Brand Extension For McDonald's Restaurant example essay topic

McDonalds Brand Identity Model: In advance of recommending a brand extension for McDonald's Restaurant, an intimate understanding of the Brand's identity is essential. The application of the brand identity model to McDonald's, has been adapted from the interpretation in the David A. Aaker text, 'Building Strong Brands? Core Identity: ? Food Quality: The food is consistent. A Big Mac in Bangkok is engineered to taste like a Big Mac in Winnipeg.

A certain degree of customization is possible. It is also of the highest quality.? Service: Quick, accurate, friendly. Delivered by a mix of young staff and experienced adults.?

Cleanliness: The dining area and kitchen are exceptionally clean. A largely visible kitchen is a common feature of McDonald's which raises the stakes and ensures a degree of cleanliness.? User: Traditionally a child-centric environment geared towards the family. Will also appeal to a wider segment, including the individual in need of a quick and tasty meal. Extended Identity: ? Convenience: Quick service equates to convenience.

The restaurants are numerous, conveniently located, and often offer drive through service.? Product Scope: Hamburgers, French Fries and children's toys. New 'lighter choice? menu items include veggie burgers, salads and other items aimed at healthier living.? Sub brands: Big Mac, Happy Meal etc.?

Corporate Citizenship: Ronald McDonald House is a massive children's charity, Social Responsibility Report available online, Sponsor of Olympic athletes, use of local suppliers.? Brand Personality: Iconic. Bright, fun and family oriented.? Relationship: Ties to the community via corporate citizenship initiatives make McDonald's 'part of the neighbourhood?? Logo: The ubiquitous golden arches. Generally visible from a distance.?

Characters: Ronald McDonald, the clown. Value Proposition: ? Functional Benefits: Quality food, friendly service and good value translate into a positive experience.? Emotional Benefits: Kids can use McDonald's as a place to congregate and share good times (i.e. for a birthday or after a little-league game). Adults can relax knowing that the food delivered is consistent and adored by children. Disparity between the brand identity model and the brand's image McDonald's has been experiencing its fair share of difficulties as of late.

Since 1997 it has lost 3% of ifs share of the fast food market. In the fourth quarter of 2002, McDonald's lost money for the first time ever, with losses totalling $343.8 million USD. Franchisees are disheartened by their lack of input, slimmer margins and increasing costs. Older customers are noticing a decline in the service and cleanliness of the restaurants, teens no longer feel McDonald's is 'cool? and children have been unimpressed with the latest string of toys in their happy meals.

The food has developed a reputation as being unhealthy which is damaging in an age when the importance of fitness is being emphasized. The pace of innovation at McDonald's has long been regarded as too slow. The last product that met with success was the chicken McNugget and that was introduced nearly 20 years ago (it took several years to get the McNugget launched). Former CEO Jack Greenberg acknowledged the problem and stated, 'There's only so much these kids who work for us can do in the restaurant. The more complicated you make it for them, the tougher service is going to be and the slower it's going to be? He addresses a fundamental problem that McDonalds is yet to solve.

Analysts are quick to point out that McDonalds? competition is stiffening as Burger King, Wendy's and Taco Bell fight to maintain their market share. Shares of McDonald's fell 14% in the fourth quarter of 2002 while the Dow Jones Index gained 5%. All of these problems can be distilled into one observation; McDonald's is not living up to its brands promise and is suffering as a result. The McDonalds brand is in need of repair Despite a tarnished brand image, the company has done well in establishing brand equity. McDonald's is an American institution that has touched the lives of many people. The golden arches are firmly entrenched in the American psyche and this gives McDonald's a certain amount of slack when they fail to live up to the customer's expectation.

McDonald's has delivered in the past and the brand is powerful enough to weather the current storm. However, the public will not continue to forgive and forget indefinitely. The Company is not oblivious to its problems and has recently assembled marketing and advertising agencies to deliver a new brand direction. The McDonald's corporate press release stated that the result of this conference was a new theme line, 'I'm lovin? it? No other details were released but one has to hope that this tag line is accompanied by some more relevant changes. The fundamental problems are not going to be fixed by a clever line or a shiny new advertising campaign.

McDonald's must focus on its core identity and make the repairs from the top down. This would involve a renewed focus on the Company's QSC standards (quality, service and cleanliness). Intensified training and sufficient janitorial staff would help improve service and cleanliness. The quality of the food remains a matter of personal preference and it would be difficult to elevate people's perceptions of the food quality. All that McDonald's can continue to do here is offer the consistency which it has become synonymous with.

Why a Brand Extension? McDonald's still possesses a powerful brand. Inter brand, a leading brand strategy and design firm ranked McDonald's as possessing the top brand in 1997 (based largely on the valuing of the brand's ability to be extended). However, the problems identified suggest that the brand would benefit from rejuvenation. The brands status may be enhanced if a successful extension is implemented. Furthermore, the extension strategy is simplified by the leveraging of an already recognizable brand.

The existing brand recognition is likely to lower costs of building customer awareness and increase the speed of market penetration. An extension may also help to further differentiate McDonald's from its increased competition and enable the company to remain at the forefront of the consumer's mind when they are making decisions about food. Extension Policy Considerations In an effort to determine the most appropriate extension for McDonald's, various considerations were made. Many studies on the viability of extensions draw insights from the 1990 Aaker & Keller model. Aaker & Keller proposed and tested a model of consumer brand extension attitude formation identifying three main factors that affected the success of the extension. They were the attitude to the original brand, the 'fit? between the original and extension product and the perceived difficulty of making the extension product.

These three factors surfaced regularly during conversations with survey respondents. It was determined that prior to any extension consideration, it was imperative that a deep understanding of brand meaning was in place. A survey of ten individuals was conducted and the first five minutes of the interview was used to discuss what McDonald's represented or meant to them as customers or non-customers (depending on the subject). Following the brief conversation, the survey participants looked at six possible brand extensions for McDonald's and asked to rank them in order of McDonald's ability to 'pull it off? After the ranking was completed, the respondent was asked to justify their ranking.

Many useful insights were gained from this process, including the following framework for McDonald's new brand extension. 1) Understand the brand. What is it capable of? What is it not capable of? 2) Conduct a thumbnail SWOT analysis. Attempt to match up any opportunities with strengths that the Company has.

This analysis will allow the brand extension team to identify attractive new markets. 3) Speak to people. Conduct a survey to gain insights and confirm findings in the SWOT analysis. 4) An understanding of the brand will allow the Company to address any concerns and tidy up its image prior to its extension implementation. 5) Target the appropriate audience. Avoid the temptation of casting too wide a net during the segmentation process.

Inappropriate audience selection will inevitably have negative repercussions on the brand in its original category. 6) Be sure to have a well laid out implementation plan in place. It is easy to conceive of good ideas. It is difficult to get them off the ground. Rationale for brand extension choice Based on the framework that relied on research, observation and surveys, I have recommended that McDonald's proceed with an extension into the grocery store. While the concept of the amusement park elicited the most enthusiastic response it was deemed too capital intensive and frivolous during an economic slowdown.

Respondents frequently mentioned that it was a good idea but seemed like a difficult extension for McDonald's. After weighing the many options, frozen meals was chosen to explore further. For detailed survey results please see Appendix B. McDonald's is a large Company and will have manufacturer's anxious to establish relationships with them and produce the product. A favourable deal may be struck if McDonald's leverages its brand's power.

Mass production runs will help McDonald's achieve economies of scale in a short period of time. Another reason to proceed into this market is that the research suggests that frozen dinners are well-positioned to continue as one of the fastest growing and most dynamic food categories in North America. Consumers are time-starved and need convenient solutions. This extension will address these customer needs and as a result the product will provide value to the customer. This extension will be targeting the same audience that McDonald's restaurants target. The meals will be developed for children primarily but also offer alternatives for adults that need a quick meal.

McDonald's popularity with children should drive sales and its brand will save consumers time when shopping. The frozen food options have increased lately and having the McDonald's brand at a reasonable price in the grocery store will allow the consumer to dismiss the numerous alternatives. Important brand associations can be carried into the new offering. Consumers will value the consistency and value that the McDonald's frozen meal offers. A parent will appreciate the fact that after a long day at work they can feed their children something dependable that will not be met unenthusiastically. A complete implementation process is available in Appendix C. Conclusion McDonald's is fortunate in that it has a powerful brand.

This presents the Company with any number of possibilities when considering extensions. Much has been made of recent lapses in service and cleanliness, however these problems can be fixed with a modicum of effort. Certain factors are highly influential in the formation of consumer attitude toward new extensions and these affect the eventual success or failure of the extension. These considerations combined with thorough research into the new product market are essential steps to take prior to proceeding with a brand extension. As long as McDonald's is able to transfer some of what it does well into the new product category (i.e. consistency, value etc.) there is an increased likelihood the effort will succeed.

Appendix B: Survey Results Methodology: Respondents were asked to rank in order the extension that they felt McDonald's would be most successful / competent at. Participants consisted of 4 female, 6 male with a mix of 4 McDonald's customers and 6 non-customers. A customer was defined as someone who has eaten at the restaurant in the last month, and intends to eat there again in the near future. Ages ranged from 16 to 62.

Survey Respondent Numbe 10 Mean Score Farm Equipment 5.4 Dinnerware Frozen meals in the grocery stor 2.2 Amusement Par 2.2 Day Care Facilities 2.3 Educational, Interactive CD ROM for Children 3.9 The below are some of the most insightful qualitative statements and reflections made by respondents. Farm Equipment This choice was provided in an effort to evoke negative commentary or raise questions about what McDonald's is 'not good at? It was revealed by most of the respondents that McDonald's would be ill advised to extend into an area that they have 'nothing to do with? Most people saw farm equipment as having no connection to McDonald's current business. Respondent nine was the exception as the subject referred to the attributes of assembly line production and associations with potatoes and farming. Dinnerware Dinnerware was consistently dismissed on the basis that McDonald's does not have a high quality or prestigious image which are important attributes in the new product category.

One respondent suggested that McDonald's would be better suited to license or produce paper plates and cups. Frozen Meals at the Grocery Store A popular choice based on McDonald's obvious association with food products. Respondents noted that this would also take the least effort. People would recognize the brand in the aisles and instantly connect with it. It was noted that the frozen meals would be easy to make consistent which is an attribute that McDonald's wishes to be associated with. Respondent nine was again somewhat unique by wondering, 'if the food is garbage in the restaurants, why it would be any better from a grocery store??

Amusement Park This is the brand extension that was met with the most enthusiasm. People saw the park as a natural extension of the McDonald's Play lands. One respondent noted the success of a similar Hershey branded theme park. Strong associations with children often caused respondents to assign this a #1 ranking. The idea sparked the most conversation as respondents began sectioning off the proposed park according to McDonald's characters like Grimace and the Hamburg lar.

When asked if McDonald's still relies on these characters in their marketing, there seemed to be a degree of uncertainty. Day Care Facilities Evoked the most diverse responses. People saw value in a chain of consistent facilities where parents could expect a certain level of service and cleanliness. However, one respondent expressed concern regarding the possibility of one of the restaurant's young (inept) employees taking care of their children. In addition concerns about what the children would be fed every day were raised. McDonald's reputation for unhealthy food was touched on by most survey respondents.

One respondent addressed the fact that such an extension would be capital intensive and the training requirements would be considerable. It was therefore judged to be less suitable than a more modest extension like frozen meals. Liability issues were also raised. Educational Interactive CD-ROM This option was met with relative indifference. The only connect that people saw was through the association with children. There was concern about the ability of McDonald's to deliver educational material and help with the development of children.

The same problem was present with the Day Care option. Appendix A: A Thumbnail SWOT Analysis Strengths: McDonald's food is consistent. Staff are friendly given the demand for rapid transactions. The Company is well regarded in the community as a responsible corporate citizen (Ronald McDonald charitable foundations). A well recognized brand. Weaknesses: Perceived quality is slipping, and fast.

The cleanliness that McDonald's espouses is clearly not being delivered. Innovation is slow and falling behind its competition. Franchisees would like more autonomy but that may threaten the consistency which McDonald's is so proud of. Opportunities: Leveraging of the strong brand. The brand is basically an untapped gold mine. Stand behind the lighter choice menu.

If it catches on, it will go a long way in changing the unhealthy image. Threats: Competitive pressure from Wendy's, Burger King etc. Environmental and anti-globalization groups. General downturn in US economy. Appendix C: Implementation Process? A 6 P Analysis Product: Variety will be limited initially.

Meals will be based on products that are currently available in McDonald's restaurants (i.e. Chicken Nuggets and fries). McDonald's is clearly not gourmet food so they should avoid moving into the premium priced frozen food section. Quality will be similar to the restaurant's (R&D important here) and the packaging design should evoke feelings of the restaurant. The golden arches logo should be prominent.

Kid's meals may wish to include a small toy in order to deliver excitement to the child. Price: McDonald's should keep with a value offering. Price is an attractive feature of the restaurant and should be carried over into the grocery store. Many frozen entrees are expensively priced and McDonald's may benefit from positioning themselves as the dependable, affordable alternative. Promotion: Using the extensive networks of franchises is an excellent way of promoting the offering. McDonald's restaurants may wish to offer a special initial sales promotion whereby restaurant customers receive coupons for 50 cents off of a McDonald's frozen meal purchase.

Place: McDonald's should aim for significant grocery store penetration. They will likely wish to stay out of the prestigious chains where sales would likely suffer. People: This element of the mix will be less important than in their restaurants. Poorly run grocery stores with bad service should be avoided if possible in order to avoid negative associations with the brand. Relationships with manufacturers and grocery store managers will be an important part of getting the extension off the ground.

Process: McDonald's will have to have a closely monitored supply chain. Orders should be delivered in a timely manner to the various grocery stores. The manufacturing may be done by a company that McDonald's is already familiar with. Quality and consistency of the meals should be closely monitored..