop a new oven that could bake a pizza in less than five minutes.

Launch date

Once the product was ready, a launch date was chosen and the McDonald’s marketing machine shifted into high gear.

The company branded the product with a unique logo, in which McDonald’s ‘golden arches’ were turned on their side to form the Zs in Pizza.

Fifteen-second teaser commercials ran for five days before the launch, telling viewers to watch for a major announcement.

Road-blocking airwaves

Beresford says the company bought a two-minute time slot at 9 p.m. on March 23 on every network and local tv station in Canada, ‘effectively road-blocking the airwaves with our message.’

‘This was extremely important, because on that day, we created instant awareness that McDonald’s had just opened 640 pizzerias and had just become the largest pizzeria in Canada,’ he says.

The product was heavily merchandised with point-of-purchase materials.

‘When you consider that, on average, two million Canadians visit McDonald’s every day, you realize that McDonald’s is a medium unto itself,’ Beresford says.

Employees were introduced to the process with training videos and pizza parties.

Finally, Beresford says staff were encouraged to answer customers’ questions about the product.

‘That’s why we spent so much time training and informing our own staff about what we were doing and how we were doing it,’ he says.

‘The better trained our employees are, the better capable they are of serving the customer.’

Q. From where do you get your inspiration?

A. If I were to use the word ‘inspiration,’ the thing that was inspiring for me was the way the company and all its employees can focus its efforts on one particular event and overnight create such a staggering success.

I get my inspiration from watching the results of a program like pizza.

Q. What have been the most startling changes in retail over the past couple of years?

A. The most startling change is the movement from the 1980s to the 1990s. We have not seen an evolution, but a consumer revolution. I’m not sure people understood the magnitude of that revolution a few years ago, but I think they do now.

The consumer has told us they have changed the way they approach the retail business, their own spending habits, their own disposable income, and they’ve told us they’ve not just changed in the short term. This is a revolution. This is a long-term change in their thinking.

I do see it as an opportunity for McDonald’s because of the way we approach our business. As long as you are talking to your customer, you can react to the necessary changes.

Value meals

We reacted to this a year and a half ago. We lowered the price of hamburgers and cheeseburgers and introduced a concept called value meals.

Someone asked me if this was a promotion and I said this is not a promotion, this is a philosophy.

Q. What trends can you see on the horizon that will most affect your business?

A. If I can expand on what I said earlier, the consumer is looking for more when they go shopping. Very specifically, in our research, they talk to us about value. They are very price-sensitive, but, in addition, they want service, and they want service from enthusiastic people.

Service

They have added service as an extremely important component of the value attribute. The service component will be a key factor in this decade. If [retailers] don’t have the specialized service they want, their response is, ‘I can buy this somewhere else.’

In response to that, McDonald’s introduced a guaranteed service program. We’re not only promoting it through merchandising in the restaurant, we’re actually advertising it on tv and radio.

We are making a guaranteed promise to our consumers that if, for example, they go through the drive-through and there is a mistake in their order, come back and we’ll make it right, or your next meal will be on us.

We want to make sure they are completely satisfied with every visit.

Q. What qualities does one need to stay ahead of the pack?

A. It’s often said that a great retailer has to have the right product available at the right place at the right time. But I think he has to listen to the customer before he begins that process.

Great response

Our founder, Ray Kroc, had a great response when he was asked ‘What will you be serving at McDonald’s in the year 2000?’

His response was, ‘I don’t know what product that will be, but I can assure you we’ll be serving more of it than anyone else.’ His response was simple – the customers will tell us what they want.

If you look at McDonald’s’ menu board, you can see our response. You can see our move to low-fat yogurts, our move to salads. And, probably, the best example of all is the launch of pizza.

Q. How do you stay on top of your concept?

A. We stay on top of it two ways. We’re in the field every day. By staying in touch with the consumer, you are understanding what they are thinking and you’re able to react.

Our research is done formally by mail, in group panels, telephone surveys, or in-store, with forms. We also have our own tools to evaluate sales figures, product figures, and those we do on a daily, weekly and monthly basis.

I watch the sales of pizza, for example, every day. The response from the customer has been fabulous, the sales figures have been fabulous.

Q. How has the recession affected your business?

A. We’re in the restaurant business, and clearly, the introduction of the gst and the recession has meant consumers are cutting back on their spending.

But we saw it as an opportunity for McDonald’s because people would trade down from more formal dining.

A visit to McDonald`s becomes an affordable alternative for people still wanting to take the family out for a treat.

The restaurant business clearly had a challenging year in ’91. Our growth was slower, but our market share was higher in ’91 Now, both our growth and our market share was much higher in ’92. With McDonald’s offering pizza, we are seeing some excellent sales results in ’92.